(1) Sheikh Abdulrahman Khalid Bin Mahfouz and Others (Applicants/Claimants) v (1) Muhaned Farid Mahmoud El-Rashid (Respondent/First Defendant) (2) Noble Holdings Group Corporation (Second Defendant) (3) Ms Loreta Stakauskaite (Third Defendant)
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Teare |
| Judgment Date | 22 June 2017 |
| Neutral Citation | [2017] EWHC 1460 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2015-000812 |
| Date | 22 June 2017 |
[2017] EWHC 1460 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Justice Teare
Case No: CL-2015-000812
Leona Powell (instructed by Jones Day) for the Applicants/Claimants
The Respondent/First Defendant did not attend and was not represented
Hearing date: 24 May 2017
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is an application by the Claimants that the First Defendant be committed for contempt of court. The First Defendant did not attend the hearing but applied, by a letter delivered to the court the day before the hearing, for an adjournment. For reasons given on the day of the hearing I dismissed the application for an adjournment and decided that it was appropriate to proceed with the hearing in his absence.
The First Defendant is a Jordanian national, is aged about 70 and appears to reside in this country. There is evidence that he suffers from neurological problems, probably related to Guillain-Barré syndrome.
On 22 July 2011 the Claimants transferred €35m. to the First Defendant in the belief that the payment would be used by him for the purpose of funding a down–payment in respect of a proposed oil related transaction. In fact (as documents disclosed in these proceedings have shown) the First Defendant received the money into his Swiss bank account and immediately thereafter began to spend it on, amongst other things, a house in Knightsbridge and a surprising number of expensive cars.
In November 2015 the Claimants issued proceedings for the return of the money. A Freezing Order and a Search Order were obtained. By this time it appears that the Claimants' money had been dissipated.
On 25 May 2016 Leggatt J. gave the Claimants summary judgment upon their claim. The judge was satisfied that the suggested defence (that the money had been transferred as a gift) was false, "a figment of the Defendant's graphic imagination." The judge was further satisfied that the money had been transferred for a purpose which failed because the First Defendant had misappropriated the money.
The committal application was issued on 10 February 2017 and served on 18 February 2017. It relates, primarily, to breaches of the Freezing Order. It alleges 16 counts of contempt. However, counsel for the Claimants helpfully limited the counts to 4 since the additional counts are in essence further manifestations of the 4 principal alleged contempts.
The first, described as contempt 4 in the notice of application, alleged that the First Defendant, in breach of paragraph 10(3) of the Freezing Order, has failed to provide the Claimants with full details of what had happened to the money. The second, described as contempt 1 in the notice of application, alleged that the First Defendant, in breach of paragraph 9(1) of the Freezing Order, has failed to give full details of his bank accounts. The third, described as contempt 2 in the notice of application, alleged that the First Defendant has failed, in breach of paragraph 9(3) of the Freezing Order, to inform the Claimants of six cars (two Bentleys, two Ferraris and two Mercedes) which he owned and were worth in excess of £10,000. The fourth, described as contempts 14–16 in the notice of application, alleged that the First Defendant, in breach of the Vehicle Order made by Males J. on 22 August 2016, did not give the Claimants effective access to 5 vehicles (including a Bentley and a Rolls Royce) that were locked in the Q Park, Knightsbridge, and did not inform the Claimants of the location of 5 further vehicles which were not in the Q Park or Harrods Car Park.
The standard of proof required of these allegations is the criminal standard, that is, the court must be sure that the First Defendant has acted in contempt of court. This is to be contrasted with the civil standard which requires the court to make findings based upon the balance of probabilities. In order to establish that a person has acted in contempt of court it is necessary to show (i) that the person knew of the terms of the court order; (ii) that he acted or failed to act in a manner which involved a breach of the order; and (iii) that he knew of the facts which made his conduct a breach. It is not necessary to show that the person knew that what he was doing was a breach of the order or that he intended to breach the order. These propositions are established by Marketmaker Technology and others v CMC Group and others [2009] EWHC 1445 (QB) at paragraphs 14–17 (per Teare J.), Masri v Consolidated Contractors International Company SAL [2011] EWHC 1024 (Comm) at paragraphs 150 and 155 (per Christopher Clarke J.) and Holland and others v Fast Corporate Solutions and others [2014] EWHC 825 (QB) at paragraph 24 (per Carr J.)
