Lee Chu v Kin Ming Je & Anor
[2024] EWHC 90 (Ch)
4VVV Limited & Ors v Nicholas Spence & Ors
6 January 2023
[2023] EWHC 1 (Comm)
High Court
Imagine a property investment scam. The investors sued, freezing the assets of the main players. The court said the freeze stays because there's a good chance the accused are hiding money. They also said the investors can go after the money held by companies secretly controlled by one of the accused.
Key Facts
- •4VVV Limited and others (Claimants) sought discharge of worldwide freezing orders (WFOs) against Nicholas Spence (1st Defendant) and Andrew Crump (3rd Defendant).
- •The 3rd Defendant also sought fortification of the Claimants' cross-undertaking in damages.
- •Claimants sought Chabra relief against companies controlled by the 3rd Defendant.
- •The Claimants' case alleged Ponzi/teaming and lading fraud in property investment schemes.
- •The 3rd Defendant's companies marketed the schemes, allegedly containing fraudulent misrepresentations.
- •The Kennedys Letter revealed misleading marketing material and non-disclosure to insurers by the 3rd Defendant's companies.
- •The 1st Defendant's non-compliance with disclosure orders was a key issue.
- •The XIP companies, controlled by the 3rd Defendant, received substantial dividends.
- •The Claimants alleged that the XIP companies held assets as nominees for the 3rd Defendant.
Legal Principles
Principles applicable to grant and discharge of freezing orders (WFOs)
Lakatamia Shipping Co Ltd v Morimoto [2019] EWCA Civ 2203
Distinction between 'mere unfocused finding of dishonesty' and 'dishonesty at the heart of the claim'
Jarvis Field Press Ltd v Chelton [2003] EWHC 2674 (Ch); VTB Capital plc v Nutritek International Corp [2012] EWCA Civ 808
Full and frank disclosure on without notice applications
Konamaneni v Rolls Royce Industrial Power (India) Ltd [2002] 1 WLR 1269; Alliance Bank JSC v Zhunus [2015] EWHC 714 (Comm); National Bank Trust v Yurov [2016] EWHC 1913; Federal Republic of Nigeria v Royal Dutch Shell Plc [2020] EWHC 1315 (Comm)
Chabra relief principles
T.S.B. Private Bank International S.A. v Chabra [1992] 1 WLR 231; Convoy Collateral Ltd v Broad Idea International Ltd [2022] 2 WLR 703; JSC BTA Bank v Ablyazov (No 10) [2015] 1WLR 4754; Prest v. Petrode 1 Resources Ltd [2013] UKSC 34
Principles for fortification of cross-undertaking
Phoenix Group Foundation v. Cochrane [2018] EWHC 2179 (Comm)
Outcomes
Discharge applications of 1st and 3rd Defendants fail.
Claimants demonstrated a realistically arguable case on the merits and a real risk of dissipation against both defendants. The 3rd Defendant failed to demonstrate material non-disclosure.
3rd Defendant's fortification application fails.
Insufficient evidence of losses directly caused by the freezing order.
Claimants' Chabra application succeeds.
Realistically arguable case that XIP companies held assets as nominees for the 3rd Defendant and that dividend payments were potentially avoidable under s.423 of the Insolvency Act 1986.
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