Pakistan v Zardari [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Lawrence Collins J |
| Judgment Date | 06 October 2006 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 06 October 2006 |
Queen's Bench Division (Commercial Court).
Lawrence Collins J.
Robert Miles QC and Gregory Denton-Cox (instructed by Kendall Freeman) for the claimant.
Antony White QC (instructed by Saunders) for the first defendant.
David Brownbill (instructed by Ingram Winter & Green) for the second, third and fourth defendants.
The following cases were referred to in the judgment:
Agip (Africa) Ltd v JacksonELR [1991] Ch 547 (CA); [1990] 1 Ch 265.
Amin Rasheed Shipping Corp v Kuwait Insurance CoELR [1984] AC 50.
Attorney General for Hong Kong v ReidELR [1994] 1 AC 324.
Banco Nacional de Cuba, ReWLR [2001] 1 WLR 2039.
Bank of Credit and Commerce International (Overseas) Ltd v AkindeleELR [2001] Ch 437.
Banque Indosuez SA v Ferromet Resources IncUNK [1993] BCLC 112.
Boscawen v BajwaWLR [1996] 1 WLR 328.
BP Exploration Co (Libya) Ltd v HuntWLR [1976] 1 WLR 788; [1976] 3 All ER 879.
Carvill America Inc v Camperdown UK LtdUNK [2005] EWCA Civ 645; [2005] 1 CLC 845.
Daraydan Holdings Ltd v Solland International LtdUNK [2004] EWHC 622 (Ch); [2005] Ch 119.
De Molestina v Ponton [2001] CLC 1412.
Grant v Gold Exploration and Development Syndicate LtdELR [1900] 1 QB 233.
ISC Technologies Ltd v GuerinUNK [1992] 2 Ll Rep 430.
ISC Technologies Ltd v Radcliffe (unreported, 7 December 1990, Ch D).
Konamaneni v Rolls Royce Industrial Power (India) LtdWLR [2002] 1 WLR 1269.
Limit (No. 3) Ltd v PDV Insurance CoUNK [2005] EWCA Civ 383; [2005] 1 CLC 515.
Lister & Co v StubbsELR (1890) 45 Ch D 1.
Mahesan S/O Thambiah v Malaysia Government Officers Co-operative Housing SocietyELR [1979] AC 374.
Metall und Rohstoff AG v Donaldson Lufkin & Jenrette IncELR [1990] 1 QB 391.
NABB Bros Ltd v Lloyds Bank International (Guernsey) LtdUNK [2005] EWHC 405 (Ch); [2005] ILPr 506.
Nycal (UK) Ltd v Lacey [1994] CLC 12.
Pallant v MorganELR [1953] Ch 43.
Paragon Finance plc v Thakerar & CoUNK [1999] 1 All ER 400.
Polly Peck International plc v Nadir (No. 3) (Independent, 2 September 1992; The Times, 22 March 1993 (CA)).
Sahar v TsitsekkosUNK [2004] EWHC 2659 (Ch).
Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami IranELR [1994] 1 AC 438.
Spiliada Maritime Corp v Cansulex LtdELR [1987] AC 460.
Westdeutsche Landesbank Girozentrale v Islington LBCELR [1996] AC 669; [1996] CLC 990.
Bribery — Constructive trusts — Service out of jurisdiction — Defendants' application to set aside — Properties in England allegedly purchased with proceeds of bribes obtained in connection with contracts entered into by claimant or its agencies — Whether defendants held as constructive trustees and liable to account — Claimant had real prospect of success on merits — Defendant had sought to conceal beneficial interest — Reasonable prospect of establishing that funds used to purchase properties were fruits of corruption — Court could assume jurisdiction where whole subject-matter of claim related to property situated in England — Whether defendants constructive trustees and alleged liability arose out of acts committed within England — England clearly appropriate forum for determining ownership of land and proceeds of sale — Civil Procedure Rules 1998, r. 6.20(10), (14).
The defendants applied for an order declaring that the English court had no jurisdiction and setting aside service of the proceedings out of the jurisdiction.
The first defendant (Z) was the husband of the former Prime Minister of Pakistan (B). Z was, at various times during B's two premierships, a member of the national assembly of Pakistan, a member of the senate of Pakistan and a federal minister.
The proceedings concerned three properties in Surrey known collectively as the Rockwood Estate, which had been purchased by the second to fourth defendant companies in 1995, during B's second premiership. The companies were Isle of Man special purpose vehicles incorporated in 1995, and were set up for the purchase of the estate.
