Introduction
1. On 11 August 2014, Asplin J made a freezing order against
the Defendant, Mr Stephen Goldberg, in the amount of 1.6 million. As is often
but not invariably the case, that application was heard without notice. From
the note of the hearing, it is clear that the Judge regarded this as a
borderline case on risk of dissipation of assets, in the light of the
considerable delay, and was only just persuaded to make the order.
2. The Claimants apply to continue the freezing injunction.
That application is opposed and there is also a cross-application by Mr
Goldberg to discharge the injunction, although it expires in any event at the
conclusion of this hearing.
3. The return date of the original injunction was 21 August
2014, when the matter came back before Peter Smith J. Both sides were then
represented and it was agreed that a full day's hearing was required, with
further time for evidence. The Judge therefore continued the injunction to an
adjourned hearing to be held between 18-23 September, and directed that Mr
Goldberg file and serve his evidence by 4pm on 3 September and the Claimants
file and serve any evidence in reply by 4pm on 11 September.
4. Mr Goldberg asked for an extension from the Claimants of
24 hours and served his evidence at about 5pm on 4 September. The Claimants had
adopted in correspondence the position that in return for that extension they
required an extension of 72 hours. However, they sought to serve an additional
witness statement only on 16 September, followed by the exhibit on 17
September, the day before the hearing. Mr Littman, who appeared for the
Claimants on this application as he had at the original without notice hearing,
frankly accepted that no good excuse could be put forward for the late service,
for which he could only apologise. But if that late evidence were admitted, it
would mean that Mr Goldberg would not have an opportunity to file any evidence
in response to the quite serious allegations being made. I regard it as wholly
unsatisfactory that a claimant who has obtained a freezing order from the Court
on a without notice application, which of its nature places a defendant under
considerable pressure, should then conduct itself in that way. The timetable
set out in Peter Smith J's order was clearly designed to enable both sides to
take full account of each other's evidence. With the agreement of Mr Freedman
QC, appearing for Mr Goldberg, I admitted that evidence de bene esse, on the
basis that Mr Freedman could respond on instructions to the new factual
material being put forward.
Background
5. The First Claimant ("Anglo") is a Panamanian
company and the Second Claimant ("Fortis") is a Delaware corporation.
The controlling mind of both companies appears to be Mr Louis Kestenbaum, who
lives in New York City. It is Mr Kestenbaum who represented the Claimants in
the transactions which give rise to the present claim and who gives evidence on
their behalf. Both Claimants appear to be engaged in making financial
transactions, i.e. advancing loans, often for short periods at high rates of
interests.
6. Mr Goldberg is a solicitor and now works as the in-house
solicitor for his family's company that is engaged in property investments in
the United Kingdom, Northern & Midland Holdings Ltd ("N&M").
However, at the material time and until about 2010, he was in independent
practice. From 1998-October 2007 his firm was called Goldberg Linde. Mr Carl Linde
was the other partner until September 2003 and subsequently acted as a
consultant to the firm. Over that time, Mr Linde became less engaged in legal
work as he concentrated more on assisting his clients with management of their
assets. For that purpose, Mr Linde used a company called Fidex Asset Management
SA ("Fidex"), incorporated in Luxembourg, and other companies bearing
the "Fidex" name. Mr Goldberg also had some involvement with Fidex
and signed loan agreements on its behalf. His connection is also indicated by
the fact that in October 2007, Mr Goldberg ceased to trade as Goldberg Linde
and practised thereafter as Fidex Law.
7. The other key individual to feature in the story is Mr
Robert Hirsch, who is resident in Switzerland. He operated what is described by
Mr Kestenbaum as a trustee/fiduciare business through a company called Maverick
Conseil SA ("Maverick") and also controlled a Swiss firm, Hirsch
& Cie. Mr Hirsch became a business associate of Mr Linde, in that they were
involved together on a number of transactions.
8. From Mr Kestenbaum's evidence, it appears that from the
year 2000 onwards Mr Linde introduced him to a number of financing
opportunities and that Mr Kestenbaum's companies made a series of loans to
clients of Mr Linde or Fidex, which were all repaid without a problem. Mr
Kestenbaum came to trust Mr Linde and a close friendship developed between
them. Mr Linde also introduced Mr Kestenbaum to a number of other investment
opportunities, including a dot.com
business venture.
