El-Farargy v El Farargy & Ors

This is a singularly unsatisfactory, unfortunate and embarrassing matter. On 1st August 2007 we allowed an appeal by Sheikh Khalid Ben Abdullah Rashid Alfawaz (“the Sheikh”), the third respondent in ancillary relief proceedings, against the order of Singer J. made on 10th July 2007 dismissing the Sheikh’s application for the judge to recuse himself on the ground that comments made during the course of a pre-trial review betrayed apparent bias towards the appellant. We directed that the matter be heard by a different judge of the Family Division of the High Court, we set aside the order for costs made against the Sheikh and, by consent, made no order for costs here and below. These are our reasons for doing so.

It will be difficult to capture in a few paragraphs the full flavour of this case, features of which are quite remarkable. It is a claim by Mrs Wendy Ann El Farargy for ancillary relief, bitterly contested by her husband Mr Nael Mahmoud El Farargy. She was born in South Africa 59 years ago. He is a 67 year old Egyptian. They married in 1974 after the wife had converted to Islam. They have an adult son estranged from his father.

Their financial affairs are extraordinarily complicated. Mr Cayford Q.C., who appears for the wife, has told us he has “trawled through more than 50 lever arch files”, and that was before full discovery had been given. That gives some impression of the scale of the case.

The couple started married life in Qatar but subsequently moved to Egypt. In 1981 they returned to the United Kingdom and purchased a flat at 92 Gloucester Place. Later, in 1987 a Jersey company, Neon Investments Ltd, purchased 2 Pinehurst Close, Kingswood, which became their matrimonial home. Still later, in March 2003 their last matrimonial home in Cobham was purchased for £1.7 million in the name of McKellar Holdings Ltd (“McKellar”), a British Virgin Island registered company. Husband and wife still occupy the house in what must be the most trying circumstances. The Sheikh now claims to be the beneficial owner of McKellar. In that he is supported by the husband. This is strongly denied by the wife who asserts that the family home belongs beneficially to her and her husband. This is one of the key issues in the case and accounts for the Sheikh’s involvement in the case.

Together husband and wife worked in the hotel industry, incorporating Wena Hotels Ltd (“Wena”) in the United Kingdom in 1982, the name taking “We” from her name, Wendy, the “na” from his, Nael. Both are directors and they hold the shares in the approximate proportions of 70% to the husband and 30% to the wife. The way in which they operated Wena is central to the enquiry. At first the company was concerned with British hotels. Then in 1984 Wena Hotels International (“Wena International”), a British Virgin Island company was incorporated, managed by a Guernsey trust which so far as the wife is concerned was part of the El Farargy family trusts. In 1989 the business expanded to Egypt and Wena and an Egyptian state-owned hotels company entered into a lease for the Luxor Hotel and Wena and Wena International signed agreements for the management of that hotel. A year later they entered into arrangements for the management of the Nile Hotel.

Their problems began in 1991 when the Egyptian government seized the two hotels. They were returned to Wena’s management in 1992. Problems with the government continued and in 1993 and 1994 Wena issued arbitration proceedings in Egypt relating to the two hotels and were successful. Success was short-lived and the Egyptian court overturned the arbitrator’s awards in their favour. Cutting the story very short, Wena applied to the International Center for International Disputes (ICSID) in Washington for compensation for the government of Egypt’s failure to protect Wena’s investments in Egypt and this led to another long drawn-out struggle. In December 2000, the ICSID held the government of Egypt liable and awarded Wena $20.6 million in compensation. The Egyptian government appealed. The appeal was rejected in February 2002 and Wena received their compensation then worth about £14.5 million and this was placed with Investec.

The summer of 2004 saw some serious rifts in the relationship of husband and wife. She began to suspect him of transferring monies away from the Investec accounts. In November 2004 she launched these proceedings. Coleridge J. granted a freezing order which was returnable on 10th December 2004 and thus began Singer J.’s involvement in this case. He reserved it to himself. Of specific concern at the time of that injunction was the destination and beneficial entitlement to sums of £5 million and $5 million transferred from Investec to UBS in Switzerland.

