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||Neutral Citation Number:  EWHC 2732 (Comm)
||Case No: 2004 Folio 319
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
||Royal Courts of Justice
Strand, London, WC2A 2LL
||3rd November 2004
B e f o r e :
Gavin Kealey Q.C. sitting as a Deputy High Court Judge
|| Trade Credit Finance No (1) Limited
National Westminster Bank Plc
||- and -
Lime Company Limited
Coutts & Co
Mr. Paul Downes and Mr. Peter de Verneuil Smith (instructed by Clyde & Co.) for the Claimants
Mr. Khawar Qureshi (instructed by St. Davids) for the First Defendant
Mr. Stuart Adair (instructed by Arnold Fooks Chadwick) for the Second Defendant
Hearing dates : 28th& 29th June, 1st & 7th & 15th July, 13th & 30th September, 5th October
HTML VERSION OF JUDGMENT
Crown Copyright ©
Gavin Kealey Q.C. :
- There are before the Court six applications as follows: (i) the Claimants' application for summary judgment against the First Defendant; (ii) the Second Defendant's application for summary judgment against the Claimant; (iii) the Claimants' application for a continuation of the freezing injunction against the First and Second Defendants until further order; (iv) the First Defendant's application to set aside the freezing injunction; (v) the First Defendant's application for specific disclosure; and (vi) an application by the First Defendant's wife, Mrs. Guler Bilgin, to be added as a defendant to the action and for declaratory relief. It is agreed by all the parties, and also by Mrs. Bilgin, that her application should be adjourned.
- The original time estimate for these applications was three days. In the event, they occupied just short of eight days of the court's time. This is not surprising: the documentary evidence alone filled eight lever arch files, and the authorities (once supplemented in the course of the hearing) filled more than three lever arch files. Much of this material was referred to in the written submissions. Much more was then referred to during the course of oral argument. As time wore on, the applications for summary judgment appeared more and more to take the form of mini-trials. There was a temptation to bring matters to a more speedy solution than any of the parties might have liked. In the end, however, it seemed to me that, since so much time and effort had been invested by the parties in these applications and, further, since it was possible to reach final conclusions on some of the issues raised, the interests of justice were best served by permitting the applications for summary judgment to be heard in full.
- There is little significant dispute among the parties in relation to the essential background facts.
- By a Conditional Sale Agreement dated 16th October 1998 the First Claimant ("TCF") agreed to sell a Goss Colorline 80 printing press to Sabah Yayincilik AS ("Sabah") for a total price, including finance charges, of £10,253,225.07. The printing press had been the subject of an earlier sale agreement between Goss Graphic Systems Limited ("Goss") and Sabah dated 9th April 1998 but, after TCF had agreed to provide a facility of £8,300,000 to Sabah to facilitate the purchase, the earlier agreement was varied under the terms of a Variation Agreement dated 16th October 1998 so that TCF was substituted for Sabah as purchaser of the printing press from Goss.
- The Conditional Sale Agreement provided for payment of a deposit followed by the balance of the purchase price by 10 instalments falling due on various dates between 1st September 1999 and 1st March 2004. Clause 16 contained a retention of title provision by which the printing press was to remain TCF's sole and exclusive property until the entire purchase price (the deposit and all ten instalments) had been fully paid.
- By virtue of Clause 3.1.2, Sabah was required to procure, as part of the security for payment of the instalments, the issuance of a personal guarantee and indemnity by the First Defendant, Mr. Dinc Bilgin, in form and substance acceptable to TCF. Sabah is one of Turkey's leading newspaper groups and Mr. Bilgin was its driving force.
- By a Deed of Guarantee executed on 16th October 1998, Mr. Bilgin guaranteed to TCF the payment by Sabah of 12% of the first four instalments and 100% of the last six instalments under the Conditional Sale Agreement. TCF assigned all its rights, title and interest in the guarantee to the Second Claimant, National Westminster Bank Plc, by an assignment dated 30th November 1998. Written notice of the assignment was given to Mr. Bilgin on 4th December 1998, and Mr. Bilgin duly confirmed receipt of that notice on about the same date.
- Pursuant to the Conditional Sale Agreement, the deposit for the printing press was paid. The press, itself, was delivered to Sabah in Turkey. TCF paid Goss the purchase price due under the terms of the Variation Agreement, and Sabah paid the first four instalments under the Conditional Sale Agreement as and when they fell due. It was thereafter that problems arose.
- On the basis of the material before the Court, it appears that the origin of these problems was Mr. Bilgin's decision to expand his business interests into the field of banking. Mr. Bilgin acquired a Turkish bank called Eti Bank. In 2000, there was a banking crisis in Turkey, and special legislation was passed to enable the Turkish financial regulatory and supervisory authorities to take over affected banking institutions. Eti Bank had not proved to be a success under Mr. Bilgin's governance and it was one of eight Turkish banks taken over by the authorities. In November 2000, the Turkish banking authorities also froze all of Mr. Bilgin's assets and a criminal investigation was begun into his business affairs. In April 2001, Mr. Bilgin was arrested and imprisoned without charge. He remained in prison for ten months, all the while without charge. During that period, Mr. Bilgin was unable to conduct any business and, in his evidence to the Court, he attributes the failure of his businesses, including Sabah, to discharge their debts as and when they fell due to his incarceration.
- The fifth instalment under the Conditional Sale Agreement fell due on 1st September 2001 but was not paid. Following non-payment of that instalment, TCF and Sabah reached an agreement as to the payment of the outstanding amount and the re-scheduling of payment of the balance. That agreement was set out in a Protocol (the "First Protocol") dated 28th May 2002. It described itself as a re-scheduling of the payment terms of the Conditional Sale Agreement, and stipulated that TCF retained the option to initiate any legal action that it deemed necessary or appropriate against Mr. Bilgin as guarantor under the original Guarantee. Only the first two of the re-scheduled payments, each of £75,000, were made, and those were late.
- Sometime towards the end of 2002 (Mr. Bilgin's evidence does not specify with any greater certainty when), Mr. Bilgin granted a licence over his newspaper and other media operations to another Turkish company called Merkez. He did so, apparently, in order to enable those operations to survive and to facilitate an agreement with the Turkish banking authorities in resolution of his previous difficulties. According to Mr. Bilgin's evidence, "Merkez wishes to purchase the printing press and to this end agreements have been entered into between Sabah and Merkez in terms whereof Merkez will purchase the asset from the Claimants" (by which, I presume, he means from TCF).
- Following the apparent breakdown of the re-scheduled payment plan set out in the First Protocol, on 24th January 2003, TCF commenced an action against Sabah in the High Court in England seeking declarations that, pursuant to the retention of title provision in the Conditional Sale Agreement, the printing press remained TCF's sole and exclusive property and that it was entitled to re-possess it. Those proceedings were not far advanced when, on 17th March 2003, a further Protocol (the "Second Protocol") was signed. The parties to the Second Protocol included TCF, Sabah and Mr. Bilgin. In its preamble, the Second Protocol recorded that the purchase price for the printing press had been guaranteed by Mr. Bilgin but had not been fully paid, and that TCF was seeking declaratory relief in England in relation to the press. Thereafter, the Second Protocol was in four principal sections, of which only parts are of immediate relevance to the present applications. First, by clause 1, TCF agreed that, upon receipt of a definitive Turkish court judgment to the effect that it had title in the printing press (and upon the assumption that it was otherwise in a position to sell the press), it would give Merkez a first option to purchase the press on terms and conditions acceptable to TCF. Secondly, by clause 2, TCF agreed that, if it signed an agreement with Merkez for the sale of the press, it would thereafter release Mr. Bilgin from any further obligations under his guarantee. Thirdly, by clause 3, Sabah and Mr. Bilgin agreed to co-operate with TCF in relation to TCF's action for declaratory relief in England and such application as it might make to the Turkish courts for the recognition and enforcement of an English judgment. Fourthly, by clause 4, it was agreed that the terms of the Second Protocol did not affect Mr. Bilgin's obligations and responsibilities under the guarantee, and that the guarantee continued in full force and effect.
- Shortly after the Second Protocol was signed, and as its terms envisaged, TCF sought without opposition and on 27th March 2003 obtained declaratory orders from the High Court in England against Sabah that the printing press was its property and that it was entitled to its re-possession. On 3rd October 2003, the Turkish court issued a judgment upholding the English declaratory judgment. TCF and Merkez thereafter entered into negotiations for the sale and purchase of the printing press but these have still not culminated in any agreement. The Turkish courts have apparently granted seven orders of seizure or attachment against the printing press in favour of creditors of Sabah which, it is said on behalf of TCF, will remain in place unless and until TCF commences and completes what would be a protracted and expensive process of applications leading to their vacation. Mr. Bilgin acknowledges these orders in his evidence to this court and, himself, avers that unless and until the charges on the printing press that they represent (totalling apparently £15 million in value) are released, Merkez will not be able to purchase the printing press from TCF.
- The Claimants' claims against Mr. Bilgin under the guarantee are in respect of the last six instalments originally payable under the Conditional Sale Agreement. Under the terms of that Agreement, the final three of those instalments originally fell due on 1st March 2003, 1st September 2003 and 1st March 2004. Demands to pay those last three instalments were made upon Mr. Bilgin under the terms of the guarantee after the date when the Second Protocol was signed: namely, on 24th June 2003 (for instalment no. 8), on 24th December 2003 (for instalment no. 9) and on 23rd June 2004 (for instalment no. 10).
- However, no steps were taken by the Claimants to execute those demands or to enforce the terms of the guarantee against Mr. Bilgin until application was made without notice in this action on 16th April 2004 (before the Claim Form had been issued) for a freezing order against Mr. Bilgin and the Second Defendant. I am informed by Mr. Downes, who with Mr. de Verneuil Smith has appeared on behalf of the Claimants, that what triggered the commencement of this action was the receipt of information about the existence, and real risk of imminent disposal, of a valuable asset against which any judgment against Mr. Bilgin in connection with his obligations under the guarantee might be enforced: namely, the property known as 117 Sloane Street in London (the "property").
THE INJUNCTION AND THE PROPERTY
- On 16th April 2004 David Clarke J. made a freezing order in favour of the Claimants against Mr. Bilgin and the Second Defendant, Lime Company Limited ("Lime"), restraining them (i) from removing from the jurisdiction of this court any of their assets within the jurisdiction up to the value of £4 million; and (ii) from in any way disposing of, dealing with or diminishing the value of any of their world-wide assets up to the same value. The order identified two specific assets as being the subject of its terms: namely, the property or its net sale proceeds after discharge of any mortgages; and any money in an identified account at a branch of Coutts Bank in the joint names of Mr. and Mrs. Bilgin. David Clarke J. also made an ancillary disclosure order against the Third Defendant, Coutts & Co. ("Coutts"). Following service of the orders upon Coutts, the Claimants' solicitors were informed by Coutts' in-house counsel that the sale of the property had already taken place and that the proceeds had been paid into Lime's account held at Coutts' head branch office, Strand.
- The connections between Mr. and Mrs. Bilgin, the property and Lime originate from events taking place long before Sabah's and Mr. Bilgin's business relationship with TCF began. In the late 1980s, Mr. and Mrs. Bilgin purchased and became the joint owners of a property known as Flat 31, Chalfont House in London SW1. In 1995, Mr. and Mrs. Bilgin decided to sell their flat and purchase a house. On about 1st February 1996, they purchased the leasehold interest in the property in their joint names (holding as tenants in common in equal shares) with the assistance of a mortgage advance of £800,000 from Coutts. The balance of the purchase price for the property of some £355,000 came, it appears, from the joint sterling account of Mr. and Mrs. Bilgin held with Coutts. The mortgage on the property was in the joint names of Mr. and Mrs. Bilgin, and they were registered at H.M. Land Registry as joint proprietors of the property. The mortgage was serviced from an account at Coutts in their joint names and the material before the court indicates that the mortgage advance was partially secured by life assurance taken out on the lives of each to the value of the mortgage.
- In and after March 2002, Mr. and Mrs. Bilgin took advice from Coutts and their solicitors regarding the transfer of the property to an off-shore company. Following that advice, it was decided that (i) the property should be transferred to an Isle of Man registered company managed by Coutts, of which Mr. and Mrs. Bilgin would each beneficially own 50% of the issued share capital; (ii) the price paid for the property by the Isle of Man company would be based on an independent valuation; (iii) Coutts would make a mortgage advance to the Isle of Man company that would be sufficient to discharge the existing mortgage and provide funds for administration, and which would be secured by a first legal charge over the property; (iv) part of the purchase price would be paid in cash to Mr. and Mrs. Bilgin to enable them to discharge the existing mortgage, and the balance of the purchase price would be treated in the accounts of the company as a debt to Mr. and Mrs. Bilgin; and (v) thereafter, an off-shore trust would be established and the shares in the company would be settled in the trust.
- In accordance with the decisions that had been taken, the Second Defendant, Lime, was incorporated by Coutts (Isle of Man) Ltd., and two of Coutts (Isle of Man) Ltd.'s officers were appointed as directors. In a report dated 8th November 2002, an independent valuer, Mr. Colin J. Smith, valued the property at £3.4 million. On about 21st July 2003, the property was transferred by Mr. and Mrs. Bilgin to Lime in consideration of a purchase price of £3.4 million and, on the same day, a legal charge over the property was executed by Lime in favour of Coutts. By letter dated 29th July 2003, Lime granted Mr. and Mrs. Bilgin a licence to occupy the property. The Stamp Duty paid on the transfer was £136,000 and the transfer was registered at H.M. Land Registry on 9th October 2003.