9. For legal work in England, Mr Kestenbaum's companies used
Goldberg Linde/Fidex Law as their principal legal advisors. Mr Kestenbaum came
to know Mr Goldberg very well and states that they became friends: he was
introduced to Mr Goldberg's father and went to Mr Goldberg's daughter's
engagement party. In the Particulars of Claim, their relationship is described
as a "close friendship". Mr Kestenbaum says, and I accept, that he
came to trust Mr Goldberg as he did Mr Linde.
The Claim
10. The claims against Mr Goldberg by Anglo and Fortis are
distinct and need to be described separately.
Anglo
11. The claim by Anglo concerns two loan transactions made,
respectively, in January 2007 and February 2008.
12. The January 2007 loan was initially made to Maverick,
supposedly a client of Fidex, and subsequently by novation the borrower became
Brevard Ltd, a British Virgin Islands ("BVI") company, described in
the loan document as a client of Fidex with its office in Geneva. The loan (the
"Brevard loan") was for 1 million and was periodically extended. The
final extension was by written agreement dated 4 August 2008. The loan matured
on 4 February 2009 when it was repayable with fixed interest of 260,000. The
"Borrower" is defined in the loan agreement and related promissory
note as comprising not only Brevard Ltd but also its sole corporate director,
LZ Nominees Ltd ("LZ Nominees"), and Fidex. The Brevard loan is
signed by Mr Goldberg along with Mr Linde on behalf of LZ Nominees.
13. The February 2008 loan is pleaded by the Claimants as
being made to a company called New Sales Ltd. However, from the loan
documentation before the Court it seems that New Sales Ltd was borrowing
jointly with Mr Hirsch personally. The agreement is entered into between Anglo
as lender and Fidex and Hirsch & Cie as agents. New Sales Ltd is stated to
have the same corporate address in Lausanne as Hirsch & Cie. This loan (the
"New Sales loan") was for 1.375 million. The New Sales loan was also
extended, eventually by an agreement dated 4 August 2008 with a related
promissory note. The maturity date under those documents was the same as for
the Brevard loan, i.e. 4 February 2009. The loan was repayable with fixed
interest of 357,500. The "Borrower" is defined in the loan documents
as comprising not only New Sales Ltd and Mr Hirsch but also Fidex and Hirsch
& Cie. It is signed by Mr Goldberg along with Mr Linde, this time on behalf
of Fidex, and by Mr Hirsch on behalf of himself personally and for Hirsch &
Cie.
14. The promissory notes relating to both the Brevard loan
and the New Sales loan contain an identical term that in the event of default,
interest will accrue "at the highest rate permitted by law."
15. Anglo asserts in the Particulars of Claim (at para 16)
that neither the Brevard loan nor the New Sales loan, nor the stipulated
interest, was paid on maturity on 4 February 2009 or at any time since.
16. Both loan agreements contain a number of warranties made
by the "Borrower":
a) clause 4C of the Brevard loan provides that the amount on
deposit at the Borrower's specified bank account at ING Wolvendael in Brussels
exceeds 2 million and "will at all times until the Note is paid and
discharged in full exceed the Loan Value", which in turn is defined as
being 2 million.
b) clause 4C of the New Sales loan is in similar terms save
that the account there specified is with Clariden Leu Bank in Zurich and the
minimum amount and Loan Value is stated to be 2.75 million.
17. Central to the claim against Mr Goldberg is clause 4B.
Although the Particulars of Claim is framed on the basis that the terms of this
clause are identical as regards Mr Goldberg in both agreements, that is not
correct, as Mr Littman accepted when that was pointed out in the course of
argument.
18. In the New Sales loan, clause 4B provides:
"The Borrower hereby represents, warrants, attests,
declares and covenants and agrees as follows:
B. The Signatories hereto, Carl Linde, Esq., Stephen
Goldberg, Esq, and Robert Hirsch are the sole signatories on the Account and
will remain so until all amounts due and arising under the Note have been
unconditionally and irrevocably paid and discharged in full. The Signatories
hereto unconditionally warrant jointly and severally that they will not take
any action with respect to the Account in contravention of the terms of this
Agreement, and assume full responsibility under the terms of this Agreement for
any such action. The Borrower and the undersigned Signatories hereto further
undertake that until such time as the Note has been unconditionally and
irrevocably paid and discharged in full, they will not authorise the
withdrawal, transfer of or assignment of any of the monies in the Account other
than to make payment to the Lender under the terms of the Note."
