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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Bank of Beirut S.A.L. & Anor v HRH Prince Adel El-Hashemite & Anor  EWHC 1451 (Ch) (22 May 2015)
Cite as:  WLR(D) 230,  EWHC 1451 (Ch),  3 WLR 875
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Fetter Lane, London, EC4A 1NL
B e f o r e :
| (1) BANK OF BEIRUT S.A.L.
(2) BANQUE DU LIBAN
|- and -
|(1) HRH PRINCE ADEL EL-HASHEMITE
(2) THE REGISTRAR OF COMPANIES FOR ENGLAND AND WALES
Mark Mullen (instructed by Treasury Solicitor) for the Second Defendant
Crown Copyright ©
Mr Justice Nugee :
(1) In claim no. HC-2014-001497 they are two Lebanese banks, namely (i) Bank of Beirut s.a.l. ("BoB"), one of the leading commercial banks in Lebanon; and (ii) Banque du Liban ("BdL"), the Central Bank of Lebanon.
(2) In claim no. HC-2014-001951, there is one claimant, Arab National Bank ("ANB"), a Saudi Arabian bank.
Each of the Banks claims to be the victim of a fraud carried out by a man who styles himself HRH Prince Adel El-Hashemite. I have heard no evidence or submissions as to whether he is entitled to use this title (there is an indication in the papers that he is, or claims to be, the grandson of King Feisal, who became the first ruler of the Hashemite kingdom of Iraq in 1921) but I will refer to him, as counsel did, as "the Prince". The Prince is the First Defendant in each action.
(1) The Prince claims (falsely) to be owed money by the relevant Bank.
(2) The Prince claims (falsely) to have an irrevocable power of attorney from that Bank.
(3) Using that supposed power of attorney, the Prince claims (falsely) to have entered into a limited partnership governed by English law pursuant to the Limited Partnerships Act 1907 ("the 1907 Act"), under which the relevant Bank is the general partner and he is the limited partner.
(4) The Prince has registered that supposed limited partnership with the Registrar of Companies ("the Registrar"), the Registrar being under a duty under the LPA 1907 to register limited partnerships, and has been issued by the Registrar with a certificate of registration.
(5) The Prince has used that certificate of registration as an instrument of fraud, in particular in Germany where he is resident.
The facts – ANB
(1) In 1994 ANB had provided banking services in Saudi Arabia to Mr El-Abdali (the defendant in that action). Disputes arose between them and litigation in Saudi Arabia followed. ANB recovered judgment against Mr El-Abdali on two promissory notes for some $6.6m. There was also litigation before the Saudi Arabian Monetary Authority ("SAMA") concerning Mr El-Abdali's margin trading account which had not concluded when Morison J gave judgment.
(2) On 2 January 2002 ANB received out of the blue a fax purporting to be an Order, made in an arbitration commenced by Mr El-Abdali as Applicant against ANB as Defendant, requiring ANB to provide copy documents in relation to the margin trading account. None of the agreements between ANB and Mr El-Abdali contained an arbitration agreement (and in Saudi Arabia all proceedings relating to banking, including claims under arbitration agreements, have to be submitted to SAMA for approval which Mr El-Abdali had not done). The fax purported to come from the "International Fraud Bureau, Division Of Human Rights Arbitration Forum, Member of London Court of International Arbitration", and was signed by the Prince, described as "President & CEO, Human Rights Arbitration Forum". It gave a docket number of 281201S02 and a "current Saudi address" at a hotel in Mecca.
(3) The evidence before Morison J (and before me) is that Mr Zuhair Al-Herbish, the Head of Legal Affairs for ANB, contacted the hotel to see if the fax was authentic and spoke to someone claiming to be the Prince very briefly. ANB contacted SAMA who told it not to respond, and Mr Al-Herbish says he did not send any written acknowledgment of the fax. Nevertheless in May 2004 Richards Butler, who acted for ANB in the proceedings before Morison J, received a copy of what purported to be an acknowledgment of the fax signed by Mr Al-Herbish. Mr Al-Herbish's evidence (before Morison J and before me) is that the signature was a copy of his signature which he believed had been taken from genuine legal documents signed by him in the proceedings between ANB and Mr El-Abdali in Saudi Arabia and cut and pasted onto the acknowledgment form. Morison J concluded that this document was a forgery.
