Sarkis v Mirza

J U D G M E N T

Thursday, 30th June 2005

1. LORD JUSTICE TUCKEY: This is an appeal by Miss Jan Mirza from a 28-day committal order made by Mr Justice David Clarke on 18th March 2005 for failure to comply with an order to disclose assets as one of the terms of a freezing injunction made against her. The appellant's contention is that the judge should have adjourned the hearing on 18th March, as he was asked to do, and should not, in any event, have imposed an immediate custodial sentence, at least one of 28 days.

2. The history of the matter is as follows. The appellant is a 61-year-old Jordanian. She has lived in this country for some time and worked as a social worker. The 77-year-old claimant was a friend of hers and, she says, he was also her accountant. Between December 2001 and September 2004 he says he made unsecured loans to her totalling £903,350. They were repayable on demand. She acknowledged this debt in an affidavit which she swore in 2003 and for present purposes admits that she still owes at least £700,000.

3. The claimant's evidence is that he saw no risk involved in lending money to the appellant in this way because she was a member of the extended family of the Jordanian monarchy and said she needed to borrow money pending resolution of an inheritance dispute with her family which had resulted in her assets being frozen and an inability to open bank accounts.

4. She also said that she was a member of a consortium of ex-patriot Jordanians who had been generously rewarded for their loyal services by the late King Hussein with substantial grants of cash and other assets, including land, properties and cars, both in this country and abroad. However, a legal team from Jordan had come to London in 2002 to investigate the financial affairs of this consortium with a view to liquidating its assets and repatriating them to Jordan. The appellant introduced the claimant to one of the members of this legal team. That member told the claimant that she was aware of the appellant's problems and that she was involved in activating the appellant's bank account, at which time she promised that the claimant would be repaid all the monies which were owed to him. Text messages exhibited to the claimant's affidavit confirm his account. No repayment was, in fact, forthcoming and eventually the claimant says he was told by the appellant that £3,500,000 of funds belonging to the consortium had been deposited in an account with Lloyds TSB bank in Moorgate in the name of Mirjan & Mirjan, a company owned by the appellant.

5. As well as this bank account, the claimant stated that the appellant had two identified bank accounts in her name with the HSBC. She had shown him statements of these accounts, showing credit balances totalling £570,000 in September 2004. He also said that she had a bank account with UBS in Curzon Street, that she corresponded with UBS in Geneva and that the London account had a credit balance of £107,000 in it. He added that she had used £80,000 of the money he had lent her to buy two Mercedes cars in August of 2003 and that she was regularly collected from her flat in St John's Wood by a chauffeur-driven Mercedes car.

6. After a history of bounced cheques and broken promises of repayment, the claimant started these proceedings. A without notice freezing injunction was granted by Gray J on 7th January 2005. It was in the standard worldwide form and identified those assets to which I have referred. It required the appellant to provide information to the claimant's solicitors about all her assets in England and Wales and worldwide exceeding £1,000, but the order omitted to say by what date she had to provide this information. The proceedings and the injunction were served on the appellant at her flat at 75 Wellington Court, Wellington Road, London NW8 on 12th January.

7. The appellant did not attend on the return date for the injunction before Field J on 21st January. Field J continued the order, but required the appellant to provide the information about her assets within seven days of service of the order upon her. Service took place, as before, on 27th January.

8. Despite being reminded in letters from the claimant's solicitors of her obligation to provide the financial information in accordance with the terms of the order by 3rd February, the appellant failed to do so. An application for her committal, however, provoked some response. On 23rd February, two days before the application was due to be heard, she contacted the claimant's solicitors by telephone. In conversations on that and the following day she said she was in the process of arranging for £100,000, which she had borrowed from friends, to be paid on account to the claimant. The solicitor, however, reminded her of the requirement to provide a statement of her assets, but she said she would attend to this after the £100,000 had been paid. In the first of these conversations she said that she did not know where all her assets were. Part of the solicitor's attendance note for the 24th reads as follows:

"I suggested to Mrs Mirza that she sit down that evening and list all her assets. She informed me that a list was more difficult than I thought. She needed a solicitor to help her. She was 'not a grocer'. Her assets were worldwide. She was just concentrating on getting the money. The payment would happen."

