Akhmedova v Akhmedov
| Jurisdiction | England & Wales |
| Judge | HADDON-CAVE J |
| Judgment Date | 19 April 2018 |
| Court | Family Division |
Financial relief – Enforcement – Service by alternative means – Nomineeship and beneficial ownership of assets – Evasion principle – Conflicts of law – Rebuttable statutory presumption s 37 MCA 1973 – Setting aside transactions under s 423 Insolvency Act 1986 – Relevant purpose – Relief – Freezing injunction.
In 2012 the husband sold his shares in a Russian company for $1.375 billion and transferred the funds to his Panamanian company, P Ltd. In October 2013 he transferred significant assets into a Bermudian trust: he was both the principal beneficiary of the trust and sole director of the trustee company, C Ltd. A few weeks later the wife applied for a divorce. In March 2015, the husband executed a further deed of trust, and a declaration of trust, assigning further assets to the trust.
At the final hearing of the wife’s financial remedy proceedings, at the end of 2016, the husband, P Ltd and C Ltd chose not to be present or represented. The husband had participated until a month before the final hearing, but was in breach of various court orders concerning disclosure, participation in the court process generally, and costs. The wife’s case was that the husband still had assets of over £1 billion, all built up during the marriage. The judge found that P Ltd was a nominee and bare trustee for the husband. The judge awarded the wife assets to the value of £453,576,152 (41.5 per cent of the total assets), including an art collection and £350 million in cash, making the husband and P Ltd jointly and severally liable to pay. The judge set aside the husband’s March 2015 transfer of substantial assets as a disposition intended to defeat the wife’s claim, under s 37 of the Matrimonial Causes Act 1973, and as a transaction defrauding creditors, under s 423 of the Insolvency Act 1986. He went on to make a worldwide freezing order. The court was then informed that the husband had very recently transferred various assets, including the art collection, from P Ltd to two other corporate entities O1 and O2. O1 and O2 were also found to be no more than ciphers and the husband’s alter ego. These dispositions were also set aside under s 37 of the MCA 1973 and s 423 of the IA 1986, and they too were made jointly and severally liable for payment of the lump sum. The judge found that the husband had displayed a ‘naked determination to hinder or prevent the enforcement’ of the wife’s claim.
The wife attempted to enforce the judgment against the husband in various jurisdictions around the world. She managed to obtain court orders: (a) in the Isle of Man in respect of a helicopter and private jet and (b) in Dubai in respect of a yacht worth more than her claim, which had been put into dry dock in Dubai for maintenance. (DIFC (the international commercial freezone in Dubai) courts applied common law principles regarding the enforcement of foreign judgments; had a reciprocal enforcement relationship with the courts of Dubai itself; and exercised a ‘conduit jurisdiction’, by which judgments registered in the DIFC courts could be taken to the Dubai courts for execution. Accordingly, it was possible for parties to seek to execute foreign judgments in Dubai via the DIFC Courts.) The relevant assets were all linked to the husband by a series of transfers. These included the husband’s transfer of €260,000,000 to another Panamian company, A, in December 2014 and the transfer of the yacht, via O2, to a Liechtenstein anstalt, S, in March 2017. A and S were both controlled ultimately by the husband.
Pursuant to the liberty to apply, the wife issued an application seeking further English orders designed to enable her to enforce the main order, including joinder of A and S, orders for service on all parties by alternative means and the setting aside of the relevant transactions and piercing the corporate veil in relation to S (not, at present, in relation to A, because other, more conventional relief was likely to be sufficient to secure third party debt orders against A in the Isle of Man).
Held – (1) Service by alternative means on the respondents should be permitted and validated; service of the application was deemed to have taken place on 2 March 2018. The following amounted to ‘a good reason’ for the court to exercise its discretion in this way: service via judicial channels would be likely to take a long time; over the past 18 months, in the post-judgment enforcement phase, the husband had repeatedly demonstrated a willingness to take rapid and multifarious steps to evade enforcement at every turn; time was clearly of the essence in the enforcement proceedings; there was self-evidently a continuing risk that the husband would take every step available to him to seek to render the orders and judgments of this court nugatory, unless the court acted with expedition; in any event, it was important for the process of enforcement against the husband’s assets to proceed with expedition so that they were not further dissipated or their value diminished in the meantime; and local lawyers had confirmed that service by the methods used would not contravene the laws of the relevant territories. Further, the exceptional steps taken by the husband to evade enforcement in the past 18 months gave rise to ‘exceptional circumstances’ under the more stringent test required in Hague Convention State cases. Finally, and in any event, service of this application on the husband was good service on A and S (see [41]–[44], below).
