Sheikh Abdulrahman Khalid Bin Mahfouz & Ors v El-Rashid & Ors

This is an application by the Claimants that the First Defendant be committed for contempt of court. The First Defendant did not attend the hearing but applied, by a letter delivered to the court the day before the hearing, for an adjournment. For reasons given on the day of the hearing I dismissed the application for an adjournment and decided that it was appropriate to proceed with the hearing in his absence.

The First Defendant is a Jordanian national, is aged about 70 and appears to reside in this country. There is evidence that he suffers from neurological problems, probably related to Guillain-Barré syndrome.

On 22 July 2011 the Claimants transferred €35m. to the First Defendant in the belief that the payment would be used by him for the purpose of funding a down–payment in respect of a proposed oil related transaction. In fact (as documents disclosed in these proceedings have shown) the First Defendant received the money into his Swiss bank account and immediately thereafter began to spend it on, amongst other things, a house in Knightsbridge and a surprising number of expensive cars.

In November 2015 the Claimants issued proceedings for the return of the money. A Freezing Order and a Search Order were obtained. By this time it appears that the Claimants’ money had been dissipated.

On 25 May 2016 Leggatt J. gave the Claimants summary judgment upon their claim. The judge was satisfied that the suggested defence (that the money had been transferred as a gift) was false, “a figment of the Defendant’s graphic imagination.” The judge was further satisfied that the money had been transferred for a purpose which failed because the First Defendant had misappropriated the money.

The committal application was issued on 10 February 2017 and served on 18 February 2017. It relates, primarily, to breaches of the Freezing Order. It alleges 16 counts of contempt. However, counsel for the Claimants helpfully limited the counts to 4 since the additional counts are in essence further manifestations of the 4 principal alleged contempts.

The first, described as contempt 4 in the notice of application, alleged that the First Defendant, in breach of paragraph 10(3) of the Freezing Order, has failed to provide the Claimants with full details of what had happened to the money. The second, described as contempt 1 in the notice of application, alleged that the First Defendant, in breach of paragraph 9(1) of the Freezing Order, has failed to give full details of his bank accounts. The third, described as contempt 2 in the notice of application, alleged that the First Defendant has failed, in breach of paragraph 9(3) of the Freezing Order, to inform the Claimants of six cars (two Bentleys, two Ferraris and two Mercedes) which he owned and were worth in excess of £10,000. The fourth, described as contempts 14-16 in the notice of application, alleged that the First Defendant, in breach of the Vehicle Order made by Males J. on 22 August 2016, did not give the Claimants effective access to 5 vehicles (including a Bentley and a Rolls Royce) that were locked in the Q Park, Knightsbridge, and did not inform the Claimants of the location of 5 further vehicles which were not in the Q Park or Harrods Car Park.

The standard of proof required of these allegations is the criminal standard, that is, the court must be sure that the First Defendant has acted in contempt of court. This is to be contrasted with the civil standard which requires the court to make findings based upon the balance of probabilities. In order to establish that a person has acted in contempt of court it is necessary to show (i) that the person knew of the terms of the court order; (ii) that he acted or failed to act in a manner which involved a breach of the order; and (iii) that he knew of the facts which made his conduct a breach. It is not necessary to show that the person knew that what he was doing was a breach of the order or that he intended to breach the order. These propositions are established by Marketmaker Technology and others v CMC Group and others [2009] EWHC 1445 (QB) at paragraphs 14-17 (per Teare J.), Masri v Consolidated Contractors International Company SAL [2011] EWHC 1024 (Comm) at paragraphs 150 and 155 (per Christopher Clarke J.) and Holland and others v Fast Corporate Solutions and others [2014] EWHC 825 (QB) at paragraph 24 (per Carr J.)

Paragraph 10(3) of the Freezing Order dated 12 November 2015 ordered the First Defendant immediately to provide

“(b)

Full details of what happened to the Money following the Transfer;

(c)

Full details of any accounts into which Trust Assets (or any part thereof) have been paid or transferred;

(d)

Full details of any assets that have been acquired using any of the Trust Assets;

(e)

Details (including in particular name, address, telephone numbers, e-mail addresses) of any person to whom any part of the Trust Assets have been paid, including any person or entity that now has custody or control of any part of the Trust Assets, including details of the amount held by them;

(f)

Details, to the best of his knowledge information and belief, of what has become of the Trust Assets and the present nature, location and value of the Trust Assets or any part thereof.”

