Khulood Abdulla Hassan Al Rostamani & Ors v Mohamed Hassan El Haddad

This was the final hearing of a bankruptcy petition (“the Petition”) presented on 4 September 2024 by various members of the Al Rostamani family against Dr Mohamed Hassan El Haddad (“Dr Haddad”). The Petition was based on three costs orders made against Dr Haddad in favour of the Petitioners (amounting in aggregate to £1,478,565) as follows:

Those Orders, made in 2021 and 2022, created judgment debts in liquidated sums which have not been paid; interest at 8%, the judgment rate, continues to accrue.

Broadly, the Petition was opposed by Dr Haddad on grounds that he has a serious and genuine cross-demand, and/or that the Petition was an abuse of process and would serve no useful purpose, and/or that the Petitioners have acted unreasonably by failing to accept certain alleged offers relating to land owned by a Saudi company in which Dr Haddad holds a 51% stake, and/or that the Costs Orders were procured by fraud (or in any event, that the court should “go behind” those judgments, and refuse to make a bankruptcy order by reference to them). None of Dr Haddad’s other creditors either opposed or supported the Petition.

To explain those grounds, it is necessary to say something about the history of this dispute.

Essentially, the purpose of the Partnership Proceedings (described in greater detail in the judgment of Zacaroli J at [2021] EWHC 1892 (Ch)) was to establish the existence of a partnership allegedly entered into by Dr Haddad with the First Petitioner, Ms Khulood Abdulla Hassan Al Rostamani (“Ms Khulood”) in 2002. Dr Haddad alleged that Ms Khulood and the other defendants (including the Petitioners) had devised and executed a plan to misappropriate partnership assets in England and Dubai. Amongst other things, he sought an order for the dissolution and winding-up of the partnership, and all necessary accounts and inquiries.

Again in brief summary, amongst other things, Zacaroli J held that “the issue which lies at the heart of these proceedings” - whether there was an “overarching partnership” between Dr Haddad and Ms Khulood - had already been conclusively determined in proceedings in Dubai decided ultimately by the Dubai Court of Cassation (the final court of appeal) in 2020 in case number 508/2019 (in which it was held that the issue had been decided previously by the Court of Cassation in 2018 in case number 548/2017); he held that “there is no serious issue to be tried as to whether Dr Haddad can refute the contention that his claim based on the alleged Partnership is barred by issue estoppel”; accordingly, he held that Dr Haddad had not established a good arguable case that his pleaded claim fell within any of the “gateways” for service out of the jurisdiction in paragraph 3.1 of PD 6B.

Of some importance in the present context, before Dr Haddad began the Partnership Proceedings, the Petitioners’ solicitors, Allen & Overy, had written a substantive response to his solicitors’ letter before action, in which they had argued that the issue concerning the existence of the partnership had already been determined in the Dubai proceedings. However, when Dr Haddad applied for permission to serve out of the jurisdiction, he made no reference to that letter, and omitted to exhibit it to his evidence; indeed, he made no reference at all to the fact that the defendants intended, as he knew, to rely on issue estoppel.

Zacaroli J held that this failure was a breach of Dr Haddad’s obligation to give full and frank disclosure; moreover, he held that his failure was no mere “oversight”, but was born of “a positive desire … to avoid engaging with the possibility” of an issue estoppel. At [134], Zacaroli J said:

“For these reasons, had it been necessary to do so, I would have found that not only was Dr Haddad in breach of the obligation to provide full and frank disclosure on his application for service out, but that the evidence was positively misleading and that these failings were the result of deliberate conduct as opposed to accidental omission. In accordance with the principles set out at [122] to [126] above, I would have set aside the Service Out Order, leaving it to Dr Haddad to make a further application for service out. ….”

From that it follows that the costs order made by Zacaroli J on 8 November 2021 - the First Costs Order - would very likely have been made against Dr Haddad regardless of the merits of the argument concerning issue estoppel (in respect of which, in any event, Dr Haddad lost).

On 23 February 2023, Dr Haddad began further proceedings (BL-2023-000283 - “the Fraud Proceedings”) against the Petitioners and eleven other Defendants, including lawyers acting for the Petitioners (comprising Allen & Overy (now A&O Shearman), Clyde & Co, senior solicitors at both firms, as well as leading counsel and junior counsel). By those Proceedings, Dr Haddad sought to set aside the orders made by Zacaroli J and all other orders made against him in the Partnership Proceedings (including in the Court of Appeal) on grounds (as stated in the Claim Form) that “they had been procured by deliberately misleading the court, and/or obtained by fraud and/or were tainted by deceit and/or were tainted and affected by fraudulent conduct”.

By his judgment given on 1 March 2024 (at [2024] EWHC 448 (Ch)), as against the “Lawyer Defendants” (as he defined them at paragraph [3] of his judgment), Fancourt J struck out the proceedings and gave reverse summary judgment. Between paragraphs [8] and [20], as follows, the judge described events since the judgment of Zacaroli J in July 2021:

“8.

