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Michael Wilson & Partners Ltd as the assignee of Robert Colin Nicholls & Temujin International Limited (as trustee of Temujin International (trading) Trust) & Temujin Services Limited v Emmott - [2024] NSWSC 438 - NSWSC 2024 case summary — Zoe
Michael Wilson & Partners Ltd as the assignee of Robert Colin Nicholls & Temujin International Limited (as trustee of Temujin International (trading) Trust) & Temujin Services Limited v Emmott
In accordance with orders made by the Court on 1 March 2024 and 5 April 2024, the plaintiff, Michael Wilson & Partners Ltd (MWP), seeks leave to file what are described as a further restated and further amended summons (the FRFAS) and a restated and further amended commercial list statement (the RFACLS).
[2]
Background
Before addressing the amendments directly, it is necessary to say something about the history of the proceedings.
Prior to June 2006, the defendant, Mr John Emmott, and Messrs Robert Nicholls and David Slater had worked in the law and corporate advisory practice carried on by MWP in Kazakhstan and the surrounding region. In or about June 2006, they established various entities including Temujin International Limited (TIL) and Temujin Services Limited (TSL) (together, the Temujin Entities) and commenced providing legal and corporate advisory services in competition with MWP and took a number of clients from it.
MWP commenced arbitration proceedings in London against Mr Emmott and proceedings in this Court against Messrs Nicholls and Slater and TIL and TSL consequent on Messrs Emmott, Nicholls and Slater's departure from MWP. It ultimately obtained judgment against Messrs Nicholls and Slater and TIL and TSL. Relying on that judgment, it bankrupted Messrs Nicholls and Slater and placed TIL and TSL into liquidation. It then took an assignment from the trustees in bankruptcy and liquidators of those entities of their rights against Mr Emmott.
Relying on those assignments, MWP commenced these proceedings on 2 February 2016.
The day after the proceedings were commenced, MWP filed an amended summons. MWP claimed that Messrs Emmott, Nicholls and Slater had established a partnership in equal shares when they left MWP. It sought, as an assignee of the rights of Messrs Nicholls and Slater, declarations to that effect. It also in effect sought an account of all benefits received by Mr Emmott as a partner, as well as an account of benefits received by a number of entities said to be associated with him. It also made several other claims against Mr Emmott, the details of which are no longer important.
Following service of the amended summons and commercial list statement on Mr Emmott in England, Mr Emmott made an application in England for an anti‑suit injunction to restrain MWP from pursuing the proceedings. That application was successful at first instance, but on 31 January 2018, the Court of Appeal of England and Wales delivered a judgment in which it concluded that the anti‑suit injunction should not extend to the partnership claims advanced by MWP as assignee: see Michael Wilson & Partners Ltd v Emmott [2018] EWCA Civ 51.
On 3 October 2018, MWP served a further amended summons and amended commercial list statement.
On 1 November 2018, Mr Emmott filed a notice of motion seeking an order that service of the amended summons and commercial list statement be set aside on the ground that they were served outside of Australia without leave and in circumstances not permitted by the Uniform Civil Procedure Rules 2005 (NSW).
On 8 March 2019, I delivered judgment permanently staying the proceedings: see Michael Wilson & Partners Ltd v Emmott [2019] NSWSC 218.
On 20 July 2021, the Court of Appeal heard MWP's appeal from that judgment. It delivered its judgment on 17 December 2021: see Michael Wilson & Partners Ltd v Emmott [2021] NSWCA 315. Relevantly, the Court of Appeal allowed the appeal and made the following order:
(4) Set aside the orders made in the Commercial List of the Equity Division on 8 March 2019 and in lieu thereof:
(a) Grant leave under Uniform Civil Procedure Rules 2005 (NSW), r 11.5, to the plaintiff to serve the proceedings on the defendant outside Australia and in England, insofar as it relates to the claims for relief in paragraphs 3 to 10 of the Further Amended Summons of 3 October 2018;
(b) Order that proceedings on the Further Amended Summons other than in respect of the claims referred to in (a) be permanently stayed;
(c) Otherwise dismiss Mr Emmott's motion filed on 1 November 2018; and
(d) No order as to costs of the motion, to the intent that each party bear its own costs; …
The effect of that order was to permit MWP to advance the claims based on the alleged existence of a partnership between Messrs Emmott, Nicholls and Slater, but not to permit the other claims made in the proceedings.
On 27 August 2021, after the hearing before the Court of Appeal but before it delivered judgment, MWP acquired from the trustee of the bankrupt estate of Mr Thomas Sinclair certain rights that Mr Sinclair had against Mr Emmott. More will be said about Mr Sinclair shortly. However, it appears that Mr Sinclair was a director of one or more clients of MWP who followed Messrs Emmott, Nicholls and Slater. He also apparently at some stage lent money to Mr Emmott.