19. In the Brevard loan, clause 4B provides:
"The Borrower hereby represents, warrants, attests,
declares and covenants and agrees as follows:
B. The Signatories hereto, Carl Linde, Esq. and Stephen
Goldberg, Esq, plus Arthur Ashton are the sole signatories on the Accounts
[sic] and will remain so until all amounts due and arising under the Note have
been unconditionally and irrevocably paid and discharged in full. The
Signatories hereto unconditionally warrant jointly and severally that neither
they nor Arthur Ashton will take any action with respect to the Accounts in
contravention of the terms of this Agreement, and assume full responsibility under
the terms of this Agreement for any such action. The Borrower further
undertakes that until such time as the Note has been unconditionally and
irrevocably paid and discharged in full, it will not authorise the withdrawal,
transfer of or assignment of any of the monies in the Accounts other than to
make payment to the Lender under the terms of the Note in this Loan and
Security Agreement."
20. Anglo's case against Mr Goldberg is essentially simple.
It alleges that on the maturity date, 4 February 2009, both the specified bank
accounts were empty. Accordingly, on the assumption that the respective amounts
specified were indeed in those accounts at the time the loan agreements were
entered into, as the Borrower warranted, there must have been withdrawals from
the accounts. Those withdrawals must have been authorised by at least one of
the signatories to the respective account. Even if it was not Mr Goldberg who
authorised the withdrawals, by clause 4B he assumed liability for such a breach
of warranty by one of the other specified signatories.
Fortis
21. The claim by Fortis is of a wholly different nature. In
late August or early September 2008, Mr Kestenbaum was approached by Mr Hirsch
with a proposal that one of his companies could invest in a mining concession
in Rwanda which he was told Hirsch & Cie was seeking to acquire. That was
not the kind of investment of which Mr Kestenbaum had prior experience.
However, he agreed with Hirsch & Cie to advance $5.25 million for 90 days,
after which it would either be converted at the lender's option to an equity
investment in the mining concession or treated as a straight loan attracting
26.7% interest. Mr Linde was also involved in the meetings and discussions
concerning this proposal, which he was evidently seeking to advance on behalf
of Mr Hirsch.
22. As a result, Mr Kestenbaum agreed on behalf of Fortis to
proceed with the transaction. On 8 September 2008, the money was paid on behalf
of Fortis to Hirsch & Cie's account at Clariden Leu Bank in Switzerland and
a promissory note for that sum was executed by Hirsch & Cie in favour of
Fortis. The promissory note was governed by New York law with a New York
jurisdiction clause.
23. It is not alleged that Mr Goldberg had any involvement
in the negotiations or transaction at that point.
24. The Particulars of Claim contend that on the next day, 9
September 2008, Mr Kestenbaum proposed in an email to Mr Goldberg that he (i.e.
Mr Goldberg) should "work in an unspecified capacity with Fortis in
connection with the loan and mining concessions conditional on there being no
conflict of interest for [Mr Goldberg] in so doing."
25. The Claimants have not exhibited that email or the
initial reply which it seems Mr Goldberg made, but have exhibited what is
expressly stated to be a further email from Mr Goldberg of 10 September in
which he says that he has spoken to Mr Hirsch and is satisfied that he can
operate in an independent manner on Mr Kestenbaum's behalf. He then proposes
how he would need to go out to Rwanda, meet the appropriate professionals and
carry out due diligence there, and he sets out his proposed fees.
26. Mr Kestenbaum gave Mr Goldberg instructions to proceed
by a further email on the same day which is very clear and specific in its
terms. From that email, it is evident that the due diligence which Mr Goldberg
was being instructed to carry out concerned the mining concession; and it was
not due diligence regarding Hirsch & Cie and its creditworthiness regarding
the loan itself, which had of course already been advanced. However, if the
equity investment were to proceed, Mr Kestenbaum was also looking to Mr
Goldberg to assist in establishing an appropriate partnership structure that
would safeguard Fortis' interest.
27. Although the pleading is somewhat ambiguous in that
regard, Mr Littman confirmed that this was his client's position. Although Mr
Littman referred to a subsequent draft agreement which Mr Goldberg had
prepared, that related not to the initial loan but to potential further loans
which were never in fact made.