(4) On 8 February 2002 ANB received what purported to be an arbitral award, dated 13 January 2002 and signed by the Prince, awarding Mr El-Abdali very large sums (81m Saudi Riyals and some $110m) against ANB. The basis for the assertion of jurisdiction over ANB was the return of the form of acknowledgment of service.
(5) Also in February 2002 Richards Butler was contacted by an English solicitor, Mr Michael Robinson. Mr Robinson had been approached by the Prince (of whom he had never previously heard) to register the arbitral award, and to register at Companies House a mortgage against an English branch of ANB. He made inquiries of the London Court of International Arbitration but was told by the registrar that he had no knowledge of the Human Rights Arbitration Forum and it was not a member. Mr Robinson declined to accept instructions. He provided ANB with a copy of what purported to be a Fixed and Floating Mortgage made by ANB as mortgagor in favour of Mr El-Abdali as mortgagee, dated 30 January 2002 and expressed to be by Order of the Arbitral Court – Human Rights Arbitration Forum. It too had a copy of Mr Al-Herbish's signature on it. Mr Al-Herbish's evidence is that he had never signed the document, or talked to the Prince about it, or indeed seen the document until he was shown a copy by Richards Butler in July 2004.
(6) In May 2004 ANB's London branch received a letter from English solicitors, Forum Law, seeking to enforce the arbitral award, which was said to then stand (with interest) at about $160m. It was this which prompted the application to the Commercial Court.
(7) Morison J found that ANB had established by overwhelming evidence that the arbitral award had been obtained by fraud, that there was no arbitration agreement in place, that the arbitral tribunal was not properly constituted and there was no agreement as to the scope of the arbitration. He also found that Mr Al-Herbish's signature had been forged on the mortgage. He declared both the award and the mortgage to be not binding on or enforceable against ANB, and restrained Mr El-Abdali from taking any steps to enforce or publicise them.
The facts – BoB
Facts - BdL
(1) The claim was issued on 25 November 2014.
(2) Attempts to serve the Prince by post at his Saarbrucken address were unsuccessful, but the claim form and enclosures were also sent by e-mail to him on 26 November 2014.
(3) It is apparent that he received them as he sent to the Court (and the Registrar) two notices of discontinuance, one in the name of BoB and the other in the name of BdL, each being notarised in Luxembourg on 4 December 2014.
(4) On 19 January 2015 BoB and BdL applied to the Court for an order for substituted service and default and summary judgment.
(5) On 6 February 2015 the Prince sent to the Court a second notice of discontinuance (in the name of both BoB and BdL).
(6) On 9 February 2015, Newey J directed that the service of the claim form and enclosures by e-mail on 26 November on the Prince stand as valid service and that the time for him to serve an acknowledgment of service, admission or defence be 14 days after service of his Order by e-mail, and gave directions for the balance of the application to be heard on 30 or 31 March 2015.
(7) Service of the Order took place on 10 February 2015.
(8) No acknowledgment of service or defence has been received from the Prince by 24 February 2015, or at all.
(1) The claim was issued on 18 December 2014.
(2) ANB applied to the Court for permission to serve by e-mail which was granted by Master Teverson on 9 January 2015.
(3) Service of the claim form and enclosures was effected by e-mail on 12 January 2015, meaning that the Prince had until 28 January 2015 to respond.
(4) The Prince has not filed an acknowledgment of service or defence but on 27 January 2015 sent a notice of discontinuance on behalf of ANB to the Court.
(5) On 2 February 2015 ANB applied for summary judgment and judgment in default of acknowledgment of service and for an order that its application be heard together with that in the other action.
(6) This was served on the Prince on 3 February 2015 to which he responded by asking for an adjournment for one month and sending to the Court a second notice of discontinuance in the name of ANB.