In accordance with orders made by Hammerschlag J on 7 March 2022, on 1 April 2022, MWP filed a further amended commercial list statement which was intended to bring the claims advanced by MWP into conformity with the Court of Appeal's decision. The further amended commercial list statement also adds allegations in relation to Mr Sinclair. Relevantly, it includes the following paragraphs (omitting the track changes):
21 Thomas Ian Sinclair ("Sinclair"), is and was at all material times a director and officer, and a direct or indirect shareholder, of Sokol Holdings Incorporated ("Sokol"), a company incorporated in the State of Delaware in the United States of America, who encouraged the formation of, was involved in and funded the Temujin Partnership, was a lender to Emmott and the Temujin Partnership, its designates and nominees, and who was made a bankrupt by the judgment and order of I&CCJ Prentis on 9 March 2021 in the I&CL of the B&PC of the English High Court, whereupon his estate vested in the Official Receiver, and where Messrs Mummery and Atkinson were appointed as his trustees by the Secretary of State in April 2021, which Trustees sold and assigned to MWP all of the debts of ≥US$27m advanced by Sinclair, directly and/or through Sokol to Emmott and the Temujin Partnership, and who was also involved in and one of the conduits through whom the Temujin Partnership sought and received Shares and Other Benefits.
…
70. In addition, on 27 August 2021, the Trustees of the Estate of Sinclair sold, transferred and assigned to MWP, and MWP purchased all of the debts of ≥US$27m and all related rights and benefits owned by Sinclair. Notice of such assignment was given by the Trustees by email and letter on 30 August 2021. Emmott has admitted and accepted the validity of such assignment.
Paragraph 71 also seeks by reason of the assignments (including the assignment from Mr Sinclair) "a declaration as to Emmott's joint and several liability for each and all of the following ….":
(b) all fees, costs, rights and benefits howsoever sought and obtained, whether directly or indirectly, related to the legal, business consultancy and other services provided in particular, but not limited to the legal, business consultancy and other services provided to former clients and contacts of MWP, and in relation to projects, developments and matters in which MWP was involved, including the Temujin Projects, which any of the judgments listed [the listed judgments have been deleted from para (a)] determined to be properly owing to the Plaintiff (save and except for the Injuncted Claims and Matters [a reference to the anti-suit injunction obtained in England];
(c) all success fees bonuses, profits, proceeds, Shares and Other Benefits sought and received, whether directly or indirectly, by Emmott, his designates and nominee, whether directly or indirectly;
(d) the assignees' and the Temujin Partnership's various costs of commencing and defending the proceedings, referred to in paragraphs 6 and 44-48 above.
In addition, the relief claimed in the summons was amended to include the following (again omitting the track changes):
6. An order that the defendant is liable to allow inspection of all originals, disclose, allow the carrying out of an inquiry, the taking of an account, proprietary tracing and bring to the account of the plaintiff, as the assignee of the rights of Slater, Nicholls[,] the Temujin Entities, and certain rights of Sinclair, all of the revenues and assets of the partnerships, arrangement, agreement, and understanding (as referred to in paragraph 29 of the Further Amended Commercial List Statement), in respect of all monies, Shares and Other Benefits (as defined in paragraph 28 e) iii. of the Further Amended Commercial List Statement) howsoever sought and received, whether directly or indirectly, whether through the partnership, arrangement, agreement, and understanding or otherwise, and whether through agents, designates and nominees, acting directly or indirectly by:
a. [The summons then contains a long list of entities said to be associated with Mr Emmott.]
…
9. A declaration that the defendant, and his agents, designates and nominees holds all and any Shares and/or Other Benefits, as may be so determined following said inquiry, on a resulting trust or constructive trust for MWP, as the assignee of Nicholls, Slater, the Temujin Entities and Sinclair.
9A. An order that the defendant allow inspection of all originals, disclose and account to the plaintiff, as the assignee of Nicholls, Slater, the Temujin Entities and Sinclair for any and all surplus revenues and assets of and which belong to, or should have properly belonged to the Temujin Partnership, arrangement and understanding, the Temujin Entities and Sinclair, and their agents, designates and nominees.
9B. An order that the plaintiff as the assignee of Nicholls, Slater, the Temujin Entities and Sinclair, be entitled to trace into and follow on a proprietary basis whatever became of all of the assets and revenues of the partnerships, arrangement, agreement, and understanding.
