(1) Mr Albert John Martin Abela (2) Albert J.M. Abela Srl and Another v (1) Mr Ahmad Baadarani (2) Cicines Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Edward Evans-Lombe |
| Judgment Date | 28 January 2011 |
| Neutral Citation | [2011] EWHC 116 (Ch) |
| Docket Number | Case No: HC09C01454 |
| Court | Chancery Division |
| Date | 28 January 2011 |
[2011] EWHC 116 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Edward Evans-Lombe
(Sitting as a Judge of the High Court)
Case No: HC09C01454
Mr Clive Freedman QC, Mr Tim Penny (instructed by PCB Litigation LLP) for the Claimants
Mr Paul Greatorex (instructed by M& S Solicitors Ltd) for the First Defendant
Hearing dates: 7/12/10–10/12/10
I have to deal with an application under CPR Part 11 by the First Defendant Mr Ahmad Baadarani ("B"), who, together with the Second Defendant company Cicines Limited ("C Limited"), is sued by the First Claimant, Mr Albert John Martin Abela ("A"), the Second Claimant company, Albert J.M. Abela SRL ("SRL") and the Third Claimant company, Albert J.M. Abela Catering and Interactive Systems Limited ("Limited") for various relief based on allegations of fraud as a result of A and Limited having entered into a contract ("the Contract"), dated 26 th March 2002, for the purchase of 40% of the shares in an Italian company, Gama Spa ("Gama"), held by C Limited and a further 2% of such shares held by B. The Claimants allege that A and Limited were persuaded to enter into this contract as a result of fraud by, amongst others, B in concealing from A Gama's true financial position. It is the Claimants' case that the main persuasive force was a Mr Haan ("Haan"), a solicitor, consultant with the London law firm Hammonds. Haan was the Claimants' solicitor at all material times leading up to the Contract retained by A. B was a director of Gama with a Mr Carlo Rami ("Rami"). B had extensive commercial interests in Kazakhstan. A was chairman of Gama but asserts that he played little part in its management at any relevant time. SRL is an Italian company wholly owned by Limited, a Cypriot company controlled by A. At the time of the Contract, SRL held the substantial balance of 52% of the shares in Gama.
The background facts
In December 1998, A's father, a very wealthy man with extensive business interests, died. In March 1999, A engaged Hammonds as his solicitors with the primary task of dealing with his father's estate. As a result he came into contact with Haan. It is A's case that in the years succeeding his father's death he suffered from depression and, as a result, became increasingly reliant on Haan in the management and disposition of the substantial assets which had passed to him from his father. In May 2000, SRL acquired 98% of the shares in Gama, the remaining 2% being acquired by Rami, who became Gama's managing director. Rami was related by marriage to A. In October 2000 a company, Gama K, was incorporated as a subsidiary of Gama and thereafter carried on business, including a hotel business, primarily in Kazakhstan. B became a director of Gama K. In late December 2000, SRL sold 37% of the issued shares in Gama to C Limited, a Cypriot company. It is the Claimants' case that C Limited is controlled by B but may be owned by his wife. As a result of further transactions, by April 2001 Gama's shares were held as to 52.04% by SRL, controlled by Limited for A, and 40.82% by C Limited.
It is the Claimants' case that over the period from the original acquisition of Gama in May 2000, unknown to A, the business of Gama was conducted fraudulently so that its assets were substantially diminished. It is further the Claimants' case that in January 2002 Haan met B who gave him instructions in relation to his business opportunities in Kazakhstan and from whom Haan was told of B's wish to sell C Limited's shares in Gama. Thereafter, it is the Claimants' case that, with the encouragement of B, Haan and Rami embarked on a campaign to persuade A to repurchase the Gama shares held by C Limited at a price, ultimately $14 million, which shares were, by this time, actually worthless. On 8 th February 2002, at a meeting between A, B, Rami and Haan, agreement was reached in principle for the purchase by Limited of C Limited's shares in Gama. A written agreement comprising the Contract was signed by the parties on 15 th March 2002 and is dated 26 th March 2002.
The cash consideration for the purchase, of $12 million, was payable in three tranches. The first tranche was payment of $3 million on 26 th March 2002. A second tranche of $4.5 million was payable between 1 st and 15 th May 2002 and the third tranche of $4.5 million on 1 st December 2002 unless the parties agreed earlier payment. The balance of the consideration was met by the transfer of a plot of land in Lebanon to B and by the transfer to B of Gama's shares in Gama K. The land has been transferred but the transfer of the Gama K shares has not taken place.