- In March 2004, offers were made by two prospective purchasers to buy the property. In the event, on 11th March 2004, the directors of Lime resolved to sell the property for £4 million to one of those prospective purchasers, Cadogan Estates Limited. On 30th March 2004, contracts were exchanged for the sale of the property to Cadogan Estates Limited, and on 16th April 2004 (the same day the freezing order), the sale was completed. The proceeds of sale were paid into Lime's account at Coutts where they have remained, subject to the terms of the freezing order, ever since.
THE CLAIMANTS' APPLICATION FOR SUMMARY JUDGMENT AGAINST THE FIRST DEFENDANT
- The Claimants have applied for summary judgment against Mr. Bilgin under the terms of the guarantee in respect of instalments nos. 5 to 10 under the Conditional Sale Agreement together with contractual interest at the rate provided for in the guarantee. It appears not to be in dispute that Sabah has not paid those instalments and so is liable to the Claimants in respect of them. It also appears not to be in dispute that demands have been made of Mr. Bilgin in respect of the unpaid instalments on the dates pleaded in the Particulars of Claim and deposed to in the evidence before the court, and that Mr. Bilgin has not paid those instalments either. The principal claimed against Mr. Bilgin amounts to £4,978,547.29 and the contractual interest, which continues to accrue for each day that the principal remains unpaid, currently amounts to a figure exceeding £600,000.
- The guarantee provided by clause 2.1 as follows:
"In consideration of the Company [TCF] entering into the Conditional Sale Agreement .. the Guarantor as primary obligor unconditionally and irrevocably:
(a) guarantees to the Company by way of continuing guarantee as principal obligor and not merely as surety the payment by the Borrower [Sabah] of each Instalment up to the Guaranteed Amount for that Instalment; and
(b) agrees that if and each time that the Borrower shall fail to pay any Instalment as and when the same becomes due, the Guarantor will on demand .. pay to the Company (as if the Guarantor instead of the Borrower were expressed to be the primary obligor) up to the Guaranteed Amount in the case of that Instalment free from all deductions whatsoever, together with interest thereon at a rate of 10.05 per cent per annum .."
- The effect of the guarantee was that Mr. Bilgin was subjected to alternative liabilities in respect of unpaid instalments: in the first place, he was liable as primary obligor to pay the instalments as and when they fell due; in the second place, he was liable to pay any instalment in the event that Sabah failed to pay it and demand was made on him to do so.
- Clause 2.3 of the guarantee was in the following terms:
"The obligations of the Guarantor hereunder shall not be affected by any matter or thing which but for this provision might operate to affect such obligations including without limitation
(a) any time or indulgence granted to or composition with the Borrower or any other person;
(b) the taking, variation, renewal or release of, or neglect to perfect or enforce, any rights, remedies or securities against the Borrower or any other person; or
(c) any unenforceability or invalidity of any obligations of the Borrower, so that this Deed shall be construed as if there were no such unenforceability or invalidity."
- The effect of clause 2.3(a) of the guarantee was, in broad terms, to prevent concessions to Sabah compromising Mr. Bilgin's liability under the guarantee. It follows that neither the First nor the Second Protocol affected Mr. Bilgin's obligations under the guarantee. Even if that proposition were in any doubt under the terms of the guarantee, such doubt is removed by the terms of the Second Protocol (to which Mr. Bilgin was a party) which, by clause 4, made it clear that Mr. Bilgin's obligations under the guarantee were unaffected and continued in full force and effect.
- At first blush, therefore, Mr. Bilgin is liable to the Claimants under the terms of the guarantee in respect of the amounts of principal and interest claimed.
- Mr. Bilgin has advanced two arguments in his resistance to the Claimants' application for summary judgment. The first is based on an alleged oral assurance given to him on behalf of the Claimants before he signed the Second Protocol. He says in his affidavit sworn on 7th May 2004 that he was told by Mr. Caglar, the Turkish lawyer acting on behalf of the Claimants in connection with the Second Protocol who also signed that document on their behalf, that "in between signing the said agreement [the Second Protocol] and the transfer of ownership of the asset [the printing press] to Merkez, no action would be taken against me and that all demands for payment under the guarantee would come to a halt." He says further that he signed the Second Protocol accordingly – by which I infer that he is saying that he relied on the oral assurance in signing the agreement contained in that Protocol. Later in his affidavit, he amplifies his understanding of his position as a result of the alleged oral assurance: he says that he had faith that, whilst his position as guarantor would remain as such, the guarantee would not be enforced pending the process that would lead to Merkez's purchase of the printing press. For his part, Mr. Caglar categorically denies in his witness statement that he gave any such assurance to Mr. Bilgin, and emphatically denies ever having had the authority to give any such assurance.
- Mr. Downes first submitted that I could reject Mr. Bilgin's evidence of the oral assurance for four reasons:
(a) on the basis of the evidence of Mr. Caglar referred to above and the suggested unlikelihood of Mr. Caglar having given such an assurance in circumstances where the Second Protocol was a negotiated document in which Mr. Bilgin had secured more generous wording than that originally proposed;
(b) on the basis that the oral assurance was contrary to the terms of the Second protocol;
(c) on the basis that Mr. Bilgin's evidence is internally contradictory; and
(d) on the basis that, after the Second Protocol was signed, demands were made on Mr. Bilgin in respect of the 8th and 9th instalments without eliciting any protest from Mr. Bilgin.
- I am not persuaded by these submissions.
(a) In relation to the evidence of Mr. Caglar, there is a serious dispute that will turn on what was said or not said between two persons at meetings when, so far as I can infer from the material, no-one else was present. I cannot resolve that dispute at this juncture in advance of disclosure and without the benefit of oral evidence. As for the fact that the wording of the Second Protocol was more generous to Mr. Bilgin than that originally proposed, that does not in and of itself negative the real possibility that the oral assurance was give.
(b) I do not consider that the assurance is necessarily inconsistent with the terms of the Second Protocol. The former, if given, would be suspensory and, whilst clause 4 of the Second Protocol emphasised that that the guarantee continued in full force and effect, that does not mean that the beneficiary of the guarantee might not at the same time have agreed not to enforce its terms pending an anticipated sale contract being concluded. On the contrary, if there were an expectation that such a sale contract would be concluded and might realise an amount sufficient to discharge Sabah's debts under the Conditional Sale Agreement, it might have made sense to the parties to suspend any action to enforce the guarantee in the period between the entering into the Protocol and the conclusion of the sale contract.
(c) I do not consider that any inconsistencies in Mr. Bilgin's evidence are of such substance as to warrant the rejection of those parts that are critical to this factual issue. It seems to me clear what Mr. Bilgin is saying. The accuracy of his account, and the question of such internal inconsistencies as may exist, are matters that I cannot resolve on a application for summary relief.
(d) It is correct that demands were made on Mr. Bilgin after the signing of the Second Protocol and that, it would appear, Mr. Bilgin did not raise any protest about them notwithstanding the terms of the oral assurance on which he relies. However, I do not consider that, taken singly or in conjunction with the other matters addressed above, this is sufficient to justify the rejection at this juncture of Mr. Bilgin's evidence. After all, it might equally be said against the Claimants that they took no steps against Mr. Bilgin to enforce the guarantee after the signing of the Second Protocol until they learned of the existence of a valuable asset in this jurisdiction, and that such forbearance is consistent with the alleged oral assurance having been given. (Mr. Downes submitted that I could not take into account such post facto conduct on the basis that it was inadmissible in aid of construction. I reject that submission. The conduct is not relevant to construction; it is relevant and admissible to the issue whether an assurance was given as and in the terms alleged.) In the final analysis, these are matters of evidence and ultimately of submission to a court that has had the benefit of oral testimony. They cannot sensibly be resolved at this stage.
- In summary, therefore, I cannot resolve this factual dispute on the basis of the written material, including affidavits and witness statements, before the court. I do not consider that it would be a proper exercise of the court's jurisdiction under CPR Part 24 on an application for summary judgment. The alleged oral assurance is not so implausible that it can be dismissed as merely fanciful or, in so far as it might be different, as affording Mr. Bilgin no real prospect of success. Mr. Downes suggests that Mr. Bilgin's account is "highly improbable" but I do not think either that I would go so far as Mr. Downes suggests, or that a high degree of improbability on a seriously disputed factual issue which will turn on oral evidence is sufficient to justify summary judgment.
- Mr. Downes' second set of submissions was premised on the hypothesis that the oral assurance had indeed been given in the terms suggested by Mr. Bilgin in his affidavit. Mr. Downes submitted on this hypothesis that the oral assurance afforded Mr. Bilgin no defence because:
(a) the Second Protcocol was inconsistent with the oral assurance and, therefore, Mr. Bilgin could not rely on any principle of estoppel;
(b) since the Second Protocol was inconsistent with the oral assurance, the only relief for which Mr. Bilgin could contend was rectification of the former so that it accorded with the latter, and Mr. Bilgin was not seeking such relief; and
(c) Mr. Bilgin has not explained how Mr. Caglar could have had actual or ostensible authority from the Second Claimant to whom the guarantee had been assigned. (This last submission featured briefly in Mr. Downes' Skeleton but was not developed in oral submission.)
- Again, I am not persuaded by these submissions: in relation to the first and second, I am of the view, as already expressed above, that the alleged oral assurance and the Second Protocol are not necessarily inconsistent. I do not think, therefore, either that an estoppel case on the basis of the assurance is legally fanciful or that, in the absence of a rectification defence, Mr. Bilgin has no realistic prospects of success in his arguments. As to the third, the issue of actual or ostensible authority is one that requires factual investigation before it can be resolved. It is clear that Mr. Caglar had authority from TCF to sign the Second Protocol and it is implicit in his own evidence that he seems to have been charged by TCF with the task of negotiating that document. It is not unrealistic to suppose that, since he had actual authority to agree the Second Protocol, he also had actual authority to give the alleged oral assurance. Since the Second Protocol was concerned in part with the guarantee and its continued validity, it is not unrealistic to suppose that TCF (and its delegate, Mr. Caglar) were actually or at least, by being permitted by the Second Claimant to negotiate and agree terms with Mr. Bilgin in relation to it, ostensibly authorised by the Second Claimant to deal with Mr. Bilgin in relation to it. Suffice it to say that it does not appear to me that these are matters that I am able to or should seek to determine finally on an application for summary judgment.
- Mr. Downes' last submission in this context was introduced in the course of argument. It does not appear in his Skeleton. It was that the alleged assurance was, on its terms, suspensory, applying only for such period as steps were being taken to effectuate a sale agreement with Merkez or while negotiations with Merkez were continuing. Mr. Downes argued that negotiations with Merkez have ceased and, therefore, the assurance no longer had any effect. Mr. Downes argued in the alternative that the suspensory effect of the assurance was to subsist only for a reasonable time which, he suggested, was a period of 30 days or, at least, was not such a period of time as extended into July (and now, September/October) 2004. In support of this argument, Mr. Downes was able to point, among other matters, to the following:
(a) the evidence of Mr. Wood of Clyde & Co. at paragraph 12 of his second affidavit sworn on 17th May 2004 that it was "quite likely Merkez is not keen to enter into an agreement to buy the [printing press] because it presently has the use of it without any payment to the Claimants";
(b) the fact, deposed to by Mr. Wood in his second affidavit, that significant efforts have been made by representatives of TCF and the ECGD to negotiate with Merkez an agreement to purchase the printing press but these have not met with a positive response from Merkez;
(c) the failure by Merkez to give an indication of the purchase price that it would be prepared to contemplate in relation to the printing press despite having told Mr. Crick of the ECGD in the first week of March 2004 that it would give such an indication within the following two weeks;
(d) the failure by Mr. Bilgin to produce any evidence to support his statement that Merkez had agreed with Sabah to purchase the printing press from the Claimants;
(e) the statement by Mr. Bilgin in his affidavit of 7th May 2004 that, unless and until the charges by which the printing press has become encumbered in Turkey are released, Merkez cannot purchase it; and
(f) Mr. Wood's belief, as expressed in his second affidavit, that "the intentions of Merkez to purchase the [printing press] are at best equivocal, based on the experience of Mr Bob Crick [ECGD] and Mr Simon Jones [TCF]".
- I agree that the assurance, if made, was suspensory in effect. It was clear from the words said to have been used by Mr. Caglar ("in between signing the said agreement [the Second Protocol] and the transfer of ownership of the asset [the printing press] to Merkez, no action would be taken against [Mr. Bilgin] and that all demands for payment under the guarantee would come to a halt") that the cessation of demands and the forbearance to take action were to subsist only until a transfer of ownership to Merkez had taken place. Objectively analysed, it cannot have been the intention of the parties (and, indeed, Mr. Bilgin does not argue) that the suspension of demands and of action was to last forever if no sale to Merkez took place. Taking account of the background against which the assurance is said to have been given, in particular the contemplation of the parties that Merkez would purchase the printing press from Sabah, it was clearly implicit that, in the event of no transfer of ownership to Merkez taking place within a reasonable time or of no transfer being possible or of negotiations for such a transfer coming to an end, the suspension was lifted.