9. No money was, in fact, paid by or on behalf of the appellant, and the hearing on the 25th went ahead before Holland J. The appellant attended this hearing in person. She did not dispute the claimant's solicitor's account of her conversations with him over the previous two days, or claim that she had no assets. In his judgment, which was given in her presence, the Judge said:

"Mrs Mirza has not had legal advice yet, although she states she is deeply in need of legal advice. I have made the point that any legal adviser appointed by her will want what the court now requires, a list of her assets. Mrs Mirza does say that she intends to get urgent legal advice and asks that I adjourn this application."

10. He did not do so and went on to find that she was in contempt of court. He imposed a sentence of 28 days' imprisonment, suspended, so long as the appellant complied with the requirement of Field J's order to provide information about her assets by 4 pm on 11th March 2005.

11. On 7th March the applicant sent a letter to this building, addressed to Holland J, saying:

"Your Honour, I wish to apologise for any inconvenience I have caused the court on 25 February in not preparing the reply required by the court order set on 21 January under Mr Justice Field. Further to the court hearing on 25 February, I wish to confirm my current status. As you note above, I have moved temporarily into a new apartment on 14 February 2005, which is neither owned by myself nor rented."

Her address was now given as 67, as opposed to the previous address, 75, Wellington Court.

"With reference to my estate, I wish to declare that I have no assets in the UK or worldwide. As regards my solicitors, you will note that I have approached Seddons and ASB Law firm to assist me in the case. However, after establishing the huge costs involved, I approached other lawyers and asked for legal aid for which I am awaiting their consideration. I am, therefore, representing myself with the help of the Citizens Advice Bureau and Consumer Credit Services. All correspondence must be addressed to me directly. I hope this clarifies my personal situation."

12. The appellant did not copy this letter to the claimant's solicitors until 11th March. Understandably, however, in view of the history I have recited, they did not accept what she said or that this letter in any way complied with the order for disclosure which had been made against the appellant.

13. A further application for disclosure and to activate the suspended committal order followed. This came before Tugendhat J on 15th March. The appellant did not attend this hearing, although it is apparent that she was in this building on that day, for reasons which I will explain in a moment. The Judge made an order for specific disclosure of particular documents with which we are not concerned, but adjourned the application for committal to 2 pm on 18th March, which of course gave the appellant some further time to put her house in order. That order was served on the appellant that day by fax and by post, but nothing further was forthcoming from her.

14. It subsequently transpired that on the 15th the appellant had attended this court and declared herself bankrupt under the provisions of section 264(1)(b) of the Insolvency Act 1986. Her declaration was supported by a sworn Statement of Affairs which disclosed no assets, apart from a pension of £6,000 per annum. The claimant and HSBC were shown as her only creditors and her outgoings were said to be £390 per month. She explained that she had been supported by her ex-husband, family and friends.

15. So this was how things stood when the matter came before David Clarke J. Despite requests from the claimant's solicitors, the Statement of Affairs was not produced by or on behalf of the appellant until that hearing. The appellant was not present but was represented by counsel, Mr Khan, who had been instructed by her present solicitors. They were first consulted by the appellant on 15th March. Mr Khan applied for an adjournment on the ground that the appellant was unfit to attend the court. The Judge records how he dealt with this application as follows:

"I was satisfied on consideration of all the circumstances, and by reference to CPR 23-11 that I both could and should proceed with the hearing, and I so ruled. I made it clear that, if, in the course of the hearing, medical evidence of her inability or her unfitness to attend court were presented, I would reconsider the matter. The hearing has continued and has lasted over an hour, and no such medical certificate has been forthcoming. I am told that arrangements have been made to fax one through to the court but the gentleman who accompanied her to the doctor has instructed Mr Khan, through the solicitors, that the condition of which she was complaining was an anxiety state about attending court today. I do not, therefore, believe that there is any risk that there is an underlying organic illness keeping her away and, accordingly, I do not intend to give any longer for the medical certificate to be presented."

