|[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]|
England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Apollo Ventures Co Ltd v Manchanda & Ors  EWHC 2206 (Comm) (12 August 2020)
Cite as:  EWHC 2206 (Comm)
[New search] [Context] [View without highlighting] [Printable PDF version] [Help]
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
Rolls Building, Fetter Lane,
London, EC4A 1NL
B e f o r e :
(Sitting as a Judge of the High Court)
| APOLLO VENTURES CO. LIMITED
|- and –
|SURINDER SINGH MANCHANDA
GURMUKH SINGH MANCHANDA
GURBAKSH KAUR MANCHANDA
GURSEV SINGH MANCHANDA
SIMRAT KAUR MANCHANDA
4G PROPERTIES LIMITED
HKM INVESTMENTS LIMITED
Jeremy Bamford (instructed by Rubric Lois King Solicitors) for the First Defendant
Thomas Roe QC (instructed by Gresham Legal) for the Second, Third, Fifth, Sixth, Seventh and Eighth Defendants
Hearing date: 27 July 2020
Crown Copyright ©
(1) Apollo is a company incorporated under the laws of Thailand in 2003, of which Surinder Manchanda ("Surinder") and Suhel Manchanda ("Suhel") (Surinder's son by his second wife, Rachpal Kaur Narula ("Rachpal")) are the main shareholders (each having a 49% shareholding). At the time the subject loans were made, Rachpal had a 49% shareholding which has subsequently been transferred to Suhel.
(2) The claim involves various allegations against Surinder, various members of his family by his first wife Harmeet Kaur Dang, and two companies alleged to have been set up to receive the proceeds of an alleged fraud. The allegations against Surinder include forgery, fraud, conspiracy, breach of his obligations as a director of Apollo, together with other civil wrongs under Thai law.
(3) It is alleged that in 2013 Surinder, who is the First Defendant, procured that Apollo enter into two loans ("the Loans") with Suchin Worawongvasu, a Thai businessman, under which Apollo borrowed approximately £4.4m and became liable to pay further amounts such that the total amount now owed by Apollo is said by the Claimant to be £5.8m. Apollo alleges that Surinder entered into the Loans in its name without the involvement, knowledge or consent of the other officers or shareholders of Apollo using forged documents. It is alleged that the greater part of the proceeds of the Loans was not paid to or for the benefit of Apollo but to Surinder, his family members or other entities controlled by them. The Claimant admits that part of the proceeds of the Loans was used to repay an existing mortgage held by Apollo and that Suhel, Rachpal and Gurdyal (Surinder's daughter by Rachpal) all received monies from the Loans.
(4) The claims against the other Defendants in these proceedings are advanced under two main heads:
(a) A claim of unlawful means conspiracy against the First to Third and Fifth and Sixth Defendants, these unlawful means being the alleged breaches of fiduciary and/or directorial duties, or an alleged equivalent liability under the Thai Civil and Criminal Code.
(b) Claims based on alleged unconscionable receipt by the Defendants and/or an obligation to account for amounts allegedly received by the Defendants under Thai law and/or on the basis that the Defendants are allegedly constructive trustees of the amounts received by them.
(5) Surinder denies any liability. His case is that the other directors and shareholders in Apollo were aware of and consented to the making of the Loans and that the subsequent distribution of the Loan monies was for the benefit of Apollo and the shareholders of Apollo.
(6) The other Defendants also deny liability. They deny involvement in any conspiracy or any knowing receipt of funds. Gurmukh Manchanda's case is that he received money from Surinder by way of a loan at a rate of interest of 18% (a substantial portion of which has been repaid) and that, at the time, he did not know that the funds were proceeds of the Loans. Gursev Manchanda's case is that he received monies from Surinder by way of loans to set up a new business and did not know, at the time, where the money had come from but assumed it was from property investments.
Security for costs.
(1) The court may make an order for security for costs under rule 25.12 if –
(a) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and
(i) one or more of the conditions in paragraph (2) applies, or
(ii) an enactment permits the court to require security for costs.
(2) The conditions are –
(a) the claimant is –
(i) resident out of the jurisdiction; but
(ii) not resident in a Brussels Contracting State, a State bound by the Lugano Convention, a State bound by the 2005 Hague Convention or a Regulation State, as defined in section 1(3) of the Civil Jurisdiction and Judgments Act 1982 7;
(c) the claimant is a company or other body (whether incorporated inside or outside Great Britain) and there is reason to believe that it will be unable to pay the defendant's costs if ordered to do so;"
"because the Claimant is a company incorporated in Thailand and which, on its own evidence, is impecunious, meaning that it is highly unlikely that any order for costs made in the Defendants' favour will ever be recovered"
(1) A statement from Mr Winston, of Squire Patton Boggs (the Defendants' then solicitors), dated 30 November 2016. That statement made reference to statements made in earlier statements by Mr Tossaporn Sumpiputtananadacha on behalf of the Claimant, dated 11 May 2016, Suhel dated 19 May 2016 and Surinder dated 28 May 2016.
