Landmark victory for MWP in the English Court of Appeal against Mr T. I. Sinclair, Sokol Holdings Inc. and J. F. Emmott
MWP is delighted to announce a highly important judgment handed down by the English Court of Appeal on 13 January 2017 in Michael Wilson & Partners, Limited v. Sinclair and others [2017] EWCA Civ 3.
A bench composed of Patten, Ryder and Simon LLJs overturned the judgment of Teare J at [2012] EWHC 2560 (Comm), in which the judge had struck out a multi-million dollar fraud, bribery and dishonest assistance claim brought by MWP against the defendants - Mr Sinclair, Sokol Holdings Inc., the Eagle Point Group and Butterfield Bank (Bahamas) Ltd, which action also concerned Mr Sinclair’s business and litigation partner Mr J. F. Emmott - against whom MWP commenced an arbitration in 2006, after discovering his fraud on, theft from and gross, serious and dishonest breaches of his fiduciary duties and contract with MWP, which it transpired had commenced in 2001.
The struck out claim concerned 14.75m shares and US$950,000 of related cash in what became Max Petroleum Plc., which were received in August and November 2005, respectively, and held on behalf of Mr Emmott while an employee of MWP, in breach of his contractual obligations and fiduciary duties to MWP. MWP consistently argued that Mr Emmott acquired the benefits with the Sinclair defendants’ knowing assistance, or alternatively, that they represented the payment of a bribe or secret commission for which the Sinclair defendants are liable.
At the heart of the appeal was the legal question of whether it is an abuse of process for A to claim against C in litigation, on a basis which has been decided against A in arbitration between A and B.
The Court of Appeal determined that, whilst the doctrine of abuse could apply where the previous determination was that of an arbitral tribunal, it will be a rare case - perhaps a very rare case - where court proceedings against a non-party to an arbitration will be held to be an abuse of process. The court emphasised that all cases are fact dependent, and concluded that it is not an abuse of process for MWP to pursue its claims against the Sinclair defendants, the Eagle Point Group and the Butterfield Bank (Bahamas) Ltd, when MWP has no other avenue of relief against them. The court held that this was so even when substantially the same claim has been decided in a manner partly adverse to MWP (given that Mr Emmott admitted to stealing US$250,000, and was promised and expected to receive Max Shares) in the arbitration between it and Mr Emmott, noting in particular that inconsistent decisions between two or more curial and/or arbitral bodies are not unusual or objectionable in principle.
The court rejected the first instance judge’s finding of “special circumstances” raising the Sinclair defendant’s case above that threshold, and also his finding that the alleged abuse was ”within the spirit of the issue estoppel rule”. The Sinclair defendants were not parties to the arbitration, had refused to join into the arbitration when invited by MWP, and had asserted in related litigation that the arbitration was totally irrelevant to them, and that they would not be bound by the same. Despite that, the Sinclair defendants later sought to rely on the arbitral award to assert that the claims were an abuse, and sought to take the benefit from the award, in circumstances in which they would not have been bound if the award had been in MWP’s favour, so that there was no mutuality. The Court of Appeal concluded that the first instance judge had, therefore, placed too much weight on irrelevant factors, and had also wrongly reversed the burden of proof in relation to abuse, from being a burden on the Sinclair defendants to MWP.
The court also noted in relation to Mr Emmott that ”it could not be said that his reputation had survived the arbitration intact”, given that Mr Emmott had admitted to stealing US$250,000, and was promised and expected to receive Max Shares, personally which would have properly belonged to MWP.
The judgment has helpfully clarified the law as to one aspect of the interplay between curial and arbitral processes, with the practical result that MWP can now commence the long-delayed trial process against the Sinclair defendants in respect of the value of the 14.75m Max shares and US$950,000 of cash, proving their true ownership, and discovering what actually became of the much larger number of shares, of which the 14.75 was but one tranche, and in compelling payment of bills of more than US$1.43m, which have remained unpaid since May 2004. As the winner, costs will follow the event so that MWP is also entitled to its costs, dating back to May 2011 when the Sinclair defendants and Mr Emmott first brought their flawed and now failed strike-out and summary judgment application.
In addition, and in parallel, MWP’s claims against the Sinclair defendants for their role, involvement and dishonest assistance in the Temujin Partnership fraud will also proceed to trial.
Currently, the Sinclair defendants are in breach of judgments and costs orders made in favour of MWP by all of the Bahamas Supreme Court, Bahamas Court of Appeal, Judicial Committee of the Privy Council, the Commercial Court and QBD in England, as well as the New Zealand High Court and Court of Appeal, as a result of which Mr Sinclair’s NZ$4m house in Wellington, New Zealand is in the process of being sold to pay MWP’s unpaid judgment debts.
About MWP:
MWP is a full service law firm with offices in both Almaty and Baku covering Azerbaijan, Kazakhstan, the Central Asian Region and the Caucasus. MWP was established in Almaty in July 1998 and in Baku in 2003. Today it is recognised as one of the leaders in the Central Asian and Caucasus Region, combining years of collective experience throughout the CIS.
Before founding MWP, Mr Wilson was the founding partner of the major international law firm, Baker & McKenzie throughout this Region, establishing offices for that firm from scratch in Almaty, Tashkent, Bishkek, Astana and Baku, which were the most successful group of new offices ever established anywhere in the world in the long history of Baker & McKenzie.
However, in order to better meet the needs of multinational and local clients for premier quality legal advice, know-how and innovative work product, MWP was established as a fully independent international law firm, operating through offices in Almaty and Baku, focused upon the Central Asian and Caucasus Region, and which works together with and cooperates with many of the world’s leading firms.