For the purposes of the disposal of these applications, it is of importance that at clause 7, under the heading "Governing Law", the Contract contained a provision that "this agreement shall be governed by the law of England and the parties submit to the non-exclusive jurisdiction of the English courts."
The second tranche of $4.5 million under the Contract was paid on 24 th June 2002 by A to B. On 28 th June 2002, $180,000 was paid by B to Rami. On 1 st July 2002, $100,000 was paid by B to Haan and on 8 th July $180,000 was paid by B to a Mr Kanafani ("Kanafani") who worked for Gama and was known to A.
The third tranche under the Contract of $4.5 million together with a sum of $392,687, apparently for interest, was paid on 25 th October 2002. On 26 th November 2002, B paid Rami $325,000 and Kanafani $200,000. On 2 nd December 2002, £350,000 was paid by B to Haan.
There was in evidence a hand-written letter written by Haan, dated 2 nd December 2002, recording the two payments to him, comprising the £350,000 receipt, as loans repayable in one year's time and making provision for security.
It seems that in early 2003 A became aware of the severe financial predicament of Gama. He proceeded to initiate a series of enquiries into Gama's affairs. The first, by Firecrest Capital Limited, reported on 3 rd March 2003. The second, by the accountants KPMG, reported on 27 th March. There was an internal Gama enquiry which reported on 2 nd April 2003. Finally, Kroll, the forensic accountants, submitted a report on 20 th May 2003. All these reports demonstrated the dire financial straits of Gama, but none of them identified the payments by B to Rami, Kanafani and Haan.
It is the Claimants' case that those payments only came to the notice of A in May 2003 and they were specifically identified for the first time in a follow-up report by Kroll dated 26 th June 2003. A description of how, what were described as the "secret payments", came to light is set out in the sixth witness statement of Trevor Mascarenhas of 25 th October 2010 at paragraphs 21 and 22. It is B's case that A ought to have discovered the secret payments as a result of the earlier reports into the financial state of Gama. If correct, the claim would incontrovertibly be barred by Limitation.
In July 2003, A severed his relationship with Haan and Hammonds. On 27 th October, he commenced proceedings in the Lebanon against five named defendants, including Rami, Kanafani and B. Those proceedings were mixed criminal and civil proceedings. Proceedings of such type in the Lebanon can be initiated, as in this case, by a report by a private individual which can be taken up by the prosecuting authorities if they think appropriate. The civil claim awaits the result of the criminal charges. By the civil claim the initiator of the proceedings can obtain compensation for any damage he has suffered from the actions of the defendants complained of. It appears that A's proceedings in the Lebanon have not yet completed the criminal stage. It is B's case that that delay in completion was, to a large extent, caused by A's failure to co-operate fully with the proceedings for unexplained reasons. A's claims in the Lebanese proceedings are very wide and cover the matters raised in A's civil claims in this country advanced in the present proceedings. Neither SRL nor Limited are claimants in the Lebanese proceedings, but in them B has launched a counter-claim against A seeking to enforce the provisions of the Contract under which he was entitled to receive the shares in Gama K, the Kazakhstan subsidiary of Gama.
In 2007, the Claimants in these proceedings launched proceedings against Haan and Hammonds, the trial of which commenced on 11 th March 2009. The claim was settled within eight days of its commencement upon payment by the defendants of a sum of money, which included a sum representing costs. In the course of the eight-day trial before such settlement, A gave evidence and was cross-examined. A transcript of his cross-examination was amongst the papers before me. It is B's case that in the course of that cross-examination A gave answers which are inconsistent with the existence of a fraudulent conspiracy between B, Haan, Rami and Kanafani to persuade A to procure the repurchase by Limited of the Gama shares from C Limited upon the terms set out in the Contract. I will refer to these proceedings as "the Haan action". The claims made against B by A in the present proceedings mirror claims made in the Haan action.
The claim form in the present proceedings was issued on 30 th April 2009. They came before Mr Justice Morgan on 14 th September 2009 when, upon the Claimants undertaking "not to take any further steps in the Lebanese civil proceedings commenced by him in October 2003 to pursue any of the claims in the Particulars of Claim herein", he:
i) granted the Claimants permission to serve the claim form and all other relevant documents out of the jurisdiction on B in the Lebanon at...
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