Cibc Mellon Trust Company & Ors v Stolzenberg & Ors

Relief from sanctions under CPR r.3.9 requires a methodical assessment of all relevant circumstances, including each applicable factor in the rule and the overriding objective. The court may consider the merits, but an arguable defence does not outweigh deliberate and informed non-compliance with freezing and “unless” orders. Particular weight may be given to intentional default against legal advice, delay, prejudice to a fair and efficient trial, and the public interest in finality. Article 6 is relevant where the sanction prevents a trial on the merits, but it does not require relief in every such case.

The claimants sought to preserve and recover assets allegedly connected with frauds involving the Castor Group. Default judgments were entered against Mora Hotel Corporation NV and Chascona NV after they failed to comply with freezing orders and “unless” orders requiring disclosure, asset statements and related steps. The defendants later applied to set aside the judgments and obtain relief from the sanctions.

The applications were made after substantial delay, following unsuccessful jurisdiction challenges and enforcement proceedings abroad. The central issues were whether the defendants had real or arguable prospects of defending the tracing and conspiracy claims, and whether the circumstances justified relief under CPR r.3.9.

1. The applications were dismissed. The defendants had to satisfy both the merits threshold and the discretionary requirements for relief from sanctions under CPR r.3.9. An arguable defence was relevant but not conclusive.
2. The court applied the guidance in Woodhouse v Consignia [2002] EWCA Civ 275, requiring consideration of each relevant factor in CPR r.3.9(1), a methodical balancing exercise and an explanation of the result. The discretion had to be exercised against the overriding objective in CPR r.1.1. The merits could be considered as part of all the circumstances, as recognised in Chapple v Emmett and Arrow Nominees Inc. v Blackledge [2002] 2 BCLC 167.
3. On the merits, Mora had an arguable defence to the tracing claim, but the claimants also had a real prospect of success. The evidence could support imputation of Mr Gambazzi’s knowledge to the companies, applying the reasoning in El Ajou v Dollar Land Holdings Plc [1994] 2 All ER 685.
4. The court rejected both proposed extremes on conspiracy. Commercial terms and a legitimate use of funds did not make conspiracy legally impossible where the recipient knowingly participated in a wider fraudulent scheme. Conversely, mere receipt of stolen money with knowledge did not automatically establish conspiracy. Concerted action remained essential, distinguishing conspiracy from accessory liability and knowing receipt. The court considered Grupo Torras SA v Al-Sabah and BCCI (Overseas) Ltd v Akindele [2001] Ch 437.
5. The decisive factors against relief included conscious and deliberate non-compliance with freezing and “unless” orders, contrary to the advice of English solicitors; the importance of compliance with orders preserving assets, information and evidence; delay of approximately three years and two years after the judgments; the public interest in finality; likely further delay before trial; risks to witness recollection and documentary evidence; and additional costs that would effectively fall on the claimants.
6. The court recognised that two orders had proceeded on mistaken factual assumptions and that one order had not been strictly breached. Those matters weighed in favour of relief but did not overcome the much more substantial factors against it. Article 6 of the Convention was relevant because refusal would prevent a trial on arguable claims, but the overriding objective and administration of justice still required refusal.

First-instance decision. The judgment records earlier jurisdiction proceedings and subsequent foreign enforcement proceedings, but determines the applications itself under CPR r.3.9.