The Freezing Order was personally served on the First Defendant on 13 November 2015. There can be no doubt that he was aware of its terms. It contained a penal notice.

Trust Assets were defined by paragraph 10(1) of the Freezing Order as meaning “the specific sum of €35m. transferred from an account belonging to the Applicant (“the Money”) to an account held in Switzerland on 22 July 2011, by virtue of the instructions attached to this Order at Schedule D (“the Transfer”), and any other monies or assets which have been acquired by or which are derived from or which represent the money.”

When the Freezing Order was served on 13 November 2015 the First Defendant was asked where the money went. He said he spent it on “security” and “other wages”, on a “deposit”, “possibly” on his house, on “oil contracts” and on “cars”.

On 15 November 2015 his then solicitors Taylor Wessing wrote to Jones Day (the solicitors for the Claimants) in response to the Freezing Order. The letter stated that the money was paid into the First Defendant’s Lombard account and to the best of the First Defendant’s recollection was transferred to his Lloyds account and was “likely used for (a) payment of wages for security, household staff and drivers; (b) legal and other expenses, (c) general household and living expenditure and (d) the acquisition of property and other investments." They said that an accurate and detailed itemisation of the relevant transfers would be complex and time-consuming.

On 18 November 2015 Taylor Wessing provided Jones Day with copies of bank statements from Lombard. From these it is clear that the source of the First Defendant’s funds in his Lombard account was the €35m. paid by the Claimants. The account had a zero balance until on 25 July 2011 it received the Claimants’ money. By 30 December 2011 the balance in that account was €450.50. Some of the money had been transferred into a sterling subsidiary account (which he used to fund expenditure) but by 26 November 2015 that had a balance of £952.99. Some had been transferred into a Euro subsidiary account but by 31 December 2014 that had a zero balance. There were other subsidiary accounts but, effectively, the Claimants’ money had been spent by the time the Claimants obtained the Freezing Order in November 2015.

On 10 December 2015 the First Defendant swore his first affidavit. At this time he was represented by Gresham Legal (Taylor Wessing having ceased to act for him). At paragraphs 18-25 he purported to comply with paragraph 10(3) of the Freezing Order. He said that the money was transferred into his Lombard account in Switzerland. He said that as to the balance of the information required he could not, without having all relevant financial information documents to hand and without having undertaken a forensic analysis of these documents, provide all these details. He then confirmed that approximately £14.5m. was spent on the purchase of real estate in Knightsbridge and that about £4.35m. to £4.45m. was spent on an attempted further real estate purchase. He said that £125,000 had been transferred to his partner Loreta Stakauskaite. He said that about £1m. had been spent on promoting the alleged joint venture and some £2.4m. to £3.4m. in paying for staff in connection with the alleged joint venture. Finally, he said that money had been transferred to his Lloyds Accounts, which money was used to pay about £250,000 to the CEO of RAM Oil Corporation and further sums were paid for household staff, security, household and living expenditure, medical bills and the gift of a Rolex watch to his partner.

There was correspondence between the parties as to the alleged inadequacy of this response.

By letter dated 6 April 2016 the Claimants’ solicitor said that paragraph 10(3) was an important provision of the order, that the Claimants had expended considerable sums trying to work out what had happened to the Trust Assets but there remained many millions unaccounted for. The Claimants provided a schedule detailing its understanding of what had happened to the Trust Assets and requested the First Defendant to consider it and “provide full details of the dissipation by providing details of each of the transfers referred to.” By letter dated 25 April 2016 Baker & McKenzie (who were then acting for the First Defendant, Gresham Legal having come off the record on 8 February 2016) replied stating that they were not in a position to identify every payee of every cheque but were working to ascertain those details. They drew attention to the difficulty of the exercise. The period in question covered 4 years, there were accounts in different currencies, the accounts were used for trading (which process was not followed by the First Defendant), Baker & McKenzie had only recently been instructed, the First Defendant’s medical condition affected his ability to focus and concentrate, Lombard had an un-cooperative approach and it was necessary to take instructions concerning the vehicle preservation application. They were however able to say that one particular sum was paid in respect of medical fees.