28. Mr Goldberg duly travelled to Rwanda, along with a
geologist, and reported back to Mr Kestenbaum. There is a detailed email from
Mr Goldberg dated 13 November 2008. That does not advise Mr Kestenbaum against
making the investment, as Mr Goldberg suggests in his evidence, but rather sets
out some concerns which he and the geologist had, and expresses the view that
if Mr Hirsch addresses those concerns adequately, then this could be a very
worthwhile project.
29. In any event, no criticism is made by Mr Kestenbaum
regarding this advice and there is no suggestion that Mr Goldberg was not then
acting in good faith. Whether it is because the concerns which Mr Goldberg set
out in his email were not adequately addressed or for some other reason, Mr
Kestenbaum decided not to proceed to take an equity interest in the mining
concession.
30. There were apparently discussions between Mr Kestenbaum
and Mr Hirsch regarding an extension of the loan, in which Mr Goldberg was not
involved, and on 26 February 2009 Fortis formally demanded repayment of the
loan. It was not repaid and on 11 March 2009, the Supreme Court of New York
granted Fortis judgment against Mr Hirsch and Hirsch & Cie, along with
another defendant, in the sum of a little over $6.8 million.
31. By that time, it had emerged that the entire transaction
was a fraud perpetrated by Mr Hirsch on Mr Kestenbaum and Fortis. The intention
of Mr Hirsch was to use the money provided by Fortis not for an investment in
Rwanda but to satisfy his liabilities to an independent third party in
Australia. But although Mr Kestenbaum considers that Mr Linde was involved in
that fraud, it is not alleged that Mr Goldberg had any involvement. The case
against Mr Goldberg is based entirely on what it is alleged Mr Goldberg should
have done after he found out about the fraud.
32. It appears, and is Fortis' case, that on the date of the
New York judgment the $5.25 million which Fortis had advanced was still in the
account of Hirsch & Cie at Clariden Leu Bank. It was transferred from that
account to the account of the third party in Australia on Friday, 13 September
2009.
33. Apparently, that same day Mr Goldberg spoke to Mr
Kestenbaum and they discussed the position of this money in the Clariden Leu
account. It seems that Mr Goldberg told Mr Kestenbaum that the money was
blocked, by what I infer is a saisie or the Swiss equivalent of a freezing
order, by a Swiss Court in either Zurich or Lausanne. That emerges from the
transcript of a further telephone call between Mr Kestenbaum and Mr Goldberg on
Sunday, 15 March, which Mr Kestenbaum has exhibited. In summary, Mr Goldberg
then told Mr Kestenbaum that although he believed that a block had been put on
the money in the account, Mr Hirsch had told him on Thursday that he was hoping
to get that block lifted, and if that happened Mr Hirsch could send the money straight
away to Australia. Accordingly, he told Mr Kestenbaum that he should take
urgent action himself to get the money blocked, by contacting his lawyers in
Switzerland first thing on Monday morning. I think it is appropriate to quote
from the transcript:
"LK: Let me ask you a question: you could find, eh, is
there any way you can find out the real details of the block? Or you can't?
SG: I can't
LK: You cannot
SG: I can't. But your lawyer should be able to; your lawyer
gets on the phone tomorrow morning, at 8:15, and speaks to them, and put a
block on it. Notify them that this is, as you said, this is fraudulent money,
it was taken under false pretenses, and let him put a block on it, but he
should do that first thing; I'm telling you, Louis,
LK: OK.
SG: It is very important;
LK: But Friday you were comfortable that nothing is going to
happen for a month or two or three, you said; now, now you are changing your
mind
SG: I am changing my mind, yes
LK: OK, I try to understand the background
SG: Because, because, I, because, I am worried, that I know
that it has changed from one area to another, and I don't know of what has
happened in the intervening period, because I, I know when I spoke to Robert
Hirsch, he told me there was a period when there wasn't a block on it, and he
tried to send the money, but then it was blocked I don't know"
34. Mr Kestenbaum contacted his Swiss lawyers as soon as
possible thereafter and they sent an urgent letter to Clariden Leu Bank on the
Monday morning seeking to block the funds. But by that stage it was too late:
the money had gone the previous Friday.
