B e f o r e :
LORD JUSTICE AULD
LORD JUSTICE LLOYD
LORD JUSTICE WILSON
|| (1) DALTEL EUROPE LIMITED (in liquidation)
(2) JAMES EARP, ROBERT HARRY PICK AND NICHOLAS STEWART WOOD (the liquidators of Daltel Europe Ltd)
(3) PACIFICA LIMITED (in liquidation)
(4) JAMES EARP, ROBERT HARRY PICK AND NICHOLAS STEWART WOOD (the liquidators of Pacifica Ltd)
(5) GLOBENET (UK) LIMITED (in liquidation)
(6) JAMES EARP, ROBERT HARRY PICK AND NICHOLAS STEWART WOOD (the liquidators of Globenet (UK) Ltd)
Claimants / Respondents
||- and -
HASSAN ALI MAKKI
|First Defendant / Appellant
||- and -
||WEYBRIDGE MANAGEMENT LLC
DALTEL USA LLC (both companies incorporated under the laws of Delaware, USA)
|Second and Third Defendants
(Transcript of the Handed Down Judgment of
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Hugo Page Q.C. (instructed by Irwin Mitchell) for the Appellant
Robert Anderson (instructed by Jones Day) for the Respondents
HTML VERSION OF JUDGMENT
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Lord Justice Lloyd:
- This is an appeal by Hassan Makki against orders made by Mr Justice David Richards upon finding Mr Makki guilty of contempt of court in a number of respects. Mr Makki challenges most of the findings of contempt, some of the sentences passed, which were for committal for periods aggregating 12 months, and the order for costs. He also seeks to challenge a later decision of the judge on an application by the Claimants under CPR Part 24 for summary judgment.
- His appeal against the orders for committal lies without permission. He may have needed a short extension of time for that appeal, which he was granted at the outset of the hearing. He needs permission to appeal as regards costs. He also sought permission to amend the grounds of appeal, and to introduce additional evidence. He needs permission to appeal against the order for summary judgment. As regards all these matters, apart from the extension of time, we heard argument in full and said that we would give our decisions when giving judgment on the appeals.
- The claim form was issued on 26 February 2004, at that stage against Mr Makki alone. On the same day freezing and search orders were made without notice against Mr Makki by Mr John Jarvis Q.C. sitting as a judge of the Chancery Division. They were executed on the next day at the offices in London which Mr Makki used at that time. Particulars of Claim were served in March 2004 and Mr Makki's Defence in May 2004. The Defence was verified by a statement of truth signed by Mr Makki. In the meantime, Mr Makki had been examined in private under the Insolvency Act 1986 section 236, on 6 April 2004. On 17 June 2004, at a directions hearing the Claimants were given permission to add an extra Claimant (Globenet) and two additional Defendants. The Claim Form and Particulars of Claim were duly amended in July, and the Third Defendant served a Defence in August, also verified by a statement of truth signed by Mr Makki.
- The Claimants issued two separate applications to commit Mr Makki for contempt, and relied on two separate kinds of contempt: first, breaches of the search and freezing orders made on 26 February 2004, and secondly, under CPR rule 32.14, that Mr Makki had verified Defences in the action on his own and the Third Defendant's part without an honest belief in the truth of the statements made. Permission to make that application was given by Mr Justice Mann in September. The first committal application, made later in September, relied on rule 32.14 and also on some breaches of the orders made on 26 February 2004. The second, made in December 2004, relied on further alleged breaches of the orders.
- The committal applications came before the judge in January 2005, for a hearing which lasted over all or parts of 16 days, until 11 February. The parties were represented as they are before the Court of Appeal, the Claimants by Mr Anderson, instructed by Jones Day, and Mr Makki by Mr Page Q.C., instructed by Irwin Mitchell. Mr Makki did not attend the hearing. Eight affirmations made by him were before the judge, but he did not make himself available for cross-examination. The same was true of two other witnesses on his behalf.
- On 3 May 2005 the judge handed down his judgment on the committal applications, in which he held that most of the contempts alleged were made out. On 10 and 11 May he heard submissions about the orders to be made in consequence of his findings. He ordered that Mr Makki be committed to prison for various periods in respect of the different contempts proved. He gave judgment on 10 May about that, and also as to the primary question of costs. On 11 May he gave a further judgment on an application by Mr Makki for a stay of the costs orders and one by the Claimants for an interim payment on account of costs, and he refused permission to appeal on the question of costs. His order was sealed on 25 May.
- Before the committal applications came on for hearing the Claimants had also applied for judgment under Part 24 on part of their claim against Mr Makki. That application came on for hearing before the judge on 19 and 20 July. He gave judgment on 21 October, and refused permission to appeal. By then the appeal against the committal order was listed for hearing before the Court of Appeal in late November. Mr Makki issued an Appellant's Notice on 3 November, and the application for permission to appeal was then directed to come on for hearing with the committal appeal.
- Thus it is that we have heard argument over three days on the appeal against the committal orders, together with Mr Makki's applications to amend his grounds of appeal and to adduce additional evidence in support of that, and for permission to appeal in respect of the costs order and of the later order under Part 24. We were provided with a mass of documentary material, but by dint of full skeleton arguments from both Counsel on the main appeal, and well-focussed oral submissions from each of them, the argument was conducted within the time allowed, though supplemented by further written submissions at the court's invitation after the hearing.
- The principal judgment runs to 375 paragraphs, with an appendix of a further 24 paragraphs, extending over 118 pages. The judge deals very fully with the various issues as they were before him, in particular with the factual allegations of contempt. In all respects except one the committal appeal is on questions of fact, and is not, therefore, of general interest outside the parties involved in or affected by the various transactions and the trial itself. In those circumstances, while I will deal fully with the one point of law which was argued before us, I do not propose to deal extensively with the facts, on the basis that anyone interested in the case on the facts will have access to and will have read, or be able to read, the judge's judgment. I will deal with the facts by focussing on the principal points and on the salient features of the evidence so far as relevant to those points.
- The Claimants are three companies all now in liquidation, and their respective liquidators. Mr Makki was the person behind each company while it was active, though he denies that as regards Globenet. The two companies most important for present purposes are Pacifica and Globenet. Each of these held a licence under section 7 of the Telecommunications Act 1984 to offer telecommunication services. This they did, on a wholesale basis, using telecommunication switches connected physically with the BT network so as to be able to route incoming and outgoing calls via that network. Pacifica and Globenet entered into interconnect agreements with BT under which they agreed to pay for access to the BT network on a time basis according to tariff tables. They could sell the right to use their interconnect services to others. This is sometimes referred to as the sale of airtime, which is a convenient label, so long as it is understood that what was sold was a contractual right in the nature of a service, rather than a commodity. The access which they obtained under these agreements was used (to speak in neutral terms at present) by a New Jersey company, which I will call Arbinet, which operates a global exchange to facilitate the sale and purchase of voice telephone minutes. Arbinet is a third party in no way connected with Mr Makki. It paid for the minutes used at a price quoted to it which, it is common ground, was less than the price payable by Pacifica and Globenet to BT. Pacifica traded from about June to August 2003, its services being suspended by BT on 27 August, no doubt for non-payment. Globenet traded with BT from about 28 September until 28 October 2003, when BT suspended its service for failure to provide a guarantee.
- The amounts paid by Arbinet were credited to two different accounts: one in the name of the first claimant, Daltel Europe Ltd ("Daltel"), a US dollar account in London, and the other an account in the name of the Third Defendant, Daltel USA ("DUSA"), in Geneva. In particular, $3,650,000 was paid into the Daltel London dollar account, and $1,413,929.35 into the DUSA account in Geneva. Part of the sum paid to the London dollar account was later transferred to the Geneva account. These sums were then withdrawn and paid to accounts in the name of Mr Makki and his father in Beirut. No sums were paid to Pacifica and Globenet, except insofar as payment to the Daltel London dollar account may have amounted to payment to Pacifica and Globenet, which did not have bank accounts of their own. Pacifica and Globenet either did not receive any money from the sale of airtime to Arbinet, or if they did it was paid away. Neither was left with any funds with which to pay BT for the airtime. Each company was therefore left heavily insolvent. In due course BT brought winding-up proceedings. It is not in doubt that BT is funding the liquidations and these proceedings by the companies and their liquidators. The Claimants contend that some $5 million was paid away to accounts at various banks in Beirut in the joint names of Mr Makki and his father, and that in procuring these payments Mr Makki was acting in breach of his duties as a director of Daltel and of Pacifica and Globenet, and that he is accountable to the respective companies for the sums paid away.
- Mr Makki's case was that he owned and controlled Daltel at all material times, and also Pacifica. He said that Pacifica sold airtime to another company called Weybridge (the Second Defendant) which was at all material times owned and controlled by a Mr Al-Eid, that Weybridge sold the airtime on to DUSA (which he accepts that he did own and control), and that DUSA sold the airtime on to Arbinet, which he says was therefore bound to and did pay DUSA for the airtime. He accepts that DUSA did not pay Weybridge, but he says that merely gave rise to a debt, and likewise as between Weybridge and Pacifica, just as between Pacifica and BT. As regards Globenet, he says that, by the time it began to trade, he had sold this company as well to Mr Al-Eid, or rather to another company, Hillside Trading Group LLC ("Hillside"), which he had sold to Mr Al-Eid shortly beforehand. He said he was not privy to Globenet's arrangements with BT or with Weybridge. He says that DUSA bought airtime from Weybridge during the time when Globenet was trading, just as it had done while Pacifica was trading, and sold it to Arbinet, which paid DUSA for the services. He also contended that all sums paid into the Daltel London dollar account belonged to DUSA, and were covered by a depository trust agreement. The Defences served on behalf of Mr Makki and DUSA put forward this version of the facts.