To say that Dr Haddad was aggrieved by the judgment would be a considerable understatement. He first applied to Zacaroli J to recuse himself from hearing his application for permission to appeal, and when this was inevitably refused he advanced 66 grounds of appeal, which included that the judgment was obtained by fraud of the defendants' expert witness of UAE law, Mr Aidarous, and that the Judge was apparently biased. Permission to appeal was refused.

9.

Dr Haddad then applied to the Court of Appeal for permission to prepare a skeleton argument estimated to require 139 pages to address 111 alleged errors of fact or law in the judgment (62 of which related to the issue estoppel issue), one allegation that the judgment was obtained by fraud and six allegations of misleading the court, and allegations of breach of natural justice and fairness and lack of independence on the part of the tribunal. (Dr Haddad was represented before Zacaroli J by Andrew Ayres QC but prepared the intended appeal himself and then persuaded junior counsel, Mr Baki, to lend his name to the skeleton argument.) At the same time, Dr Haddad applied to the Court of Appeal for permission to adduce a bundle of about 1350 pages instead of the permitted 350 pages in support of his application for permission to appeal.

10.

The Court of Appeal refused permission for a longer skeleton argument and larger appeal bundle, but Dr Haddad took no notice. He filed a skeleton argument running to 81 pages, his extensive appeal bundle, and an application to rely on new evidence, including a new, further expert report from his UAE law expert, Dr Khrais. The skeleton argument addressed (in the event) 57 grounds of appeal that were pursued, which focused mainly on the issue estoppel argument, contending (essentially, but in multifarious different formulations) that the Judge had erred in concluding that the existence of an English partnership with Ms Khulood had been the subject of consideration or decision in the UAE cases. The skeleton also contained grounds:

i)

that, on the basis of the new evidence of Dr Khrais, that the expert evidence of Mr Aidarous had deceived the Court;

ii)

that the solicitors acting for the defendants to the Partnership Claim and their leading and junior counsel had dishonestly misled the court, and so the judgment was obtained by fraud; and

iii)

further, that the judgment was in breach of the rules of natural justice and of Article 6 of the ECHR.

The bias allegation was dropped at that stage.

11.

It is notable, therefore, that the application for permission to appeal the 2021 Judgment included allegations of fraud by the Lawyer Defendants at that stage.

12.

Males LJ refused permission to appeal, principally on the basis of the serious failure by Dr Haddad to give full and frank disclosure, and so dismissed the application for permission to rely on new evidence. In his reasons, he explained that it would be wrong to leave the matter there, and commented that the skeleton argument was incoherent and that it was hard to see that there was any proper basis for allegations of dishonesty on the part of Mr Aidarous, solicitors or counsel. His Lordship therefore directed a hearing to explore with Mr Baki of Counsel whether there was any proper basis for the allegations of dishonesty that he had pleaded.

13.

At that hearing, Mr Baki disavowed the allegations of dishonesty and apologised for lending his name to allegations that he was not able to justify, though he made clear that Dr Haddad would continue to pursue the matter of dishonesty elsewhere. Males LJ dismissed the applications for permission to appeal, and for permission to appeal his order for costs, as being totally without merit. This obviously included the attempt to appeal on the basis that the Court had been deceived by the Lawyer Defendants and wrong about the issue estoppel.

14.

Undeterred by that setback, Dr Haddad personally wrote a letter before claim on 20 January 2023 to all eighteen Defendants. The letter was characteristically long and repetitive, running to 163 closely-typed pages and 903 paragraphs.

15.

Equally characteristically, Dr Haddad pulled no punches in what he said. He accused:

i)

the solicitors representing the First to Eighth Defendants of intentionally misleading the court with 14 dishonest strategies in preparing the evidence on which they relied;

ii)

Mr Aidarous of 5 dishonest strategies relating to his expert evidence;

iii)

Counsel instructed on behalf of the First to Eighth Defendants of knowingly misleading the court with nine dishonest strategies relating to the hearing before Zacaroli J;

iv)

Counsel instructed by the First to Seventh Defendants of 2 dishonest strategies in their skeleton argument, which was adopted by counsel for the Eighth Defendant;

v)

All Counsel of knowingly misleading the court by the list of issues that they agreed, and 19 dishonest strategies at the hearing, as well as a further 9 dishonest strategies to mislead the court in responding to the application for permission to appeal.

A further 14 dishonest strategies were also alleged, though it is difficult to say whether these were distinct from those previously alleged.

16.

All of the solicitors and barristers concerned were alleged to have been complicit in others' dishonesty: in other words, they conspired together, to some extent (though at the hearing before me, Dr Haddad disavowed any allegation of conspiracy, on the basis that he did not have any evidence to establish that).

17.

These are clearly exceptionally serious allegations, made as they are against respected and long-established City firms (though what the firms are alleged to have done distinctly from the individual lawyers involved is nowhere adequately particularised) and well-regarded and experienced solicitors and counsel. Involving, as the allegations do, so many serious allegations against two firms, three senior solicitors, two leading counsel and three junior counsel, there is a degree of inherent improbability about them. That does not mean that the court does not consider the allegations carefully, without fear or favour and with a mind open to being persuaded that some or all of what is alleged is properly arguable. But it does mean that there is a heavy burden on the person bringing a claim based on such allegations to set out with utmost clarity exactly what is alleged as having been dishonest, in particular the facts as to knowledge of falsity on the part of the Lawyer Defendants that are relied upon as giving rise to an inference of fraud.