16. In his judgment, the Judge then proceeded to set out the history of the matter, to which I have referred, and concluded in paragraph 26 of his judgment:

"I am satisfied that the sequence of events which I have described demonstrates an history of blatant and increasingly desperate efforts on the part of the defendant to frustrate the court's orders and to fail to comply with and to flout indeed the court's orders, and thereby frustrate the proper efforts of the claimant to secure his position with a view to recovering the debt."

He decided that the appellant's letter of 7th March failed to comply with the order for disclosure. The evidence before him, he said, demonstrated that he could properly infer that the appellant had assets, whether in this country or not. He went on to remind himself that he had to consider sentence afresh, despite the suspended sentence, and concluded, at paragraph 33:

"I have considered the circumstances as they are today, including the steps taken by the defendant at the eleventh hour by way of declaring herself bankrupt rather than attending the hearing before Mr Justice Tugendhat. I have considered the sentence itself and the length of it which was imposed, and I am satisfied that it was an appropriately short sentence for the contempt in the failure to comply with orders which exist here, by comparison with the very much longer sentences which, on the authorities, are imposed for other forms of disobedience of court orders. It is clear to me that Mr Justice Holland reached an appropriate duration of sentence.

He added at paragraph 35:

"I also make clear that to impose a prison sentence in civil proceedings is a rare occurrence and it is a step taken by the court with reluctance and after consideration of whether any other form of sanction might have been appropriate in its place. There is none that I can think of and none that has been suggested. Mr Khan has, rather, argued the case on the basis that this was not a non-compliance, an argument which I have rejected. He has also urged me to consider in mitigation what I have been told about this lady's anxiety about the proceedings, and I have taken that into consideration."

17. The order for committal was subsequently stayed, pending the appeal. We have admitted further evidence on the appeal in the shape of a witness statement dated 11th May 2005 from the appellant. In it she confirms the information contained in the Statement of Affairs to which I have referred. She says she has be unable to verify the assertions she makes because of the bankruptcy which has, amongst other things, denied her access to her two HSBC accounts. She is a lodger in the flat she now occupies, which is rented and paid for by a friend. She denies that the claimant saw her bank statements in September 2004. He only saw her paying-in books. The cheques were subsequently returned unpaid because the transactions to which they related did not go through. She says that Mirjan & Mirjan is a dormant company which has never traded. The claimant's solicitor's attendance note says:

"... whilst not being false, have nonetheless conveyed an inaccurate position to the court, that there are funds available to me and I am in turn withholding this from the Court. This is untrue."

Finally, the appellant exhibits a letter from someone who described himself as Z.Y. Miscony, whom we are told is a physician, which says:

"This is to certify that the above-named was not able to attend to her necessary commitments during the month of March and April 2005 due to stress/anxiety that she suffers from.

On 18th of March 2005, she suffered a near nervous breakdown due to personal matters, at which point she was prescribed medication to sedate her. I further recommended that she abstain from any work or stress related activities for a period of 3-4 weeks and to rest."

The appellant's statement concludes by saying that she was sedated for a period and has now resumed attendance on these matters, that is to say the matters raised by the claimant, because of the importance she placed on them.

18. This last assertion is not borne out by information from the Insolvency Service which the claimant has put before us, which shows a persistent failure to attend for statutory interview or public examination.

19. It seems to me that the history of this matter speaks for itself. First, the judge was quite right, on the information before him, to refuse an adjournment. The appellant had not mentioned ill health as a reason for non-compliance with the orders of the court or attendance at court on any previous occasion. She failed to provide medical evidence before the hearing and the information provided to the Judge during the hearing justified his decision to proceed. Nothing in the later letter from Dr Miscony persuades me that, even with the benefit of hindsight, the Judge was wrong to do so.

20. Mr Wheater, in his tenacious submissions before us, submitted that the Judge's decision to adjourn was nevertheless unreasonable. He should have paused to think that he was being asked to imprison a lady who was not present and who, it was said, was too ill to attend. So he should have given some further time, perhaps a day or so, to enable the medical position to be explored fully. Had that been done it would have been possible for the appellant to have put before the court the information in the witness statement which we now have. No prejudice would have been suffered by the claimant if such a short adjournment had been granted.