(7) On 9 February 2015 Newey J refused the adjournment and gave directions for the hearing of ANB's application together with the applications by BoB and BdL.
Should there be an adjournment ?
The Banks' claims against the Prince
(1) The Prince says that each Bank is in an insolvency process, relying in each case on what he says is the approval of the Financial Conduct Authority. In fact the letters he produces from the FCA are only concerned with the use of the name "bank" as a sensitive business name in the proposed name of each partnership.
(2) The Prince says that the powers of the board of directors and signatories of each Bank have been terminated since the partnerships have been registered. This assumes that the partnerships were validly entered into and I am satisfied that they were not.
(3) The Prince says that the judgment of the Beirut criminal court produced by BoB's solicitors is not authentic and that they have therefore misrepresented the position. I am very doubtful indeed that there is any real question mark over the authenticity of this document but even if it is put to one side there is ample material to show that the Prince's case is quite unsustainable.
(4) The Prince says that the Banks' solicitors (Reed Smith for ANB and CMS Cameron McKenna for BoB and BdL) have not produced any valid power of attorney to act for the Banks. In relation to the Lebanese banks (BoB and BdL) this point is elaborated on in great detail in his second notice by reference to extracts from the Lebanese Civil Procedure Code. I am not going to attempt to construe this foreign code on the basis of the translation of certain extracts and will proceed on the basis that the Prince is, or may be, right that it provides that in Lebanon a litigant that litigates certain claims must do so by a lawyer, and that such lawyer must hold a power of attorney, and that such power of attorney must be conferred by deed under seal. I will also assume, although there is less material to this effect, that similar provision is made in Saudi law. But even taking this at its highest, it seems to me to do no more than regulate procedure before the Lebanese or Saudi courts (as indeed the title of the Lebanese code suggests). Procedure is a matter for the forum and in particular it is a matter for the English court as to which representatives the court will hear. In England the practice is to hear counsel instructed (without a power of attorney) by solicitors who are themselves instructed (without a power of attorney) by the client. If it is established that solicitors acting for a claimant are doing so without authority the action is no doubt liable to be struck out as a nullity, but the Court does not require any particular proof of such authority. In the present case I have witness statements from Mr Spafford, a partner in Reed Smith, and Mr Foss, a partner in CMS Cameron McKenna, in each case saying that he is duly instructed by ANB, or by BoB and BdL respectively; and I have no reason to doubt that evidence. For the purposes of English procedure that is sufficient; it is also perfectly clear from the evidence of the officers of each Bank that the solicitors are indeed authorised to bring these claims.
(5) In his second notices, the Prince refers to the fact that parallel civil proceedings are taking place in Germany which concern the same parties, the same evidence and the same subject matter. In a general sense this is no doubt true but the relief sought in each action is different. The object of the German proceedings, so far as appears from the evidence, is to nullify the registration of the partnerships in Germany and (in the case of BoB) the notarised acknowledgments of debt. In the English proceedings the object is primarily to nullify the registration of the partnerships in England, relief which one would have thought could only be obtained in England. I see nothing objectionable in the Banks proceeding in this way.
(6) In his second notices the Prince refers extensively to the fact that certificates from Companies House are conclusive evidence, relying on the certificates which purport to certify that he is the irrevocable general attorney-in-fact of each Bank. There is nothing in this point. Leaving aside the very strong likelihood that certificates in this form are not genuine, the only conclusive evidence provision in the 1907 Act is s. 8C which provides that a certificate of registration is conclusive evidence that a limited partnership came into existence on the date of registration. I consider the effect of this provision in more detail below, but it says nothing about the effect of a certificate of good standing (which as explained above is non-statutory); in any event even if the effect of a certificate of registration is to preclude any challenge to the existence of the limited partnership, it does not preclude the Court finding that that partnership has been brought into existence by means of false statements and granting relief accordingly.
(7) A number of other matters are referred to in the Prince's notices but none of them require to be dealt with separately. None of them alters my conclusion that each Bank has shown that the Prince has no real prospect of success.
