Lakatamia Shipping Company Ltd v Chang Tai-Chou & Ors

In an undefended civil trial, the claimant must still prove its case on the balance of probabilities. Serious allegations require cogent evidence, but not necessarily evidence described as compelling.

A finding in earlier proceedings against a person who was not a party is inadmissible as proof of the same facts, although the underlying evidence may be considered. A statement of case is not evidence at trial unless properly adduced.

A person outside the jurisdiction who benefits from a Babanaft proviso cannot incur tortious liability merely by assisting a breach of the freezing order. The Marex tort requires intentional inducement or procurement of a breach of judgment rights. Honest belief in entitlement may negative intention, and justification may in principle provide an alternative defence.

The claimant pursued claims for unlawful means conspiracy and the Marex tort against three defendants arising from the transfer of proceeds from the sale of two Monaco properties. The proceeds were alleged to belong beneficially to Mr Su and to fall within an English freezing order securing the claimant’s judgment debt.

The second and third defendants did not participate in the proceedings. The first defendant was permitted to make limited submissions but could not adduce evidence. The central questions were whether the defendants possessed the knowledge and intention required for the torts, whether the Babanaft proviso protected the third defendant, and whether the transfer amounted to inducement or procurement of a breach of judgment rights.

1. Evidence and prior proceedings. The claims were dismissed. Even in an undefended trial, the claimant had to establish its case on the balance of probabilities. The seriousness of the allegations required cogent evidence. Findings made in earlier proceedings against persons who were not parties were inadmissible as proof of the facts found, although the underlying evidence recorded in those judgments could be considered. Findings in proceedings between the same parties could engage cause of action estoppel or issue estoppel.

2. A statement of case, even if verified by a statement of truth, was not evidence at trial unless it was adduced by court order, agreement, adoption in oral evidence, permission of the court, or an applicable procedural rule. The trial bundle had been made evidence by order, but the pleaded allegations concerning the defendants’ states of mind carried little weight.

3. Mr Chang. It was not proved that Mr Chang knew of the freezing order, the judgments or the outstanding judgment debt when he instructed the transfer. Although he acted on Mr Su’s instructions and knew that Mr Su was the beneficial owner of Cresta Overseas, the required elements of unlawful means conspiracy and the Marex tort were not established.

4. Maître Zabaldano and unlawful means conspiracy. He knew of the freezing order, the judgment debt and Mr Su’s beneficial interest, and honestly believed that he was entitled, and obliged, to follow the client’s instruction. Under the binding majority decision in Racing Partnership, ignorance of the law did not prevent liability for unlawful means conspiracy where the facts making the means unlawful were known. However, the Babanaft proviso applied because Maître Zabaldano was outside the jurisdiction when he acted. Its expansive wording and policy precluded tortious liability based merely on assisting or combining in a breach of the freezing order. Independently unlawful conduct, such as producing false documents, might lead to a different result.

5. The Marex tort. A third party may in principle be liable for knowingly assisting a judgment debtor to dissipate assets and hinder enforcement, without any independent unlawfulness. Maître Zabaldano took an active step which sufficiently established facilitation. However, his honest belief that he was entitled to transfer the money negatived the necessary intention. Alternatively, justification was available in principle and would have succeeded on the facts: he acted pursuant to an apparently lawful client instruction, believed himself subject to a superior professional duty, and the foreign judgments had not been recognised in Monaco. The claims against him therefore failed.

6. Mr Su and final order. Mr Su knowingly participated in breaches of the freezing order, but no conspiracy existed because neither other defendant was liable in unlawful means conspiracy. All claims were dismissed. Quantum did not arise; if liability had been established, the recoverable loss would have been US$26,712,851.68.