North of England Coachworks Ltd v Mohammad Asif Khan
| Jurisdiction | England & Wales |
| Judge | Mr Justice Griffiths |
| Judgment Date | 02 October 2020 |
| Neutral Citation | [2020] EWHC 2596 (QB) |
| Docket Number | Claim No: QB 2019-003298 |
| Date | 02 October 2020 |
| Court | Queen's Bench Division |
[2020] EWHC 2596 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Griffiths
Claim No: QB 2019-003298
Jonathan Cohen QC (instructed by Sherrards Solicitors LLP) for the Applicant
Adrian Eissa QC (instructed by Tuckers Solicitors LLP) for the Respondent
Hearing date: 24 September 2020
Judgment Approved by the court for handing down
(subject to corrections)
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This is an application by North of England Coachworks Ltd (“NECL”) to commit the Respondent Mohammad Khan (“Mr Khan”) to prison for contempt of court.
The application is made under CPR 81.18(1)(a) in respect of false statements of truth. The application required the leave of the Court, which was granted by His Honour Judge Dight on 13 May 2020 after a contested hearing.
It was adjourned by Kerr J in order to enable Mr Khan to obtain legal representation and he has been represented before me by Adrian Eissa QC. NECL has been represented throughout by Jonathan Cohen QC. I am grateful to both of them for their written and oral submissions.
The contempts of court alleged
NECL's amended Grounds of Application specify the contempt of court alleged as:
“…a false statement of truth on a statement of case filed and served by Mr Khan entitled “Counter-schedules to defence of first defendant” dated 16 December 2019 (“the Counter-Schedules”). The statement of truth was signed by Mr Khan's solicitor to certify Mr Khan's belief in the truth of the content of the Counter-Schedules.”
The Grounds then allege that some of the entries in the Counter-Schedules were false. Not all those allegations are pursued. Those which are still maintained (following admissions by Mr Khan) are entries relating to:
i) a person called on the Counter-Schedules “G Massey” (or her company “Massey Enterprise”);
ii) a person called on the Counter-Schedules “S Merryfield” (spelled in the Grounds of Application as “S Merrifield”);
iii) a person called on the Counter-Schedules “K Summers”; and
iv) a person called on the Counter-Schedules “J Thomas”.
The issues in the action
The context of these entries is that the Particulars of Claim in the action allege that Mr Khan “perpetrated a substantial fraud on NECL” (para 8). They plead that he was employed by NECL from 2010 to 3 July 2019 (para 2) and they allege that the fraud took place “from an unknown date to the termination of his employment in July 2019” (para 8). They plead that the alleged fraud was conducted by four methods:
i) By writing cheques on NECL's account to himself, his wife, his sister, or “a range of third parties” for services which were for his or his wife's benefit and which were not for NECL's benefit. Appendix 1 sets out details of each such cheque relied upon.
ii) By using NECL's credit card for transactions for his and/or his wife's joint benefit. Appendix 2 sets out details of each such credit card transaction relied upon.
iii) By making electronic money transfers from NECL's bank account, either to himself or “a range of third parties”, for services which were for his or his wife's benefit and which were not for NECL's benefit. Appendix 3 sets out details of each electronic transfer relied upon.
iv) By using cash payments from NECL' s customers “for his own purposes, putting false entries into NECL's records so as to pretend that the cash was being spent for NECL's purposes.” (para 15). There is no Appendix in relation to this part of the claim and it does not feature in the committal application.
The action was brought against three Defendants: Mr Khan (First Defendant), his wife (Second Defendant) and his sister (Third Defendant).
A joint Defence was filed on behalf of Mr Khan and his wife, coupled (in the same document) with a Counterclaim on behalf of Mr Khan only. This pleads that “NECL has never been run in a conventional manner” (para 3). It says that the “ultimate beneficial owner and de jure director”, Mr John O' Sullivan, was “reluctant to invest his own money”, or “significant time” in NECL, and left “both the operational and corporate aspects of its running” to its “de facto Managing Director”, Mick Warren, and to Mr Khan “who at all material times reported to Mr Warren” (para 3). It says that “the financial expectations made of [Mr Khan] were unorthodox in the extreme” (para 6). In particular, Mr O'Sullivan expected Mr Warren and Mr Khan himself “to make use of their own financial resources to assist NECL with… cash-flow”, and demanded “that they run NECL's business as if they were… running their own company on a highly informal basis and advancing it loans as and when its business needs required” (para 6). The Defence alleges that a total of “some £826,980.97 of his personal funds” was paid by Mr Khan to NECL over the period of 2011 to 2019 “over a series of some 214 payment transactions”. It sets out a fluctuating balance which it pleads was owed by NECL to Mr Khan from time to time over the period 2015–2019 “by way of example only” (para 6). It also pleads that Mr Khan used “some £47,406.44 of his personal funds so as to pay off liabilities NECL owed to third parties” between 2011–2019 “over a series of some 44 payment transactions” which were “never reimbursed to Mr Khan” although it was “understood and agreed that they should be”.