- I will need to examine the basis of the claim by the various company claimants in some respects when I come to the appeal against the order for summary judgment under Part 24. The relief sought also included claims by the liquidators under the Insolvency Act 1986 as regards both fraudulent and wrongful trading, but those are not relevant for present purposes. What does matter is the claim that, by virtue of various facts alleged in the Particulars of Claim, Mr Makki is liable to Pacifica and Globenet by reason of breaches of duty for damages or equitable compensation, and liable to account to each company in respect of his dealing with their respective property, and a trustee of the property which he received by reason of his misappropriation on constructive trust for the relevant company. This particularly applies to the money transferred from accounts of Daltel and DUSA into accounts in his and his father's names.
- The freezing and search orders made on 26 February were in the normal form, with variants, and required substantial disclosure from Mr Makki. He received a full explanation of the order from the supervising solicitor and he was able to instruct and receive advice from his own solicitor at some length before the Claimants' solicitors were able to embark on executing the orders. He had the benefit of further information from the supervising solicitor and advice from his own solicitor during the day. He made some disclosure on the day of execution, Friday 27 February. He disclosed two further assets on the following day. He made an affirmation verifying his disclosure which he served on 9 March, as required by the orders. This gave some additional information.
- The provisions of the orders which are most relevant for the purposes of the committal appeal are as follows:
The Search order
i) Paragraph 15 required Mr Makki to hand over immediately to the Claimants' solicitors any of the "listed items" in his possession or under his control. The listed items are defined in Schedule B. The list includes a category called Company Asset Documents, which includes all books papers or records of any of Daltel, Pacifica and Globenet, and any accounting or financial records that relate to any of those three companies.
ii) By paragraph 16.1 Mr Makki was required to permit an independent computer specialist who attended on the search to make electronic copies of any documents on any or all of the computers or electronic data storage devices situated on or accessible from the premises.
iii) By paragraph 17 he was required immediately to inform the Claimants' solicitors (so far as he was aware) where all the listed items are.
iv) By paragraph 18 he was required, within 4 hours of service, to inform the Claimants' solicitors, so far as he was aware, of the name and address of the legal and/or beneficial owner, shareholders and directors of DUSA, Hillside Trading Group LLC and Weybridge.
v) Paragraph 19 obliged him to swear and serve an affidavit setting out all the information required to be given by paragraphs 17 and 18, within 7 working days after service.
The Freezing order
vi) Paragraph 4 of this order is the basic provision restraining dealings with assets. Paragraph 4.2 prohibited Mr Makki from in any way disposing of, dealing with or diminishing the value of any of his assets, worldwide, up to a value of £6 million. Paragraph 6 identified a number of assets in particular which were subject to this restraint. They include any account controlled by Mr Makki at Blom Bank SAL in Beirut or at Arab Bank plc (Verdun branch) also in Beirut.
vii) Paragraph 8 required the provision of various information. Under paragraph 8(1)(a), within 2 hours after service, he was required to give the Claimants' solicitors details of the whereabouts of certain payments made from the Daltel London dollar account, including $200,000 paid on or about 21 July 2003 and $750,000 paid on or about 30 July 2003. Under paragraph 8(1)(d) he was required within 4 hours after service to give details of, among other things, "all real property". Though it does not say so in terms, clearly it means all real property which is an asset of his within the terms of paragraph 5, which extends to assets of Mr Makki whether in his own name or not and whether solely or jointly owned.
viii) Paragraph 12 required him to deliver up to the liquidators within 2 business days any property, books, papers or records of Daltel, Pacifica and Globenet.
ix) Under paragraph 15 he had to swear and serve within 7 days of service an affidavit setting out what documents he has in his possession power or control (wherever situate) which are (among other things) books papers or records of Daltel Pacifica or Globenet.
x) Under paragraph 16 he was obliged within 7 days of service to swear and serve an affidavit setting out the location of all Company Asset Documents.
xi) Paragraph 18 required him to deliver up immediately (where possible) all Company Asset Documents.
- The subject matter of the contempts which are the basis of the judge's committal order fall into five groups.
- The first is concerned with what was known in the proceedings as the Merjan property. This is an apartment in Beirut, bought in the name of Mr Makki on 4 August 2003 for $925,000 or $950,000, funded by the transfers from the Daltel dollar account mentioned in paragraph 8(1)(a) of the freezing order (see paragraph 15(vii) above) to an account in the joint names of Mr Makki and his father. On 27 February 2004 it was still in Mr Makki's name. On 28 February it was transferred into his mother's name, his father executing the necessary document on his behalf under a power of attorney, which he had also used to complete the purchase in Mr Makki's name. He did not disclose the property until 28 February. The contempts proved are his non-disclosure and that he was responsible for the disposal to his mother.
- The second subject is a dollar account with Banque de Liban et D'Outre-Mer ("Blom Bank") in Beirut in the joint names of Mr Makki and his father. Mr Makki did not deny the existence of this account. What is said is that he assisted his father to dispose of the funds in the account.
- Thirdly, there is an account in the names of Mr Makki and his father at Banque de la Mediterranean in Beirut, which Mr Makki did not disclose on 27 February, though he did disclose it the next day, saying that when he last knew the balance it was about $1 million. The judge did not find it proved that he had disposed of the funds in the account, but he did find that there had been deliberate non-disclosure on 27 February.
- Fourth is the information held on two switches operated by Pacifica and Globenet and used for routing telecommunications traffic. The switches contained information relating to the calls routed through them. The Claimants' case, which the judge accepted, was that the records held on the switches were listed items. The breaches of the orders alleged and proved included failure to permit the independent computer specialist to have access to the information on the switches, which was accessible remotely from the relevant premises, and failure to disclose or deliver up the records.
- The fifth group of matters relates to the ownership of Globenet, Weybridge and Hillside, and to the contention that Pacifica and Globenet sold their airtime to Weybridge, rather than directly to Arbinet. This relates both to breaches of paragraph 18 of the search order and to the contempts alleged under rule 32.14. It is said that Mr Makki's statements, in response to the obligation in the search order, and by way of verification of the case made in the Defences of himself and of DUSA, that Globenet, Weybridge and Hillside belonged to Mr Al-Eid, and that Pacifica and Globenet sold their airtime to Weybridge (and in turn Weybridge sold it on to DUSA, which then sold to Arbinet) were not only false, but dishonest in that Mr Makki knew that they were false.
- Mr Page's attack on the judgment is largely directed at the judge's factual findings. On this I will need to take each group of matters in turn. However he sought to add to his grounds of appeal one point of law which is of relevance to more than one of the contempts. I will deal with that first.
- In his judgment, Mr Justice David Richards dealt at an early stage with a number of general matters. He discussed the burden and standard of proof, and the mental element necessary for a contempt of court to be found proved. He accepted that, for a contempt to be properly punishable by committal, the conduct in question had to be knowing and deliberate. No exception is taken on this appeal with anything he had to say on these points.
- He then went on to deal with another issue which Mr Makki seeks to challenge, namely the relevance and admissibility of hearsay evidence. In several respects the Claimants rely on hearsay evidence, both as regards the role of Mr Al-Eid, and in relation to the Merjan property. Mr Page submitted that hearsay should not be allowed to be used in support of a committal application, because it would not be admissible in criminal proceedings, to which a committal application is analogous, and also because it would be inconsistent with article 6(3)(d) of the European Convention on Human Rights.
- As the judge noted at paragraphs 53 and 62, Mr Page did not argue before him that the proceedings, in respect of either the breaches of the orders or of Part 32.14, were not civil proceedings to which the Civil Evidence Act 1995 applied. He did argue that all of article 6 applied, on the basis that a criminal charge, in Convention terms, was involved, and that was accepted. He argued that hearsay ought to be excluded under Part 32.1(2), and he does not now challenge the judge's rejection of that. He also made submissions as to the weight to be given to the evidence in question.
- By his additional grounds of appeal Mr Page now seeks to argue that the proceedings before the judge, as regards both the breaches of the orders and Part 32.14, were not civil proceedings to which the 1995 Act applied, but rather criminal proceedings, and that therefore hearsay evidence could only be admitted under the provisions then in force in relation to hearsay at a criminal trial, namely sections 23 to 26 of the Criminal Justice Act 1988. He would go on to argue that the admission of the evidence in question could not be justified under those provisions, with immaterial exceptions. Given the importance of this point, and the fact that it had only been raised very shortly before the hearing, so that Mr Anderson had not had the opportunity to formulate his response in a skeleton argument, we invited Mr Page to supplement his submissions on this in writing after the hearing, if he wished, and gave Mr Anderson the opportunity to respond in writing. Both Counsel took advantage of this. Despite this, it seems to me most regrettable that the point was not raised sooner. It seemed to me that because of the very short notice given of the point, Counsel were not able to give the court as much assistance as they otherwise would have done on the point. It is a point of some importance on which I would have preferred to have had fuller and more considered submissions.
- Although Mr Page did not submit to the judge that the proceedings which the judge was hearing were not civil proceedings, the judge himself embarked on that enquiry, as regards Part 32.14. He held that they were civil proceedings, basing this on a number of points. One was the precedent of Savings & Investment Bank Ltd v. Gasco Investments (Netherlands) BV (No 2)  Ch 422, in which the Court of Appeal held, affirming Scott J, that a committal application for civil contempt was civil proceedings within the similar definition in the Civil Evidence Act 1968. He also relied on the decision of Sir Richard Scott VC in Malgar v. R E Leach (Engineering) Ltd  FSR 393 concerning rule 32.14. He noted that the proceedings were part of a civil claim in the High Court, to which the CPR applied, and that the applications related to both civil and criminal contempts, without objection. He observed that the subject matter of the statements alleged to have been put forward and verified dishonestly was at the heart of the issues in the case, and that hearsay evidence would certainly be admissible at trial on the question whether the facts were as alleged by Mr Makki or not.
