Brittain v Courtway Estates Holdings SA & Anor

In this case the Trustee in Bankruptcy (“the Trustee”) of Michael Rottmann (“the Bankrupt”) claims against Courtway Estates Holdings SA (“the Company”), a company incorporated in the Bahamas but subsequently re-registered in Panama, a declaration “that the property situate and known as 58 Magnolia Dene, High Wycombe, Bucks… was/is beneficially owned by the Bankrupt and accordingly vested in the Applicant by virtue of Section 306 of the Insolvency Act 1986” by application in the bankruptcy proceedings dated 25 May 2007. By a further application dated 12 July 2007, the Second Respondent, Jafar Shayesteh (“S”) in the same proceedings claims that no. 58 Magnolia Dene (“the Property”) referred to in the Trustee’s application, contrary to the Trustee’s contention, belongs to him. By an order of 27 July 2007 of Mr Registrar Nicholls, S was joined as a Second Respondent to the Trustee’s application so that the issues raised by the two applications could be dealt with together.

A bankruptcy order was made against the Bankrupt on 1 December 2005 on the petition of John Tabor (“Mr Tabor”), in circumstances which I will describe, the petition debt being £6,000.

The principal creditor of the Bankrupt is a German institution, the Bundesanstalt Für Vereinigungsbedingte Sonderaufgaben (“BvS”) concerned with the disposal of state assets of the DDR consequent on the reunification of Germany. It appears that the Bankrupt and three confederates succeeded in taking over one such entity, known as WBB, from which they abstracted its assets and in consequence became the subject of both criminal and civil proceedings. The claimant in the civil proceedings, which started in 1997, was the BvS. The claim was for DM169 million or €86 million. The Bankrupt fled Germany in the face of the criminal proceedings in 1995 and after travels came to this country in 1998. He was discovered in this country in October 2000 living under an assumed name. In the interim his three confederates had been prosecuted and convicted in Germany. The Bankrupt was arrested in extradition proceedings brought by the German prosecuting authorities and has since been resisting extradition.

The Bankrupt was married to Yasmin Senft (“YR”) in 1993 with whom he entered into a prenuptial agreement of 15 July 1993 in which she is described as a “student” then 23 years old. The Bankrupt is 27 years older than her. They now have four children.

On his arrest the Bankrupt was found to be living in the Property into which it seems that he had moved with his family in 1998. The proprietorship register in respect of the Property shows the Company as having been registered as the proprietor on 5 March 1998. The Company was incorporated in the Bahamas on 15 May 1997 with an authorised capital of US $5,000 divided in to 5,000 shares of $1 each. At all material times all those shares have been issued in bearer form. On 15 May 1997 Montague Westwood Trust Company Limited (“MW”) of Nevis, West Indies, declared itself to have “an interest of 5,000 shares in the capital of the Company” which they held “as nominee and trustee” for YR.

The vendors of the Property to the Company instructed Messrs. Bettison & Johnson in the sale. That firm’s client account shows the purchase price of the Property, £326,250, being received from the Royal Bank of Scotland Nassau on 22 January 1998. The purchase of the Property was handled by the Sark and Guernsey branch of MW acting through a Mr Lawson, a solicitor who, it appears, has subsequently been struck off the roll. There is no documentary evidence of how or by whom that purchase price was funded.

On 27 March 2001 Messrs. Druces & Atlee, solicitors, wrote to YR a letter of which only the first page is available. The first paragraph on that page reads:-

“Dear Mrs Rottmann

I refer to my recent meeting with your husband, Michael Rottmann, and take this opportunity of thanking you for instructing this firm to represent you in relation to matters concerning Courtway Estates Limited [the Company]. This letter together with our standard terms of business attached explains the basis upon which we shall carry out work for you.”

It appears from answers given by Mr Campbell of that firm at his examination under Section 366 of the Insolvency Act that Druces & Atlee were instructed to “tidy up” the transaction whereby the Property was bought for the benefit of YR, those who had been acting for MW and the Company having disappeared.

There was in evidence an official document emanating from Panama recording the transfer of the residence of the Company from the Bahamas to Panama, dated 17 September 2001 under a new name Courtway Estates Holdings SA, its present name. This document shows as the “resident agent, in Panama concerned with the transfer” the law firm of Icaza, Gonzalez-Ruiz & Aleman (“Icaza”). It appears that Messrs. Druces & Atlee were in contact with that firm from an attendance note showing YR as client and recording a telephone conversation with “Roberta Aleman.” Correspondence and attendance notes in evidence show that Druces & Atlee continued to act for the Rottmanns until, at least, April 2006. On 20 November 2001 Druces & Atlee applied for a copy of the Land Registry entry in respect of the Property.