It is unnecessary to deal in detail with the progress of the wife’s claims for ancillary relief. Significant events include the joinder of McKellar as second respondent on 19th May 2005, the hearing of the first appointment. In July 2005 Singer J. in effect converted into an order an agreement which had earlier been made with the wife to release part of the frozen funds to her because her husband was not paying her as he had been ordered to do. The husband appealed but received short shrift in the Court of Appeal where Thorpe L.J. described his manoeuvre as “deeply unattractive” and “the judge’s instinct to hold the husband to his agreement rest[ing] on the surest of foundations”.

In September 2005 McKellar issued a summons to determine the beneficial ownership of the company, serving in support of their application an affidavit sworn by the Sheikh. He asserted that he owned the shares in that company and he was supported by the husband in that case. It may be significant to note that he did not intervene. These contentions seem to have come as a surprise to the wife who asserts she had not even heard his name mentioned until about mid-2004. The Sheikh was later joined as the Third Respondent on the wife’s application.

Several days were set aside in October for a preliminary fact-finding hearing which, in Singer J’s unavoidable absence, was conducted by Mr Andrew Moylan Q.C., as he then was. The Sheikh was required to give evidence. He was called late in the afternoon of 4th October and the court adjourned before Mr Cayford had completed his cross-examination on inconsistencies in the documents said seriously to undermine his case. The next day was the first day of Ramadan. It is now accepted that the Sheikh had indicated he would not return the following day. The hearing broke up somewhat inconclusively and was resumed in November with no greater progress made. The deputy judge made a series of orders which the husband sought unsuccessfully to appeal.

In the course of the adjourned hearing Mr Moylan described the case which had been put to him about McKellar as having been “blown out of the water ”, saying:

On 3rd January 2006 Wena intervened seeking a declaration that the Isle of Man bond frozen by the injunction was beneficially owned by the company. At about the same time the Sheikh’s solicitors came off the record and he remained unrepresented until June.

The trial had been fixed for November 2006, but in July 2006 the husband was granted an adjournment on the grounds of his ill health. The earliest date available for the resumed hearing then thought to be likely to last 3 weeks was a year later in November 2007. A pre-trial review was also fixed to be heard in September.

That directions hearing took place on Monday 18th September and resumed on Friday 22nd September 2006, the transcripts of those hearings running to 82 and 108 pages respectively. It was during these hearings that Singer J. made the comments which lead to this application that he recuse himself. That application was, however, not made until 22nd March 2007. As already set out, Singer J. refused to recuse himself on 10th July, and as five weeks had been set aside for the hearing to commence on 22nd October 2007, we expedited the hearing of the appeal and dealt with it in the long vacation.

That may be the bare bones of the chronology but I have given no impression at all as yet about the extraordinary way this litigation has been conducted, especially by the husband. He had shown himself to be contemptuous of his wife and equally contemptuous of the court, as, on a number of occasions, the court has found. Mr Cayford has placed before us a schedule of breaches of no less than twelve orders of the court despite in some cases penal notices having been attached to them. He has flagrantly ignored orders for the payment of maintenance pending suit to the wife and even when the order, upheld by the Court of Appeal, required him to pay her out of the frozen funds he did not do so. He has given incomplete discovery of documents. In the judgment under appeal Singer J. adverted to “some abbreviated account of background events” saying:

By summons issued on 22nd March 2007 the Sheikh applied for an order that the judge recuse himself and that the application be released to another judge of the Family Division. Complaint was made about seventeen comments made by the judge, six on 18th September and the remainder on 22nd September. In this appeal the Sheikh relies on only six of those remarks, four of which it is alleged, to quote from the grounds of appeal,

I shall now set those remarks out adopting in this judgment the request made by Mr John Randall Q.C., who appeared in this Court, though not below, that we highlight the words to which objection is taken and place them in parenthesis. So, with highlight and brackets added the six comments are these:

The judge was very alive to and concerned by the time this case was taking to get to trial. It will be recalled that the hearing fixed for the Michaelmas term 2006 was adjourned just before the long vacation and the earliest available date was a year later. The judge was aware that a further application was listed before Baron J. to break that fixture. Singer J. said:

When this appeal came into my list I was aghast at the prospect that allowing the appeal would have the effect of putting the hearing back another year to 2008. When I spoke at the beginning of this judgment about unsatisfactory features of the case, one of them to my mind is the length of delay the Family Division is having to endure in cases of this kind. That is no fault of the Clerk of the Rules nor of the judges assigned to the task of deciding these “big money” cases where millions of pounds are frequently involved. The trouble is that there are simply not enough judges to do this complicated work which takes second place to the children’s cases. The first step is for the parties to exchange their Form Es, which give complete financial disclosure and an up-to-date picture of their means. The first appointment may take six months to fix. Then there is a wait for another six months for the financial dispute resolution hearing. If no compromise is reached, they have to wait up to and even more than a year for a date for the final hearing, sometimes, perhaps, through excessive indulgence to counsel’s convenience. By then the valuations are out of date and the whole process begins again. No wonder the costs are sometimes enormous. Because I was so appalled by this prospect, I spoke to the President very shortly before he departed on holiday. I have his permission to disclose what happened. Singer J. was rightly concerned about the application and the effect it would have on the fixture. Very properly he consulted the Head of his Division to discuss the predicament and see whether anything could be done about the listing of the final hearing before another judge of the Division but the emphatic information given by the then Clerk of the Rules was that no other judge could be found to replace him. If he could not hear it, the hearing would have to be vacated and further delay would ensue. I mention this in fairness to the judge because, if the inference could not have been drawn from paragraphs 6 and 7 of his judgment which I have already cited, it surely now can be drawn that he would (and, this is my guess, would willingly) have released the case to another judge of the Division if that could have been arranged. That not being possible, he had to get on with deciding the application and making up his own mind on the merits as he saw them. He was right to make it plain that listing difficulties could have no impact on the outcome.

Lord Justice Wilson was equally concerned about delay and he made independent approach to the new Clerk of the Rules and, great advocate that he is, persuaded her to re-organise the sitting of the High Court judges of the Division so that someone would be available to deal with this matter on the dates listed and we were able to hear the appeal relieved by that news. The hearing is under way before Baron J. as we prepare these judgments.

He recorded that there was effective unanimity about the applicable law and he recited at length paragraphs [99] - [105] inclusive of Lord Hope’s speech in Porter v McGill [2001] UK HL 67, [2002] A.C. 357 and from paragraph 25 of the judgment of the Court of Appeal in Locabail (UK) Ltd v Bayfield Properties [1999] EWCA Civ 3004, [2000] Q.B. 451 at 480. He correctly summarised the test to be “whether a fair-minded and informed informer would conclude that there is a real possibility of potential bias (actual bias not being asserted) on the part of the tribunal”.

Of the allegations that he had apparently made his mind up, he said:

Dealing with the other complaints, the judge said:

There is no dispute about the law. In Lord Hope’s words in paragraph 103 in Porter v McGill: “the question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased”. Mr Randall also directs our attention to paragraph 63 in Lord Hope’s speech in Millar v Dickson [2001] UK PC D4, [2002] 1 W.L.R. 1615 where he referred to:

With those last words ringing in my ears, I consider first the submission advanced by Mr Randall that there is a real possibility that the learned judge had formed so strong a view manifested by his reference to “near conviction” and “obvious[ly] … formed a view” that the husband and the Sheikh were party to an improper combination or campaign so as to throw doubt on the judge’s ability to try the issues with an objective, open judicial mind.

For my part I do not accept that submission. This judge had already had to deal with this matter on many occasions for many days and, in the light of the husband’s appalling forensic behaviour, no observer sitting at the back of his court could have been surprised that he had formed a “prima facie” view nor even that it was “a near conviction”. A fair-minded observer would know, however, that judges are trained to have an open mind and that judges frequently do change their minds during the course of any hearing. The business of this court would not be done if we were to recuse ourselves for entering the court having formed a preliminary view of the prospects of success of the appeal before us. Singer J. did express himself in strong terms and he would have been wiser to have kept his thoughts to himself. But there are times in any trial and in any pre-trial review where a judge is entitled to express a preliminary view and I do not see that Singer J. has over-stepped the mark in the particular circumstances of this case. The husband has behaved disgracefully yet he, noticeably, has not joined in the application for the judge to recuse himself. The Sheikh, who allies himself with the husband, cannot complain too vociferously if some of the judge’s wholly justifiable ire rubs off on him.