- Mr Page now says that the judge's decision was wrong, and seeks to go further to say that it would have been wrong if made in relation to civil contempts as well.
- It is clear that committal proceedings are to be categorised as criminal proceedings for the purposes of article 6, whether the contempt involved is classified as civil or as criminal. The requirement that the acts in question be proved to the criminal standard of proof, which has been part of English law since long before the Human Rights Act 1998, is consistent with that. Similarly the courts have taken the view that the admission of additional evidence on appeal in such a case should be governed by the relevant rules applying to criminal cases rather than by the Ladd v. Marshall test: Irtelli v. Squatriti  QB 83. Again, the defence of autrefois acquit has been held to apply: Danchevsky v. Danchevsky (No 2) 10 November 1977, 121 Sol J 796. But the classification of any given proceedings for domestic procedural purposes is a question of domestic law, independent of the Convention. The question under the Convention is whether the proceedings, however they are categorised under local law, respect the party's Convention rights. Section 11 of that Act defines civil proceedings as "civil proceedings before any tribunal in relation to which the strict rules of evidence apply".
- The relevant statutory provisions in force at the date of the trial before the judge which govern the admission of hearsay evidence in criminal proceedings were sections 23 to 26 of the Criminal Justice Act 1988. (They were repealed and replaced by other provisions under the Criminal Justice Act 2003, on 1 April 2005, after the hearing though before judgment was given.) Sections 23 and 24 provide for statements of various kinds in documents to be "admissible in criminal proceedings" by way of hearsay, though whether any such statement is admitted will depend on the exercise of a discretion by the court under either section 25 or section 26. The definition of civil proceedings in the 1995 Act may seem somewhat circular, but so far as I have been able to discover there is no definition in the 1988 Act of criminal proceedings at all. There is, however, some guidance as to what is meant by criminal proceedings in section 25. That section gives the court a discretion to exclude a statement which would be admissible under section 23 or 24, in relation to which the court must have regards to factors set out in sub-section (2). By contrast, section 26 provides that a statement, though admissible under section 23 or 24, is not to be admitted unless the court decides otherwise, if it was prepared (otherwise than in certain specified circumstances) for the purposes of pending or contemplated criminal proceedings or of a criminal investigation. It seems to me that these two discretions are important parts of the regime as to the admissibility and use of hearsay evidence introduced by the 1988 Act.
- Section 25(1) is specific about the courts which may exercise the exclusionary discretion. They are (1) the Crown Court, on a trial on indictment, on a an appeal from a magistrates' court, or on a hearing of an application transferred from the magistrates' court under section 6 of the Criminal Justice Act 1987; (2) the criminal division of the Court of Appeal; (3) a magistrates' court on a trial of an information. Section 26 speaks more generally of "the court". Nevertheless it seems to me that the specific terms of section 25(1) provide a strong indication that the "criminal proceedings" in which hearsay evidence is made admissible under sections 23 and 24 are proceedings before those three courts and, as regards the Crown Court, only proceedings of the three kinds mentioned. Those sections therefore do not provide for the admissibility of hearsay evidence in any proceedings in the High Court or the county court. Mr Page might submit that this makes his case all the stronger, if the committal applications were criminal proceedings (so not within the 1995 Act) but not criminal proceedings to which the relevant provisions of the 1988 Act applied: he might say that this allows no opportunity at all for the admission of hearsay evidence on a committal application. (He did not in fact make this point, because no attention was given during the hearing to the question of the meaning of criminal proceedings in sections 23 and 24.) It seems to me, however, that this is a powerful indication that proceedings in the High Court are not to be regarded as criminal proceedings, but rather are civil proceedings to which the 1995 Act does apply.
- In support of his submission that committal proceedings are not civil proceedings, but criminal proceedings, Mr Page relies to a considerable extent on R (McCann) v Crown Court at Manchester  UKHL 39,  1 AC 787, affirming [2001 EWCA Civ 281,  1 WLR 1084. This case concerned procedural aspects of proceedings for the grant of an anti-social behaviour order. Such an order had been made by magistrates, and that order was upheld after a rehearing on appeal to the Crown Court. There was then an appeal to the Queen's Bench Divisional Court, and thence to the Court of Appeal (Civil Division) and in due course to the House of Lords. It was held at all levels that the proceedings were civil, so that the appeal route taken was correct, and that hearsay evidence was admissible under the Civil Evidence Act 1995 and the equivalent provisions as regards civil proceedings before magistrates, though the criminal standard of proof was to be applied.
- Mr Page submits that the approach of the Court of Appeal and the House of Lords to the question of the classification of the proceedings under domestic law, as civil or not, supports his contention that proceedings for contempt are not civil proceedings. He points out that Lord Steyn observed that the form of procedure used is not conclusive, and that the substance of the matter at issue has to be considered. He submits that what was held to be decisive was that the proceedings (unlike any later proceedings for breach of the order if made) did not relate to a criminal act already committed, that is to say a prohibited act with penal consequences. Here, by contrast, he says that both the breaches of the orders and the acts relevant under rule 32.14 are prohibited acts – prohibited in the one case by the orders themselves and in the other by the rules – and they have penal consequences, in that they may be punished by committal or fine.
- As Lord Steyn also said, it is important in each case where classification is relevant to be aware of the purpose for which classification is required. At paragraphs 19 to 21 he said this:
"19. It is necessary to consider whether under domestic law proceedings under the first part of section 1 should be classified as criminal or civil proceedings. In law it is always essential to ask for what purpose a classification is to be made or a definition is to be attempted. It is necessary in order to decide whether the provisions of the Civil Evidence Act 1995, which permits the admission of hearsay evidence in civil proceedings, and the Magistrates' Courts (Hearsay Evidence in Civil Proceedings) Rules 1999, are available to establish the requirements of section 1(1). It is also relevant to the appropriate standard of proof to be adopted.
20. In a classic passage in Proprietary Articles Trade Association v Attorney General for Canada  AC 310, 324 Lord Atkin observed:
"Criminal law connotes only the quality of such acts or omissions as are prohibited under appropriate penal provisions by authority of the state. The criminal quality of an act cannot be discerned by intuition; nor can it be discovered by reference to any standard but one: Is the act prohibited with penal consequences?"
In Customs and Excise Comrs v City of London Magistrates' Courts  1 WLR 2020, 2025 Lord Bingham of Cornhill CJ, expressed himself in similar vein:
"It is in my judgment the general understanding that criminal proceedings involve a formal accusation made on behalf of the state or by a private prosecutor that a defendant has committed a breach of the criminal law, and the state or the private prosecutor has instituted proceedings which may culminate in the conviction and condemnation of the defendant."
21. Absent any special statutory definition, in the relevant contexts, this general understanding must be controlling. …"
- Mr Page cited to us a decision of the Divisional Court in A-G v. Express Newspapers  EWHC (Admin) 2859, in which the admissibility of hearsay evidence in proceedings for criminal contempt was considered. Lord Justice Rose observed that there were respectable arguments in favour of the admissibility of hearsay evidence, but that he would proceed on the basis that it was not admissible. It is not, therefore, a decision on the point, but Mr Page says it is a pointer from a highly authoritative source to the effect that hearsay is not admissible (or, strictly, was not then, because the rules as regards hearsay in criminal proceedings have changed since then under the Criminal Justice Act 2003, as from 1 April 2005). Mr Page suggested that Gasco may have been cited to the court, but I do not think that can be assumed, since it concerns a civil contempt whereas A-G v. Express Newspapers was about a criminal contempt.
- He also showed us relevant passages from Arlidge Eady & Smith on Contempt, 2nd ed., including the proposition, at paragraph 3-219, that "hearsay evidence is not admissible in the case of criminal contempts, but it is in civil cases". The third edition of that work was published in the week of the hearing before us. It does not contain that unqualified proposition in the equivalent passage, at paragraphs 3-227 to 3-238.
- Mr Page submitted that Gasco was either distinguishable or wrong. He pointed out that the issue there turned on a provision in the Rules of the Supreme Court, and that those rules, which certainly applied to the proceedings which were in the Chancery Division, expressly did not apply to any criminal proceedings. That factor played a part in the reasoning of the court. By contrast, he says, the Civil Procedure Rules apply to all proceedings in the High Court, with specified exceptions: see Part 2.1(1) and (2). The rules themselves, despite their name, do not therefore dictate the classification of the proceedings.
- He cited McCann as an example of civil proceedings in a court which normally exercises criminal jurisdiction, and says that, by the same token, it is possible to have criminal proceedings in a normally civil court. I doubt whether the premise for that point is made out, because the proceedings started in the magistrates' court, which undoubtedly has both criminal and civil jurisdiction, and they reached the Crown Court on appeal, which equally has jurisdiction in appeals against decisions of magistrates in the exercise of some of their civil jurisdiction. Thus the forum in which the proceedings were brought, in McCann, was an ambivalent indication on the question whether the proceedings were criminal or civil. It was therefore necessary to focus on other points, including the substance of the point at issue. By contrast in a case such as the present, where a committal application is brought by a party to litigation, in the proceedings in or in relation to which the contempts are said to have been committed, the forum and the procedure are strong indications that the application is rightly characterised as a civil proceeding.