Relief sought against the Prince
"justice to the claimant, justice to the defendant, whether the declaration would serve a useful purpose and whether there are any other special reasons why or why not the court should grant the declaration."
(a) The Limited Partnership Agreements purported to be made by the Banks and the Prince are not the deed of the Banks and are void.
(b) The Prince holds no power of attorney on behalf of the Banks.
(c) The applications in form LP5 filed by the Prince for the limited partnerships were false, fraudulent and made without authority.
(d) The documents in relation to the limited partnerships on the Registrar's public register only exist as a result of false representations by, and the fraud of, the Prince.
(e) The Banks are to be indemnified by the Prince in respect of any debts and liabilities arising in relation to the limited partnerships.
The claim against the Registrar
"The [Registrar] shall as soon as practicable remove from the records held at the Registry at Companies House all documents and information relating to [each of the limited partnerships] excluding any note explaining the reasons for the documents' removal."
"the Chief Executive Officer of the BANK OF BEIRUT SAL DEBENTURE DEED LIMITED PARTNERSHIP, Registered Number: LP015722 at Companies House – Cardiff UK; and HRH Prince Adel El-Hashemite being "BANK OF BEIRUT SAL Irrevocable General Attorney-in-fact" pursuant to the terms of this registered Limited Partnership and HRH Prince Adel El-Hashemite is authorised at all times to execute without limitation and to sign at any time and at any place whatsoever any type of documents, contracts, agreements, instruments ….in the name and under the common seal and on behalf of BANK OF BEIRUT SAL (the General Partner of BANK OF BEIRUT SAL DEBENTURE DEED LIMITED PARTNERSHIP), evidenced by the Registrar's Certificate."
This is typical of the documents produced by the Prince. The Banks say that any third party presented with such documents can confirm, by a simple internet search, that the BoB partnership is indeed registered at Companies House under number LP015722; and that in this way the fact of registration may assist the Prince in his fraudulent schemes. They suggest that this was presumably how the Prince obtained the notarised acknowledgments of debt.
The 1907 Act
"shall register a limited partnership if an application is made to the registrar in accordance with section 8A."
s. 8A specifies the requirements for an application for registration, including a requirement (by s. 8A(1)(c)) that the application be signed by or on behalf of each partner.
"(1) On registering a limited partnership the registrar shall issue a certificate of registration.
(2) The certificate must be—
(a) signed by the registrar, or
(b) authenticated with the registrar's seal.
(3) The certificate must state—
(a) the firm name of the limited partnership given in the application for registration,
(b) the limited partnership's registration number,
(c) the date of registration, and
(d) that the limited partnership is registered as a limited partnership under this Act.
(4) The certificate is conclusive evidence that a limited partnership came into existence on the date of registration."
Re Calmex Ltd
"In my judgment the court does in principle have jurisdiction according to ordinary public law principles to control the way in which the registrar carries out his statutory duties, subject to any specific exclusions of that jurisdiction or the evidence on which it could be founded."
Conclusive evidence provisions
"the Attorney-General, on behalf of the Crown, could institute proceedings by way of certiorari to cancel a registration which the registrar in affected discharge of his quasi-judicial duties had improperly or erroneously allowed."
An example where this course was indeed taken is provided by R v Registrar of Companies ex p Attorney General  BCLC 476 where a company was incorporated for the purpose of carrying on the business of prostitution under the name of Lindi St Claire (Personal Services) Ltd (the Registrar having declined to accept the first two names offered, Prostitute Ltd and Hookers Ltd), and the Court had no difficulty in quashing the registration at the instance of the Attorney-General on the ground that the company had been formed for unlawful purposes.
"fraud is a thing apart. This is not a mere slogan. It reflects an old legal rule that fraud unravels all: fraus omnia corrumpit. It also reflects the practical basis of commercial intercourse. Once fraud is proved, "it vitiates judgments, contracts and all transactions whatsoever": Lazarus Estates Ltd v Beasley  1 QB 702 at 712, per Denning LJ. Parties entering into a commercial contract will no doubt recognise and accept the risk of errors and omissions in the preceding negotiations, even negligent errors and omissions. But each party will assume the honesty and good faith of the other; absent such an assumption they would not deal."
