Hotel Portfolio II UK Limited (in Liquidation) & Anor v Andrew Joseph Ruhan & Anor

This judgment determines consequential matters arising from the trial judgment of 23 February 2022 ([2022] EWHC 383 (Comm)). The court applied established principles as to declaratory relief (Office Depot), the narrow circumstances in which post-judgment joinder under CPR 19.2 is appropriate, and the equitable jurisdiction to award compound interest where fiduciaries have retained or misapplied funds or where profits have been obtained by fraud.

The court granted limited declarations that Cambulo Madeira acted as a nominee for Mr Ruhan in relation to the BSA, certain receipts and dispositions following sales and dividends, and that those beneficial interests were subject to a constructive trust in favour of HPII; and a declaration that Phoenix and Mr Stevens acted as Mr Ruhan's nominees in the Geneva Settlement. Other declarations sought by HPII were refused as unnecessary or evidential only.

The court refused to join Grenda under CPR 19.2 because the findings concerning it were evidential rather than determinate legal rulings binding on a non-party, and because joinder after trial to bind a party who had no opportunity to be heard would be inappropriate in the circumstances.

On quantum, judgment was to be entered for profit disgorgement/account amounts of £7.76m (Lancaster Gate) and £94.5m (Kensington) (aggregating the sum relied on in the Judgment), with both defendants liable (Mr Ruhan to account; Mr Stevens to pay equitable compensation). Payment was ordered within 28 days. The court awarded compound interest on a rate of 2.5% over Bank of England base with six-monthly rests and made orders as to costs (indemnity basis, joint and several save in respect of the two Deeds of Indemnity), a payment on account of costs of £2m (joint and several), and interim payments in respect of the Deeds of Indemnity (Ruhan £108,000; Stevens £162,000).

Background and parties: The claimants were Hotel Portfolio II UK Limited (in Liquidation) and its liquidator. The defendants were Andrew Joseph Ruhan and Anthony Edward Stevens; interested parties included Phoenix Group Foundation, Minardi Investments Limited and Tania Jane Richardson. The judgment resolves consequential matters following an earlier trial judgment of 23 February 2022 ([2022] EWHC 383 (Comm)).

Nature of application/relief sought:

• Declarations summarising and giving effect to findings in the earlier judgment (including nominee and constructive trust findings and findings about the Geneva Settlement);
• an application under CPR 19.2 to join Grenda Investments Ltd to bind it to the judgment;
• quantum issues (principal judgment sums, time for payment, interest: simple v compound, rates and rests);
• costs issues (joint and several liability, payment on account, time for payment, interest on costs, and the Deeds of Indemnity); and
• applications for permission to appeal and conditions on any appeal; and the position of Ms Richardson.

Issues framed by the court: Whether declaratory relief should be made and in what terms; whether Grenda should be joined under CPR 19.2 after judgment; the principal sums for which judgment should be entered and the timing; whether compound interest should be awarded and, if so, at what rate and with what rests; the appropriate costs orders and payments on account; and permission to appeal and any stay or security conditions.

Court’s reasoning and decisions (concise):