It is S’s case that the purchase price for the Property in 1998 was provided by a Mr Morteza Mahmoudi (“MM”) who was a well-established dealer in carpets in this country and Iran. On 28 November 2001 MM apparently wrote to YR at the Property as follows:-

“In respect of Courtway Estate Holding S.A. (the Company) and the beneficial interests of property known as 58 Magnolia Dene, High Wycombe, Bucks HP15 7QE, located at United Kingdom.

Due to security and other exchange and overseas assets tax restriction in Iran, I hereby would like to appoint you to act as my nominee and hold for me the entire interests of the registered shareholding of the company Courtway Estate Holding S.A.

However, I will remain the beneficial owner of the property and the Company until such a time when I shall notify you as trustee to act as per my instruction.

I confirm that I will, at all material times, keep you as Trustee indemnified against all costs damages expenses claims proceeding and demands in respect of the property and the shares of the Company and any dealing with it authorised by the Purchasers and Trustee shall not be required to incur any expenditure in respect of the property except in so far as the money in respect of it shall be provided by me.”

The letter is signed “Morteza Mahmoudi” and countersigned under the words “I hereby agreed [sic] to act as nominee” by YR.

It seems from a document in evidence dated 15 December 2003 that on that date the Company entered into a licence with the Bankrupt to occupy the Property from 14 August 2003 until 13 August 2005 “such occupation being by the licensee and his family personally only, and to use the Owner’s furniture and effects there,”.

The Bankrupt achieved a settlement of the claim against him by BvS for €50 million in January 2005. It seems that in early April 2005 he consulted a Mr David Rubin of David Rubin & Partners, a firm of accountants specialising in insolvency. On 20 May 2005 Mr Rubin wrote to the Bankrupt as follows:-

“I refer to our meeting at my Bedford Row office on 18 May 2005, which I felt was extremely useful. Thank you very much for your cheque in the sum of £2,000, which I will be placing in this firm’s client account and will be used to defray my time costs in dealing with your affairs.

As discussed, I think it would be sensible for you to have the advice of both an insolvency practitioner such as myself, as well as an insolvency solicitor. In that regard, I have recommended Grant Rechnic of Messrs. Rochman Landau. You said you would be in touch with Grant in due course and I will attempt to meet with Grant early next week, in order to discuss your case and, in particular, highlight the issues upon which I need Grant’s legal advice.”

On 6 June 2005 the Bankrupt wrote to Mr Rubin:-

“I had a short phone discussion with Grant and as he wants to see the underlying documentation, I have asked to look for the requested originals. This will take about four weeks and then some time for translation. I am however not convinced that this route will provide any answers to rely on as Grant wants to enhance the interpretation of the documents by a personal interview of the parties to ascertain their state of mind 10 years ago. For the time being I will proceed and keep you posted on the progress.”

On 8 June Mr Rubin responded as follows:-

“Thank you for your e-mail of 6 June 2005. I did speak with Grant Rechnic at a recent conference in Athens and we had a brief discussion about the case.

As discussed at our meetings and in correspondence, your three alternatives are going to be:

1.

To fight the claims against you by the German tax authorities and others.

2.

To propose an Individual Voluntary Arrangement pursuant to Part VIII of the Insolvency Act 1986 (as amended).

3.

To either declare yourself bankrupt or to wait for one of your creditors to issue a Bankruptcy Petition against you.

If, as I suspect, you take the third alternative, it is absolutely crucial that a skilled insolvency solicitor pushes and shoves at the foundations of the gift you made to your wife during the 1990s, part of which was used to purchase your current matrimonial home. To go into any of the above procedures without such a vigorous test would not, in my opinion, be sensible.

I appreciate that the estimation of Grant’s costs in dealing with this matter are slightly higher than you had originally envisaged, however, I can assure you that it is my view that this work should be carried out, sooner rather than later.

If Grant’s findings are that the house is safe from attack from any quarter, the decision as to your future will be far easier to consider. Naturally, the state of mind of the participants at the time of the transfer, some ten years ago, is vital to the entire exercise, as we have already discussed.

Please accept my humble apologies if this advice is not what you wanted to hear, but it is my view that this work should be undertaken at the earliest opportunity by a solicitor specialising in this field and likely to be instructed himself by a Trustee in Bankruptcy who would undoubtedly make the attempt to pursue your matrimonial home.”