- So far as procedure goes, proceedings for contempt are governed by Order 52 of the Rules of the Supreme Court, as adapted and appended to the CPR in Schedule 1, and by the Practice Direction supplementing those rules. Undoubtedly many aspects of the Civil Procedure Rules apply to proceedings for contempt, whether civil or criminal, and some rules have been specially adapted or disapplied because of the special considerations relevant to committal proceedings. So far as Part 32.14 is concerned, a creation of the rules themselves, proceedings may be brought by the Attorney-General, but otherwise they may only be brought with the permission of the court. In the latter case they are likely to be brought by another party to the litigation in which the false statements are said to have been made. In that case they will be brought in those proceedings. It would seem odd for an application within what are undoubtedly civil proceedings to be found not to be civil proceedings, but Mr Page is entitled to say that a committal application is a distinct proceeding, governed in some respects by special rules, and that it would not be impossible to have one proceeding which is not civil brought within another which is civil. Though he did not put in quite this way, he could rely on Lord Bingham's description of the essence of criminal proceedings, cited above, and say that, in a committal application, a formal accusation is made on behalf of the state (if the Attorney-General brings the application) or by a private prosecutor (if it is brought by another party to the litigation) that a defendant has committed a breach of the criminal law, and that, by bringing the application, the state or the private prosecutor has instituted proceedings which may culminate in the conviction and condemnation of the defendant. Possibly it would not matter, for the purposes of such an analogy, that it has been said that there is no prosecutor in the case of a contempt application: see for example Mustill LJ in R v. Griffin (1989) 88 Cr App R 63 at 67 in a passage which points out many differences between proceedings of a summary nature for a criminal contempt and normal criminal proceedings. However, it seems to me that, despite the analogy suggested above, and despite the fact that there plainly could be criminal proceedings for contempt, the aptness, in other circumstances, of the description quasi-criminal for committal proceedings is fully borne out by the comparison and the differences between criminal proceedings on the one hand and an application for committal for contempt in the course of proceedings in the Chancery Division on the other.
- I dare say that it would not be impossible to conclude that proceedings in the Chancery Division, governed by the Civil Procedure Rules and in particular by RSC Order 52 as adapted and set out in the Schedule to the CPR, are not civil but criminal proceedings, but it would certainly be odd and surprising. Sir Richard Scott V-C in Malgar v. Leach noted that proceedings under rule 32.14 were brought in the public interest, not for the furtherance of private interests, and that they were in some respects like criminal proceedings. He held that they were civil proceedings but it does not seem that the contrary was argued before him.
- Mr Anderson invited us to note the contrast between rule 32.14 on the one hand and section 89 of the Criminal Justice Act 1967, on the other, which makes it an offence to put forward a written statement for use in criminal proceedings knowing it to be false. Plainly a prosecution for such an offence would be a criminal proceeding, and it would be very different from an application based on contempt, whether criminal or civil, as regards the initiating process, the prosecutor, the course of the proceedings, and the tribunal by which it would be decided.
- Mr Page pointed out that proceedings for civil contempt have been held to have some of the incidents of criminal proceedings: not just the standard of proof, but the application of autrefois convict, as well as the criminal approach to the admission of new evidence on appeal. He also cited Jelson Estates v. Harvey  1 W.L.R. 1401, which also involved the double jeopardy rule. In that case Cumming-Bruce LJ accepted the proposition put forward by the Defendant that
"proceedings for civil contempt … are quasi-criminal in character, so that the principles that apply in entertaining and proceeding upon motions for a civil contempt ought to follow the analogy of criminal proceedings with some strictness": see  1 W.L.R. at 1408, C and G.
The reference to the proceedings being quasi-criminal, a phrase which is commonly found in cases of contempt, does not assist Mr Page.
- Mr Page sought to distinguish Garvin v. Domus Publishing Ltd  Ch 335 where Walton J held that proceedings for civil contempt are not criminal proceedings, the point at issue there being the privilege against self-incrimination, and also Cobra Golf Inc v. Rata  Ch 109 on the same point, where Rimer J held that the privilege does exist in such proceedings, because they were proceedings "for the recovery of a penalty" within the terms of section 14 of the Civil Evidence Act.
- There are observations in Danchevsky to the effect that a civil contempt is a crime, but these are not necessary to the decision (see Cobra) and even if it is a crime, it does not follow that proceedings for contempt are criminal proceedings, though a prosecution clearly would be a criminal proceeding.
- The making of a false statement on oath would be perjury, which plainly is a crime, and proceedings for which would be a prosecution, plainly criminal proceedings. When the new rules were devised, with the emphasis on verification of statements by a statement of truth, which is not made on oath, it was necessary to consider what should be the sanction for non-compliance. An offence could have been created, but it was not. Instead recourse was had to the established concept of contempt, which is not the subject of a prosecution or a trial before a jury, but rather of either proceedings within an existing action or separate proceedings before the Divisional Court brought by a Part 8 claim form.
- The question being whether the applications before the judge were civil proceedings within the rather general definition in the 1995 Act, it seems to me that the judge was right to decide that they were, and Mr Page was right in the first place not to argue to the contrary. Though I accept that procedure is not necessarily decisive, it seems to me that it is strongly relevant where the question is as to whether a given proceeding is or is not "civil proceedings". In a sense the question is about procedure as such, and so the procedural aspect is necessarily relevant, even if (as McCann says) not conclusive.
- I accept that part of the reasoning behind Gasco is no longer relevant, because the terms of the current rules are different. But in substance I think it is right, and that this is reinforced by the way in which the sanction under rule 32.14 has been set up by the Civil Procedure Rules for breach of the obligations as regards statements of truth.
- As the judge said, this is a quite different question from that arising as to the application of article 6. I agree that the whole of article 6 applies, but it does not seem to me that this shows that the proceedings are not civil proceedings to which the 1995 Act applies.
- Mr Page submitted that this might lead to anomalies as regards proceedings in respect of a criminal contempt, according to how those proceedings are brought. I doubt that very much, not least because article 6 will apply in each case as a guarantee of the alleged contemnor's Convention rights.
- Mr Page also submitted, if he were right about the criminal rules for the admission of hearsay, that the various items of hearsay which the judge admitted and to which he attached any weight could not, with almost no exceptions, have been admitted under the then applicable provisions of the Criminal Justice Act 1988. If I had come to the conclusion that he was right as to the premise, it seems to me that this court could not satisfactorily have ruled on whether the tests under the 1988 Act had been satisfied, not least because section 26 requires the judge to consider the exercise a discretion, which Mr Justice David Richards never considered, Mr Page not having submitted that he needed to.
- There might be a question whether, in the light of that, it would have been appropriate to allow Mr Page to raise this point, as taken in his proposed ground of appeal number 47, the case having been conducted before the judge without reference to this. However, I would give permission to Mr Page to amend the grounds of appeal to raise the additional points about hearsay evidence, but I would not accept them as valid. I am satisfied that the committal applications were civil proceedings to which the 1995 Act applied, though article 6 also applied in full. The judge was therefore right in the way he directed himself on these issues.
- The next question is whether the admission of hearsay evidence under the 1995 Act is compatible with Mr Makki's article 6 rights. Article 6(1) and 6(3)(d), which have to be read together, are as follows, so far as relevant:
"6(1) In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. …
(3) Everyone charged with a criminal offence has the following minimum rights:
(d) to examine or have examined witnesses against him …"
- On its face that appears to be incompatible with reliance on hearsay evidence in any criminal proceedings. However, the European Court of Human Rights has not treated the position as categorical in that respect. Mr Justice David Richards cited a decision of that Court in Lucà v. Italy App 33354/96, decided on 27 February 2001. In that case the applicant had been convicted of drugs offences in an Italian court solely on the basis of a statement made at an early stage of the investigation by another man, against whom separate but related proceedings were later brought, by reason of which, though called to give evidence at Lucà's trial, he refused to give evidence, as he was entitled to. The European Court of Human Rights held that article 6(3)(d) had been infringed, because the accused had not been given an adequate and proper opportunity to contest the statements on which his conviction was based. But it did not decide that hearsay evidence could never be used in a criminal proceeding. I believe the latest statement of that Court on this question, at any rate as at the time of argument on this appeal, to be in a decision Taal v. Estonia, App 13249/02, decided on 22 November 2005, the week before the hearing before us. In paragraph 31 of that decision, consistently with its earlier decisions on the point, the Court said:
"The court reiterates that all the evidence must normally be produced in the presence of the accused at a public hearing with a view to adversarial argument. However, the use in evidence of statements obtained at the stage of the police enquiry and the judicial investigation is not in itself inconsistent with article 6(1) and (3)(d) of the Convention, provided that the rights of the defence have been respected. As a rule these rights require that the Defendant be given an adequate and proper opportunity to challenge and question a witness against him either when he was making his statements or at a later stage of the proceedings."
- Mr Justice David Richards also referred to several recent cases in the Criminal Division of the Court of Appeal, the most recent being R. v. Sellick  EWCA Crim 651. In that case the Court of Appeal had to consider a challenge on article 6 grounds where the judge had exercised his power under the Criminal Justice Act 1988 to admit written statements made by four witnesses who did not attend at trial, two because he was satisfied that they had been kept away by fear and the other two because they had not been found despite reasonable efforts to trace them. The Court of Appeal considered a sequence of decisions from Strasbourg, up to and including Lucà. The general position was summarised as follows at paragraph 50:
"What appears from the above authorities are the following propositions:-
i) The admissibility of evidence is primarily for the national law;
ii) Evidence must normally be produced at a public hearing and as a general rule Article 6(1) and (3)(d) require a defendant to be given a proper and adequate opportunity to challenge and question witnesses;
iii) It is not necessarily incompatible with Article 6(1) and (3)(d) for depositions to be read and that can be so even if there has been no opportunity to question the witness at any stage of the proceedings. Article 6(3)(d) is simply an illustration of matters to be taken into account in considering whether a fair trial has been held. The reasons for the court holding it necessary that statements should be read and the procedures to counterbalance any handicap to the defence will all be relevant to the issue, whether, where statements have been read, the trial was fair.
iv) The quality of the evidence and its inherent reliability, plus the degree of caution exercised in relation to reliance on it, will also be relevant to the question whether the trial was fair."
