Ian Franses (Liquidator of Arab News Network Ltd) v (1) Somar Al Assad (2) Mounir Developments Sa (3) Trustees of The Cayman Dolphin Trust (4) Trustees of The Opus Trust
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Henderson,THE HONOURABLE MR JUSTICE HENDERSON |
| Judgment Date | 26 October 2007 |
| Neutral Citation | [2007] EWHC 2442 (Ch) |
| Docket Number | Case No: 2235 of 2004 |
| Court | Chancery Division |
| Date | 26 October 2007 |
[2007] EWHC 2442 (Ch)
The Honourable Mr Justice Henderson
Case No: 2235 of 2004
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Max Mallin (instructed by DLA Piper UK LLP) for the Applicant
Mr Matthew Collings QC and Mr Richard Morgan (instructed by Farrer & Co LLP) for the First Respondent
Hearing dates: 11 and 12 September 2007
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.
Introduction and Background
The hearing before me in this matter, which took place on 11 and 12 September 2007, was originally intended to be the first effective return date of an application for freezing orders first made in a telephone hearing without notice before Morgan J on the evening of Friday, 20 July 2007. Morgan J made the orders sought until a return date on the following Wednesday, 25 July, when they were continued by Evans-Lombe J until a further return date in September at which applications by the first, second and third respondents to discharge the freezing orders, and the question whether the applicant was entitled to a continuation of the orders (and, if so, on what terms), would be determined. The order of 25 July gave directions for the service of evidence in the meantime, and expressly recited that the respondents reserved all arguments that would have been open to them on the first return date, including arguments as to jurisdiction and service.
The principal subject matter of the freezing orders was a sum of £6.5 million forming part of the proceeds of sale of a property known as Witanhurst, 41 Highgate West Hill, London N6 (“Witanhurst”). The proceeds of sale were held in a client account of Lawrence Graham. The applicant had obtained information which indicated that they were due to be remitted overseas to the trustees of an offshore discretionary trust on Monday, 23 July.
The applicant is Mr Ian Franses, the liquidator of Arab News Network Ltd, a UK company which was compulsorily wound up on 12 May 2004 with a deficiency to creditors of around £35 million. At the date of the winding up order the sole director of the company was the first respondent, Mr Somar Al Assad, a French national who lives in Paris. Mr Al Assad is a member of the Al Assad family that has ruled Syria for nearly forty years, and he is a cousin of the present President.
In December 2005 the liquidator began wrongful trading proceedings against Mr Al Asssad, who was in due course debarred from defending after he had failed to comply with an unless order to file a defence. On 4 July 2006 Registrar Derrett gave judgment against him in the sum of £5,108,413 plus interest and costs, and also ordered that his claims as a creditor in the liquidation should rank behind all other debts owed by the company. This judgment remains wholly unsatisfied.
It is important to emphasise at this early stage that the liquidator is a judgment creditor of Mr Al Assad, in a sum which (including interest and costs) now exceeds £6 million, in the context of an existing liquidation (No. 2235 of 2004) and the wrongful trading proceedings which he brought in the course of that liquidation.
The liquidator subsequently sought and obtained an order under CPR Part 71 for the examination of Mr Al Assad as a judgment debtor. The examination took place on 19 December 2006 before Registrar Rawson. The liquidator was represented by Miss Marcia Shekerdemian of Counsel, and Mr Al Assad by his solicitor, Mr James Price, a partner in Farrer & Co LLP.
In the course of the examination, Mr Al Assad said among other things that:
(a) he had “not a penny” with which to pay the judgment debt, and had no assets apart from personal clothing;
(b) he had not had a bank account anywhere in the world since 2004;
(c) legal title to Witanhurst was vested in a Panamanian company called Mounir Developments SA (“Mounir”), and Witanhurst had been “off and on the market for a long time”, although he did not know whether it was still on the market;
(d) he last lived at Witanhurst himself in 1997, and had been managing director of a UK company called Sard International Ltd which managed the property on behalf of Mounir;
(e) Mounir was owned by a discretionary trust set up by his father and managed by Lawrence Graham, of which members of the family, including himself, were beneficiaries;
(f) he had never received any income from that trust;
(g) there were a number of other family discretionary trusts, some of which were managed by Lawrence Graham, of which he was also a beneficiary but from which he had received no income or other benefits in the last five years apart from one life insurance payment;
(h) he lived with his wife and family in his mother's apartment in Paris and was supported financially by her;
(i) his family had property interests in Spain, comprising about a dozen houses owned by offshore companies and a hotel owned by a Spanish company; the offshore companies were in turn owned by further trusts managed by Lawrence Graham; and
(j) the amount of his debts was currently in the region of £2.2 million.