In my judgment the judge was right not to recuse himself on the basis that he had apparently already closed his mind.

The other attack upon him is of a quite different character. It will be recalled that Mr Randall invited us to read extracts 1-4 with brackets inserted around the offending words. This was an utterly compelling piece of advocacy. There is a world of difference between saying: “If he chose to depart never to be seen again” and gratuitously adding “if he chose to depart on his flying carpet never to be seen again”. Likewise it would have been unexceptional to say that the Sheikh would be present “to see that no stone is unturned”, without glibly adding “every grain of sand is sifted”. The judge could well make the point that he did not know what lines of communication were available to Saudi Arabia or wherever the Sheikh may be yet once again there was no need for the uncalled-for addition of “at this I think relatively fast-free time of the year”. Without the additional words, the judge was making fair points but the incidental injections of sarcasm were quite unwarranted.

The third example is the worst. Mr Cayford quite clearly did not understand why the judge had interrupted his submission that the Sheikh’s case was not entirely clear by commenting that the affidavit was “a bit gelatinous”. He did not understand the interruption because he would not have appreciated that, as Mr Randall correctly submits, the judge was setting himself up to deliver the punch line to his joke, “a bit like Turkish Delight”.

When I said at the beginning of the judgment that I found this case embarrassing, no little part of my embarrassment comes from my belief that the injection of a little humour lightens the load of high emotion that so often attends litigation and I am the very last judge to criticise laughter in court. I fully appreciate the conventional view that jokes are a bad thing. Of course they are when they are bad jokes - and I am sure I have myself often erred and committed that heinous judicial sin. Singer J. certainly erred in this case. These, I regret to say, were not just bad jokes: they were thoroughly bad jokes. Moreover, and importantly, they will inevitably be perceived to be racially offensive jokes. For my part I am totally convinced that they were not meant to be racist and I unreservedly acquit the judge of any suggestion that they were so intended. Unfortunately, every one of the four remarks can be seen to be not simply “colourful language” as the judge sought to excuse them but, to adopt Mr Randall’s submission, to be mocking and disparaging of the third respondent for his status as a Sheikh and/or his Saudi nationality and/or his ethnic origins and/or his Muslim faith.

I have given most anxious thought to whether or not I am giving sufficient credit for the robustness of the phlegmatic fair-minded observer, a feature of whose character is not to show undue sensitivity. Making every allowance for the jocularity of the judge’s comments, one cannot in this day and age and in these troubled times allow remarks like that to go unchallenged. They were not only regrettable, and I unreservedly express my regret to the Sheikh that they were made: they were also quite unacceptable. They were likely to cause offence and result in a perception of unfairness. They gave an appearance to the fair-minded and informed observer that that there was a real possibility that the judge would carry into his judgment the scorn and contempt the words convey. Singer J. may talk too much; yet he is a good judge. Unfortunately for him and for all of us, on this occasion he crossed the line between the tolerable and the impermissible. For that reason, allowing the appeal is inevitable.

It is an embarrassment to our administration of justice that recusal applications, once almost unheard of, are now so frequently coming to this Court in ways that do none of us any good. It is, however, right that they should. The procedure for doing so is, however, concerning. It is invidious for a judge to sit in judgment on his own conduct in a case like this but in many cases there will be no option but that the trial judge deal with it himself or herself. If circumstances permit it, I would urge that first an informal approach be made to the judge, for example by letter, making the complaint and inviting recusal. Whilst judges must heed the exhortation in Locabail not to yield to a tenuous or frivolous objections, one can with honour totally deny the complaint but still pass the case to a colleague. If a judge does not feel able to do so, then it may be preferable, if it is possible to arrange it, to have another judge take the decision, hard though it is to sit in judgment of one’s colleague, for where the appearance of justice is at stake, it is better that justice be done independently by another rather than require the judge to sit in judgment of his own behaviour.

I agree.

I also agree.