- The court then addressed, in paragraph 51, the question whether there was a fifth proposition, for which Lucà seemed to give some support, that:
"to the effect that where the circumstances justify the reading of the statement where the defendant has had no opportunity to question the witness at any stage of the trial process, the statement must not be allowed to be read if it is the sole or decisive evidence against the defendant."
- The court rejected any such absolute proposition. Of course, on the facts of that case the case for allowing hearsay evidence to be adduced, even though it was potentially decisive, was strong, since otherwise the accused could have thwarted the prosecution by frightening the critical witnesses. This is not such a case. I will consider later the question whether any of the hearsay evidence was decisive. But the Court of Appeal's judgment justifies a flexible approach to the admission of hearsay evidence, rather than its exclusion as a matter of principle. They said at paragraph 57:
"Our view is that certainly care must be taken to see that sections 23 and 26, and indeed the new provisions in the Criminal Justice Act 2003, are not abused. Where intimidation of witnesses is alleged the court must examine with care the circumstances. Are the witnesses truly being kept away by fear? Has that fear been generated by the defendant, or by persons acting with the defendant's authority? Have reasonable steps been taken to trace the witnesses and bring them into court? Can anything be done to enable the witnesses to be brought to court to give evidence and be there protected? It is obvious that the more "decisive" the evidence in the statements, the greater the care will be needed to be sure why it is that a witness cannot come and give evidence. The court should be astute to examine the quality and reliability of the evidence in the statement and astute and sure that the defendant has every opportunity to apply the provisions of Schedule 2. It will, as section 26 states, be looking at the interests of justice, which includes justice to the defendant and justice to the victims. The judge will give warnings to the jury stressing the disadvantage that the defendant is in, not being able to examine a witness."
- In a committal application, moreover, the decision is that of a judge, giving reasons, from which the significance (or lack of it) of the hearsay evidence will be apparent, as will the reasoning on which its admission and the weight given to it by the judge is based.
- Since the hearing before us, R. v. Al-Khawaja  EWCA Crim 2697  1 All ER 543 has been reported, in which the Court of Appeal, Criminal Division, followed R. v. Sellick. There the hearsay statement was that of the complainant in relation to one of two counts of indecent assault, who had died before the trial.
- In those circumstances, and for those reasons, it seems to me that the judge was right to reject the suggestion that article 6(3)(d) precluded the admission of hearsay evidence on the application before him.
The Merjan property
- I now turn to deal with Mr Page's challenge to the judge's findings on the various alleged contempts, starting with the Merjan property. As mentioned in paragraph 17 above, the Claimants' case was that Mr Makki had not only failed to disclose this property as an asset of his on 27 February, but also that he had disposed of it in breach of the freezing order before disclosing it on the following day. It is common ground that the apartment in Beirut was bought in the name of Mr Makki on 4 August 2003 for either $925,000 or $950,000, and that the price was provided by two transfers from the Daltel dollar account of $200,000 and $750,000, which are among those mentioned in paragraph 8(1)(a) of the freezing order (see paragraph 15(vii) above), into an account in the joint names of Mr Makki and his father, that it was in Mr Makki's name on 27 February, but that on 28 February it was transferred into his mother's name, his father executing the necessary document on his behalf under a power of attorney, which he had also used to complete the purchase in Mr Makki's name.
- Mr Makki's case was that he did not know that the property had been bought in his name, and did not regard it as an asset belonging to himself. When he disclosed it on 28 February, it was not as an asset of his but as an asset bought by his father with funds provided by the two transfers. He said he had been aware of that earlier, but had overlooked it on 27 February due to the stress of the day. He said that he had had no part in the transfer made on 28 February 2004, and that it was not until a telephone call from his father some days later that he knew that the property had been bought in his name. He said that his father had made it clear that he regarded it as his own property, not as that of Mr Makki. He also said that he knew nothing until then of the transfer of the property into his mother's name. The disclosure made on 28 February was only of money in the joint account having been used towards its purchase, with no details of the price or in whose name it stood, of which it was said that Mr Makki was ignorant.
- Mr Page's argument on the appeal is that the evidence before the judge did not justify findings that Mr Makki deliberately concealed the property on 27 February, or that he was involved in its transfer to his mother on 28 February. Part of the evidence relied on by the Claimants was hearsay, so that the issue of principle discussed above is relevant.
- The judge dealt with this property in paragraphs 107 to 148 of his judgment. He focussed first on the acquisition of the property in August 2003. The vendor of the property was a Mr Hussein Hoteit. The negotiations for the sale took place during July 2003. It was in dispute whether Mr Makki was involved, he claiming that only his father had taken part. On 19 July 2003 Mr Makki executed a general power of attorney in favour of his father, which seems to have been the first time that he had done such a thing. On 20 July he left Lebanon for London. On 21 July he authorised the transfer of $200,000 form Daltel's London dollar account to a joint account of his and his father's at Arab Bank in Beirut, which left some $60,000 in the Daltel account. On 30 July he authorised a further transfer of $750,000, leaving a balance of about $25,000. On 4 August Mr Makki's father signed a deed of purchase of the property in Mr Makki's name, using the power of attorney, and drawing the funds to pay the price (whether it was $925,000 or $950,000) from the joint account at Arab Bank.
- The judge said at paragraph 117 that, in the absence of credible evidence to the contrary, he would have concluded, without doubt, that Mr Makki knew of the agreement for the sale, executed the power of attorney so that it could be concluded in his absence, made the transfers from the Daltel account in order to provide for payment of the price, and knew that the property had been acquired in his name. Mr Makki said otherwise in his affirmations, but did not submit himself to cross-examination. His father did not give evidence in any way.
- Mr Hoteit's story was put before the court in hearsay statements because he himself was unwilling to give evidence. The evidence came in two forms. First, evidence was given orally by Dr Mugraby, the Claimants' lawyer in Beirut, who said that he had had a number of conversations with Mr Hoteit. Secondly, Mr Alain Checri, a partner in Jones Day, the Claimants' solicitors, (who is Lebanese and fluent in Arabic) made an affidavit exhibiting an attendance note of a telephone call in November 2004 between his office in London (where Mr Richards, the partner with conduct of the case, and Dr Mugraby were also present) and Mr Hoteit in Beirut. Mr Checri was not cross-examined, it being accepted for Mr Makki that his note was a true record of the conversation. Mr Page did not accept that what Mr Hoteit had said during the conversation was accurate. In particular Mr Hoteit said, and Mr Makki denied, that the negotiations for the sale had been with Mr Makki, rather than with his father, and that the latter had been involved only later, bringing the cheque for the price and dealing with execution of the deed on his son's behalf.
- To contradict this, Mr Makki made an affirmation denying that it was the case, and his lawyer in Lebanon, Mr Adnan Nawfal, also made an affirmation in which he said that he had met Mr Hoteit on January 2005 who had told him that he was confused as to whether Dr Mugraby had been referring to the father or the son when he said that Mr Makki had negotiated the agreement for the sale. Mr Nawfal was not made available for cross-examination.
- In those circumstances, the judge preferred the clear statements recorded in Mr Checri's attendance note to the statements of which Mr Nawfal gave evidence. He accepted that it was unfortunate that Mr Hoteit should not wish to sign a statement of his evidence, or give evidence in the proceedings, but that this was an understandable attitude on the part of Mr Hoteit. He drew a different conclusion from the unwillingness of Mr Makki and Mr Nawfal to be cross-examined on their written evidence. He considered with care the oral evidence of Dr Mugraby, which did contain some inconsistencies. On balance he found it proved beyond reasonable doubt that Mr Makki had been directly involved in the negotiations for the purchase, had executed the power of attorney and transferred the funds for the specific purpose of facilitating the purchase, and had known about it at the time, including that it was bought in his own name. He considered whether he should admit the evidence of Mr Hoteit's statement as recorded by Mr Checri, notwithstanding article 6(3)(d), and decided that he should, because it was not the sole or decisive evidence on the point, and it was open to Mr Makki to adduce direct evidence to contradict it from himself, his father or his father's lawyer, Mr Kamal Abou Zahr (who he said had also been involved in the negotiations rather than himself) who did make a statement, but not dealing with this point.
- That finding plainly influenced the judge's attitude to the next question, namely whether Mr Makki was conscious on 27 February 2004 of the need to disclose this asset in response to the obligations in the freezing order. Mr Makki's case had been that he had known of the property, and that it had been bought by his father with money transferred to a joint account, but had overlooked it that day. Mr Makki had the benefit of advice from the supervising solicitor and then from his own solicitor before execution of the order began and during the day. He disclosed no asset of which the Claimants were not already aware, the extent of their knowledge being apparent from the terms of the orders themselves. There was a dispute as to how often during the day he was asked by the Claimant's solicitor whether he owned any real property, but he certainly was asked that question. Looking at the evidence on the point as a whole, the judge was satisfied that, on 27 February, Mr Makki had known about the property as (a) having been bought using the two transfers to the Arab Bank and (b) being an asset in his own name and belonging to him, had realised that he was required to disclose it by the orders, and deliberately failed to do so.
- The next question for the judge was whether, despite his denials, Mr Makki had been involved in the arrangements made for the transfer of the property into his mother's name on 28 February. The judge's finding that he knew of the property on 27 February and deliberately concealed it was, of course, relevant on this question in turn.
- Mr Makki put forward a different account of the transfer. First, in his affirmation on 9 March required by the orders, he said that his father had told him on 5 March that he had been advised to transfer the property into his own name because he was concerned about mounting indebtedness of Mr Makki to himself. Then, although Mr Ali Makki did not give evidence, his lawyer in Beirut, Mr Zahr, did make an affirmation. This related information from Mr Ali Makki, including that he had heard of the freezing order directly from Arab Bank on 28 February, to which instructions signed by Mr Makki had been sent, as required by the orders, that he had telephoned his son about it, to be told that he was not allowed to talk about it, that he had then taken advice from Mr Zahr, the content of which was privileged, and that he had then arranged for the transfer to provide protection in respect of the debt owed to him by his son. No supporting evidence was provided of the indebtedness of which he spoke. Mr Zahr's evidence was all hearsay, based on what he had been told by Mr Ali Makki, apart from the fact of advice having been taken on 28 February, the nature of which was not revealed.