21. I do not accept these submissions. The Judge explained clearly, and to my mind convincingly, why he did not adjourn. Judges in this situation are frequently faced with applications for adjournment. This one was made at the eleventh hour of the fifty-ninth minute. The reason for non-attendance was said to be the anxiety generated by the fact of the application itself. That is not a reason for deciding to adjourn. A decision as to whether or not to adjourn is quintessentially one for the Judge's discretion. There is nothing to show here that the Judge exercised his discretion in a manner which would justify this court's interference.

22. It is now conceded that the appellant was in contempt. In my judgment, not only had she failed to make any proper attempt to disclose information about her assets, but the Judge was right to conclude that her assertion that she had no assets here or abroad was untrue.

23. This, then, brings me to sentence. Mr Wheater submits that the appellant's contempt can be explained by the fact that she was acting in person and attempting to deal with judicial proceedings which she did not fully understand. She had prioritised the negotiation of a settlement with the claimant over compliance with the court's order in the belief that this would be the best for everyone. She had now, he submits, complied with the order to the best of her ability. There would be a full investigation of her assets in the bankruptcy proceedings which would protect the claimant's interests. For these reasons, the Judge should have given the appellant one last chance, or at least we can do so in the light of the new evidence. He cited various cases in support of these submissions, saying that for this type of breach a custodial sentence was not really justified and, if it was, a sentence of 28 days was too long. In support of his submissions that she had complied with the order, Mr Wheater says that the Judge had before him, albeit at the very last moment, the sworn Statement of Affairs and he should have taken that as compliance with the order, or, at least, it should have persuaded him that it was right to give the appellant one last chance.

24. I do not accept these submissions. It seems to me that the Judge was right to conclude that the history of this matter showed a blatant attempt on the part of the appellant to frustrate and flout the court's orders. At various times she had access to legal advice and the claimant's solicitors repeatedly reminded her in terms which she obviously understood what it was that she had to do and when. I am not persuaded that she had now complied with the orders. She has not satisfactorily answered the claimant's evidence about assets he believed she had. Her explanation for what she told the claimant's solicitors about her assets is unintelligible. Moreover, she has not in any way explained what has happened to the very large sum which she admits she borrowed from the claimant. Her professed wish to deal with the matter properly is belied by what has happened in the bankruptcy proceedings, where so far no progress whatsoever has been made in the investigation of her assets. The appellant has had more than one last chance to comply with the court's orders and, it seems to me, has chosen not to do so. In those circumstances, the Judge was entirely justified in passing the custodial sentence and I am not persuaded that anything which has happened since justifies our taking a different view.

25. The cases to which we have been referred do not, it seems to me, assist one way or another. Each case must depend upon its own facts. This Judge is very experienced in these matters. Having decided that an immediate custodial sentence was justified, as I think it was, a sentence of 28 days cannot possibly be described as manifestly excessive. It is, as is apparent, at the bottom end of the scale, the maximum sentence for contempt being two years. For those reasons, I would dismiss this appeal.

26. LORD JUSTICE LLOYD: I agree.

27. LORD JUSTICE BROOKE: I also agree.

28. MR POWELL: My Lord, I am grateful. There are two matters I wish to raise. My Lord, the first is obvious, and that is a straight-forward costs order. My Lord, I appreciate this was in the faxed bundle that may not have got through to all of your Lordships.

29. LORD JUSTICE BROOKE: What page?

30. MR POWELL: My Lord, page 31. I hope it is consistent with all of your Lordships' bundles.

31. LORD JUSTICE BROOKE: Is that on 7th June?

32. MR POWELL: My Lord, yes, from Selva & Co. My Lord, you will see in the final paragraph in relation to our request as how this was being funded, the reference to it being funded by Mr Irvani Pour to date, although the suggestion that he had no dealings in the decision of the matter and no input as to the conduct, no interest as to the outcome. My Lord, I appreciate it may take your Lordships some time to consider what I have to say.

