Hashem v Shayif & Anor

I handed down judgment in these proceedings on 22 September 2008: Ben Hashem v Al Shayif [2008] EWHC 2380 (Fam), [2009] 1 FLR 115. The order giving effect to that judgment is dated 3 November 2008. Paragraph 16 of the order is in the following terms:

“It is recorded that the items of personal property in the possession of each party are the property of that party. Neither party shall hereafter be entitled to make any application under the Married Women’s Property Act 1882 in relation to items of personal property.”

On 17 April 2009 I handed down a further judgment, Ben Hashem v Ali Shayif and Radfan Ltd [2009] EWHC 864 (Fam), [2009] 2 FLR 896, which dealt with two matters: first, the question of the costs of the proceedings; and, secondly, the question of whether I should vary the terms of the injunction which prevents the company securing any borrowing against 17 Kensington Heights.

That injunction was granted initially by Roderic Wood J on 12 October 2006 and subsequently amended by orders made by Bennett J on 20 November 2006, by Holman J on 16 July 2007 and finally by me on 14 October 2008. By an order dated 8 April 2009, and for the reasons explained in my second judgment (Ben Hashem v Ali Shayif and Radfan Ltd [2009] EWHC 864 (Fam), [2009] 2 FLR 896, at paras [81]-[87]), I further amended the injunction to permit the company to secure borrowings of up to £150,000 against 17 Kensington Heights to fund its normal business expenses.

In my first judgment I had referred to what it is convenient to call the loan account issue: Ben Hashem v Al Shayif [2008] EWHC 2380 (Fam), [2009] 1 FLR 115, at para [336]. Paragraph 8 of the order dated 3 November 2008 directed that there be “an inquiry into the amount of the outstanding loan account, if any”. I emphasise the important qualifying words “if any”, which reflect what I had said in my judgment (see further below). Paragraph 8 of that order also set out directions for the trial of the loan account issue; the timetable was subsequently adjusted by orders I made on 1 December 2008 and 22 January 2009. The directions provided for pleadings and the filing of written evidence and made clear (for the avoidance of doubt) that the evidence I had received during the original trial in April 2008 was to stand as evidence in the inquiry. I reserved the matter to myself.

As recorded in my second judgment (Ben Hashem v Ali Shayif and Radfan Ltd [2009] EWHC 864 (Fam), [2009] 2 FLR 896, at para [2]) the loan account issue had been fixed for hearing before me on 30 April 2009. Unhappily that hearing had to be vacated for want of court time – another ‘big money’ case in my list was seriously overrunning. Indeed, in circumstances to which I must return in due course, the loan account issue has still not been heard.

On 8 May 2009 the wife sought permission to appeal to the Court of Appeal in respect of certain of my substantive findings in relation to 17 Kensington Heights and also in respect of part of my decision in relation to the costs, but not, it may be noted, in respect of my decision in relation to the injunction. Her application came before the Court of Appeal (Thorpe, Scott Baker and Sullivan LJJ) on 22 July 2009 and was dismissed for reasons given by Thorpe LJ: Hashem v Shayif and ors [2009] EWCA Civ 984. In the course of his judgment, Thorpe LJ (at para [9]) made certain observations about the loan account issue, which he called ‘the satellite case’:

“I digress to say that that satellite case seems to me to be completely pointless given that the wife as claimant was not in a position to fire any ammunition. The effective creditor will take no part in the proceedings whatsoever, and all that is likely to emerge is sterile outcome with further bleeding of whatever monies there are in this jurisdiction in favour of eminent and expensive lawyers. So it is not surprising that thoughts of mediation have entered judicial minds. Mr Wagstaffe has emphasised that the wife is very keen to mediate, and Miss Evans-Gordon, without instructions, recognises the good sense of mediation and has, through her instructing solicitors, sought instructions to take that sensible path.”

I do not know whether anything, or anything effective, was done to follow up the suggestion of mediation but the fact is that the loan account issue remains very much alive.

