Emirates NBD Bank PJSC (a company incorporated in the Emirate of Dubai) v Rashed Abdulaziz Almakhawi

Hearing dates: 27 February – 2 March 2022

Approved Judgment

I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

David Edwards, KC

This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 12 May 2023 at 10:30am.

David Edwards, KC:

A. The Parties

The Claimant (“the Bank”) is a bank incorporated in the Emirate of Dubai, United Arab Emirates (“UAE”).

The First Defendant (“Mr Almakhawi Sr”) is a UAE national. He was born on 1 October 1947 and so by the time of the trial he was 75 years old. He was at one time UAE Ambassador to Germany and subsequently Ambassador to a number of other countries. He is a well-educated man, holding doctorates from three universities. The Second Defendant (“Mr Almakhawi Jr”) is his son.

B. Background

Mr Almakhawi Sr was originally the sole beneficial owner of System Construct Dubai, LLC (“System Construct Dubai”), a construction company incorporated in Dubai, although at some point his shareholding was reduced to 51%. He was one of the company's three directors. The company went into insolvent liquidation on 28 September 2014 having suffered substantial losses.

On 25 January 2010, some years before its liquidation, System Construct Dubai entered into a Facility Agreement with the Bank (subsequently extended and amended) under which the Bank provided letter of credit, overdraft and other financial facilities (“the Facility”). Mr Almakhawi Sr, along with the other directors, provided guarantees to support the company's borrowings.

On 19 October 2015, following its entry into liquidation, the Bank commenced proceedings in Dubai Court of First Instance seeking repayment of the outstanding amount under the Facility from System Construct Dubai and payment of the equivalent amount from Mr Almakhawi Sr and the other guarantors under their personal guarantees (“the Dubai Proceedings”).

On 16 January 2017 the Dubai Court of First Instance entered judgment in favour of the Bank for AED 142,303,347.42 plus interest. System Construct Dubai and the guarantors appealed to the Dubai Court of Appeal, but the appeal was unsuccessful, and on 27 February 2019 the Court of Appeal entered judgment for the revised sum of AED 218,299,040.31 plus interest.

There was then a further appeal to the Dubai Court of Cassation, Dubai's highest court, but this too was unsuccessful. On 7 July 2019 the Court of Cassation entered judgment ordering System Construct Dubai, Mr Almakhawi Sr and the other guarantors to pay the Bank AED 211,299,040.31 (approximately £47.5 million at current exchange rates) plus interest (“the Dubai Judgment”).

The Bank has sought to enforce the Dubai Judgment, but the evidence before me was that no, or at least only very limited, recoveries have been made by the Bank so far.

C. The English Proceedings

In these English proceedings, the Bank seeks the following relief against Mr Almakhawi Sr and against his son, Mr Almakhawi Jr.

First, as against Mr Almakhawi Sr, the Bank seeks to enforce the Dubai Judgment in this jurisdiction. There is no treaty providing for the recognition and enforcement of judgments between the United Kingdom and the UAE, and so the Bank seeks to enforce the judgment by way of a common law action on the judgment.

Secondly, the Bank seeks relief against both Defendants in respect of transfers of property and money made by Mr Almakhawi Sr to Mr Almakhawi Jr in 2019, specifically in respect of:

i) A property at 193 Warren House, Beckford Close, London W14 8TR (“the Warren House Property”) transferred to Mr Almakhawi Jr on 8 July 2019; and

ii) Sums of £200,000 and £2,336,873.28 transferred to Mr Almakhawi Jr on, respectively, 16 August 2019 and 18 October 2019 (“the Money Transfers”), still held intact by him in a UK bank account.

In relation to these transfers, the Bank seeks either declarations that Mr Almakhawi Sr retained beneficial title to the relevant assets and that they are held by Mr Almakhawi Jr on resulting trust, or alternatively relief under section 423 of the Insolvency Act 1986 (“the 1986 Act”) on the ground that the transfers were transactions defrauding creditors within the meaning of the section.