• Declarations: applying the discretionary principles for declarations and the need for precision, the court declined several of HPII’s proposed declarations as unnecessary because the Judgment and monetary relief already reflected the findings. The court granted targeted declarations that: (i) Cambulo Madeira acted as Mr Ruhan’s nominee in entering the BSA and in receipt/disposition of sale proceeds and specified dividend receipts, and that Mr Ruhan’s beneficial interest held through Cambulo Madeira was subject to a constructive trust in favour of HPII; and (ii) Phoenix and Mr Stevens acted as Mr Ruhan’s nominees in the Geneva Settlement so that rights/assets acquired were for Mr Ruhan’s benefit. A liberty to apply was retained limitedly for declaratory relief.
• Joinder under CPR 19.2: the court refused to join Grenda. CPR 19.2 can be used after judgment but is typically forward-looking; joining a non-party after trial to bind it to findings it had no opportunity to contest would be exceptional. The findings about Grenda were evidential rather than determinate legal conclusions appropriate to bind a non-party, and the case management decision not to join Grenda at trial was upheld.
• Quantum and time for payment: both defendants accepted the primary accounting figures (£7.76m and £94.5m). HPII abandoned an argument for credit in relation to a settlement on review. The court refused to allow extended time to pay and ordered payment by each defendant in 28 days (Mr Ruhan to account; Mr Stevens to pay equitable compensation). The court rejected the argument that HPII must enforce against Mr Ruhan first before recovering from Mr Stevens.
• Interest: the court held that it had equitable jurisdiction to award compound interest against the fiduciary and, following recent first instance authorities and obiter in the Privy Council, was prepared to award compound interest against a dishonest assistant by way of equitable compensation. The court set compound interest at Bank of England base plus 2.5% with six-monthly rests, having rejected the parties’ competing proposals and declined to require a detailed counterfactual enquiry about HPII’s hypothetical commercial use of funds.
• Costs: both defendants to pay costs on an indemnity basis; the court ordered joint and several liability save for costs of the two Deeds of Indemnity. The court ordered a payment on account of costs of £2,000,000 (70% of an adjusted £2.9m estimate) to be paid jointly and severally within 28 days, and interim payments of £108,000 (Ruhan) and £162,000 (Stevens) in respect of the Deeds of Indemnity; the Deed in favour of Mr Ruhan was released and the Deed in favour of Mr Stevens to be released in 28 days unless he applied to keep it in place. Simple interest on costs was ordered at Bank base + 2% with specified application of the Judgments Act 1838 for post-hand-down periods.
• Permission to appeal and conditions: Mr Stevens was granted permission to appeal on issues including liability of a dishonest assistant to account (grounds 1 and 2) and the availability of compound interest against dishonest assistants (ground 5); permission was refused on his challenges to the exercise of discretion in ordering an account for certain payments and to the limitation/timeliness ruling (grounds 3 and 4). A stay of execution was refused in general, subject to an undertaking that any recovery from Mr Stevens be paid into court; Mr Stevens was ordered to provide security for HPII’s appeal costs of £150,000.
• Ms Richardson: orders as agreed save that payments of costs due to her by Mr Ruhan were to be made within 28 days.

The court gave reasons for the exercise of its discretion in each respect and retained a limited liberty to apply on declaratory relief. The judgment set practical time limits and procedural directions to facilitate enforcement and any permitted appeal.

The court made specific consequential orders arising from its earlier judgment of 23 February 2022. It granted limited declarations that Cambulo Madeira acted as Mr Ruhan’s nominee in relation to the BSA, certain sale proceeds and dividend receipts and that those beneficial interests were subject to a constructive trust in favour of HPII; and that Phoenix and Mr Stevens acted as Mr Ruhan’s nominees in the Geneva Settlement. The court refused other declarations as unnecessary. It declined to join Grenda under CPR 19.2. Judgment was ordered for profits/accounting of £7.76m (Lancaster Gate) and £94.5m (Kensington) with payment by each defendant within 28 days; compound interest was awarded at Bank of England base + 2.5% with six-monthly rests. Costs were awarded on an indemnity basis, generally joint and several, with a payment on account of £2,000,000 (joint and several) and interim Deeds of Indemnity payments (Ruhan £108,000; Stevens £162,000). Permission to appeal was granted to Mr Stevens on liability-to-account and compound interest issues (certain grounds) but refused on others; security for appeal costs of £150,000 was ordered. The orders were founded on the court's discretionary powers to grant declarations, established equitable principles on nominee and constructive trust findings, the limited and exceptional nature of post-judgment joinder, and equitable jurisdiction to award compound interest in the circumstances found in the earlier judgment.

This judgment resolves consequential issues arising from the trial judgment handed down on 23 February 2022: [2022] EWHC 383 (Comm). It is a first-instance Commercial Court judgment addressing consequential relief, declarations, joinder, quantum, interest, costs and permission to appeal arising from that earlier judgment.