BCS Corporate Acceptances Ltd & Ors v Terry, Court of Appeal - Queen's Bench Division, September 07, 2018, [2018] EWHC 2349 (QB)

Resolution Date:September 07, 2018
Issuing Organization:Queen's Bench Division
Actores:BCS Corporate Acceptances Ltd & Ors v Terry

Neutral Citation Number: [2018] EWHC 2349 (QB)

Case No: HQ12X05102



Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 7 September 2018

Before :


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Between :

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Mark Watson Gandy (instructed by Akin Palmer Solicitors) for the Claimants

Simon Stafford-Michael and Sam Jarman (instructed by Martin Cray & Co) for the Defendant

Hearing dates: 9 & 10 May 2018

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Mr Justice Morris:


  1. By application notice issued on 19 April 2018, Daniel Terry, the defendant in this action (``the Defendant'') makes applications arising out of a freezing order in varied form dated 30 June 2017 (``the Freezing Injunction'') and an interim third party debt order made against him and his solicitor, Martin Cray & Co (``the Solicitors'') dated 5 June 2017 (``the Interim Order''). The application concerns funds currently held in the Solicitors' client account (``the Client Account''). As at the date of the application these funds stood in total at £137,804.40. The application concerns principally £89,353.20 of that sum.

  2. By the application, the Defendant originally applied as follows:

    (1) For directions permitting the payment to the Solicitors of outstanding legal fees, under the terms of paragraph 12 of the Freezing Injunction.

    (2) To set aside the Interim Order on grounds of non-disclosure and/or abuse of process, alternatively to amend the Interim Order by inserting a provision to permit the payment of legal costs.

    (3) To stay the order for payment of £90,000 on account of costs, made by Elisabeth Laing J dated 30 June 2017.

    (4) Alternatively for directions, pursuant to CPR 3, in relation to the Defendant's ability to pay his legal representatives and their ability to be paid.

  3. By the close of the hearing, the Defendant indicated that he did not pursue the application for a stay referred to in (3) above. Indeed following the hearing, by order dated 21 May 2018 Longmore LJ has stayed the order for payment of the £90,000 costs.

  4. The application is made in the name of the Defendant. Whilst in principle it might be that the interests of Defendant and of the Solicitors on this application are not necessarily aligned, the Defendant in his witness statement dated 16 April 2018, and Mr Stafford-Michael in the course of argument, have confirmed that no such conflict arises on the part of the Defendant and that the Defendant in principle consents to the funds held in the Client Account being used to pay outstanding legal fees and disbursements.

  5. The Defendant's essential case is that the funds in the Client Account do not belong to him personally. He submitted that the evidence shows that his legal representation in this case has been the subject of non-commercial funding and that monies held in the Client Account have been provided by members of the Prodani family, for that exclusive purpose. Therefore, first, the Freezing Injunction does not bite on those funds and, secondly, the Interim Order should be set aside and/or amended to permit his legal team to be paid out of those funds. Alternatively, sums held in the Client Account should be directed to be paid to the Solicitors as the Solicitors have self certified that the legal fees have been reasonably incurred.

  6. The original basis upon which the application was been made was that if directions are not made, the Solicitors will have no option but to come off the record and the Defendant will as a result be without legal representation to continue his pursuit of redress in the current action. However by the close of oral argument, it was no longer maintained that funding for his legal representation could only be sourced from existing funds in the Client Account; those funding him remained willing to provide other funds. This was an important concession by the Defendant.

  7. Following the hearing of oral argument, and further directions dated 18 May 2018, the parties put in further material by way of written submissions. The effect of these submissions has been first, to narrow the issues between the parties: the sum in the Client Account in issue is now limited £89,353.20; and secondly materially to alter the Defendant's position: despite the terms of the revised order below, the Defendant said that he wished to use that sum, principally, in order to satisfy the order for security for costs now made by Longmore LJ (as explained below) - and not to fund his own legal representation. Subsequently, it now appears that that security for costs has in fact been paid from another source.

  8. The order which the Defendant now seeks is in rather different terms. In addition to the setting aside of the Interim Order the Defendant now seeks:

    (1) An order granting permission for the Solicitors to pay £89,353.20 from the Client Account in respect of the Defendant's legal costs, subject to the Claimants' right to challenge the reasonableness of those costs at a later day.

