Marlwood Commercial Inc & Ors v Kozeny & Ors

The court may direct a separate trial of an issue where it is substantial, potentially determinative, manageable within the available court time, and likely to avoid undue delay. The court must balance those advantages against duplication, additional expense and the risk of an unhelpful preliminary determination. A case-management order may be appropriate where proceedings are already substantially delayed and the issue will logically precede other issues. Once the threshold for a freezing order has been crossed, the extent of fortification of the cross-undertaking in damages primarily depends on the possible loss caused by the order and other discretionary considerations, rather than the precise strength of the claimant’s case within the good arguable case range.

The claim arose from investments in Azerbaijani privatisation vouchers and options. The defendants alleged that Mr Lewis, who managed the claimant companies’ investments, was their directing mind and that his knowledge of corruption should be attributed to them. A previous order had left that issue for trial.

The full trial could not proceed in January 2009 because related criminal proceedings in the United States had not concluded. The court considered which issues should instead be tried separately in January and whether an existing undertaking in damages supporting freezing orders should be further fortified.

1. Separate trial. The attribution issue was a solid issue with considerable force in the defendants’ submissions. Its resolution might determine the claims in deceit, conspiracy and breach of fiduciary duty and would logically precede consideration of other persons’ knowledge. It was suitable for determination in January, having regard to the likely evidence, the available court time, the freezing order and the risk of substantial delay.
2. The court balanced the benefits against duplication of evidence and expense. Those considerations did not outweigh the utility of a separate hearing. The court was also receptive to separate trials in the context of the Commercial Court Long Trials Working Party’s recommendations and the pilot study concerning more active case management.
3. The attribution question should be framed as whether Mr Lewis’s knowledge was to be attributed to the claimants, without turning the factual particulars into a series of examination questions. The issue was to be determined on the assumption that Mr Lewis had not disclosed his knowledge of corruption and had agreed with Mr Kozeny not to do so. The court also considered other possible issues concerning affirmation, rescission, secret profits and accounts, subject to further formulation and directions.
4. Fortification. The court refused to vary the order requiring security for the cross-undertaking in damages. Once the good arguable case threshold for a freezing order is crossed, the principal consideration in deciding the extent of fortification is the possible loss caused by an order later found to have been wrongly made, together with other discretionary factors. No sufficient change of circumstances had been shown, and the evidence of loss was unconvincing in material respects.
5. The January hearing was directed to deal only with the identified issues, subject to further discussion with counsel. No further fortification of the undertaking was ordered.

The judgment records that Mr Justice Hirst, sitting as a Deputy Judge, had previously declined to determine the attribution issue summarily and had made final declarations concerning the effect of the alleged corruption. Mr Justice Gross had made earlier orders concerning the freezing orders and security for the cross-undertaking in damages. This judgment gave further case-management directions and declined to vary Mr Justice Gross’s order.