At the conclusion of the hearing Registrar Rawson gave the liquidator permission to apply to restore the examination if he had been unable to obtain satisfactory answers to questions concerning Mr Al Assad's family or discretionary trusts by 30 January 2007. On 19 January the liquidator's solicitors, DLA Piper UK LLP, wrote to Farrer & Co asking about the ownership of the various trusts mentioned in the course of the examination. On 26 January Farrer & Co replied, enclosing a letter from Lawrence Graham dated 22 January. Lawrence Graham's letter confirmed that they acted for the trustees of various Al Assad family trusts, and that Somar Al Assad was a discretionary beneficiary of nine trusts, the names of which were then given. They included “The Cayman Dolphin Trust (Mounir Developments SA)”. In their covering letter Farrer & Co said:
“As you will see from Lawrence Graham's letter, the Cayman Dolphin Trust owns the shares in [Mounir]. Our client is a discretionary beneficiary of the Cayman Dolphin Trust.”
On 30 January DLA Piper wrote again to Farrer & Co requiring “further information and documentation” in relation to all of the trusts of which Mr Al Assad was a beneficiary, and asking whether he would provide a letter of authority for them to communicate with Lawrence Graham direct. On 1 February Farrer & Co replied:
“We are instructed that our client does not have documentation relating to the trusts, and that the information which he gave about the trusts at the hearing on 19 December 2006 is the extent of the information which he has. In fact the details which we have obtained for you from Lawrence Graham go further than our client's recollection (as is apparent from the transcript of the examination). The interest which our client has in the trusts is as a discretionary beneficiary only. He is not, for example, and never has been, a trustee.
As to the request for a letter of authority, you do not of course need such a letter of authority to approach Lawrence Graham, which you are free to do. It is in any event not proposed to provide you with a letter of authority because this is beyond the scope of CPR Part 71.”
DLA Piper then wrote to Lawrence Graham on 13 and 22 February 2007, but were met with the response on 27 February that all information in respect of the trusts listed in Lawrence Graham's letter to Farrers of 22 January was confidential, and the trustees were under no obligation to provide it to the liquidator. Further attempts to extract information about the trusts from Farrer & Co and Lawrence Graham proved fruitless, so in due course the liquidator applied to restore the examination. This application was opposed by Mr Al Assad, on two grounds. The first ground was that a bankruptcy petition had been served upon him in the meantime, with the result (so it was said) that the liquidator had elected to pursue his claim in bankruptcy proceedings and it would therefore be inappropriate for him to pursue the oral examination, which was part of the ordinary enforcement procedure for a judgment debt. The second ground was that Mr Al Assad could not be compelled to give information about trusts where the information was not directly within his knowledge. The hearing of the application took place before Deputy Registrar Christopher Brougham QC on 16 July 2007, when he reserved judgment. On 1 August 2007 he handed down a written judgment. By this date the liquidator had already made his successful application to Morgan J for freezing orders on 20 July. The Deputy Registrar declined to order restoration of the oral examination. He gave four reasons for his decision. First, on the evidence before him he saw no reason to suppose that further examination of Mr Al Assad would yield any further useful information concerning the trusts. Secondly, he was not satisfied that the Court, in exercise of its jurisdiction under CPR Part 71, had power to order Mr Al Assad to obtain information or documentation from Lawrence Graham, or to provide a letter of authority. Thirdly, on the basis that the trusts in question were discretionary trusts, the exercise of such a power, if it existed, would be likely to be of no effect, as the trustees would be entitled to refuse any request by Mr Al Assad for information or documentation, and to decline to act on his letter...
To continue reading
Request your trial
-
Andrew William Shaw and Another v Geoffrey Collins Logue
...Ellington Cushnie and others [2004] EWHC 218 (Ch) and Ian Frances (Liquidator of Arab News Network Ltd) v Somar Al Assad and others [2007] EWHC 2442 (Ch). In Keary the Court of Appeal pointed out that in assessing whether the ordering of security for costs would stifle a valid claim the Cou......
-
Hunt v Ubhi
...the liquidator is being funded by a creditor, that may put a “different complexion” on matters (paragraph 82 and Franses v Al Assad [2007] EWHC 2442 (Ch), [2007] BPIR 1233, at paragraph 81). In Pugachev itself, Rose J had been entitled to conclude that the liquidator had failed to discharg......
-
Masri v Consolidated Contractors International UK Ltd and Others (No. 2)
...with the principle stated by Lord Wrenbury, a security right is created.” (My emphasis.) 68 I also refer to Franses (Liquidators of Arab News Network Limited) v Somar Al Assad [2007] EWHC 2442 at paragraph 100, per Henderson J. Franses was a case where the judge made a post-judgment freezin......
-
JSC Mezhdunarodniy Promyshlenniy Bank and Another v Sergei Viktorovich Pugachev
...may be different." 82 This is a case in which there are indeed large and substantial creditors. Likewise in Franses v Al Assad [2007] EWHC 2442 (Ch), having referred to DPR Futures, Henderson J said at [81] that the matter would take on "a different complexion if the liquidator is being fu......