PERMISSION TO APPEAL – TWO YEARS OUT OF TIME – SET ASIDE: COURT WAS “MISLED BY SERIOUS MISREPRESENTATIONS AND NON DISCLOSURES”

In Kovarska v Otkritie International Investment Management Ltd & Ors [2017] EWCA Civ 1485 the Court of Appeal set aside an extension of time for appealing.  The order had been granted without a hearing. It was held that the Court had power to set aside an order made in these circumstances. On the facts of this case there was no doubt that it was appropriate for the order to be set aside.

THE CASE

The claimant obtained a judgment in 2014 after a 46 day trial.  The deadline for appealing was 1st April 2014.  In April 2016 the defendant applied for permission to appeal out of time.  The defendant served the application, but not the skeleton argument in support, on the claimant.  The court granted the application. The claimant applied to set aside the order extending time.

PROCEDURAL DEVELOPMENTS IN RELATION TO THE APPLICATION TO APPEAL OUT OF TIME

    1. Ms Kovarska’s applications to appeal out of time and to rely on additional evidence were made in her Appellant’s Notice dated 1 April 2016 which was supported by:
a) Grounds of Appeal and (two weeks later) a skeleton argument, each settled by counsel, a Mr John Carl Townsend, who had not appeared at the trial (as I have already mentioned, Ms Kovarska had been represented by Mr Peto QC and Mr McDonagh throughout the trial, and at the hearing on consequential matters held on 14 March 2014; and she had been represented by English solicitors at all times until 19 September 2014); and
b) brief – but unsigned – witness statements from:
a) Ms Kovarska’s (then) solicitor, Mr Mayall of Guney, Clark and Ryan (“GCR”), who had similarly not been involved at the trial (“1-Mayall”); and
b) Ms Kovarska herself (“5-Kovarska”).
    1. Although on 6 April 2016 Ms Kovarska served the respondents with a copy of her Appellant’s Notice (including the Grounds of Appeal and the witness statements), in breach of PD52C §7.1A she did not serve the skeleton argument that she subsequently filed. The respondents were unaware that a skeleton had been filed until they requested a copy from the Court in November 2016 after seeing it mentioned in the Order itself.
    2. On 8 November 2016 SJ sent a Jolly v Jay letter to the Civil Appeals office providing the respondents’ brief observations “as to Ms Kovarska’s reasons for applying for permission to appeal two years out of time and to summarise the relevant legal principles”. In the letter the respondents submitted that Ms Kovarska had failed to show any legitimate excuse for filing her appeal two years out of time and that her reasons did not come close to justifying any extension applying the relevant legal principles.
    3. Contrary to the inference which the respondents sought to draw in their submissions, that Jolly v Jay letter was indeed before me when I considered Ms Kovarska’s applications and made the Order on 21 November 2016. However, for obvious reasons the letter did not address the submissions made in Ms Kovarska’s skeleton argument as to the merits of the proposed appeal, since that skeleton argument had not been served on the respondents.
    4. On 6 December 2016 the respondents applied to set aside the Order. It was supported by the forty-sixth witness statement of the principal solicitor acting for the respondents, Mr Dooley of SJ (“46-Dooley”).
    5. Subsequently:
a) Ms Kovarska responded to that evidence through:
a) a statement from Mr Dorrian of Sperrin solicitors, who had in the meantime come on the record in place of GCR (“1-Dorrian”); and
b) a further statement of her own (“6-Kovarska”).
  1. The respondents served evidence in reply by Mr Dooley in his forty-seventh statement (“47-Dooley”).
  2. Subsequently Ms Kovarska changed solicitors again and at the hearing before this Court was represented by Patron Law, the fifth firm that has represented her in these proceedings, and Mr D Giles of counsel. The managing partner of Patron Law, Mr Benjamin May, has apparently given expert evidence to the Israeli courts on behalf of the Pinaevs in support of their attempts to resist enforcement of the judgment, to the effect that even long after the expiry of the 21-day deadline for filing an appeal, an application for permission to appeal against any English judgment may still be made and granted because it is always open to the appellant to apply to extend time.
  3. At the hearing before us, the respondents argued in the alternative, that if, contrary to their submissions, the Order were not set aside in its entirety, the Court should (a) impose a condition requiring Ms Kovarska to consent to the restitution to the respondents of the proceeds of sale of the Geneva villa; and (b) order Ms Kovarska to provide security for costs of her appeal.”