(2) The question was whether the assets of A and S could be said to belong beneficially to the husband as the effective controller of those entities. It was clear that A and S were more mere ‘ciphers’, designed by the husband to evade enforcement. There was no difficulty in inferring, in all the circumstances, that the husband had not genuinely intended to part with beneficial ownership of either the cash or the vessel, but had intended to remain the real owner throughout. As the husband had provided all the purchase monies for no apparent consideration, there was a presumption of resulting trust which had not been rebutted (cf Prest v Petrodel Resources Ltd [2013] UKSC 34). Various terms could be used to describe this arrangement, including ‘resulting trustee’, ‘bare trustee’ or ‘nominee’, but the concept of ‘nomineeship’ was more likely to be understood in civil law jurisdictions in which the wife might seek to have the judgment recognised and enforced (see [47]–[50], below).
(3) The husband was acting with real impropriety and deliberately seeking to evade his legal obligations to the wife by employing the devices of A and S to put legal obstacles in the way of enforcement of the judgment. Accordingly, the ‘evasion’ principle applied and it was appropriate to pierce the ‘corporate veil’ so as to make S directly liable on the judgment against the husband. In relation to conflicts of law, the ‘evasion’ principle had been developed to respond to dishonest attempts to evade enforcement of a subsisting obligation or liability by the interposition of a company or legal entity. Questions as to mode and method of enforcement and available remedies were for the lex fori and there were sound policy reasons as to why the general lex fori rule should apply to cases concerning the ‘evasion’ principle, not least that to apply the lex incorporationis in such cases would be to do the international fraudster’s job for him, permitting enforcement to be subverted simply by the use of corporate structures in jurisdictions with no such exceptions to the ‘veil’ of incorporation (see [57], [61], [62], [68], below).
(4) Given that A and S were mere ‘ciphers’ of the husband, being at the very least bare trustees for him, A and S could be said, parasitically, to have submitted to the court’s jurisdiction, even if they had purported not to submit, as they were bound by the husband’s full and voluntary submission to the jurisdiction. An order against a trustee (a fortiori a bare trustee) bound the beneficiary and vice versa on grounds of privity (applying Gleeson v J Wippell & Co [1977] 1 WLR 510) (see [67], below).
(5) The rebuttable statutory presumption under s 37 MCA 1973 applied in respect of O2’s disposition of the yacht to S, which had taken place within a year of the present application being issued. O2 had already been found to be the ‘cipher’ or alter ego of the husband, thus, the yacht’s disposition to S, though purportedly by O2, had in fact been made by the husband. The husband had not appeared and had not served any evidence rebutting the presumption. Accordingly, an order under s 37 should be made, declaring the transaction void. For the same reasons, O2’s disposition of the yacht to S had been void ab initio. As S held the yacht absolutely for the husband, it was open to the court to transfer the yacht into the wife’s name under s 24(1)(a) of the MCA 1973 and to order that all necessary steps be taken by the husband and S to vest the yacht in the wife’s name. This was a paradigm case for such an order to be made, on the basis of the wife’s undertaking that she would give full credit for all proceeds of sale against the lump sum order made in her favour. The husband’s payment to A of €260 million was outside the three-year statutory period for the rebuttable presumption set out in s 37 of the MCA 1973. However, the court was satisfied that the disposition should be set aside on the facts under s 37, for the same reasons as it was impugned under s 423 of the Insolvency Act 1986. The court was satisfied that both transactions had been for nil value and that the real substantial purpose of both had been to place assets beyond the reach of the wife’s claims, as part of the husband’s wider pattern of conduct. Neither transaction had served any genuine commercial purpose. Both transactions had been between known corporate ‘ciphers’ of the husband. In each case, the husband had been on both sides of the transaction. Both transactions had been...
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