- Mr. Khawar Qureshi, who appeared on behalf of Mr. Bilgin, rightly in my view, did not challenge the suspensory nature of the assurance or the basis on which the suspension would come to an end. On the contrary, he submitted that the material before the court did not establish either (i) that the process of negotiation with Merkez has come to an end or (ii) that Merkez lacks the intention to purchase the printing press. Mr. Qureshi was able to draw my attention to a letter from Merkez dated 21st June 2004 in which Merkez stated: "We do not feel it is correct to suggest that we are (or have at any time been) anything other than immediately able and willing to effect a purchase of the said equipment (and assist with all necessary formalities in that regard). Of course, we would expect this to be achieved by a process of negotiation with reference to the market price, the condition of the equipment, and under valid legal conditions (with permission of TMSF)." I do not think that I can conclude on the evidence that, when made, this statement was untrue or inaccurate. It may not be entirely consistent with Merkez's previous conduct but it is not so lacking in plausibility that I can say, at this juncture, that it was false.
- If matters had rested there, I would not have been able to conclude with the necessary degree of certainty that negotiations between TCF and Sabah had come to an end or that steps to conclude a contract with Merkez have ceased or in practical terms that a sale to Merkez is no longer possible. Further, it is not clear to me that, if the oral assurance was given, it was to last either only 30 days or for some shorter period than that during which realistic negotiations for the sale of the printing press were continuing.
- However, matters did not rest there. By the date when argument on the Claimants' application for summary judgment against Mr. Bilgin was finally concluded, Merkez's letter had been overtaken by events. The train of those events began on 16th March 2004 when the Savings Deposit and Insurance Fund (the Turkish banking authority, "SDIF") imposed a seizure order on the printing press. Once that order had been imposed, one of Sabah's creditors, Halkbank, which has asserted a commercial pledge over the press, applied to the Execution Office in Turkey to auction the press. The auction was originally fixed to take place on 23rd July 2004 but it was suspended as a result of a complaint by Sabah to the 6th Execution Inspection Court in Istanbul that, if the printing press were to be sold, it should be sold in its entirety and not in individual parts. Sabah's complaint (which is apparently not to the effect that the printing press should not be sold) is due to be heard by the Court in Istanbul on 4th November, 2004.
- The most recent evidence of the events in Turkey that has been put before me is an unchallenged Witness Statement of Gulay Parlat dated 6th September 2004. Mr. Parlat is one of the Claimants' Turkish lawyers. He says that the sale to Merkez, as envisaged by the Second Protocol, is now not possible for the following reasons:
(a) One method of trying to oppose the auction would be to obtain an injunction from a court in Turkey other than the Execution and Inspection Court. However, this has already been attempted by the Claimants and they failed: they submitted an objection to the originally scheduled auction on the basis of the English judgment declaring TCF to be the owner of the press but this was rejected.
(b) Other creditors might also initiate a sale by auction of the printing press at any time. Whilst the Claimants could apply to oppose any such auction on the basis of the English judgment, if they fail, there would be a real risk that they would have to pay a penalty to Halkbank of up to 40% of the value of the press. That is a risk that the Claimants have decided that they are not prepared to take.
(c) Finally, upon a sale by auction, under Turkish law, Halkbank's commercial pledge would take priority over any rights to ownership that the Claimants might have. The Claimants would only have a right to a share in the proceeds of sale of the press once Halkbank's claim had been satisfied. That claim amounts to over U.S.$ 27 million and far exceeds the value of the printing press.
- I accept Mr. Parlat's unchallenged evidence. There is no suggestion in any of the evidence before the court that the auction will not take place with the consequences to which Mr. Parlat has deposed. It is therefore clear to me on the basis of the recent evidence that a sale of the printing press by TCF to Merkez is no longer a realistic possibility. It follows inexorably that, even if the oral assurance contended for by Mr. Bilgin had been given, it does not provide Mr. Bilgin with a defence to the Claimants' claim under the guarantee.
- The second argument advanced by Mr. Qureshi in resisting the Claimants' application for summary judgment under the guarantee was based on the argument that TCF failed either to acquire title in the printing press (which I have to say, if correct, serves to reinforce the conclusion that a sale by TCF to Merkez is simply not and never has been a possibility) or to register its title in the printing press in Turkey. This argument was put by Mr. Qureshi in a variety of ways, namely: failure of consideration, fundamental breach, fundamental mistake, application of equity. In more elaborate form, it went as follows: the consideration for the guarantee was the Conditional Sale Agreement between TCF and Sabah. By virtue of clause 28 of the Conditional Sale Agreement, that Agreement incorporated the terms of an offer letter from TCF to Sabah which provided that title in the printing press should remain with TCF until the final bill of exchange was paid. The Conditional Sale Agreement itself provided by clause 16 that, pending payment in full of the total purchase price and other payable sums, the printing press remained the sole and exclusive property of TCF. However, not only (so it was argued) did TCF never acquire title in the printing press but, in any event, the Conditional Sale Agreement was never registered in Turkey with the result that TCF's title (if any) in the press was never registered. On the contrary, by virtue of Turkish law, it was argued that Sabah (not TCF) acquired title in the printing press, this being achieved when the printing press was delivered to Sabah in Turkey. This had the result of negating the value of the printing press because it enabled the creation of various encumbrances by alleged creditors of Sabah in Turkey, and so it was argued, meant that the consideration for which Mr. Bilgin had entered into the guarantee had failed. In his oral submissions, Mr. Qureshi suggested that TCF's failure to register its title in Turkey undermined its claim under the guarantee either because of fundamental mistake or because it amounted to a breach of the Conditional Sale Agreement which either was incorporated into the guarantee or was collateral to the guarantee. Mr. Qureshi's written submissions suggested that the consequence in equity of TCF's non-registration of title discharged Mr. Bilgin from any liability under the guarantee, or reduced any such liability to the extent that the value of the printing press has been diminished.
- It seems to me that there are compelling reasons why, whichever way in which Mr. Qureshi has put his case on title, it must fail. The starting point of the analysis is the guarantee. The consideration for the guarantee was the entering into by TCF of the Conditional Sale Agreement. TCF duly entered into that Agreement on the same day as Mr. Bilgin executed the guarantee. The Conditional Sale Agreement, which was governed by English law (clause 27.1), was and remains a valid contract. This conclusion is unaffected by the fact that the retention of title provision, clause 16 in the Conditional Sale Agreement, might have been rendered ineffective as a result of its non-registration in Turkey or as a result of the fact that, under Turkish law (which, as the lex situs, under the English conflicts of laws principles governs the question of transfer of corporeal movable property: see Hardwick Game Farm v Suffolk Agricultural Poultry Producers Ass.  1 W.L.R. 278, 330; Cammell v Sewell (1858) 3 H&N 617, 5 H&N 728; Winkworth v Christie Manson and Woods Ltd.  Ch 496), Sabah acquired good title in the press when it was delivered to Sabah in Turkey. It is also unaffected by the fact alleged by Mr. Bilgin that TCF never acquired title in the press from Goss (a dubious proposition at best given (a) the fact that TCF paid Goss in full for the printing press and (b) the terms of the original sale and Variation Agreements). Thus, the consideration for which Mr. Bilgin entered into the guarantee was provided.
- It is a general principle of the law of sureties and guarantees that a creditor to whom a guarantee has been given should neither act nor neglect to act so as to jeopardise the value or effectiveness of any securities that he holds for the guaranteed debt. If the creditor jeopardises the value or effectiveness of such securities, he may find as a result of the principles of equity that the surety is discharged either wholly or in part. This is because one of the surety's most important rights, upon payment, is the right to call for all securities held by the creditor for the guaranteed debt in the same condition as that in which they were when originally received by the creditor: see, for example, Wulff and Billing v Jay (1872) 7 Q.B. 756; Watts v Shuttleworth (1860) 5 H. & N. 235. Mr. Qureshi relies on these principles: he says that, because TCF failed to register its title in the printing press in Turkey, the security provided by the retention of title clause has been rendered valueless. Therefore, he argues, Mr. Bilgin's liability under the guarantee has been discharged.
- It seems to me that this argument is bound to fail. By the terms of the guarantee, Mr. Bilgin undertook as though he were the primary obligor to pay to TCF any instalment as and when the same became due under the Conditional Sale Agreement. He further specifically agreed, by clause 2.3 of the guarantee, that his obligations should be unaffected by any matter or thing which would otherwise operate to affect those obligations including (without limitation) the release by TCF of its rights or securities, or TCF's neglect to perfect or enforce any rights or securities against Sabah and the unenforceability or invalidity of any obligations of Sabah. TCF thus contractually and effectively preserved its right to seek recourse against Mr. Bilgin even (a) in the event that it failed to enforce its rights under the retention of title provision (clause 16 of the Conditional Sale Agreement) or to perfect such security as that provision afforded it, or (b) in the event that it released that security, by failing to register the Conditional Sale Agreement in Turkey in accordance with Turkish law.
- On the question of fundamental mistake, Mr. Qureshi was unable to offer me any authorities that might assist his argument. It does not seem to me that the principle of common mistake (for example, some shared and fundamental mistake as to critical underlying facts) or any other type of mistake has any relevant application. As for the argument of fundamental breach of the Conditional Sale Agreement, mentioned by Mr. Qureshi without elaboration in oral argument, it seems to me that, in so far as it was intended to suggest that it had an effect on the rights and obligations of the parties under the guarantee, it must fail for the same reasons as his argument based on equity. So far as I understand Mr. Qureshi's argument, it is that it was TCF's obligation under or collateral to the Conditional Sale Agreement to register its title in the printing press. By failing to register its title, TCF committed a fundamental breach of the Condtional Sale Agreement or some agreement collateral to it. This, it was suggested, discharged Mr. Bilgin under the guarantee. Another way of putting it was to say that it was a condition precedent of the guarantee that TCF had title to the printing press. I can find no support for these arguments. On the contrary, the guarantee made it clear that any failure by TCF to perfect its security or to enforce its rights against Sabah (both of which must include a failure to register title) had no effect on Mr. Bilgin's obligations. That, it seems to me, is an end of the matter.
- I should also mention an argument that appears in Mr. Qureshi's written submissions, and again mentioned with the utmost brevity in the course of oral argument, to the effect that there was a misrepresentation by TCF which induced Mr. Bilgin to enter into the guarantee. The representation was said to be that TCF had registered its title in the printing press and this representation was said to have been contained in the offer documents leading up to the Conditional Sale Agreement. I can find no such representation. At most, there was a representation of intention that title in the printing press should remain in TCF by virtue of registration. However, there is no evidence that such intention was not held at the material time and thus there is no evidence that any such representation of intention as was made was inaccurate.
- In all of this, I must remind myself of the test that I should apply upon an application for summary judgment. CPR Part 24.2 provides as follows:
"The Court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if
1. it considers that
(i) that claimant has no real prospect of succeeding on the claim or issue; or
(ii) that defendant has no real prospect of successfully defending the claim or issue; and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial."
- In the light of the guidance given by Swain v Hillman  1 All ER 91 (CA) and Three Rivers DC v Bank of England  2 All ER 513, an application under Part 24 should be approached as follows:
ii. Part 24 confers on the court an exceptional power since the ordinary principle, which is established to meet the ends of justice, is that disputes are to be resolved at trial on the evidence and after completion of disclosure.
iii. Part 24 is to be applied in the interests of all concerned to dispose of cases or issues that are not fit for trial at all.
iv. The test whether a case or issue is fit for determination on an application for summary judgment is whether there is a real prospect of the claim or defence, as the case may be, succeeding in circumstances where "real" is to be equated with "realistic" and contrasted with "fanciful".
v. A Part 24 application is not to be used for the conduct of a mini-trial on the documents chosen to be deployed by the parties without disclosure or oral evidence. Where the case or issue is complex or its determination is time-consuming, the court must be astute not to allow an application for summary judgment to turn into a mini-trial and should consider with care whether or not the application should be permitted to proceed. However, where there is a realistic prospect of benefit to the parties, the court may permit the application to proceed but it will be necessary for it to keep in mind the nature of the exercise that is permissible under Part 24.
- The application by the Claimants for summary judgment has, it seems to me, almost developed into a mini-trial on the basis of documents and extensive affidavit and other witness evidence. I am bound to say that I do not consider that it is appropriate for a case of this complex and intricate nature, factually and legally, ordinarily to be the subject of an application for summary judgment. Even so, on the basis of the material that has been put before me, it is clear to me that Mr. Bilgin has no realistic defence to the claim against him under the guarantee. It is clear to me that, even if the alleged oral assurance was given to Mr. Bilgin as he contends (and it is not unrealistic to suppose that it might have been), it does not afford Mr. Bilgin a defence on the facts as they have evolved since the assurance is said to have been given. It is also clear to me that all the arguments that have been raised on Mr. Bilgin's behalf that rely on the question of title (or absence of title) in the printing press are bad in law.
- Therefore, I conclude that the Claimants are entitled to summary judgment against Mr. Bilgin on the guarantee.
THE SECOND DEFENDANT'S APPLICATION FOR SUMMARY JUDGMENT
- In their draft Amended Particulars of Claim, which they have not yet asked permission to make, the Claimants indicate that they will be seeking the following relief:
"A declaration that the proceeds of sale of the Property and/or all sums held in the Second Defendant's Coutts bank account at 440 Strand are beneficially owned by the First Defendant.
Alternatively, a declaration that 50% of the proceeds of sale of the Property and/or all sums held in the Second Defendant's Coutts bank account at 440 Strand are beneficially owned by the First Defendant."