THE PRINCIPLES RELATING TO THE APPLICATION TO SET ASIDE THE ORDER

Lady Justice Gloster considered the relevant principles governing the application.

  1. Ms Kovarska’s application for permission to appeal was decided on the papers and without a hearing under the usual “essentially ‘without notice’ procedure” (per Brooke LJ in Jolly v Jay [2002] EWCA Civ 277 at [46]). Ms Kovarska was therefore under a duty to make full and frank disclosure of all material facts (and a fortiori not positively to misrepresent material facts): see the White Book (2017) at §52.18.2 (p. 1805).
  2. By CPR 52.9 (as it stood at the relevant time), the Court may set aside permission to appeal in whole or in part, where there is a compelling reason to do so. It has been held that CPR 52.9 is “there to cater for the rare case in which the Lord Justice granting permission has actually been misled” (per Laws LJ in Barings Bank v Coopers & Lybrand [2002] EWCA Civ 1155); and that, unless some decisive authority or statutory provision has been overlooked, an applicant for an order “would normally have to show that the single lord justice has actually been misled in the course of the presentation of an application” (per Longmore LJ in Nathan v Smilovitch [2002] EWCA Civ 759.
  3. In Obsession Hair and Day Spa v Hi-Lite Electrical [2011] EWCA Civ 1148, Ward LJ (with whom Sullivan LJ agreed) considered an application made pursuant to CPR 52.9 to set aside an order both extending time to appeal and granting permission to appeal. There was no suggestion that CPR 52.9 was not the appropriate route to challenge all aspects of what were (and are in all such cases, including the present one) effectively two facets of a single order granting permission to appeal out of time. Echoing the comments of Laws LJ in Barings, Ward LJ referred at [28] to the fact that the duty to make full and frank disclosure was an aspect of the obligation owed by litigants to the Court not to abuse its process.
  4. Finally and in any event, the Court also has the power to vary or revoke any aspect of the Order pursuant to CPR 3(7), in circumstances where it is misled as to the correct factual position in various important respects, whether in relation to the application for an extension of time or in relation to the merits of the appeal.

SETTING ASIDE PERMISSION TO APPEAL IN THE CURRENT CASE

 

