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England and Wales High Court (Commercial Court) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Emirates NBD Bank PJSC v Almakhawi & Anor [2023] EWHC 1113 (Comm) (12 May 2023) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2023/1113.html Cite as: [2023] EWHC 1113 (Comm) |
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BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES
COMMERCIAL COURT (KBD)
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
SITTING AS A JUDGE OF THE HIGH COURT
____________________
| EMIRATES NBD BANK PJSC (a company incorporated in the Emirate of Dubai) |
Claimant |
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| - and - |
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| (1) RASHED ABDULAZIZ ALMAKHAWI (2) ABDULAZIZ RASHED ABDULAZIZ MOHAMMED ALMAKHAWI |
Defendants |
____________________
DANIEL LEWIS (instructed by Spector Constant & Williams) for the Defendants
Hearing dates: 27 February 2 March 2022
____________________
Crown Copyright ©
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 12 May 2023 at 10:30am.
David Edwards, KC:
A. The Parties
B. Background
C. The English Proceedings
i) A property at 193 Warren House, Beckford Close, London W14 8TR ("the Warren House Property") transferred to Mr Almakhawi Jr on 8 July 2019; and
ii) Sums of £200,000 and £2,336,873.28 transferred to Mr Almakhawi Jr on, respectively, 16 August 2019 and 18 October 2019 ("the Money Transfers"), still held intact by him in a UK bank account.
i) The property and money transfers represented gifts made by Mr Almakhawi Sr to his son, made principally for the purposes of succession or inheritance planning;
ii) The Bank cannot rebut the presumption of advancement applicable to transfers between father and son; the beneficial interest in the assets was transferred to Mr Almakhawi Jr and the assets are not held on resulting trust; and
iii) Although it is accepted that the transfers were gratuitous, they were not made by Mr Almakhawi Sr for one of the prohibited purposes set out in section 423(3) of the 1986 Act and so relief cannot be granted under that section.
D. The Trial
i) Oasha Obaid Khalifa Abdulla Almehairi, a Senior Vice President of the Bank; and
ii) Amir Alkhaja of Habib Al Mulla, lawyers who represented the Bank in the Dubai Proceedings.
These statements dealt with various formal matters - the amount of the judgment and the absence of any recoveries. Neither of them was required by the Defendants to attend for cross-examination, and I accept the evidence contained in their statements.
E. Enforceability of the Dubai Judgment
1. English law principles of enforceability
" a foreign judgment in personam given by the court of a foreign country with jurisdiction to give that judgment in accordance with the principles set out in Rules 47 and 48, and which is not impeachable under any of Rules 52 to 55, may be enforced by a claim or counterclaim for the amount due under it if the judgment is
(a) for a debt, or definite sum of money (not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty); and
(b) final and conclusive,
but not otherwise."
"A foreign judgment may be impeached if the proceedings in which the judgment was obtained were opposed to natural justice."
i) Natural justice is concerned with procedural fairness, not whether the judgment of the foreign court is wrong (or even manifestly wrong) as a matter of fact or law: Adams v Cape Industries Plc [1990] Ch. 433, 569EF (Slade LJ);
ii) Proof of a mere procedural irregularity in the foreign court is not enough. What is required for the exception to bite is a defect which would constitute a breach of the English court's view of substantial justice; Adams at 559FG and 566F568A (Slade LJ); and
iii) It is not enough that the foreign court takes a different procedural approach to that which an English court might take, unless that difference deprives the judicial process of the quality of substantial justice: Yukos Capital v OJSC Rosneft Oil Company [2011] EWHC 1461 (Comm), [2012] 1 All ER (Comm) 478 at [67] (Hamblen J).
"Since the ultimate question is whether there has been proof of substantial injustice caused by the proceedings, it would, in our opinion, be unrealistic in fact and incorrect in principle to ignore entirely the possibility of the correction of error within the procedure of a foreign court which itself provides fair procedural rules and a fair opportunity for remedy. The court must, in our judgment, have regard to the availability of a remedy in deciding whether in the circumstances of any particular case substantial injustice has been proved. However, the relevance of the existence of the remedy and the weight to be attached to it must depend upon factors which include the nature of the procedural defect itself, the point in the proceedings at which it occurred and the knowledge and means of knowledge of the defendants of the defect and the reasonableness in the circumstances of requiring or expecting that they made use of the remedy in all the particular circumstances."
2. Mr Almakhawi Sr's case
"The only issue relied upon by the Defendants is the reliance placed by the Dubai Courts on the two expert reports dated 18 September 2016 (the 'First Report') and 20 November 2016 (the 'Second Report') which each referred to the superseded Law No. 8 of 1974 when they should have be[en] prepared in accordance with the Law No. 7 of 2012."
i) The banking expert appointed by the Dubai Court of First Instance had (as was common ground) referred in his two reports to an outdated and superseded Dubai law regulating the use of expert evidence;
ii) This mis-reference - regardless, as Mr Lewis made clear, of whether there was anything wrong with the substance of the expert's reports, and regardless of whether the expert had, as a matter of fact, complied with his duties under the current regulatory law - meant that the two reports were "null and void" as a matter of Dubai law; and
iii) For the Dubai courts to rely, and to base their judgments, upon expert reports (as they obviously had) which were null and void, meant that the judicial process in Dubai was substantially unjust.
3. The Dubai Proceedings and the Expert
Therefore, the Counter Claimant [Mr Almakhawi Sr] submitted this lawsuit to request the appointment of an expert according to Article 69 and the following articles of the law of evidence. The expert shall be assigned to investigate the elements of calculation in both the Principal and counter-claims according to this statement of claim and as a result, a judgment will be passed granting the Counter Claimant the amounts resulting from such calculation according to the technical and accounting standards.
"Whereas the Court decides to delegate an Expert in the Lawsuit pursuant to Article No. (69) of the Evidence Law.
The Court ruled, before adjudicating on the subject matter, to delegate the competent banking expert, who has the next turn on the roster and whose mission is to review the file of the Lawsuit and the documents submitted therein and what may be provided by the litigants of non-denied assets or non-denied photocopies of contracts, correspondence or any other documents as well as regular paper, electronic commercial records, books (in accordance with Article No. (5) of 2006 regarding transactions and E-commerce) paper and electronic correspondence, all within the limits of the Defendant's accounts with the Plaintiff Bank, subject matter of the Lawsuit, provided that they are executed in Arabic or provided with a certified translation to indicate whether there is a banking relationship between the parties to the Lawsuit or not, and in the first case, it shall indicate the following:
- The nature of that relationship and its date and evidence.
- The type, date, amount, guarantee, applicant, its capacity, beneficiary and method of benefit of the facilities granted from the Plaintiff Bank to the Defendant.
- Interest calculated by the Plaintiff Bank on these facilities and their evidence.
- Indicating on whether the Defendant used those facilities, subject matter of the Lawsuit, or not, and the total amounts owed and the accrued interest on them, whether the Defendant paid such amounts or part of them or not.
In the first case, indicating the total amount paid by the Defendant or obtained by the bank from the guarantees provided by the Defendant and indicating the total entitlements owed by the defendant added to the contractual interests. The same to whether or not the specified interest on the part of the plaintiff was included in the agreement to obtain such facilities. Indicating whether the interest specified by the plaintiff was included in the agreement to obtain such facilities or not, and indicating on whether the subject matter of Lawsuit amounts is in compliance with the facts of the Lawsuit. Indicating whether the current account in which these facilities were deposited and whether they were deposited in one current account or not. In the first case, the indicating of the total entitlements owed by the Defendant, if any, until the date of closing that account, which the cut-off date for the last transaction is made by the Defendant with the Plaintiff bank in any of those facilities. Provided that the compound contractual interests in all those facilities up to that date are calculated in his account added the delayed interest after closing the account until the date of the dispute's register on 19.10.2015 furthermore interest shall be calculated at 9% annually, and in the event that each facility is included in separate current accounts, these accounts shall be determined and the account closure rule applied to each account separately in accordance with the previous rules, as well as achieving the Cross Plaintiff's defense.
In general, the account shall be settled between the two parties in order to reach the extent of the eligibility of the Plaintiff bank in its requests and the fulfilment of the requests and defense of the parties to the litigation.
It authorized the Expert, in order to perform his task entrusted thereto, to move to any destination it deem to move to, including the state Plaintiff's headquarters, to review the documents it deems useful in performing the task, and to hear the statements of the litigants and their witnesses without an oath. and the expert shall taken into account the procedures and deadlines prescribed in the Article No. 81 of the Evidence Law in addition to indicate how to perform this, the parties shall deliver the Expert what they have of exhibits in the hearing of the first meeting and the expert shall fill its report at the specified hearing."
"Second: Procedures taken by the Expert to Perform the Task and Prepare the Report.
Within the limits of the task assigned to us by the honorable Court and in implementation for the provisions of Law No. (8) of 1974 Regulating The Experts before the Courts, Law of Evidence in Civil and Commercial Transactions promulgated by Law No. (10) of 1992 AD, the professional norms and practices, we took the following procedures."
I draw attention to the reference to Law No. 8 of 1974 "Regulating the Experts before the Courts" ("the 1974 Law"), which is at the heart of Mr Almakhawi Sr's complaint.
"4. To return the case to the same expert again in light of the objections raised in the papers, especially, the lack of investigation of the defence of the Counter Defendant or to delegate another expert to perform the same missions."