As set out in more detail below, in relation to the issue of enforcement of the Dubai Judgment, Mr Almakhawi Sr contends that the judgment was obtained as a result of a breach of natural justice concerning the terms of the two reports submitted by the court-appointed expert in Dubai and, as such, the judgment falls within a recognised English law exception to enforcement.

As for the transfers, the Defendants contend that:

i) The property and money transfers represented gifts made by Mr Almakhawi Sr to his son, made principally for the purposes of succession or inheritance planning;

ii) The Bank cannot rebut the presumption of advancement applicable to transfers between father and son; the beneficial interest in the assets was transferred to Mr Almakhawi Jr and the assets are not held on resulting trust; and

iii) Although it is accepted that the transfers were gratuitous, they were not made by Mr Almakhawi Sr for one of the prohibited purposes set out in section 423(3) of the 1986 Act and so relief cannot be granted under that section.

D. The Trial

The trial before me took place over four days, with the morning of the first day used for pre-reading, followed by short oral openings.

Thereafter, the remainder of Day 1, the whole of Day 2 and part of Day 3 were taken up with cross-examination of Mr Almakhawi Sr, who gave evidence remotely with the assistance of an interpreter. The remainder of Day 3 was used for the evidence of Mr Almakhawi Jr, who gave evidence in person, and for the evidence of the Dubai law experts, who gave their evidence remotely. Day 4 was used for oral closing submissions.

In addition to the evidence of the two Defendants, I also received witness statements, served on behalf of the Bank, from:

i) Oasha Obaid Khalifa Abdulla Almehairi, a Senior Vice President of the Bank; and

ii) Amir Alkhaja of Habib Al Mulla, lawyers who represented the Bank in the Dubai Proceedings.

These statements dealt with various formal matters — the amount of the judgment and the absence of any recoveries. Neither of them was required by the Defendants to attend for cross-examination, and I accept the evidence contained in their statements.

I set out my findings in relation to the evidence I received in the sections below where I deal with the substantive issues. Of the two factual witnesses from whom I heard oral evidence, the evidence of Mr Almakhawi Sr was the most significant, and I had an opportunity to assess his demeanour and candour over a cross-examination approaching two days.

Many of the events occurred some years ago, and for this reason, and as is often the case in commercial disputes, I consider that the surest guide to the facts are the contemporaneous documents, the inferences that can properly be drawn from those documents (or, in some cases, from the absence of documents) and the probabilities. There are, however, areas of the case where the documentation is scant.

E. Enforceability of the Dubai Judgment

The first issue I have to decide concerns the enforceability of the Dubai Judgment.

English law principles of enforceability

There was no dispute between the parties as to the English law principles relating to the enforceability of foreign judgments.

The basic principle is set out in Dicey, Morris & Collins on the Conflict of Laws (16th ed.), Rule 46 at paragraph 14R-024. As there stated, subject to certain exceptions:

“… a foreign judgment in personam given by the court of a foreign country with jurisdiction to give that judgment in accordance with the principles set out in Rules 47 and 48, and which is not impeachable under any of Rules 52 to 55, may be enforced by a claim or counterclaim for the amount due under it if the judgment is

(a) for a debt, or definite sum of money (not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty); and

(b) final and conclusive,

but not otherwise.”

There was no dispute that the Dubai courts had jurisdiction to give the judgments they did or that the requirements set out in sub-paragraphs (a) and (b) of Rule 55 are satisfied. The issue between the parties concerned the exceptions to enforcement, specifically the exception recognised in Dicey, Morris & Collins ( op. cit.), Rule 55 at paragraph 14R-158 that:

“A foreign judgment may be impeached if the proceedings in which the judgment was obtained were opposed to natural justice.”

I was referred to a number of authorities that have considered the circumstances in which the natural justice exception applies. These authorities demonstrate that:

i) Natural justice is concerned with procedural fairness, not whether the judgment of the foreign court is wrong (or even manifestly wrong) as a matter of fact or law: Adams v Cape Industries Plc [1990] Ch. 433, 569E–F (Slade LJ);

ii) Proof of a mere procedural irregularity in the...