China Evergrande Group v Ding Yu Mei
[2024] EWHC 2100 (Comm)
AB and Ors v CD and Ors
3 October 2023
[2023] EWHC 2419 (Ch)
High Court
Imagine someone's money is frozen because someone else says it's theirs. This person wants to use the frozen money to pay for a lawyer. The judge says the lawyer's fees are too high and only allows the person a smaller amount to pay their lawyer, so the other person still has a chance to get their money back.
Key Facts
- •Proceedings concern a mini-bond investment scheme where £237m was invested, with £5.2m allegedly paid to the First Defendant (D1).
- •Claimants (Cs) allege proprietary claims against D1 for the traceable proceeds of this £5.2m.
- •D1 denies the claims and seeks to vary a proprietary freezing order (PFO) to pay legal fees to his solicitors, Richard Slade & Company (RS).
- •D1 proposes a conditional fee agreement (CFA) with RS for a fixed fee of up to £4m, secured by a mortgage on his house.
- •The PFO includes an exception for 'reasonable' legal expenses, mirroring a similar exception in a worldwide freezing order.
- •The trial is set for 22 weeks, and D1’s estimated legal costs under the CFA are around £7m.
- •The claimants argue the CFA is unreasonable and would extinguish their proprietary claims.
Legal Principles
Legal expenses under PFOs require a careful balancing of the claimant's proprietary claim and the defendant's right to a fair defense.
Sundt Wrigley & Co Limited and Another v Wrigley [1993] Lexis Citation 1664; Marino v FM Capital Partners Ltd [2016] EWCA 1301; Ostrich Farming Corporation Ltd v Ketchell [1997] Lexis Citation 5078; Skatteforvaltningen v Edo Barac [2020] EWHC 377 (Comm)
Court orders, particularly freezing orders, are to be construed strictly, with their natural and ordinary meaning in context.
LLC Eurochem North-West-2 v Tecnimont [2023] EWCA Civ 688
Legal expenses under non-proprietary freezing orders generally allow for reasonable costs, with a light touch approach to reasonableness. Exceptional circumstances may warrant more intervention.
Anglo-Eastern Trust v Kermanshahchi [2002] EWHC 2938 (Ch); Anglo Eastern Trust Limited v Kermanshahchi [2022] EWHC 3152 (Ch); HMRC v Begum [2010] EWHC 2186 (Ch)
Outcomes
The court rejected D1's application to vary the PFO to allow the sale of assets to pay legal fees under the CFA.
The court found the CFA unreasonable given the lack of detail in the cost budget, the potential for extinguishing the claimants' proprietary claims, and the exceptional circumstances of the case.
The court exercised its discretion under Marino principles and allowed the release of £1.2m (plus VAT) for D1's legal costs.
This amount balances the claimants' proprietary interest with D1's need for legal representation in a complex case, taking into account various factors such as the size of the litigation, overlap of claims with other defendants and D1's mental health.