Failure to provide full details of what happened to the money
Paragraph 10(3) of the Freezing Order dated 12 November 2015 ordered the First Defendant immediately to provide
"(b) Full details of what happened to the Money following the Transfer;
(c) Full details of any accounts into which Trust Assets (or any part thereof) have been paid or transferred;
(d) Full details of any assets that have been acquired using any of the Trust Assets;
(e) Details (including in particular name, address, telephone numbers, e-mail addresses) of any person to whom any part of the Trust Assets have been paid, including any person or entity that now has custody or control of any part of the Trust Assets, including details of the amount held by them;
(f) Details, to the best of his knowledge information and belief, of what has become of the Trust Assets and the present nature, location and value of the Trust Assets or any part thereof."
The Freezing Order was personally served on the First Defendant on 13 November 2015. There can be no doubt that he was aware of its terms. It contained a penal notice.
Trust Assets were defined by paragraph 10(1) of the Freezing Order as meaning "the specific sum of €35m. transferred from an account belonging to the Applicant ("the Money") to an account held in Switzerland on 22 July 2011, by virtue of the instructions attached to this Order at Schedule D ("the Transfer"), and any other monies or assets which have been acquired by or which are derived from or which represent the money."
When the Freezing Order was served on 13 November 2015 the First Defendant was asked where the money went. He said he spent it on "security" and "other wages", on a "deposit", "possibly" on his house, on "oil contracts" and on "cars".
On 15 November 2015 his then solicitors Taylor Wessing wrote to Jones Day (the solicitors for the Claimants) in response to the Freezing Order. The letter stated that the money was paid into the First Defendant's Lombard account and to the best of the First Defendant's recollection was transferred to his Lloyds account and was "likely used for (a) payment of wages for security, household staff and drivers; (b) legal and other expenses, (c) general household and living expenditure and (d) the acquisition of property and other investments." They said that an accurate and detailed itemisation of the relevant transfers would be complex and time-consuming.
On 18 November 2015 Taylor Wessing provided Jones Day with copies of bank statements from Lombard. From these it is clear that the source of the First Defendant's funds in his Lombard account was the €35m. paid by the Claimants. The account had a zero balance until on 25 July 2011 it received the Claimants' money. By 30 December 2011 the balance in that account was €450.50. Some of the money had been transferred into a sterling subsidiary account (which he used to fund expenditure) but by 26 November 2015 that had a balance of £952.99. Some had been transferred into a Euro subsidiary account but by 31 December 2014 that had a zero balance. There were other subsidiary accounts but, effectively, the Claimants' money had been spent by the time the Claimants obtained the Freezing Order in November 2015.
On 10 December 2015 the First Defendant swore his first affidavit. At this time he was represented by Gresham Legal (Taylor Wessing having ceased to act for him). At paragraphs 18–25 he purported to comply with paragraph 10(3) of the Freezing Order. He said that the money was transferred into his Lombard account in Switzerland. He said that as to the balance of the information required he could not, without having all relevant financial information documents to hand and without having undertaken a forensic analysis of these documents, provide all these details. He then confirmed that approximately £14.5m. was spent on the purchase of real estate in Knightsbridge and that about £4.35m. to £4.45m. was spent on an attempted further real estate purchase. He said that £125,000 had been transferred to his partner Loreta Stakauskaite. He said that about £1m. had been spent on promoting the alleged joint venture and some £2.4m. to £3.4m. in paying for staff in connection with the alleged joint venture. Finally, he said that money had been transferred to his Lloyds Accounts, which money was used to pay about £250,000 to the CEO of RAM Oil Corporation and further sums were paid for household staff, security, household and living...
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