35. Although I have to say that it is not at all clear from
the way the matter is pleaded, it is Fortis' case, as explained by Mr Littman,
that as soon as Mr Goldberg spoke to Mr Hirsch on the Thursday and learnt that
(as he here relates) Mr Hirsch was seeking to get the block lifted, Mr Goldberg
should have got on the telephone to Mr Kestenbaum and told him to get a new
block placed on the money. If Mr Goldberg had done that, then Mr Kestenbaum
could have got his Swiss lawyer to block the money successfully on the Friday
morning, as opposed to seeking to do so unsuccessfully the following Monday.
36. In his affirmation, Mr Kestenbaum goes further and
states, at paragraph 90:
"Mr Goldberg subsequently told me that he was aware of
the fact that, when he advised me to freeze the funds in Switzerland, they had
already left the jurisdiction."
No details are given as to when and in what circumstances Mr
Goldberg is alleged to have made that admission, which is denied by Mr Goldberg
in his evidence in reply. Although Mr Kestenbaum, as I mentioned at the outset,
served a further witness statement in response, he does not there address this
point at all.
37. These facts are alleged to constitute a breach of
fiduciary duty on the part of Mr Goldberg as solicitor to Fortis, or breach of
contract and negligence at common law. Mr Littman explained that the broader
allegations made against Mr Goldberg in the pleading are not abandoned but depend
upon further investigation of what exactly Mr Goldberg knew and at what stage.
For the purposes of the freezing order, he confined his case to this particular
allegation regarding the monies frozen in the Clariden Leu account.
Freezing order
38. The requirements for the grant of a freezing order are
well known. There are three cumulative conditions:
a) The claimant must show a good arguable case: that is
something less than the balance of probabilities but more than a serious
question to be tried (i.e. the American Cyanamid test): see, in the context of
jurisdiction, Canada Trust v Stolzenberg (No. 2) [1998] 1 WLR 547 per Waller LJ
at 555.
b) There must be a real risk of dissipation of assets such
that a judgment in the claimant's favour would be unsatisfied: The
Niedersachsen [1983] 1 WLR 1412 at 1422.
c) It must be just and convenient to grant relief: sect.
37(1) of the Senior Courts Act 1981.
Good arguable caseAnglo
39. As regards Anglo, I accept for the purposes of this
application that, on the basis of the express personal warranties by Mr
Goldberg in both the Brevard and New Sales loan agreements, there is a good
arguable case of breach.
40. However, I am not at all clear that there remains any
loss suffered by Anglo that has not been satisfied. In May 2009, Anglo and
Fortis brought a claim in this Court against Mr Linde along with Mr Hirsch,
Hirsch & Cie and some others. They obtained a freezing order against Mr
Linde and on 4 December 2009 that action as against him was settled by a Tomlin
order. The terms of that order are not exhibited but it is disclosed that the
Claimants have recovered some $7.285 million from Mr Linde.
41. Further, the Claimants have recovered from Mr Hirsch and
Hirsch & Cie some $2.566 million. As explained above, Mr Hirsch and Hirsch
& Cie are both comprised within the "Borrower" and therefore
liable under the New Sales loan.
42. Accordingly, there has been a total recovery of about
$9.85 million which, applying Mr Littman's conversion rate of 1.7:1, amounts to
around 5.79 million.
43. The recovery from Mr Linde alone is more than the
principal and interest due on the two loans as at 4 February 2009. Although
Anglo has claimed "non-UK legal fees" of 1,881,618, paid on 24 June
2012, those are wholly unparticularised and it is unclear how such high fees
might be justified when Anglo had the benefit of a settlement with Mr Linde
under an order of this Court.
44. Anglo is also entitled to interest after 4 February
2009, but Mr Littman had to accept that the interest calculation set out in the
pleaded Particulars of Loss cannot be correct since it is computed on the full
liability as at 4 February 2009 for the period up to 7 August 2014 and
therefore fails to take account of the fact that part, if not all, of the
principal debt was satisfied during that period by the recovery made against Mr
Linde.
45. It is highly unfortunate, to say the least, that
interest has been pleaded in an exaggerated amount, in Particulars of Claim
substantiated by a statement of truth on behalf of Anglo, which is well
accustomed to international financial dealing and would readily appreciate the
basis on which interest has to be calculated.
46. Accordingly, although I accept that Anglo has an
arguable case, I am not satisfied that it has a good arguable case to recover
monies from Mr Goldberg, applying the slightly higher test set out in Canada
Trust. It is wholly unclear when recovery was made from Mr Linde, and Mr
Littman had to tell the Court that he did not know. The calculation of loss
begs far too many questions.