Mr Almakhawi Sr thus invited the court to remit the matter back to the same expert that had issued the First Expert Report for further consideration.
"Whereas, it is held that the Trial Court has the power to understand and comprehend the facts of the lawsuit, assess the evidence and exhibits submitted to it, and reason the facts of the lawsuit insofar as its decision is based on plausible grounds [Contestation No. 398 of 2011, hearing dated 3.10.12].
Whereas, based on the foregoing judicial and legal precedents, the facts of the Case as adequately deduced by the Court based on the entire papers of the Case and exhibits, including the original and supplementary reports of the deputized expert are represented in that the Claimant Bank granted the Second Respondent Company, at the letter's request, various banking facilities which included overdraft, trust receipts, and documentary credits, and that the Second Respondent Company continued to pay the outstanding dues to Claimant Bank up to 28.09.2014 (account closure date), on which date the activity of the Respondent Company's current accounts ceased after the latter became indebted in favor of the Claimant Bank at the time with the amount of AED 142,303,347.42 (UAE Dirhams One Hundred Forty Two Million Three Hundred Three Thousand, Three Hundred Forty Seven and Forty Two Fils).
Whereas, in view of the foregoing, it is established that each of the Third to Fifth Respondents had submitted a continuing personal written guarantee to guarantee the indebtedness payable by the Second Respondent Company in exchange for using the banking facilities in favor of Claimant Bank on 08.12.2010, noting that the said obligation was renewed by them upon re-signing the banking facilities letter dated 14.04.2013; hence, it is admissible for the Claimant Bank to request the Third, Fourth and Fifth Respondents to jointly pay with the Second Respondent Company the amount specified in the operative part of the judgment. Accordingly, the Court impliedly rejects all the substantive pleas previously addressed by it."
" did not investigate where and to whom such amounts and banking facilities were issued did not review the accounts of System Dubai, the account holder, and the projects for which the banking facilities were signed, whether they were letters of guarantee or personal guarantees, and it did not review as well the accounts of System Abu Dhabi [and] did not comply with the principles of the accounting profession and did not review or examine at the accounts of System Dubai or System Abu Dhabi and did not examine to whom such facilities were issued and for which projects, knowing that the Director of System Dubai is the Second Appellee and the same Director of System Abu Dhabi."
"Whereas, regarding the Appellant's request to deputize a tripartite expertise committee from the Ruler's Court to perform the assignment set forth in the Explanatory Memorandum and to look into the Appellant's claims and objections, it is held that the Trial Court has full powers to understand and comprehend the facts of the lawsuit, assess the evidence and exhibits submitted to it, weigh between them and adopt whatever it is satisfied with and disregard otherwise, and has absolute power to assess the activities of the expertise as an element of evidence, and adopt whatever matters it is satisfied with on the basis of the veracity of the grounds upon which they are based in conformity with the facts established in the lawsuit, insofar as its judgment is based on plausible grounds, substantiated by the papers, and reasoned, without being bound thereafter by individually addressing each and every objection raised by the litigant against the expert's report, since the Court's adoption of the reasoned report signifies that the Court did not find in the litigants' pleading anything that would impair the veracity of the conclusion reached in the report and that such pleading is not worthy of addressing beyond what is contained in the report, with the Court's right to disregard the request of appointing a tripartite expertise committee (Contestation No. 284/2011 Civil Hearing dated 09.05.2012).
Whereas, the Court has found the Case papers and exhibits, including the expert's reports, sufficient to establish its conviction, and that the expert has discharged of his assignment in a manner that has satisfied the purpose of his appointment within the scope of his assignment indicated in the interlocutory judgment, noting that specific matters which the Appellant requested to be investigated are not related to the subject matter of the Case, namely how the amounts and banking facilities were used, whether there was fraud committed by the Company's managers and whether the managers' personal accounts were illegally accessed etc., and other request which are not the subject matter of the Case relating to the banking facilities acquired by the Company and guaranteed by the Appellant."
"1. The Applicant challenges the challenged judgment for its error in applying the law and its interpretation, which invalidates its conclusion.
2. Deficiency in presentation and examination in its grounds which led to another deficiently in reasoning and flaws in inference.
3. The failure to respond to the pleas submitted by the Applicant contained in the papers of the challenged judgment and the appealed judgment with justifiable reasons sufficient to dismiss them and dismiss their significance, which led to a prejudice to the right of defense."
"The Claimant argued that the said judgment relied on the report produced by the deputized expert, to the effect that the Respondent Company received miscellaneous banking facilities from the Fourth Respondent Bank, whereupon the Respondent Company became indebted in favor of the Respondent Bank with the adjudged amount, and that the Claimant and Second and Third Respondents guaranteed the First Respondent by way of a continuing personal guarantee with the Fourth Respondent Bank against the use of the said facilities.
The Claimant also invoked inveracity of the expert's conclusion in the report and that the Fourth Respondent Bank allowed that the credit facilities granted to the Company be used in favor of another company, namely System Construct Abu Dhabi, which is not a party to the Agreement and is not guaranteed by the Claimant.
The Claimant argued that the Bank contravened the conditions of disbursement and the decision of the execution judge by liquidating the letters of guarantee. Therefore, the Claimant requested to appoint a banking expert or a tripartite expertise committee to consider his pleading and to determine entitlement of the Respondent Bank to grant and renew the banking facilities for the benefit of the First Respondent Company in respect of other projects relating to another company, namely (System Construct L.L.C. Abu Dhabi). The Claimant added that the Challenged Judgment declined his substantial pleas and his request to deputize an expert or a tripartite expertise committee on the grounds that the papers of the Case and the report produced by the expert are adequate for the Court to hand down a judgment on the substance of the Case, which renders the judgment defective and necessitates that it be vacated.
The Trial Court has the power to understand and comprehend the facts of the lawsuit, assess the evidence submitted to it, and adopt whatever it is satisfied with and disregard otherwise, and has the power to construe contracts, agreements, and all exhibits in such a manner as it deems best satisfies the intent of the contracting parties, designate the guaranteed debt, and deduce the guarantor's approval to the continuation of the guarantee. Moreover, the Trial Court has the right to assess the activities of the expert and to adopt his conclusion insofar as it is satisfied with the veracity of his research and considers that the expert has investigated all the points of the dispute in the action. Thereafter, the Trial Court is not bound by individually addressing the exhibits submitted by the litigants or discussing every illegal argument raised or addressing their different arguments and claims and individually replying thereto, insofar as the fact it is satisfied with and evidenced impliedly refutes such arguments and claims.
Whereas the First Instance judgment, upheld by the Challenged Judgment in this respect, compelled the Claimant and the First, Second and Third Respondents to jointly pay to the Fourth Respondent Bank the adjudged amount and the interest based on the grounds mentioned in its recitals to the following effect:
It is evident from the original and supplementary reports produced by the expert, with which the Court is satisfied due to being based on plausible grounds substantiated by the papers, that the facilities, subject matter of the Case, were granted to the First Respondent Company 'System Construct L.L.C.', which benefited from the bank guarantees by entering into tenders and having contracting projects awarded thereto;
Hence, the Fourth Respondent Bank has the right to claim the amount paid with regard to the aforesaid letters of guarantee from the value of guarantees and documentary credits, totalling AED 149,132,233.92. On conducting a simple calculation, the Court finds that the amount payable to the Bank on the account closure date, namely 28.09.2014, is as follows:
Whereas, the conclusion reached by the Challenged Judgment, whereby it is established that the Claimant guaranteed the First Respondent and that the Claimant is compelled to jointly repay with the First Respondent the outstanding indebtedness, is valid and plausible; hence, the contention raised against the Challenged Judgment in this respect is unfounded.
Whereas, based on the foregoing, the Contestation is bound to be dismissed."
4. Dubai law regulating expert evidence
"In practice, it may happen sometimes that a court appointed expert may exceed the mandate and make certain legal determinations. However, this will not of itself invalidate the Court's judgment unless the Court relies upon such legal determinations made by the expert without independently satisfying itself that the facts and evidence support the expert's findings by giving appropriate weight to the evidence submitted by the parties and applying the appropriate legal principles to the issues at hand."
"The first law regulating experts before the Courts was Federal Law No. 8 of 1974 ('Law of 1974') that regulated the procedure for their appointment by the Court, their fees, the manner in which experts are to carry out their assignment (such as meeting the parties, preparing minutes of meetings geld with the parties, preparing the final report, etc.), cross examination of experts by the Court, the Court's power to adopt or disregard the findings of experts, the creation of a register for experts held by the UAE Ministry of Justice, the criteria to be met for registration of experts, the disciplinary measures that may be taken against experts, etc."
i) Article 3 specifies a number of requirements for an expert to be included on the register: he or she must be of good conduct, must hold a university degree, must have a prescribed number of years of post-graduate experience, must have the approval of his or her employer, and must pass procedures and tests prescribed by the Ministry;
ii) Articles 4 to 9 are concerned with the establishment of the expert register, the making of applications for inclusion, the period for which an expert is entitled to remain on the register, the taking of an expert's oath, and the circumstances in which an expert's registration might be suspended in the event of impediment and then renewed;
iii) Article 11 contains a statement of expert duties. Some 12 duties are listed, and I will not recite them all, but they include the following:
"The expert shall abide by the following:
1 Practice his profession with accuracy, honesty and sincerity, in a manner that preserves its dignity and consideration, while taking into account the principles and traditions in accordance with the Charter.