On 16 July 2009, just before the hearing in the Court of Appeal, His Honour Judge Wilcox, sitting as a Deputy Judge of the High Court, had further amended the injunction by increasing to £177,000 the amount of the borrowings the company was permitted to secure against 17 Kensington Heights, the purpose of this further variation being to cover the company’s costs of the hearing in the Court of Appeal.

Unsurprisingly, the company had given the wife notice to quit 17 Kensington Heights as soon as it was in a position to do so, that notice expiring on 14 May 2009. At that stage, of course, the wife’s application for permission to appeal was still pending in the Court of Appeal (it had been issued as recently as 8 May 2009), so equally unsurprisingly perhaps, she did not vacate. But, as it was entitled to, the company issued possession proceedings in the West London County Court on 19 May 2009. A hearing of those proceedings listed for 7 July 2009 was adjourned pending the hearing in the Court of Appeal. Following the outcome in the Court of Appeal on 22 July 2009, the possession proceedings were re-listed for hearing on 3 August 2009, on which date an order was made requiring the wife to give vacant possession on or before 17 August 2009. She failed to do so and the company had to take steps to have her evicted on 22 August 2009. The contents were not removed until 19 October 2009, in circumstances which gave rise to the complaint by the wife shortly thereafter to which I refer below.

As I have said, the hearing of the loan account issue which had been fixed for 30 April 2009 had to be vacated. It proved impossible to find any date convenient both to the court and to counsel either before the end of the July 2009 sittings or during the period in August 2009 when I was sitting as a vacation judge. However, the parties were informed by my Clerk on 29 July 2009 that I would be able to accommodate the hearing in October, November or December 2009. On 28 September 2009, by which time I had read the judgment of the Court of Appeal, the parties were told that, if they still wished for a hearing of the loan account issue, they should contact my Clerk with a view to fixing a date in either October or November 2009. On 19 October 2009, by which date I had become aware that the wife was experiencing difficulties in relation to her public funding, the parties were told that I was anxious, if at all possible, to deal with the matter – that is, to hear and determine the loan account issue – before the end of term.

Shortly after that, the wife wrote to me seeking what she called “clarification” of paragraph 16 of the order of 3 November 2008, her complaint apparently being that, as she put it, the company’s solicitors “have not accepted that the possessions in the Kensington Flat were in fact my property and their clients have taken it upon themselves to cherry-pick the majority of items they wish to keep.” My Clerk replied on 27 October 2009 indicating on my behalf that “if you wish to pursue this matter with [the judge] it should be done by way of formal application which can be dealt with at the forthcoming loan account hearing.” No such application has in fact yet been issued.

By mid November 2009 nothing effective had been done to list the hearing of the loan account issue and my Clerk accordingly wrote to the parties on 11 November 2009 expressing my “increasing concern” about the ongoing delays. The same day my Clerk received a response from a firm of solicitors recently instructed by the wife, who said that they were awaiting receipt of the papers from the solicitors who had previously been acting for her. His response on 13 November 2009 was to indicate on my behalf that, although it seemed unlikely that the substantive matter could be ready for hearing before the end of term, I thought that the matter should nonetheless be listed for directions.

Despite further to-ing and fro-ing, so little progress appeared to have been made that on 1 December 2009 I directed my Clerk to notify the parties that I proposed to list the matter for two hours in the middle of the month. On 3 December 2009, and having considered further e-mailed representations from the parties, I directed that the matter was to be listed before me on 14 December 2009 “but only for directions and timetabling”. The e-mail from my Clerk to the parties containing this direction continued:

“The judge has asked me to point out that he will, in principle, be willing to make an order for directions without the need for attendance by the parties, if you are able to agree an order before 14 December 2009 in terms which he is willing to approve – in which event the order can be made without the need for a hearing.”

In the event the parties were unable to agree directions. The wife’s proposed directions were set out in a letter from her solicitors to the company’s solicitors dated 9 December 2009; the company’s draft did not arrive until the morning of the hearing, on 14 December 2009.