Fortis
47. As regards Fortis, the first question is whether Mr
Goldberg owed any continuing duty to the company as at mid-March 2009. Mr
Goldberg had completed his due diligence on the mining concession in late 2008,
and Mr Kestenbaum had decided not to take an equity investment. Mr Littman
argued that Mr Goldberg's role amounted to more than just due diligence on the
mining concession, and that Mr Goldberg acted as agent for Fortis and
"owed the duty of agent as regards the prospective transaction." I
have major doubts that the "prospective transaction" was anything
other than the investment in the Rwanda mining concession, and certain other
concessions which Mr Hirsch claimed to be considering and which were also not pursued.
I can see that Mr Goldberg may have owed a duty to reveal to Mr
Kestenbaum/Fortis when he discovered that the mining transaction was part of a
fraud whereby Mr Hirsch had procured the advance of $5.25 million. But it is
clear that Mr Kestenbaum was aware of that fraud by 11 March, whether as a
result of information supplied by Mr Goldberg or from elsewhere. To succeed
under this head, Fortis would have to satisfy the Court that Mr Goldberg owed a
duty to warn Fortis as soon as he learnt that the money frozen in Hirsch &
Cie's Swiss bank account became unblocked, or even might become unblocked. That
would be a considerable extension of any duty or retainer, when it seems that
Mr Goldberg did no further work for Fortis or Mr Kestenbaum after the end of
2008.
48. However, in the light of my findings on the risk of
dissipation and non-disclosure, it is unnecessary to reach a concluded view as
to whether Fortis has shown a good arguable case on this ground. I shall simply
say that I have serious doubt that it meets the threshold.
49. Further, under this head also, the claim as advanced in
support of a freezing order appears to me manifestly overstated. The loss
claimed against Mr Goldberg by Fortis is pleaded at some 6.83 million plus the
recovery of costs of $127,000. That may be Fortis' total loss as a result of
the Rwanda fraud since the loan carried a significant rate of interest. But the
particular breach now advanced as against Mr Goldberg resulted, on Fortis'
case, in the loss of $5.25 million that was transferred out of the Clariden Leu
account on Friday, 13 March 2009.
50. However, since the freezing order made by Asplin J was
limited to 1.6 million, and there is no attempt on the part of the Claimants to
increase that sum, it is unnecessary to say more in that regard.
Risk of dissipation
51. The relevant principles have been conveniently
summarised by Eder J in Elektromotive Group Ltd v Pan [2012] EWHC 2742 (QB) at
[33(i)]:
"i. the Court must conclude on the whole evidence
before it that the refusal of a freezing order would involve a real risk that
the judgment would remain unsatisfied: The Niedersachsen [1983] 1 WLR 1412 (at
1422H). In Z Ltd v A-Z [1982] QB 558 (at 585A-G), Kerr LJ held that one
particular form of abuse of this basic jurisdictional principle was as follows:
"The increasingly common one, as I believe, of a Mareva
injunction being applied for and granted in circumstances in which there may be
no real danger of the defendant dissipating his assets to make himself
'judgment-proof'; where it may be invoked, almost as a matter of course, by a
plaintiff in order to obtain security in advance for any judgment which he may
obtain; and where its real effect is to exert pressure on the defendant to
settle the action."
ii. Bare assertions that a defendant is likely to put assets
beyond the claimant's grasp and is unlikely to honour any judgment or award are
not enough of themselves. Exiguousness of the claimant's evidence on this
aspect must weigh strongly when the Court comes to consider the matter inter
partes on an application to discharge: The Niedersachsen (above) (at
1419H-1420B).
iii. There must be solid evidence of the risk of
dissipation: Thane v Tomlinson [2003] EWCA Civ 1272 (at para 21).
iv. The mere reliance on the alleged dishonesty of the
defendant is not of itself sufficient to found a risk of dissipation. It is
appropriate in each case for the Court to scrutinise with care whether what is
alleged to have been the dishonesty of the person against whom the order is
sought in itself really justifies the inference that that person has assets
which he is likely to dissipate (Thane (above) at para 28)."
52. In his argument against continuation of the injunction,
Mr Freedman relied strongly on the delay before the Claimants launched these
proceedings. He submitted that in the present case, the issue of delay is
relevant to both the risk of dissipation and non-disclosure.
