Pakistan v Zardari
| Jurisdiction | England & Wales |
| Judge | Mr Justice Lawrence Collins |
| Judgment Date | 06 October 2006 |
| Neutral Citation | [2006] EWHC 2411 (Comm) |
| Docket Number | Case No. 2006 Folio 156 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 06 October 2006 |
(1) Asif Ali Zardari
(2) Romina Properties Limited
(3) Winkford Farm Limited
(4) Parsonage Farm Limited
[2006] EWHC 2411 (Comm)
Mr Justice Lawrence Collins
Case No. 2006 Folio 156
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Robert Miles QC and Mr Gregory Denton-Cox (instructed by Kendall Freeman) for the Claimant
Mr Antony White QC (instructed by Saunders) for the First Defendant
Mr David Brownbill (instructed by Ingram Winter & Green) for the Second, Third and Fourth Defendants
Hearing dates: July 20 and 21, 2006
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
()
IIntroduction
The first defendant ("Mr Zardari") is the husband of Ms Benazir Bhutto ("Ms Bhutto"), the former Prime Minister of Pakistan (between December 1988 and August 1990, and between October 1993 and November 1996).
Mr Zardari was at various times during Ms Bhutto's premiership a Member of the National Assembly of Pakistan, a Member of the Senate of Pakistan, and a Federal Minister.
These proceedings concern three properties near Godalming in Surrey known collectively as the Rockwood Estate, comprising 350 acres of farmland, a principal farm (Rockwood House) and two smaller farms (Winkford Farm and Parsonage Farm).
The Rockwood Estate was purchased by the second to fourth defendants, Romina Properties Ltd ("Romina"), Winkford Farm Ltd ("Winkford") and Parsonage Farm Ltd ("Parsonage"), or "the defendant companies" collectively, on or about October 2, 1995, during the second premiership of Ms Bhutto.
Romina, Winkford and Parsonage are Isle of Man special purpose vehicles incorporated in 1995, and were set up for the purchase of the Rockwood Estate. The shares in these companies are owned by trusts. After the purchase, the Rockwood Estate was registered at HM Land Registry in the names of the defendant companies. The defendant companies entered into members' voluntary liquidation in February 2002.
The Government of Pakistan ("Pakistan") claims that the defendant companies were vehicles or alter egos of Mr Zardari and/or Ms Bhutto used for the purchase of the Rockwood Estate; that these companies (and the series of trusts employed to hold their shares) were a device used by Mr Zardari and/or Ms Bhutto to conceal their identity as purchasers; and that the reason for the motive behind the use of these secret vehicles was that Mr Zardari and/or Ms Bhutto funded the purchase and refurbishment of the Rockwood Estate from secret commissions or bribes they obtained in connection with contracts entered into by Pakistan or its agencies.
After the claims had been formulated by Pakistan, and the defendant companies had been placed into liquidation, the Rockwood Estate was sold for £4,350,000, and the liquidator of the defendant companies holds the net proceeds of sale, some £3,130,000.
Pakistan claims that it is beneficially entitled to the proceeds of sale of the Rockwood Estate, and entitled to an order that such proceeds of sale be paid to it; that the defendants hold their interest in the Rockwood Estate and its proceeds on constructive trust for Pakistan; and that Mr Zardari is liable to account to Pakistan or compensate Pakistan in equity for the monies that passed through his hands and were used for the purchase or refurbishment of the Rockwood Estate.
I was told that Mr Zardari is now in New York on a temporary visa undergoing medical treatment for a heart condition. I was also told that Ms Bhutto (together with their children) is currently resident in Dubai, and that elections are due in Pakistan at the latest by 2007, and that she may return to power.
Since Mr Zardari and the defendant companies are outside the jurisdiction in countries to which the Judgments Regulation (and the 1968 and Lugano Conventions) do not apply, it was necessary for Pakistan to obtain permission to serve them abroad. This is my judgment on applications to set aside the permission granted by Cooke J.
IIThe particulars of claim
Bomer/Nassam/Benington
The allegations in the particulars of claim (and I emphasise that at this stage they are only allegations, and that I am not making any findings of fact in this judgment) are as follows. Mr Zardari and/or Ms Bhutto, acting in concert with their associate, Mr Jens Schlegelmilch, a Swiss lawyer who was the Bhutto family's lawyer in Europe ("Mr Schlegelmilch"), received secret commissions and bribes, and concealed them through bank accounts in Geneva held in the names of shell companies registered in various offshore locations (including the BVI and Panama), in particular Bomer Finance Inc ("Bomer"), Nassam Overseas Inc ("Nassam") and Benington Management Inc ("Benington"). The accounts were controlled by Mr Zardari and/or Ms Bhutto: para. 18.