- Given that Mr Makki was not willing to be cross-examined on this, or at all, that Mr Zahr's evidence was in effect all hearsay, and that Mr Ali Makki gave no evidence in any form, the judge concluded that this was an extremely flimsy and unconvincing attempt to rebut the strong inference arising from the undisputed facts, taken with his finding that Mr Makki had consciously and deliberately breached the orders by concealing on 27 February this asset which he believed (rightly) that the Claimants did not then know about.
- Mr Page's submissions on the Merjan property contempts amounted to saying, first, that Mr Hoteit's evidence should have been ignored and, secondly, that the account given by Mr Makki, Mr Nawfal and Mr Zahr should have been enough to show that there was at least a reasonable doubt as to Mr Makki's guilt.
- I can see no fault in the judge's consideration of whether to admit Mr Hoteit's statement (or, under the 1995 Act, to give it any weight) despite article 6(3)(d). I agree with him that even without it the case against Mr Makki on the facts otherwise found to be proved is very powerful, and would have satisfied the criminal standard of proof.
- I also reject Mr Page's submission that the evidence adduced on behalf of Mr Makki should have given the judge at least a reasonable doubt as to Mr Makki's guilt. The judge had considered in the introductory part of his judgment what attitude he should take to the evidence of Mr Makki and his other witnesses who were not made available for cross-examination (Mr Nawfal and Mr Al-Eid). Both sides had prepared for the hearing on the basis that their affirmations would be evidence in the case, though the judge made the point that a Respondent to a committal application cannot be compelled to give evidence but, if he does so by affidavit or otherwise, cannot insist on that evidence being read if he refuses to be cross-examined on it. He rejected a submission from Mr Anderson that he should give it no weight at all, and concluded, at paragraph 95, as follows:
"On each issue the court must look at the totality of the evidence and decide whether it is sure that the alleged contempt is established, bearing always in mind that it is for the claimants to establish it. If the claimants' evidence taken on its own would establish the contempt but the affirmation evidence filed by or on behalf of Mr Makki raises a reasonable doubt, notwithstanding that the deponents have declined to be cross-examined, the allegation is not established. The weight, if any, to be given to the affirmation evidence in the absence of cross-examination will depend on the particular circumstances of the alleged contempt and the other evidence before the court on that issue. The affirmation evidence is likely to carry little or no weight on a particular issue, where the weight of the evidence is otherwise strongly in favour of the claimant's case and there is little or nothing to support the deponent's account."
- Consistently with that, he considered the evidence so far as it related to the issues about the Merjan property, and declined to give it any significant weight. Certainly it did not raise a reasonable doubt. In my judgment the judge was right in every respect in his treatment of the issues concerning whether Mr Makki had been in deliberate contempt as alleged in this respect.
- Mr Page also challenged the sentence of 7 months' imprisonment imposed for these contempts. I will deal with his points on sentence together once I have reviewed the challenges to the findings of contempt on the merits.
The BLOM Bank dollar account
- Money from Daltel's dollar account had been transferred to a joint account in the names of Mr Makki and his father at BLOM Bank. The freezing order referred specifically to money in any account at this bank controlled by Mr Makki. Paragraph 14 of that order required him to sign a letter addressed to the bank instructing it to return specified sums (equal to the amounts transferred) to an account in the names of the liquidators, and to send to Mr Richards at Jones Day bank statements showing all payments since 1 May 2002 and a copy of the original bank mandate. Mr Makki complied with this obligation on 27 February and Jones Day sent the letter to the Bank at once by fax and courier. The bank did not act on the instructions so given, because Mr Makki's father would not agree. Far from agreeing to the transfer of the relevant amount to the liquidators' account, Mr Ali Makki instructed the bank to transfer sums out of the account to his order. Writing to the bank to object to the transfer to the liquidators' account, he referred to his power of attorney on behalf of Mr Makki, and expressed himself to be acting on his son's behalf as well as his own.
- In May 2004 Mr Ali Makki applied to the court in Beirut for an order against the bank for the release of the funds in the account. The bank resisted this by reference to Mr Makki's letter of instruction for a transfer to the liquidators' account. Mr Zahr, for Mr Ali Makki, wrote to Mr Nawfal, for Mr Makki, about this. Mr Nawfal replied stating that Mr Makki had no objection to the transfer requested by his father, and asked the bank to act on his father's instructions without the need to refer to Mr Makki. Mr Makki was joined as party to the proceedings in July 2004. Mr Nawfal lodged a memorandum as to Mr Makki's position, stating that he agreed that his father should be able to deal with the funds in the account. In November 2004 Mr Nawfal wrote to the bank expressly absolving the bank of liability towards the liquidators, and agreeing that the account should be dealt with in accordance with Mr Makki's father's wishes, and he later filed a further memorandum in court referring to this letter and reiterating the position.
- Jones Day received copies of these various documents in December 2004 from their Lebanese lawyers. On the basis of them they contended that Mr Makki's acts, by his father as attorney and by Mr Nawfal, constituted breaches of the freezing order, in that he was attempting to dispose of the funds in the account.
- In January 2005 Mr Makki made an affirmation in which he stated that he did not support his father's application to the court in Beirut and was willing "(if required)" to confirm to the Lebanese court that he accepted that he was bound by the terms of the freezing order and the letter of instruction which he had signed on 27 February 2004, and that he also withdrew his offer to indemnify the bank against liability to the liquidators. Later he put in evidence a letter to the court in Beirut dated 14 January 2005, which he said he had lodged on 24 January, to that effect, and a revocation on 14 January of the power of attorney given in July 2003.
- Before Mr Justice David Richards it was not in dispute that the acts which I have summarised were a breach of the freezing order. Mr Makki's case was that Mr Nawfal had acted without his knowledge, instructions or approval, and that the contempt, if any, had been purged by Mr Makki's change of position in January 2005. The judge found as a fact that Mr Nawfal had acted on and in accordance with his client's express instructions, and that Mr Makki thereby committed a deliberate and very serious breach of the freezing order. The judge did not refer to whether Mr Makki had purged the contempt in his main judgment.
- On the appeal Mr Page does not challenge the finding that Mr Makki was guilty of a deliberate contempt in this respect. His argument is only that Mr Makki had done all that he could be expected to do by way of reversing the effect of the contempts and that accordingly it was not appropriate to sentence Mr Makki to prison for this contempt.
- The judge did refer to Mr Makki's conduct in changing the position towards the bank which, in breach of the order, he had previously taken on these matters when he came to give judgment on sentence. He did not regard it as amounting to purging the contempt but he did say that it would be right to take it into account in considering whether there should be any, and if so what, period of committal in respect of these breaches. It seems to me that he was entirely justified in dealing with these matters in that way. I bear in mind in particular that Mr Makki was forced into taking the position that he did in January, of countermanding the position he had previously adopted in support of his father's application, and that in that respect he did the least he could possibly do, and did it with a remarkable lack of diligence. That he should offer, in an affirmation on 7 January, to confirm his changed and correct position to the court in Beirut "if required", rather than to do it immediately and unconditionally, and that he should not communicate his position to the court until 24 January, does not seem to me to display the sort of attitude to his breaches of the order which is a part of the basis of purging contempt. In that affirmation he states that his lawyer acted without his instructions, but he does not express any regret or apology for the breach. The judge was right to take account of what he had done, but it does not seem to me that Mr Makki was properly to be regarded as having purged his contempt in this respect. There is no substance in the appeal on this point.
Banque de la Mediterranean
- The freezing order required Mr Makki to give details of the whereabouts of several payments out of the Daltel dollar account, including one of $1,500,000 made on 3 November 2003, and also of a payment said to be of £1.4 million (in fact $1.4 million) made by Arbinet on or about 15 November 2003, which in fact went into the DUSA account in Geneva. It referred, among the assets expressly frozen, to accounts at BLOM Bank and Arab Bank in Beirut. It did not refer to any account at Banque de la Mediterranean, because the Claimants did not know about any such account. In fact the payments of $1.5 million and $1.4 million both went to an account with that bank in the joint names of Mr Makki and his father. Mr Makki did not mention this account on 27 February. He first disclosed it, via his solicitors, to Jones Day at about 10.20 am (12.20 in Beirut) on 28 February, saying that he had inadvertently overlooked it the previous day. That day was a Saturday but the evidence showed that banks in Lebanon are open on Saturday morning. There would therefore have been time for Mr Makki to have given instructions to dispose of the funds in that account before he disclosed its existence.
- At first the Claimants did not treat the late disclosure as culpable. However, having by December got the evidence of what they regarded as Mr Makki's breaches of the order in relation to the Merjan property and the BLOM bank dollar account, they included in the December application an allegation that his non-disclosure of this account on 27 February had been deliberate, and they also alleged that he had disposed of some or all of the funds in the account on 28 February before disclosing it. The judge did not feel able to find the latter proved beyond reasonable doubt. However, he did find that Mr Makki had concealed the existence of the account deliberately on 27 February. Mr Page challenges that finding. He says that the evidence in support of it is only circumstantial and, in the face of Mr Makki's denial, should not be accepted as justifying a finding of fact to the necessary standard.