Baker & McKenzie ceased to act for the First Defendant on 20 May 2016 and there has been no further attempt by the First Defendant to comply with his obligations pursuant to paragraph 10(3) of the Freezing Order. Mr. Richards of the Claimants’ solicitor has given evidence on oath that no further details have ever been provided.

In his affidavit at paragraphs 53-74 Mr. Richards has explained the Claimants’ understanding of what has happened to at least some of the €35m. However, about one third of the money, some £10,207,000 remains unaccounted for and the First Defendant has failed to disclose where this money went. Thus £7,700,000 and €1,166,000 was transferred out of the Lombard account by way of cheques to beneficiaries that cannot be identified. Some £242,000 was transferred from Lloyds account 260 (into which some of the €35m. had been paid) by way of cheque or bank transfer to beneficiaries who cannot be identified. Some £1,443,000 was transferred from Lloyds account 760 (into which some of the €35m. had been paid) by cheque to beneficiaries who cannot be identified. Some of these payment are in large round number figures (for example £400,000 on 26 July 2011 and £900,000 on 1 October 2013 from the Lombard account) which the First Defendant must be able to identify. Although the First Defendant has had every opportunity to explain where these large sums have gone he has not done so. In addition, the First Defendant said in his affidavit that he had transferred £125,000 to his partner. That sum was transferred on 25 July 2011. He failed to disclose that he had instructed Summers Solicitor to transfer further sums totalling some £470,000 to her between 22 March 2012 and 29 November 2013. It is further to be noted that in his affidavit he failed to disclose his considerable expenditure from the Claimants’ money on some 19 motor vehicles (though he did disclose that he owned 8 vehicles).

The First Defendant has not attempted to grapple with the detail of Mr. Richards’ evidence. Instead he has said in his letter dated 20 May 2017 that he lacks legal representation, that he suffers from severe neurological problems, that the Claimants are motivated by “revenge”, that the allegations of contempt are “invented”, that the Claimants have generously funded his lawyers to make the First Defendant’s life “hell”, that the Fifth Claimant does not exist, that the Claimants are implicated in funding terrorists, that it is in fact the Claimants who are in contempt of court “on multiple counts”, that the Claimants in fact owe the First Defendant and the late King of Jordan over £187m. and that settlement discussions are underway. None of this is in a witness statement or affidavit.

I accept the evidence of Mr. Richards. There is nothing in the First Defendant's letter dated 20 May 2017 which seeks to grapple with the detail of Mr. Richards' evidence concerning what has happened to the Claimants' money. In particular there is no challenge to his evidence that almost one-third of the money is unaccounted for. I note that the First Defendant has had no legal representation since May 2016 but I am unable to accept that that explains why he has not challenged the evidence of Mr. Richards. A person faced with a committal application and an allegation that in breach of a court order he has not explained where a very substantial sum of the Claimants’ money has gone would surely seek to comply with the court order or explain that he has already done so. His failure to take either step is not explained by his absence of legal representation but, in my judgment, by his choice not to give the Claimants any further information as to where their money went.

Thus the position is that from the service of the Freezing Order in November 2015 until the service of the Committal Application in February 2017 (and to date) the First Defendant has failed to provide full details of what has happened to the Claimants’ money. Of that I am sure. The question is whether that amounts to a breach of the Freezing Order. Paragraph 10(3)(b) of the Freezing Order stated that First Defendant “must immediately provide the Applicant’s solicitors with ….(b) Full details of what happened to the Money following the Transfer”. Although the First Defendant gave some information as to what happened to the Claimants’ money on 14, 15 and 18 November 2015, on 10 December 2015 and on 25 April 2016 I am satisfied so that I am sure that “full details of what happened to the Money” were not provided immediately or at all. I accept that there might be some latitude in the meaning of “immediately” where detailed information is sought in 2015 of what happened to money paid over in 2011 but whatever the scope of such latitude the First Defendant had exhausted such latitude long before the committal application was issued in February 2017. I am therefore sure that the First Defendant failed to comply with paragraph 10(3)(b) of the Freezing Order.

