S.C.F. Finance Company Ltd v Masri (No. 3)

JurisdictionEngland & Wales
JudgeLORD JUSTICE RALPH GIBSON
Judgment Date16 July 1986
Judgment citation (vLex)[1986] EWCA Civ J0716-11
Docket Number86/0729
CourtCourt of Appeal (Civil Division)
Date16 July 1986
S.c.f. Finance Company Limited
and
Khalil Said Masri

and

Ina'am Masri
(Otherwise Ina'am Mahmoud El Khatib)

[1986] EWCA Civ J0716-11

Before:

Lord Justice Slade (not Present)

Lord Justice Ralph Gibson

Sir John Megaw

86/0729

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM AN ORDER OF MR JUSTICE LEGGATT

Royal Courts of Justice

MR S.E. BRODIE Q.C. and MR C.R.D. MOGER, instructed by Messrs Herbert Oppenheimer Nathan & Vandyk, appeared for the Appellant (Garnishee).

MR N.W. LYELL Q.C, MR R.J.P. AIKENS Q.C. and MR R.D. LORD, instructed by Messrs Elborne Mitchell & Co., appeared for the Respondents (Judgment Creditors).

LORD JUSTICE RALPH GIBSON
1

On 4th July 1985 Leggatt J. gave judgment for S.C.F. Finance Co. Ltd. ("SCF") for $910,031.70, together with interest thereon, as sums due from the first defendant ("Mr Masri") and arising out of transactions conducted for Mr Masri by SCF. Mr Masri's appeal against that judgment, based upon the contention that the taking of deposits by SCF under the terms of their customer agreement was in breach of section 1 of the Banking Act 1979, has been dismissed for the reasons set out in the judgment of the court. This second appeal was brought by the second defendant ("Mrs Masri"), the wife of Mr Masri, against the order made by Leggatt J. on 25th July 1985 whereby he directed Mrs Masri to pay to SCF the sum of 400,000 and the costs of the garnishee proceedings against her in which that order was made. At the request of both sides, the court heard the argument on the second appeal immediately following, and before the decision of, the first appeal.

2

The garnishee proceedings were concerned with the sum of 400,000 or thereabouts standing in an account (we refer to the relevant account or accounts as one) in Mrs Masri's name with the United Arab Bank Ltd. at their branch at St. Martin's Le Grand in London. The decision of the judge was that, since that sum of money ("the dollar account") was in truth the property of Mr Masri, although in the name of Mrs Masri and claimed by her to be her own property, it was a debt due from Mrs Masri to her husband and available to be attached in garnishee proceedings under R.S.C. Order 49 towards payment of Mr Masri's judgment debt to SCF. The decision of the judge was made without there having been any trial on the merits of the issue as to whether Mrs Masri or her husband was the beneficial owner of the dollar account. The decision was based upon issue estoppel: in the events which had happened Mrs Masri was held to be estopped from asserting that the beneficial ownership of the dollar account was other than in her husband. The estoppel was held to have arisen against Mrs Masri because she had made an application to the court for the setting aside of a Mareva injunction, in so far as it affected her, on the ground that the dollar account was her own separate property and not that of her husband; and then, when her application was called on for trial, she had declined to proceed with it and had accepted that it be dismissed. By her appeal Mrs Masri has contended that the garnishee proceedings against her were entertained by the court, and judgment given in those proceedings, without jurisdiction; and that, in any event, Leggatt J. was wrong to hold that the estoppel had been raised against her. Before considering the submissions of the parties it is necessary to state the sequence of the events which happened. This must be done in detail as to some aspects of the story, and, in particular, for the purpose of examining what issue or issues, if any, was or were conclusively resolved against Mrs Masri when her application was dismissed, and whether at the relevant time Mrs Masri was "within the jurisdiction" for the purposes of R.S.C. Order 49.

3

4

(i) The proceedings against Mr Masri were begun by writ issued on 7th February 1984. Leave had been obtained on 6th February 1984 to serve the writ on Mr Masri in Amman in Jordan. At the same time SCF applied for relief by way of Mareva injunction. By order of 6th February it was ordered that, upon the usual undertakings as to damages, Mr Masri "be restrained from removing from the jurisdiction… or otherwise dealing with any of his assets within the jurisdiction… so as to reduce such assets below the sum of £700,000…"; and the order was to apply to "any… accounts held by or on behalf of… Mr. Masri by the Arab Bank…" at two named branches in London.