Discussion and determination
    1. I am satisfied that in granting the extension of time, permission to bring an appeal out of time and permission to adduce so-called “new” evidence as set out in the Order, I was misled by serious misrepresentations and non-disclosures made by Ms Kovarska or by her legal representatives on her behalf. It is not necessary for me to decide whether such misrepresentations or omissions were deliberate or simply careless. They were certainly highly unfortunate as they have resulted in interference and delay with Otkritie’s execution process and unnecessary wastage of court time and costs. Had I been aware of the full facts, I should not have granted any of Ms Kovarska’s applications.
    2. I should say first of all that I do not accept Mr Pillow’s argument that the fact that Mr Townsend, in making his written submissions in support of the applications, did not draw the court’s attention to the authorities identifying the proper approach to be taken to her application to appeal out of time, is a reason for this court to consider setting aside the permission. The court was, and is, well aware of the authorities that require a strict approach to be taken to applications for extension of time to seek permission to appeal after the 21 day period prescribed by the rules, as articulated in cases such as R (Hysaj) v Home Secretary (Practice Note) [2014] 1 WLR 2472 (CA). But if the interests of justice nonetheless require an extension of time to be granted, and sanctions to be relieved, and there is a real prospect of success on appeal, then permission will be granted.
    3. However, having heard and considered the submissions of Mr Pillow and Mr Giles, I have no doubt that this court should set aside the order which I previously made in relation to all three aspects – namely extension of time, permission to appeal and permission to introduce further evidence. I conclude that I was indeed misled by the materials presented on behalf of the appellant, Ms Kovarska, and the absence of reference to certain critical facts, relevant to her applications. My reasons are as follows.
(i) Ms Kovarska, whilst represented by counsel and solicitors, did in fact consider an appeal in time
    1. In the evidence and skeleton argument filed in support of her applications, Ms Kovarska conveyed the clear impression that she could not afford and was therefore unable to obtain legal advice and assistance within the time-limit for lodging an appeal; and was only in fact able to do so more than a year later. However, the actual position was very different.
    2. In fact, as the respondents’ evidence to this court has revealed, she did seek legal advice as to whether to appeal within the relevant deadline, which she herself had successfully applied to extend, at a time when she was still represented by leading and junior counsel and solicitors, i.e. Mr Peto QC, Mr McDonagh and Cartier & Co. What neither Ms Kovarska nor her legal representatives thought necessary to mention in her applications were the following:
a) On 10 February 2014, Mr Peto QC and Mr McDonagh jointly wrote to Eder J seeking an extension of time for any appeal, so that the 21-day period would run from the proposed hearing of consequential matters (14 March), rather than the date of judgment (10 February).
b) On the same day, Eder J made such a direction.
c) At that hearing of consequential matters on 14 March 2014, Ms Kovarska continued to be represented by her leading and junior counsel, who made extensive written submissions on her behalf and oral submissions at the hearing itself. They had had the judgment, in draft and as handed down, for six weeks by that stage.
d) Ms Kovarska could then (or at any time in the preceding six weeks) have sought a further extension of time for appealing from Eder J, but she did not do so. The written and oral submissions on her behalf made no reference to any proposed appeal, nor to any difficulties she might have claimed to have had with complying with the (extended) deadline. (That was in marked contrast to another defendant, Mr Jemai, who did apply at the consequentials hearing for, but was refused, a further extension.)
e) Indeed on 12 March 2014 (two days before the consequentials hearing), Ms Kovarska’s counsel expressly confirmed to Cs’ counsel that she did not intend to seek permission to appeal from the judge at the hearing (although he refused to be drawn as to whether permission would be sought from the Court of Appeal). This followed discussions which Mr Dooley had himself had with Ms Kovarska’s (then) solicitor.
f) In fact, Ms Kovarska had on 17 February 2014 caused her Latvian lawyer, Mr Gobzems, to remit a further £11,000 to her English solicitor (Mr Cartier) for her legal representation in England. (This money was said to have come from her parents, although why it was transferred via Mr Gobzems has never been explained.)
g) There followed discussions between Mr Dooley and Mr Cartier, in which (as Mr Dooley recorded at the time) Mr Cartier stated “that the monies that [his firm] received via Mr Gobzems were to be used towards filing an appeal.” Cartier confirmed on 12 April 2014, in relation to the moneys they had received on account for Ms Kovarska (totalling £40,000), that “consideration for an appeal is only part of the work undertaken. No Appeal was filed. The majority of the monies received have been disbursed…”.
    1. Had I been given the full picture relating to Ms Kovarska’s position during this period, I do not believe that I would have considered it appropriate to grant her a further extension of time to seek permission to appeal, let alone an extension of two years. I would have regarded Ms Kovarska as having had, and having taken, ample opportunity to consider and seek advice on appealing; and as having made a deliberate and informed decision not to do so, for whatever reason. That was not the impression conveyed by Ms Kovarska’s evidence in support of her applications. At the very least I would have required a convincing explanation as to why Ms Kovarska had changed her mind in the intervening period.