2 Handle personally the task entrusted to him.
3 Not to disclose information which he may have accessed by virtue of his work of expertise.
4 He, nor anyone of his relatives up to the fourth degree of kinship, shall [not] have a personal interest directly or indirectly in any business related to the subject of the case subject to his expertise.
6 Not to accept the work of expertise in a dispute in which he has been already asked for consultancy or briefed on the documents related thereto, by any party to the conflict."
iv) Articles 12 to 15 provide for the establishment and composition of an Expert Affairs Committee, responsible for registering, rejecting or striking off an expert from the approved list and for dealing on a preliminary basis with any complaints or court proceedings against an expert;
v) Articles 16 to 24 deal with disciplinary proceedings before a Disciplinary Board with powers to issue a warning, to suspend the registration of an expert for up to one year and to strike an expert off the approved list permanently, from whose decisions an appeal can be made to the Competent Court of Appeal; and
vi) Articles 27 and 28 provide for fines and/or for a term of imprisonment for any expert who practises without being registered on the list or who violates certain articles of the 2012 Law including Article 11.
"Article 4 Expert commitments
The expert shall commit to the following:
1 Federal Law no. 8 of 2012 on the regulation of expertise before the judicial authorities.
2 Federal Law no. 10 of 1992 on the evidence in civil and commercial transactions and its amendments.
3 Cabinet Decision no. 6 of 2014 on the regulation of Federal Law no. 7 of 2012 on the regulation of expertise before the judicial authorities.
Article 5 Main professional values
Experts shall commit to the following professional values while performing their job and duties:
1 Honesty, trust and impartiality.
2 Integrity and transparency.
3 Respect of others' rights.
4 Cooperation with experts and teamwork in relation to the tripartite committees' matters.
5 Commitment to job performance and completion on the set dates.
6 The expert shall keep a true copy of the original of the reports they elaborate until a final judgment is rendered in the case.
7 The expert shall preserve the confidentiality of the information that comes to their knowledge during or due to their performance of the tasks entrusted thereto.
8 The expert shall commit to submitting the expertise reports on the set date to the competent court.
Article 6 Code of professional conduct
1 To commit to receiving the mission they are entrusted with from the competent court and appear before it on the set dates.
2 To accomplish the mission entrusted thereto in person and within the scope of this mission.
3 - To perform their duties while adopting the highest standards of quality and competence.
4 To observe the principles, ethics and practices of the profession.
5 To exercise due diligence in improving their knowledge, developing their professional skills through education and participation in scientific and training sessions.
6 To inform the department within one month of any amendment to or change of their address or licensing data."
"Q. You accept, I think, that the 2012 law has expanded on the duties and requirements imposed upon experts, yes?
A. No. It doesn't expand on the duty, it is rather regulating their work in terms of the regulation for registration was a requirement, it is more detail, but there is no major change in the law about the duties of experts and the old law and the new law are the same.
Q. Yes. The code of conduct was a feature than only came about after the 2012 law, correct?
A. Yes, if you want to say codified code of conduct, but always there is a code of conduct, the major principle, duties of the expert contained in the old law and the new law and the conduct maybe just improve it is nothing new.
Q. Is this a fair way of putting it, Mr Al Aidarous: after 2012 the provisions became more detailed as to what was expected of experts? Yes?
A. No. No. No. It was simply it is more regulation side, because don't forget the old law 1974, the country used this law for almost 40 years, it is a natural things, the system will be improved, there is more regulation providing for how to register the expert, about the measures of discipline measure, but it doesn't change the basic duties of the expert in the old law and the new law are the same."
"Q. It is correct, isn't it, that the basic duties an expert owes to the court were the same under the 1974 and 2012 laws?
A. 2012 is more advanced and more details. This is what I can say.
Q. Yes, more detail
A. - in general
Q. - but the basic principles were the same?
A. No, there is some principle it is there, but it is more with detail, more with, you know, it is a big difference from 1974 up to the year of 2012, if I am not mistaken, okay? So that is that that big difference. Of course, the new law will be more modern, more details, and that is what I can say about it."
"Q. What article 11 does is it sets out, if you like, a code, what is expected of an expert in terms of standards of conduct, yes?
A. Yes.
Q. Do you see that? My question to you is very simple. This is the first time in the law of 2012 that those standards were expressly put, were expressly written down. Do you agree with that?
A. Yes, yes. If you said expressly, yes, agreed, but those duties exist all the time."
5. The Ministry Circular
"Mr Lewis: And your Lordship said to my learned friend, you said there is no requirement to actually refer to a specific law in the report.
The Judge: I don't know, I hadn't been shown one.
Mr Lewis: I have looked through the legislation that we have post 2012 and I accept that there is no such obligation."
"The Judge: Just so that I am clear, you say it is a serious defect whether or not, as a matter of fact, the expert acted in a way which was consistent with the new law?
Mr Lewis: Yes well, we simply don't know.
The Judge: I think, as I understand your proposition, you are saying that regardless of whether the expert in fact acted in accordance with the new law, the fact that he referred to the old law in his report is itself a serious defect?
Mr Lewis: We say that, yes, my Lord. Yes."
"Dear honourable Experts,
Peace be upon you.
At first, we would like to extend you our best regards, wishing you continuous success and we would like to inform you that the Judicial Authorities stated the following:
- Some Experts' reports still include the phrase: (This report was prepared in accordance with Federal Law No. (8) of 1974 Regulating Expert Profession) and since Law No. 8 of 1974 was repealed by the issuance of Law No. 7 of 2012, any report that includes this phrase shall be considered null and void.
- It was noted that some of the initial reports that are sent to the parties for comment are not signed by the delegated expert, which violates the Evidence Law and its amendments, and therefore please adhere to the correct law.
Yours Sincerely,
Expert/M.S. Aisha Suleiman Al Ali
Director of Technical Experts and Translators Affairs Department."
i) There was no evidence of what the judicial authorities assuming that this can be taken to mean the judiciary as a whole or perhaps the senior judiciary had actually said, or that there had been a court decision in which it had been held that an expert report which mistakenly referred to the 1974 Law was automatically null and void; and
ii) Even if the Ministry Circular, by its reference to the judicial authorities, can be treated as having some sort of binding legal effect, which I doubt, there was no evidence that it was intended to operate retrospectively so as to invalidate decisions in prior cases that had been reached in reliance upon expert reports which mistakenly referred to the 1974 Law.
"A. This is a regulatory body of experts and they receive a complaint from the courts that is a separate stating that there are some experts who are still referring to the old law. I think the expert, the Ministry of Justice, the regulatory body, they try to notify to the expert, please abide by the new law, don't refer to the old law.
What the statement is said by the ministry, if you refer to the old law, maybe this is the intention it was it might be or it will be nullified by the court, but the Ministry of Justice have no powers to nullify any expert report. The expert report will be nullified by the court.
Q. What you have then is a direction from the Ministry of Justice to the courts as to how they should treat experts' reports which refer to the 1974 law, isn't that correct?
A. No. This is addressed to the expert, notifying them, 'Please be careful, use the new law to make a reference', it is not addressed to the court, it is not the duty of the Ministry of Justice to say to the court what is annulled and the experts is null and void or not, this is the court, this is a court judiciary decision to be made by the court itself.
A. This is basically a direction to the expert to the intention was to tell them you might be nullified by the court, it is not for the Ministry of Justice to nullify the expert report in the first place."
Mr Al Zarouni disagreed with the suggestion that the Ministry Circular was simply a notification or a warning, but on this point I preferred the evidence of Mr Al Aidarous.
"Q. Suppose, prior to this circular being issued, a judgment relies upon a report referring to the 1974 law, once the time for appealing has passed, such that the judgment is final and binding this law doesn't retrospectively invalidate the judgment sorry, this circular does not retrospectively invalidate the judgment?
A. The circular is nothing to do to only invalidate. The law by itself is by operation of the law it is invalidated, because the decision based on the expert which is null and void. That is exactly what it the grounds of that judgment was based on the expert, so if the ground is not there, then it should be like this. Now the way how they can approach the court and how they can do it, that is not part of my legal expert to be very frank, to talk about it.
Q. Can we just unpack that? I think your point there was that the 2012 law means that a report that refers to the 1974 law is invalid and that is simply a consequence of the 2012 law. Is that what you are saying?
A. Again.
Q. Is your evidence that the effect of the 2012 law is that an expert report produced after the 2012 law came into force [that] refers to the 1974 law, it is invalid by virtue of the 2012 law?
A. Yes, because that is which is the circular is confirming."
6. A local remedy?
"Q. I am asking you a purely legal question. Suppose you are right, that a reference to the 1974 law means as a result of the 2012 law a trial judge shouldn't refer to it, shouldn't rely on it?
A. Ah ha.
Q. That, as a matter of law, is an argument you can make to the trial judge and if the trial judge accedes to it, you can appeal to the Court of Appeal on that ground and you can appeal to the Court of Cassation on that ground?
A. Yes, if their counsel they look at it, they can use that, of course. It is a matter of there is a they have some good reasoning, in my opinion."
"Thirdly, where the procedural defect is apparent to the defendant he should use the local remedy of appeal before resorting to the contention in this country that the assessment of his liability was not in accordance with the principles of substantial justice."