- It is true that the evidence relied on for the finding is circumstantial, but it is very compelling. Mr Makki did not, on 27 February, disclose the existence of any asset of which the Claimants were not already aware. He knew what assets they were aware of because they were mentioned specifically in the orders. He withheld information about the Merjan property, bought some 6 months before for almost $1 million, and this bank account which (when he did disclose it) he said had contained about $1 million when he had last checked, which had been in January 2004. The judge's finding about deliberate concealment in relation to the Merjan property, and his findings about Mr Makki's deliberate breaches of the order in relation to the BLOM Bank account, were relevant to the inferences he could draw from the circumstantial evidence. It seems to me that he was fully entitled to make his finding on this, to the criminal standard of proof.
Information held on the switches
- The two switches involved were both large items of telecommunications equipment, which the judge described as operating like a telephone exchange, routing incoming calls either to a carrier (such as BT) or to another switch. Incoming calls may come from an end-user or from another switch. Physically they were located at premises known as Telehouse in Clifton Street in London. A switch generates information about the traffic carried, which can be accessed and stored in computerised form. One switch can be used by more than one reseller; if so, separate records would be generated for each. The ownership of the two switches was in dispute, and the judge did not decide that question. He proceeded on the basis that Mr Makki believed that one was owned by DUSA and the other by another company, not by any of the Claimant companies. The contempts alleged concerned not the ownership of the switches but the information held on them relating to calls attributable to Pacifica and Globenet. The Claimants contended that this information was within the definition of listed items, and was therefore subject to Mr Makki's obligations to deliver up what he could and state the location of all listed items. For this purpose it is necessary to consider the width of that definition. They also contended that the search order required Mr Makki to give the independent computer specialist access to the information on the switches, since it was accessible remotely from his office: this depends in part on the meaning of the word "permit" in paragraph 16.1 of the search order.
- The relevant part of Schedule B to the search order, which defines listed items, is as follows:
"Company Asset Documents
4. All books, papers or records of any of the First and Third Applicants and/or Globenet (UK) Limited.
5. Any documents that relate to the existence, location or value of all monies or other assets of any of the First and Third Applicants and/or Globenet (UK) Limited.
6. Any accounting or financial records that relate to either of the any [sic] of the First and Third Applicants and/or Globenet (UK) Limited.
7. Any documents that relate to any and all payments made by or to any of the First and Third Applicants and/or Globenet (UK) Limited and to all monies derived directly or indirectly from those payments and any other monies or assets which have been acquired by or which are derived from or which represent such monies.
8. Any documents relating to:
8.1. Daltel USA LLC (and/or any other entity that uses or trades under the name of "Daltel");
8.2. Hillside Trading Group LLC (and/or any other entity that uses or trades under the name of "Hillside"); and/or
8.3. Weybridge Management LLC (and/or any other entity that uses or trades under the name "Weybridge")."
Paragraph 1 of Schedule B defines "documents" to include:
"any information stored on a computer or computer hard disk or floppy disk or compact disk or magnetic tape or any other electronic medium and shall also include any electronic data storage devices including but not limited to diskettes, hard drives, CD ROMs, telephone or fax memory facilities and personal organisers."
- The relevant information is agreed to have consisted of Call Detail Records (CDRs) and summary statistical records. The Claimants contended that they were within paragraphs 4, 6 and 8 of Schedule B. The judge held that they were "records" of Pacifica and Globenet, and therefore within paragraph 4 at least, and also that they were accounting or financial records that related to Pacifica and Globenet and so within paragraph 6. Mr Page challenges the finding that they were listed items on either of these bases. He submits that, although records, they were not records of Pacifica and Globenet, because Pacifica and Globenet had no right of access to them, and that they were not accounting or financial records. On the first point, it was clear that Pacifica and Globenet did have access to the records. A neat illustration of this came when Mr Makki's expert, Mr Castell, obtained access to the records remotely from Mr Makki's office for the purpose of preparing his report. It seems to me that the judge was right when he said at paragraph 214 that:
"Provided that the records contain details of transactions of the company which are maintained for its use and provided that it has a right to access to the records, they are properly regarded as records of the company"
and also right in his finding, for reasons explained at paragraph 215, that Pacifica and Globenet did have a right of access to the information.
- If that is so, it does not matter whether they were also accounting or financial records relating to Pacifica and Globenet. Mr Page challenged the judge's conclusion on this, saying that the judge was incorrect in saying that the switch records contain details of the cost and revenue generated by calls. Plainly they contain the necessary details from which that cost and revenue can be calculated, including the relevant tariffs used by the particular reseller. In my judgment that is sufficient for them to qualify as accounting or financial records, even if the judge was wrong to think that the cost and revenue are themselves recorded on the switches.
- The next question is whether the judge was justified in holding that Mr Makki, who said nothing about information on the switches on 27 February, was acting deliberately in this respect. The judge found that Mr Makki was very familiar with the information on the switches and with its central importance to the businesses. Mr Page submitted to the judge, and to us, that it was quite possible that Mr Makki did not give any thought to this information on 27 February, and that a finding that he did think about them and deliberately failed to mention them was not open to the judge, on the criminal standard of proof. As the judge said, this does not stand up to examination in the light of what Mr Makki himself said in his third affirmation. He dealt with the switches at paragraphs 61 to 87 of that document. In paragraph 62 he said this:
"I also believed at the time of the Search Order, and still believe, that the records kept on those switches are the property of the owners of the switches."
and at paragraph 69:
"As well as believing that the Search order did not cover the records on the switches, I also believed, and still believe, that I had no access to Call Detail Records more than 90 days old. The information on the switches did not therefore seem to me to be relevant to the case."
- That shows plainly that Mr Makki did think about the information on the switches on 27 February and decided consciously not to refer to it because he thought it was not relevant. Even if he thought that Call Detail Records were deleted after 90 days, the same did not apply to the summary statistical information. As for the belief which he says he had that the information was not a listed item unless it belonged to one of the Claimants, and that this information did not belong to any of the Claimants, the judge rejected this at paragraph 224 on the basis of Mr Makki having had a full explanation of the orders from the supervising solicitor and a full opportunity to take advice about them from his own solicitor. Of course, what was said between Mr Makki and his solicitor is privileged and it is no doubt possible that, even though Mr Makki thought about the information during the day, he did not ask for advice about whether it was within the scope of the order. If so, it seems to me that he would have had at least Nelsonian knowledge of the answer he would have got, if he had asked the question and had given his solicitor full information on the points necessary to enable him to receive proper advice, namely that the information was within the definition of listed items.
- The judge also found proved deliberate breaches of obligations as regards the information in the freezing order. In almost all respects the issues on this were the same as on paragraph 17 of the search order, and I need not deal with these separately.
- Different points arise on paragraph 16.1 of the search order, which turn on the word "permit" in the following context:
"The Respondent must immediately permit the Independent Computer Specialist to make two electronic copies (or images) of any or all of the documents (whether are listed items or not) held on any or all of the computers or electronic data storage devices situated on or accessible from the premises."
- Mr Page submits that it is not shown that the specialist could have copied the data from the switches if he had tried. I see no substance in that point. More to the point, he submits that no request was made in general or specific terms for access (other than by the terms of the order itself) and that it was not required of Mr Makki that he should volunteer information about the switches so as to "permit" access. If he had been asked to provide access, he would have had to have done what he could to make it possible. But he says that "permit" denotes a reactive process, responding to a request, not a proactive one by which Mr Makki should have pointed out the existence of the information, held on electronic data storage devices remotely accessible from the premises, and offered to facilitate access and copying.
- The judge explained at paragraph 240 why he did not accept this argument. I agree with him. Among the points he makes, it seems to me that the comparison with paragraph 16.2 of the order is particularly instructive. By that paragraph Mr Makki is required to "give" the search party effective access to, among other things, the computers and other electronic equipment situated on or accessible from the premises, and to permit them to be searched, once the independent specialist has made the copies provided for in paragraph 16.1. The language is different in detail, but it seems to me plain that the search party was to be given access to the information held on the switches, among other things, and I can see no reason for construing Mr Makki's obligation under paragraph 16.1 as merely reactive and thus different from that under paragraph 16.2 which is plainly proactive, requiring him to volunteer access to the stipulated items.
- For these reasons it seems to me that the judge was right to hold that Mr Makki was in deliberate breach of the various parts of the two orders relied on by the Claimants in relation to at least some of the information held on the switches.
- I therefore come to those of the alleged contempts that arise from Mr Makki's contention that at all relevant times Hillside and Weybridge were owned and controlled by Mr Al-Eid, that Globenet belonged to Mr Al-Eid during the period of its trading, and that Pacifica and Globenet sold all their airtime to Weybridge. Mr Makki made the first two assertions in his affirmation on 9 March 2004 in response to the freezing order. He made all three assertions in his Defence, and in that of DUSA, and verified each of these documents by a statement of truth which he himself signed.
- In relation to the assertion that Weybridge, Hillside and Globenet belonged to Mr Al-Eid, not to himself, at all relevant times, the Claimants put before the court two kinds of evidence: first, evidence derived from documents and other information obtained by the Claimants on execution of the search order and by the liquidators in the course of their duties and, secondly, evidence given by Mr Abdelmawla, who was engaged by the Claimants to make enquiries as to Mr Al-Eid in Syria. He gave oral evidence to the judge, by a satellite link from Syria, but a good deal of his evidence consisted of hearsay material. The judge gave no weight at all to some of that material, but he did place some reliance on other evidence given by Mr Abdelmawla. Mr Page submits that this was not legitimate, having regard to the considerations as regards hearsay evidence on a committal application to which I have already referred. He also submitted that Mr Abdelmawla was not a witness to whom any credence could properly be given.
- As a preliminary point he contended that, if the Claimants could not rely on Mr Abdelmawla's evidence, they were not entitled to rely on the first category of evidence to which I have referred above, because of the way their case was put before the judge. The judge rejected this argument, for reasons given in paragraphs 256 to 261 of the judgment. In my view he was right to do so.