18.

Dr Haddad proceeded to issue his claim form but did not immediately serve it. The Ninth Defendant wrote to Dr Haddad in detail explaining that if the claim was issued an application would be made to strike it out, on the ground (among others) that the subject matter of the claim had already been disposed of in the Partnership Claim.

19.

On 27 April 2023, before serving his claim form, Dr Haddad applied to the Court of Appeal for his application for permission to appeal to be re-considered under CPR rule 52.30 , and for Males LJ to recuse himself from considering it on the basis of apparent bias.

20.

That application was dismissed by Popplewell LJ on 9 June 2023. Still undeterred, Dr Haddad applied to Popplewell LJ for him to reconsider his decision, on the basis of a further witness statement. That application was dismissed as being totally without merit on 19 July 2023, bringing the appellate process to a final end. A footnote is that, on the same day, Popplewell LJ made an Extended Civil Restraint Order against Dr Haddad in terms making serious criticism of the approach of Dr Haddad in making spurious or unsupported allegations of dishonesty and refusing to "take no for an answer" from the courts.”

Amongst other things, again to summarise very briefly, Fancourt J held that Dr Haddad’s case that the Lawyer Defendants had fraudulently misled the court about the true meaning and effect of the Dubai judgments on which Zacaroli J had based his conclusions on issue estoppel, was “wholly artificial and … based on no more than statements made by the Lawyer Defendants with which Dr Haddad disagrees …. Dr Haddad’s approach is that any assertion with which he disagrees is wrong, and the relevant Lawyer Defendant was therefore in breach of duty, which breach he said was sufficient evidence of knowledge of the falsity of the statement and therefore fraud on the court. This is self-evidently an incoherent and deeply flawed approach.” He therefore held that there were no reasonable grounds for bringing the claim.

In addition, Fancourt J held the claim to be an abuse of process, because he held that it was, in reality (albeit “in the guise of a most serious and unfounded fraud claim”) no more than a further attempt to appeal against the decision of Zacaroli J in respect of the issue estoppel, despite having in that regard been “comprehensively rejected by the Court of Appeal on three separate occasions”. In substance, that conclusion, as I will explain below, comprised a short and complete answer to Dr Haddad’s argument in the present case (to the same effect, and based on the same evidence) that the Petition against him ought to be dismissed because the Costs Orders were procured by fraud.

In the meantime, there were two other litigation developments.

First, in respect of the Costs Orders, the Petitioners served on Dr Haddad a statutory demand dated 2 February 2023. Dr Haddad applied to set aside that demand on 6 March 2023, and his application was dismissed by ICC Judge Mullen on 10 July 2024 (after the decision of Fancourt J described above).

Second, on 18 July 2023 (the day before an Extended Civil Restraint Order (“the ECRO”) was made against Dr Haddad by Popplewell LJ) Dr Haddad began proceedings in the King’s Bench Division (Case No. KB-2023-003059, “the KBD Proceedings”) against Ms Khulood only. In those Proceedings, according to the Claim Form and the Particulars of Claim, Dr Haddad advances two claims.

On 16 October 2024 (following numerous interim steps which, for present purposes, it is unnecessary to rehearse) Ms Khulood, without thereby submitting to the jurisdiction, applied to strike out the claim in the KBD Proceedings, and/or for reverse summary judgement; applied to challenge the jurisdiction of the English Court under CPR Part 11; and/or applied to set aside a procedural order made in the claim under CPR Part 11 (and CPR r.23/10 and/or 3.1(7)). By an order made on 29 November 2024, that application was listed for hearing before a High Court Judge between 9-11 July 2025. Unfortunately however, on 4 July 2025, the parties were informed that the allocated judge was no longer available; the application was subsequently re-listed for hearing between 1-4 December 2025. As an alternative to his case that the Petition should be dismissed, Dr Haddad’s position was that it ought to be adjourned or stayed pending the outcome of that hearing.

The hearing of Dr Haddad’s application to set aside the statutory demand was on 24 April 2024. It was supported by four witness statements made by Dr Haddad, on 3 March 2023 (before commencement of the KBD Proceedings) and on 20 February 2024, when two were made, and 21 March 2024 (after their commencement). Dr Haddad appeared in person at the hearing, and produced a (45 page) skeleton argument. Amongst other things, as part of its pre-reading, the court was asked to read the Particulars of Claim in the KBD Proceedings, the KMI Employment Contract, and the Declaration of 25 March 2007. Mr Ryan Perkins of counsel, who appeared at the hearing of the Petition before me, also appeared at the hearing before ICCJ Mullen.