"39. On the basis of the evidence before us it appears to me that, contrary to the statement of Mr Myers in the later affidavit, it was the duty of the judge to leave the assessment of the damages for the decision of the jury in light of the wide variation in the expert evidence before them. The judge did not do so, with the result that, arguably, the assessment of damages required by the order did not take place.
40. So the question arises whether Mr Leaver should have pursued any remedy in Texas by way of appeal in respect of the failure to observe the requirements of the 1994 order. The judge considered that he should. She said:
It is sufficiently obvious, therefore, that if that was a breach of procedure, it was a matter that could be pursued in an appeal in Texas. The procedures that were provided in Texas were in themselves reasonable and the fact that a bond may or may not have been required in order for the defendant to pursue an appeal from a default judgment in Texas does not so far offend the concept of natural justice as to provide any basis for a challenge to the Texas judgement as regards the amount of the actual award of damages. I do not find therefore but any breach of procedure, even assuming there were one, or the availability of means to redress it, had gone so far as to offend the English concept of proper justice and proper procedure. This case is therefore well on the inside of the line as drawn in the Adams v. Cape Industries case as to whether the court will enforce a judgement. Therefore I reject that as a matter supposedly giving rise to a reasonable defence such that leave to defend ought to be given on that score.
41. On the basis of the evidence before us, I would answer the question in the negative. The evidence of Mr Myers was to the effect that the quantum of liability had been assessed by the jury in the normal way. I share the judge's astonishment at Mr Myers' evidence as to the course the proceedings took. The true position did not come to light until September 1998. By that time Mr Leaver's appeal in Texas had long since been dismissed for failure to provide security for costs. I am by no means satisfied that he could at that late stage had re-opened the appeal on the new ground he might then have realised was available."
7. Conclusion
F. The Transfers
i) The assets transferred are still beneficially owned by Mr Almakhawi Sr and are the subject of a resulting trust in his favour; or
ii) The transfers amounted to transactions in defraud of creditors within the meaning of section 423 of the Insolvency Act 1986.
I summarised the Defendants' response in paragraph 14.
1. Resulting Trust
i) The presumption is just that a presumption;
ii) It may be rebutted by evidence, and in Vandervell v Inland Revenue Commissioners [1967] 2 AC 291 at 312F Lord Upjohn said that it was "easily rebutted"; and
iii) The presumption may also be rebutted by the counter-presumption of advancement - itself, of course, only a presumption - which applies to transfers between parent and child, even where the child is not a minor: Wood v Watkin [2019 EWHC 1311 (Ch), [2019] BPIR at [82]-[93] (ICC Judge Barber).[3]
"In general, any evidence of the real purchaser's actual intention at the time of purchase which is admissible under the general law of evidence may be adduced to support or rebut a presumption of resulting trust or advancement. Thus, acts and declarations antecedent to or contemporaneous with the purchase, or so immediately after it as to constitute part of the same transaction may be relied on in evidence for the purpose of rebutting or supporting the presumptions.
The focus is on the intention of the transferor; it is not necessary that the transferee's intention should be the same: see Lewin (op. cit.), paragraph 10-010.
2. Section 423 of the 1986 Act
"423 Transactions defrauding creditors.
(1) This section relates to transactions entered into at an undervalue; and a person enters into such a transaction with another person if
(a) he makes a gift to the other person or he otherwise enters into a transaction with the other on terms that provide for him to receive no consideration;
(2) Where a person has entered into such a transaction, the court may, if satisfied under the next subsection, make such an order as it thinks fit for
(a) restoring the position to what it would have been if the transaction had not been entered into, and
(b) protecting the interests of persons who are victims of the transaction.
(3) In the case of a person entering into such a transaction, an order shall only be made if the court is satisfied that it was entered into by him for the purpose
(a) of putting assets beyond the reach of a person who is making, or may at some time make, a claim against him, or
(b) of otherwise prejudicing the interests of such a person in relation to the claim which he is making or may make.
(5) In relation to a transaction at an undervalue, references here and below to a victim of the transaction are to a person who is, or is capable of being, prejudiced by it; and in the following two sections the person entering into the transaction is referred to as "the debtor".
"This, as Stephen Gee, KC says in Commercial Injunctions (7th ed.) at 13-031 requires proof of a subjective, positive intention on the part of the company entering into the transaction (the debtor) to achieve a Prohibited Purpose, which is a question of fact. However:
(i) Whilst it is important to distinguish between the purpose of a transaction and what is simply a collateral effect, it is not necessary to show that a Prohibited Purpose was the only, or the dominant, or the predominant purpose. No adjective should be read in to the statutory language: see JSC BTA Bank v Ablyazov at [14] per Leggatt LJ;
(ii) Nor is it necessarily fatal that, even absent a Prohibited Purpose, the debtor (here Petrogat) might have entered into the impugned transaction anyway: see JSC BTA Bank v Ablyazov at [11] [12] per Leggatt LJ, citing the judgments of Laws and Simon Brown LJJ in Inland Revenue Commissioners v Hashmi at [33] and [38];
(iii) Proof that the consequence of the transaction was to put assets beyond the reach of creditors is not, in itself, enough; however, evidence that this was the foreseeable and foreseen result may, nonetheless, support an inference that the transaction was, in fact, entered into for a Prohibited Purpose, as may also evidence that this was something the actor desired.
" a transfer at less than full value by an insolvent person is presumptively made for a prohibit[ed] purpose."
" a man must be presumed to intend the natural consequences of his own act."
Mr Edwards submitted in closing that, where the transferor was insolvent, there was "a completely objective" standard.
"The difficulty the Vice-Chancellor seems to have felt in this case was, that if he, as a special juryman, had been asked whether there was actually any intention on the part of the settlor in this case to defeat, hinder, or delay his creditors, he should have come to the conclusion that he had no such intention. With great deference to the view of the Vice-Chancellor, and with all the respect which I most unfeignedly entertain for his judgment, it appears that this does not put the question exactly on the right ground; for it would never be left to a special jury to find, simpliciter, whether the settlor intended to defeat, hinder, or delay his creditors, without a direction from the judge that if the necessary effect of the instrument was to defeat, hinder or delay the creditors, that necessary effect was to be considered as evidencing an intention to do so. A just would undoubtedly be so directed, lest they should fall into the effort or speculating as to what was actually passing in the mind of the settlor, which can hardly ever be satisfactorily ascertained, instead of judging of his intention by the necessary consequences of his act, which consequences can always be estimated from the facts of the case.
But it is established by the authorities that in the absence of any such direct proof of intention, if a person owing debts makes a settlement which subtracts from the property which is the proper fund for the payment of those debts, an amount without which the debts cannot be paid, then, since it is the necessary consequence of the settlement (supposing it effectual) that some creditors must remain unpaid, it would be the duty of the Judge to direct the jury that they must infer the intent of the settlor to have been to defeat or delay his creditors, and that the case is within the statute.
"Of course the irresistible conclusion from that was, that the voluntary settlement was intended to defeat the subsequent creditors. That being so, I do not thing that the Vice-Chancellor need have felt any difficulty about the case of Spirett v. Willows, but he seems to have considered, that in order to defeat a voluntary settlement there must be proof of an actual and express intent to defeat creditors. That, however, is not so. There is one class of cases, no doubt, in which an actual and express intent is necessary to be proved that is, in such cases as Holmes v. Penney, and Lloyd v. Attwood, where the instruments sought to be set aside were founded on valuable consideration; but where the settlement is voluntary, then the intent may be inferred in a variety of ways. For instance, if after deducting the property which is the subject of the voluntary settlement, sufficient available assets are not left for the payment of the settlor's debts, then the law infers intent, and it would be the duty of a Judge, in leaving the case to the jury, to tell the jury that they must presume that that was the intent. Again, if at the date of the settlement the person making the settlement was not in a position actually to pay his creditors, the law would infer that he intended, by making the voluntary settlement, to defeat and delay them.
"The statute of 13 Eliz. C. 5, is not only directed against transfers of property as are made with the express intention of defrauding creditors; but, as has been justly remarked, it extends as well to such as virtually and indirectly operate the same mischief, by abusing their confidence, misleading their judgment, or secretly undermining their interests. To obviate this, it has gradually grown into a practice to regard certain acts or circumstances as indicative of a so-called fraudulent intention in the construction of the Statute, although, perhaps, there was in fact, no actual fraud or moral turpitude. It is difficult, in many cases of this sort, to separate the ingredients which belong to positive and intentional fraud from those of a mere constructive nature, which the law thus pronounces fraudulent upon principles of public policy.
To draw any definite invariable line of distinction between moral and technical fraud, on the one hand, or between actual and constructive on the other, would be next to impossible and could rarely serve any useful purpose. But there are certain circumstances, the presence of which has been taken as conclusive evidence of fraud, and as invariably avoiding the conveyance.
The ordinary form of this constructive fraud under 13 Eliz. C. 5, is a voluntary conveyance made by a man deeply indebted, which accordingly is void, under the Statute, as against the grantor's creditors."