In the meantime, on 8 December 2009, the company had issued an application, returnable on 14 December 2009, for (1) the discharge of the injunction and (2) in the alternative, the further amendment of the injunction to permit the company to secure borrowings of up to £300,000 against 17 Kensington Heights. That application was supported by a further witness statement from the company’s solicitor, Miss Emberton (her seventh), dated 8 December 2009. On 10 December 2009 the company indicated through its counsel, Miss Jane Evans-Gordon, that it:

“must pursue its application dated 8 December 2009 to discharge or vary the current injunction on Monday because without at least a variation it cannot pay the bills on its properties or fund its legal costs, including those of preparing for and attending the hearing of the Loan Account inquiry.”

It was in these circumstances that the matter came before me on 14 December 2009. Miss Evans-Gordon appeared, as before, for the company; the wife was represented by Mr Philip Squire who, through no fault of his own, had come into the case at virtually the very last minute.

There were, as will be appreciated, three matters before me: first, and listed at my direction, there was the question of directions and timetabling in relation to the loan account issue; second, there was the company’s application for the discharge of the injunction; and, third, there was the company’s application, in the alternative, for the further amendment of the injunction to increase the permitted secured borrowing. It is convenient to deal with them in turn.

The parties agree that the directions I gave on 3 November 2008 have been complied with. The prime necessity now is therefore to fix the hearing of the loan account issue – a hearing which will have to be before another judge because, with my new responsibilities and their attendant obligations, I can no longer justify reserving the matter to myself. The order I have made gives the appropriate directions for a hearing on the first open date on or after 15 March 2010 – which will give the wife’s new legal team ample opportunity to master the case.

I should add, not least because of various observations made both by Mr Squire and Miss Evans-Gordon, that the hearing of the loan account issue – the trial of the inquiry I have directed – is not an occasion or an opportunity for any general re-opening or re-arguing of issues which I have already decided following the original trial in April 2008. The only issue remaining to be determined by the court is the amount of the outstanding loan account (if any), as it is that which I have ordered to be transferred to the wife. To reach a conclusion on that issue, the court will have to consider the quantum, and the nature and character, both of the payments by the husband to the company and of the payments by the company to the husband. Nothing else remains to be determined.

However, I am sure there will be no need to trouble the judge conducting the inquiry with more than a small fraction of the voluminous documentation that was properly before me during the original trial in April 2008. I am quite sure that the material which the judge will need in order to dispose of the loan account issue fairly and properly can be accommodated, more than comfortably, in at most two lever arch files. So I have included a direction to that effect in my order. And I have also included a direction that counsel are jointly to prepare an agreed pre-reading list for the judge identifying the particular relevant paragraphs or passages in any judgment, witness statement or other document that require to be pre-read. Given the limited ambit of the loan account issue, a proper reading list will, I believe, enable even a judge who will be coming fresh to the case to do the necessary pre-reading within a couple of hours.

I referred above to the wife’s complaint in relation to the contents of 17 Kensington Heights, remarking that, despite what she had been told on 27 October 2009, she has still not issued any application. I am not prepared to tolerate any further delays, nor, in particular, am I prepared to contemplate the possibility of the hearing of the loan account issue being anything other than the final hearing of all outstanding issues (enforcement apart) as between the wife, the company and the husband’s children. Accordingly I have directed that if the wife wishes to pursue any claim in relation to these chattels she must file and serve a Scott Schedule in a form I have specified by 8 January 2010, failing which, as my order spells out, she shall be debarred from pursuing such a claim. If such a claim is made then, in accordance with the further directions I have given, it will be tried at the same time as the loan account issue.

I turn to the second matter: the company’s application for the discharge of the injunction.

In her skeleton argument dated 10 December 2009 Miss Evans-Gordon identifies two reasons why, as she would have it, the injunction should be discharged:

I am not prepared to decide this question without giving the wife a proper opportunity to consider her response to an application made, albeit within the letter of the rules, only a matter of days before the hearing and, moreover, in circumstances where the company has not previously attempted to discharge an injunction which has been in place for over three years. Furthermore, it is not immediately obvious that the company’s case for the discharge (as opposed to the further amendment) of the injunction is that compelling. Whatever the merits (or otherwise) of the wife’s claim in relation to the loan account issue it is far from clear that the balance of convenience calls for the discharge of the injunction given that it protects one of only two assets within the jurisdiction and, in particular, given that the company is in principle entitled, as I have already held (Ben Hashem v Ali Shayif and Radfan Ltd [2009] EWHC 864 (Fam), [2009] 2 FLR 896), to raise money on the security of the property to meet its normal business expenses notwithstanding the existence of the injunction. And it is a fact that the primary cause of the delay in the trial of the loan account issue was the inability of the court to honour the fixture on 30 April 2009 rather than the wife’s dilatory conduct of the proceedings since then.