In Dr Haddad’s skeleton argument, he set out, in some considerable detail, the basis of his application, including:

Judge Mullen dismissed the application. In summary, of particular relevance to the present hearing, in respect of the two claims made in the KBD Proceedings, he held as follows:

Dr Haddad unsuccessfully sought permission to appeal against the order of Judge Mullen. First, on 30 September 2024 he was refused permission to apply for permission to the Court of Appeal by Rajah J under the ECRO; then on 8 November 2024, he was refused permission under the ECRO to apply to the Court of Appeal for permission to appeal against the order of Rajah J; next, on 6 December 2024 he applied for ECRO permission to apply to a High Court Judge for permission to appeal against the order of Judge Mullen, and on 9 December 2024 for ECRO permission to apply to “correct” one paragraph of Judge Mullen’s order; those last two applications were both refused on 23 January 2025, again by Rajah J.

In the reasons given for his Order of 30 September 2024, Rajah J said that the appeal had no prospect of success, and that it was “clear that Dr Haddad is simply re-running in a different guise a case which has been carefully considered and firmly rejected first by Zacaroli J and then by the Court of Appeal, and then again by Fancourt J. Dr Haddad’s behaviour in refusing to accept the decisions which have been made against him, and to run the same case in a different form somewhere else, lies at the heart of what makes his conduct an abuse of process and is the reason why the ECRO was made against him”.

Turner v Royal Bank of Scotland [2000] BPIR 683, was a decision of the Court of Appeal in respect of a bankruptcy order made against the Appellant, Mr Turner. The petition presented against him, and the statutory demand which preceded it, were based on a judgment debt in favour of the Respondent Bank; Mr Turner had applied, unsuccessfully, to have the demand set aside on the basis that he had a cross-claim against the Bank for a sum greater than his debt; his application to the Court of Appeal for permission to appeal against that order had been refused.

In respect of Mr Turner’s application in respect of the bankruptcy order itself, the Court of Appeal held that the order had been properly made. Moreover, in respect of the power of the court on the hearing of a petition to revisit arguments advanced and determined at the stage of an application to set aside a statutory demand, Chadwick LJ (with whom Buxton and Aldous LJJ agreed) said as follows (having referred first to sections 267 and 268 of the Insolvency Act 1986, and rules 6.4 and 6.5 of the Insolvency Rules 1986, the predecessors of rules 10.4 and 10.5 of the Insolvency Rules 2016):

“47.

The scheme of those provisions, plainly, is to ensure that if the debtor wishes to dispute the debt, or wishes to raise a counterclaim or cross-demand against the creditor, he should have the opportunity to do so by an application to set aside the statutory demand; and that until that application has been heard and determined, no petition for bankruptcy can be presented. If an application to set aside a statutory demand is made, the Court is required to consider, and adjudicate upon, any contention advanced by the debtor that he has a cross-demand which extinguishes the debt. If satisfied that there is a genuine triable issue in that respect, then the Court will normally set aside the statutory demand and no bankruptcy petition can be presented.

48.

Section 271(1) of the Insolvency Act prohibits the Court from making a bankruptcy order on a creditor's petition unless it is satisfied that the debt, or one of the debts, in respect of which the petition was presented is either (a) a debt which, having been payable at the date of the petition or having since become payable, has been neither paid, nor secured, nor compounded for; or (b) is a debt which the debtor has no reasonable prospect of being to pay when it falls due. Section 271(3) provides that the Court may dismiss the petition if it is satisfied that the debtor is able to pay all his debts, or is satisfied (a) that the debtor has made an offer to secure or compound for a debt in respect of which the petition is being presented; (b) that the acceptance of that offer would have required the dismissal of the petition; and (c) that the offer has been unreasonably refused. Those provisions give a flavour of the issues which the Court is to be concerned on the hearing of the petition. Questions as to the existence of the debt at the date of the presentation of the petition, and any cross-claim, are intended to be dealt with on an application to set aside the statutory demand — that is to say, before the petition is presented.

49.

Rule 6.25 of the 1986 Rules provides that on the hearing of the petition, the Court may make a bankruptcy order if satisfied that the statements in the petition are true and that the debt on which it is founded has not been paid or secured or compounded for. So the Court is not bound to make a bankruptcy order; there is some residual discretion in the Court to decide on the hearing of the petition whether or not to make the bankruptcy order. But it cannot have been intended, as it seems to me, that when exercising the discretion (which it undoubtedly has under Rule 6.25 ), whether or not to make a bankruptcy order at the hearing of the petition, the Court is required to revisit the arguments which have already been advanced on the hearing of the application to set aside the statutory demand; and which have already been rejected at that hearing. As Vinelott J pointed out in the Brillouett case, the debtor cannot go back and reargue the very grounds on which he unsuccessfully sought to have the statutory demand set aside. It will require some change of circumstance between the unsuccessful attempt to set aside the statutory demand and the hearing of the petition before the Court (on the hearing of the petition) can be asked to go into the question which has already been determined at the hearing of the statutory demand. To hold otherwise would be to encourage a waste of court time, and a waste of the parties' money; and would defeat the obvious purpose of the statutory scheme.” (Emphasis added.)

That conclusion, which I shall refer to as the “Turner Principle”, is a manifestation in the scheme of the Insolvency Act of the court’s broader unwillingness to allow parties to revisit and reargue issues previously determined following argument.