"Save as provided in this section, every conveyance of property, made whether before or after the commencement of this Act, with intent to defraud creditors, shall be voidable, at the instances of any person thereby prejudiced."
i) In re Eichholz [1959] Ch. 708 at 722-724 (Harman J):
"There is no doubt that the Statute of Elizabeth was available after a man's death to his creditors to recover from a volunteer property of whatever kind It was not necessary to prove a fraudulent intent. The mere fact of insolvency was enough: see Lord Hatherley's judgment in Freeman v Pope. In my judgment, all this continues to be good law under section 172 of the Law of Property Act";
ii) Lloyds Bank Ltd v Marcan [1973] 1 WLR 339 at 344H (Sir John Pennycuick V.C.):
"The word "intent" denotes a state of mind. A man's intention is a question of fact. Actual intent may unquestionably be proved by direct evidence or may be inferred from surrounding circumstances. Intent may also be imputed on the basis that a man must be presumed to intend the natural consequences of his own act: see the judgment of Lord Hatherley LC and Giffard LJ in Freeman v Pope (1870) 5 Ch. App. 538. I would mention that today this imputation might well be considered applicable where there has been a valuable consideration short of full consideration. I do not, however, propose to pursue that point for this reason. In the present case there is evidence of actual intention. That, of course, is by no means always so in cases under this section. Where there is evidence of actual intention, in the nature of things there is very little room for imputing intention. I do not, therefore, propose to pursue the difficult questions which arise as to the circumstances in which intention may be imputed.
See also, dismissing an appeal in the same case, reported at [1973] 1 WLR 1387, the judgment of Cairns LJ at 1392D-E:
"Other cases make it clear that if the conveyance is voluntary it is easier to infer a dishonest intention than when it is made for consideration or even that no dishonest intention need then be established: see Freeman v Pope (1870) 5 Ch. App. 538, Ideal Bedding Co. Ltd v Holland [1907] 2 Ch 157, In re Eichholz, decd. [1959] 1 Ch. 708."
"The section does not render a transaction voidable unless there is an intent to defraud creditors. Unfortunately, it is not entirely clear what is the meaning of 'to defraud' in this context; though it seems that, in practice, the requisite inference of fraud will be drawn whenever the necessary consequences of the transaction is to defeat, hinder, delay or defraud the creditors or to put assets belonging to the debtor beyond their reach. Where the requisite intention is proved, or inferred, any person prejudiced may have the transaction set aside, whether or not there was any intention of defrauding that person."
" the necessary intent is an intent on the part of the debtor to defeat, hinder, delay or defraud creditors, or to put assets belonging to the debtor beyond their reach, and that such intent may be inferred whenever this is the natural and probable consequence of the debtor's actions, in light of the financial circumstances of the debtor at the time, as known, or taken to have been known, to him."
The recommendationΈ I note, was for the inclusion of language that intent "may" be inferred, not, as the judgments in Freeman might be thought to suggest, that intent must be inferred in certain circumstances.
i) The section imposes separate, clearly cumulative requirements for relief, namely that the relevant transaction should both:
a) be entered into at an undervalue, e.g., a gift or a transfer of property made for no consideration (section 423(1)); and
b) be entered into for a Prohibited Purpose (section 423(3));
ii) The section uses different language to the 1571 and 1925 statutes, referring not to a conveyance "with intent to defraud" but in section 423(3) to a transaction entered into "for the purpose" of putting assets beyond the reach, or of prejudicing the interests, of those who have or who might have claims.
The additional language suggested in the Cork Report, referred to in paragraph 136 above, was notably not included in the 1986 Act.
"For the purposes of this appeal, though without deciding the point, I am content to assume in favour of the plaintiffs that the relevant purpose which has to be established in the application of s. 423 is substantial purpose, rather than the stricter test of dominant purpose.
In the present case it is not open to the plaintiffs to argue that the very fact that the transfer was made for no consideration by itself establishes the requisite purpose of defrauding creditors. The requirements for the operation of the section imposed by s. 423(3) are additional to those imposed by s. 423(1) so that the actual purpose of the transferor has to be investigated. The test is not a solely objective one.
No doubt the result of the transfer was to put assets beyond the reach of the plaintiffs and otherwise to prejudice their interests, but in applying the section, result cannot be equated with purpose; and as yet, in my judgment, no prima facie case showing the relevant purpose has been established."
23. The question arising on this appeal is whether on the true construction of s. 423 the purpose shown must be a dominant purpose. In my judgment the answer to that question must be arrived at taking into account the role, as explained above, of s. 423 in insolvency legislation. Accordingly it is not necessarily helpful to apply the construction placed on similar words in different provisions and none was suggested. In my judgment there is no warrant for excluding the situation where purposes of equal potency are concerned. Accordingly, in my judgment, the section does not require the inquiry to be made whether the purpose was a dominant purpose. It is sufficient if the statutory purpose can properly be described as a purpose and not merely as a consequence, rather than something which was indeed positively intended. Moreover, I agree with the observation of the judge that it will often be the case that the motive to defeat creditors and the motive to secure family protection will co-exist in such a way that even the transferor himself may be unable to say what was uppermost in his mind.
25. I cite these examples to emphasise that for something to be a purpose it must be a real substantial purpose; it is not sufficient to quote something which is a by-product of the transaction under consideration, or to show that it was simply a result of it, as in Royscot Spa Leasing Ltd v Lovett [1995] BCC 502 itself, or an element which made no contribution of importance to the debtor's purpose of carrying out the transaction under consideration. I agree with the point made by Laws LJ in argument that trivial purposes must be excluded.
"There can be no doubt but that s. 423(3) requires the person entering into the transaction to have a particular purpose. It is not enough that the transaction has a particular result".
15. Arden LJ made this very point in the Hashmi case when she said (at [23]) that 'there is no epithet in the section and thus no warrant for reading one in'. When later in her judgement she referred (at [25]) to a 'real substantial' purpose, it is apparent from the context that the reason for using those adjectives at that point was to underline the distinction between a purpose and a consequence of the relevant transaction. As Arden LJ emphasised, it is not enough to bring a transaction at an undervalue within s. 423 that the transaction had the consequence of putting assets of the debtor beyond the reach of creditors. That is so even if the consequence was foreseeable or was actually foreseen by the debtor at the time of entering into the transaction. Evidence that the debtor believed that the transaction would result in putting assets beyond the reach of creditors may support an inference that the transaction was entered into for the purpose of doing so, but the two things are not the same. To illustrate the distinction using a less homely example than that given by Arden LJ, a commander may order a missile strike on a military target knowing that it will almost certainly cause some civilian casualties. But this does not mean that the missile strike is being carried out for the purpose of causing such casualties.
16. When judging a person's intentions, we are generally more inclined to accept that an action was not done for the purpose of bringing about a particular consequence, even if the consequence was foreseen, if there is reason to believe that the consequence was something which the actor wished to avoid or at least had no wish to bring about. Hence, in the example just given, where the missile strike had a clear strategic purpose, we may readily accept that it was not ordered for the purpose of causing civilian casualties - particularly if, for example, there is evidence that the commander gave anxious consideration to how many civilians were likely to be in the target area and planned the strike for a time when the number was expected to below. By contrast, a consequence is more likely to be perceived as positively intended if there is reason to think that it is something which the actor desired. Thus, evidence that a person who entered into a transaction at an undervalue foresaw that the result would be to put assets out of reach of creditors and desired that result might lead the court to infer that the transaction was entered into for that purpose. But such a conclusion is not a logical or legal necessity. It is a judgement which has to be based on an evaluation of all the relevant facts of the particular case.
"Once one accepts that there is a strong prima facie case that the bank's security has been transferred to members of the family at a time when action by the creditor was clearly anticipated by the debtor and that these transfers were at an undervalue and that what remains in the hands of the debtor barely if at all covers the debt, there is in my judgment a strong prima facie case that the purpose of the transactions was to prejudice the interests of the creditor."
"14. The principle that creditors should be protected from the consequences of transactions which are designed to prejudice their interests has long been embedded in English law. Section 423 of the 1986 Act is derived from a Statute of Elizabeth (13 Eliz 1, c 5) which provided that all dispositions of property made with the intention of delaying, hindering or defrauding creditors should be void against creditors. This did not extend to any estate or interest created bona fide and for good consideration in favour of any person not having at the time notice of such fraud. It has even been said that the Statute of Elizabeth was merely declaratory of the common law. It was replaced by section 172 of the Law of Property Act 1925, which in turn was replaced by section 423 and following.
15. There is considerable case law on the predecessors of section 423. Lord Mansfield CJ held that the Statute of Elizabeth (13 Eliz 1, c 5) should be liberally interpreted: Cadogan v Kennett (1776) 2 Cowp 434. Intent to defraud could be inferred from the making of a conveyance that would leave creditors unpaid: Freeman v Pope (1870) LR 5 Ch App 538. As Lord Hatherley LC so pithily put it in that case, at p 540, 'persons must be just before they are generous".
17. Section 423 does not impose a sanction on a debtor whose actions prejudice his creditors unless the debtor's purpose satisfies section 423(3). None the less, as I see it, section 423 has to be seen in the context of a debtor's responsibilities to his creditors generally. It actualises those responsibilities in particular circumstances. Any argument that section 423 does not involve a breach of duty has therefore a somewhat counter-intuitive ring to it. Section 423 can be contrasted with for example section 238 of the 1986 Act which invalidates transactions at any undervalue within a given period of the insolvency. The object of this sanction is at least in part to enlarge the pool of assets available for creditors generally."
"This is essentially a question of fact. The purpose of a person in entering into a transaction is a matter of the subjective intention of that person: what did he aim to achieve? Section 423(3) does not require the specified purpose to be the sole or dominant purpose. It is sufficient if it 'can properly be described as a purpose and not merely as a consequence, rather than something which was indeed positively intended': Inland Revenue Commissioners v Hashmi [2002] EWCA Civ 981; [2002] B.C.C. 943 at [23] per Arden LJ."