33. LORD JUSTICE BROOKE: There is no way we can make any order without notice.

34. MR POWELL: No. My Lord, that flowed from the letter you will have seen from us. My Lord, indeed prior to the hearing on 18th March, the same point was raised, and at the hearing on the 18th March I raised exactly the same matter, the part 48.2, section 51, which I know your Lordship is familiar with, my Lord, before David Clarke J. I think in the circumstances of that particular day he declined my application. I do not seek to review that, of course, but we do seek it for today. My Lord, Mr Irvani Pour was present on that day. I know he is here today. My Lord, I appreciate you will not deal with it today, other than whether he should be added, but clearly the only way you would determine that is whether there is any merit on the application with regard to this. My Lord, I say, clearly in these circumstances, any application for costs as against the defendant is hollow; it must be, my Lord, in the circumstances in which we currently find ourselves where she contends that she is bankrupt with no money.

35. My Lord, I also rely upon those parts of part 48.2, which are in the White Book. I know your Lordship is very familiar with third party costs funding, but, my Lord, what I say is this. This is a set of circumstances in which this appeal has clearly been funded where it is asserted that this defendant is insolvent by a third party. My Lord, we do say, in those circumstances, particularly where one could not add him as a party to the action for the very obvious reason, he has nothing to do with this, we could not obtain a costs order against him. This is an exceptional case, my Lord, it having been pursued in the light of the findings of David Clarke J in which a third party costs funding order has merit. For that purpose, my Lord, he should be added.

36. LORD JUSTICE TUCKEY: Is it right in this type of case where the appellant has an automatic right of appeal in this court against an order made imprisoning her, that one should effectively penalise someone who is funding her appeal. It is not ordinary commercial litigation.

37. MR POWELL: No, my Lord, I accept that. That is why I have referred expressly to the fact that it was raised before the learned Judge below in the presence of Mr Irvani Pour.

38. LORD JUSTICE BROOKE: Whether or not it is at the moment a principle set out by Simon Brown LJ in Al-Fayed , which addressed that the voluntary funding, when you have got no stake in the outcome, they would not ordinarily be ordered to pay costs.

39. MR POWELL: My Lord, I appreciate that. I anticipate that my learned friend is going to tell you that that is the position here. My Lord, we do say, I appreciate it is a voluntary fund, I accept that --

40. LORD JUSTICE TUCKEY: Your application is only in relation to this appeal, is it?

41. MR POWELL: My Lord, yes. I cannot seek to persuade your Lordship to deal with that matter alone. I expressly raised it with David Clarke J. We have not cross-appealed. My Lord, I do not, for those purposes.

42. LORD JUSTICE BROOKE: It does not sound too promising, even if we do give whatever directions that you are asking us for, for the matter to come back on another date.

43. MR POWELL: My Lord, if your views are that the merits are against me on what I have said thus far --

44. LORD JUSTICE BROOKE: In relation to a recent decision of the Court of Appeal, I had to look at Al-Fayed and other Privy Council cases in relation to voluntary funding. They have no stake in the outcome except to wish to help somebody who does not want to be setting a precedent.

45. MR POWELL: My Lord, I appreciate that is very different --

46. LORD JUSTICE BROOKE: I accept what you are saying, but I am up to date, rather unusually, with this rather odd jurisprudence. I would not like to see Mr Sarkis potentially throwing good money after bad in an attempt to trace voluntary funding on the present state of the law.

47. MR POWELL: My Lord, perhaps I should also have mentioned this. He is, in fact, funded by the Legal Services Commission. I know it is not a matter your Lordship will have been aware of.

48. LORD JUSTICE BROOKE: Who is?

49. MR POWELL: Mr Sarkis, for these purposes. That may well militate against him.

50. LORD JUSTICE BROOKE: I doubt if the Legal Services Commission will be all that keen on creating this particular --

51. MR POWELL: My Lord, there it is.

52. LORD JUSTICE BROOKE: That is your first application.

53. MR POWELL: My Lord, the other application is obviously for costs against Mrs Mirza.

54. LORD JUSTICE BROOKE: There is an application for costs against your client.

55. MR WHEATER: My Lord, obviously that would be an application for costs to be assessed. I have not seen a costs schedule. I do not see how I can oppose it and I have no instructions on behalf of my client.

56. LORD JUSTICE BROOKE: Very well. We make an order for costs against the appellant. We do not make any direction in relation to the funding.

57. MR POWELL: I am grateful.