No second bite of the cherry on interim applications (Mirchandani v Gheewala and Another)

No second bite of the cherry on interim applications (Mirchandani v Gheewala and Another)

Dispute Resolution analysis: The court refused to discharge freezing orders where the application was made late, relevant arguments had not been made at earlier interim hearings, and there had been no material change in circumstances. This case shows the importance of a party raising all points reasonably open to them at the first opportunity. In considering the application, the court analysed the Court of Appeal’s judgment in Chanel Limited v FW Woolworth & Co Ltd and the Commercial Court decision in Orb a.r.l v Ruhan. The court also considered the effect of coronavirus (COVID-19) and CPR PD 51ZA on a retrospective application to extend time. Written by Harriet Campbell, professional support lawyer, at Stephenson Harwood LLP.

Mirchandani v Gheewala and another [2020] EWHC 1742 (QB)

What are the practical implications of this case?

On an application to set aside an interim order, the court will only permit a party to raise arguments that could have been raised at earlier hearings but were not, in limited circumstances. Summarising the authorities, the court confirmed the three circumstances in which this is permissible:

• where there has been a material change in circumstances

• where the facts underlying the original decision were misstated

• where the judge made a manifest error

This case highlights that in relation to freezing orders in particular, the court will require cogent evidence of a change in circumstances to permit a rehearing of a ‘fight that has already been fought’ (Chanel Limited v FW Woolworth & Co Ltd [1981] 1 WLR 485; the court also considered Orb a.r.l v Ruhan [2016] EWHC 850 (Comm) on this point). The court emphasised that the fact that judgment has been obtained (but not yet enforced) is not a material change: ‘A freezing order subsists until judgment is enforced or the orders are set aside’ (para [46]).

In relation to applications for extensions of time, this case is an important reminder that it is not sufficient simply to reference coronavirus without a clear explanation of why it has caused a delay in complying with an order. The court has a wide discretion under CPR 23.10 to permit a respondent to a without notice order to apply to set it aside. Looking at all the circumstances of the case, although Mr Mirchandani’s application to set aside the freezing order was only four days late, the court concluded that the retrospective extension of time granted on a without notice basis should be set aside.

Although the numbers of successful private prosecutions are on the rise, enforcing orders obtained remains a challenging and potentially expensive prospect. This case highlights the difficulties involved in seeking to enforce orders where the ownership of assets is contested, a frequent issue in cases of financial crime or fraud.

Private prosecutors need to be aware that it is by no means guaranteed that the costs of enforcing orders through the civil courts will be met by central funds. Frequently, the civil courts will have more efficient and effective mechanisms for enforcing judgments than the criminal courts but the costs involved can be significant. This case highlights the need for a careful assessment of the risks as well as the rewards of pursuing enforcement strategies.

What was the background?

As a result of a private prosecution, Mr Mirchandani secured an £18m compensation order against the assets of a fraudster, Mr Somaia (the compensation order). In an attempt to enforce the compensation order, Mr Mirchandani pursued civil proceedings against Ms Gheewala (Mr Somaia’s former wife) claiming that her share in a property should be made available to satisfy the compensation order. Mr Mirchandani lost that claim. Although an order was initially made providing for the costs to be met by central funds, this was overturned and Mr Mirchandani was ordered to pay Ms Gheewala’s costs. Following his failure to pay, Ms Gheewala sought and obtained a freezing order against Mr Mirchandani. Mr Mirchandani did not attend the hearing or the return date. Pursuant to the freezing order, Mr Mirchandani filed an affidavit stating that he had no assets.

In 2020, Augusta Ventures Limited (the second respondent) also sought and obtained a further freezing order against Mr Mirchandani in connection with an unpaid loan (which Mr Mirchandani stated he had taken out to assist with the enforcement of the compensation order). Prior to the return date of that freezing order, Mr Mirchandani obtained legal representation. Counsel for Mr Mirchandani sought to adjourn the return date of the hearing on the grounds that he had not had sufficient time to examine the freezing order. Although the adjournment was not granted (and the freezing order continued), as a result of those representations, and taking into account CPR PD 51ZA, the court provided that any application to set aside should be made by 17 April 2020. The order further provided that in the event no such application was made, Augusta Ventures would be entitled to its costs of the freezing order applications.

Without notice to Augusta Ventures, on 21 April 2020 Mr Mirchandani sought and obtained a retrospective extension of time to apply to set aside the freezing order. On 29 April 2020, Mr Mirchandani then applied to set aside the freezing orders obtained by Ms Gheewala and Augusta Ventures. On the same date, Augusta Ventures applied to set aside the retrospective extension of time granted to Mr Mirchandani. On 5 May 2020, judgment was awarded against Mr Mirchandani on Augusta Ventures’ claim.

What did the court decide?

On the application to set aside the freezing orders, Mr Mirchandani argued that he had been unable to obtain sufficient legal representation to advance relevant arguments at earlier, interim hearings, due to impecuniosity. He also argued there had been a material change in circumstances in three different ways:

• an affidavit of assets had now been sworn

• an undertaking in respect of certain assets had been offered

• a final judgment had now been given in the claim (although as yet unenforced)

The court was unpersuaded by the evidence on impecuniosity and concluded that all of these arguments could have been raised at the earlier hearings. On the facts, neither the provision of an affidavit nor the undertaking constituted a material change. The affidavit was based upon information that had always been available and the undertaking was inadequate given Mr Mirchandani’s conduct to date.

On Augusta Venture’s application to set aside the extension of time, the court observed that it had a wide discretion under CPR 23.10 and that the purpose of the provision was to allow a party affected by an order made without notice to have an opportunity to present their case. The court set aside the retrospective extension of time because it considered that no adequate explanation had been given for the necessity for an extension of time. Although coronavirus had been referenced, there was no evidence that Mr Mirchandani’s solicitors had sought an extension of time by consent. The court also concluded that account had been taken of the impact of coronavirus pursuant to CPR PD 51ZA in the original order which had provided Mr Mirchandani with nearly a month in which to apply to set aside the order. Finally, the court concluded that had Augusta Ventures been able to make representations at the time, the extension would not have been permitted given the circumstances of the case and the court’s discretion to take those circumstances into account.

Case details

• Court: Queen’s Bench Division, High Court of Justice

• Judge: Mr Justice Garnham

• Date of judgment: 2 July 2020

Harriet Campbell is a professional support lawyer at Stephenson Harwood LLP, and a member of LexisPSL’s Case Analysis Expert Panels. If you have any questions about membership of these panels, please contact caseanalysis@lexisnexis.co.uk.

 

 

 

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