As can be seen, he said that purpose was a matter of subjective intention, and the explanation in Hashmi that there was a distinction between consequence and purpose was specifically endorsed.
i) Cases where insolvency is established where, as Mr Edwards submitted in closing, a completely objective test should be applied; and
ii) Cases where insolvency is not established where proof of a subjective, positive intention on the part of the transferor to achieve a Prohibited Purpose is required.
i) Section 423(3) requires proof of a subjective, positive intention on the part of the transferor to achieve a Prohibited Purpose;
ii) That intention may be, and very often is, inferred from the circumstances, and the Prohibited Purpose need not be the only, or even the dominant or predominant, purpose of the relevant transaction; but proof that the consequence of the transaction is to put assets beyond the reach of creditors is not, in itself, enough.
3. The parties' cases
i) The timing of the transfer of the property on 8 July 2019, the day after the decision of the Court of Cassation (see paragraph 48 above);
ii) The fact that the transfer of the property was made by (what it termed) a "bare" form TR1, not by deed of gift;
iii) The fact that Mr Almakhawi Sr had continued to pay (up to at least November 2021) the council tax and utilities due in respect of the property, notwithstanding its transfer to Mr Almakhawi Jr more than two years earlier; and
iv) A pattern of other divestments: these included the Money Transfers made in August and October 2019, but also:
a) Gifts purportedly made by Mr Almakhawi Sr to Mr Almakhawi Jr and his two other children on or about 20 November 2018 of four different properties (three residential and one commercial) in Dubai with a combined recorded value of AED 195 million;
b) A gift purportedly made by Mr Almakhawi Sr to Mr Almakhawi Jr and his two other children on or about 28 February 2019 of a further property in Dubai with a recorded value of AED 10 million;
c) The transfer by Mr Almakhawi Sr to Mr Almakhawi Jr on or about 7 March 2019 of a 95% shareholding in a Dubai-registered company, United Makgroup Technologies LLC ("Makgroup"); and
d) The transfer by Mr Almakhawi Sr on or after 19 September 2019 of a residential apartment building at 39 East 29th Street, New York, NY 10016 ("the New York Property") into the Redington Trust (see below).
i) The timing of the transfer: see paragraph 170 i) above;
ii) The fact that a deed of gift was executed only on 23 July 2019, after the transfer had taken place, and so the transfer was made by a "bare" form TR1: see paragraph 170 ii) above; and
iii) The pattern of other divestments and the result: see paragraphs 170 iv) and 171 above.
"In around 2010, in view of his advancing years and also financial disputes which had arisen between him and his siblings, [Mr Almakhawi Sr] formed an intention to transfer assets to his children as an 'inheritance' while he was still alive. His wish was to minimise the risk of disputes between them after his death and to avoid the complications of a Sharia-compliant (post-mortem) inheritance. After the death of his brother Mohamed Almakhawi in November 2014, which precipitated a bitter inheritance dispute which continues to this day, that intention on the part of [Mr Almakhawi] developed into a plan. In pursuance of that plan, and for the purposes described above in this paragraph, he first transferred to his children properties in Dubai (see paragraph 24 below) and then his flat in London, 193 Warren House, which he wished to gift to his son, [Mr Almakhawi Jr]. In respect of 193 Warren House, [Mr Almakhawi Sr] had the additional motivation that [Mr Almakhawi Jr] had paid substantial amounts of money to or on behalf of his father over the preceding few years."
4. The witnesses
"As is typical in such cases, his daughter is far better able to recount and describe these symptoms because the nature of the condition adversely affects the sufferer's insight, making it difficult for the patient to remember and describe their symptoms in any detail or in any logical or chronological order."
His report set out the description he had been given by Mr Almakhawi Sr's daughter (who did not give evidence before me) of the difficulties Mr Almakhawi Sr had apparently experienced previously in responding to persistent, detailed questioning in court.
"[Mr Almakhawi Sr] appears to be suffering from the following conditions and symptoms, which are likely to have been largely caused, and/or exacerbated by, the prolonged high stress and distress from many years of protracted intense legal action and court appearances:
1. Major Depressive Disorder
2. Anxiety Disorder
3. Panic Attacks / Panic Disorder
4. Insomnia and sleep deprivation
5. Chronic Confusional State."
"[Mr Almakhawi Sr] is currently fit to appear in Court but I qualify this statement as follows: I respectfully advise the Court(s) that all the above mental health conditions and symptoms suffered by [Mr Almakhawi Sr], will be significantly exacerbated by the very high stress of court appearances and persistent detailed questioning. As a result of the aforementioned mental health conditions and stressful Court appearances and questioning, [Mr Almakhawi Sr] will inevitably exhibit: significantly impaired recall; difficulty and delays in comprehending and responding to questions; confusion, vagueness, inaccuracies, factual errors and inconsistencies in answers; great difficulty organising his thoughts and answers; severe difficulty with organising and recounting answers in terms of chronology, dates, names of persons, lawyers and firms; confusion, uncertainty, hesitation, vagueness, factual errors, chronological errors and inconsistencies in answers to questions, particularly regarding which person, lawyer or legal firm made which particular comments or statements, whether written or verbal."
5. The facts
(a) The Dubai Proceedings; a reminder
i) On 28 December 2014 System Construct Dubai was placed into liquidation;
ii) On 19 October 2015 the Bank commenced the Dubai Proceedings against Mr Almakhawi Sr and others;
iii) On 16 January 2017, the Dubai Court of First Instance entered judgment against Mr Almakhawi Sr for AED 142,303,347.42 plus interest;
iv) On 27 February 2019, the Dubai Court of Appeal dismissed Mr Almakhawi Sr's appeal ordering him to pay the revised sum of AED 218,299,040.31 plus interest; and
v) On 7 July 2019, the Dubai Court of Cassation dismissed Mr Almakhawi Sr's further appeal, giving judgment for the revised amount of AED 211,299,040.31 plus interest.
(b) The death of Mr Almakhawi Sr's brother
" led to a bitter inheritance dispute between my siblings, which still remains unresolved to date."
"Court of Personal Status hereby certifies that the file of the inheritance, belonging to the above-mentioned deceased/Muhammad Al-Makhawy Al -Swaidy, has been registered dated 24-08-2015 AD. His inheritance was limited to his two brothers/Rashid and Salim and to his Turkish sister. The legal division was determined by five shares, each brother is entitled to two (2) shares, while the sister is entitled to one (1) share. So far, the distribution of the inheritance elements and the proportion of each heir have not been finalized. The property located in Umm Al Quwain has been transferred in the name of the heirs. In addition, the inventory has been transferred to the heir/Rashid Abdulazeez Al-Makhawy, deducting from his proportion in an amount of (AED 19453645)."
(c) The December 2015 Letter
"Q. You say in your statement at paragraphs 37 and 54 that you started succession planning in 2015. That is your evidence, is it not?
A. Yes, this is true.
Q. You do not in your witness statement talk about succession planning in 2010, do you.
A. This subject happened in 2015 and not 2010."
"In view of the problems that happened in the estate of my brother Mohamed Al-Makhawi, which you are aware thereof, in your capacity as the lawyers who defend me in the estate mentioned above, I decided to transfer all my property, inside and outside, in the name of my children avoiding any disputes that may arise in the future among them, noting that you have all papers and documents related to my property. I trust that you will complete such actions and you have the right to duly enlist any of the bodies and persons that have competence and experience."
"We, Dar Al Adalah, received on 29/12/2015".
I refer to the document for this reason as "the December 2015 Letter"; but that label is applied simply for convenience and should not be understood as indicating that I accept that the document represents a letter that was created or sent by Mr Almakhawi Sr to DAA in that month.
"This PDF document was not included in the Defendants' original batch of Extended Disclosure. It was provided late on 20 December 2022. The First Defendant appears to make reference to this document in his witness statement for trial stating (at paragraph 39) that he has 'a letter formally instructing DAA to start transferring my assets as a part of succession planning in 2015 and I will provide a copy of this letter as soon as I am able'. DWF asked to inspect the original letter which SCW said was being held with the Defendants' lawyers in Dubai. However, upon visiting their offices, DWF were informed that the Defendants' lawyers are only holding a copy of this document and not the original."
i) Mr Almakhawi Sr relies upon the letter as an instruction to his lawyers, but its content is remarkably vague;
ii) The letter refers to transferring "all my property, inside and outside, in the name of my children", but it contains no explanation of what the property actually is, or as to which of Mr Almakhawi Sr's children is to get what item(s) of property. It seems unlikely to be a set of instructions upon which a lawyer could properly act, at least without asking further questions;
iii) But insofar as DAA, to whom the letter was supposedly sent, might have asked for more specific instructions, there was no documentary evidence that Mr Almakhawi Sr was asked for or gave any such instructions, or that he met with DAA in 2015 to discuss the transfer of his property to his children, or that DAA made any attempt to effect such a transfer.
