ORB a.r.l. & Ors v Ruhan & Ors, Court of Appeal - Commercial Court, April 15, 2016, [2016] EWHC 850 (Comm)

Issuing Organization:Commercial Court
Actores:ORB a.r.l. & Ors v Ruhan & Ors
Resolution Date:April 15, 2016
 
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Case No: CL-2012-000625

Neutral Citation Number: [2016] EWHC 850 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice, Rolls Building

Fetter Lane, London, EC4A 1NL

Date: 15/04/2016

Before :

THE HON. MR JUSTICE POPPLEWELL

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Between :

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James Drake QC, Matthew Ryder QC, Lorna Skinner, Nicholas Gibson, Sarah Martin & James Goudkamp (instructed by Stewarts Law LLP) for the Claimants

Richard Waller QC, Tim Jenns & Michael Ryan (instructed by Memery Crystal LLP) for the Defendant

Ian Mill QC & Mark Vinall (instructed by Jones Day LLP) for the 3rd & 4th Parties

Angeline Welsh (instructed by Simons Muirhead and Burton LLP) for the 6th Party

Niall McCulloch (instructed by Holman Fenwick Willan LLP) for the Liquidators

David Head QC & Christopher Bond (instructed by Stewarts Law LLP) for Minardi Investments

Hearing dates: 14-17 March 2016

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JudgmentThe Hon. Mr Justice Popplewell :

Introduction

  1. On 20 March 2015 Cooke J made an order in these proceedings (``the March Order'') which included:

    (1) a worldwide freezing order over the assets of the Claimants, the Fifth Party (Dr Cochrane) and the Seventh Party (``SMA'') (collectively ``the Orb Parties'') up to a value of £67,323,000 (``the March Freezing Order''); and

    (2) an order that the Orb Parties provide disclosure in relation to certain assets and transactions, verified on affidavit and by an independent accountant (``the March Disclosure Order'').

  2. The March Order followed an order made by Cooke J on 11 February 2015 (``the February Order'') which included:

    (1) an order for the provision of information in four categories by the Orb Parties (``the February Disclosure Order''); the March Disclosure Order replaced the February Disclosure Order and was in wider terms as a result of the Orb Parties' failure to comply with the February Disclosure Order; and

    (2) undertakings given both by the Orb Parties and by the Defendant (Mr Ruhan), to the Court and to each other, which were made part of the February Order (``the February Undertakings''); by the February Undertakings the Orb Parties and Mr Ruhan each undertook not to dispose of, or deal with, or encumber, or diminish the value of, scheduled lists of assets; the February Undertakings were not replaced by the March Order which recorded that they should remain in place.

  3. The Orb Parties have not complied with the March Disclosure Order.

  4. Over four days between 14 and 17 March 2016, sitting extended court hours, I heard a number of applications and a third Case Management Conference in this action, which presents considerable case management challenges. I gave directions towards a trial fixed to start on 12 December 2016, with an estimate of 16 weeks including 8 days' reading time.

  5. Amongst the applications I heard and determined were:

    (1) an application by the Orb Parties dated 15 October 2015 for a declaration that the March Order had ceased to have effect, alternatively an order that it should be discharged (``the Lapse/Discharge Application);

    (2) an application by Mr Ruhan dated 8 February 2016 for variation of the March Order in a number of respects, including the freezing of additional assets and additional disclosure (``the Variation Application'');

    (3) an application by Mr Ruhan for an order that unless the Orb Parties complied with the March Disclosure Order, their claim and defence to counterclaim should be struck out (``the Unless Order Application'').

  6. At the conclusion of the hearing I announced my decision on these applications and heard argument on the appropriate terms of the orders, with my written reasons to follow. These are my reasons.

    The Claim and Counterclaim

  7. The First Claimant (``Orb'') is a private limited company registered in Jersey. Following a corporate reorganisation in August 2002, it became the holding company of a group with interests in hotels, commercial and warehouse properties, transport and logistics businesses and venture and private capital. Its shares are held by a company as trustee of a Jersey settlement, of which Dr Cochrane, the former wife of the Sixth Party (Dr Smith), and their two daughters, are the sole beneficiaries. Dr Cochrane is a GP who practises full time in Jersey. Pro Vinci Ltd (``Pro Vinci''), a company of which Ms Dawna Stickler is the managing director and sole shareholder, provides family office services to Dr Cochrane's family, including investment management in respect of the investments owned by her.