(2) A statement from Suhel dated 6 July 2020, served after a debate between the parties' respective solicitors (who were by now different solicitors' firms to those instructed originally) as to timetabling which began at the beginning of June 2020 (when Gresham Legal were instructed on behalf of the Defendants).
(3) A reply statement from Gurmukh Manchanda ("Gurmukh") served on 20 July 2020.
(1) The Defendants relied on an assertion that the Claimant was impecunious; that there was therefore reason to believe it would unable to pay the Defendants' costs if ordered to do so; and that in these circumstances it would be just to make an order for security for costs. The Claimant responded by saying that the making of such an order would stifle its claim; that its claim was at least arguable; and that it would therefore not be just to make an order.
(2) The Defendants also relied on the fact that the Claimant was resident in Thailand, and produced evidence to show that enforcement in Thailand would be difficult. The Claimant did not produce any evidence on this, but simply argued once again that it would be unjust to make an order which might have the effect of stifling a potentially valid claim.
(1) In my judgment, this point is misconceived. It is up to the Defendants to decide what is in their application notice. If the evidence that is relied on is inconsistent with what they argue, then that is a matter that the Claimant can of course, rely on. However, here, what is said by the Claimant (as I note below) is that the evidence relied on by the Defendants is wrong and should be rejected.
(2) As to allowing further evidence, I note the following:
(a) First, this hearing has been in the diary for some substantial time.
(b) Secondly, on being instructed, the solicitors for the Defendants sought to ensure an early and orderly exchange of evidence. It was because of delays on the part of the Claimant in engaging with this question that their evidence was served only 3 weeks prior to the hearing.
(c) Gurmukh's reply statement was then served two weeks later.
(d) At that stage, if it wished to put in further evidence, it was open to the Claimant to seek to do so, or to apply to adjourn. It did neither.
(e) Overall, I take the view that it would be wrong to allow further evidence to be adduced at this very late stage, with the consequent wasted costs. However, I do take note of the explanations given to me on instructions by Counsel, and the fact that Gurmukh's evidence is challenged. I deal with the relevance of this below.
"The burden is on the Claimant to establish the probability that her claim would be stifled if she were ordered to pay more than £1.1 million as further security for costs and her evidence has to be full, frank, clear and unequivocal; see Al-Koronky v Time Life Entertainment Group  EWHC 1688 (QB) at 31. Some of the more recent authorities to the same effect are noted in Accident Exchange and another v Mclean and others  EWHC 1533 (Comm) at paragraphs 10-13."
"17. It is clear that, even when the appellant appears to have no realisable assets of its own with which to satisfy it, a condition for payment will not stifle its appeal if it can raise the required sum. As Brandon LJ said in the Court of Appeal in the Yorke Motors case, cited with approval by Lord Diplock at 449H:
"The fact that the man has no capital of his own does not mean that he cannot raise any capital; he may have friends, he may have business associates, he may have relatives, all of whom can help him in his hour of need.""
"24. The criterion is simple. Its application is likely to be far from simple. The considerable forensic disadvantage suffered by an appellant which is required, as a condition of the appeal, to pay the judgment sum (or even just part of it) into court is likely to lead the company to dispute its imposition tooth and nail. The company may even have resolved that, were the condition to be imposed, it would, even if able to satisfy it, prefer to breach it and to suffer the dismissal of the appeal than to satisfy it and to continue the appeal. In cases, therefore, in which the respondent to the appeal suggests that the necessary funds would be made available to the company by, say, its owner, the court can expect to receive an emphatic refutation of the suggestion both by the company and, perhaps in particular, by the owner. The court should therefore not take the refutation at face value. It should judge the probable availability of the funds by reference to the underlying realities of the company's financial position; and by reference to all aspects of its relationship with its owner, including, obviously, the extent to which he is directing (and has directed) its affairs and is supporting (and has supported) it in financial terms."
(1) The first is the evidence of the resources of the company itself. This is scant, to say the least:
(a) I have seen no accounting documents. Thus, I have been given no audited accounts, no management accounts, no balance sheets and no profit and loss accounts.
(b) I have seen no bank documentation of any sort.
(c) Suhel (who is the holder of 49% of the shares in the company) has given evidence as to the income of the company and how it is spent. In his first statement in 2016, read along with that of Mr Sumpiputtananchanda, quoted in Mr Winston's statement, he says that the company's only income is rental from its office block, which covers its outgoings on staff but little more. The remainder has been spent on legal fees, both in this action and in the related Thai actions. However, there was no detail of these legal fees and the exact amounts paid by the company in each jurisdiction. Of course, to the extent that the same relief is sought in numerous jurisdictions in relation to the same alleged loss, with consequent increases in costs, this must be relevant in relation to the exercise of the Court's discretion.