It appears that the letter of 8 June was followed by an exchange of e-mails which are not available. On 11 June the Bankrupt wrote to Mr Rubin as follows:-

“I am sorry if my e-mail sounded as if I would not take your advice re Grant Rechnic or some other qualified insolvency practitioner. During the talk with Grant Rechnic the reasons became less obvious than you are emphasizing (vigorous test) now.

It is a fact that none of the documents were in this country, as you will surely appreciate, we did travel light during the years of hiding. I am presently ascertaining in which offshore location the documents are stored.

I had asked the German Notary Public to provide a duly executed copy of the Pre-Nuptial agreement and in the meanwhile I have received the notarised copy of the Pre-Nuptial agreement. The signed and dated original document with which my wife and I have agreed that, following the birth of our first son and giving due consideration to the fact that she had given up her University studies in Political Science and would for some time not be able to re pursue these activities, a sum should be set aside for her independent security, will be next. Then I will order the translation work and make all available to Grant Rechnic and to you. As I had pointed out to you the demands from the German Internal Revenue Service are being contested before a court in Germany.”

This run of correspondence concludes with Mr Rubin’s letter to the Bankrupt of 21 June 2005 which reads:-

“Apart from advising you generally, as well as dealing with any insolvency matters that may arise later on, I see my first and main task to ensure that the matrimonial home is safeguarded. As a secondary priority, but probably equally important from an emotional point of view, any monies held by your wife in respect of the 1995 settlement must also stand beyond attack.

As a Trustee in Bankruptcy, I have in the past pursued similar assets using Grant Rechnic of Rochman Landau and other equally qualified insolvency solicitors. It remains my view, therefore, that, in order to ensure that these assets are safeguarded – as I believe they are, the foundations of the various transactions must be shaken and tested to ensure that they do not succumb to attach by a Trustee in Bankruptcy in the United Kingdom.

For the record, I believe that your ultimate strategy will be to declare your bankruptcy in the UK and, once that has occurred, it is more than likely that a Licensed Insolvency Practitioner will be appointed as your Trustee in Bankruptcy. It is also likely that either the court authorities or the Inland Revenue authorities in Germany will appoint such a Trustee and you can, therefore, expect a vigorous attack on any assets that you may have held over time. Naturally, if your Trustee accepts your explanations and does not attack those assets, then so much the better. My view, however, is “forewarned is forearmed”.

Perhaps when you have all of the documents in your hands, we can have a further brief meeting to go through them. There are a number of housekeeping matters that I would like to discuss with you as you get nearer to your decision.”

In evidence was a document headed “general power of attorney” dated 21 August 2005 by which it appears that MM, from an address in Tehran, “irrevocably” transferred to his “agent” Saed Samii of an address in Tehran “all rights attached to me as shareholder of Courtway Estates Holding S.A., Panama” granting him “full power and authority to act on my behalf” in relation to that company and its shares. This document appeared for the first time attached to an affidavit of S sworn on 16 May 2008, the last of a series of five statements by him in which he says it had been sent by MM to him on 12 May.

On 13 October 2005 Mr Tabor presented a petition seeking a bankruptcy order against the Bankrupt for a petitioning debt of £6,000. It is not in issue that Mr Tabor had a background of being in business but by this time was in his early eighties. The petitioning debt was not one incurred by the Bankrupt directly with him but represented a loan made by Mr Abdul Latif to the Bankrupt in May 2004 subsequently assigned to Mr Tabor.

Mr Latif swore an affidavit in the proceedings upon which he was cross-examined. At paragraph 5 of his affidavit he states that he was introduced to the Bankrupt by MM, his “business associate and friend” in 1997. At paragraph 15 he accepts that he and the Bankrupt “entered into business relationship and formed certain limited companies” of which he names three, in respect of each of which the Trustee had produced extracts from their files at Companies House. Further on in paragraph 15 he says “none of these formed companies has ever been successful in the trade.” At paragraph 29 Mr Latif states that he understood “from Mr Mahmoudi he knew [sic] Mr Rottmann for many years.” Under cross-examination he accepted that the Bankrupt had an office in his (Mr Latif’s) building known as “Latif House” from which he conducted his own business. From the same sources, namely, the Trustee’s searches of company records, it appears that both the Bankrupt and Mr Latif had business relationships with Mr Tabor.