- The Claimants' primary case in their draft pleading, which they say does no more than reflect the material before the court on which they rely, is that, when originally purchased, the property was held in the legal names of (i) Mr. Bilgin and (ii) Mrs. Bilgin as nominee on behalf of Mr. Bilgin; and that the beneficial ownership in the Property was never transferred to Lime but remained vested in Mr. Bilgin. The Claimants' alternative, primary cases are that, when transferred into the name of Lime, the beneficial interest in the property remained in Mr. Bilgin either (a) on the basis of a resulting trust in his favour; or (b) on the basis that Lime was a façade; or (c) on the basis that Lime is a vehicle or puppet or alter ego of Mr. Bilgin. The Claimants' secondary case is advanced on the hypothesis that Mrs. Bilgin is found not to be Mr. Bilgin's nominee: it replicates the primary case but confines it to 50% of the beneficial interest (i.e. excluding Mrs. Bilgin's assumed beneficial interest) in the property.
- Despite being confronted by a barrage of apparently complicated legal argument deployed by the Claimants, the Second Defendant, Lime, has pressed ahead with its application for summary judgment. Through its counsel, Mr. Stuart Adair, it invites me not to be dissuaded from rigorously analysing each the Claimants' claims with a view to their ultimate, summary rejection. I remind myself, however, that the application of which I am seized is one for summary judgment. It is not one for the final determination of preliminary issues.
- The case which Lime invites me summarily to reject is undoubtedly one of some complexity. However, I begin by considering the more straightforward question of the purchase of the property on 1st February 1996 in the names of Mr. and Mrs. Bilgin for the sum of £1,155,000.48.
- It is, to my mind, significant to bear in mind, as I have already indicated, that the property was purchased in the joint names of Mr. and Mrs. Bilgin long before Mr. Bilgin encountered any problems in Turkey in relation to the operation of his businesses, and over two years before Mr. Bilgin executed the guarantee in favour of TCF. It has not been suggested that Mr. and Mrs. Bilgin had in mind, when the property was purchased, the avoidance of any current or future liabilities to which Mr. Bilgin might be or become subject, and no argument has been made or evidence adduced as to why it should have been the intention of Mr. and Mrs. Bilgin that the property should not be beneficially owned by them both. (It is now pleaded, on the basis of inference, that Mr. and Mrs. Bilgin intended the latter to hold the beneficial interest as the former's nominee but no suggestion is made as to what would have motivated Mrs. Bilgin to do so.)
- It is also significant to note that:
(a) the purchase of the property in 1996 was made with the assistance of a mortgage from Coutts in the joint names of Mr. and Mrs. Bilgin, Mrs. Bilgin thereby subjecting herself to significant personal obligations to Coutts;
(b) the mortgage dated 1st February 1996, which defined the Borrower as Mr. and Mrs. Bilgin, further provided by clause 2 that "the Borrower [Mr. and Mrs. Bilgin] as beneficial owner hereby charges by way of legal mortgage the Mortgaged Property as a continuing security to the Lender";
(c) Arnold Fookes Chadwick, solicitors, acted in connection with the purchase of the property expressly on behalf of both Mr. and also Mrs. Bilgin;
(d) the transfer was with full title guarantee, and it is plain from the restriction on the office copy of the entry at H.M. Land Registry that Mr. and Mrs. Bilgin were tenants in common in equity.
- The Claimants submit that Mrs. Bilgin's nominee status is evident from a variety of factors dating from 1995 through to 2004, as follows:
(a) the property was not the "matrimonial home";
(b) it is to be inferred that Mr. Bilgin provided the cash that was used to fund the purchase of the property;
(c) Mr. Bilgin has placed other assets beneficially owned by him into the names of family members to act as his nominee;
(d) there is no record of any meeting between Mrs. Bilgin and either Coutts or Arnold Fookes Chadwick;
(e) there are a number of documents that refer to the purchase of the property by Mr. Bilgin without mention being made of Mrs. Bilgin, and a number of documents that indicate that decisions relating to the property were made by Mr. Bilgin alone;
(f) it was the privacy of Mr. Bilgin, and not that of Mrs. Bilgin, that was the predominant motive for the transfer of the property to Lime;
(g) there is no record of any advice from Arnold Fookes Chadwick regarding Mrs. Bilgin's residential status and tax liability; and
(h) decisions relating to the property whilst it was held by Lime, and decisions relating to the proceeds of sale of the property to Cadogan Estates, were made by Mr. Bilgin alone.
- It does not seem to me that there is anything of real substance in the Claimants' submissions (whether taken singly or cumulatively), and certainly nothing of sufficient substance even at the stage of an application for summary judgment to displace the factors set out in paragraphs 53 and 54 above which, to my mind, point clearly to the conclusion that Mrs. Bilgin held 50% of the beneficial interest in the property in her own name on her own behalf. I come to that conclusion without regard to the presumption of advancement, even though the conclusion might draw further support from it.
- The Claimants cannot point to any factor that is inconsistent with Mrs. Bilgin's personally held beneficial interest. Taking each of the factors upon which the Claimants rely:
(a) the fact that the property was not the "matrimonial home" does not seem to me to advance the matter further one way or another. Mr. Bilgin has deposed that, throughout his marriage to Mrs. Bilgin, he and Mrs. Bilgin have owned their separate assets but some of their valuable assets are and have been owned by them in equal shares. He says that, since his family was growing up and he and his wife were fond of visiting London regularly, they decided in the late 1980s to purchase a flat in Chalfont House. They then decided to sell the flat and purchase a house. There is no evidence to gainsay what Mr. Bilgin has deposed to. On the uncontroverted evidence, the property, like the flat before it, was intended to be enjoyed by both Mr. and Mrs. Bilgin as a matrimonial asset. The fact that it was not their principal matrimonial residence does not alter that fact. All the evidence is to the effect that it was a family property which Mr. and Mrs. Bilgin and their family enjoyed and which Mrs. Bilgin and her daughter, in particular, used to visit frequently. It was, in effect, Mr. and Mrs. Bilgin's London home.
(b) It is said that Mr. Bilgin supplied the cash with which the property was purchased. In fact, if the cash was provided by Mr. Bilgin, it was first paid into the joint account in the joint names of Mr. and Mrs. Bilgin before being used to pay for the purchase. But, putting that matter to one side, it is not suggested that the provision of funds by a husband for the purchase of a matrimonial asset is anything out of the ordinary. If the suggestion is to be made that the provision of funds by a husband for the purchase of a matrimonial asset is something that, in and of itself, should attract the suspicion that the asset which is then purchased in joint names is not in fact beneficially jointly owned, I would reject it. At best, the provision of funds by a husband for such a purchase is neutral. It is entirely consistent with what happens in many families where one spouse is the sole earner and the other provides for the family in as valuable but different a way. The source of the money does not dictate, or assist in determining, where the beneficial interest lies.
(c) As to the allegation that Mr. Bilgin has placed other assets beneficially owned by him into the names of family members to act as his nominee, the only example that the Claimants are able to give does not provide the support that the Claimants need. The Claimants point to a letter signed by Mr. Bilgin on 23rd March 2004 (over six years after the property was purchased) in which he instructed Coutts to transfer $6.4 million out of the joint account in his and Mrs. Bilgin's name at Coutts into the bank account of his son-in-law and daughter (Mr. and Mrs. Polley) in Boston, U.S.A.. The Claimants rely in this context upon the statement by Mr. Polley in his second affidavit sworn on 24th June 2004 that he was to hold the funds in equal shares for and on behalf of Mr. and Mrs. Bilgin. Whilst Mr. Polley thus confirms that he was to hold the funds effectively as nominee, sight should not be lost of the identity of those for whose benefit the funds were to be held: the funds were not to be held for the benefit of Mr. Bilgin alone; they were to be held as to 50% for Mrs. Bilgin. Properly analysed, therefore, this factor does not advance the Claimants' case. On the contrary, it supports the proposition that family assets were held jointly by Mr. and Mrs. Bilgin.
(d) The absence of any record of any meeting between Mrs. Bilgin and Arnold Fookes Chadwick suggests that there was no meeting between them. However, any suggestion that this is anything out of the ordinary is not supported by any evidence. It has not been suggested that this situation was any different from that of other ordinary married couples whose assets are held in joint names. It cannot realistically be suggested that the purchase of a beneficial interest in the property by Mrs. Bilgin required any such meetings or that she was ill-served by the absence of any. Moreover, it is clear from the documents why no meeting occurred: Mrs. Bilgin's solicitor wrote to Coutts on 7th December 1995 and stated that he did not think that it would be necessary for Coutts to interview Mrs. Bilgin. He also made reference to her very busy schedule. The inference that the Claimants are presumably seeking to draw is that it was Mr. Bilgin who had control over the arrangements for the purchase of the property and who exclusively dealt with it. That may be correct. But that fact does not negative the acquisition by Mrs. Bilgin of a beneficial interest in the property. After all, she applied for the mortgage, signed the mortgage documents and assumed onerous personal obligations as lessee and onerous personal obligations to Coutts. The fact that this was all arranged, even controlled, by Mr. Bilgin goes no further than to show that Mr. Bilgin was in charge – but not unusually, or suspiciously, so.
(e) The Claimants also seek to infer an intention shared by Mr. and Mrs. Bilgin that the latter would hold her share of the property as the former's nominee from a number of documents.
i. The first is a note of a meeting between Mr. Bilgin and Arnold Fookes Chadwick on 4th December 1995 in which it is recorded as having been said that the purchase of the property would be by Mr. Bilgin personally and that the property would be registered in his sole name. However, this meeting took place two months before the purchase and, moreover, only three days before Arnold Fookes Chadwick wrote a letter to Coutts (the same letter as that referred to in (d) above) in which they referred to the purchase of the property by both Mr. and Mrs. Bilgin and dealt in some detail with Mrs. Bilgin's affairs. On the same day, the same solicitors wrote to the vendors' solicitors to say that they were instructed by Mr. and Mrs. Bilgin who had (both) agreed to purchase the property. The overwhelming weight of the documentary evidence demonstrates beyond any realistic doubt that the intention of Mr. and Mrs. Bilgin was to purchase the property in both their names and to register the property accordingly. The one note of an early meeting upon which the Claimants rely does not detract from that conclusion.
ii. The second is an undated net asset statement signed by Mr. Bilgin's cousin which appears to have been attached to the mortgage application and which notes that Mr. Bilgin owned the flat at Chalfont House and had an outstanding balance on it. However, the mortgage application, itself, which was apparently signed by Mr. and Mrs. Bilgin describes both Mr. and also Mrs. Bilgin as the owners of the flat and as having been the owners of the flat for the previous four years (as in fact they had been). It is not sensible to give the asset statement any weight in the light of the signed mortgage application form and the correct facts.
iii. Thirdly, the Claimants rely on several documents which, it is said, demonstrate that all decisions regarding the property and Lime were ultimately taken by Mr. Bilgin alone. Assuming that to be correct, again it is not said that it is at all out of the ordinary so far as many married couples are concerned. Control of affairs by Mr. Bilgin shows no more than that Mr. Bilgin did indeed apparently have or take control of such affairs. However, it does not mean that the beneficial proprietary interest in the matrimonial property was not shared between himself and his wife. There is no inconsistency between the two.
(f) The sixth point relied on, namely that Mr. Bilgin's privacy was the dominant motivating force behind the transfer of the property to Lime, is to my mind nothing to the point. If it was Mrs. Bilgin's privacy that had been in jeopardy and had induced the transfer, that would not have indicated that Mr. Bilgin held his apparent interest in the property as his wife's nominee. The point relied on by the Claimants shows only that Mr. and Mrs. Bilgin decided that they should transfer the property out of their names in order to dissociate the property from Mr. Bilgin.
(g) The seventh point seized on by the Claimants is the apparent absence of advice from Coutts concerning Mrs. Bilgin's residential status and tax liability. It is suggested, as a result, that Mrs. Bilgin has not treated her perceived beneficial interest in the property as a taxable asset in the United Kingdom. However, it is quite clear that Coutts did consider Mrs. Bilgin's residential status and tax liability: the notes of the meeting with Mr. Polley on 20th May 2002 make that explicitly clear. Interestingly, Coutts appear to have considered those matters so far as they concerned Mrs. Bilgin and her daughter but not so far as they concerned Mr. Bilgin. Coutts in fact suggested that these matters (concerning Mrs. Bilgin and her daughter) should be addressed by a suitably experienced UK solicitor.
(h) The last point on which the Claimants rely is that the decisions relating to the property whilst it was held by Lime, and the decisions relating to the proceeds of sale of the property to Cadogan Estates, were made by Mr. Bilgin alone. However, for the reasons that I have already expressed in other related contexts above, this is not a point that substantively advances the Claimants' case on the issue of Mrs. Bilgin's proprietary interest. The Claimants cannot apparently point – in fact they do not even attempt to point - to anything that distinguishes the situation and conduct of Mr. and Mrs. Bilgin in relation to their purchase of the property in 1996 from those of other ordinary married couples whose assets are held in joint names. The Claimants have done nothing to show that, whilst those other husbands and wives will each hold for his or her own benefit an equal beneficial interest in the asset that they have purchased (even in circumstances where the funds originally come out of the earnings of only one of them, and where one of them alone takes charge of the arrangements for the purchase and makes decisions alone), Mr. and Mrs. Bilgin did not.