53. The significance of delay will vary greatly from one
case to another. In particular, it is important to consider what happened over
the period of delay and how the claimant seeks to explain it. As Eder J stated
in Enercon GmbH v Enercon (India) Ltd [2012] EWHC 689 (Comm) at [78]:
"Delay in bringing the application is at least one
factor to be weighed in the balance in considering whether or not to continue
the freezing injunction. it is not simply the fact of delay that is so
important but what it tells the court about the risk of dissipation. Absent
some proper explanation, the fact that the claimants here waited for almost 2
and a half years before seeking a freezing injunction raises, at the very
least, a large question mark as to whether there is indeed a real risk of
dissipation particularly against the background of the many and varied Indian
proceedings in which the parties have been engaged since 2007."
54. In the circumstances of the present case, I consider the
delay to be very relevant.
55. It is common ground that after obtaining the Tomlin
order against Mr Linde in late 2009, Mr Kestenbaum engaged in 2010 in prolonged
negotiations with Mr Goldberg in an attempt to achieve settlement of his
companies' claims against him. Those negotiations ultimately broke down,
although they proceeded for almost a year. Thus, Mr Goldberg was well aware
that Mr Kestenbaum was pursuing him for the recovery of the substantial losses
made by his companies.
56. Further, the matter resumed in about 2012 when an
intermediary approached Mr Goldberg on behalf of Mr Kestenbaum. Mr Kestenbaum
and Mr Goldberg are both orthodox Jews, and Mr Goldberg then suggested that the
case could be brought before the rabbinical Court of the London Beth Din as
opposed to the ordinary courts. Mr Kestenbaum did not follow that course, but
Mr Goldberg could have been under no illusion that Mr Kestenbaum was still
seeking to recover the monies his companies had lost. However, it was only in
August 2014 that the Claimants launched these proceedings.
57. Accordingly, if Mr Goldberg was someone who had the
intention or desire to spirit away or conceal his assets to avoid a judgment,
he had ample opportunity to do so. And if Mr Kestenbaum really believed that
there was a serious risk that Mr Goldberg would act in that way, I would expect
him to have commenced these proceedings and sought a freezing order not months
but years before now.
58. What explanation does Mr Kestenbaum give for this delay?
Hardly anything is said in his affirmation, save that he waited first to try
and collect monies from other entities that had responsibility for the losses.
But at least as regards the period from 2010, that seems to me inconsistent
with the fact that Mr Kestenbaum then engaged in prolonged negotiations to try
to get payment from Mr Goldberg.
59. In Mr Littman's skeleton argument, it is said that the
Claimants had doubt that Mr Goldberg was worth pursuing but that more recently
"it became apparent that he is worth powder and shot." Not only is
that explanation not part of the Claimant's evidence, although it is now
adopted in Mr Kestenbaum's recent witness statement, but given the nature of Mr
Goldberg's assets and what I have been told about what was said in those
negotiations, there is no basis on which it can be suggested that the Claimants
have made some recent and significant discovery about Mr Goldberg's wealth.
This is not a case of an individual who has come into new and substantial funds
in the past few years. Moreover, if Mr Kestenbaum had believed that Mr Goldberg
was unable to pay significant money, it is difficult to understand why he
nonetheless devoted prolonged efforts to seek a substantial payment from Mr
Goldberg in the many months of negotiations in 2010. In that regard, it is
telling to learn from Mr Kestenbaum's recent witness statement what he said to
Mr Goldberg on 27 April 2010, according to the transcript of the conversation
from which he quotes:
"LK: The bottom line is, if I get paid from Robert, I
am not going to take, if I get paid from you, I am not going to take. But I
don't know what's going to happen. I am not a prophet, I am going to work very
hard to get it. I need a proposal, The bottom line is to me you have shares,
you're worth money, you are going to make money, you made money, and. [sic] If
you don't, I am not going to get, I am not going to go, I don't want to go in
court. I want to avoid everything to go in court. I don't have to, I don't want
to do it. But one thing I need from you, I need, get this money and to see
what, you know what I am saying, give me a proposal, a plan, if, I have no
problem, If I get from them I write to you, you don't owe me the money, but if
I don't get from them I want the money from you."