For the same reasons I am also sure that the First Defendant has failed immediately to provide details of all the persons to whom the money has been paid in breach of paragraph 10(3)(e) of the Freezing Order.

The First Defendant had knowledge of the terms of the Freezing Order. He acted in a manner which involved a breach of the Freezing Order and he must have known that he had failed to provide the information required of him by the Freezing Order. He was thereby in contempt of court.

Paragraph 9(1) of the Freezing Order required the First Defendant to disclose full details of his bank accounts. The Freezing Order defined bank accounts as including “any bank account (whether in the name of the First Defendant or not) in respect of which the signatory habitually obeys the instructions of the First Defendant or over which the First Defendant exercises de facto control.”

The First Defendant disclosed information concerning three bank accounts, namely, the Lombard and two Lloyds accounts to which reference has already been made. The Claimants contend that there were at least two further accounts in the name of European Professional Security Network Limited (“Europro”) and European International Security Limited (“Euroint”) in respect of which the signatory habitually obeyed the instructions of the First Defendant and/or over which the First Defendant exercised de facto control. The First Defendant and the signatory of the accounts, Mr. Thomas Balter, have said (in November and December 2015) that the First Defendant had no control over those accounts; see paragraphs 76 and 77 of Mr. Richards’ affidavit. I have noted in particular Mr. Balter’s letters dated 18, 21 and 28 November and 14 December 2015.

The Claimants challenge this evidence by reference to a number of matters. They are summarised in paragraphs 80-82 of Mr. Richards’ affidavit. First, bank account statements for Europro (which were found during a search at 4 Beaufort Gardens, London SW3) revealed that the only source of funds into the Europro account was money transferred from the First Defendant’s Lombard account. Credits are in large round sums and appear to be made as and when the balance approaches zero. Second, bank accounts for Euroint were found during the search at 10 Walton Place (the First Defendant’s address) which bore annotations demonstrating that the First Defendant closely monitored transactions on the account. As with the Europro account the source of funds is the First Defendant’s Lombard account and credits are made in large round sums when the balance approaches zero. Third, Europro entered into a licence for an underlease for 17 car parking spaces at Q Park for three years until 31 January 2016. Q Park is where several of the vehicles purchased by the First Defendant were stored. Fourth, £173,000 in respect of rent for the lease was paid by the First Defendant from the Lombard account. Fifth, correspondence found during the search appears to demonstrate the First Defendant’s control over the relationship between Europro and Q Park. Reference is made to the "Chairman, Alexander" who appears to be the First Defendant (see footnote 21 of Mr. Richards’ affidavit). Although it has been said by the First Defendant and Mr. Balter that Europro was a service or security company and that the First Defendant had no control over its bank account I am sure that the accounts in the name of Europro and Euroint are accounts in respect of which the signatory, Mr. Balter, habitually obeys the instructions of the First Defendant or over which the First Defendant exercises de facto control. That appears to me to be the only realistic inference to draw from the matters relied upon by Mr. Richards, the detail of which has not been challenged by the First Defendant. In particular, there seems to me to be considerable force in the point made by Mr. Richards that the large, round transfers to Europro and Euroint are inconsistent with the operation of an independent third party business, in the point that it is implausible that a client of such a business would keep banking records of such a business at his home and in the identification of the First Defendant as the "Chairman, Alexander" to whom Mr. Balter makes reference in seized documents. There has been no response by the First Defendant to these matters. It is also striking that the First Defendant has not identified a bank account which contains a current source of income.

Paragraph 9(1) of the Freezing Order required the First Defendant to provide details of all his Bank Accounts (as defined) “to the best of his ability”. I am sure that it was within the First Defendant’s ability to provide details of the Europro and Euroint bank accounts very shortly after service of the Freezing Order upon him. He did not so; he said that he had no control over them. That was untrue. It follows that I am sure that the First Defendant breached paragraph 9(1) of the Freezing Order by failing to disclose all of his bank accounts.

The First Defendant had knowledge of the terms of the Freezing Order. He acted in a manner which involved a breach of the Freezing Order and he must have known that he had failed to provide the information required of him by the Freezing Order. He was thereby in contempt of court.

