Invest Bank PSC v Ahmad Mohammad EL-Husseini
| Jurisdiction | England & Wales |
| Judge | Lord Justice Singh,Lord Justice Males,Lord Justice Popplewell |
| Judgment Date | 19 May 2023 |
| Neutral Citation | [2023] EWCA Civ 555 |
| Docket Number | Case No: CA-2022-001893 |
| Court | Court of Appeal (Civil Division) |
[2023] EWCA Civ 555
Lord Justice Singh
Lord Justice Males
and
Lord Justice Popplewell
Case No: CA-2022-001893
CA-2022-001871 CA-2022-001912
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
KING'S BENCH DIVISION
COMMERCIAL COURT
Mr Justice Andrew Baker
Royal Courts of Justice
Strand, London, WC2A 2LL
Paul McGrath KC and Marc Delehanty (instructed by PCB Byrne LLP) for the Claimant
Daniel Warents (instructed by Longmores Solicitors LLP) for the 3rd and 4th Defendants
Hearing dates: 3 & 4 May 2023
Approved Judgment
This judgment was handed down remotely at 2 p.m. on 19 May 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Introduction
There are two appeals before this Court which arise from the same proceedings in the High Court. The first appeal, brought by the Claimant, Invest Bank PSC (“the Bank”) with the permission of Males LJ, concerns the question whether it is possible for a debtor to enter into a transaction with another person (a third party) within the meaning of section 423 of the Insolvency Act 1986 (“the 1986 Act”) if his acts are to be regarded in law as the acts of a company.
In a judgment given on 13 May 2022 Andrew Baker J (“the Judge”) held that, in respect of a transfer to a third party of an asset owned by a company which is owned and controlled by a debtor, at an undervalue, where the transfer is caused by the debtor (acting with the relevant statutory purpose of prejudicing his creditors), section 423 is not applicable unless the debtor acted separately in a personal capacity and not only as the instrument by which his company acted. The Bank appeals on the ground that he was wrong to do so.
The second appeal, which is brought by the Third and Fourth Defendants (or simply “the Defendants”) with the permission of the Judge himself, raises the question whether a “transaction” can be entered into within the meaning of section 423 of the 1986 Act if the assets are not beneficially owned by the debtor. In his judgment of 13 May 2022 the Judge held that it could. The Defendants submit that he was wrong to do so. They also submit that the Bank's appeal only arises if their own appeal is dismissed. Although that is logically right, I will address the two appeals in the order in which they were presented before this Court.
Factual background
The Bank is a public shareholding company established in Sharjah, United Arab Emirates (“UAE”) and listed on the Abu Dhabi Securities Exchange, with retail and corporate banking activities in the UAE and Lebanon. The First Defendant (referred to in these proceedings as “Ahmad”) is a Lebanese businessman against whom the Bank says it has judgment debts from proceedings brought by it in Abu Dhabi. The claims in those proceedings were made on what the Bank says were personal guarantees given by Ahmad in connection with credit facilities granted to two UAE companies. The total said to be due under the judgments is c.AED 96 million (equivalent to c.£20 million).
The Second to Fifth Defendants (“Mohammed”, “Alexander”, “Ziad” and “Ramzy”, collectively “the Sons”) are Ahmad's sons by his marriage to the Sixth Defendant (“Joan”). Ahmad and Joan say they divorced in 2017. Further to its suspicions about Ahmad's dealings with his assets at that time, and by reference to certain evidence which is arguably inconsistent with the claimed divorce, the Bank does not admit that Ahmad and Joan are not still married (or at least not managing their financial affairs as if still married).
The proceedings in the High Court
In the High Court proceedings the Bank sought to pursue:
(1) primary debt claims against Ahmad, suing on the UAE judgments, alternatively on the underlying alleged guarantees; and
(2) secondary claims, which variously involve the other defendants, for relief relating to assets (“the Claim Assets”) against which, directly or indirectly, the Bank wishes to assert an entitlement to enforce Ahmad's liability to it (if any).