The Defence then pleads that Mr Khan never had a written contract of employment, and “the terms on which [he] was employed were characterised by vagueness” (para 7). His initial salary was £30,000 per annum “but NECL never paid him in accordance with its PAYE obligations”. He never received monthly salary on a defined date (para 7). “Over time as his role developed it was agreed that he would be compensated in excess of £30,000 p.a., to reflect both his increased responsibilities and the extent of his financial assistance to NECL” but “by how much was never clearly defined” (para 7) and “the form of such additional payments (as at all times authorised by Mr Warren) was sometimes unorthodox” (para 7).
The Defence then defines repayments to Mr Khan of sums he had personally advanced to NECL, and also payments of remuneration or enhanced remuneration to him as “Remuneration Payments” (para 8). These were said to be “delineated” by Mr Warren and Mr Khan “with full knowledge of Mr O'Sullivan and Karen Jennings”, and to have been “effected by way of cheque payments” which, “in keeping with the informal running of NECL's business” Mr Khan would “from time to time, and with the authorisation of Mr Warren”, pay by cheques to himself, his wife or his sister “or to other third parties” (para 8). Further the Remuneration Payments “were in any event authorised in their entirety by Mr Warren” and, “in their near-entirety”, when made out to Mr Khan, his wife or his sister personally “were further countersigned by Mr Warren, as a mark of his authorisation of the same” (para 8).
To this general case of authorised, if unorthodox, payments from NECL to Mr Khan and others, including “third parties”, by way of “Remuneration Payments” as defined, NECL has not pleaded in any detail (its short Reply dated 10 January 2020 is lacking in particulars and was filed, it says in para 2, “to comply with time limits”).
The Defence of Mr and Mrs Khan then addresses the four methods of fraud alleged in the Particulars of Claim.
i) The cheque fraud is denied, and “Mr Khan will in due course serve a counter-schedule” (Defence para 16) in respect of the Claimant's schedule of cheques (i.e. the Claimant's schedule in Appendix 1 to the Particulars of Claim).
ii) The credit card fraud is denied (Defence para 17).
iii) The money transfer fraud is denied (Defence para 18) and “Mr Khan will in due course serve a Counter-Schedule in relation to the Claimant's schedule of the Money Transfers” i.e. the Claimant's Appendix 3.
iv) The cash payments claim is also denied (Defence para 19) but, as I have said, there was no Appendix to the Particulars of Claim for cash payments and no Counter-Schedule. No point arises on it on this committal application.
The Defence pleads at para 18(d)(iv) that “the net position is that NECL owes Mr Khan £31,345.64” and Mr Khan's Counterclaim is for that sum (para 29).
The Defence and Counterclaim are signed with statements of truth on behalf of Mr Khan and Mrs Khan separately, although both are given by their solicitor. The committal application (as is clear from the Grounds which I have cited above) is not based on these statements of truth. They are dated 22 November 2019.
The brief and provisional Reply and Defence to Counterclaim was served on 10 January 2020. In the meantime, however, the First Defendant (not the Second Defendant) filed the Counter-Schedules on the basis of some parts of which the committal application is made.
The Counter-Schedules
The Counter-Schedules form part of a self-contained document of 71 pages entitled “Counter-Schedules to Defence of First Defendant”. The first 2 pages contain the following preamble in 5 numbered paragraphs:
“1. These Counter-Schedules have been prepared by Mr Khan. The Claimant, North of England Coachworks Limited (NECL) has issued what is plainly a Chancery Division Claim in the Queen's Bench Division, such that it has not come under the obligations of the Disclosure Pilot Scheme. It has generally behaved oppressively in relation to time extensions. Mr Khan has done his best to remember the reason for a great many transactions made over the course of many years, without the benefit of NECL's records and accounts over the material time, such that he has been unable to...
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