Under cross-examination Mr Latif was unable to give any satisfactory explanation for why he assigned the Bankrupt’s indebtedness to him to Mr Tabor, so that Mr Tabor could present a petition against the Bankrupt, for which service, Mr Latif said, Mr Tabor was to be paid a commission.

A bankruptcy order was made against the Bankrupt on 1 December 2005. There is no evidence that any attempt was made by him to oppose the petition or pay the petitioning debt. A Mr Brenner was appointed his Trustee in Bankruptcy on 17 May 2006. Mr Brenner made a witness statement in the proceedings dated 27 October 2006. At paragraph 3 of that statement he says this:-

“3.

Michael Karl Rottmann was made bankrupt on 1 December 2005 on the petition of one John Tabor. I do not have a copy of the petition. However Mr Tabor approached my firm on or about 21 February 2006 requesting that I take the appointment as Trustee. I was reluctant as there did not appear to be assets but Mr Tabor was insistent and promised verbally to my consultant Cyril Gold to fund the estate to the tune of £4,000 to persuade me to consent, which I finally did. … At page 3 to 5 is a copy of the Official Receiver’s report to creditors. …”

The Official Receiver’s report on the Bankrupt’s statement of affairs shows no assets and total liabilities of £45,547,570 including “income tax in Germany” of approximately £8 million and “litigation settlement in Germany” of approximately £34.5 million. Mr Brenner’s witness statement continues at paragraph 4:-

“4.

In fact Mr Tabor never funded anything. Copies of our communications with him are at pages 6 to 8. He never submitted any proof of debt …. ”

The address shown by the Bankrupt on his statement of affairs is Latif House.

The “communications” referred to by Mr Brenner include a letter from Mr Tabor to Mr Gold of Mr Brenner’s office of 14 June 2006 which reads:-

“Re Michael Rottmann

Further to my letter dated 29 May I would like to make it clear that I do not wish to have anything further to do with this matter. The debt of £6,000 was assigned to me by Mr Latif and I am now referring all matters related to Mr Rottmann to him. I have forwarded your correspondence received yesterday. I am not making any claims against Mr Rottmann and will not attend any hearings. I would appreciate therefore your confirmation that I am no longer involved in this affair.”

Mr Tabor was not called to give evidence.

Meanwhile on 20 December 2005 MM applied to the Land Registry for a restriction on dealings with the Property on the ground, revealed at box 13 of the application form, that “I have provided the entire purchase money for this property registered at title no. BM80391.” This restriction was not actually registered until March 2006 according to Mr Samii, a solicitor who drafted the application. No explanation was offered for why this restriction was thought necessary if MM had acquired the Company’s issued shares.

There was in evidence a document dated 2 January 2006 appearing to record an agreement between the Company and YR granting YR a licence to occupy the Property from 14 August 2005 (when the previous licence to the Bankrupt expired) until 13 August 2007.

S filed a total of five affidavits and witness statements. In the second of those, dated 11 July 2007, he describes himself at paragraph 3 as “a citizen of the Islamic Republic of Iran and a businessman by occupation”. He then continues:-

“I had never met or known Mr Michael Rottmann or his wife Yasmin Rottmann until I went to see and examine the property 58 Magnolia Dene before I purchased the said property in June 2006. I had been informed by Mr Morteza Mahmoudi they [the Rottmanns] were the lessees of the premises and that they were to give up possession by the end of October 2006.

1.

On or about the twenty-first day of June 2006 I purchased all the beneficial and proprietary interest in the said property …from Morteza Mahmoudi…. I purchased the said property in good faith and for value without notice of any restriction except the charge in favour of Mr Morteza Mahmoudi which has been assigned to me by way of form RX4 duly signed and witnessed.

2.

At the time of purchase by me, 58 Magnolia Dene was occupied by Mr and Mrs Rottmann with their four children. I was informed again that Mr Rottmann and his family would give up possession of the said property on or about 31 December 2006.

3.

I purchased all of the beneficial interest in the said property for a consideration in the sum of £750,000. I paid this said sum of money to Morteza Mahmoudi by traveller’s cheques (cash) in Iran in Iranian riyals. It was a term of the purchase that if the vacant possession is not delivered up by 31 December 2006, the vendor shall have to pay 5 million riyals for each day of delay….”

Then at paragraph 10 he says “I declare that Mr Michael Rottmann or his family have no connection or relation with me.”

In his affidavit, the third of the series, dated 30 July 2007, at paragraph 2 he says that MM was a friend of his father whom he, S, had known for many years, and, in early 2006, MM knew that he intended to move to and set up an office in the UK in 2007. The affidavit continues at paragraph 3:-

“Morteza Mahmoudi offered me to purchase a property he owns in the UK namely [the Property] together with the company Courtway Estate Holdings SA.”

