Berezovsky v Wah

1. LORD JUSTICE MUMMERY: I will ask Jacob LJ to give the first judgment.

2. LORD JUSTICE JACOB: The primary matter before us is the renewed application for permission to appeal the order of Gray J made on 20 January 2005 and his refusal to vary that order on 17 February 2005. On 20 January 2005 Gray J ordered the defendant to pay into court the sterling equivalent of $2.5 million as a condition of being allowed to defend the action.

3. The nature of the case against the defendant is that he caused the claimants to part with $5 million by a fraud. The legal basis is deceit, fraudulent misrepresentation and a claim that the defendant is a constructive trustee of the money. Gray J summarised the case in paragraphs 2-4 of his judgment. I need not repeat that here.

4. The claimants obtained a freezing order against the defendant on 29 September 2004. The defendant was in breach of that order and failed to comply with the disclosure requirements. Gray J summarised the position in paragraphs 5-9 of his judgment, all of which is accepted and I do not repeat them here. Gray J went on to hold that where there had been a contempt of a court of a flagrant nature the court does have a power to debar the defendant from defending, but that the power will only be exercised where it is necessary and proportionate and only where no lesser measure will do. So much is accepted by Mr Guthrie QC, who appears for the defendant.

5. Gray J then went on to consider what to do in this case. He concluded that "the defence is shadowy in the extreme". Mr Guthrie before us somewhat challenge that. But having read the materials myself, I would agree with Gray J - indeed I think he put it rather gently. Gray J nonetheless refused to debar the defendant from defending but decided that a proper approach was to consider what the position would be if there had been an application for summary judgment. He decided the appropriate thing to do was, in effect, to give conditional leave to defend. The condition that he imposed was that a figure of $2.5 million should be paid into court.

6. On 17 February the defendant made an application to Gray J to vary his condition so that the figure would be $1.2 million rather than $2.5 million. The case advanced before Gray J was that no greater sum of money was possible because the defendant could not raise any more money; accordingly the $2.5 million figure would be stifling, and that it is inappropriate to impose a condition which cannot be complied with.

7. The principal point before us is that Gray J erred in exercising his admitted discretion on 17 February to vary the figure as asked. I would add that he also at the same time required a figure of $1.2 million as a condition for a stay of execution pending the hearing before the Court of Appeal. That much had been offered by the defendant.

8. Although it has been offered it has never been paid into court. It has not been put into the defendant's solicitors' hands as a sum which could be used, if necessary; and the story behind the $1.2 million is itself fairly shadowy. It is said that the defendant was going to borrow the money. Quite why anybody would lend him the money unless he had assets with which to pay it back is never explained, and in truth the whole of the case of the defendant is one of surmise and conjecture and failure to provide proper details.

9. The defendant says the sum imposed would be stifling. He gives but a shadowy explanation of why he could not raise the money. It had emerged, for example, that a person mentioned just briefly in his original disclosure affidavit is either his wife or his mistress, although he admits to neither expressly. We know nothing about her position. We know nothing about the defendant's general state of assets other than a very brief statement saying he has a Patek Philippe watch, which is hardly the mark of someone who has no money.

10. In short, it is not shown that the condition is stifling. I am satisfied that Gray J made no error whatever when he refused to vary the condition. It was for the defendant to prove that the sum imposed would be stifling. Given the various circumstances, his single word on oath would not be adequate to prove that. What was wanted and what is manifestly missing is full chapter and verse. I think Gray J was right. I would refuse permission to appeal.

11. LORD JUSTICE MUMMERY: I agree. I think that Smith LJ was right to refuse permission to appeal against the orders of 20 January and 17 February 2005 when she dealt with the matter on the papers, and for the reasons given by Jacob LJ I agree that this renewed application should be refused. (Application refused; no order for costs).