I propose therefore to adjourn the hearing of this part of the company’s application to enable the wife’s new legal team to assess the position, both generally and, specifically, in relation to the company’s application to discharge the injunction. Justice will be done if I direct that the adjourned application is to be listed for hearing (with a time estimate of one half-day) on a date no earlier than Monday 25 January 2010 and no later than Friday 5 February 2010 to be fixed as soon as possible by the Clerk of the Rules in consultation with counsel’s clerks. And in this connection I draw the attention of both the parties and the Clerk of the Rules to R (Casey) v Restormel Borough Council [2007] EWHC 2554 (Admin). Where a judge has identified, as I have here, the ‘window’ within which an application to discharge an interim injunction is to be listed, it is the duty of the court to list the application in accordance with the judge’s direction.

I turn to the third and final matter: the company’s application, in the alternative, for the further amendment of the injunction to increase the permitted secured borrowing by a further £123,000 from the existing limit of £177,000 to a total of £300,000.

The background to this application – the third since I gave judgment, as Miss Evans-Gordon correctly observes – is, as the evidence establishes and as the court has recognised on previous occasions, that the company has no liquid assets and must therefore borrow to fund its ongoing property expenses and legal costs; and given its lack of income and the ongoing litigation it can borrow only if it gives security. Moreover, she says, the court has already ruled on the principle that the company is entitled to use its assets to fund its expenses and legal costs and that it may charge its properties for the purpose – so the matter is res judicata. That, of course, is so. For the reasons set out in my second judgment (Ben Hashem v Ali Shayif and Radfan Ltd [2009] EWHC 864 (Fam), [2009] 2 FLR 896, at paras [83], [86]), I accepted Miss Evans-Gordon’s submission on that occasion that, as a matter of principle, the court will ensure that a defendant is not deprived of professional legal representation by reason of a freezing order and that where, as in the present case, there is no proprietary claim, the defendant ought to be able to use its own assets to defend itself, indeed, to pay its debts generally as they fall due; a proposition which I held she had made good by reference to what Morritt J had said in Investment and Pensions Advisory Service Ltd v Gray [1990] BCLC 38 at page 43. And, as I have already remarked, there was no attempt by the wife to appeal my decision on this point.

The point of principle thus being established, Miss Evans-Gordon points to Miss Emberton’s most recent witness statement (that dated 8 December 2009) as showing that the company has almost exhausted the money it has thus far been entitled to secure against its property and that it can no longer pay its bills or its legal costs.

I need not go into the exact details but Miss Emberton identifies that between now and December 2010 the company will have to spend £44,936 in all in meeting its administrative and property expenses. In addition it has legal costs (including counsel’s fees and other disbursements) of £41,591 billed but not yet paid and anticipates having further legal costs of something in the order of £30,000. The grand total comes to £116,527, an amount which, as Miss Emberton points out, does not make allowance for any rental income that may in due course be received as and when 17 Kensington Heights is let. Miss Evans-Gordon acknowledges that the amount being claimed – a further £130,000 – in any event exceeds Miss Emberton’s figure but says that past estimates have usually been too low. She says that the company seeks the whole of the sums required for the next year in order to avoid the costs of a further application. She seeks to sugar the pill for the wife by suggesting that it may not be necessary to borrow the full amount and that it is hoped that a stream of income will be generated by renting out the property. That said, as she points out, the ongoing expenditure and lack of income can be attributed largely, if not entirely, to the wife’s actions. Finally, and seeking to meet Mr Squire’s obvious objections in anticipation, she says that it is difficult to see what evidence the wife could adduce in relation to this application, as none of the relevant matters are within her knowledge.