At para. 3(2) of his judgment, the Judge said that the Bank sought to pursue the following Claim Assets:
“(a) two London properties, 9 Hyde Park Garden Mews (‘9HP’) and 32 Hyde Park Garden Mews (‘32HP’), the latter of which is a corner property also referred to as 43 Sussex Place;
(b) the proceeds of sale (‘the Proceeds’) of a third London property, 18 Hyde Park Square (‘18HP’), as to which the basic facts are that 18HP was transferred to the seventh defendant (‘Virtue Trustees’), a Swiss entity operated by Kendris AG (‘Kendris’), a professional services company, as trustee of a trust known as the Spring Blossom Trust, established by Ahmad as settlor on 4 April 2017, the beneficiaries being Joan and the Sons, and Virtue Trustees sold the property some months later at a fair market price, to a buyer unconnected to Ahmad or his family, and transferred almost all of the net proceeds of sale to Joan;
(c) shares (‘the UK Shares’) in the eighth defendant (‘Commodore UK’), previously named Commodore Contracting Company Limited, a company incorporated in this jurisdiction; and
(d) US$15 million in cash (‘the US$15m’) said to have been held by Medstar Holdings SAL (‘Medstar’), a Lebanese company that appears to have been owned and controlled by Ahmad at all material times.”
At para. 6 the Judge stated that:
“The Bank alleges that Ahmad took steps in relation to the Claim Assets in 2017 by which to disguise his (beneficial) ownership of them or to cause them to be transferred within his family with a view to putting them beyond the reach of, or otherwise prejudicing the interests of, his creditors.”
The factual background to this is outlined at paras. 4–5 of the judgment:
“4. Prior to the events upon which the secondary claims focus, legal title to 9HP and 18HP was held by Marquee Holdings Ltd (‘Marquee’), a Jersey company that has since been dissolved. It was not in dispute that there is a serious issue to be tried on the Bank's claim that Marquee was ultimately wholly owned and controlled by Ahmad, albeit (as to control) the Bank acknowledges that Marquee's directors were individuals from Kendris. The Bank asserted that Marquee held that title for and on behalf of Ahmad as beneficial owner of the properties. The defendants disputed that there is a serious issue as to that, i.e. they said it was fanciful to suggest that Marquee was not the beneficial owner.
5. It was common ground, in contrast, that Ahmad was legal and beneficial owner of 32HP before the events of 2017.”
As the Judge said at para. 7, the Bank seeks to claim:
(1) declarations that Ahmad holds the beneficial interest in 9HP, 32HP and the UK Shares, legal title to which is now held variously by the Sons (the Bank no longer pursues any claim for a declaration that the UK Shares are held on trust for Ahmad by the Sons); and
(2) relief under section 423 of the 1986 Act as regards all of the Claim Assets (but in the alternative as regards 9HP, 32HP and the UK Shares), on the basis that the steps allegedly taken by Ahmad in 2017 relating to each of the Claim Assets involved a transaction at an undervalue entered into by him for the purpose of putting assets beyond the reach of or otherwise prejudicing the interests of his creditors.
No trial has yet taken place. The proceedings are at a preliminary stage.
As the Judge said at para. 8, he had before him:
(1) the Bank's application to amend its Particulars of Claim in certain respects to add certain claims;
(2) applications by Ahmad and the Third and Fourth Defendants to set aside permission to serve the claim on them outside the jurisdiction in certain respects;
(3) an application by Mohammed challenging jurisdiction in respect of the claims pleaded against him concerning his UK Shares; or seeking a stay of those claims; and an alternative application by him for reverse summary judgment dismissing those claims.
The points argued before the Judge all concerned the substantive merits of the proposed claims and the arguments proceeded on the basis that there was no material difference between: (a) the need for there to be a serious issue to be tried as a pre-requisite for the grant of permission to serve proceedings out of the jurisdiction; (b) the need for there to be a real as opposed to a fanciful prospect of success so as to defeat an application for reverse summary judgment; and (c) the need for a claim proposed to be introduced by amendment to have arguable merits sufficient for it to be appropriate to grant permission to amend in the face of resistance: see para. 9 of the judgment.
As the Judge said at para. 10, so far as matters of fact were concerned it was agreed that the facts as pleaded by the Bank should be assumed to be true for the purpose of these preliminary applications unless it could be shown on a summary argument that they were demonstrably untrue or unsupportable.
In the course of dealing with the various applications before him, the Judge had to address two issues of law. I have outlined his conclusions on those issues at paras. 2–3 above. It is those two issues which now come before this Court on these appeals. I will...
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