According to S he was considering the Property as a house where he could live with his mother.

Then, having, at paragraph 4, described MM as “a well-known figure in our community in Tehran”, and at paragraph 5 the difficulties encountered by wealthy individuals in Iran, continues at paragraph 6:-

“I am aware that among wealthy Iranians properties registered in offshore companies are located in Europe and the US. These properties change hands frequently in Iran and the exchange of bearer shares together with cash transactions for the property before an Iranian notary are the norm.

7.

Morteza Mahmoudi invited me to see the property after I had expressed interest. I viewed the property in May 2006. I travelled to High Wycombe and inspected the premises and the surroundings. I met a gentleman at the property with two boys the apparent tenants of Morteza Mahmoudi. During the same trip I investigated – talking to various real estate agents – the value of the property which was quoted between £750,000 to £780,000. After hard bargaining my offer of £750,000 was accepted on the condition that there was a sitting tenant who would give up possession in December 2006. Secondly assets could be transferred in the UK without money moving out of Iran, I therefore paid the purchase price in Iran.”

Then continuing at paragraph 11 he says:-

“11.

In February 2007 the property had not been released to me nor had the tenant moved out. A further agreement was needed so Morteza Mahmoudi who apparently was very ill and had just come out of hospital – could avoid paying the contractual penalty. This additional agreement allows that the tenant – as I understand now the bankrupt Michael Rottmann – could stay till December 2007 for consideration to be paid by Morteza Mahmoudi. …

12.

This additional agreement has the condition that I take one room in the house for my immediate use.”

In the course of his cross-examination S admitted that Mr Latif was a “child friend” of his and that he had been introduced to Mr Tabor by Mr Latif in Iran. He accepted that the registered address of his companies incorporated in England was Latif House and that Mr Tabor was their company secretary. Accompanying this witness statement were a series of documents in Farsi together with the English translations apparently recording a sale of the Property by MM to S on 21 June 2005 at a price in Iranian riyals the equivalent of £750,000, a document headed “share purchase agreement” appearing to record a sale by MM to S of 5,000 shares of US $1 each in the Company for £750,000, a tenancy agreement appearing to record a lease by S to MM of the Property for the period between 30 January 2007 and 30 January 2008 at a rental of £1,950 per annum and documents appearing to record the sale of gold coins by S on 17 June 2006 sufficient to raise £814,209.40.

On 11 April 2006 MM’s application for a restriction on the Property was referred by the Land Registry to Druces & Atlee as the Bankrupt’s solicitors who referred it on to the Bankrupt. Their attendance note of their resulting conversation with the Bankrupt is in evidence. In the course of the conversation the Bankrupt indicated that he was expecting that the notice would go to “the agents for Courtway Estates”. He initially said he knew nothing about the notice but then said he did not wish to comment “although he did understand the implications”.

On 24 November 2006 on the application of Mr Brenner an order was made suspending the discharge of the Bankrupt’s bankruptcy and on 3 January 2007 Mr Brenner was replaced as Trustee in Bankruptcy by Mrs Louise Brittain of Messrs. Baker Tilly, the Trustee.

It appears from a bill for legal services sent by Icaza, dated 20 April 2007, and sent to YR that that firm received a letter from YR on 30 March 2007 instructing them to prepare a board resolution of the Company “for the granting of a power of attorney to Mr Abdul Akmad Amir Akbar to sell the property in London and for obtaining certain documents in relation to the company.” This power of attorney together with minutes of a meeting of the board of the Company on 10 April 2007 authorising it were in evidence. The power was “to sell the property located at 58 Magnolia Dene…at the conditions set by the shareholder and to disburse the proceeds to the shareholder as identified by the bearer share presented to the conveyance solicitors.” Those documents were sent by the Panamanian lawyers to YR by letter dated 20 April 2007. Mr Akbar gave evidence. He was an accountant.

On 2 February 2007 an order was made in the bankruptcy redirecting the Bankrupt’s post to the Trustee. As a result of this redirection the Trustee received a letter addressed to the Bankrupt dated 30 March 2007 from MM as follows:-

“I am sorry to receive your letter dated 12 last month informed me your wife Jasmine is leaving you. I could not understand why considering 4 children and current circumstances??? Some one must be behind it.

I have been in hospital for last 2 months and I have seen your letter just recently.

I feel much better.