"Met client who recently credited $21m from HSBC Jersey trustees. Courtesy meeting as was outside DIFC. Client indicated that he is a very conservative investor and is not comfortable with fluctuations of the market. Client indicated that he will invest $5m and see what performance will be and might invest further going forward. Agreed that we would provide an investment proposal to Mohamed Hadi, his PAO in DIFC which will be discussed in compliance with DFSA rules and potentially invested accordingly. Client is shortly travelling to London and Germany where he has homes (extended invitation to Luxembourg). Discuss with David and prepare proposal for M Hadi to present to client."
(d) The Violet Trust
"The meeting was being held as [redacted] and wished to set up the same for the money that had been distributed to him from this Trust.
RAM is a very private person and does not like others to be aware of his affairs. Most of his assets are held in cash and he wants to protect this for his family whilst ensuring that Sharia applies in terms of distribution.
[Redacted] went through the MENA Deed Questionnaire and explained to him a Trust, the parties to a Trust, the pros and cons and provided live examples. RAM made it clear he wanted his Trust to reflect that of [redacted] with his children as beneficiaries. Following his death the Trust Fund is to be distributed. [Redacted] confirmed that this could be arranged.
RAM expressed the importance to having the documents be ready for him to execute for him to execute before Eid and a meeting for 19 June 2017 was agreed."
"A. There is no relation between the judgment and when I instruct my bank.
Q. You had $21 million in a bank account in Luxembourg which you knew your creditors would be able to attach, to execute against, if they found out about it. That is why you settled the Jersey trust, to protect that money for your family, to put it beyond the reach of creditors. That is true, is it not?
A. Okay, so the bank suggests this is not true, because the bank comes to me with the idea of investments and I let them get on with it. The court the judgment against me was unjust and in reference to several experts."
i) Mr Almakhawi Sr's ownership of 95% of the Rashed Al Makhawi Enterprises Group, which was said to have diversified interests in a number of industries; and
ii) The audited financial statements of the group for the year ended 31 March 2016, which were said to show the AED equivalent of $9,260,008 in revenue and $8,936,449 in assets.
i) Data obtained by the Bank from the Dubai Department of Economic Development suggested that Mr Almakhawi Sr may have only ceased to be a shareholder, if he had, on 7 March 2019;
ii) The identity of the person or entity to whom Mr Almakhawi Sr's shareholding in Makgroup had been transferred, if it had been, was not disclosed nor were any documents showing the terms of the disposal;[8]
iii) Mr Almakhawi Sr patently had an ongoing connection with Makgroup as late as October 2019 when an email was sent by Makgroup's Chief Accountant on his behalf to HSBC Private Bank; and
iv) As late as 11 December 2021, as apparent from a letter he sent to HSBC in London, seeking copies of bank statements for the purposes of disclosure in this litigation, Mr Almakhawi Sr still operated a Makgroup email address [email protected].
"My reasons for settling the Trust include:
- to benefit the beneficiaries and provide for their education advancement, maintenance and support;
- a desire to avoid the delay, and hardship which can be brought about by lengthy probate procedures;
- succession planning; and
- to protect the assets in the Trust as much of possible from disruptive events such as the bankruptcy of a beneficiary."
(e) The transfer of the US property
"RAAM then made reference to his UK Premiere account explaining that he had received a letter from them requesting additional due diligence. RAAM provided CB with a copy of this letter and she confirmed that she would deal with this matter. CB asked what currency the funds in this account were held in. RAAM informed CB that the monies were held in sterling. CB suggested that RAAM consider converting this to USD as IHT would be payable if held in GBP on RAAM's passing. RAAM confirmed that he would do this and also informed MH that he wanted an account open with Premiere in the UK for his son in respect of the UK property to be gifted to his children (see below).
RAAM then made reference to two properties that he owns. One in the UK located at 193 Warren House, 185 Beckford Close, W14 8TR, which he purchased in 2008/2009 for circa GBP1.6m. The second in New York in the US which was purchased two years ago for circa USD1.65m.
RAAM wants to understand what he needs to do for succession planning in respect of these properties. CB recommended that RAAM first obtain a valuation for the property in the UK (he wants to gift this property to his three children who are all resident in the UAE) and obtain tax advice for the property in the US (which he is considering gifting to his daughter). RAAM requested that CB arrange this on his behalf."
i) There is no evidence of any steps taken by either of the Defendants in that regard prior to 2019 to document any such trust; and
ii) There is nothing to suggest that Mr Almakhawi Sr informed HSBC Private Bank when he met them that there was an agreement to that effect and that he was already holding the Warren House Property (which, according to the Meeting Report, he said he wanted to gift not to Mr Almakhawi Jr but "to his three children") on trust for Mr Almakhawi Jr.
"Q. You didn't tell HSBC about it, did you?
A. So why would I every time there is a problem I have to run to HSBC and inform them.
Q. You were going to HSBC saying you were going to gift a property to your children and you didn't tell them about the judgment against you, did you? That is the question.
A. What has the bank got to do with the judgment that is a bank, why "
In response to a question from me, Mr Almakhawi Sr simply said that he did not remember informing HSBC that there had been a judgment against him in Dubai.
(f) The transfer of the Warren House Property
"Kindly note that I have a UAE resident client who has a property in London which is debt free.
Our client wishes to gift the property to his son and as such a valuation has been carried out, which confirms that on 5 April 2015 the property value was GBP1,750,000 and today the value is GBP1,595,000 meaning that it has declined.
On this basis, I understand that no CGT is payable on the gift from father to son and all that is required is for a TR1 form to be completed and filed with Land Registry.
I would be grateful if you could let me know if this is the case (or if I am missing anything) and also if you would be able to assist us in arranging the gift for which we would require an indication of your costs."
"SCOPE OF OUR WORK
The scope of our work will comprise transferring the ownership of your UK property to your son, including:
1. Preparing the deed of gift to transfer the property;
2. Carrying out the property transfer work;
3. Dealing with a licence to assign and any other landlord's requirements in respect of the transfer; and
4. Filing the non-resident capital gains tax return in respect of the transfer of ownership."
The reference to Charles Russell's anticipated instruction to prepare a deed of gift is of significance given the argument as to whether Mr Almakhawi Sr intended to transfer beneficial ownership of the Warren House Property to his son.
"The transfer is not for money or anything that has a monetary value."
The form was signed by Mr Almakhawi Sr and a scanned copy of the form was returned to Charles Russell by email on 2 July 2019 with the original subsequently sent by courier.
" the deed of gift for the client and his son to sign in acknowledgment of the transfer".
"(B) The Donor has transferred the leasehold property known as 192 Warren House Beckford Close Warwick Road London W14 8TR and registered at the land registry with title number BGL42461 (the Property) to the Donee with full title guarantee.
(C) The Donor wishes to confirm that the Property has been irrevocably gifted to the Donee.
(D) The Donee wishes to accept the gift of the Property."
"1. The Donor hereby confirms that beneficial title to the Property has been irrevocably transferred from the Donor to the Donee by way of gift and legal ownership of the Property has transferred so that the Property is now under the Donee's control.
2. The Donee hereby acknowledges and accepts the gift of the Property and confirms receipt thereof."
"The property was not sold rather transferred between family members. The payment arrangements/direct debit will be remaining as they were an no apportionment or refunds will be necessary."
Mr Almakhawi Sr did not dispute that he continued to pay the service charges, council tax and utility bills for the Warren House Property, but he said that the amounts were very modest, and Mr Almakhawi Jr was his son.
"Q. Okay, what I am going to suggest to you is this. You transferred this property to your son to protect it from your creditors for the benefit of your family.
A. No, this is not true.
Q. There are two possibilities: either your son was holding it for you which is consistent with the fact that you continued to meet the outgoings or it was an out-and-out gift to protect it from your creditors.
A. Okay, so I did not lose all the cases. To answer your question, it is not true in terms of the gift and the transfer. Some of these cases were lost because of Dar-Al-Adalah, and by that I mean the ex solicitors, who did not submit the paperwork on time and did not attend court, and I was outside I was out of the country at the time."
"Q. One question, you gave the instruction to transfer the New York flat for the same reason as you gave to transfer the London flat. Namely to protect it from your creditors. That's correct, is it not?
A. This is part of the distribution of my assets to my children and it is my right to do so."
(g) The cheques
i) Bank statements for the accounts from which the payments were allegedly made, and which would show whether the cheques had been collected or cashed, had not been disclosed. Mr Almakhawi Jr said that there had been a bank merger and so it would be difficult to obtain statements, but it seems unlikely that records did not exist;
ii) The cheques, or at least PDFs of them, had been disclosed (some completed in Arabic and some completed in English; there were also in some cases translations of notations that appeared alongside the copy of the cheque), but the cheques did not appear to bear any notation or marking indicating that they had passed through clearing;
iii) There were multiple copies of at least one of the cheques, the cheque for AED 5.7 million (a cheque made out to cash), but the notations that were on the PDF appeared in at least one case to be different. It was, furthermore, not clear when and by whom the copies of the cheques had been made:
a) If the cheques had been presented and cleared, they would likely have been in the hands of Mr Almakhawi Jr's bank. Mr Almakhawi Jr confirmed, however, that he did not have cheques returned to him by his bank after they had been collected;
b) On that basis, the copies provided must have been taken before the cheques were cashed or sent to their intended recipients, if they had been. But it was not obvious, why this would have been done, or indeed who had done it;
iv) There were generally no supporting documents; in the case of the labour and utility costs, for example, there were no documents showing the make up of the costs paid, or any correspondence with the liquidator of System Construct Dubai, sums having been paid on the company's behalf which would ordinarily fall within the insolvent estate;
v) In the case of the cheques allegedly issued for the purpose of paying Mr Almakhawi Sr's legal fees, DAA did issue receipts, because such three receipts were included in the bundle; but these receipts did not correspond with the payments identified on the schedule, and they were seemingly issued for payments made by Mr Almakhawi Sr himself;[9]
vi) The second and third of the three payments allegedly made to DAA involved cheques dated 25 February 2016; but in circumstances where Mr Almakhawi Sr had received $20,917,358.42 on 30 October 2015 (see paragraph 205 above) it was not clear on what basis it was said he was in financial difficulties and unable to make the payments himself.