Against that background, I turn to the grounds of opposition raised on behalf of Dr Haddad. As to those, Dr Haddad served a Notice of Opposition dated 30 December 2024, a witness statement made on 28 February 2025, and a further witness statement made on 21 March 2025. In response, and in support of the Petition, the Petitioners relied on a statement made by Ms Maeve Hanna (a partner at Allen Overy Sherman Sterling LLP) on 14 March 2025. In addition to a 436 page core bundle of documents, was a 5,082 page supplementary bundle.

First, Dr Haddad sought to rely on the existence of the extant claims asserted against Ms Khulood in the KBD Proceedings. For the following two reasons, I do not accept that those claims comprise grounds on which either to dismiss the Petition, or adjourn it.

First, as I have explained above, they were raised, argued and ultimately decided, for the purposes of these proceedings, by Judge Mullen on Dr Haddad’s unsuccessful application to set aside the statutory demand; Dr Haddad’s various attempts to appeal Judge Mullen’s order came to nothing; Rajah J concluded that an appeal would have no prospect of success.

I was not told of any change of circumstance since Judge Mullen’s decision; on the contrary, as I have described, Judge Mullen had before him (and referred in his judgment to) the Particulars of Claim in the KBD Proceedings, as well as the documents available to Dr Haddad which were said to support his claims; it was not suggested to me that any material or evidence has since then come into Dr Haddad’s possession; certainly, I was not shown any; furthermore, in any event, I do not disagree with Judge Mullen’s decision in this respect (or that of Rajah J).

Therefore, in accordance with the Turner Principle, it would be wrong (and I decline) to allow Dr Haddad (in the words of Chadwick LJ) “to reargue the very grounds on which he unsuccessfully sought to have the statutory demand set aside” – “to hold otherwise would be to encourage a waste of court time, and a waste of the parties' money; and would defeat the obvious purpose of the statutory scheme”.

Second, the claims in the KBD Proceedings are against Ms Khulood alone, not the other Petitioners to whom Dr Haddad is indebted - whether or not there is an arguable claim against her, there is no such claim against the others. Dr Haddad sought to avoid this problem by suggesting that he would, in due course, and if his claim survived the pending application made by Ms Khulood, apply to join the other Petitioners, on grounds (which appeared in particular to have been directed at alleging involvement in the second claim, under the Declaration) that:

In my judgment, this was wholly inadequate as a basis upon which to conclude that Dr Haddad has a claim against the other Petitioners (even assuming for a moment that he has such a claim against Ms Khulood). Whilst Dr Haddad outlined the possibility of the other Petitioners’ indirect stake or involvement in KMP Saudi, he failed to explain the nature of his alleged cause of action against them or to articulate its content, and he failed (completely) to refer to any evidence of their actual participation in alleged wrongdoing – the allegations were no more than bare assertions; no draft Particulars of Claim were produced. Moreover, the KBD Proceedings began, against Ms Khulood, in July 2023; in the two years since then, Dr Haddad has not attempted to join the other Petitioners, despite having otherwise made a plethora of applications of one sort or another; his Notice of Opposition referred only to the claim presently pursued against Ms Khulood.

In all the circumstances, I am not persuaded that in any event, there is any basis for a claim against the Second to Seventh Petitioners.

Although Mr Baki, who appeared for Dr Haddad, relied on each of these matters independently of one another, they were, in my view, sensibly considered together, cumulatively, because they were in substance said to comprise a single narrative justifying the conclusion that the Petition is abusive and/or that the court should in any event exercise its discretion to dismiss it (albeit in circumstances where it was admitted that the requirements of a bankruptcy order against Dr Haddad were otherwise satisfied).

Essentially, the following evidence was relied on by Dr Haddad:

The relevant principles were explained by Snowden J (as he then was) in Re Maud [2016] EWHC 2175 (Ch), in summary, as follows.

As to alleged “pointlessness”, in a subsequent case involving the same debtor, Re Maud [2020] EWHC 974, Snowden J, at [116]-[117], accepted the following propositions: “First, that the court has a discretion not to make an order if to do so would be completely pointless. Secondly, the test is whether there is no possibility of any benefit to creditors. Thirdly, that the impossibility of benefit must be obvious at the petition hearing without any detailed investigation. Fourthly, the concept of benefit includes a reasonable desire on the part of creditors that there should be an investigation by the trustee in bankruptcy.” He also observed that in this context, “the courts will not simply accept an uncorroborated statement by the debtor that he has no assets or that a bankruptcy order would serve no purpose” – to do so would be an obvious invitation to abuse (see Megarry V- C in Re Field [1978] 1 Ch 371 at 375 – “A man may indeed be too poor to be made bankrupt: but the burden of proof is heavy.”).

In the context of corporate insolvency proceedings, the question of abuse of process was considered by the Privy Council in Ebbvale Limited v Hosking [2013] UKPC 1. In that case, the company appellant appealed against a winding-up order made against it on the petition of the respondent, Mr Hosking, in his capacity as the trustee in bankruptcy of one Mr Andreas Michaelides.