(d) The company's only capital asset was the land and office block in Bangkok. That land was said to be fully leveraged so that it was in effect worthless. The loans secured on the property were some £5.8m. It is this property which, on the evidence of Gurmukh, was on the market for £17.5m, and which generated the procedural arguments that I have dealt with above. I was told by Counsel for the Claimant that the actual value of the property is much less than £17.5m and that it was being marketed for an artificially high value. In these circumstances, I do not think that I can reliably reach any conclusions as to the actual value of the property, nor as to the amount of loans secured on it.
(e) Finally, there was some evidence to the effect that one reason for the company's impecuniosity was because rental income that should have gone to the company was directed to Suhel and Rachpal instead. This would be another reason for ordering security under CPR Rule 25.13(2)(g).
(2) The next category of available finance would be from those standing behind the company – and in particular Suhel himself and his mother, Rachpal. Again, here, the evidence was extremely unsatisfactory.
(a) Suhel's evidence in his 6 July statement was that he had no shares of any value, no property (most of his property having been pawned), no ownership interest in his house, no income other than his rental income from Apollo (the amount of which is not specified) and no money in the bank. He also stated that he could not borrow money.
(b) His evidence as to Rachpal's financial position was that her position was the same as his – ie no shares, no house, no income other than rental from Apollo, without amounts specified, no property and no money in the bank. Again, his evidence was that she could not borrow money.
(c) He also referred to the fact that both he and Rachpal had pawned a number of items to fund the litigation in 2019 and 2020, and exhibited receipts in this regard. In fact, however, when these receipts were analysed and translated, a number of them predated the litigation; and many were produced twice, with the front and back produced separately.
(d) Finally, there was evidence put in by Gurmukh in reply to the effect that Rachpal had inherited a property from her father. That assertion was challenged by Counsel for the Claimant, but again I had no evidence before me. Again, I do not think I can reach any reliable conclusion on this.
(1) First, the policy expressly excluded costs which had been incurred prior to the period of insurance, defined as 30 November 2017: see exclusion 1. The amount of such costs, I was told, was £283,000.
(2) Secondly, the insurance would not necessarily be available to the Defendants, because of considerations of privity of contract. The amounts payable by the Claimant to the Defendants would not be ring fenced in any way.
(3) Thirdly, the policy contained a right to cancel which was very general in its terms. The Claimant submitted that this right must be construed as prospective only, and I would be inclined to accept this submission, although the point is not clear.
(4) Fourthly, the policy contained a right to avoid in the event that the policy had been procured by fraud. Here, the Defendants submitted, there was a very real possibility of this, because of the nature of the action. Many of the issues in this action turned on questions of credibility, so that it might well be that a finding against the Claimant would involve findings of fraud on the part of its representatives.
Increase in fortification.
(1) Prior to the imposition of the WFO, the Seventh Defendant had two property transactions in contemplation, in relation to Northwood Works Industrial Estate in Birmingham and a second at Regent's House. One would be a cash purchase; whilst the other required finance.
(2) The second of these purchases went through. However, when it was realised (in November 2016) that the WFO could not be set aside, then it was also realised that the financing required for the first could not be obtained, since that would have required disclosure of the existence of the WFO, which would have led to the refusal of the financing request and also to the calling in of other loans.
(3) In December 2016, apart from the request for increased fortification, no attempt was made to vary the terms of the WFO to enable further funding to be obtained.
(4) The loan was not pursued at that stage. In the event, the financing bank found out about the existence of the WFO in 2018 and called in other loans.
(1) The first was that, once again, the making of such an order would stifle its claim;
(2) The second was that any such application should have been made on the return date.
(1) The security could have been sought at the time the injunction was initially sought, and a party could then have chosen not to pursue the injunction;
(2) The Court had no power to impose such a condition ex post facto since it could not determine what the position would have been at the time the injunction was initially sought and obtained;
(3) Since the injunction had been discharged, the application in that case was not for fortification at all, but was for security, not the purpose of the fortification in the Mareva context.
(1) This security could have been sought at the time of the grant of the injunction. However, because of the form of the order sought, the Seventh Defendant is attempting to give the Claimant the right to elect not to keep the freezing order (although no suggestion is made that the grounds for the imposition of such are no longer apposite). That is the choice that Hirst J considered the Claimant in The Mito was being deprived of.
(2) The second point relied on by Hirst J is really a reiteration of the first. I reject it for the same reasons.
(3) As to the third point, in this case the injunction has not of course been discharged and thus the case is clearly distinguishable.