"A. As I told you, I keep repeating nearly 20 times this, for now my job was to write the cheque whenever my father asks for money. I would give him the cheque.
Q. Is that because what is mine is his, if I can put it that way, and what his is mine?
A. Exactly.
Q. Sort of family honour.
A. Exactly.
Q. If you have the money so you are morally obliged to hand it to your father and if it were the other way round he would give you the money.
A. Exactly."
(h) The Money Transfers
i) The first statement for the account starts with the 16 August 2019 transfer of £200,000. The relevant page is marked "Sheet Number 001", indicating that it is the very first statement for this account, and that the 16 August 2019 transfer was the very first transaction;
ii) The next transaction, which also appears on Sheet Number 001, is the transfer from Mr Almakhawi Sr on 18 October 2019 of £2,226,873.28, which brought the total credit balance on the account as at that date to £2,536,873.28.
"A. So would you like me to say no to my children? My son deals with shares and, you know, sometimes there are large amounts involved, and I do ask him occasionally, what is this amount for and this? But on the whole this is my family and when they want money, they get it."
He suggested that the reason the money had not been spent was because his son had not had the opportunity to travel to London.
"My son asked me for it and I gave it to him."
"A. I don't do this business. I never do deposits.
A. And I am free to do whatever I want with my money. Maybe for you it makes sense to make a deposit, for me it doesn't."
"Q. What I am going to suggest to you is this. These monies were transferred into an account not used previously for any other purpose. That is correct, isn't it?
A. It has not been used, no.
Q. They were not mixed with any other monies.
A. Okay, because that is the only money in the UK.
Q. And that is because the basis of these transfers was either that you would hold the cash for your father or because it was made to shield the asset from your father's creditors and you wanted an account that was not traceable back to you, because there were
A. Well, it is traceable, it is not it is traceable, you are saying we are trying to transfer to an account which cannot be traced. It is traced.
Q. What I am suggesting to you is the reason you wanted an account which had not been used before was so that somebody in Dubai who started looking into where your money had gone wouldn't be able to see that account on any document in Dubai?
A. That is not correct. That is not correct. He wanted to pay me back the loan that I have given him.
Q. Then why did you specially open an account to receive the monies?
A. Because I do not have any relation with any British bank. How was he going to give me the money?
Q. He could just organise a funds transfer to you anywhere. He could just tell his bank to make a transfer.
A. Well, we decided and discussed to have the money in the UK.
Q. Are you seriously suggesting that you don't know that you can tell your bank to make an international funds transfer?
A. I did not need the money in the Emirates. I do not need it. I want this money in the UK. I don't want to put all my eggs in one basket.
Q. But your father had a sterling account. He could have transferred it into dirhams or dollars or euros or any other currency anywhere, but what you did was open an account specially and move the money into that account.
A. Because we I wanted the money to be in the UK.
Q. I am suggesting to you that you wanted it in the UK in an account which had no previous dealings in respect of it
A. That is not correct.
Q. - so that somebody
A. Because I did not need the money to use it, okay, and I wanted to diversify, that is why I wanted to open a bank open an account in the UK, which I had never invested in before and I have never had a relation in the UK with a bank. I dealt with different banks around the world, but I have never dealt with the UK."
6. Discussion
(a) The Bank's primary case; beneficial ownership
i) It is admissible evidence of Mr Almakhawi Sr's intention when transferring the Warren House Property, i.e., that the property was intended to be a gift under which the beneficial interest would pass to Mr Almakhawi Jr: see Lewin (op. cit.), paragraph 10-037;
ii) Charles Russell's instructions from the outset were that a deed of gift should be prepared; indeed, they had been told by HSBC Private Bank that "our client wishes to gift the property to his son" (see paragraphs 255 and 256 above). The fact that the Deed of Gift was only drawn up only afterwards does not indicate that Mr Almakhawi Sr's intention at the time of the transfer was not to make a gift but to retain the beneficial interest in the property himself.
(b) The Bank's alternative case; section 423
i) System Construct Dubai went into insolvent liquidation in September 2014. Given his personal guarantee, it would have been apparent to Mr Almakhawi Sr from that point on that he would likely face substantial claims;
ii) By October 2015, when the Dubai Proceedings were commenced that expectation had become a reality; and by 16 January 2017, when the Dubai Court of First Instance gave judgment against him, he knew that, subject to a successful appeal, in relation to the Bank alone he faced very substantial liabilities approaching $40 million;[10]
iii) It is against that background that all the various transfers took place. Notably:
a) There is no evidence to support the pleaded case that Mr Almakhawi Sr had formed an intention to transfer assets to Mr Almakhawi Jr or his other children in 2010;
b) Indeed, aside from the December 2015 Letter, which I have held was not genuine and which, in any event, would have been sent at a time when Mr Almakhawi Sr was already facing proceedings involving a sizeable claim, there is no evidence that he took any steps to transfer assets until June 2017;
c) All of the transfers were made after the Dubai Court of First Instance had given judgment against him; the transfer of the Warren House Property and the Money Transfers were made after his appeals against that judgment had failed;
iv) It is a powerful fact that, although Mr Almakhawi Sr had received a distribution of $21 million from his brother's estate in October 2015, he took no steps to place that money into trust until June 2017, after he had been found liable in the Dubai Proceedings.
i) The money was transferred into a newly opened account, never used before and never used again;
ii) An amount of over £2.5 million was allowed to sit in a non-interest bearing account for over two years, something that no rational person would do without good reason. I agree with Mr Edwards' submission that this was a price that was obviously felt to be worth paying to avoid creating a paper trail.
Mr Almakhawi Jr's evidence on this topic was contradictory and unsatisfactory.
G. Conclusion
Note 1 The original documents in relation to the Dubai Proceedings were in Arabic. The certified translations were generally good, but the English was, predictably, not perfect. I have not sought to correct it. [Back] Note 2 Mr Almakhawi Sr complained about the conduct of DAA, and on 12 August 2020 the Professional Conduct Committee of the Government of Dubai Legal Affairs Department issued a decision giving the firm a written warning about its conduct. On the basis of the documents I was shown paragraph 22 of Mr Almakhawi Srs witness statement, where he suggested that DAA had been suspended from practice, was incorrect. [Back] Note 3 The presumption of advancement is set to be abolished by section 199 of the Equality Act 2010, but that section has not yet been brought into force. [Back] Note 4 I was not taken to this case, but it was referred to in Hashmi with which I deal next. [Back] Note 5 I was told by Mr Edwards that proceedings had been commenced in Jersey in which the Bank was seeking to unwind the Violet Trust, but I know little about those proceedings, and the status of the Violet Trust is not for me. The same is true in relation to the Redington Trust, which I describe below. Both trusts are expressly governed by Jersey law and subject to Jersey jurisdiction. Mr Lewis suggested in his closing note that these divestments are themselves subject to the presumption of advancement, but I make no findings about that.
[Back] Note 6 The exception is a document that appeared at the back of one of the chronological bundles entitled Detailed summary of the estate of the Deceased/Muhammad Abdul-Aziz Al-Mokhawi brother of Rashid Abdul-Aziz Al-Mokhawi. This appeared to describe events going back to Mr Al-Swaidys death in 2014, but I was told that the metadata indicated that the document was not contemporaneous but had been prepared in January 2022. The Bank had served a Notice to Prove under CPR 32.19 in relation to the document; but, notwithstanding that notice, no evidence was adduced as to its authenticity or content. It was not clear who had prepared the document, for what purpose, and on the basis of what primary sources.
[Back] Note 7 Mr Almakhawi Jr confirmed in his oral evidence that he owned the other 5%. [Back] Note 8 The Bank pleaded that Mr Almakhawi Srs shareholding in Makgroup was transferred to Mr Almakhawi Jr, but there is insufficient evidence for me to find that this was the case. [Back] Note 9 A similar issue arose with other payments. There was a letter from the Chief Justice of the Labor Conciliation and Reconciliation Department in the Labor Court dated 18 January 2015, which appeared to record a payment of AED 8,126,461.00 made by Mr Almakhawi Sr to pay workers, but this did not match with any of the payments on the schedule. [Back] Note 10 The Bank did not plead that Mr Almakhawi Sr was insolvent when he transferred the Warren House Property or when he made the Money Transfers, and there is no basis for me to make a finding of insolvency in those circumstances. Nor am I satisfied that it would be proper for me to do so; it appears that Mr Almakhawi Sr may still have owned property in Dubai (protected from enforcement as a gift from the Ruler of Dubai) or other assets. But, for the reasons I have explained, it is not necessary for the Banks section 423 case that I make a finding of insolvency. On any view, at the time the Warren House Property transfer and the Money Transfers were made Mr Almakhawi Sr had very substantial liabilities and had already divested himself of significant assets. [Back]