He went on to hold that even if it were in theory possible for a party to a contract to exclude liability for the fraud of his agents, such intention must be expressed in clear and unmistakable terms (at ):
"General words, however comprehensive the legal analyst might find them to be, will not serve: the language used must be such as will alert a commercial party to the extraordinary bargain he is invited to make. It is no doubt unattractive for a contracting party to propose a term clearly having such effect, because of its predictable effect on the mind of the other contracting party."
As this makes clear, the principle in HIH is a principle of contractual interpretation: words in a contract relieving a party of liability will not extend to a case of fraud unless fraud is expressly mentioned.
"'Conclusive evidence' means that no contrary evidence will be effective to displace it unless the so-called conclusive evidence is inaccurate on its face, or fraud can be shown."
"Any fraudulent ruling would, I have no doubt, be vacated by a competent Court."
This too seems to me on analysis to be in the end a question of construction: North J construed the articles as not extending to the chairman's decision being deemed to be valid in the case of a fraudulent ruling (by which I assume he meant a case where the chairman was acting dishonestly not where he had been deceived by the fraud of someone else). This is readily explicable on the same principle as HIH: a person becoming a shareholder in a company on the basis of the articles is to be taken as agreeing to abide by the ruling of the chairman if he is merely wrong, but not if he is acting dishonestly.
"No court in this land will allow a person to keep an advantage which he has obtained by fraud. No judgment of a court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything. The court is careful not to find fraud unless it is distinctly pleaded and proved; but once it is proved, it vitiates judgments, contracts and all transactions whatsoever: see as to deeds, Collins v. Blantern; as to judgments, Duchess of Kingston's case; and as to contracts, Master v. Miller. So here I am of opinion that if this declaration is proved to have been false and fraudulent, it is a nullity and void and the landlords cannot recover any increase of rent by virtue of it."
"I am satisfied that I should make the order in accordance with the fundamental principle that "fraud unravels all" and in view of the fact the Registrar has public duties, one of which must be not to allow the continuance of a state of affairs in breach of an order of the High Court declaring that a document which was subsequently registered in the public records was a fraud and a forgery."
However this was an ex tempore judgment given in a case where there was no appearance on behalf of the Registrar (or Mr El-Abdali), and nothing in Lawrence Collins J's judgment to indicate that his attention was drawn to the "conclusive evidence" provision in what was then s. 401(2)(b) of the Companies Act 1985, or the decision of the Court of Appeal in Exeter Trust v Screenways. I do not think I can regard it as an authority deciding that the Re Calmex jurisdiction can be used to override the effect of a conclusive evidence provision in the case of fraud. Mr Mullen pointed out that in an earlier case on the same conclusive evidence provision (then found in s. 98(2) of the Companies Act 1948), Re Eric Holmes (Property) Ltd  1 Ch 1052, Pennycuick J had held that its effect was that once the Registrar's certificate had been granted it was impossible to go behind it even though the particulars of charge lodged for registration had misstated the date of the charge, adding:
"It is, I think, possible that there is some lacuna in the Act here, inasmuch as the Act gives, apparently, protection where the certificate is made upon the basis of particulars which are incorrect and might even be fraudulent."
This was clearly obiter but shows that Pennycuick J at any rate thought that the certificate might be conclusive even in a case of fraud.
What should be done ?
"To obtain further details, click on the appropriate company number below"
and if one clicks on the number, it brings up a screen showing the partnership's status as "Converted/closed 17/04/2015". There is a clickable link for "Order information on this company" which takes one to another screen which lists the available information which can be ordered with a date and a brief description. This list shows the following:
|1 GENERAL PARTNER(S) APPOINTED, 1 LIMITED PARTNER(S) APPOINTED AND THE CONTRIBUTED AMOUNT IS 1000 USD
Order declaring the application for registration to be false, fraudulent and made without the authority of the Bank of Beirut S.A.L.
A user who registers and pays a fee of £1 can download this information and will retrieve a copy of the Order I made on 30 March 2015.