The Financial Conduct Authority v Da Vinci Invest Ltd & Ors, Court of Appeal - Chancery Division, September 06, 2017, [2017] EWHC 2220 (Ch)

Issuing Organization:Chancery Division
Actores:The Financial Conduct Authority v Da Vinci Invest Ltd & Ors
Resolution Date:September 06, 2017
 
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FCA v Pornye

2

Neutral Citation Number: [2017] EWHC 2220 (Ch)

Case No: HC11CO2409

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Rolls Building, Fetter Lane,

London, EC4A 1NL

Date: 6 September 2017

Before :

MR. JUSTICE SNOWDEN

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Between :

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Javan Herberg QC and Simon Prichard (instructed by the FCA's legal group) for the Claimant

The First to Fifth Defendants did not appear

The Sixth Defendant appeared by telephone

Paul Mitchell QC (instructed by RPC) for the Seventh Defendant

Hearing date: 5 October 2016

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Judgment ApprovedMr Justice Snowden:

Introduction

  1. By an application which was eventually issued on 4 August 2016, the Sixth Defendant (``Mr. Pornye'') applied, ``To change the order of 28 April 2016'' in these proceedings.

  2. The order to which Mr. Pornye was referring was in fact an order made by me on 25 April 2016 (``the Unless Order''). The Unless Order had stated that unless Mr Pornye provided certain documents and information to the Claimant (``the FCA''), and to the Seventh Defendant (``Bivonas'') by 4pm on 10 May 2016, his application dated 9 December 2015 to set aside an earlier order which I had made on 6 November 2015 (``the Set Aside Application'') would automatically be dismissed.

  3. Mr. Pornye had not complied with the Unless Order, and hence his application was in substance an application for relief against the automatic imposition of the sanction under the Unless Order that his Set Aside Application should be dismissed.

  4. The order of 6 November 2015 was an order that I had made after the end of a lengthy trial in May 2015, imposing a financial penalty of £410,000 upon Mr. Pornye (and larger penalties upon others) under section 129 of the Financial Services and Markets Act 2000 (``FSMA'') for market abuse contrary to section 118(5) FSMA. Mr. Pornye had brought his Set Aside Application on the basis that he had not been served with the FCA's claim and that he had not instructed Bivonas to act for him in relation to it.

    Background

  5. Mr. Pornye is a Hungarian citizen resident in Budapest. On 12 August 2015, after a trial that commenced on 6 May 2015 and ended on 20 May 2015, I gave judgment (the ``Judgment'') in favour of the FCA against Mr. Pornye and others for market abuse: [2015] EWHC 2401 (Ch).

  6. Along with two other Hungarian traders (Mr. Banya and Mr. Brad), an off-shore company that they had formed (``Mineworld'') and two other corporate defendants on whose behalf I found that the individuals were trading (``the Da Vinci companies''), I found that Mr. Pornye had engaged in practices known as "layering" and "spoofing", in which large orders were placed electronically on the stock markets without the intention that they would ever be executed. This was done to create an artificial impression of the level of demand for shares, falsely raising and lowering the prices so that shares could be bought at a lower price and sold at a higher price than would otherwise have been available.

  7. In response to the FCA's claim, a joint Defence of the three individual traders dated 27 January 2012, and a witness statement purporting to be from Mr. Pornye dated 31 January 2013, were served by Bivonas, who were solicitors who had gone onto the court record for all three traders in 2011 and had purported to act on behalf of all of them in defending the proceedings. However, neither Mr. Pornye nor the two other individuals were present or represented at the trial. Instead, as I recorded at paragraph 6 of my Judgment, on the first day of the trial I was informed that the FCA had been notified a few days earlier by Bivonas that the individual defendants were not planning to attend. On that basis, I struck out their Defence under CPR 39.3 and proceeded to hear the trial in their absence, with the allegations being contested only by the Da Vinci companies.

  8. These events at the start of the trial in May 2015 followed a letter being sent by Bivonas by email and courier to Mr. Pornye on 24 April 2015 threatening to come off the record in the proceedings and giving him a deadline of 27 April 2015 to engage with them, and in particular to complete a statement of means in advance of the trial. Mr. Pornye did not respond or take any other steps in relation to that letter. This had the result that Bivonas sent Mr. Pornye a further letter by email and courier on 28 April 2015. That further letter attached an email from the FCA which stated that if Mr. Pornye did not attend the forthcoming trial and was not represented, the FCA would apply to have his Defence struck out. Again, Mr. Pornye did not respond to this letter in any way.