Mr Squire, valiantly doing his best to make bricks with little if any straw, submitted that there was no justification for any further amendment of the injunction. Inevitably, his arguments bore a strong resemblance to those, put before me by Mr Wagstaffe on a previous occasion, which I have already rejected.

I remain firmly of the view that Miss Evans-Gordon is, in principle, entitled to the relief she seeks. That, after all, as she rightly says, is res judicata between the parties. The question therefore is simply one of fact, as to which Miss Emberton’s latest evidence is clear. I confess to having some difficulty in seeing how the wife can realistically hope to displace Miss Emberton’s evidence and I recognise that I am adopting a course that some might think unduly pusillanimous. But given that the wife’s new legal team has had little time to master the case, let alone to grapple with an application made at such a late stage, and given that the question of the injunction is in any event coming back before the court in early course, I propose to grant Miss Evans-Gordon’s application, but at this stage only to the extent necessary to carry the company through to that hearing. Miss Evans-Gordon suggests that, on that footing, what will be required is a further £30,000 or so. She may be right, but focussing on those liabilities the non-payment of which might expose the company to irretrievable loss, I think that a further £23,000 will suffice to tide the company over for the next eight weeks at most until the matter returns to court. I shall accordingly increase the level of the permitted borrowing on the security of 17 Kensington Heights by £23,000 from £177,000 to £200,000.

In arriving at this conclusion I wish to emphasise two things. First, I am not finding that the company’s liabilities as they are today or as they will be by 5 March 2010 are such as to necessitate only a further £23,000 of borrowing. On the contrary, those liabilities are almost certainly higher – much higher – bearing in mind, for example (and it is only one example; I could take others), that the company has outstanding legal bills of over £40,000, as to which it is difficult to see what conceivable argument the wife would be able to put forward as to why they should not be paid, and paid now rather than at some vague time in the future. Second, the wife and her legal advisers need to think very carefully before deciding to continue their resistance to this part of the company’s application. The point of principle is concluded against them; and what basis do they have for challenging Miss Emberton’s evidence? Although I have given them a breathing space in which to consider matters at more leisure than has thus far been afforded them, they should be under no illusions as to the reason why I have given them this liberty: it has everything to do with procedural fairness and little if anything to do with the substantive merits.

I must deal finally with the costs – that is, to be precise, the costs of the hearing before me on 14 December 2009 (the costs of the company’s application generally will, of course, be matter, at least initially, for the judge who hears the adjourned application early next year). Unsurprisingly the parties differed as to how these costs should be borne. Having heard what both Miss Evans-Gordon and Mr Squire have had to say on the topic, I propose to adopt the following course.

There were, in substance, two quite distinct matters before me on 14 December 2009: one, brought before me at my direction and in circumstances where the parties had been unable to reach the agreement which would otherwise have avoided the need for the hearing on this point, the directions hearing in relation to the loan account issue; the other, brought before the court at the company’s insistence, its application to discharge or amend the injunction. In relation to the first, the appropriate order, in my judgment, is that the costs should be costs in the cause. The reasons are so obvious as not to require elaboration. In relation to the second, the appropriate order, in my judgment, is that the costs should be reserved to the judge hearing the company’s adjourned application, for he or she will, as it seems to me, be in a better position than I am to assess whether there really was justification for the adjournment. I shall so order.

It is plainly highly undesirable that it should be left to a taxing judge to apportion the costs of the hearing on 14 December 2009 as between the two topics. Indeed, I am, in the nature of things, in a much better position than a taxing judge to come to a view. Apportionment in such circumstances is, almost inevitably, a matter of somewhat rough justice, but doing the best I can, and evaluating what took up the time at court on 14 December 2009, I think that justice will best and most accurately be served if I say that the costs of the hearing are to be apportioned equally between the two topics.

Accordingly, I shall direct that half the costs of the hearing on 14 December 2009 be costs in the cause and that the other half be reserved to the judge hearing the company’s adjourned application.