The Government of Pakistan claimed that the defendant companies were vehicles or alter egos of Z and/or B and that the reason or motive for their use was that Z and/or B 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. The companies had been placed into liquidation and the estate sold. Pakistan claimed that it was beneficially entitled to the proceeds of sale of the estate, and that Z was liable to account to Pakistan or compensate Pakistan in equity for the moneys that passed through his hands and were used for the purchase or refurbishment of the estate.
Since Z and the defendant companies were outside the jurisdiction in countries to which Council Regulation 44/2001 did not apply, Pakistan obtained permission to serve them abroad. The defendants applied to set that permission aside.
Pakistan's application to serve out was made under CPR, r. 6.20(10) on the basis that the whole subject matter of the claim related to property within the jurisdiction and r. 6.20(14) on the basis that the claim was made against the defendants as constructive trustees.
The defendants applied to set aside service on grounds that the claim did not fall within CPR, r. 6.20(10) or 6.20(14); there was no serious issue to be tried; and England was not the proper place to bring the claim.
Held, dismissing the defendants' applications:
1. Pakistan had a real prospect of success on the merits. Z had sought to conceal his interest in the Rockwood Estate. He acknowledged that he was the beneficial owner of the estate (and of the defendant companies), which he had previously denied. The purchase price and costs of refurbishment were paid by a company which appeared to be beneficially owned by Z. There was no direct evidence that the source of that company's money used to fund the purchase was the proceeds of corrupt payments. No explanation had been given by Z of the source of the payments into the company's accounts. There was a reasonable prospect of Pakistan establishing that the funds used to purchase and refurbish the estate were the proceeds of payments which were the fruits of corruption and that the defendant companies through Z were aware of all relevant matters.
2. By CPR, r. 6.20(10) the court could assume jurisdiction if the whole subject-matter of the claim related to property situated in England. If the claim was limited to the proceeds of the estate the whole subject matter of the claims against Z and the defendant companies related to property in England. Both the estate and the proceeds of sale were in England. The subject matter of the claim was the property. The basis of the claim rested on alleged corruption, but that did not affect the existence of jurisdiction under r. 6.20(10). The intention of that head of jurisdiction was to confer a discretionary jurisdiction on the English court to hear disputes relating to property in England. The rule was intended to relate to disputes over funds of money representing property in England. (Re Banco Nacional de Cuba [2001] 1 WLR 2039 and Sahar v TsitsekkosUNK[2004] EWHC 2659 (Ch)considered.)
3. If the payments were bribes, and if (as was alleged) Z was the controlling mind of the defendant companies, then the defendant companies would be constructive trustees on the basis of their knowing receipt of the proceeds of the bribes. (NABB Brothers Ltd v Lloyds Bank International (Guernsey) LtdUNK[2005] EWHC 405 (Ch); [2005] ILPr 506, Boscawen v BhajaWLR[1996] 1 WLR 328and Attorney General forHong Kong v ReidELR[1994] 1 AC 324 considered.)
4. The next question would be whether the relevant defendant's liability arose out of acts committed within the jurisdiction. It was probably sufficient if a substantial part of the acts, viewed as a whole, on the part of the original fiduciary and the defendant which gave rise to the alleged liability took place within the jurisdiction. There could be no doubt that the liability of the defendant companies arose out of acts committed within the jurisdiction, namely their acquisition of the Rockwood Estate in England with allegedly corrupt funds. There was a good arguable case that Z would be within the rule because his liability in respect of the Rockwood Estate itself arose out of acts committed in England by the defendant companies on his instructions. (NABB Brothers Ltd v Lloyds Bank International (Guernsey) LtdUNK[2005] EWHC 405 (Ch); [2005] ILPr 506, ISC Technologies Ltd v Radcliffe (unreported, 7 December 1990, Millett J), ISC Technologies Ltd v GuerinUNK[1992] 2 Ll Rep 430, Polly Peck International plc v Nadir, The Independent, 2 September 1992, Knox J; The Times, 22 March 1993, CA considered.)
5. It was not necessary to decide definitively whether Z was within CPR, r. 6.20(14) because he clearly came within CPR, r. 6.20(10). In any event, even if Z were not within CPR, r. 6.20(10) and 6.20(14), he would plainly be within CPR, r. 6.20(3) as a necessary or proper party.
6. The Isle of Man as the place of incorporation and residence of the defendant companies was not the appropriate forum. Nor was Pakistan the appropriate forum. The payments were made in England through Switzerland via entities incorporated in offshore jurisdictions. Looking at the matter in the round England was the clearly appropriate forum for the determination of a dispute relating to the ownership of land and the proceeds of sale in England, when the issues were likely to involve events, persons and documents in several countries, including, as an important place for those events, England.
Lawrence Collins J: I Introduction
1. 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).
2. Mr Zardari was at various times during Ms Bhutto's premiership a...
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