  9. After the trial had commenced, and still not having received a response from Mr. Pornye, Bivonas made an application to come off the court record for him, which was granted by Deputy Master Mathews on 15 May 2015. This order was sent to Mr. Pornye by Bivonas on 26 May 2015, together with a copy of the order that I had made on 6 May 2015, striking out his Defence. Again, there was no response from Mr. Pornye.

  10. As I have indicated, I reserved my judgment at the end of the trial and handed down my written judgment on 12 August 2015. A copy of the Judgment, together with an order which I made on the same day, was then emailed directly to Mr. Pornye by the FCA on 24 August 2015. The FCA notified Mr. Pornye that a hearing to determine consequential matters was to be fixed for a date after 7 September 2015.

  11. On 7 September 2015, Mr. Pornye emailed the FCA. Mr. Pornye stated,

    ``I am wondering why you missed to formally inform me about this case where I am a defendant supposedly. How could this [have] happened?

  12. In subsequent correspondence with the FCA, Mr. Pornye also denied any knowledge of Bivonas. So, for example, his next email of 14 September 2015 to the FCA stated,

    ``So, let's start at the beginning. Who is Bivonas LLP? Is this a lawyer company? Sorry, but I don't know the British law well. Can a lawyer represent me without my permission and my signature in the UK? Do you have a formal document where you can find my name and my signature? If yes, please scan for me to check them.''

  13. The FCA responded by sending Mr. Pornye a copy of the email dated 9 December 2011 by which Bivonas had informed the FCA that they had confirmation that they had been instructed by him (and Mr. Brad), that they could accept service of documentation on Mr. Pornye's behalf, and that they had returned the Acknowledgments of Service to the court indicating an intention to defend the proceedings. The FCA also provided Mr. Pornye with a copy of the Defence dated 27 January 2012 which had purportedly been signed by Mr. Pornye and by each of the other traders. Mr. Pornye's response by email stated,

    ``First you should know that this is not my sign[ature] on the paper. I don't know Bivonas company.

    I believe that someone misled me. I checked my emails and I find an email conversation with Banya Szabolcs in where he asked me to send my personal documents (IDs, utility bills) to him because he wanted to register me to a MLM company named Unaico. This email conversation was at 27 January 2012 around when I supposedly sign a contract with this Bivonas.

    I think that someone abused my personal data and made document forgery. This is a crime.

    Of course I can prove this email conversation with Banya Szabolcs, and of course a handwriting expert will easily identify that this is not my sign[ature].''

  14. On 6 October 2015, Mr. Pornye emailed Bivonas explaining that the FCA had informed him that Bivonas had filed a defence on his behalf and asking various questions. Mr. John Bechelet of Bivonas replied to him the next day, 7 October 2015, indicating that all communications with him concerning the case had been made via the other two individual defendants, Mr. Banya and Mr. Brad, and acknowledging that Mr. Pornye had not signed the statement of truth on the Defence in his (Mr. Bechelet's) presence. Mr. Bechelet also drew Mr. Pornye's attention to the letter dated 24 April 2015 which had been sent to him by email and courier and which had been signed for on 27 April 2015.

  15. The hearing to consider matters arising from the Judgment took place on 6 November 2015. The day before, Mr. Pornye emailed an unsigned letter to me, the material parts of which were as follows (emphasis in the original),

    ``1. As of utmost importance, I must first note that I had been unaware of the claim against me and the ongoing procedure until very recently.

  16. My first encounter with present case was by way of a press article, published on a Hungarian internet news site, in which I was informed that the court had issued a judgement and imposed a penalty on me with two other Hungarian individuals. The article directly mentioned my name, that is how I became aware of the case in the first place. Subsequently I was approached by FCA in email on a private email address I use infrequently. It turns out that both FCA and the Court was aware of my resident address and identification data, but in spite of this I never received any notification concerning the procedure.

  17. I had never before heard of the firm of solicitors Bivonas LLP.

  18. I have never appointed Bivonas LLP or any other solicitor to represent me in present case, and I have never granted them a power of attorney to act on my behalf.

  19. I hereby state that the signature alleged to be mine on the Defence filed by Bivonas LLP and dated 27 January 2012 is not my signature.

  20. Also, my personal ID documents (Hungarian address card card and personal ID card) were most probably abused in order to forge a power of attorney for Bivonas LLP on my behalf. I also note here that I have the intention to pursue further action in order to discover how and by whom such forgery was committed.

  21. On 27 January 2012 (which is, interestingly, the same date as the date written on the defence submitted by Bivonas LLP) I provided...

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