    (2) A declaration, that as at the date of the Interim Order, there was no ``debt due or accruing due'' from the Solicitors to any other person and therefore there was no debt to which the Interim Order could attach.

    (3) A declaration that the Claimant be barred from issuing a fresh application for a third party debt order without first establishing that the retainer of the Solicitors has been terminated or all proceedings have been concluded.

    (4) A direction that the Solicitors should inform the Claimants' solicitors of the amount of legal costs incurred on a monthly basis, of amounts received into their client account and the source of those funds.

    The factual background

  9. The current proceedings arise out of a claim and, now a counterclaim, of fraud in connection with financial guarantee bonds and a credit facility said to have been arranged by the Defendant for the Claimants. The Claimants commenced the proceedings on 30 November 2012 against the Defendant claiming damages for fraud. Since then the proceedings have had a complex procedural history and a substantial number of orders have been made. Judgments have been given, amongst others, by May J on 11 March 2016 in relation to a freezing injunction and more recently by Elisabeth Laing J on 30 June 2017. The latter (``the Laing Judgment'') provides an important part of the backdrop, and I refer to paragraphs 3 to 11 of the Laing Judgment for a more detailed description of the background.

  10. In short, on 21 February 2013, Master Kay QC gave judgment in default of defence. After unsuccessful attempts to set aside that judgment, on 29 July 2015 the Claimants obtained a judgment (``the Judgment'') against the Defendant for damages in the sum of £1,686,874.92 and €578,801 (``the Judgment Debt''). Significantly, the Judgment remains in force and enforcement of it has not been stayed. On 19 December 2015 Sweeney J granted a worldwide freezing order against the Defendant and his wife, in aid of enforcement of the Judgment. In response, the Defendant stated that the funding of litigation came from his employer, ISS and ultimately from members of the Prodani family. On 11 March 2016 May J set aside the freezing injunction as against the wife but continued it against the Defendant. A number of substantial costs orders had been made against the Defendant in the course of the proceedings, totalling, by November 2016, £267,450.

    The ``Main Application''

  11. The Defendant then sought effectively to overturn the Judgment on the basis that the Claimants' claim had itself been wholly fraudulent and made to deceive the French courts. On 18 November 2016 the Defendant applied to strike out the claim in the action for abuse of process and to set aside the Judgment on the basis of fraud and perjury. This application is referred to by the Defendant as ``the Main Application''. The Claimants then applied for orders that the Main Application be stayed until the Defendant discharged the costs orders already made and had given security for costs. On 23 February 2017 Green J ordered the Defendant to pay into court a sum reflecting the total costs, namely £267,450 as a condition of pursuing the Main Application (and to pay over to the Claimants an interim payment on account of costs of £10,000). He did not require payment of these sums over to the Claimants.

  12. On 20 February 2017 the Claimant issued an application to commit the Defendant for contempt for failure to say where funds for the Main Application had come from, in breach of the order of May J.

  13. On 17 March 2017, according to the Defendant, he arranged with his employers for funds to be advanced so he could continue with the litigation. The source of these funds (and the basis upon which they are held) are disputed. As a result the sum of almost £475,000 was received by the Solicitors into the Client Account. Out of that sum, £276,450 was paid into court pursuant to the order of Green J. On 24 March 2017 the Solicitors wrote to the Claimants stating that the funds did not belong to the Defendant and were not subject to the Freezing Injunction. Further sums in respect of outstanding legal fees (both of the Solicitors and of counsel) were paid out, leaving, by the end of April 2017, the sum of £89,348.21 in the Client Account.

    The Laing Judgment and order of 30 June 2017

  14. The Defendant applied for directions in relation to the Main Application. Each party made a number of further applications, including an application by the Defendant to set aside May J's freezing injunction; the Claimants cross-applied for security for costs and for committal for contempt and made further applications. In a witness statement dated 2 May 2017, the Defendant stated that he had already paid over £1 million in legal fees. Those applications were heard by Elisabeth Laing J on 8 and 9 May 2017. In the...

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