On 7 February 2023, Mr Emmott filed a commercial list response. In response to para 21 of the commercial list statement, he pleads:
15. In answer to paragraph C21 FACLS the defendant admits that Thomas Ian Sinclair was a director of Sokol Holdings Limited who was made bankrupt on 9 March 2021, but otherwise denies the said paragraph.
In response to para 70, he pleads:
59. The defendant does not admit paragraph C70 FACLS, and in further says that any claim therein is outside the claims for relief in paragraphs 3 to 10 of the Further Amended Summons of 3 October 2018 allowed to go forward by the Order of the Court of Appeal of 17 December 2021 and is accordingly liable to be struck out.
Mr Emmott denies para 71.
It is quite apparent that no cause of action is asserted against Mr Emmott by MWP as an assignor of any rights that Mr Sinclair had against Mr Emmott. The allegations in paras 21 and 70 are plainly vexatious as they go nowhere. Paragraph 71 is also vexatious as it contains a bald claim for relief. The three paragraphs were liable to be struck out. However, Mr Emmott chose not to take that course.
[3]
The amendments
The amendments sought to be made by the FRFAS and RFACLS fall into a number of categories. Many of them are minor and seek to address what are said to be deficiencies in the current list statement. So, for example, some amendments cater for the possibility that the Court might find that Messrs Emmott, Nicholls and Slater were in partnership, but not for the period asserted by MWP (that is, the period from "early September 2005 to date"). Some address the fact that Mr Nicholls is now dead. Some delete allegations that Messrs Nicholls, Slater and Emmott were "consultants" to TIL. Some address the fact that a particular agreement pleaded by MWP may be a deed.
Mr Emmott did not seriously oppose many of the amendments. However, he advanced two main arguments. First, he took objection to a number of paragraphs in the existing list statement. Second, he took objection to any amendments designed to expand the existing allegations sought to be made by MWP as an assignor of claims available to Mr Sinclair.
[4]
Determination
There is no basis for Mr Emmott's first category of objections. Although there may be a question whether MWP had leave to file a summons and list statement in the form in which they are currently in, Mr Emmott has already filed a list response to the current version of the list statement. Any failure to obtain leave to file the current version of the list statement was an irregularity. By filing a list response, Mr Emmott has lost the right to have the filing of the list statement set aside: see Civil Procedure Act 2005 (NSW), s 63(4) (CPA). Mr Emmott may be entitled to make an application to have the relevant paragraphs of the list statement struck out. However, no such application is made, and it is unlikely that it would succeed given that a list response has already been filed.
On the other hand, I accept that MWP should not be permitted to include the further amendments arising from the assignment of rights from Mr Sinclair.
Mr Emmott objected to those amendments on the basis that they are not permitted by the orders of the Court of Appeal. I do not accept that submission. The Court of Appeal was only concerned with the claims that were then advanced in the summons and list statement. It determined that only the relating to the allegation that Messrs Emmott, Slater and Nicholls were in partnership could proceed. The Court of Appeal did not determine that MWP was barred from bringing any other possible claim against Mr Emmott.
However, the amendments should not be allowed for other reasons.
First, the amendments are sought to be made very late and no explanation is given for the delay. MWP took an assignment of Mr Sinclair's rights on 27 August 2021. Allegations based on that assignment were included in the list statement filed on 1 April 2022, now over two years ago. No reason is given for the delay in seeking to make the amendments. It is true that there has been little progress in the proceedings since that date, due largely to a number of interlocutory applications. Indeed, it remains unclear whether MWP has yet served all its evidence in chief, and certainly it appears that it will still be some time before the proceedings are ready to be set down for a hearing. In the usual case, those facts may be reasons for permitting the amendments notwithstanding that they are sought to be made late. But in this case, the application to amend needs to be considered in context. The dispute between the parties arises out of events that occurred in 2006. They have spawned a multiplicity of court proceedings in several jurisdictions. Frequently, the parties, and MWP in particular, have been criticised for their approach to the litigation, which involves an excessive number of interlocutory applications, the making of "elaborate, extensive and discursive" (to quote from the judgment of Brereton JA in the Court of Appeal at [30]) allegations in written submissions and affidavit evidence and the assertion of broad-ranging claims which it is doubtful can be made consistently with the obligations imposed by ss 56-60 of the CPA. Against that background, and absent any explanation for the delay, the focus of the parties, and of the Court, should be to bring the existing claims to a hearing, not on the expansion of a case which has already taken too long to come on for hearing and an expansion which is likely to lead to further delays and interlocutory applications.
