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Sunday, May 5, 2019

Anglo Financial SA & Anor v. Goldberg pt. 2


67. Before the Judge on the without notice application and again before me, the Claimants sought to place considerable reliance on the position regarding the former matrimonial home at 103 Bridge Lane and the house where Mr Goldberg now lives with his wife at 16 Decoy Avenue, both in London NW11. The Decoy Avenue property was bought in April 2008 and the Bridge Lane property was sold in June 2012. At least part of the long interval between the two transactions was due to the fact that extensive building works were carried out at the Decoy Avenue site so the Goldberg family remained resident at Bridge Lane until the new house at Decoy Avenue was ready.

16 Decoy Avenue

68. In the affirmation placed before the Court at the without notice application, the Claimants exhibited the Land Registry entry showing that the property was registered in Mrs Goldberg's name in August 2010. On the basis that it had been purchased in 2008, Mr Kestenbaum stated that he had been "advised that it can be inferred" that Mr Goldberg "simply transferred it into her name" in August 2010. However, Mr Goldberg explains in his evidence that 16 Decoy Avenue was purchased from the outset in his wife's sole name, and he exhibits the contract of purchase. He explains that the failure to register her title in 2008 was just an oversight that came to light in 2010 when they sought to execute a charge over both the Decoy Avenue and Bridge Lane properties as security for a loan which they took out to cover the building works. That failure was remedied by transfer forms sent to the Land Registry at the time, who corrected the Register. Thus, there never was a transfer by Mr Goldberg of the property to his wife.

69. Instead of accepting this explanation, Mr Littman advanced a new submission that Mr Goldberg was not telling the truth in his affirmation of assets, since there he disclosed no interest in 16 Decoy Avenue. Mr Littman argued that Mr Goldberg would have a beneficial interest, since on his evidence the money for the purchase came from the proceeds of disposal of another property, in Grosvenor Gardens, which Mr and Mrs Goldberg had initially agreed to buy as their new home but then released to the owners of the adjacent property who were prepared to pay a premium of 500,000. That money, together with some 45,000 of family savings, was used to pay the purchase price of 16 Decoy Avenue in 2008.

70. However, Mr Goldberg states that the move from 103 Bridge Lane had always been his wife's project and that she was the driving force in finding the new properties and negotiating the transactions, so he was content for 16 Decoy Avenue to be owned solely by her. Whether that is the full explanation, or whether there were in addition fiscal considerations, as suggested by the letter from Mr Goldberg's former solicitors of 18 August 2014, the simple fact is that the contract for Mrs Goldberg to purchase 16 Decoy Avenue was entered into on 10 April 2008. That is long before the problems arose with the Brevard and New Sales loans and before any prospect of an investment on the part of Mr Kestenbaum's company in Rwanda had even been put forward. It is, in my judgment, wholly misconceived to suggest that the purchase in his wife's sole name in April 2008 of what was to become the new family home indicates a risk of Mr Goldberg dissipating his assets.

71. As for Mr Goldberg's affirmation of assets, as Mr Freedman pointed out, the law on resulting trusts is not straightforward and the presumption of advancement would normally have applied at that time to a purchase by a husband of property in the name of his wife, rebutting any intention to create a trust. The purchase of 16 Decoy Avenue was completed prior to sect. 199 of the Equality Act 2010 coming into force. I reject the suggestion that the affirmation of assets was dishonest on this basis.

72. The fact that in the "without prejudice" negotiations in 2010, Mr Goldberg may have referred to the property as "his house", even if that were admissible and not covered by privilege, does not, in my judgment, affect this conclusion. In negotiations of that kind, people often talk of assets on which they can raise funds without necessarily being precise, and his wife may have been willing to allow their home to be used to assist in achieving an overall settlement of the claims against her husband.