Bomer was incorporated in 1991 in the BVI, and Mr Schlegelmilch was its sole director. It had an account at Citibank Private Bank in Geneva, and the account had two US dollar sub-accounts and a sterling sub-account. It also had an account at UBS Geneva: paras 22–24.
Bomer and its accounts were at all material times owned by Mr Zardari and/or Ms Bhutto (para 25):
(1)Mr Zardari now asserts that he is the beneficial owner of the Rockwood Estate, which was purchased and refurbished with the use of, inter alia, funds derived from bank accounts in the name of Bomer.
(2)A manuscript ledger maintained by Mr Schlegelmilch for payments received by the Bomer UBS Account notes that receipts were 50% for the account of "A.A.Z." (Mr Zardari) and 50% for the account of "B.B." (Mrs Bhutto).
(3)Citibank's account opening form (Form A) for the Bomer Citibank Account contains a declaration signed by Mr Schlegelmilch that Mr Zardari was the beneficial owner.
(4)An undated mandate agreement between Mr Zardari and Mr Schlegelmilch mandates the latter to be sole director-president of Bomer and to carry out his functions by observing Mr Zardari's instructions.
(5)Mr Schlegelmilch stated at an oral examination in October 1997 in Swiss criminal proceedings that Bomer was acquired by him on behalf of Mr Zardari, and that some of the monies received into its accounts were for the benefit of Mr Zardari.
(6)In 1997 an item of jewellery was acquired by Mrs Bhutto in London, and part of the price (£92,000) was paid by a payment from the Bomer UBS Account.
Nassam was incorporated in 1989 in Panama. Mr Schlegelmilch and his wife were directors. Nassam had an account at Barclays Bank (Suisse) in Geneva, with two US dollar sub-accounts and a Swiss franc account. Payments were made from the Nassam Barclays Account for the refurbishment of the Rockwood Estate, and it is to be inferred that Nassam and its accounts were controlled by Mr Zardari and/or Ms Bhutto: paras 26–29.
Benington was incorporated in the BVI in (it is thought) 1996, and was represented by Mr Schlegelmilch, who arranged for it to have an account at Banque Pasche, Geneva. The account opening form contains a declaration by Mr Schlegelmilch that the beneficial owner was Mr Zardari. The Rockwood estate was in part refurbished with monies derived from bank accounts in the name of Benington. When Citibank decided to close the Bomer Citibank Account (and an account in the name of another company, Capricorn, controlled by Mr Zardari and/or Mrs Bhutto) the credit balances were transferred to Benington's account with Banque Pasche: paras 30–32.
Bribery allegations
In the claim, Pakistan relies in particular on payments made to accounts in the names of Bomer, Nassam and Benington, which have no commercial business of their own, and were incorporated or acquired simply to receive bribes, secret commissions and the proceeds thereof: paras 18–19, 33.
In that context Pakistan relies, in addition to the general allegation of corruption, on transactions in which illegal bribes and commissions were paid by two Swiss inspection firms, SGS and Cotecna: para 34.
It is alleged that Nassam and Bomer received very substantial secret commissions in connection with contracts entered into between SGS and Cotecna (Swiss customs surveillance and inspection companies) and the Government of Pakistan in 1990 and 1994.
(1)By a letter to Mariston Securities Inc ("Mariston", a company incorporated in the BVI in 1989) Cotecna confirmed that, should it receive an inspection contract from the Government of Pakistan within 8 months, it would pay Mariston 6% of the amount billed. Mr Schlegelmilch held the shares in Mariston on behalf of Ms Bhutto's mother, and money received into its account was for the benefit of Mr Zardari and/or Ms Bhutto.
(2)By a letter to Nassam dated January 10, 1990 (during Ms Bhutto's first period of premiership), Cotecna confirmed that should it receive an inspection contract from the Government of Pakistan within 6 months from that date, it would pay to Nassam 3% of the amount billed to the Government of Pakistan, and on the same date Cotecna agreed to pay 1% to Mr Schlegelmilch personally.
(3) The Government of Pakistan entered into a contract for inspection services with Cotecna on April 18, 1990, and the services were provided in 1990 and 1991.
(4) In accordance with its agreement with Nassam, between February 14, 1991 and October 8, 1992 Cotecna paid at least $428,202 to Nassam (to its account with Barclays Bank in Geneva), $856,406 to Mariston and $142,734 to Mr Schlegelmilch.
(5)The contract with Cotecna was terminated in November 1991, following the dismissal of the first Bhutto government.
(6)By letters dated March 11, 1994 (during Ms Bhutto's second period of...
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