- On the fifth day of the hearing of the several applications before me, Mr. Downes introduced further evidence upon which he relied in seeking to answer Lime's application for summary judgment. On 8th July 2004, the Claimants' solicitors instructed Dr. Audrey Giles, a forensic document examiner, to examine and compare the signatures of Mrs. Bilgin as they appear on the copy of her passport and other copy documents purporting to bear her signature, including the mortgage application form. By letter dated 12th July 2004, Dr. Giles reported that Mrs. Bilgin's signature in her passport appears different from the other signatures particularly in its complexity. She wonders whether the signature may have been overwritten or whether it is a more formal signature than Mrs. Bilgin would use on a day to day basis.
- I invited Mr. Downes to explain precisely what he was alleging. He made it clear that the Claimants were not alleging forgery. He said, however, that the contents of Dr. Giles' report demonstrated that this was not a suitable case for summary judgment in favour of Lime.
- Mr. Downes also pointed out that one of the documents bearing a signature purporting to be that of Mrs. Bilgin (a Deed of assignment of life policies to Coutts as security for the mortgage loan) was apparently witnessed by Mr. Jan Devletoglu, Sabah's London representative. What I am supposed to make of that, I am not sure. Mr. Downes made it clear that the Claimants did not suggest that Mr. Devletoglu's signature was forged, although he alluded to the possibility that Mr. Devletoglu might not have been present when Mrs. Biglin's signature was purportedly inscribed on the Deed, despite the fact that the Deed suggests expressly otherwise.
- The question I have to ask myself is whether the matters raised by Mr. Downes give rise to some reason why, as a matter of justice, there should be a trial of this action: see the test in Miles v Bull  1 Q.B. 258 per Megarry J.. Those matters are wholly speculative. (I disregard for present purposes that they were also raised extremely late.) I have also reminded myself of the words of the same judge who, in Miles v Bull, had enunciated the test by which I am to be guided: "A desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to sufficient reason for refusing to enter judgment for the plaintiff. You cannot get leave to defend by putting forward a case that is all surmise and Micawberism": The Lady Anne Tennant v Associated Newspapers Group Ltd.  F.S.R. 298. These words are as apt to be applied under the new rules of the C.P.R. as they were under the old rules. It seems to me that Mr. Downes' arguments are precisely covered by those words. I am of the view that Mr. Downes' new arguments give rise to no reason why, in the interests of justice, there should be a trial.
- In the final analysis, once their case is subjected to close examination, it becomes clear that the Claimants have no real evidence to support the assertion (which is clearly implicit in their claim and the relief that they seek against Lime) that, when the property was purchased in February 1996 in the joint names of Mr. and Mrs. Bilgin (long before Mr. Bilgin had any dealings with the Claimants and long before he encountered any financial or business difficulties), it was intended that Mrs. Bilgin should hold her apparent beneficial interest in the property as Mr. Bilgin's nominee. I find the Claimants' case in this regard to be barely supportable even on the basis of the allegations set out in the draft amended Particulars of Claim. Having looked at it with the benefit of the material before the court, I have no difficulty in concluding that it has no realistic prospect of success.
- There is equally no evidence in support of the proposition that, following the purchase of the property in 1996, Mrs. Bilgin transferred her beneficial interest to Mr. Bilgin. On the contrary, the evidence is that she transferred her beneficial interest to Lime for good consideration (one half of the purchase price of £3.4 million) in July 2003. Lime (in which Mrs. Bilgin owns 50% of the issued share capital) is indebted to her in respect of 50% of the purchase price for the property less that part of the purchase price paid to Mr. and Mrs. Bilgin in cash. Lime's accounts show a loan amount outstanding and payable in the sum of £3,201,604 of which, as Mr. Polley has confirmed on affidavit, half is owed to Mrs. Bilgin in respect of the sale of her beneficial interest in the property. Therefore, the amount owing by Lime to Mrs. Bilgin in respect of her beneficial interest in the property is £1,600,802. The chose in action in respect of this debt is owned, as I find, by Mrs. Bilgin. She holds no part of it on behalf of Mr. Bilgin.
- Moreover, it is clear on the evidence that the issued share capital in Lime was divided between Mr. and Mrs Bilgin in equal parts in order to reflect their respective beneficial interests in the property which was to be transferred by them to Lime. It follows that, at most, only 50% of the proceeds of sale of the property to Cadogan Estates and of all the sums held in Lime's Coutts bank account could be beneficially owned by Mr. Bilgin.
- Mr. Adair, on behalf of Lime, also presses the argument that the Claimants have no realistic prospects of success in respect of their claim that Mr. Bilgin beneficially owns 50% of the proceeds of sale (because he beneficially owned 50% of the property even after it had been transferred to Lime), and 50% of all the sums held in Lime's bank account at Coutts. He asks for summary judgment accordingly.
- The primary way in which the Claimants have put their case against Lime is that the beneficial interest in the property was not transferred to Lime but remained vested in Mr. Bilgin. In support of this case, the Claimants allege (a) that Mr. Bilgin's predominant motivation behind the transfer was to hide the property and use Lime as a convenient repository of or vehicle for his assets; (b) that Mr. Bilgin was further or alternatively motivated by the wish to evade existing liabilities to creditors, to deprive those creditors of existing rights and, in particular, to place the property beyond the reach of the Claimants; (c) that the board of directors of Lime exercised no independent judgment or control but acted as Mr. Bilgin's puppet; and (d) that it was, therefore, the intention that Lime should hold the property as Mr. Bilgin's alter ego and/or nominee and/or agent and/or puppet. The Claimants allege further, in the alternative, that the beneficial interest in the property remained vested in Mr. Bilgin on the basis of a resulting trust in his favour or on the basis that Lime was a façade and the court should pierce the corporate veil. This detailed formulation of the Claimants' case is taken from their proposed Amended Particulars of Claim but it reflects the way in which the case was orally presented to the court (in comparison with the rather more modest way in which the case was presented by the Claimants in their Skeleton written submissions, and in contrast with the exiguous plea in the Particulars of Claim which was merely to the effect that Lime was the vehicle or puppet or alter ego of Mr. Bilgin).
- Lime is and was an incorporated company and, on the principles laid down in Salomon v Salomon  AC 22, a legal entity distinct from its members. The usual position is that the property of a company belongs to the company and no part of it can be said to be owned by its members. Equally, the usual position is that the company carries on business on its own account and not as the agent of its members even though one or more of such members might have unfettered control over the manner in which the company in fact carries on its business. Unless there is strong evidence to the contrary, a clear distinction is drawn between a company and its members, between their respective legal personalities and between their respective properties and assets. As for agency, it is the essence of such a relationship that one party consents that another party should act on his behalf so as to affect his relations with third parties, and that other party consents so to act. Control by one party over another party's activities does not, in and of itself, equate to a relationship of principal and agent.
- Even assuming that Lime is and was subject to the unfettered control of Mr. Bilgin, and even assuming that Mr. Bilgin was the driving force behind both the incorporation of Lime and also the subsequent purchase of the property by Lime, that would be insufficient to enable the Claimants to prove that Lime held the property (or part of it) as nominee or as Mr. Bilgin's alter ego or agent, or upon a resulting trust, for Mr. Bilgin; or that, upon the transfer of the property to Lime, only Mr. Bilgin's legal title was transferred with the result that he retained his existing beneficial interest. Put another way, even assuming that Lime was indeed Mr. Bilgin's puppet, dancing to Mr. Bilgin's tune, that in and of itself would be insufficient to permit a court to disregard the effect of Lime's separate legal personality. Something more is required: Wallersteiner v Moir  1 W.L.R. 991, explained by Chadwick J. in The Arab Monetary Fund v Dr. Hashim & others (unreported, 15th June 1994).
- Mr. Downes' principal oral argument was that Lime was a "convenient repository" for the asset. I am not sure that this argument was initially intended to carry Mr. Downes beyond the submitted conclusions that Mr. Bilgin retained his beneficial title in the property, or that Lime was Mr. Bilgin's nominee or held the property on resulting trust for Mr. Bilgin. However, as developed, the concept of "convenient repository" was deployed by Mr. Downes in support of his submission that Lime was Mr. Bilgin's puppet or a mere façade, and that special reasons existed to justify the piercing of the corporate veil.
- Much of the evidence and material relied on by the Claimants in support of their argument that Lime was merely a "convenient repository" of the property (or, put another way, merely a convenient place to which Mr. Bilgin allocated the property) in fact tends to support the proposition that the beneficial interest passed from Mr. Bilgin to Lime rather than that it was retained by him. Mr. Downes relied principally upon the following:
(a) The notes of a meeting with Coutts on 20th May 2002 in which it was recorded that Mr. Polley expressed the belief that the best way forward was to transfer the property into an offshore company for the purposes of confidentiality and tax mitigation. However, whilst it might be that a desire for confidentiality did not require the beneficial interest in the property to be transferred, the proposed tax advantage could not have been gained unless the beneficial interest was transferred. As Blackburne J. said in a not dissimilar context in Nightingale Mayfair Limited v Mehta & others (21st December 1999):
"These tax objectives would simply not have been achieved if Mr Mehta had been and remained the beneficial owner; they could only have been achieved, under the structures established, if Omdeep owned the property beneficially."
The same logic applies in this case.
(b) The (alleged) facts that the purchase by Lime was apparently paid for by a loan from Mr. and Mrs. Bilgin in circumstances where no money changed hands, there are no loan notes and no contemporaneous documents supporting the existence of a loan. However, the evidence before the court paints a significantly different picture. The transfer of the property was made by Mr. and Mrs. Bilgin to Lime with full title guarantee in circumstances where (i) Coutts advanced a loan to Lime to facilitate the purchase and the property was mortgaged by Lime to Coutts, (ii) a valuation of the property was obtained from a valuer appointed by Coutts, (iii) Lime paid the stamp duty of £136,000 on the transaction, and cash to Mr. and Mrs. Bilgin sufficient to discharge their personal mortgage, (iv) documents immediately preceding the transfer (as to which see paragraph 76 below) referred unequivocally to the making and existence of the loan, and (v) in the balance sheet of Lime prepared independently by Coutts (Isle of Man) Ltd., a loan of £3,201,604 is shown as payable which not only accords with the contemporaneous evidence of the making and existence of the loan but also, according to Mr. Polley, is due as to one half to Mr. Bilgin and the other half as to Mrs. Bilgin.
(c) The transaction, it is said, was not arm's length but was dressed up to be arm's length. Reliance is placed on a letter from Mr. and Mrs. Bilgin's solicitors which stated "The above structure is the best that can be reasonably devised for protecting your privacy. The great advantage is that the initial transfer, which is essentially a public document, bears all the hallmarks of an arm's length transaction and it will be for full value." I agree that the transaction was probably not at arm's length. That was almost inevitable, given that the transfer was to a company that would be controlled by Mr. and Mrs. Bilgin. However, the stated objective of the transaction in the letter was the protection of Mr. Bilgin's privacy. That could not be achieved unless there was the appearance of an arm's length transaction. There is nothing intrinsically wrong with, or legally exceptionable about, that. It is, to my mind, of no weight when the evidence of Mr. and Mrs. Bilgin's solicitors is considered: Mr. Millman of Arnold Fooks Chadwick states, in a passage in his evidence which the Claimants have not been able to challenge:
"..Mr Cairney at Coutts confirms his understanding of the then proposed transaction and the reasons for it. It is perhaps worth noting in my letter of the 14th June to Mr Cairney, copied to Mr Polley, that I say that the funds required to be injected by Mr and Mrs Bilgin should in the first instance be treated as beneficial loans. I then speak of zero dividend shares. If [Lime] were a bare trustee there would be no beneficial loans, neither could redeemable preference shares be issued. I have no doubt that my firm's instructions were that the beneficial interest in the Property were to be transferred to the then Newco and that Coutts, effectively the mind of the Newco, believed and understood that they were through Newco to purchase the entire beneficial ownership in the Property. None of the documentation makes any sense unless that were the case."
The question that I have to determine is whether the Claimants have any realistic prospect of showing an underlying intention that Lime should not be the beneficial owner of the property. The question whether the transaction was at arm's length is of no assistance in that determination: see Hitch & Others v Stone Inspector of Taxes)  STC 431, 463. Evidence of the reasons and objectives of the transfer is far more enlightening and relevant.
(d) It is said by the Claimants that the price of the purchase was artificially depressed so as to minimise stamp duty. Even assuming that to be correct (and it is disputed by Lime), it does not advance the enquiry very much. Stamp duty in a significant amount was still paid.
(e) The board of Lime, it is said, treated Lime's assets as if they were Mr. Bilgin's. There are, it seems to me, two answers to this. In the first place, one of the two emails relied on by the Claimants in this context in their Skeleton in fact suggests that Lime's assets were subject to the ultimate control of Mr. and Mrs. Bilgin, and not Mr. Bilgin alone. That email was dated 23rd July 2003 and stated "The balance of £88,672.50 will remain in the company account for the time being unless there is a need for the funds by Mr and Mrs Bilgin". In the second place, if Lime were so subject to the control of Mr. Bilgin that he could treat Lime's assets as though they were his own, there would be no purpose whatever in Mr. Bilgin having retained any beneficial interest in the property. This was explained by Chadwick J. in The Arab Monetary Fund v Dr. Hashim & others (15 June 1994):
"The imposition on a nominal purchaser of a resulting trust in favour of the person who has provided the purchase money is founded upon the unexpressed but presumed intention of the true purchaser that he should be beneficially entitled to the property for which he has paid. But to presume such intention where land is purchased in the name of an overseas corporation which has been formed or acquired for that purpose and which is under the sole control of the true purchaser would be perverse. The likely intention of the true purchaser in those circumstances is that the whole interest in the property (both legal and beneficial) should be in the overseas entity (either in fact or in law) to control the corporation in such a way that he can deal with the property as if it were his own. To impose a resulting trust in such circumstances would be to defeat, rather than to promote, the intention of the true purchaser."