Michael – I am not sure how this position for my health will be continued. But I hope I could continue supporting you until such a time that your problems will be resolved.

If any thing happens to me I assure you that I have arranged a way that the support will be continued regularly.

I owe my life to you and I sincerely hope that I live long enough to see your problems solved.

Once more I am sorry that Jasmine has decided this way.

Please keep in touch and inform all progress.”

On 5 February 2007 the Bankrupt was interviewed by the Trustee assisted by her solicitor Frances Coulson. In the course of the interview the Bankrupt was asked about his occupation of the Property and the fact that, as he admitted, he was living in it rent free. He answered that a “good friend” owned the Property but he was not prepared to disclose the name of that friend. As a result of the evidence in this application we now know that the friend was MM. As a result of further questioning the Bankrupt admitted that he was regularly receiving payments from the same “friend” amounting to approximately £40,000 a year.

The Bankrupt was questioned about his other assets, in particular, assets which he possessed prior to the proceedings being brought against him in Germany. He accepted that this amounted to “millions” held in Switzerland. When asked what had happened to those “millions” he mentioned the cost of defending the various proceedings against him. He was then asked whether he had given any of this money away between 1990 and mid-1995. His answer was “that is an obvious conclusion”. However, under further questioning, he refused to give any particulars of those gifts. He said that he had not made any gifts after 1996.

On 5 March 2007 the Trustee interviewed YR. She described their travels on leaving Germany in 1995 and their arrival in England in 1998 and at the Property where they came to live. She described how they lived under an assumed name “Reinking” until their presence was discovered by the authorities in October 2000 and the Bankrupt was arrested and held on remand for a period during which he met Mr Latif.

The picture presented by YR of herself after her arrival in England, was of a wife who occupied herself solely with looking after her four children and having nothing to do with any of the business activities of her husband. She signed documents when asked to do so by the Bankrupt, in particular, the licence granted to her by the Company, in her sole name, to occupy the Property. She did know, however, that solicitors Messrs. Druces & Atlee were advising them after their arrival. She was not clear whether they ever acted for her as opposed to the Bankrupt.

YR knew that the everyday expenses of herself, the Bankrupt and their four children were financed by money received from a friend but she was unable to identify who this was. She said she had not received substantial sums of money from the Bankrupt directly or indirectly in the course of the previous ten years but was not sure whether she had received any such sums prior to that period.

She was not asked, directly, whether she knew anything about the Company or MW. She was not asked whether she knew anything about MM or could recollect the circumstances when she signed the document 28 November 2001 which purported to appoint her as acting as nominee for MM in respect of “the entire interests of the registered shareholding” of the Company. In the course of her cross-examination the Trustee said that it had been her intention to seek a further interview with YR.

These proceedings were commenced by application dated 25 May 2007. On that day, on the application of the Trustee, Mr Justice Blackburne made a freezing order against the Company, search orders directed to the Property and to the offices where the Bankrupt appeared to be working at Latif House and an order directed to the Bankrupt ne exeat regno. Amongst the documents found in a safe at Latif House was a bearer share certificate for the 5,000 shares in the Company.

In the course of the execution of the search order at Latif House on 5 June 2007 a courier van arrived at those premises to make delivery of two small packages addressed to Immigration Premium Limited, a company of Mr Latif. They were received by the supervising solicitor of the search and he opened them to discover that they contained magazines and that between pages of the magazines, which had been stuck together, were concealed small denomination Euro notes amounting to €10,000. The sender of the packages was a Mr Reinking, a German lawyer who had been acting for the Bankrupt in the various proceedings brought against him in Germany, to which I have already referred. It will be remembered that, on arrival in this country, the Bankrupt adopted Mr Reinking’s name.

Initially Mr Latif laid claim to the money but that claim was withdrawn. The Bankrupt, representing that the money was a loan to him by Mr Reinking, claimed it, presumably as “after acquired property”. The Trustee contended that the money was an asset of the Bankrupt vested in her.

The dispute was the subject of an application in the bankruptcy which was dealt with by Mr Registrar Nicholls who gave judgment on 15 February 2008. He concluded in favour of the Trustee and that the 10,000 euros, on the balance of probabilities, “were monies which Mr Reinking was obliged to pay, provide or reimburse to the debtor.”

From the transcript of the evidence before Mr Registrar Nicholls it emerges that, in the course of the hearing, it was accepted on the Bankrupt’s part that, besides providing the Bankrupt with the Property to live in rent free, MM made payments of cash from time to time to him. In addition he was able to pay substantial sums in Euros to his solicitors representing him in the Criminal proceedings against him in cash from sums which he suggested he had hidden in his house.