Mr Michaelides had previously owned valuable land in London, which he had purportedly transferred shortly before he was made bankrupt. Mr Hosking began proceedings to establish that the land had belonged beneficially to Mr Michaelides when he was made bankrupt (and so fell into his estate). In the meantime however, it was alleged that the transferees of the land had themselves transferred it to the company. Mr Hosking formed the view that the company was in fact under the effective control of Mr Michaelides, and that the alleged sales were nothing more that attempts to hide his continuing ownership of the land; he procured the transfer to himself of a debt owed by the company to the bank which had lent to the company to enable it to buy the land; on the basis of that debt he petitioned successfully for a winding-up order against the company, which was by then the only active defendant to his action in respect of the land. The company argued that Mr Hosking had petitioned for an improper purpose, and that the petition was an abuse of process. Its appeal failed.

The Board’s Judgment was delivered by Lord Wilson. At [25] he began with the general proposition that, as stated by Sargent J in In re Amalgamated Properties of Rhodesia (1913) Ltd [1917] 2 Ch 115, “the petitioners, as judgment creditors for this very large sum, are prima facie entitled ex debito justitiae to a winding up order, and it seems to me to be impossible to displace that prima facie position without the very strongest proof that the petition is being improperly made use of for some ulterior motive.”

Lord Wilson then referred to various cases in which a petitioner was not in fact seeking to obtain an order, but rather, by the application of pressure, was seeking some other end. However, as he pointed out at [27], those cases were “not in point”, because “Mr Hosking undoubtedly did want — and has continued to want — the winding-up order to be made …”.

At [33], Lord Wilson stated the conclusions of the Board as follows:

“(a)

It has no view about where the merits of the English action between Mr Hosking and the company lie.

(b)

There is no doubt that Mr Hosking's purposes in presenting the petition for the company to be wound up were intimately related to the English action.

(c)

It is indeed probably the case that Mr Hosking regarded a winding-up order as likely to be of advantage to him in his capacity as the claimant in the English action as well as in his capacity as the petitioning creditor. For the company's continued defence of the action was leading him to incur very substantial costs in its continued prosecution and was thus generating a potential increase in its total liability to him and a corresponding increase in the risk that such could not be met. In his capacity as claimant in the action Mr Hosking therefore probably considered it advantageous to secure a winding-up order which might lead to his saving of some such costs.

(d)

But a winding-up order was also, objectively, likely to be of substantial advantage to him in his capacity as the petitioning creditor; and to secure such an advantage was the other of his purposes. It is not necessary that it should have been his principal purpose: see In re Millennium Advanced Technology Ltd [2004] EWHC 711 (Ch), [2004] 1 WLR 2177 at para 42 (Michael Briggs QC sitting as a deputy High Court judge).

(e)

For Mr Hosking, as trustee, was a large creditor of the company; his debt was contingently unsecured and he was not even in receipt of interest. It was in the interests of the insolvent company, and in particular of himself in that capacity, that, before it proceeded, from some source or other, to incur yet further indebtedness with which to fund the maintenance of its defence at a trial estimated to last for seven or eight days, a professional decision should be taken on its behalf about the further conduct of the defence and, in the light of the latter's apparent strength or otherwise, about the terms of any compromise which it would be commercially sensible for it to propose to Mr Hosking.

(f)

In its defence of the winding-up petition the company therefore failed to establish that Mr Hosking's petition represented an abuse of the process of the court and failed to displace his entitlement to an order.”

In the context of bankruptcy, in Re Maud [2016] EWHC 2175, referred to above at [36], at [90], Snowden J similarly accepted that as long as one of a petitioner’s purposes was proper and legitimate, it was irrelevant that his principal purpose was not.

Finally, Mr Perkins placed reliance on the decision of Mr Gabriel Moss QC, sitting as a deputy judge of the High Court in Shepherd v Legal Services Commission [2003] BPIR 140, a case bearing some similarity to that presently before the court. In Shepherd, the debtor appealed unsuccessfully against a bankruptcy order based on costs orders made against him in unsuccessful civil proceedings (in which he had “attempted to pursue potential rights of appeal as far as humanly possible, without any success”) against the petitioner, the Legal Services Commission (“the LSC”).

The LSC’s evidence was that the debtor had no assets; his case was that he had a substantial asset, being his claim against the LSC. In that “peculiar situation”, having reviewed the authorities, the deputy judge said as follows (at [2003] BPIR 140, 146-147):

“The debtor, not surprisingly, relies on the Ross case [Re Ross (a bankrupt) (No. 2) [2000] BPIR 636] to support his thesis that he should be allowed to conduct his claim against the Legal Services Commission. He is understandably dismayed at the prospect of the alleged cause of action passing to a trustee in bankruptcy. However, it seems to me that on the facts there are fundamental differences between the very special circumstances in Ross and the circumstances of the present case. In the Ross case, Mr Ross appeared to have a perfectly plausible cause of action against the lady of his former acquaintance, whereas in the present case the debtor has so far lost every round in which he has attempted to pursue his alleged cause of action against the Legal Services Commission. On the special facts of the Ross case the bankruptcy appeared to have had the effect, even if that was not the intention or sole purpose, of stifling the proceedings. In the present case, it seems to me that the effect of the bankruptcy is not to stifle any proceedings against the Legal Services Commission if they have any merit; the trustee, as is his duty, will undoubtedly consider the merits of the debtor's claim. If it has merit, he will undoubtedly consider whether or not it will be proper to take proceedings himself, if he is able, or alternatively to assign the alleged cause of action back to the debtor on the basis that a proportion of any proceeds would flow to his creditors. It is of course possible that the Legal Services Commission will be the debtor's only creditor but that is not something of which I can be certain at this stage.