(ii) The so-called new evidence relating to ground 2 – in relation to the judge’s finding that Ms Kovarska had a power of attorney over the Pleator bank account
    1. As paragraph 3 of the Order recorded, in granting permission to appeal out of time, I was strongly persuaded by Ms Kovarska’s suggestion to the effect that she had only recently obtained important new evidence “conclusively” demonstrating that the judge’s finding that she had a power of attorney over a particular bank account to have been wrong, despite the absence of any explanation by her for the unavailability of this evidence at trial.
    2. The account in question was that of a Panamanian company beneficially owned by Mr Pinaev (Pleator Holding Inc., the seventh defendant (“Pleator”)) at Bordier, into which some US$37 million of the proceeds of the fraud had been received and transferred to others, including Ms Kovarska. The “fresh” evidence was said to be the bank’s “General Power(s) of Attorney/Authorised Signature(s)” form for Pleator dated 22 April 2010, showing that Mr Pinaev (alone) had such powers (the “Pleator PoA”).
    3. In making her applications, Ms Kovarska had represented to the court:
a) in her Grounds of Appeal and skeleton argument, that this evidence had only been “recently obtained”; and
b) in her own witness statement, that it had been received by her Swiss lawyer on 14 March 2016, just two weeks before her appeal was lodged, and was “not available at the trial” (see 5-Kovarska paragraph 8).
    1. But this was not the correct position. I infer that Ms Kovarska must have known that to be the case at the time her applications were made to me. The actual position was as follows:
a) Ms Kovarska had actually obtained the so-called “new” evidence to the effect that Ms Kovarska did not have a power of attorney over the Pleator account, from Bordier before the first judgment had been handed down and whilst she was still represented by her trial legal team. Yet she failed to bring this to the attention of Eder J. Nor was I apprised of the fact when dealing with her applications on the papers.
b) Despite what was said in her witness statement, the evidence had not been requested by her Swiss lawyer and received on 14 March 2016 (c.f. 5-Kovarska paragraph 8), shortly before she lodged her applications for permission to appeal. In fact, as was clear on the face of Bordier’s covering fax to her Swiss lawyer, it had been received by her lawyer almost two years earlier, on 4 February 2014, in response to his fax of the same day.
c) Moreover, far from Bordier’s fax or the Pleator PoA revealing or establishing for the first time that Ms Kovarska did not have a power of attorney over the Pleator account, the respondents had in fact accepted this at trial and had never sought to suggest otherwise.
d) Further, the Pleator PoA itself had not just been available at trial, it had been in the trial bundles from the very outset, as Mr Dooley deposed. (In a recent witness statement from her new solicitor, this is now admitted on behalf of Ms Kovarska, albeit without any explanation for her original false claim and whilst nonetheless continuing to assert that she did not mislead the Court: see 1-Dorrian at paragraph 5(a)-(b).
    1. Furthermore, Ms Kovarska failed to draw to this Court’s attention various highly material facts concerning the timing of receipt of this information and what she and her lawyers knew (and could have done, but did not do) about the error of which she now complains. Thus:
a) The fax containing the “new” evidence was in fact received by Ms Kovarska on 4 February 2014, the day after Eder J circulated the first judgment in draft to the parties, including to Ms Kovarska’s leading and junior counsel and solicitors, inviting them to provide their suggested corrections in the usual way before hand-down the following week.
b) However, even before receipt of the fax on 4 February 2014, Ms Kovarska and her lawyers had been well aware of the evidence relating to who did or did not hold powers of attorney in respect of Pleator: in their written closing submissions, Ms Kovarska’s counsel had specifically pointed out to the judge that she “did not have at any time a Power of Attorney or signatory rights in relation to Pleator and this account”. They also knew that it had never been any part of the respondents’ case that she had such power or rights in respect of Pleator.
c) Yet at no stage between receipt of the draft first judgment on 3 February and its handing down on 10 February 2014; nor during the five weeks between 10 February and the hearing on consequential matters on 14 March 2014; nor in the 21-day (extended) period for appealing thereafter, did Ms Kovarska or her legal team raise or refer to the error in the first judgment or the “new” evidence received from Bordier, despite the issues with which they were concerned being limited to a small fraction of the wider case (by the time of judgment, leading and junior counsel and their solicitors were acting only for Ms Kovarska, not additionally for the First, Second and Fourth Defendants). With such a narrow focus on just one aspect of the case, I agree with Mr Pillow’s submission that it is inconceivable that Ms Kovarska or one of her legal team did not spot the error at that time.
d) No satisfactory explanation for the omission to refer to the Bordier fax, or point out the error, has been offered by Ms Kovarska either in her evidence or in her submissions to this court. It would have taken a very short time for the slip to have been corrected. It can be inferred that the judge would have replaced the erroneous reference to a power of attorney over the Pleator account, with a reference to Ms Kovarska’s giving instructions to Bordier to make payments from the Pleator account on at least one occasion: see the email dated 1 October 2011 at NPD46, p. 98 (about which the judge found that Ms Kovarska had lied in her oral evidence, and which is the subject of Ms Kovarska’s Ground 7; see paragraph 437 of the judgment.) The substance of the matter was that the instructions had come from her, irrespective of who held the actual the Pleator PoA.