Paragraph 9(3) of the Freezing Order required the First Defendant to inform the Claimants to the best of his ability of assets exceeding £10,000 in value. The Claimants’ case is that a Bentley Continental Flying Spur acquired on 4 August 2011 for the sum of £133,000, a Bentley Mulsanne V8 Auto acquired on 29 March 2012 for the sum of £124,000, a Ferrari California 2 Plus acquired on 4 April 2012 for the sum of £166,000, a Ferrari F430 Spider FI acquired on 26 July 2012 for the sum of £123,800, and two Mercedes Benz Viano Ambiente models acquired on 12 November 2012 and 15 April 2013 for the sums of £49,179 and £42,021 respectively were owned by the First Defendant. The First Defendant did not disclose them as assets owned by him and worth in excess of £10,000.

It is true that the First Defendant is not the registered keeper of those vehicles but Mr. Richards has assembled evidence from which, it is submitted, it is to be inferred that the First Defendant is in fact the owner of those cars; see paragraphs 93-99 of his affidavit.

The First Defendant maintains in his witness statement dated 11 April 2016 that the Bentley Continental was owned by his late brother who was “like me, a car enthusiast and collector”. However, he did not mention that the purchase price was paid by the First Defendant using the Claimants’ money. He does not suggest that he made a gift of the car to his brother notwithstanding that he asked for the car to be “registered” in his brother’s name. The circumstance that the First Defendant was the only person insured to drive the car does not suggest that he had made a gift of the car to his brother. Indeed, his evidence that where “I paid for a vehicle on behalf of my brothers or sister, they would reimburse me at later dates through cash and payments in kind” is not suggestive of a gift. The fact that the First Defendant used the Lombard account to purchase the car and that he was the only insured driver suggests that he owned the car.

The First Defendant said in his witness statement dated 11 April 2016 that he could not recollect who paid for the Bentley Mulsanne and that the Claimants had failed to find evidence that he had purchased it. However, there is now evidence that Summers Solicitors paid for it on his behalf. If a person is as keen as the First Defendant appears to be to buy expensive cars it seems to me unlikely that he would have forgotten that he had instructed his solicitors to pay for a Bentley Mulsanne on his behalf. Again, only the First Defendant is insured to drive it, a clear indication that he is in truth the owner of it notwithstanding that his brother was the registered keeper.

The First Defendant’s brother was also the registered keeper of the two Ferraris but only the First Defendant was insured to drive them. The first Ferrari was bought using the Claimants’ money by way of a transfer from the First Defendant’s account. The First Defendant accepts that he paid for it, saying “it was purchased for my brother”. He gives no explanation as to why he would make a gift of a car worth £166,000 to his brother or why he would lend him the money to buy the car. He does not explain why, if it was a gift or a loan, only he was insured to drive it. The second Ferrari was purchased using the Claimants’ money as part of a settlement of a dispute with a Mr. Edward Davenport. The money was paid by Summers Solicitors on his behalf. The First Defendant does not explain why he would pay £123,800 in respect of the car if he was not the owner of it.

Finally, the two Mercedes Benz vehicles were only insured for the First Defendant to drive notwithstanding that the registered keeper was another relative of the First Defendant, namely, his sister. Each car was bought using the Claimants’ money in the First Defendant’s Lloyds account. The First Defendant said in his witness statement that both are “people carriers” which are used by his sister when she comes to London. She has “a lot of staff and security”. He says (in relation to one of the vehicles) that he does not use it and has no right to sell it. But again there is no explanation as to why he would pay over £90,000 for two vehicles which he does not own.

Mr. Richards’ affidavit has been served on the First Defendant but, save for his generalised comments in his letter dated 20 May 2017, he has not responded to the detailed evidence in it.

Having reviewed the evidence I am persuaded that it is more likely than not that the cars in question were owned by the First Defendant. However, on this application the court must be sure that he was the owner of them. It is common ground that the registered keeper of the cars was not the First Defendant but was his brother or his sister. Whilst being the registered keeper is not proof of title it is some evidence that the registered keeper is the owner. It is consistent with his brother and sister being the owner of the cars in question. It is not obvious why the First Defendant permitted this. If the reason was that he wished to distance himself from the cars why did he not arrange for all the cars to be registered in the names of persons other than himself ? It is therefore possible, as he suggests, albeit unlikely, that he made a loan to his brother and sister to enable them to purchase the cars in question. In the result I find myself unable to say that I am sure that he was the owner of the cars which were registered in the name of his brother and sister. I consider it more likely than not that he was the owner of the cars but, since these allegations must be proved to the criminal standard, that is not enough. I am therefore unable to find this allegation proved.

