Richardson-Ruhan v Ruhan

CourtFamily Division
JudgeMOSTYN J
Judgment Date09 Nov 2017
Neutral Citation[2017] EWHC 2739 (Fam)

Financial remedy – Fact-finding – Computation of assets – Use of court documents including judgments from commercial proceedings – Inferences drawn from failure to call witnesses – Whether assets held by nominee on husband’s behalf – Status of assets at issue in commercial proceedings.

The husband and wife separated after about 16 years of marriage; they had two children together. It was common ground that during the marriage the family enjoyed a very high standard of living, based on the income generated by the husband as a highly successful businessman. However, the husband claimed that he was now insolvent to the tune of £2 million, as a result of some £200 million having been stolen from him by a convicted fraudster with the assistance of the husband’s treacherous former business associates. The wife claimed that this presentation was entirely false, and that the husband remained vastly rich, in that very large sums, or the right to receive very large sums, were held on his behalf by a nominee.

It was documented fact that in 2002 the fraudster, who was then chief executive of a company called Orb, had stolen approximately £35 million from Izodia plc, a company in which Orb held a 29.9 per cent shareholding, and misapplied the bulk of those monies for Orb’s benefit. During 2003 negotiations between the fraudster and the husband and one of his business associates resulted in an agreement for the transfer of various of Orb’s assets to the husband and to companies associated with or controlled by him, in exchange for substantial sums. The relevant assets included 37 hotels, a portfolio of investment properties and businesses, and a minority shareholding in Izodia. In April 2006 the fraudster pleaded guilty to theft and false accounting for which he received an eight-year prison sentence. In November 2007, a confiscation order was made (by consent) for £41 million, with a default sentence of a further eight years in prison.

On his release from prison in 2010 the fraudster asserted that the husband held realisable property worth over £41 million which in fact belonged to him, and that he (the fraudster) had no other assets. This led to the launch of the Orb proceedings in 2012 in the commercial court, which, in turn, led to a counter-claim by the husband for £200 million. These proceedings were complex, elaborate and expensive. The fraudster claimed that the husband had agreed orally to pay, in addition to the ‘sale price’, 40 per cent of the profits generated by the hotels and 50 per cent of the profits generated by the property portfolio. The husband denied any such agreement. He also asserted that all the relevant property had been sold on to third parties and that, as a result of the treachery of his own business associates, he had been left with nothing. Shortly after the husband was served with the Orb proceedings the asserted nominee took control of £92 million associated with the sale of the Orb assets; the fraudster asserted that these funds in reality belonged to the husband. The Orb proceedings were eventually compromised by a consent order, which provided for a mutual dismissal of the claims with no order as to costs.

In 2016 the wife’s then solicitors received a one-line email from the husband’s solicitors which stated: ‘we attach a draft consent order in the commercial litigation which is with the court for sealing’. Nothing else was provided and no further explanation was given. The wife obtained an order lifting the stay on the financial remedy proceedings, which had been ordered pending completion of the Orb proceedings. In relation to the Orb settlement the husband’s new Form E explained that, having spent nearly £8 million on legal costs, he had been unable to find funding for the remaining costs, estimated at a further £8 million, and therefore reluctantly had had to discontinue his case. After further investigation by the wife’s legal team, it became clear that the settlement in fact involved both a sale and purchase agreement relating to share capital and a loan note for £73.75 million in favour of the alleged nominee.

In the financial remedy proceedings neither the husband nor the wife called the man who was said to be the husband’s nominee; also, neither called the fraudster, although he had a representative in court throughout. The husband’s evidence concerning the settlement in the commercial proceedings was heard by this representative, which led to the fraudster providing the wife at a late stage in the hearing with documents showing that the husband’s evidence was untrue.

The Orb proceedings had to some extent been re-initiated. The judge ordered the wife’s statement of case and other key documents to be served on the parties to these new proceedings, granting them permission to intervene in the financial remedy proceedings; they did not do so. The judge decided to hear the financial remedy proceedings in two parts, first addressing the findings of fact as to computation of assets and secondly hearing submissions and making decisions as to distribution of assets.