  8. Between August and November 2002, Dr Smith who was then Chief Executive of Orb, stole approximately £35 million from Izodia plc, a company in which Orb held a 29.9% shareholding, and misapplied the bulk of those monies for Orb's benefit. Of the total sum of £35 million stolen, only about £2.8 million was returned, leaving a balance of about £32.2 million owing to Izodia. In December 2002, the Serious Fraud Office raided Orb's offices in London and Jersey. As a result of the SFO's investigations, Dr Smith personally faced criminal sanctions. By early 2003, Izodia had also brought proceedings against Orb and Dr Smith for recovery of sums transferred from Izodia's bank account. Once Dr Smith's Izodia theft had been discovered, those in control of Orb resolved to sell a substantial proportion of Orb's assets.

  9. During the early part of 2003, negotiations took place between Dr Smith on the one hand, and Mr Ruhan and Mr Campbell on the other hand, resulting in an agreement for the sale of various of Orb's assets to Mr Ruhan and companies associated with and/or controlled by him (``the Orb Assets''). At the time the Second Claimant, Mr Taylor, was the group property director of the Orb group. The Third Claimant, Mr Thomas, was a businessman with whom Dr Smith had had previous business dealings. The Orb Assets comprised:

    (1) A portfolio of 37 hotels (``the Hotel Portfolio''), of which:

    (a) 32 were formerly part of the Thistle group of hotels; these included three hotels, the Thistle Lancaster Gate Hotel, the Thistle Kensington Park Hotel and the Thistle Kensington Palace Hotel, (collectively ``the Hyde Park Hotels'') which were regarded as having valuable development potential for conversion to residential use.

    (b) 5 were country house hotels, including the Cannizaro House Hotel in Wimbledon.

    (2) A portfolio of development, commercial and warehouse properties and businesses (``the Orb Securities Portfolio'');

    (3) A minority shareholding in Izodia.

  10. Although the sale of the Orb Assets was recorded in documented agreements, it is the Orb Parties' case that the documents did not fully reflect the deal agreed orally at a meeting between Dr Smith, Mr Taylor, Mr Ruhan and Mr Campbell on 6 May 2003. In particular the Orb Parties allege that it was agreed amongst other things that Mr Ruhan would redevelop, restructure, manage and/or dispose of the Hotel Portfolio and the Orb Securities Portfolio; he would pay Orb, Mr Taylor and Mr Thomas (in agreed proportions) 40% of the profits thereby generated from the Hotel Portfolio; and he would pay Orb 50% of the profits thereby generated from the Orb Securities Portfolio, with Orb retaining a 50% interest in any assets retained within the Orb Securities Portfolio. It is alleged that Mr Thomas subsequently negotiated a further 7.5% share of the profits and retained assets in respect of the Orb Securities Portfolio. Mr Ruhan denies any such oral agreement. The written agreement dated 7 May 2003 by which the Hotel Portfolio was transferred (as varied on 13, 14 and 23 May 2003) provided that Orb group should receive interest bearing loan notes in the principal sum of £35 million issued by Atlantic Hotels (UK) Ltd, which following completion would be the holding company of subsidiaries through which the Hotel Portfolio would be held, and that these should be assigned by Orb to Izodia in settlement of the claim brought by Izodia against Orb and Dr Smith, amongst others.

  11. Following the acquisition, in 2004 or 2005 the Orb Assets were transferred by Mr Ruhan into a complex structure involving numerous companies ultimately owned by the trustee of an Isle of Man settlement established by deed of settlement dated 29 March 2004 known as ``the Arena Settlement''. The trustee was Atticus Trust Co Ltd. Between 2005 and 9 April 2014, there were over 100 companies within the Arena Settlement. It is the Orb Parties' case that Mr Ruhan, in breach of the May 2003 agreement and his fiduciary duties, sold on the Orb Assets to third parties for his personal profit and concealed such sales behind an opaque arrangement with, principally, a Mr Anthony Stevens.

  12. Whilst Mr Ruhan originally denied it in his Defence, he now avers in his amended Defence and Counterclaim that he was at all material times the ultimate beneficiary of the Arena Settlement, by virtue of his former solicitors and trusted business advisors, Mr Simon Cooper and Mr Simon McNally, who were discretionary objects thereunder, holding such interest as nominee for him. He also maintains that he was in ultimate control of all of the companies within the Arena Settlement.

  13. In April 2006, Dr Smith pleaded guilty to a number of charges relating to the transfer of Izodia's monies and was subsequently sentenced to eight years in prison. This was not his first conviction: in 1993 he was convicted of fraud in relation to a sum of £2 million and sentenced to 2 years' imprisonment. In 2007, a confiscation order was made against Dr Smith in the sum of approximately £41 million and enforcement receivers were appointed to recover the debt.

  14. On 27 October 2012, shortly after Dr Smith's release from prison, this action was commenced by Orb, Mr Taylor and Mr Thomas alleging that in breach of the May 2003 oral agreement and Mr Ruhan's fiduciary duties, Mr Ruhan had sought to conceal the Orb Assets in the complex structure of the Arena...

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