    1. Had I known of the above matters, I would not have granted permission to appeal out of time. Ms Kovarska’s failure to disclose the fact that she, whilst legally represented and before judgment was even handed down, knew of and had every opportunity to present the relevant evidence and correct the error, was clearly a breach of her obligations of disclosure to this court.
(iii) Misrepresentation/non-disclosure in relation to Ground 7
    1. Ground 7 of Ms Kovarska’s appeal challenges the judge’s finding that Ms Kovarska was liable for dishonest assistance and/or knowing receipt in respect of the transfers of €1.45 million of the fraud proceeds from Pleator to a company called Haymoks Trend.
    2. The basis of the challenge is that the judge concluded (after hearing Ms Kovarska’s evidence in cross-examination on the subject, which he rejected as “deliberately false”) that the email Ms Kovarska sent to Bordier with the bank details for the payments to Haymoks Trend had been tampered with, but that this allegation had not been pleaded by Otkritie and “the consequence was that Ms Kovarska was deprived of the opportunity to make inquiries into the contents of the email”, which it was submitted “was significant”.
    3. However, the evidence now provided by the respondents has shown that the suggestion that Ms Kovarska was deprived of such opportunity was in fact incorrect and contrary to Ms Kovarska’s own submission at trial. Thus:
a) Ms Kovarska had and took the opportunity of making enquiries with Google through her then solicitors after she had given her oral evidence; and was permitted to adduce, without objection from the respondents or her recall for further cross-examination, a yet further (fourth) witness statement dealing with those enquiries;
b) This was specifically highlighted in Ms Kovarska’s written closing submissions at trial which included the express submission that: “Ms Kovarska supplemented her evidence having taken the opportunity to make enquiries with Gmail”.
    1. Again I would not have given permission to appeal in relation to this ground, had I been apprised of the correct position.granted her permission to appeal on this Ground, let alone a two-year extension of time in which to do so….
(v) Ms Kovarska’s assertions of impecuniosity and an inability to find English lawyers); and supposed practical difficulties in instructing English lawyers and lodging an appeal because she was in Israel
    1. Nor in the light of the detailed evidence provided by the respondents in relation to Ms Kovarska’s financial position, her defence of enforcement proceedings and her current lifestyle, do I remain satisfied, as I was at the time of my making the Order on the basis of the information provided by Ms Kovarska, that she faced genuine and substantial financial difficulties and difficulties in instructing lawyers, which for all practical purposes prevented her from lodging an appeal within time.
    2. Ms Kovarska’s evidence at the time of her applications conveyed the impression that she had no money, or access to funds or other financial assistance, except for the very limited sum she was belatedly able to withdraw in cash from her Israeli account, which (she claims) was derived from allowances paid to her by the Israeli government; and that she had therefore been unable, prior to April 2015 at the earliest, to afford to instruct English lawyers for her appeal. That was a misleading picture since, as was not disclosed to the court at the relevant time, throughout the relevant period:
a) she had been (and continues to be) able to instruct lawyers, receive valuable legal services, and put up security for her applications, in legal proceedings in various jurisdictions around the world (including Israel, Switzerland and Latvia);
b) apparently she owned (and continues to own) valuable real property, in particular in Latvia, Russia and Switzerland; and
c) she had received (and continues to receive) significant financial support from her parents, Mr Pinaev’s parents and her friends.
    1. Moreover, the evidence provided by the respondents demonstrates that Ms Kovarska is perfectly able, when she considers it in her interests to do so, to procure the services of experienced lawyers, and engage in extensive and costly litigation, including in Israel, Latvia and Switzerland (and to incur the cost of travelling overseas).
    2. None of this was disclosed to the court by Ms Kovarska in the context of her applications for permission to appeal. The picture which was presented to me was a misleading and incomplete one. In particular, she should have explained why she was apparently able to fund litigation elsewhere, resisting attempts by the respondents to execute against her assets, but unable to launch the necessary appeal in England. Likewise she should have explained why she was unable to raise funds from her various properties, particularly in circumstances where, as this court was informed by the respondents on the appeal, her counsel made it clear to Eder J at the consequential hearing in March 2014 that she intended to cooperate fully with the respondents and sell her real property in order to pay her judgment liability; and she specifically sought (and obtained) a provision in the post-judgment freezing order enabling her to do so.
Disposition
  1. For all the above reasons, I was satisfied when this court made the order on 16 June 2017, that the Order should be set aside because of Ms Kovarska’s serious misrepresentations and non-disclosures when making her applications for permission to appeal out of time and to adduce new evidence. Moreover, even on the assumption that it would be appropriate for this court to reconsider her applications, not only am I satisfied that no extension of time should be granted, given the circumstances which I have outlined above, but also I am satisfied that the arguments which she put forward for justifying a real prospect of success on the substance of the appeal, are, on proper analysis, and in light of the matters put forward by the respondents, without foundation.
  2. For the above reasons I granted the respondents’ application to set aside the Order and dismissed her application for permission to appeal.