It appears to me that there are two main issues in the case:-

I will deal with the first issue. It seems to me that the key to the solution of what is a pure issue of fact, is to be found in the correspondence between the Bankrupt and Mr David Rubin which I have set out above and, in particular, in the letter of 8 June 2005. From that letter it emerges that the Bankrupt had told Mr Rubin that the Property was purchased from a fund the subject of a “gift you made to your wife during the 1990s, part of which was used to purchase your current matrimonial home.” In Mr Rubin’s letter of 21 June 2005 the “gift” is referred to as “the 1995 settlement”. Given the situation in June 2005, it is clear that the “matrimonial home” being discussed must have been the Property. In the course of his interview with the Trustee the Bankrupt appeared to accept that in the early 1990s he was a wealthy man and had given away part or all of his wealth prior to 1996. It is plain from this correspondence that the Bankrupt was seeking Mr Rubin’s advice as to whether, if he became bankrupt, that fund, or any identifiable asset which that fund purchased, could be taken by a future trustee in bankruptcy for the benefit of his creditors.

It is not known whether Mr Rubin, or the solicitor expert in insolvency whom he recommended, actually advised on whether the “gift to the wife” could be attacked. What did happen, however, was that, shortly after the exchange of letters between the Bankrupt and Mr Rubin, a bankruptcy order was made against the Bankrupt on what appears plainly to have been a contrived petition. It is clear from the letters of 8 and 21 June that the plan was that Mr Rottmann should evade his debts by becoming bankrupt in England, obtaining his discharge after one year, while preserving his pre-existing assets intact in the form of a fund or property vested in others but to which he would have access. This would be achieved by the contrived bankruptcy revealing no assets available to fund a diligent enquiry into the previous dispositions of the Bankrupt’s considerable wealth. It was presumably thought that it would add to the strength of the deception that the Bankrupt should not present his own petition, but that the bankruptcy order should be obtained upon the petition of someone who was colourably a creditor. Mr Brenner was persuaded to accept appointment on the promise that his costs of acting as trustee would be funded by Mr Tabor to the tune of £4,000. That funding never appeared and Mr Tabor then backed out.

What then followed was an event which was plainly inconsistent with the successful achievement of the Bankrupt’s plan, namely, the successful application by Mr Brenner to suspend the Bankrupt’s discharge followed by his replacement by a well-funded and active trustee.

As I have said, we do not know what final advice, if any, the Bankrupt obtained from Mr Rubin or his recommended solicitor. However, in my view it can reasonably be assumed that, either they would have advised him or alternatively he came to realise, his settlement of funds on his wife in 1995 might be set aside by a trustee in bankruptcy pursuant to Section 423 of the Insolvency Act and the fund, or any asset purchased with money from that fund, which was traceable, recovered for the benefit of his creditors. It was presumably realised that it might be possible to trace the source of the purchase price paid for the Property by MW. It was therefore necessary to bring into existence an alternative source for that money, thus the appearance of MM, apparently a long-established friend of the Bankrupt.

S’s case depends on it being established that the instructions to MW to acquire the Company as a vehicle for the purchase of the Property came from MM who also provided the money to fund the transaction. The difficulty which that case encounters is that there is no evidence that that is what happened. Nowhere in the correspondence between the vendor of the Property’s solicitors and MW, through Mr Lawson, is there any mention of MM. Messrs. Druces & Atlee write on 27 March 2001 accepting YR’s instructions “in relation to matters concerning Courtway Estates Limited.” Nowhere in Druces & Atlee’s correspondence, primarily with the Bankrupt, which is in evidence, is MM mentioned. In the course of his examination under Section 366, on 5 December 2007, Mr Campbell of Druces & Atlee, who had been instructed in 2001 to tidy up the transaction under which the Property had been purchased and who remained instructed until late 2006, said he had never heard of MM. He had not heard of S until S contacted his firm “earlier this year” [2007] claiming to own the Company. S presents MM as a long-standing friend of his family and himself. It is to be assumed, therefore, that MM would be an active supporter of S’s case in these proceedings. MM is, apparently, a substantial businessman. It is to be presumed, therefore, that he would be able to provide documentary proof of value passing from him to MW with which to fund the purchase of the Property – bank statements, paid cheques etc. No such evidence has been produced. The only evidence that MM supplied the purchase price for the Property is contained in his application to impose a restriction on the disposition of the Property dated 20 December 2005.