73. The circumstances of the development loan secured on the properties were not relied on in the original application for a freezing order as the Claimants were then not aware of it. It is disclosed in Mr Goldberg's evidence and he exhibits a copy of the loan agreement dated 20 December 2010. It is a loan facility from a Gibraltar company, Enid Properties Ltd ("Enid"), enabling Mr and Mrs Goldberg together to draw down up to 1.25 million by tranches. The loan is secured by mortgages on both the Bridge Lane and Decoy Avenue properties. The executed version of the agreement was produced by English solicitors, and Mr Littman did not suggest that it was other than genuine, but nonetheless sought to argue that there is "a cloud of suspicion" over this agreement. That was essentially on the basis that the lender was an obscure Gibraltar company, the loan was secured using the services of a solicitor at the well-known Gibraltar firm of Hassans who was engaged in tax planning rather than property transactions, and the interest rate was stated to be 20%. However, Mr Freedman pointed out that the loan was for a total period of 20 months, out of which it was interest-free for the first 14 months. That disposes of the interest rate point. As for the use of a Gibraltar company, it may be that there was an element of tax planning in this borrowing but there is nothing untoward about that. Clause 19 of the loan agreement significantly states:

"Stephen Jonathan Goldberg has joined in this Loan Agreement at the request of the Lender. Such participation is not to be deemed an express or implied representation or warranty on the part of the Borrower that Stephen Jonathan Goldberg has an equitable or legal interest in the Decoy Avenue Property."

I should add that I see nothing suspicious about the fact that this clause was added in manuscript before the agreement was executed.

103 Bridge Lane

74. On 11 June 2012, Mr Goldberg sold his house to Uri and Rebecca Goldberg for 950,000. In the affirmation placed before the Court at the without notice application, Mr Kestenbaum stated that it was sold to Mr Goldberg's son and daughter-in-law and added:

"I have no idea whether they paid full market value for it but I have my doubts."

75. Mr Goldberg points out that the purchasers were not his son and daughter-in-law but his nephew, who is in his thirties, and his wife. Mr Goldberg says that the sale was at market value since he got valuations from two estate agents (whom he identifies), who both advised that the property could be marketed at just over 1 million to enable a sale price "slightly below 1 million" to be achieved. He explains that he therefore discounted from 1 million to arrive at a price of 950,000 to account for fees and VAT saved by not selling through an estate agent, and the benefit of avoiding the inconvenience of having to market the property.

76. The Claimants now apologise for the mistake made as between Mr Goldberg's son and his nephew. However, Mr Littman proceeded to submit that it really made no difference as this was not a sale on the open market but within the family, and therefore was likely to be at an undervalue. I have to say that I found that an astonishing submission. As Mr Kestenbaum is well aware, Mr Goldberg has several children. There is no suggestion that Mr Goldberg is an individual of enormous wealth. The benefit which a man may wish to pass on to one of his own children, who in due course may be expected to inherit from him, is, in my view, obviously different from the arrangement he may come to with another member of the family regarding one of his most valuable assets. I would have thought that, as a general proposition, that is self-evident.

77. Mr Kestenbaum's witness statement of 16 September 2014 asserts:

"We have been advised that the property would be worth significantly greater than the amount it was sold for."

But he further states:

"We are still awaiting an expert's report in relation to the value of the property at the relevant time."
78. I note that Mr Kestenbaum does not disclose the source of the advice he says he has received on the property's value. The Claimants have had months to prepare their case and obtaining a professional valuation of a property in London as at June 2012 is hardly a difficult exercise. Although Mr Littman sought to complain that Mr Goldberg had not exhibited the valuations to which he referred, the burden is of course on the Claimants to support their assertions that the sale of 103 Bridge Lane indicates a risk of dissipation of assets. There is not a shred of evidence before the Court to support the Claimants' suggestion that it was sold at an under-value.

Other suggestions

79. The Claimants sought to rely on the fact that Mr Goldberg engaged in prolonged negotiations in 2010 and then, as Mr Kestenbaum puts it, "inexplicably walked away" without denying liability, as indicating that he is someone who is devious and not to be trusted. However, it is a commonplace that parties to very many of the commercial cases that come to trial have attempted to negotiate a settlement, and there are all kinds of reasons why such negotiations may be unsuccessful. That the claims were not settled cannot be taken of itself as an indication that one side cannot be trusted. On the contrary, in the present case, as I have already observed, the very length of those negotiations, and the fact that Mr Goldberg did not seek to conceal or dissipate assets at that time, is in my judgment a significant factor in the balance when assessing whether there is a real risk that he would do so now.