The real question in the present case in this regard appears to be whether it would be sensible to allow the debtor to continue with what so far has been futile litigation creating considerable liabilities for court costs which he has no prospects of paying and thereby causing the Legal Services Commission very considerable loss which it has no realistic prospect of recovering, or allowing an objective and independent officer of the court to consider the matter in a dispassionate way and see whether there can sensibly and properly be brought any further proceedings against the Legal Services Commission. It seems to me that that purpose, which appears to be the purpose for which the Legal Services Commission has brought these bankruptcy proceedings, is a proper purpose because it seeks ‘the proper administration’ of the debtor's assets within the meaning of that phrase as used by Harman J in the Re a Company No. 001573 of 1983 case I have referred to above. It also seems to me that a bankruptcy order is justifiable on the grounds that there is a proper reason other than simply the realisation and distribution of assets, namely an investigation by the trustee of the affairs of the debtor and in particular these very serious allegations against the conduct of the Legal Services Commission. That would seem to be a proper purpose for insolvency proceedings in terms of the approach of Chadwick J in the Bell Group case. Unlike the debtor, the trustee in bankruptcy has statutory powers of investigation, including the ability to ask the court, if appropriate, to require the production of documents and to examine relevant persons on oath. If the trustee, as an objective and independent officer of the court, considers that those steps are necessary to investigate the very serious allegations made by the debtor, then he is able to take those steps whereas the debtor himself cannot.

I am satisfied that in seeking their goal the Legal Services Commission have not acted oppressively in bringing these bankruptcy proceedings. I am also satisfied on the evidence before me and before the learned deputy district judge that there is no case to be made out of an attempt to stifle any future proceedings but merely an understandable attempt to ensure that they are considered by an independent and objective officer of the court.

Accordingly, summarising my conclusions in relation to the question: although there are not likely to be any assets in this case other than the alleged claim against the Legal Services Commission and although the purpose for which the bankruptcy order was sought is not perhaps the typical purpose for which such orders are sought by petitioning creditors, it is nevertheless the case that I am satisfied on the facts before me and in light of the authorities that the bankruptcy order was properly made in the discretion of the deputy district judge.”

In summary, by reference to those authorities, of particular relevance to the present case:

Finally, in relation to the allegation that the Petitioners have unreasonably refused to (cause KMP Saudi to) accept offers in respect of its land, I understood Dr Haddad also to rely on section 271(3) of the Insolvency Act 1986, which states:

“The court may dismiss the petition if it is satisfied that the debtor is able to pay all his debts or is satisfied–

(a)

that the debtor has made an offer to secure or compound for a debt in respect of which the petition is presented,

(b)

that the acceptance of that offer would have required the dismissal of the petition, and

(c)

that the offer has been unreasonably refused;

and, in determining for the purposes of this subsection whether the debtor is able to pay all his debts, the court shall take into account his contingent and prospective liabilities.”

In Re a Debtor (No.32 of 1993) [1994] 1 W.L.R. 899, it was held by Timothy Lloyd QC (sitting as a deputy High Court judge) that in “order to conclude that the refusal was unreasonable, it seems to me that the court has to be satisfied that no reasonable hypothetical creditor would have refused the offer, and that the refusal of the offer was therefore beyond the range of possible reasonable actions in the context”. Essentially, in its approach to the exercise of its power under section 271(3), that continues to be the court’s starting point (albeit that further clarification has been given in other cases, see in particular, Revenue and Customs Commissioners v Garwood [2012] B.P.I.R. 575, at [23]).

The Petitioners’ case and their evidence (set out in the witness statement of Ms Hanna) was that:

In my judgment, by reference to the principles that I have explained, by reference to the Petitioners’ evidence, and for the following reasons, the Petition was not an abuse of process, and there was no basis on which to refuse an order in the exercise the court’s discretion.

First, I begin with the proposition that the Petitioners are prima facie entitled to an order: the debts are liquidated; they have been outstanding for several years, and they are wholly unpaid; interest continues to accrue on them, equally unpaid; in each case, the orders which created them were made on the indemnity basis, as a mark of the court’s disapproval of Dr Haddad’s litigation conduct; despite those facts, Dr Haddad has continued in his campaign of (patently expensive, and substantially unsuccessful) litigation.

Second, there is no basis upon which to disregard or disbelieve the Petitioners’ explanation of their purposes. As in Shepherd (and indeed, Ebbvale) it may be that an order will bring welcome and desired advantages to the Petitioners in their capacity as litigants in the KBD Proceedings and the Fraud Claim, but I accept that a purpose (at least) of the insolvency proceedings is to obtain, insofar as possible, payment of sums due to them by means of a collective enforcement process, and, in addition, to have Dr Haddad’s assets and claims investigated and assessed by a trustee. If his claims have merit, there is no reason to think they will be stifled; they can be pursued by a trustee for the benefit of all creditors; indeed, if his claims are meritorious, and if they are as very highly valuable as he maintains, it may be to the positive advantage of Dr Haddad to have them investigated (and if appropriate, pursued) by and with the assistance of a professional, independent insolvency practitioner.