For more information, please contact Assel Kulisheva at Assel.Kulisheva@mwp.kz or visit our websites at www.mwp.kz and www.mwp.az.
A bench composed of Patten, Ryder and Simon LLJs overturned the judgment of Teare J at [2012] EWHC 2560 (Comm), in which the judge had struck out a multi-million dollar fraud, bribery and dishonest assistance claim brought by MWP against the defendants - Mr Sinclair, Sokol Holdings Inc., the Eagle Point Group and Butterfield Bank (Bahamas) Ltd, which action also concerned Mr Sinclair’s business and litigation partner Mr J. F. Emmott - against whom MWP commenced an arbitration in 2006, after discovering his fraud on, theft from and gross, serious and dishonest breaches of his fiduciary duties and contract with MWP, which it transpired had commenced in 2001.
The struck out claim concerned 14.75m shares and US$950,000 of related cash in what became Max Petroleum Plc., which were received in August and November 2005, respectively, and held on behalf of Mr Emmott while an employee of MWP, in breach of his contractual obligations and fiduciary duties to MWP. MWP consistently argued that Mr Emmott acquired the benefits with the Sinclair defendants’ knowing assistance, or alternatively, that they represented the payment of a bribe or secret commission for which the Sinclair defendants are liable.
At the heart of the appeal was the legal question of whether it is an abuse of process for A to claim against C in litigation, on a basis which has been decided against A in arbitration between A and B.
The Court of Appeal determined that, whilst the doctrine of abuse could apply where the previous determination was that of an arbitral tribunal, it will be a rare case - perhaps a very rare case - where court proceedings against a non-party to an arbitration will be held to be an abuse of process. The court emphasised that all cases are fact dependent, and concluded that it is not an abuse of process for MWP to pursue its claims against the Sinclair defendants, the Eagle Point Group and the Butterfield Bank (Bahamas) Ltd, when MWP has no other avenue of relief against them. The court held that this was so even when substantially the same claim has been decided in a manner partly adverse to MWP (given that Mr Emmott admitted to stealing US$250,000, and was promised and expected to receive Max Shares) in the arbitration between it and Mr Emmott, noting in particular that inconsistent decisions between two or more curial and/or arbitral bodies are not unusual or objectionable in principle.
The court rejected the first instance judge’s finding of “special circumstances” raising the Sinclair defendant’s case above that threshold, and also his finding that the alleged abuse was ”within the spirit of the issue estoppel rule”. The Sinclair defendants were not parties to the arbitration, had refused to join into the arbitration when invited by MWP, and had asserted in related litigation that the arbitration was totally irrelevant to them, and that they would not be bound by the same. Despite that, the Sinclair defendants later sought to rely on the arbitral award to assert that the claims were an abuse, and sought to take the benefit from the award, in circumstances in which they would not have been bound if the award had been in MWP’s favour, so that there was no mutuality. The Court of Appeal concluded that the first instance judge had, therefore, placed too much weight on irrelevant factors, and had also wrongly reversed the burden of proof in relation to abuse, from being a burden on the Sinclair defendants to MWP.
The court also noted in relation to Mr Emmott that ”it could not be said that his reputation had survived the arbitration intact”, given that Mr Emmott had admitted to stealing US$250,000, and was promised and expected to receive Max Shares, personally which would have properly belonged to MWP.
The judgment has helpfully clarified the law as to one aspect of the interplay between curial and arbitral processes, with the practical result that MWP can now commence the long-delayed trial process against the Sinclair defendants in respect of the value of the 14.75m Max shares and US$950,000 of cash, proving their true ownership, and discovering what actually became of the much larger number of shares, of which the 14.75 was but one tranche, and in compelling payment of bills of more than US$1.43m, which have remained unpaid since May 2004. As the winner, costs will follow the event so that MWP is also entitled to its costs, dating back to May 2011 when the Sinclair defendants and Mr Emmott first brought their flawed and now failed strike-out and summary judgment application.
In addition, and in parallel, MWP’s claims against the Sinclair defendants for their role, involvement and dishonest assistance in the Temujin Partnership fraud will also proceed to trial.
Currently, the Sinclair defendants are in breach of judgments and costs orders made in favour of MWP by all of the Bahamas Supreme Court, Bahamas Court of Appeal, Judicial Committee of the Privy Council, the Commercial Court and QBD in England, as well as the New Zealand High Court and Court of Appeal, as a result of which Mr Sinclair’s NZ$4m house in Wellington, New Zealand is in the process of being sold to pay MWP’s unpaid judgment debts.
About MWP:
MWP is a full service law firm with offices in both Almaty and Baku covering Azerbaijan, Kazakhstan, the Central Asian Region and the Caucasus. MWP was established in Almaty in July 1998 and in Baku in 2003. Today it is recognised as one of the leaders in the Central Asian and Caucasus Region, combining years of collective experience throughout the CIS.
Before founding MWP, Mr Wilson was the founding partner of the major international law firm, Baker & McKenzie throughout this Region, establishing offices for that firm from scratch in Almaty, Tashkent, Bishkek, Astana and Baku, which were the most successful group of new offices ever established anywhere in the world in the long history of Baker & McKenzie.
However, in order to better meet the needs of multinational and local clients for premier quality legal advice, know-how and innovative work product, MWP was established as a fully independent international law firm, operating through offices in Almaty and Baku, focused upon the Central Asian and Caucasus Region, and which works together with and cooperates with many of the world’s leading firms.
For more information, please contact Assel Kulisheva at Assel.Kulisheva@mwp.kz or visit our websites at www.mwp.kz and www.mwp.az.