Abuse of process – Collateral attack on previous decision – Respondent bank applying for charging order over flat to secure judgment debt – Appellant claiming that he and not judgment debtor owning beneficial interest in flat – Appellant previously disbelieved by court when giving evidence to that effect in earlier proceedings against judgment debtor for contempt of court – Whether appellant’s application to be joined to charging order proceedings amounting to abuse of process as collateral attack on findings in committal proceedings – Appeal allowed
The respondent, a bank based in Kazakhstan, applied to the court for a final charging order over a flat in London NW1 to secure two judgment debts totalling about $1.6bn (£1.3bn) which it had obtained against its former chairman, A, in proceedings alleging the fraudulent misappropriation of moneys. The respondent had previously obtained an interim charging order over that property. The registered proprietor of the flat was a company incorporated in the British Virgin Islands (BVI), which had purchased a long leasehold interest in it for £965,000 in June 2008. However, the respondent asserted that the true beneficial owner of the flat was A.
The appellant, who was A’s brother-in-law, applied to the court to be joined as a party to the charging order application. He sought to contend that he was the owner of the BVI company and that accordingly he, and not A, was the ultimate beneficial owner of the flat, such that the court had no jurisdiction to grant a charging order over it.
The judge held that the appellant’s application should be dismissed as an abuse of process since the appellant’s position amounted to a collateral attack on the findings of the court in earlier proceedings to commit A for contempt of court. In those proceedings, the respondent had alleged that A had given false evidence on oath so far as he had stated that all the residential properties that he owned were included in a schedule of assets which he had submitted in compliance with a freezing order. That schedule made no mention of the flat. The judge had found that A’s assets were administered through various offshore companies, which A was assisted in managing by trusted friends, associates and family members, including the appellant. As a witness for A, the appellant had given evidence that he was the owner of the flat but had been disbelieved; the judge found that A was the beneficial owner and was therefore in contempt of court by failing to list the flat in the schedule.
The appellant appealed against the refusal to join him to the charging order proceedings. He contended that the doctrine of doctrine of abuse of process by reason of a collateral attack on a previous decision applied only to a litigant who was party to the previous decision or the privy of such a party. He argued that the doctrine should not be applied to someone who was merely a witness in the earlier proceedings and who was therefore unable to make submissions in those proceedings or to appeal against the outcome.
Held: The appeal was allowed.
(1) The doctrine of abuse of process by reason of a collateral attack on a previous decision was not necessarily limited to a litigant who was party to the previous decision or to the privy of such a party. Whether the principle was engaged would depend on the particular circumstances of the case: Hunter v Chief Constable of West Midlands Police [1982] AC 529, Re Norris [2001] UKHL 34; [2001] 1 WLR 1388, Secretary of State for Trade and Industry v Bairstow [2003] EWCA Civ 321; [2004] Ch 1 and Conlon v Simms [2006] EWCA Civ 1949; [2008] 1 WLR 484 applied.
(2) The aim of the contempt proceedings was to establish that A had been lying on oath so that he might be subjected to a term of imprisonment or a fine. The only relevance of the issue relating to the ownership of the flat was to establish whether A had lied. A contempt application was treated as a self-contained procedure. It did not lend itself to the resolution of other disputes which might arise in relation to the potential execution of future judgments, nor did it lend itself to joinder with an application for a charging order. The committal procedure prescribed by CPR 81 did not require the appellant, merely because he was appearing as a witness, to put his case that he had a beneficial interest in the property at that stage.
The time and place for the appellant to assert his civil law rights over the property was when the respondent attempted by the application for the charging order to deprive him of his claimed interest in it or the BVI company. The appellant did not become directly affected until that stage, at which the onus was on the respondent to prove that A had a beneficial interest in the flat and that the appellant had no such interest. The appellant, as a party claiming to be interested, had a right, both under the Charging Orders Act 1979 and CPR 73, to object to the making of a final charging order and, at the very least, to invite the judge to direct the determination of an issue relating to the ownership of the property. It could not be an abuse of process for a third party claiming an interest in property, to whom a right was given by the 1979 Act and CPR 73 to make representations to the High Court, to seek to exercise that right just because he had given evidence in committal proceedings to which he was not a defendant in support of the defendant’s case that he had not lied and that the property was not his. The appellant was not “misusing” the procedure of the High Court but was instead making the proper use of the civil jurisdiction of the High Court to protect his alleged proprietary rights as the 1979 Act and the CPR both contemplated that he should.
(3) It was also relevant that the appellant was a mere witness in the committal proceedings, with no right of representation, no control of the proceedings and no right of appeal. The judge had erred in assuming that the appellant’s interests were aligned with those of A. The committal proceedings and the defence of those proceedings were for the benefit of A and the respondent, not the appellant. At the hearing of the charging order application, the judge, based on his wide experience in the committal proceedings and the main proceedings, was too greatly influenced by his adverse views of A and the appellant to reach a balanced view of the evidence relating to the discrete issue of ownership of the flat. He was therefore unable objectively to consider whether the appellant was entitled to a proper opportunity to vindicate his claim to the property, either through his beneficial ownership of the BVI company or on the basis that it held the property as his nominee.
(4) Accordingly, whatever the outer limits of the legal principle of collateral attack, this was clearly a case where the appellant should be joined as a defendant to resist the respondent’s claim for a charging order. The respondent had given no indication, at the stage of the committal proceedings, that it would piggy-back on any conclusions reached by the judge in in the contempt proceedings, treat them as binding as against the appellant in relation to the flat and proceed to enforce against any interest that he might have in the property as a result, without affording him any further opportunity to defend his position or adduce any further evidence. The appellant had been given no proper opportunity to establish his claim to ownership of the flat in proceedings to which he was formally a party and in relation to which the issue was whether he was the ultimate beneficial owner of the flat. It followed that the appellant’s attempt to resist the respondent’s claim to a charging order was not an abuse of process.
James Sheehan (instructed by Withers LLP) appeared for the appellant; Stephen Smith QC and Emily Gillett (instructed by Hogans Lovells International LLP) appeared for the respondent.
Sally Dobson, barrister
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