80. Mr Littman also suggested in his skeleton argument placed before the Judge at the without notice application that "it is all too easy for someone like [Mr Goldberg] to leave the jurisdiction and go to Israel, from which he could not be made to return." This remarkable submission was repeated in argument before me, on the basis that Mr Goldberg made his affirmation of assets of 21 August 2014 in Israel and first instructed to represent him in the present action a firm of English solicitors that also have an office in Tel Aviv. But Mr Goldberg has not moved to Israel in the four years since Mr Kestenbaum started to seek recovery from him; he is involved with his family's UK property business; and he states in his affirmation that four of his children live in England, the youngest of whom is a teenage girl at school and living at home. He states firmly that he has no plans to leave the United Kingdom. There is no basis whatever to find otherwise. That is quite aside from the fact that there is reciprocal enforcement of civil judgments as between Israel and the jurisdictions in the United Kingdom pursuant to the 1958 Convention between Israel and the United Kingdom on the Reciprocal Recognition and Enforcement of Judgments in Civil Matters.

81. Altogether, I find that the Claimants' case on risk of dissipation, when carefully scrutinised in the light of Mr Goldberg's evidence in reply, rests on bold surmise supported by an attempt to raise suspicion and draw inferences against Mr Goldberg on the flimsiest foundations. The Claimants have repeatedly attacked Mr Goldberg's honesty and both the evidence of Mr Kestenbaum and the arguments of Mr Littman are replete with suggestions of duplicity, deceit and even, in Mr Littman's oral submissions before me, perjury. Those are serious allegations to make against any individual, let alone against a professional solicitor.

82. On this interim application, I am of course not concerned with determining what happened regarding the monies in the bank accounts referred to in the Brevard and New Sales loan agreements, or precisely when Mr Goldberg discovered that the advance by Fortis in relation to the purported concession in Rwanda had been procured by fraud. Mr Goldberg is not an individual with significant liquid assets. I conclude that on the evidence before the Court, there is no basis to find that there is, objectively viewed, a real risk of dissipation of assets by Mr Goldberg in the absence of a freezing order.

83. That is of course sufficient to dispose of the Claimants' application. However, as it was fully argued and may have some further relevance, I address the points raised by Mr Freedman concerning non-disclosure.

Material non-disclosure

84. The importance of an applicant for a freezing order on a without notice application making full and frank disclosure has been repeatedly emphasised by the courts. In an oft-cited passage in Siporex Trade v Comdel [1986] 2 Lloyd's Rep 428 at 437, Bingham J stated:

"Such an applicant must show the utmost good faith and disclose his case fully and fairly. He must, for the protection and information of the defendant, summarize his case and the evidence in support of it by an affidavit or affidavits sworn before or immediately after the application. He must identify the crucial points for and against the application, and not rely on general statements and the mere exhibiting of numerous documents. He must investigate the nature of the cause of action asserted and the facts relied on before applying and identify any likely defences. He must disclose all facts which reasonably could or would be taken into account by the Judge in deciding whether to grant the application. It is no excuse for an applicant to say that he was not aware of the importance of matters he has omitted to state."

85. In Brink's Mat Ltd v Elcombe [1988] 1 WLR 1350, Ralph Gibson LJ, in a judgment with which Slade and Balcombe LJJ agreed, set out at 1356-1357 the following principles that should apply in deciding whether there had been relevant non-disclosure:

"(1) The duty of the applicant is to make 'a full and fair disclosure of all the material facts:' see Rex v. Kensington Income Tax Commissioners, Ex parte Princess Edmond de Polignac [1917] 1 K.B. 486,514, per Scrutton L.J.