MM made a witness statement intended to be used in these proceedings. At a late stage in the preparation of the case an application was made that his witness statement be admitted without his attendance for cross-examination which was opposed by the Trustee and which was dismissed. He did not attend to give evidence. I have, however, read his witness statement. It does not contain any evidence of how MM acquired the Company’s 5,000 bearer shares. It seems from the single sentence justifying MM’s application for a restriction order that those shares must have been acquired in the process of the establishment of the Company and its purchase of the Property and not as a result of any subsequent purchase. The bearer shares in question were found in the course of executing the search order at Latif House.

In my description of the facts, I drew attention to the letter from MM to YR of 28 November 2001 apparently appointing her as his nominee to hold his interest in the Company’s shares. This document presents a number of difficulties. It does not appear to take account of the fact that MW had already declared themselves trustees of the shares for YR back in 1997. If those shares actually belonged to MM as a result of his having provided the purchase price for the purchase of the Property at that time, MM presumably regarded her as his nominee at that time and he would hardly have worded the letter in the way that he did if he was simply confirming her nomineeship in November 2001. In any event, title to bearer shares attaches to the individual in whose custody they are from time to time. Save for the fact that they were found in Latif House, which is ambiguous, there is no evidence that YR has ever had possession of these bearer shares. They should have been at all times in the possession of MW who should have held them in pursuance of the trust which they declared in favour of YR. If YR was as she represented herself to be, it is extraordinary that MM should have selected her to be his nominee. It seems to me highly likely that his letter was brought into existence subsequently to its date as part of the process of introducing MM as the financier of the purchase of the Property.

A sale by MM to S of the Company’s shares on 21 June 2006 is inconsistent with his “irrevocably” transferring his rights as a shareholder of the Company to Mr Samii on 21 August 2005, see paragraph 17 above. A board resolution of the Company on 10 April 2007 authorising Mr Akbar to sell the Property is inconsistent with such a sale having taken place on 21 June 2006, see paragraph 33 above.

Finally, and perhaps most tellingly, if MM had in fact financed the purchase of the Property in 1997/8, there was no purpose in the Bankrupt seeking the advice of Mr Rubin in April 2005 on the basis that he appears to have sought it, made plain in the exchange of letters in June 2005.

S was joined as a party to the Trustee’s application so that his claim to the Company’s shares could be dealt with simultaneously with that of the Trustee. He was joined as a Respondent to the Trustee’s application. However, it seems to me that he is in the position of a claimant and that the burden of proof rests on him to establish his claim to the Company’s shares. In my judgment he has failed to do so because he has failed to show that MM ever acquired those shares so as to be able to sell them on to him.

I therefore turn to consider the second issue, namely, whether the Trustee is entitled as against the Company to a declaration that the Bankrupt was the beneficial owner of the Property which now vests in the Trustee under Section 306. My conclusion on the first issue means that, as matters stand, the legal owner of the Property is the Company. Both board and shareholder control of the Company rest with MW save that MW have declared themselves as holding the 5,000 issued shares of the Company in trust for YR and those shares are bearer shares currently in the possession of the Trustee as a result of the search order. If the picture painted by the Bankrupt’s letters to Mr Rubin of 8 and 21 June 2005 is correct (and the Trustee has submitted up to this point that it is correct), the Property was purchased with money provided from a fund to which YR is entitled as a result of a gift from the Bankrupt in 1995. The Property is the only asset of the Company. It follows that YR, as things stand, has a competing claim to a beneficial interest in the Property, either because she has a beneficial interest in the shares, which control the Company, which in turn owns the Property, or because the Company holds the Property on resulting trust for her as the provider of the funds which purchased it from the Bankrupt’s settlement on her.

At paragraph 52 of his written closing submissions Mr Davenport sets out five alternative ways (a) – (e), by which the Trustee can obtain the declaration which he seeks. I will deal with each in turn.

As I mentioned in the course of the argument, there is a simple remedy available to the Trustee but one which requires YR and probably MW to be parties, namely, a claim that the transaction by which the Property was purchased by the Company with money provided from a fund whose origin was the Bankrupt can be set aside as a transaction in fraud of creditors pursuant to Section 423 of the Insolvency Act 1986. I will discuss with counsel the orders which need to be made to bring the matter back to the court on this basis and to continue to preserve the Property in the interim.

In the result I dismiss S’s claim to have an interest in either the Property or the Company’s shares. I will make no order on the Trustee’s claim today.