Second, the amendments do nothing to cure the problems with the existing pleading. They add to the allegations made in relation to Mr Sinclair without providing any assistance in identifying the cause or causes of action that Mr Sinclair is said to have had against Mr Emmott that have now been assigned to MWP.
Paragraph 21 of the RFACLS now alleges that Mr Sinclair was also a "power of attorney holder" of Sokol "as well also of the relevant SPV's, comprising Sokol itself, as well as the "sons of Sokol", namely Sea Shell Cowaramup, Coville and the like", whatever precisely "the like" means. Paragraph 28 relevantly alleges that from early September 2005, Messrs Slater, Nicholls and Emmott commenced to carry on a business in common with a view of profit "with the encouragement and involvement of and funding by Sinclair, Sokol and G. S. Kachshapov". That allegation is repeated in various forms in other paragraphs of the RFACLS. It is also alleged that Mr Sinclair or "his designates or nominees" were involved in particular transactions which are alleged to be transactions that were taken from MWP, presumably for the benefit of the partnership. Those facts are alleged in para 72A of the RFACLS to give rise to a right on the part of MWP as assignee of the rights of Messrs Nicholls, Slater and Sinclair "to trace into and follow on a proprietary basis against Emmott, Sinclair, their agents, designates and nominees, including (without limitation) the Emmott Entities, into whatever became of all and any of the income, success fees, bonuses, profits and proceeds" the benefits derived from the transactions about which MWP complains.
This pleading is, to say the least, confused. The allegation seems to be that Mr Sinclair or entities associated with him has some liability to MWP because they participated in breaches of duty owed by Messrs Emmott, Nicholls and Slater by assisting them to establish the partnership in respect of which MWP now makes a claim. But there are several difficulties with such a claim. First, it does not depend on the assignment of rights against Mr Emmott that belonged to Mr Sinclair. Second, there is no proper pleading of the facts which are said to give rise to such a claim. For example, there is no proper pleading of precisely what it is said Mr Sinclair did. Third, it is impossible to discern the nature of the cause of action that is said to arise from Mr Sinclair's conduct. Fourth, there must be a real question whether any such claim, if it could be identified and was tenable, is now statute barred.
A third reason why the amendments should not be allowed is that there is no compelling reason why any claim arising from rights that once belonged to Mr Sinclair, if it could be identified, should be heard with the claim brought by MWP as an assignee of the rights of Messrs Nicholls and Slater. The former would turn on the relationship between Messrs Emmott and Sinclair. The latter turns on the relationship between Mr Emmott on the one hand and Messrs Nicholls and Slater on the other. Had the claim been brought by Mr Sinclair, it is unlikely that it would have been heard together with a partnership claim brought by Messrs Nicholls and Slater. No injustice is likely to be occasioned if the same approach is adopted following the assignment.
[5]
Conclusion and orders
No notice of motion was filed seeking leave to amend. Instead, MWP filed the FRFAS and RFACLS without leave. On 5 April 2024 I ordered that the documents be removed from the Court file and said that I would deal with the question whether the amendments should be permitted without the need to file a notice of motion.
On the conclusions I have reached, many of the (minor) amendments should be permitted. It was necessary for MWP to obtain leave to make those amendments and they were not opposed.
As I have explained, I have not allowed the amendments that appear to depend on the assignment of claims from the trustee in bankruptcy of Mr Sinclair. Mr Emmott has successfully opposed those amendments. Mr Emmott also sought to oppose some paragraphs contained in the current version of the list statement. However, that opposition was prompted by MWP's unsuccessful attempt to expand the claims connected with Mr Sinclair. In those circumstances, it seems to me appropriate that MWP pay Mr Emmott's costs of and incidental to the hearing on 16 April 2024. MWP should also have any costs thrown away by reason of the amendments.
The orders of the Court, therefore, are:
1. Within 7 days of the date of this judgment the plaintiff serve on the defendant a proposed second further amended summons and second further amended commercial list statement that have been prepared consistently with the conclusions of this judgment;
2. Within a further 7 days the defendant notify the plaintiff of any proposed amendments it contends are not consistent with this judgment;
3. The matter is stood over to 10 May 2024 for directions and to deal with any dispute concerning the scope of the amendments sought by the plaintiff that are permitted by this judgment;
4. The plaintiff pay the defendant's costs of and incidental to the hearing on 16 April 2024;
5. The plaintiff pay the defendant's costs thrown away by reason of the amendments.
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Decision last updated: 24 April 2024
Parties
Applicant/Plaintiff:
Michael Wilson & Partners Ltd as the assignee of Robert Colin Nicholls & Temujin International Limited (as trustee of Temujin International (trading) Trust) & Temujin Services Limited