(2) The material facts are those which it is material for the judge to know in dealing with the application as made: materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers: see Rex v. Kensington Income Tax Commissioners, per Lord Cozens-Hardy M.R., at p. 504, citing Dalglish v. Jarvie (1850) 2 Mac. & G. 231, 238, and Browne-Wilkinson J. in Thermax Ltd. V. Schott Industrial Glass Ltd. [1981] F.S.R. 289, 295.

(3) The applicant must make proper inquiries before making the application: see Bank Mellat v. Nikpour [1985] F.S.R. 87. The duty of disclosure therefore applies not only to material facts known to the applicant but also to any additional facts which he would have known if he had made such inquiries.

(4) The extent of the inquiries which will be held to be proper, and therefore necessary, must depend on all the circumstances of the case including (a) the nature of the case which the applicant is making when he makes the application; and (b) the order for which application is made and the probable effect of the order on the defendant: see, for example, the examination by Scott J. of the possible effect of an Anton Piller order in Columbia Picture Industries Inc. v. Robinson [1987] Ch. 38; and (c) the degree of legitimate urgency and the time available for the making of inquiries: see per Slade L.J. in Bank Mellat v. Nikpour [1985] F.S.R. 87, 92-93."

86. Here, Mr Freedman relies strongly on the failure properly to disclose the repayment by Mr Goldberg of the Cotto loan. That fact was buried away in Mr Kestenbaum's lengthy affirmation made in the 2009 action against Mr Linde that was also placed before the Judge here on the without notice application, and it was not drawn to the Judge's attention at all. Mr Littman sought to persuade me that it was simply not material. He submitted that a claimant seeking a freezing injunction is not obliged to show that the defendant is not trustworthy in all aspects of his dealings. As a general statement, that is no doubt correct. But this was an instance of a defendant dealing with the same claimant, regarding a transaction that was very similar to the transactions sued upon, at almost the same time as the alleged liability that is the subject of the present action, and paying a substantial sum of money. As I have stated above, I regard it as highly material to the question of a risk of dissipation and I would have thought it self-evident that Mr Goldberg would seek to rely on it in resisting a freezing order. I have no doubt that it should have been brought to the attention of the Judge.

87. Secondly, the Court was given a false picture regarding the sale of 103 Bridge Lane to Mr Goldberg's son when it is now acknowledged that it was sold to his nephew. I have made clear my reasons for regarding that distinction as material. I accept that this was not a deliberate error. But Mr Kestenbaum has sought to emphasise how good friends he was with Mr Goldberg and his attendance at family occasions. That such a mistake was made is, in my view, an example of the somewhat cavalier way in which the Claimants put together their evidence.

88. Next, the Claimants wholly failed to point out to the Judge that Mr Goldberg was likely to rely on the years of delay and the fact that if Mr Kestenbaum believed that Mr Goldberg was dishonest and the sort of defendant who is likely to dissipate his assets to avoid his liability, it might be said that the Claimants would have sought a freezing order some years before when Mr Kestenbaum began to press their claims. I recognise that the skeleton argument placed before the Judge does refer to the delay but it fails to indicate the argument which it could be expected Mr Goldberg would wish to put forward as a result.

89. Further, the Claimants did not point out to the Judge the possible defence to the Anglo claim that there remained no recoverable loss, for reasons I have set out, and put forward a calculation of interest that over-stated the claim. Again, I do not suggest that the mis-calculation of interest was deliberate. But as I have observed, it is an elementary error made by a company well experienced in financial transactions and doubtless familiar with the way interest is to be calculated.

90. The Claimants also failed to point out a possible defence to Fortis' claim, namely that Mr Goldberg would say that he was no longer under any legal obligation to assist the company in making a recovery from Mr Hirsch or Hirsch & Cie in respect of a fraud in which Mr Goldberg himself had played no part. Indeed, the way the matter was put to the Judge in counsel's skeleton argument regarding this claim is, in my view, disturbing. That written argument states, at paragraph 17:

"[Mr Goldberg] was in possession of knowledge to the effect that the loan to Hirsch & Cie was fraudulent and owed Fortis a fiduciary duty to disclose it. He did not disclose it until too late."