Held – (1) Reference to other judgments involving the parties, or one of them, was commonplace in financial remedy proceedings, and in civil proceedings generally. The fact-finder would, as with all hearsay material, give the judgments the weight that they deserved, always reminding him or herself that the decision was to be made by him or her alone. The witness statements in the commercial proceedings were plainly admissible under s 2(4) of the 1995 Act notwithstanding that the notice requirements in FPR 23.2 had not been complied with. Nobody seriously suggested that the fact of non-compliance with the notice requirements should of itself affect the weight to be given to those statements (see [13], [14], below).

(2) The husband’s failure to call the asserted nominee was highly significant. Drawing on experience and the ‘inherent probabilities’ the court concluded that the reason for the ‘nominee’s absence was that the husband feared that admissions would have been extracted from him at variance with his case. Equally, the failure by the wife to call the fraudster was unfortunate and of significance; he would have been able to have given relevant evidence in support of the wife’s case, although as a convicted fraudster his testimony would have had to have been treated with great care (see [19], below).

(3) On a strong balance of probability, the man holding the money paid for the Orb assets and also holding the loan note was in truth a nominee for the husband; the husband had lied to conceal the truth. It was highly significant that the man in question had not intervened in the proceedings, or appeared as a witness, in order to defend his ownership of the relevant assets. Further, the use made of the £92 million plainly showed that it was the husband’s money. It followed that inasmuch as the relevant documents proclaimed that the nominee (or his creatures) were genuine parties to the agreements, then they were shams. The test for a sham (summarised in Bhura v Bhura[2014] EWHC 727 (Fam)) was fully met. However, all but £12 million of the £92 million had now been spent, so the husband should be treated as having £12 million available to him for the purposes of the distributive award (see [27], [33], [41], [42], [75], [76], below).

(4) The assets at issue in the Orb proceedings had unquestionably been matrimonial property. While the wife probably had not had any direct proprietary interest in those assets, she had had an inchoate discretionary claim to them which was of great value. It would have been expressed to be for 50 per cent of the net recovery from those proceedings. It was plain that the husband had not complied with his continuing duty of candour, which had obliged him to keep the wife fully informed of the developments in the Orb proceedings. The Orb proceedings had been spurious and abusive; there had been no oral agreement between the fraudster and the husband to share in profits. The fraudster had had the opportunity to intervene in the financial remedy proceedings to argue that the monies appropriated by him were in fact his, or to be treated as his; but he had not done so and it would be an abuse were he (or his cohorts) to be allowed in later proceedings to assert this. The effect of the settlement of the Orb proceedings was that the husband had ceded everything in a specific company to the fraudster in exchange for a payment from the fraudster’s ex-wife of £73.75 million plus 50 per cent of another company. No one had any valid claim against the husband, apart from the wife, to those assets. The other parties might well wish to fight over what was left – in particular the SFO – but those assets represented the consensual recovery achieved by the husband of his own money following appropriation by the fraudster. It remained to be seen whether the husband, acting through his nominee, made any meaningful recovery in the fresh Orb proceedings (see [44], [45], [78]–[80], below).

Statutory provisions referred to

Family Procedure Rules 2010 (SI 2010/2955), r 23.2.

Civil Evidence Act 1995, s 2(4).

Cases referred to

Bhura v Bhura[2014] EWHC 727 (Fam), [2015] 2 FCR 353, [2015] 1 FLR 153.

Carmarthenshire County Council v Y[2017] EWFC 36, [2017] 4 WLR 136.

F (children), Re[2016] EWCA Civ 546, [2016] 3 FCR 255.

Fage UK Ltd & Anor v Chobani UK Ltd[2014] EWCA Civ 5, [2014] ETMR 26, [2014] FSR 29, [2014] CTLC 49.

Grenda Investments Ltd v Barton[2017] EWHC 2371 (Comm) (unreported, 20 September 2017).

Grenda Investments Ltd v Barton[2017] EWHC 2372 (Comm) (unreported, 20 September 2017).

H (a minor) (adoption: non-patrial), Re [1982] Fam 121, [1982] 3 WLR 50, [1982] 3 All ER 84.

Henderson v Henderson(1843) 3 Hare 100, [1843] UKPC 6.

Hollington v Hewthorn [1943] KB 587, [1943] 2 All ER 35.

Hoyle v Rogers & Anor[2014] EWCA Civ 257, [2015] QB 265, [2014] 3 WLR 148, [2014] 3 All ER 550, [2014] CP Rep 30, [2014] 1 CLC 316.

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