Michael Wilson & Partners Limited v Sinclair & Ors and John Forster Emmott
In an important judgment handed down today, 15 June 2018, by Master Kay QC, the Commercial Court made clear that no Interim Third Party Debt Order (“ITPDO”) can be made under CPR 72.2.1 unless the debt concerned is both “due and owing” in the sense of being immediately repayable. If any condition remained to be satisfied no application for an ITPDO could be made.
- Mr Emmott had borrowed money from Mr Sinclair to fund his successful claims in a London arbitration against Michael Wilson & Partners Limited (“MWP”) a BVI registered company that operated as a law firm and business consultancy in Kazakhstan.
- MWP was controlled by a solicitor Michael Earl Wilson.
- The arbitration resulted in a substantial award in favour of Mr Emmott which Mr Wilson refused to allow MWP to pay.
- MWP was owed costs by Mr Sinclair in other litigation and obtained an ITPDO to recover those costs in respect of the sums borrowed by Mr Emmott to fund his arbitration costs – but meanwhile Mr Wilson maintained his refusal to allow MWP to pay the Award.
- When MWP applied to make the ITPDO final Mr Emmott objected that 1) no debt was due and owing and that 2) as a matter of discretion it should be set aside as MWP was in serious breach of multiple orders which it had failed to disclose.
The Court set aside the ITPDO on both grounds
- Where repayment was subject to a written demand that also specified the amount required to be repaid nothing was due and owing until a demand had been made a claimant in such a case could not put himself in a better position than the judgment creditor. Here no demand had been made so that no application for an ITPDO should ever have been made. Merchant International Company Limited v Natsionalna Aktsionerna Kompaniia Naftogaz Ukrainy, 2014 EWHC 391 applied.
- An ITPDO shared much with Freezing Orders and it was incumbent on applicants to make full and frank disclosure to the Court.
- Here there had been an “astonishing” failure to make either full or frank disclosure made worse by the fact that the witness statement in support had been made by
- This failure included flagrant disregard of court orders
(i) MWP owed Mr Emmott over £3.8m plus US$ 1.2m (and owed over £2m in untaxed costs) as a result of a final arbitration Award that Mr Wilson refused to allow MWP to pay
(ii) This was not a case of “can’t pay” but “won’t pay”
(iii) The refusal to pay even after all appeals were exhausted and the Award was enforceable as a judgment
(iv) Costs orders made against it by the High Court went unpaid
(v) The provisions of a Freezing Order were not being complied
- Mr Wilson’s conduct was described as “arrogant and unacceptable” and as “contumelious, inexcusable and probably amounts to contempt”
In the Court of Appeal –  EWCA Civ 51 – Sir Terence Etherton MR with whom Jackson and Underhill LJs agreed disagreed with Justice O’Farrell in that the claims fell within the scope of the arbitration clause in the MWP Agreement. The rights which the Appellant sought to enforce were rights of individuals who had not been parties to the MWP Agreement. The disputes mentioned in the clause were disputes between the Appellant and the Respondent in their capacity as alleged quasi-partners (para 41, 42, 45). It could not be said that the arbitration provisions in the Co-operation Agreement incorporated the claims in New South Wales (para 50). It was a matter for the NSW Court to decide whether the proceedings were an abuse of process. The Court of Appeal granted an order prohibiting MWP from pursuing any claims which it had lost in the arbitration; matters contrary to findings in the arbitration which were adverse to the Appellant; and claims for fraud or conspiracy. The finding by O’Farrell that MWP had been dishonest in telling the NSW Court that Mr Emmott was domiciled in NSW was not disturbed.
On 31 July 2018 UKSC 2018/0071 the Supreme Court refused permission to appeal.
Philip Shepherd QC, instructed by Kerman & Co, acted for Mr John Emmott.