Executive Authority for Air Cargo & Special Flights v Prime Education Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Yip |
| Judgment Date | 11 January 2019 |
| Neutral Citation | [2019] EWHC 522 (QB) |
| Court | Queen's Bench Division |
| Docket Number | Case No: QB2018000676 |
| Date | 11 January 2019 |
[2019] EWHC 522 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
The Royal Courts of Justice
Strand
London WC2A 2LL
Mrs Justice Yip
Case No: QB2018000676
Mr P Coppel Qc appeared on behalf of the Claimant
Ms L Lacob appeared on behalf of the Defendant
(As Approved)
The matter came before me in the interim applications court on Wednesday, 8 January 2019 on the return date following the making of a worldwide freezing order by Mr Justice Morris without notice on 19 December 2018.
At the hearing, the claimant applied for the continuation of the freezing injunction until further order. The defendants seek the discharge of the order. They contend that the claimant breached its duty of full and frank disclosure at the ex parte hearing. Further and in the alternative, the defendants contend that the evidence now before the court undermines the claimant's case that there is a good arguable case and a real risk of dissipation.
The parties' submissions occupied significantly more time than the time estimate for the hearing. Given the extent of the submissions they wished to make, it would perhaps have been better with hindsight for them to seek to have the matter relisted with a longer estimate. Before reaching my decision, I took the opportunity to consider and reflect on all the evidence and the authorities placed before me. The result has been that I have had to shuffle other work in a busy vacation court this week.
Counsel's submissions focused on the alleged non-disclosure of an amended agreement which the defendants contend entirely undermines the case presented to Morris J. Given the limited time available, some of counsel's submissions were somewhat rushed. In particular, there are a number of issues identified in the skeleton argument of Ms Lacob for the defendants which were not developed in the course of the hearing. Accordingly, and as I have identified to counsel, I intend to give my judgment in relation to the non-disclosure at this stage and then to consider with counsel whether it is necessary for me to hear any further submissions on the basis of my conclusions on that issue.
I shall keep this judgment as brief as possible, given the need also to deal with other urgent matters.
The claimant is an executive agency of the government of Libya. Its primary purpose is to provide flights for senior ministers and officials. It also has responsibility for the training of all Libyan pilots and aviation engineers. Within that remit, it arranges for students to attend aviation colleges in the European Union.
The first defendant is a company incorporated to run international educational and training programmes. The second and third defendants are British, they are husband and wife and are the directors of the first defendant. The fourth defendant is a company registered in Turkey, owned by the second defendant and a business partner which runs education and training projects from Turkey. The fifth defendant is another company registered in this country and controlled by the second and third defendants.
There is no dispute that the claimant and the first defendant entered into a contract on 17 December 2015 for the first defendant to provide the claimant with education and training consultancy and management services for Libyan students attending aviation training in the European Union. The agreement was signed by the claimant's general manager, Jamil Ali Shubana, on the claimant's behalf, and by the second defendant on the behalf of the first defendant.
Under the agreement, the first defendant was to receive fees for its services. In addition, money would be transferred by the claimant to the first defendant to allow the first defendant to make payments for the students' course fees and accommodation; salary payments to the students during their period of study and visa application fees and healthcare charges. For convenience, I shall refer to these collectively as “student disbursements.” The sums to be transferred to fund the student disbursements was significantly in excess of the fees the first defendant would be entitled to under the agreement.
Between January and March 2016, the first defendant invoiced the claimant for a total of approximately 15 million euros and £1.6 million in respect of student disbursements and approximately £339,000 in relation to their fees. Acting on those invoices, the claimant transferred approximately 15 million euros and £1.9 million to the first defendant's HSBC bank account.
On page 9 of the December 2015 agreement, there was express provision for the first defendant to open a client account with HSBC to hold the funds paid by the claimant. It explained that the client account was designed to hold clients' money and so protect it “if anything happens to the company holding the funds.” The first defendant was to have control of the bank account and the money in it but it would remain legally the claimant's money. It was stated that “Withdrawals from the account will be for payments to education providers, accommodation fees and student wages.” The terms and conditions of the account included the following:
“Funds in this account can only be used on behalf of our client (EACS) and cannot be used by PE… If PE was to cease training, sell the company or become bankrupt, the client account funds will be protected and returned to EACS.”
It is not in dispute that the only students for whom training has been arranged under the terms of the agreement is a group of 40 students who attended the ESMA flying school in France. Course fees totalling 444,500 euros were paid to ESMA. It was also agreed that a total of 1,333,720 euros was paid to the students attending the ESMA course. Having considered the materials before Morris J in December and the note of the hearing before him, it appears that he was told only that the sum of 444,500 euros had been paid to ESMA and not of the sum of approximately 1.3 million euros paid to the students. I shall have to return to this in due course.
It is also not in dispute that between March and May 2016, payments totalling 8 million euros were transferred from the first defendant's HSBC bank account to the fourth defendant. Further, the defendants admit that of the sums transferred by the claimant to the first defendant, a total of 12,819,000 euros and £1,395,480 was transferred to the fourth defendant's account. The first defendant's accounts show it making unsecured interest-free loans of £11,179,822 to the fourth defendant and £448,847 to the fifth defendant. Money transferred to the fourth defendant had subsequently been invested in the purchase and development of property in Turkey.
It is the claimant's case that the first defendant has accordingly misappropriated monies held on trust for the claimant and that each of the other defendants have knowingly and actively participated in such misappropriation.
That was essentially the case presented to Morris J on which he was satisfied that there was a good arguable case and there was a risk of dissipation of the assets, some of which had been transferred to Turkey, and decided that it was just and convenient to make the order sought.
The defendants maintain that the ex parte order was obtained on the basis of materially misleading and inaccurate evidence. The defendants' position is founded upon the existence of an amended agreement which it is claimed the claimant and first defendant entered into in July 20The defendants produced that agreement and brought the original to court. On the face of it, it bears the signatures of Jamil Ali Shubana and the second defendant. Unlike the original contract, there is no Arabic version and the document does not bear the official seal of the EACS.
It is fair to say that this agreement is an extraordinary one. It purports to set out a number of amendments to the original contract. Under the heading “Cancellation policy”, it states:
“If EACS cancels this contract for any reason without exception, PE will not refund any monies to the ACS and will continue the contract only for students who are enrolled on a course of study at the time of cancellation. Course fees and salaries will continue to be paid to those students who are enrolled on a course until the end of their existing study period. Any monies held by PE for those students who have not yet enrolled on a course of study will not be refunded to the ACS and will become cancellation penalty monies paid to PE for the cancellation of the contract. Any balance of funds held at the time of cancellation by PE will then become the cash asset of PE and EACS will no longer have any entitlement to the funds...
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