It seems to me that this passage is as apt to be applied to a case where a corporation has been formed for the purpose of purchasing a property from the person who is to be in sole control of that corporation, as it is to be applied to the case where the purchase is of property from a third party.
(f) The Claimants rely on the fact that the original scheme involving the transfer of the property to an off-shore company envisaged some form of discretionary trust. This is correct but it provides no assistance to the Claimants. The scheme was dealt with in a number of places in the correspondence but in most detail in Coutts & Co.'s letter dated 29 May 2002. It is clear from that letter that what was envisaged was that the property should be purchased from Mr. and Mrs. Bilgin by an off-shore company of which Mr. and Mrs. Bilgin would be the joint beneficial owners; and that, thereafter, Mr. and Mrs. Bilgin should gift their shares in the company to a discretionary trust. It was clearly implicit in this proposed arrangement that the entire interest of Mr. and Mrs. Bilgin in the property, legal and beneficial, would be transferred by them to the new company. Therefore, rather than supporting the suggestion that the new company should be a convenient repository of merely the legal title in the property, the proposed arrangement supports the proposition that neither Mr. nor Mrs. Bilgin intended to retain any part of the beneficial interest in the property after it had been purchased by the new off-shore company.
(g) In the event, the trust scheme was not implemented. The Claimants have suggested that this provides further support to their contention that Mr. Bilgin's beneficial interest never passed to Lime. But it does not. Their primary case was that Mr. Bilgin's predominant motivation behind the transfer was to hide the property; and that their secondary case was that Mr. Bilgin's "further or alternative" predominant motivation was to evade existing liabilities to creditors and to deprive creditors of existing rights (in particular to attempt to place the property beyond the reach of enforcement by the Claimants). It was not made clear to me by the Claimants why Mr. Bilgin would have wished to hide the property unless it was for the purpose of avoiding liabilities; and, in fact, Mr. Downes in the course of his oral submissions produced a powerful argument (for which, see paragraph 87 below) that the hiding of the property had everything to do with the evasion of enforcement of liabilities. Nevertheless, whether it was Mr. Bilgin's wish to transfer his title in the property to Lime in order to preserve or safeguard his privacy and also for estate planning reasons (as Mr. Polley suggests), or whether the transfer was in fact motivated by Mr. Bilgin's desire to hide the property and/or to avoid his contractual obligations under the guarantee and other liabilities (as the Claimants suggest), neither of these objectives could have been achieved with any sufficient degree of success without an effective and complete transfer of title. On that basis, it would simply not be logical to conclude that Lime was merely a convenient repository of the property.
- In support of his submissions on "convenient repository", Mr. Downes relied on United Overseas Bank Limited v Chief Emmanuel C. Imuanyanwu (5 March 2001). That case, however, does not assist Mr. Downes. The question whether a company serves no function other than as repository for another's asset in which that other retains the beneficial interest is one of fact: Omar v Omar (29 November 1996). I have to judge this case by reference to the facts of it and not by reference to the facts of another. The determination of the question whether the transfer of the property to Lime was intended to pass only legal title and not also the beneficial interest is not significantly assisted by an evaluation of another set of facts in another context in a different case.
- The different labels which the Claimants deployed (convenient repository, nominee, alter ego, agent, puppet etc.) in support of their case that the beneficial interest in the property never passed to Lime did not, in themselves, add to the legal enquiry. The underlying facts on which the Claimants relied were essentially the same irrespective of the label that they attached to the particular strand of submission upon which they were engaged. Nonetheless, the Claimants specifically submitted further (i) that the court should pierce the corporate veil because Lime was a façade created to evade existing liabilities to creditors and in particular to place the property beyond the reach of creditors; and (ii) that the court should find a resulting trust because there was neither any intention on Mr. Bilgin's part to make a gift of the property to Lime nor any valid loan (or if there was a loan, it was a sham).
- In relation to piercing the corporate veil, the Claimants relied on a passage in the judgment of the Court of Appeal in Adams v Cape Industries Plc  1 Ch. 433, 544 as follows:
"Mr Morison submitted that the court will pierce the corporate veil where a defendant by the device of a corporate structure attempts to evade (i) limitations imposed on his conduct by law; (ii) such rights of relief against him as third parties already possess; and (iii) such rights of relief as third parties may in the future acquire. Assuming that the first and second of these three conditions will suffice in law to justify such a course, neither of them apply in the present case. It is not suggested that the arrangements involved any actual or potential illegality or were intended to deprive anyone of their existing rights."
- Lime was a company independently owned by Mr. and Mrs. Bilgin and in which the shares were owned by Mr. and Mrs. Bilgin in law and equity. The Claimants' Particulars of Claim specifically aver that Mr. and Mrs. Bilgin each have a 50% interest in the equity of the Second Defendant (paragraph 18b of the Particulars of Claim) and this is also maintained in their draft Amended Particulars of Claim (paragraph 26b). I was under the impression that it was, therefore, accepted by the Claimants that the shares in Lime were beneficially as well as legally owned by Mr. and Mrs. Bilgin but it has been pointed out to me that paragraph 45 of Mr. Wood's Second Affidavit suggests that Mrs. Bilgin was merely her husband's nominee in her holding of her shareholding in Lime. I reject this suggestion: not only is it inconsistent with the Claimants' pleaded case but it is also not supported by the evidence. It is difficult therefore to conclude that Lime was a mere façade. Moreover, for the reasons that I have already indicated above, if the objective of the transfer of the property was to place the property beyond the reach of creditors, it becomes even less likely that Lime was a mere façade.
- It also does not appear to me that the Claimants can place much reliance on the short passage in Adams v Cape Industries Plc, quoted above. The first two conditions in that passage represented purely the submissions of counsel. The fact that the Court of Appeal did not reject those conditions does not provide the Claimants with any sustenance. I say this for the following reasons:
(a) First, it seems to me that the Court of Appeal had well in mind the fundamental principle that it is only appropriate to pierce the corporate veil where special circumstances exist indicating that the company in question is a mere façade concealing the true facts: Woolfson v Strathclyde Regional Council  SLT 159, 161. The two conditions cannot be taken in any way to derogate from that limiting principle.
(b) Secondly, the first condition was, it seems to me, intended to go no further than the decision of the Court of Appeal in Gilford Motor Co. Ltd. v Horne  Ch. 935. That decision concerned an individual defendant who had entered into covenants restricting his trading activities and, in order to avoid those covenants, had caused a company to be formed for the purpose of enabling him through it to do things which, if he had done them personally, would have amounted to a breach of covenant. The Court of Appeal concluded that the company was a mere device for enabling the personal defendant to commit breaches of covenant and so granted an injunction both against the personal defendant and also against the company. However, it was not necessary for the Court of Appeal to treat, and the Court of Appeal did not treat, the assets of the company as though they were the assets of the individual defendant.
(c) Thirdly, the third condition was, it seems to me, intended to go no further than the decision of Russell J. in Jones v Lipman  1 W.L.R. 1962. In that case, the personal defendant was seeking to avoid an order for specific performance of a contract to sell land to the plaintiffs by conveying the same parcel of land to a company that he had specially acquired after the date of the contract. Russell J. held that the company was a device or mask that the personal defendant held before his face in order to avoid recognition by the eye of equity. Again, the court did not have to, and did not, treat the defendant company's assets as though they belonged to the personal defendant. Rather it granted the equitable relief of specific performance against both defendants.
(d) Therefore, I venture to doubt that the two conditions were intended to trespass beyond the proposition that, if a person acquires a company, which is subject to his complete control, and transfers property to that company for the purpose of defeating a person's right to equitable relief against him or evading an existing equitable obligation as in Gifford Motor Company v Horne  Ch. 935 and Jones v Litman  1 W.L.R. 832 – injunction or specific performance – the court may grant a remedy directly against the company: see the discussion in the judgment of Chadwick J. in The Arab Monetary Fund v Dr Hashim (loc. cit.).
(e) Specifically, I do not consider that the two conditions were intended to support the proposition that a court may treat a company's assets as though they were the personal defendant's own merely because he has acquired that company and transferred assets of his own to it for the purpose of avoiding the risk of enforcement against him of a liability in common law damages or debt. Assuming that this was the motivation behind the transfer (and it seems to me, on the evidence, that this is by no means implausible), it is nevertheless not unlawful conduct; and I return to the compelling logic that, where such is the intention and motivation of the personal defendant, it would be perverse (in the language of Chadwick J.) to treat the company as a façade: the logical intention is that the entire interest in the assets, legal and beneficial, should pass to the company so that they remain within the control of the personal defendant while not being available to satisfy creditors.
- As for the argument of resulting trust, it seems to me that the clear answer to it is to be found in the passage of the judgment of Chadwick J. in The Arab Monetary Fund v Dr Hashim (loc. cit.), quoted in paragraph 70(e) above. Finally, in relation to the suggestion that the loan by Mr. and Mrs. Bilgin to Lime was a sham, Lime's balance sheet which was independently drawn up by Coutts (Isle of Man) Ltd. and the unchallenged evidence of Mr. Polley in this connection clearly show that loan. So do the contemporaneous documents: in particular, I have in mind (a) the internal Coutts email of 9 May 2003 which unequivocally states that "in consideration of the purchase price, Lime will pay £201,500 in cash, with the balance of £3,198,500 to be treated as a loan outstanding from Lime to the Bilgins" and (b) Lime's letter (signed by a director of Lime) to Arnold Fookes Chadwick dated 12 May 2003 in which it was stated that the purchase of the property was proceeding and further "that it has been agreed that this Company [Lime] will buy the property from Mr and Mrs Bilgin for the sum of GBP3,400,000.00. In consideration of this amount it has been further agreed that GBP201,500.00 will be paid to the Bilgins, with the remaining balance of GBP3,198,500.00 to be treated as an outstanding loan payable by Lime Company Limited to Mr and Mrs Bilgin." I do not consider that the Claimants are able to point to any satisfactory or substantive evidence in support of their assertion that the loan was a sham. Their references to the absence of loan notes and board resolutions take no proper account of the contemporaneous evidence and the witness evidence of Mr. Millman of Arnold Fooks Chadwick and Mr. Polley before the court.
- I bear in the forefront of my mind, when considering all this evidence and all the arguments that the fundamental underlying questions of which I am seized are of fact, motivation and intention, and that the issues which I have been invited to decide are of no little complexity, legally and factually. I also bear in the forefront of my mind that I have been asked to decide these issues in the context of an application for summary judgment, and not trial. Where disputed issues of fact and intention are concerned on the occasion of an application for summary judgment, it is usual and right for a court to decide that, in the interests of justice, the matter is best left over for trial: in many, if not most, of those cases, it is not possible to conclude on the basis of the written material put before the court and in circumstances where the court lacks the benefit of full disclosure and oral evidence from the relevant witnesses, that the case of the respondent to such an application is fanciful. To my mind, however, this is one of those rare cases where it is possible and right so to conclude. I am of the view, having considered the detailed arguments of the parties and having evaluated the considerable evidence, that the Claimants' case that Lime's assets (or half of those assets) are to be treated as though they are Mr. Bilgin's own, because he always retained the beneficial interest in them, is extremely fragile: to such a degree that, upon analysis, I am compelled to conclude that the Claimants have no realistic prospects of success.
- Whilst logic might not always be a sure sign of intention, I can find in the this case no reason, and certainly no good reason, why Mr. Bilgin would have wished or intended to retain his beneficial interest in the property and only to transfer to Lime the (bare) legal title. Moreover, I can find no facts or satisfactory evidence to support the Claimants' assertion that Mr. Bilgin had such a wish or intention. It comes down, in my view, to essentially the following:
(a) Whichever alleged motivation is attributed to Mr. Bilgin, there would have been no purpose in his retention of a beneficial interest. On the contrary, Mr. Bilgin's alleged objectives could not have been achieved with any sufficient degree of success, unless the transfer was effective to pass the beneficial interest to Lime.
(b) On the Claimants' case, Mr. Bilgin assumed and exercised complete control over Lime, which was merely his puppet, and thus over the property which he treated as his own (and Mrs. Bilgin's). In those circumstances, as Chadwick J. said in a similar context, it would be perverse to presume an intention of Mr. Bilgin that he should retain a beneficial interest in the property. The overwhelming likelihood in those circumstances, especially when those are combined with the others mentioned in this paragraph, is that Mr. Bilgin intended upon transfer of the property to Lime that the beneficial interest as well as the legal title should pass to Lime.
(c) That conclusion is not only reinforced by the recognition of the fact that Lime was a company independently owned by Mr. and Mrs. Bilgin in which they owned the entire issued share capital; it was moreover manifested by the manner in which Mr. and Mrs. Bilgin sought and obtained, and implemented, professional advice in relation to the transfer of the property to an off-shore company (in the event, Lime).