60. Mr Littman's skeleton argument also referred to the
period between the end of June 2014 and the issue of the claim form, when he
says the Claimants did not wish to start court proceedings because of the
strictures that he says very orthodox Jews are under in the period of
commemoration of the destruction of the Temple. I make no finding in that
regard and make clear that I do not draw any adverse conclusion from the
decision not to start proceedings over that short period. It is the much longer
period of years between 2010 and June 2014 which I regard as relevant.
61. I turn to consider what Mr Goldberg's assets are and
what has happened to them over this prolonged period.
Shares in Goldpalm Ltd
62. The Claimants rely first on Mr Goldberg's shares in
Goldpalm Ltd, which is the holding company of N&M, the family property
investment company. Mr Goldberg's evidence is that he holds 4,780 shares in his
own name, which represents 6.25% of the total shareholding. The last filed
accounts of the company show its total value at 28.8 million. This is therefore
a substantial asset, even if the value of such a minority shareholding in a
private company cannot be computed pro rata and is subject to significant
discount.
63. However, Mr Goldberg's evidence is that those shares
have been given as security to the subsidiary company, N&M, in April 2009,
in return for a loan from the family of c. 1.2 million which he raised
specifically for the purpose of paying Fortis. This arose because of another of
the loan agreements arranged largely between Mr Linde and Mr Kestenbaum. On 17
October 2008, Fortis made a loan to Cotto Assets Ltd, a BVI company (the
"Cotto loan"). The loan agreement was not dissimilar to those for the
Brevard and New Sales loans, and Mr Goldberg signed the agreement along with Mr
Linde on behalf of Fidex and LZ Nominees, the corporate director of Cotto
Assets Ltd.
64. It is not in dispute that Mr Goldberg made a payment of
over $1.278 million to Mr Kestenbaum in discharge of the Cotto loan on 27 April
2009. In my judgment, that is significant in two respects:
a) The fact that Mr Goldberg was prepared to raise money to
make such a very substantial payment to Mr Kestenbaum, or his company, in
respect of losses incurred in a very similar transaction to the Brevard and New
Sales transactions claimed on here, is in my judgment a strong indication that
Mr Goldberg is not someone who seeks to conceal or dissipate assets to avoid
having to make such a payment.
b) There is nothing untoward about Mr Goldberg pledging his
shareholding as security for the loan from his family's company. The shares
remain in his legal ownership, and as shares in a private English company, they
are not assets which can readily be dissipated. In argument, Mr Littman
submitted that the Court should draw an adverse inference from the fact that
there was no documentation of this loan, and suggested that it was all rather
suspicious. However, Mr Goldberg paid over a substantial sum of money which he
would have had to raise, and I see no basis to find that his account of these
dealings within the family regarding the pledging of his shares in the family
company as security for a loan to enable him to make the payment somehow
supports a finding that Mr Goldberg is not to be trusted and may seek to spirit
away his assets.
65. As regards Mr Goldberg's payment, there is a disputed
issue between the parties as to whether it was made, as Mr Goldberg asserts,
only in consideration of a promise by Mr Kestenbaum not to pursue him further
for any other claims and not in satisfaction of any personal liability in
respect of the Cotto loan itself. Mr Kestenbaum disputes that, and asserts that
Mr Goldberg paid because he was liable under the Cotto loan agreement which he had
signed (and which contained a personal warranty by the signatories similar to
the warranties under the Brevard and New Sales loan agreements). I obviously
cannot resolve that dispute on this interim application. But assuming in the
Claimants' favour that Mr Goldberg paid because he felt liable under the terms
of the Cotto loan, that reinforces the point that he is not an individual who
seeks to avoid satisfying a liability to a company run by Mr Kestenbaum and who
would therefore seek to dissipate his assets to that end.
Pension Plan
66. Next, Mr Goldberg has disclosed in his statement of
assets, made pursuant to the freezing order, his pension plan, currently worth
341,400. However, under legislation currently in force he can withdraw only 25%
of that value as a lump sum. Significantly, he has not done so at any time in
the past four years despite his knowledge of the claims that Mr Kestenbaum was
pressing against him. Mr Littman referred to the fact that the position will
change next April when Mr Goldberg will be able to withdraw all his pension.
But that cannot begin to constitute evidence of a real risk that Mr Goldberg
will do so, still less that he will do so in order to dissipate his assets. Mr
Goldberg states that he needs this fund for his pension and there is no reason
to disbelieve him.
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