Stolzenberg & Ors v CIBC Mellon Trust Co Ltd & Ors

Deliberate non-compliance with an unless order may justify refusing relief even where the defaulting party has an arguable defence and a fair trial remains possible. Under CPR r 3.9, the court must consider the relevant listed factors and all other circumstances, then stand back and apply the overriding objective without mechanically counting factors. Article 6 permits proportionate restrictions serving the legitimate aim of securing compliance with court orders.

For unlawful-means conspiracy, a commercial purpose or commercial terms do not necessarily negate participation in the fraud. A person may be a company’s directing mind and will for a particular transaction despite acting as a nominee or without controlling all company decisions.

The respondents, trustees of employee benefit funds, alleged that the Castor group procured loans and investments through fraud. They alleged that Mora Hotel Corporation NV and Chascona NV participated in an unlawful-means conspiracy by their dealings with Castor.

After the appellants deliberately failed to comply with freezing and unless orders, default judgments were entered against them. Etherton J refused their applications to set aside those judgments. The appellants sought permission to appeal on whether the conspiracy claim had a real prospect of success, and appealed the discretionary refusal of relief from sanctions.

The central issues were whether the conspiracy claim was properly arguable and whether the judge had erred in applying CPR r 3.9.

1. Permission to appeal on the conspiracy issue was refused and the discretion appeal was dismissed. Lady Justice Arden gave the reasons; Sir William Aldous and Lord Justice Ward agreed.

2. The tort of conspiracy consists in concerted overt acts under an agreement. An unlawful-means conspiracy requires an agreement to cause damage by unlawful means; unlike lawful-means conspiracy, it does not require proof that injury was the conspirators’ predominant purpose. The court left open whether every alleged conspirator must personally perform an overt act, because there were ample allegations that Mora and Chascona borrowed from Castor and paid commissions in furtherance of the alleged scheme: [1982] AC 173.

3. The alleged commercial purpose or terms of the loans could not be resolved at an interlocutory stage. In any event, commercial lending would not necessarily defeat the claim if the borrowing assisted a fraud through which Castor obtained funds and generated benefits for those involved. There was a real prospect that Mr Gambazzi was the directing mind and will of the companies in their Castor dealings. Attribution was transaction-specific and did not require him to have taken all company decisions or to have acted otherwise than on beneficial owners’ instructions: [1994] 2 All ER 685.

4. For relief from sanctions, CPR r 3.9 required structured consideration of the relevant listed factors and all circumstances, followed by an overall assessment under the overriding objective. The exercise was not a head-count of factors. A possible fair trial did not compel relief despite the importance of access to a court: [2002] EWCA Civ 275; [2003] EWCA Civ 1801.

5. The judge was entitled to give substantial weight to the appellants’ conscious and persistent non-compliance, their delay, the risks to a fair trial, finality, and the costs and prejudice of reviving complex litigation. The erroneous basis of parts of earlier orders and the severity of the judgments did not make the overall conclusion plainly wrong. Article 6 was not infringed: the sanctions served the legitimate aim of securing compliance with orders supporting freezing relief, were proportionate, and the appellants had always had an opportunity to comply or seek relief.

• Court of Appeal (Civil Division): Permission to appeal on the conspiracy issue was refused. The appeal against the refusal of relief from sanctions was dismissed.
• High Court, Chancery Division: Etherton J, by order dated 3 February 2003, dismissed the appellants’ applications to set aside default judgments, related unless orders and freezing orders.