5

(ii) The response of Mr Masri on affidavit to the making of the Mareva injunction was to the effect that there were then in his London accounts no more than U.S. 28,011 and £6.11. Shortly thereafter SCF obtained evidence from which, as they have submitted, it should be inferred that Mr Masri had in an account in the name of Mrs Masri with the United Arab Bank in London a sum of about 400,000 (the dollar account), by means of which he was carrying out deals in foreign currencies. The evidence (which need not be set out in detail), included the description of a transaction between Mr Masri and Mr El Qader on 8th April 1984 in Mr Masri's office in Amman which Mr Masri completed by handing to Mr El Qader a cheque for £20,000 sterling. The cheque was filled out there and then with Mr El Qader's name as payee, the amount payable and the date, but the cheque had previously been signed by Mrs Masri, who was not present, in her maiden name of El Khatib.

6

(iii) On 10th April 1984 on the application of SCF based upon the evidence mentioned, Webster J. amended the Mareva injunction so as to apply it to "accounts held by or on behalf of Mr Masri… or in the names of… Mrs…. El Khatib…" by the United Arab Bank, thereby including the dollar account.

7

(iv) On 18th April 1984 Mrs Masri applied to the court for the Mareva injunction—in so far as it applied to any account in her name, whether her maiden or married name—to be set aside or varied on the ground that the money in the accounts in her name was her own beneficial property and not that of Mr Masri. Her affidavit evidence included assertions that, since their marriage in 1959, her money (then the sterling equivalent of about £4,400) had always been kept separate from her husband's; that she had made large profits by dealing in real estate; and that in about 1964—1965 she had begun dealing in foreign currencies through several accounts in her sole name with banks including the Arab Bank. As to the account of the transaction with Mr El Qader, in so far as it referred to Mr Masri producing a cheque form from his desk which already bore Mrs Masri's signature and asserted that Mrs Masri was not present at the time, that account was described as a "complete fabrication" on the part of SCF. Mrs Masri had, she claimed, gone to Mr Masri's office and concluded the transaction with Mr El Qader.

8

(v) Her application came before Hirst J. on 3rd September 1984. By that date a number of affidavits had been filed on both sides. Counsel for Mr Masri argued that in law, for the purposes of a Mareva injunction, if Mrs Masri, as a third party not concerned in the proceedings between SCF and Mr Masri, claimed that the dollar account was beneficially her own money, the court was bound to give effect to that claim and to discharge the Mareva injunction so far as it affected that account without conducting an inquiry into the ownership of the money in the account. The submission, in brief, was that SCF must first get judgment against Mr Masri, if they could, and then in execution proceedings take such property as could be proved to be that of Mr Masri. Hirst J. rejected that submission. He held that, in order for the court to deal with Mrs Masri's application to discharge the injunction so far as concerned the dollar account, it was necessary to investigate the issue on the merits, including the allegations of SCF and of Mrs Masri and the evidence relied upon by them. The Mareva injunction was accordingly continued pending the further hearing of Mrs Masri's application which was adjourned. SCF were given leave to join Mrs Masri as second defendant in the main action, and she was so joined; but no relief has been claimed against her other than with reference to the claim of SCF that the dollar account is the property of Mr Masri. Hirst J.'s order was the subject of an appeal as set out in paragraph (viii) hereunder.

9

(vi) On 3rd November 1984 directions were given by Hirst J. for trial of the main action and of Mrs Masri's application. First, it was ordered that trial of the main action be expedited. That order meant that the trial was likely to take place in June 1985. It was expected to take 10 days. Next, for the hearing of Mrs Masri's application, it was ordered that SCF be given leave to cross-examine both Mr Masri and Mrs Masri upon their affidavits filed in support of her application; and that similar leave be given to Mr and Mrs Masri to cross-examine six witnesses who had sworn some of the affidavits upon which SCF relied in support of their case that the dollar account was the beneficial property of Mr Masri. Included among those witnesses was Mr El Qader who had received the cheque for 20,000 in Amman. The consequence of the orders for cross-examination, made under Order 38, rule 2, was that if any of the witnesses named therein did not attend for cross-examination the affidavit of that person "shall not be used as evidence without the leave of the court". Further, provision was made for discovery of documents directed to the issues raised both in the main action and in the application. The hearing of the application was estimated by the parties also to require 10 days including cross-examination of deponents. Lastly, it was directed that the hearing of Mrs Masri's application take...

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