By the Vehicle Order made by Males J. on 22 August 2016 the First Defendant was required to give certain persons (described as the Collection Party) effective access to the vehicles listed in schedules to the order; see paragraph 4(3) of the order. Further, in the event that any vehicles were not located on the premises, the First Defendant was required, upon request of the Collection Party, to inform the Collection party to the best of his ability of the location of each such vehicle; see paragraph 4(5) of the order.

The order of Males J. was not personally served on the First Defendant for reasons explained by Mr. Richards at paragraph 46 of his affidavit. Normally an order cannot be enforced by way of contempt proceedings if it has not been personally served; see CPR Part 81.5. However, the court may dispense with personal service where the court is satisfied that the person in question had notice of it by reason of being notified of its terms by telephone, email or otherwise; see CPR Part 81.8. The order was delivered to Mr. Salamon at 10 Walton Place on 23 August 2016. He confirmed that he would bring it to the attention of the First Defendant. On 31 August 2016 the First Defendant applied to have the order set aside. I am therefore satisfied that the First Defendant had notice of it by being notified of its terms by Mr. Salamon. In those circumstances I consider it appropriate to dispense with the need for personal service.

Mr. Richards, in paragraph 107 of his affidavit, has summarised the Claimants’ attempts to take delivery of the vehicles. On 31 August 2016 the Collection Party took delivery of certain of the vehicles but at 2200 the First Defendant wrote to Jones Day informing them that he had applied to set aside the Summary Judgment and asserted that this had the effect of halting the delivery up process. On 1 September the Collection Party was denied access to the Q Park by Mr. Salamon on account of the First Defendant’s application to set aside the Summary Judgment. As a result the Collection Party was denied access to 5 of the vehicles. The Collection Party was able to gain access to them on 8 September 2016 after Q Park had forcefully re-entered the space where they were stored and so ended the First Defendant’s tenancy at will on 4 September 2016.

A further 5 vehicles remained missing and, although the First Defendant was requested on 8 September 2016 to disclose their location, he failed to do so. 4 were located on 21 September 2016 but a Fiat remains missing.

I accept this evidence. I am sure that the First Defendant failed to give effective access to 5 cars between 2200 on 31 August and 4 September 2016. It is unlikely that he believed that the issue of an application to set aside the Summary Judgment had the effect that the order of Males J. did not have to be obeyed but if he did so believe that would not prevent him being in contempt of the court’s order. He knew of the terms of the order, acted in a manner which involved a breach of the order and, I infer, knew that Mr. Salamon, on his instructions, would deny access to the cars. I am also sure that the First Defendant failed to inform the Collection Party of a further 4 vehicles from 8-21 September 2016 and, in respect of a Fiat, has failed from 8 September 2016 to date to inform the Collection Party of its location.

The court is satisfied so that it is sure that the First Defendant acted in contempt of court by (i) failing, in breach of paragraph 10(3) of the Freezing Order, to provide the Claimants with full details of what had happened to the money, (ii) failing, in breach of paragraph 9(1) of the Freezing Order, to give full details of his bank accounts and (iii) failing, in breach of the Vehicle Order made by Males J. on 22 August 2016, to give the Claimants effective access to 5 vehicles (including a Bentley and a Rolls Royce) that were locked in the Q Park, Knightsbridge, and failing to inform the Claimants of the location of 5 further vehicles which were not in the Q Park or Harrods Car Park.

The First Defendant will have the opportunity to address me in mitigation when the court formally hands down judgment and considers the question of the appropriate sentence for his contempt of court. As discussed at the hearing of the contempt application I request the Claimants to provide the First Defendant with a copy of this judgment (in draft and in confidence) and to inform him of the date when this judgment will be formally handed down. The Claimants informed me that they are able to do so.