(d) The Claimants have adduced no evidence that Mr. Bilgin's solicitors and Coutts & Co. did not understand, and did not intend, the entire interest in the property to be transferred by Mr. and Mrs. Bilgin to Lime. On the contrary, the evidence from Mr. Bilgin's solicitors is that they intended and acted so as to transfer the entire interest, legal and beneficial, in the property. As for Coutts & Co., which advanced a loan by way of a mortgage to Lime and took a charge over the property as security for repayment of that loan, it would be extraordinary to suppose that it did not believe and intend the entire beneficial interest in the property to pass to Lime. As for Coutts (Isle of Man) Ltd., which supplied the management services for, and directors of, Lime, the unchallenged evidence is that it also believed and understood that Lime was acquiring and had acquired the entire beneficial ownership in the property.
(e) No special circumstances exist indicating that Lime was a mere façade concealing the true facts. There is no satisfactory or sufficient evidence to enable the Claimants to suggest with the necessary degree of plausibility, even at the stage of an application for summary judgment, that the clear distinction drawn between a company and its members, between their respective legal personalities and between their assets should, in this case, not be maintained.
- Therefore, I conclude that Lime's application for summary judgment against the Claimants succeeds.
- I should add that I do not regard this conclusion as in any way inequitable or unfortunate for the Claimants. The court has the power to appoint a receiver over Mr. Bilgin's shares and the chose in action constituted by Lime's debt to him, and over Mr. Bilgin's share of the proceeds of sale of the property and of such amount as stands to the credit of Lime's accounts at Coutts & Co. and elsewhere. Furthermore, in so far as the Claimants maintain that the transfer of the property to Lime was at an undervalue, an adequate and appropriate remedy is to be found in section 423 of the Insolvency Act 1986: see Ord v Belhaven Pubs Ltd.  BCC 607, 616 per Sir John Balcombe.
THE FIRST DEFENDANT'S APPLICATION TO DISCHARGE THE FREEZING ORDER
- By an Application Notice dated 18th June 2004, Mr. Bilgin applies for the freezing order made by David Clarke J. on 16th April 2004 to be discharged.
- The grounds of the application fall into two categories. The first is that the freezing order should not have been made because (i) there was no urgency to justify the making of an application without notice; and (ii) there was no appreciable risk of an unjustifiable dissipation of assets by Mr. Bilgin. The second is that, when the freezing order was applied for, the Claimants both misrepresented the true facts and also failed to make full and fair disclosure in a number of significant respects. It is submitted on behalf of Mr. Bilgin that, accordingly, the freezing order should be discharged and not renewed.
- I am guided by the principles established in a number of cases which have been cited to me, most particularly Third Chandris Shipping Corporation v Unimarine S.A  1 Q.B. 645, Brink's Mat Ltd. v Elcombe  1 W.L.R. 1350, Memory Corporation Plc v Sidhu (No. 2)  1 WLR 1443 and The Arena Corp. Ltd. v Peter Schroeder  EWHC 1089.
- I shall first consider whether the freezing order should have been made and whether this would be an appropriate case in which the freezing order should be continued until trial assuming the absence of any alleged non-disclosures and misrepresentations.
- I am of the firm view that this was an appropriate case for a freezing order to have been granted and that, absent any non-disclosures and misrepresentations, it should be continued until trial.
- In the first place, there was a clear risk that, unless the order were made, Mr. Bilgin's assets were liable to be dissipated with the result that any judgment against Mr. Bilgin would be rendered worthless. The information available to the Claimants was to the effect that the property was about to be sold or in fact had been sold and that the proceeds would be dispersed through Mr. Bilgin's account at Coutts & Co.. The Claimants' apprehensions were entirely justified. As the disclosed documents show, by letter signed on about 5th March 2004, Mr. and Mrs. Bilgin gave instructions to the directors of Lime to transfer all the company's assets (after sale of the property) to their joint account at Coutts. By letter dated 23rd March 2004, Mr. Bilgin informed Coutts & Co. of his wish to transfer £3,550,000 from Lime's account to the joint account, and on the same day, he gave instructions to Coutts & Co. to transfer the same sum from the joint account to an account in the joint names of his daughter and son-in-law at Fleet Bank in Boston, Massachusetts. Other letters signed by Mr. Bilgin dated also 23rd March 2004 gave Coutts & Co. still further instructions for more transfers of funds to be made from the joint account at Coutts to his daughter's and son-in-law's account in Boston. On 16th April 2004, the same date as the freezing order, the sale of the property by Lime was completed. It is transparently clear that, unless the freezing order had been made, the net proceeds of sale of the property would have been ultimately paid into the joint account in the names of Mr. and Mrs. Bilgin in London and thence transferred to Boston. Mr. Polley has also given evidence that, once the funds reached Boston, he and his wife (Mr. Bilgin's daughter) would have held on to them pending a decision as to their use. They might have been used in the purchase of a home in the U.S.A. for Mr. and Mrs. Bilgin, or another house in Lime's name or in the name of a U.S. company.
- It also appears to me, as I have indicated in another context above, that there is a powerful case that the reason why the property was acquired by Lime from Mr. and Mrs. Bilgin in the first place was to enable Mr. Bilgin to avoid enforcement against his assets of his liabilities, including his indebtedness to the Claimants under the terms of the guarantee. I have particularly in mind that the principal reason expressed on behalf of Mr. Bilgin for the transfer, at the time when it was being proposed in February 2002 that the property should be sold to an overseas company (in the event, Lime), was in order to preserve Mr. and Mrs. Bilgin's privacy in view of the political situation in Turkey. However, as Mr. Downes pointed out, it also appears that all of Mr. Bilgin's assets in Turkey had been frozen by the Turkish authorities; that Mr. Bilgin, himself, had only recently been released from detention in Turkey and so was finally in a position to attend to his U.K. property; and that a demand had been made of Mr. Bilgin on 27th December 2001 for £919,956.54 as due under the guarantee. As Mr. Downes submitted, the likely reason why Mr. Bilgin was motivated to transfer the property to Lime was the protection of his assets against execution by unsatisfied creditors. It is also reasonably to be inferred that the reason why, two years later, Mr. Bilgin was taking steps to have the property sold and the proceeds remitted via the joint account to Boston was to avoid such proceeds being available to satisfy his indebtedness to the Claimants and other creditors. He certainly does not appear to have shown any enthusiasm for using those proceeds or his share of them to discharge his debts. Thus, it is clear that, unless the proceeds were frozen, there was a real risk that they would be lost to the Claimants for the purposes of enforcement of any judgment and that any such judgment would be rendered effectively nugatory.
- It seems to me also that there was sufficient urgency in the matter to warrant a without notice application. While Mr. Simon Jones, a director of TCF, was aware of the existence of a property in Sloane Street, he had not been able to discover its precise address. The Claimants were throughout aware from a Turkish newspaper clipping that the property had reportedly been sold by Mr. and Mrs. Bilgin to a company called Lime but it does not appear that it was until some time in April 2004 that they were alerted to the possibility that the property was about to be sold by Lime, what its address was in Sloane Street, and that the proceeds were imminently to be dispersed by Mr. and Mrs. Bilgin. I am of the view that there was more than sufficient urgency to justify a without notice application. Even if there was not, it nevertheless strikes me as obvious that any application had to be made by stealth – so as not to alert Mr. Bilgin to the imminence of the application. Otherwise, by the time when the application was heard, the funds to be frozen may well have left the jurisdiction for good.
- I now turn to the questions of misrepresentation and non-disclosure. Mr. Qureshi ultimately relied principally on eight separate matters. The first was a passage in the first affidavit of Mr. Wood of Clyde & Co. the Claimants' solicitors. After referring to a report that the Sabah Group had been restructured, Mr. Wood stated that a new company under the name of Merkez had been formed by a new investor and "that the income of Sabah was being diverted to the new company so as to avoid creditors including the tax authorities." The clear impression given by this passage was that Sabah's assets, which would otherwise have been available to satisfy its creditors, were being deliberately diverted away from those creditors into Merkez's coffers. That impression was misleading. It turns out that it was well-known to the Claimants (since Mr. Jones, a director of the First Claimants had given evidence to that effect in the action between TCF and Sabah referred to in paragraph 12 above) that the arrangements that had been entered into between Sabah and Merkez not only had received the blessing of the Turkish banking authorities and tax authorities but also provided Sabah with a source of income. There has been no satisfactory explanation by the Claimants of how this misleading passage was permitted to be put in evidence. There was no deliberate intent to mislead but, nevertheless, there does not appear to be a satisfactory explanation or excuse for its inclusion. Mr. Downes submitted that the passage appears in a section in the affidavit dealing with the recovery action against Sabah and that it was not deployed in order to impugn Mr. Bilgin. I do not think that one can scientifically dissect the affidavit in that way. Mr. Bilgin was the guarantor of Sabah's indebtedness. There was clearly an association of some sort between the two. The fact that the court was being told that Sabah, a debtor of the Claimants, was allegedly taking steps to place its assets out of reach of its creditors in the context of an application for a freezing order against Mr. Bilgin, another debtor of the Claimants associated with Sabah, cannot be treated as neutral or of historical relevance only.
- The second matter complained of is (i) the reference in Mr. Wood's first affidavit to the fact that DC Berry of the Metropolitan Police was Mr. Wood's source of information relating to the property, its sale and the dispersal of the proceeds, and (ii) the reference in Mr. Wood's first affidavit in the section dealing with the risk of dissipation of assets to the fact that Mr. Bilgin had been arrested and imprisoned in Turkey – although he (Mr. Wood) was unaware of the precise charges against Mr. Bilgin, the period of his imprisonment and the basis of his release.
- I do not consider that it was inappropriate for Mr. Wood to refer to DC Berry as being his source of information. The fact was that DC Berry was indeed Mr. Wood's source of information. Also, I do not accept that a judge should or would be influenced one way or another on an application for a freezing order by such a reference. A judge evaluates the application on the basis of the substantive evidence before him. The references to DC Berry do not constitute substantive evidence relevant to an application for a freezing order. Moreover, as Mr. Qureshi accepted in the course of the hearing on more than one occasion, it was made clear by Mr. Downes to David Clarke J. on the occasion of the without notice application that no impropriety or dishonesty was being alleged against Mr. Bilgin. It seems to me that this explicit oral statement to the judge did more than enough to neutralise any prejudice that the reference to DC Berry might conceivably have created.
- It seems to me that the references to the arrest and imprisonment of Mr. Bilgin by the Turkish authorities were not relevant to the application. Mr. Downes suggested that they assisted in explaining why Mr. Bilgin had failed to pay his indebtedness to the Claimants as and when it fell due: since Mr. Bilgin was in prison, he could not attend to his affairs. It may be that Mr. Bilgin's inability to pay his debts was partly due to his incarceration in Turkey but that does not explain why it was necessary to refer to his imprisonment in that section of the Affidavit that was dealing with the risk of dissipation of assets. Having said that, again I do not think that these references will have been influential in the consideration of the application. Mr. Downes, I repeat, made it clear to the judge that no impropriety or wrongdoing was being alleged against Mr. Bilgin.
- The third matter concerns the failure by the Claimants to mention the problems arising from their failure to register their title in the press in Turkey. This does not strike me as a valid criticism. I do not consider that it affected the existence of a good arguable case against Mr. Bilgin under the guarantee. Certainly, to my mind, it did not obviously give rise to an arguable defence.
- The fourth matter, linked to the first, was the deployment of the fax from DC Berry in which he discloses the information relating to the sale by Lime of the property and the dispersal of funds. I come to the same conclusions in relation to this as I have come above in relation to the references to DC Berry in the Affidavit. It is said that the deployment of this fax was improper and was calculated to create a highly prejudicial impression against Mr. Bilgin. I do not agree. That fax contained the essential information of imminent dissipation of assets. As such, it was much more powerful evidence than some verbal communication. It was essential to be deployed. Moreover, if it had not been deployed, I venture that some criticism would have been made of the fact that the source of the information contained in the fax had not properly been described in accordance with the rules of court.
- The fifth matter is an alleged failure properly to deal with the Protocols and the fact that there was optimism that the equipment would be sold to Merkez. I do not think that one can criticize the Claimants in this way. There had been no hint of any alleged oral assurance, and the case against Mr. Bilgin on the guarantee appeared straightforward and strong.
- The sixth matter concerns Lime. In the evidence put before the judge on the application for the freezing order, Lime was described as a member of a sophisticated network of international companies operated by Mr. Bilgin. It was suggested by Mr. Downes in his argument before David Clarke J, that it was incorporated in a place, the Isle of Man, where there is no public access to details of ownership, and that the property was "bouncing" back and forth between it and Mr. Bilgin. These were matters relied on by Mr. Downes as showing a real risk of dissipation of assets. The complaint on behalf of Mr. Bilgin is that the Claimants failed to disclose that Lime's officers were employees of Coutts (Isle of Man) Limited; that the Claimants had failed to carry out a company search; that it was obvious from the information available to the Claimants that Lime banked with Coutts but this was not disclosed; and that the prejudicial and false impression was conveyed to the judge that Lime had all the attributes of the Cheshire Cat (see Third Chandris Corp. v Unimarine S.A. loc. cit.).