And then it proceeds, at paragraph 18:

"Quite clearly, had Fortis known that the money was to be used to pay a liability to Mr Blank the loan would not have been made."

The clear impression created by those assertions is that Mr Goldberg was aware of the original fraud at the time it was being practised upon Fortis. However, that is not the case at all, and, indeed, Mr Kestenbaum's evidence does not make that suggestion.

91. Having regard to all of the above factors, I have no doubt that there was material non-disclosure in this case, for much of which there is no good explanation.

92. Material non-disclosure will not necessarily lead to the discharge of a freezing order, and in this case the order will in any event elapse on determination of the present hearing. However, when it does justify discharge, it may, but will not necessarily, be the basis on which the Court refuses to grant a further injunction. In Millhouse UK Ltd v Sibir Energy PLC [2008] EWHC 2614 (Ch), Christopher Clarke J made the following observations, which I respectfully adopt:

"104. The Court will look back at what has happened and examine whether, and if so, to what extent, it was not fully informed, and why, in order to decide what sanction to impose in consequence. The obligation of full disclosure, an obligation owed to the Court itself, exists in order to secure the integrity of the Court's process and to protect the interests of those potentially affected by whatever order the Court is invited to make. The Court's ability to set its order aside, and to refuse to renew it, is the sanction by which that obligation is enforced and others are deterred from breaking it. Such is the importance of the duty that, in the event of any substantial breach, the Court strongly inclines towards setting its order aside and not renewing it, so as to deprive the defaulting party of any advantage that the order may have given him. This is particularly so in the case of freezing and seizure orders.

105. As to the future, the Court may well be faced with a situation in which, in the light of all the material to hand after the non-disclosure has become apparent, there remains a case, possibly a strong case, for continuing or re-granting the relief sought. Whilst a strong case can never justify non-disclosure, the Court will not be blind to the fact that a refusal to continue or renew an order may work a real injustice, which it may wish to avoid.

106. As with all discretionary considerations, much depends on the facts. The more serious or culpable the non-disclosure, the more likely the Court is to set its order aside and not renew it, however prejudicial the consequences. The stronger the case for the order sought and the less serious or culpable the non-disclosure, the more likely it is that the Court may be persuaded to continue or re-grant the order originally obtained. In complicated cases it may be just to allow some margin of error. It is often easier to spot what should have been disclosed in retrospect, and after argument from those alleging non-disclosure, than it was at the time when the question of disclosure first arose."
93. Here, I regard the non-disclosure as both serious and significant, in a case where the grounds for granting a freezing order were never strong. The issue of non-disclosure, as Mr Freedman submitted, is here bound up with the risk of dissipation, since the assessment of that risk is very different once the material facts are correctly before the Court. Thus, the material non-disclosure is a reinforcing ground for refusing the Claimants' application for a further injunction.

Just and convenient to grant leave

94. In the light of the above, it is unnecessary to prolong this judgment by further consideration of this as a distinct condition. I will simply observe that I regard as fundamentally misconceived the Claimants' submission that this is a question of balancing the prejudice to Mr Goldberg of granting a freezing order as against the potential prejudice to the Claimants of refusing one if a subsequent judgment in their favour should be unsatisfied. This is not a question of a balance of convenience, as applies under the American Cyanamid test for an interim injunction. In many cases, where a sufficient allowance is provided for living expenses and legal fees, an individual defendant may not suffer hardship as a result of a freezing order. That does not, in itself, make it just and convenient for such an order to be made.

95. The Claimants' application to renew the freezing order is accordingly dismissed. Since the existing order lapses under its terms, it is unnecessary to make any order on Mr Goldberg's cross-application.


96. From the note of the hearing of the without notice application, it is clear that Asplin J had reservations as to whether this application qualified as vacation business. On the basis of the much fuller material now before the Court, it is clear that her reservations were justified. Unlike many freezing orders, there was nothing particularly urgent about this application and no reason why it could not have been heard in October.

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