KB-2023-004010 - [2025] EWHC 2689 (KB)

It is now necessary to consider the cross undertaking as to damages. This might have been considered after the issue of costs, but it is more logical to decide this issue before considering costs since it is potentially relevant to the costs order.

Consequent upon the discharge of the WFO, Mr Smith and CSM seek an inquiry as to damages. They say that this is the enforcement of the cross-undertaking. They say that (i) there is no reason to depart from the usual starting point that the cross-undertaking should be enforced, and (ii) there is prima facie evidence that some loss was suffered as a result of the WFO. MGWL says that the conduct of Mr Smith and CSM in being in contempt of court is so bad that the discretion of enforcement of the cross-undertaking should be exercised against them. In any event, MGWL submits that there is no prima facie evidence of loss, and that if there is any loss, the evidence adduced is loss due to the proceedings in conspiracy and not the WFO.

The evidence relied upon in support of an application to enforce the cross undertaking as to damages comprises the following:

This evidence is to the following effect. Notwithstanding that the proceedings were commenced in Scotland in October 2023 and that the WFO was in October 2023 and amended in November 2023, it was not until August 2024 that MGWL notified custodians to CSM, listing agents for CSM and a relevant Stock Exchange where the bonds issued by CSM had been listed. The notification was by emails from Quillon Law LLP (“QL”). MGWL has refused to provide copies of the emails. This judgment shall return to whether any inferences are to be drawn as to the content of the emails.

The relevant custodians were the European Depositary Bank SA and Kaiser Partner Privatbank AG. The relevant listing agents were Steubing AG and ICF Bank AG. The stock exchange was the FSE, the Frankfurt Stock Exchange (“FSE”) which is operated by the Deutsche Borse.

The evidence of Mr. Smith is that based on the e-mail of QL, the board of directors of the FSE took a decision to put into effect the delisting of all bonds issued by CSM from the FSE and blocked any new bonds for listing on the FSE. Mr. Smith stated that investors required bonds to be listed on the FSE and that the effect of the delisting has had the effect of putting CSM out of business as far as new bonds go. Mr. Smith estimates the value of his shares in CSM as €24 million, and that the effect of the delisting could be to reduce that value to zero.

In his fifth witness statement, Mr Smith said that CSM derives income from setup charges for each bond, from annual administration services for each bond issued and from the redemption of each bond at maturity. These charges are debited to the fiduciary estates and are thus borne by the investors for whom the fiduciary estates hold the bond assets in trust. He explained why a Stock Exchange listing was important to the investors. He said that when QL sent the WFO to the FSE, this effectively destroyed CSM's business. He pointed to the timing of the notification, being nine months after the WFO was obtained and shortly before the hand down of the judgment of the Court of Appeal in England and Wales. He inferred that by that time, MGWL would have known about the judgment from reading the draft and which was to the effect that at least as regards those respondents to that appeal, there was no basis under section 25 of the CJJA 1982 for proceedings in England and Wales, and in any event the WFO had been procured by such material non-disclosure as required its discharge without re-grant.

Mr Smith referred to losses as follows. He said that the bond promoters required the CSM fiduciary estate bonds to be listed on a Stock Exchange.

On or around 7 August 2024, the present solicitors for MGWL, namely QL, wrote to the FSE and to the Vienna Stock Exchange (the “VSE”) to inform them of the WFO against CSM. MGWL has refused to provide to CSM or its solicitors, William Sturges LLP, copies of their correspondence with the FSE and the VSE. This was sent on the day before the Court of Appeal handed down a judgment against MGWL on 8 August 2024 of which QL would have had prior notice.

On 15 August 2024, the FSE duly published the Management Board’s decision to discontinue trading in bonds and certificates issued by CSM on the basis that orderly trading on the FSE could no longer be ensured. CSM was informed by the FSE that trading of three bonds and 11 certificates at the FSE issued directly or indirectly by CSM would be terminated as from the end of September 2024. Termination of trading was published by the FSE.

In the meantime, the VSE informed CSM that it had become aware of the FSE decision to suspend trading of CSM bonds; and subsequently, on 29 August 2024, the VSE decided not to list CSM bonds for EUR 450 million as detailed in Mr Smith’s fourth witness statement dated 24 February 2025 at paragraphs 19.13, 19.14 and 19.15. Paragraph 19 of Smith 4 detailed the impact of the delisting of CSM bonds by the FSE.

Mr Smith said that the decisions of the FSE to delist CSM bonds and not to allow any new listings on the FSE, and of the VSE not to list CSM bonds on the VSE were a direct result of the actions of MGWL (through QL) in “abusing/weaponizing” the WFO. CSM, as the bond issuer, for each of the relevant bonds, had been contractually engaged to issue and list the affected bonds. As per the terms of those engagements, CSM was entitled to revenue from each bond over its duration. The delisting and refusal to list those bonds by the FSE and the VSE has rendered CSM unable to issue any of the affected bonds and has thus prevented the generation of revenue from those bond issues. Had MGWL not taken the actions it did, CSM could have listed and issued those affected bonds.

According to the fifth witness statement of Mr. Smith, the bond promoters required the CSM fiduciary estate bonds to be listed on an agreed Stock Exchange so that the bonds may be acquired by their investors. CSM earned its income based upon the Stock Exchange listing of the bonds being completed and maintained. The actions in causing the delisting of the bonds as well as the refusal to list bonds resulted in the bonds not receiving investor subscriptions, which in turn is said to have resulted in lost revenue for CSM.

They lost revenue comprising the income for setup charges for each bond, from annual administration services for each issued and from the redemption of each bond on maturity. These charges are debited to the fiduciary estates and are thus borne by the investors for when the fiduciary estates hold the bond assets on trust.

Mr Smith exhibited a spreadsheet detailing losses as a result of the delisting of CSM bonds comprising sums of EUR 22,813,000. The spreadsheet was prepared on an assumption that but for the notification of the WFO to the Stock Exchange, there would have been a full subscription. As a result of the notification of the Stock Exchange and the subsequent delisting, there was a nil subscription: see Mr Smith’s fourth statement at paras. 18-21 and his fifth statement at paras. 46-55.

Mr Smith served a further sixth witness statement on 13 June 2025. There should have been a formal direction for its admission, and MGWL objects. There is no evidential prejudice identified resulting from the same, and no request was made to serve evidence in response. It has limited ambit, and the Court will admit it.

Mr. Smith and CSM sought permission to call a suitable expert accountant in order to verify and calculate the losses suffered.

In evidence in response, Ms Wright has stated that: