Akhmedova v Akhmedov and Ors (injunctive relief)
| Jurisdiction | England & Wales |
| Judge | KNOWLES J |
| Judgment Date | 03 July 2019 |
| Neutral Citation | [2018] EWHC 1705 (Fam) |
| Court | Family Division |
Financial relief – Enforcement – Freezing injunction – De facto directors – Naming in penal notices – Service – Alternative enforcement routes.
In 2013 the wife issued a divorce petition and applied for financial remedies. In 2015, the husband submitted to the jurisdiction of the English court and decree nisi was granted in December 2015. The husband and his lawyers engaged with the proceedings until October 2016, shortly after which the husband’s solicitors came off the record and the husband was thereafter neither represented nor present for the hearings. Neither of the other two respondents, a Cypriot company (C Ltd) which was the trustee of a large Bermudan trust, nor a Panamanian company (P Ltd), which the husband claimed was within the trust, were represented either.
The husband was in breach of court orders requiring him to appear at the trial, and also of various other orders concerning disclosure, participation in the court process more generally, and costs. The High Court judge awarded the wife £453 million (41.5 per cent of the assets), including a modern art collection worth over £90 million, the matrimonial home worth over £10 million, plus its contents, worth about £2.5 million, a motor car worth £350,000 and a cash lump sum of £350 million. He also awarded the wife costs of over £1 million. Subsequent developments led to two further orders, joining two corporate entities based in Lichtenstein (O1 and O2). The judge set aside various transactions made by the husband and also made a freezing order to prevent disposal of the matrimonial assets.
The wife attempted to enforce the judgment against the husband in various jurisdictions around the world. She managed to obtain a freezing order in Dubai in respect of a yacht worth a substantial sum; the legal owner of the yacht (a Liechtenstein anstalt, S, wholly owned by the husband) applied to set aside the freezing order on the basis that it was not a party to the English financial award in the matrimonial proceedings. The wife applied to the English court to join S to the matrimonial proceedings and for an English freezing order against S. The English judge concluded that the yacht was linked to the husband by a series of transfers, the last of which had been made in breach of both English and Liechtenstein orders. These included the husband’s transfer of €260,000,000 to another Panamanian company, A, in December 2014 and the transfer of the yacht, via O2, to S in March 2017.
The High Court judge declared the relevant transactions void and set them aside, making orders requiring the transfer of the yacht into the wife’s name, with a $487 million payment to the wife in default. The judge took the view that A and S could be said to have submitted to the court’s jurisdiction, because the husband had fully and voluntarily submitted to the jurisdiction and A and S were mere ‘ciphers’ and alter egos of the husband and that the assets held by A and S belonged beneficially to the husband. The court also extended the freezing injunction to cover A and S.
The wife sought enforcement and recognition of the English court orders in Dubai and again obtained freezing orders. In July 2018 the Joint Judicial Committee of Dubai decided that the Dubai Court of First Instance had jurisdiction over the case (rather than the courts of the international freezone) and eventually that court declined to recognise the English orders and judgments. The decision in the wife’s appeal had yet to be handed down. The yacht was currently still in Dubai, but if the wife’s appeal was unsuccessful, S would be able to remove the yacht from Dubai and it might become practically impossible to enforce her ownership. The wife had also begun proceedings in the Marshall Islands to re-register the yacht in her name; S was contesting those proceedings.
The wife made an urgent application for further English injunctive relief against S, including naming the de facto directors of S in an accompanying penal notice, so that it would be absolutely clear that if S directed, caused or permitted the yacht to leave the port of Dubai, the English court would have the power to deal with the individuals concerned by committing them to prison for contempt of court. The wife realised that it was unlikely that the injunctive order sought would be either recognised or enforceable in Dubai or in Liechtenstein (where S was incorporated and the de facto directors appeared to be domiciled), but submitted that the orders sought had real practical utility, as the de facto directors were Liechtenstein-based lawyers and business people with reputations to protect who would not wish to be the subject of committal proceedings in the English court.
The wife indicated that she had done everything she could to bring the application to the attention of all interested parties and invited the court to abridge time for service.
Held – (1) It was clear that in a series of emails the wife’s legal representatives had done all they could to bring the application material to the attention of S and the interested parties. There had been ample time for S and those other parties to take legal advice and to respond had they wished to do so. Steps taken on 21 March 2019 to serve the application on S by emailing S’s lawyers in both the USA and Dubai constituted good service and sufficient notice had been given of the hearing. The court dispensed with service on the remaining respondents, including the husband. The effect of this was that the wife’s application could be properly treated as an application on full notice. Hence, the wife’s legal representatives were not bound by the obligations of full and frank disclosure, as would have been the case if this had been a without notice hearing (see [21], [23], [24], [31], below).
(2) S was a party to the proceedings and should not be able to avoid compliance with orders of the court by simply refusing either to engage with the proceedings or to obey this court’s orders. In those circumstances, this court should take whatever steps it could to make its earlier orders effective (see [41], below).
(3) Although, on 1 March 2019, the wife had obtained injunctive relief on a without notice basis against S in Liechtenstein, she was required to provide security of CHF 5 million before that could be served and she did not have the funds to do this. Given this, notwithstanding the existence of the Liechtenstein injunctive order, the wife had good reason to make this application to the English court and was not merely ‘jurisdiction shopping’. In any event, waiting for the outcome of the appeal in Liechtenstein was not a sensible option, as the yacht might have long departed from Dubai by the time the appeal was resolved (see [42], below).
(4) Standing back and looking at matters in the round, the court was satisfied that it was just and convenient to make the orders sought, even though S and the husband had a history of breaching the court’s orders. The order would be enforceable here against S, an entity which had previously been found to have submitted to the jurisdiction. Additionally, these orders should provide a serious incentive to the directors of the corporate trustee to ensure that S acted in compliance with what was required of them (see [44], below).
(5) No rules of court required a penal notice to identify every individual against whom committal proceedings could be brought. FPR r 37.4(3) provided that a committal order against a company or other corporation could be made against any director or other officer of the company or corporation. The reference to ‘any director or other officer’ in the Civil Procedure Rules equivalent of FPR r 37(4(3) (CPR r 81.4(3)) included de iure and de facto but did not include shadow directors. In the court’s view the same approach should be taken to the interpretation of the identical words in FPR r 37.4(3) (see [45], below).
(6) As the commentary on p 2037 of The Family Court Practice 2018 noted, it had long been recognised that the form of penal notice prescribed by rules of court was not rigid and could be adapted to the facts of a particular case so long as it was clear and substantially accorded with the standard wording, given that a clear penal notice was an essential prerequisite to enforcement. In the interests of fairness and clarity, the court had adopted the approach to naming directors and/or officers set out in the White Book to the penal notices made within these proceedings, which were governed by the FPR (see [46], below).
(7) The existing penal notice in the S order already applied to the corporate trustee as the sole de iure director of S. It was self-evident that it would be appropriate for the corporate trustee to be named in the penal notice. Applying HMRC v Holland (In re Paycheck Services)[2010] UKSC 51, in deciding whether the directors of the corporate trustee should be named in the penal notice, the court need only ask itself whether there was a good arguable case that they were de facto directors. The court did not need to reach a concluded finding unless and until those individuals sought to have this issue tried and determined by the English court. In reaching its decision that there was a good arguable case on this issue, it was pertinent that all of the directors of the corporate trustee had individual signature rights and each of them alone could validly and bindingly act for and on behalf of the corporate trustee. As all of them had the capacity to individually bind S (through its sole director the corporate trustee), they could be said to be part of the corporate governance structure of S. Further, if the directors of the corporate trustee did not have effective control over S, it was difficult to see who did. One or more of them were the only natural persons at the end of the line, with the ability to control the corporate trustee and S (see [47]–[52], below).
(8) Having found for present purposes that each of these...
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