Third, as I have explained, a man may indeed be “too poor to be made bankrupt”, but the burden of proof is heavy, and the cases rare and exceptional, if for no other reason than that the court will be wary of accepting a debtor’s uncorroborated statement that he has no assets. But in any event, apart from his alleged claims (and the benefit to the Petitioners of having those claims properly considered and administered) Dr Haddad is not a person without other assets: on his case, he owns a very valuable 51% stake in KMP Saudi, worth more than the amount of his debts; his trustee would be entitled to realise that interest, if possible, to pay those debts.

Furthermore, fourth, for the following reasons, I reject the suggestion (and more than that, fundamentally, the relevance of the suggestion) that the Petitioners (or indeed, any of them) have “unreasonably” failed and refused to co-operate in the exploitation of KMP Saudi’s land.

Finally, the allegations of personal revenge were, as a matter of law, irrelevant to a consideration of the Petitioners’ purposes; in any event, they were in issue. In circumstances where the Petition was otherwise unopposed by Dr Haddad’s creditors, they were not relevant, and certainly not material.

Perhaps understandably, given the history of the matter, Dr Haddad’s final point was advanced by Mr Baki with some diffidence.

Essentially, Dr Haddad’s case (certainly the case which I perceive Dr Haddad himself would wish to advance, and which was explicitly stated in his evidence and the skeleton argument) was that the Costs Orders were obtained by fraud, such that the court should “go behind” them, decline to act on them, and dismiss the Petition.

Although he acknowledged in his judgment that this issue was one to be determined on the hearing of the Petition rather than the application to set aside the statutory demand, Judge Mullen (at [38] of the judgment referred to above at [21]) described Dr Haddad’s case in this respect as “wholly fanciful”. In circumstances in which Dr Haddad has unsuccessfully sought, over several years and by all manner of means, to appeal or challenge the decision of Zacaroli J, it is impossible to disagree with that conclusion.

There was no dispute about the relevant principles, which can be stated briefly. In Dawodu v American Express Bank [2001] BPIR 983, Etherton J (as he then was) recognised the discretionary power of the bankruptcy court to go behind judgments, including on the hearing of a petition (because “such a court is concerned not only with the interests of the judgment creditor and of the judgment debtor, but also with the interests of the other creditors of the judgment debtor”) and having reviewed the authorities, said, at [2001] BPIR 983, 990:

“… the cases establish that what is required before the Court is prepared to investigate a judgment debt, in the absence of an outstanding appeal or an application to set it aside, is some fraud, collusion, or miscarriage of justice. The latter phrase is of course capable of wide application according to the particular circumstances of the case. What in my judgment is required is that the Court be shown something from which it can conclude that had there been a properly conducted judicial process it would have been found, or very likely would have been found, that nothing was in fact due to the Claimant.”

Essentially, Dr Haddad’s case was that the Petitioners had allowed the court (specifically, Zacaroli J) to proceed on a false basis concerning the course and effect of the proceedings in Dubai, and thus wrongly to conclude that the issue of the underlying partnership had been previously decided. In support of that case he relied on the expert evidence of a Dr Arar Krais, a former judge of the UAE Supreme Court, adduced in the Fraud Claim.

Dr Haddad’s case suffered from two fundamental problems, each of which was insurmountable.

First, as I have said, in support of the alleged fraud, Dr Haddad relied on the evidence previously relied on at the hearing of the application before Fancourt J which resulted in his claim against the Lawyer Defendants in the Fraud Claim being struck out. Fancourt J identified two problems: first, that in substance, Dr Haddad’s case was nothing more than a further impermissible attempt to appeal or relitigate the question decided by Zacaroli J; and second, that in any event, whilst the new evidence might in substance have supported Dr Haddad’s case in respect of the Dubai proceedings, it did not support an allegation of fraud (in respect of which, his approach - that because his expert’s view was correct, the defendants’ expert and lawyers must have acted dishonestly - was “incoherent and deeply flawed”). Both points (which I respectfully agree and adopt) can be made with equal force in the present context.

Second, again as explained above at [8], Zacaroli J held that there had been a deliberate failure to give full and frank disclosure on the successful ex parte application for permission to serve out of the jurisdiction, and that had it been necessary to do so, he would in any event have set aside the order to serve out, for that reason. In other words, even if he had decided differently in respect of the substance of Dr Haddad’s application for permission to serve out, he would nonetheless have set aside Master Bartlett’s order. It follows that regardless of the merits of his case based on fraud, Dr Haddad cannot complain about the Costs Orders, each of which would have or would very likely have been made against him in any event, as a result of his own significantly imperfect litigation conduct.

In all the circumstances, for the reasons stated above, the Petitioners are entitled to a bankruptcy order against Dr Haddad.