- These criticisms appear to me to be misplaced. The fact is that Mr. and Mrs. Bilgin transferred their title in the property to Lime, an Isle of Man company, and, according to the information available to the Claimants immediately before their application for a freezing order was made, Lime was selling that property and the proceeds were about to be dispersed by Mr. and Mrs. Bilgin. That information was not inaccurate. It seems to me that, if a person uses a company such as Lime in the way in which Mr. and Mrs. Bilgin did, he invites the suspicion that the company is a special purpose vehicle – of which the purpose is to put distance between that person and his assets to protect them against the consequences of his personal liabilities. Moreover, at the time of the application for the freezing order, the Claimants did not know that Lime's directors were employees of Coutts (Isle of Man) Limited. While they were aware, as a result of a newspaper report received over one year previously, of the existence of Lime and the rumour that the property had been transferred by Mr. and Mrs. Bilgin to Lime, they did not know until Mr. Wood had spoken to DC Berry on 15th April 2004 and received his fax on the following day, either where Lime was incorporated or the address of the property (save that it was somewhere in Sloane Street). The Land Registry search, which was exhibited to Mr. Wood's First Affidavit, should have alerted Mr. Wood to the fact that the property was charged to Coutts & Co. and therefore, to the real possibility that Lime banked with Coutts in London, but this would not have been any more significant than the information, which was specifically disclosed to David Clarke J., that Mr. and Mrs. Bilgin also banked with Coutts. The fact that all these parties may have banked with a bank of impeccable reputation did not, of itself, derogate from the justifiable suspicion that Lime was a vehicle used by Mr. and Mrs. Bilgin in the manner indicated above and that there was a real and imminent risk of dissipation of the proceeds of sale of the property. I should add that I agree that the impression conveyed to David Clarke J. was that Lime was akin to a Cheshire Cat which, to my mind, was a slightly exaggerated description. However, there was more than sufficient to justify the submission that the use of Lime was suggestive of an attempt to put the property beyond the reach of creditors. The attribution of Cheshire Cat qualities did not add much to that submission.
- I should mention that, even if a company search had been undertaken of Lime, it would not have altered the picture in any significant way, other than perhaps to have strengthened the grounds of the Claimants' application. In fact Mr. Wood did initiate a search as soon as he learned of Lime's involvement but the results did not reach him until 20th April. Those results named the shareholders of Lime as two Isle of Man companies called Discovery Holdings Limited and Stanhope Securities Limited and described the directors as "Bank Officials". If one were to seek to draw any conclusions from that information, it would only be to the effect that the true owner of Lime seemed intent on not making himself apparent from the Register.
- The seventh matter concerns Arch Foreign Trade Plc.. In his First Affidavit, Mr. Wood identified this company, "Arch", as agent for service in the UK for Sabah and Mr Bilgin. However, according to Mr. Wood's evidence, Arch was no longer at the address 186 Sloane Street and no telephone number was listed for it. Mr. Wood included Arch within Mr. Bilgin's sophisticated network of companies and mentioned that a Mr. Emre Bilgin, who according to Mr. Wood was Mr. Bilgin's son, was a director. Mr. Qureshi complains of the following: (i) Mr. Emre Bilgin is not Mr. Bilgin's son and he appears to have no connection with Arch; (ii) the documents exhibited to Mr. Wood's first affidavit show clearly that Arch's registered office was 22 Melton Street, London NW1 2BW; (iii) those documents also give a telephone number and contact address for Sabah of a Mr. O'Keefe; and (iv) Arch was not a member of any network of Bilgin companies.
- Once more, I consider these criticisms to be misplaced. While it is correct that Mr. Emre Bilgin is not Mr. Bilgin's son, he is nevertheless Mr. Bilgin's nephew and a Mr. Onay Bilgin is named as a shareholder of Arch. Mr. E. Bilgin had been a director of Arch but had resigned in 2002. Thus there was and had been a connection between Arch and the Bilgin family. While it is correct that Arch's registered address was in Melton Street, the guarantee given by Mr. Bilgin stated that it was 186 Sloane Street. The guarantee was incorrect but Mr. Wood's mistake was easily made. In fact, Arch's registered address is occupied by a firm of accountants which, when approached by Mr. Wood subsequently, stated by letter dated 20th April 2004 that they had severed links with Arch in 2003 and the directors of Arch were being prosecuted for non-filing of accounts. As for contacting Mr. O'Keefe, he has stated to Mr. Wood that he had acted for Arch in the past but that, so far as he is aware, Arch has lacked a presence in the U.K. for some while. Thus, any communications with the registered address or with Mr. O'Keefe would have tended to strengthen the case for a freezing order rather than weaken it. Finally, as Arch's accounts show, Arch's income appears to have been principally derived from earnings of interest. It does not appear to have undertaken any other operations.
- The last matter complained of by Mr. Bilgin is the Claimants' failure to address Mrs. Bilgin's interest in the property. In fact, Mr. Wood's first affidavit mentioned in paragraph 32 that the property had been owned by Mr. Bilgin and his wife when it was transferred to Lime. However, I think that there is force in the criticism that it should have been apparent to the Claimants or their legal advisers that one defence that Mr. Bilgin might take in relation to the relief sought was that the proceeds of sale of the property, if beneficially held by Lime for anyone, were beneficially held for both Mr. Bilgin and also for Mrs. Bilgin. This should have been apparent from the facts (subsequently pleaded by the Claimants in their Particulars of Claim) that Mr. and Mrs. Bilgin (both) had originally had title in the property; that the property had been transferred from Mr. and Mrs. Bilgin (both) to Lime; that Mr. and Mrs. Bilgin each have a 50% interest in the equity of Lime; and that Mr. and Mrs. Bilgin have a joint account at Coutts & Co, in London. I remind myself in this context of what was said by Lord Denning M.R. in Bank Mellat v Nikpour  F.S.R. 87, 89:
"When an ex parte application is made for a Mareva injunction, it is of the first importance that the plaintiff should make full and frank disclosure of all material facts. He ought to state the nature of the case and his cause of action. Equally, in fairness to the defendant, the plaintiff ought to disclose, so far as he is able, any defence which the defendant has indicated in correspondence or elsewhere."
It seems to me that the claimant should likewise disclose any defence which the defendant is likely to take (because it is or ought to be sufficiently obvious to the claimant), whether or not the defendant has mentioned it previously.
- In summary, I consider that there is substance only in Mr. Bilgin's first and last (eighth) complaints: that relating to Merkez and diversion, and that relating to Mrs. Bilgin's potential interest.
- The first question that I have to ask myself is whether the subject-matter of those complaints was material in the context of the application for the freezing order. By material, I mean material for the judge to know in dealing with the application. I conclude that the subject-matter was material. The first matter, that relating to Merkez, gave an impression that Mr. Bilgin was connected with an organisation that was deliberately seeking to evade its liabilities; the last matter, that relating to Mrs. Bilgin, was relevant to whether any freezing order should attach to all the proceeds of sale of the property or only to half.
- The next question that I ask myself is whether, as a result of the misrepresentation and non-disclosure, I should discharge the freezing order. I am guided by the principles set out in seven paragraphs by Ralph Gibson L.J. in Brink's Mat Ltd. v Elcombe  1 W.L.R. 1350, 1356 and by the judgments of Balcombe L.J. and Slade L.J. at pages 1358 and 1359. I am also guided by the principle that there is a considerable public interest in the court ensuring that full disclosure is made on without notice applications: Behbehani v Salem  1 W.L.R. 723. I take particular account of the degree and extent of the culpability with regard to the misrepresentation and non-disclosure, and their importance and significance to the outcome of the application.
- I am of the clear view that there was no intention on the part of the Claimants, and Mr. Wood in particular, to omit or withhold information which was thought to be material, or to misrepresent the true position. However, if proper thought had been given to the evidence and to the merits of the case, even in the haste in which the application had to be mounted, it seems to me that neither the misrepresentation nor the non-disclosure would have been made. It was incumbent upon the claimants and those advising them to make proper and careful enquiries in the time available to them, and I am satisfied that, even though time was short, they had sufficient so as to have ensured that the court was not given a wrong impression. Theirs was a high duty and I do not consider that they fulfilled it.
- However, I am also of the clear view that, even in the absence of the misrepresentation and non-disclosure, the court would have granted, and would have rightly granted, the freezing order. There was more than sufficient evidence to justify the conclusion that, unless the order were granted, there was a real risk of dissipation of assets such that any judgment would ultimately prove worthless; and, to my mind, even if the court had been told of the possibility of a defence based on Mrs. Bilgin's separate beneficial interest in the property, on the basis of the limited material available at that juncture, there were sufficient grounds for the suspicion that any interest in the name of Mrs. Bilgin was held by her on behalf of Mr. Bilgin.
- I also consider that it would be unduly penal, in all the circumstances, to deprive the Claimants of the protection of the freezing order because of their defaults. I am very conscious that, ordinarily, a breach of the duty to make full and frank disclosure should lead to a discharge of the original injunction and a refusal to renew it; and that the jurisdiction to do otherwise should be exercised sparingly. However, having assessed the importance of the misrepresentation and non-disclosure, the culpability underlying them, the merits of the claimants' case for an injunction, the proportionality between the offence and the punishment, I conclude that the freezing order should be continued.
- In the light of my decisions above, however, the injunction should be confined to Mr. Bilgin's assets (not Mrs. Bilgin's) and Mr. Bilgin's interest in the assets of Lime. Furthermore, despite the fact that, as I have found, Mr. Bilgin has not retained a beneficial interest in the property and the proceeds of sale of the property, I have concluded that it is right that the freezing order should continue over one half of Lime's assets: it seems to me that, by virtue of Mr. Bilgin's shareholding in Lime and the debt owed to him by Lime (both of which are assets of Mr. Bilgin), and the power of the court to appoint a receiver over those assets in order to cause Lime to disgorge its funds in partial satisfaction of the Claimants' judgment against Mr. Bilgin, such an order is incidental to the Claimants' substantive right against Mr. Bilgin: C Inc. Plc v L  2 Lloyd's Rep 459, 474/5, Cardile v Led Builders Pty Ltd.  H.C.A. 18. If I did not make such an order, the judgment against Mr. Bilgin is liable to be rendered worthless.
THE FIRST DEFENDANT'S APPLICATION FOR SPECIFIC DISCLOSURE
- The First Defendant's application for specific disclosure logically preceded his application for the discharge of the freezing order. I dealt with it before hearing the latter and rejected it. I shall here give my reasons briefly.
- Mr. Bilgin applied for disclosure of all documentation evidencing communications with the Metropolitan Police relating to the fax from DC Berry dated 15th April 2004. Mr. Bilgin alleged that the fax was deployed for an improper purpose to substantiate an allegation of impropriety against him or as the result of the unlawful use of personal data in contravention of the provisions of the Data Protection Act 1984.
- It is now accepted by Mr. Qureshi on behalf of Mr. Bilgin that, in fact, it was made clear by the Claimants on the occasion of their application for a freezing order that no allegation of impropriety was being made against Mr. Bilgin. It was also accepted by Mr. Qureshi that the communications of which disclosure was sought would ordinarily be privileged. Mr. Qureshi submits however, and I accept, that, if the Claimants were guilty of criminal conduct in connection with obtaining the information contained in DC Berry's fax, then any documents generated by or reporting on such conduct would fall outside the protection of privilege: Dubai Aluminium Co. Ltd. v Al Alawi  1 WLR 1964, 1969, Memory Corporation Plc v Sidhu (No. 2)  1 WLR 1443, 1457/8.
- The issue of which I am seized therefore is whether, in connection with obtaining the information contained in DC Berry's fax, there is a strong prima facie case that the Claimants or those acting for them contravened the Data Protection Act 1984.
- Mr. Qureshi relied on section 55 of the Act which provides as follows:
"(1) A person must not knowingly or recklessly, without the consent of the data controller
(a) obtain or disclose personal data or the information contained in personal data, or
(b) procure the disclosure to another person of the information contained in personal data.
(2) Subsection (1) does not apply to a person who shows
(a) that the obtaining, disclosing or procuring
(i) was necessary for the purpose of preventing or detecting crime, or
(ii) was required or authorised by or under any enactment, by any rule of law or by the order of a court,
(b) that he acted in the reasonable belief that he had in law the right to obtain or disclose the data or the information or, as the case may be, to procure the disclosure of the information to the other person."
- Mr. Qureshi identified the Chief Police Officer to be the data controller and accepted that the Force Data Protection Officer could give consent on behalf of the Chief Police Officer. There is no evidence that DC Berry gave the information contained in his fax without the consent of the Chief Police Officer or the Data Protection Officer. Mr. Bilgin does not therefore come anywhere near showing a strong prima facie case of a contravention by DC Berry of section 55 of the Data Protection Act 1984. There was no evidence that the regime in the Act had not been followed. There was no evidence that the Claimants were in any way involved in a breach of the provisions of the Act. There was no evidence to suggest that the police forces were acting as the Claimants' agents. There was no evidence that the personal data, if any, were not exempt from the non-disclosure provisions contained in section 35 of the Act.
- In conclusion there was no evidence of criminal, fraudulent or illegal conduct. The application by Mr. Bilgin, therefore, failed.
- It follows from the above that I conclude that:
(a) the Claimants' application for summary judgment against the First Defendant, Mr. Bilgin, in respect of his guarantee liability succeeds;
(b) the Second Defendant's, Lime's, application for summary judgment against the Claimants succeeds;
(c) the Claimants' application for a continuation of the freezing order succeeds, subject to modification to take into account Mrs. Bilgin's interests;
(d) the First Defendant's application for the discharge of the freezing order fails;
(e) the First Defendant's application for specific disclosure fails;
(f) Mrs. Bilgin's application is adjourned.
- I shall welcome the assistance of counsel on the terms of the appropriate orders that follow from my judgment, the drawing up of the order, all issues of costs, and such other directions as they might consider appropriate.
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