- Mr Page is justified in making the point that a Respondent to a committal application is entitled to know how the case is put against him. For example, that is the basis for the requirement that the application notice must be specific as to the contempts alleged. That was fully satisfied in this case. Mr Makki also knew what evidence was to be relied on in support of the Claimants' case. Mr Anderson provided opening outline submissions setting out what would be relied on in considerable detail. Mr Page was able to respond to this with his own opening skeleton argument, though he did not go into detail as to the response on the Al-Eid aspect of the case. He said in paragraph 6 that Mr Makki would not attend for cross-examination "because the evidence put forward by the Claimants is not sufficient to require him to answer it by oral evidence". If that was his position, it was one which he was able to, and presumably did, take on the basis of all of the Claimants' evidence, not just part of it. It is true to say that Mr Anderson, in the course of his opening submissions, referred to Mr Abdelmawla's evidence, and to it being "independently supported" by other material. The judge referred to Mr Anderson as having spoken, during his oral submissions, of the other material being corroborative of Mr Abdelmawla's evidence, but it seems to me that the judge was plainly entitled to take the position, knowing the course taken by the trial as it went on, that the Claimants never limited themselves to relying on the independent material only in support of other evidence. The point gained importance during the trial, when it seemed uncertain whether Mr Abdelmawla would be able to give evidence at all. On Day 6 Mr Anderson said that he would consider whether he was able to invite the judge to find the relevant contempts proved on the basis of the independent evidence alone. On Day 11, when it was still not clear that Mr Abdelmawla would be able to give evidence, Mr Anderson said that, if it turned out that his evidence could not be given orally, he would then close the case without Mr Abdelmawla's oral evidence and submit that the contempts were proved on the basis of the other evidence. Mr Page pointed out that Mr Anderson would still have sought to rely on Mr Abdelmawla's written evidence, but it does not follow that he would have been able to do so. It seems to me that Mr Anderson was entitled to take that position and that nothing said previously precluded him from doing so. Of course he spoke of the other material as being corroborative of Mr Abdelmawla's evidence, because Mr Abdelmawla's evidence is more direct and graphic. But he relied from the start on all the evidence and he was entitled, as it seems to me, to rely on any part of it, if some of it became unavailable for either practical or legal reasons. It is entirely understandable that Mr Makki should seek to challenge Mr Abdelmawla's evidence in any way he could, but I do not accept that, if he were able to do that successfully for any reason, he did not have to deal with the rest of the evidence on which the Claimants had said they would rely in support of the allegations in question.
- Mr Page did not submit that Mr Makki would have come to give evidence if he had known that the Claimants would, in the alternative, rely on the independent evidence alone. Any such contention would have been quite implausible. He did say that Mr Makki was not given an opportunity to decide whether to come to England to deal with these points as a separate basis for committal, and that "he did not need to come to deal with Mr Abdelmawla on whom he would have little or nothing to say". I find that submission altogether unconvincing. Mr Makki knew from the start that the independent evidence formed part of the case against him, and that he needed to consider whether and if so how to deal with it. I cannot suppose that, if it had been clear at an early stage in the hearing that Mr Abdelmawla's evidence would not be relied on, Mr Makki's decision not to attend the hearing would have been affected in the slightest. I therefore agree with the judge that it is right and necessary to consider this aspect of the case by reference to the independent evidence, even if it stands alone, as well as by reference to Mr Abdelmawla's evidence.
- As the judge did, and in order to review it on its own, I will consider first the evidence other than that produced by Mr Abdelmawla. However, I must first set out Mr Makki's case, which the Claimants say was dishonestly advanced, both in response to the freezing order and in the Defences.
- In his affirmation made on 9 March 2004 in response to the freezing order he said this on the point:
"Until 12 August 2003, I was the beneficial owner of both Hillside Trading Group LLC and Weybridge Management LLC. The shares in both companies were held for me by nominees and the directors of both companies were both nominees. On 7 August 2003, I sold the entire share capital, all rights, privileges and benefits of Hillside Trading Group LLC to Mr S Al-Eid for US$25,000. On 12 August 2003, Hillside Trading Group LLC acquired the entire share capital, all rights, privileges and benefits of Weybridge Management LLC and of another company which I was the beneficial owner, Community Technology LLC, for the total sum of US$50,000. Agreements were signed at the Phenecia Hotel, Beirut. Further agreements for these sales were also signed at the Phenecia Hotel, Beirut on 22 February 2004. I am advised that these agreements were effective from 7 and 12 August 2003 respectively under the State law of Arizona. So far as I am aware, Mr Al-Eid remains the legal and beneficial owner, the sole shareholder and the sole director of both Hillside Trading Group LLC and Weybridge Management LLC. I believe that Mr Al-Eid lives in Syria. Any correspondence to him was addressed to him care of the registered office of Hillside Trading Group LLC, 910 Foulk Road, Suite 201, Wilmington, Delaware 19803, USA. I have provided the Claimants' solicitors with the agreements concerning the sales of these companies."
The agreements which he had provided, as referred to in the last sentence, were written agreements signed on 22 February 2004, that is to say the "further agreements" referred to in that paragraph. He did not produce the other agreements signed as referred to in the previous sentence.
- On 6 April 2004 Mr Makki was examined privately under section 236 of the Insolvency Act 1986 before Mr Justice Rimer. In the course of this he referred to the first contracts having been drawn up in June 2003, in Arabic. Documents were disclosed in June 2004 which he said were these contracts.
- In his Defence he said a number of things:
i) He ceased to have any interest in Globenet on 5 June 2003, or on 25 September 2003, on its sale to Mr Al-Eid or Hillside Trading Group LLC. He was a director of Globenet until 24 September 2003 but not thereafter.
ii) Pacifica traded from about 20 June 2003, and sold its airtime to Weybridge, a company ultimately owned and controlled by Mr Al-Eid through his company Hillside. Weybridge sold its airtime on to DUSA, at a loss apparently due to errors on the part of Mr Al-Eid in drawing up the rate sheet for the agreement between Weybridge and DUSA.
iii) Mr Makki was not in control of Globenet while it was trading but did provide technical assistance before it started trading and instructed solicitors on its behalf after BT suspended the supply of airtime.
iv) Mr Makki knew nothing of the arrangements between Globenet and Weybridge, but understood Globenet to have traded in the same manner as Pacifica.
v) Mr Makki agreed with Mr Al-Eid, in a written agreement dated 5 June 2003, to sell Weybridge, Hillside and Community Technology Ltd to Mr Al-Eid for $25,000 for each company, which was paid in cash. He may have been bare legal owner of the shares in Weybridge until they were transferred to Hillside on 12 August 2003, under a further written agreement dated 22 February 2004 but taking effect from 12 August 2003. He was not otherwise at any material time a shareholder in, or director or managing director or controller of, Weybridge.
- By the time of the hearing before the judge, Mr Makki's case was as summarised in paragraph 10 of the judgment as follows:
"Mr Makki accepts that he incorporated, or purchased off the shelf, Hillside and two other Delaware companies, Weybridge Management LLC (Weybridge) and Community Technology LLC (Community). He says that he sold all three Delaware companies to Chlach Abdulazziz Al-Eid, a Syrian resident and citizen, in June 2003 under a written contract in Arabic. Mr Makki later arranged for contracts in English to be signed on 22 February 2004 providing for the sale of Hillside to Mr Al-Eid "as of 7 August 2003" and for the sale of Weybridge and Community to Hillside "as of 12 August 2003". Mr Makki further says that he sold Globenet to Mr Al-Eid in June 2003 under a written contract in Arabic, although Mr Makki later arranged for a contract in English to be executed after the end of October 2003 providing for the sale of Globenet to Hillside effective as of 25 September 2003. Mr Makki says that Globenet, Hillside and Weybridge were after June 2003 controlled by Mr Al-Eid who directed their businesses."
- The judge concluded that the contracts in Arabic were not genuine documents, that documents dated 25 September 2003 relating to the sale of Globenet by Mr Makki to Hillside were not signed until November 2003 and did not represent a genuine transaction in any event, and that the documents signed on 22 February 2004 also did not represent genuine transactions, and certainly not transactions which had taken place in June or August of 2003. He also relied on the fact that, when the search order was executed, Mr Makki was found to have Hillside's transfer register in his possession, though he said he had had nothing to do with that company since either June or September 2003, and it showed no sign of any share transfer to Mr Al-Eid. Further, he relied on the absence of any sign that Mr Al-Eid had taken any part in the management or otherwise in the affairs of Globenet, Hillside, Weybridge or Community at any time, other than what Mr Makki said was Mr Al-Eid's signature of two interconnect agreements, whereas, by contrast, Mr Makki had evidently continued to be involved in their management and affairs. He also concluded that neither Pacifica nor Globenet ever entered into interconnect agreements with Weybridge, nor Weybridge with DUSA. On the question of the ownership of funds in Daltel's dollar account, Mr Makki relied on a depositary agreement said to be dated 10 July 2003, but it became plain that it was not drafted until January 2004 at the earliest. The judge rejected the contention that it replaced an earlier agreement, and held that it was a fabrication prepared after the event to justify what Mr Makki had already done.
- These matters are covered in great detail in paragraphs 263 to 319 of the judgment. To my mind the judge's treatment of each of those points is clear, powerful and convincing. I do not propose to summarise what he says on each point. Mr Page criticises his decision in this respect on a number of grounds, with some of which I must deal.
- As regards the contracts in Arabic, he submits that two of the points relied on by the judge had not been taken during the hearing, namely that Mr Makki had not explained why the Arabic contracts had not been exhibited to the affirmation made on 9 March 2004, nor why they were not referred to in the later contracts prepared by the US lawyers. Mr Anderson submits that both these points were referred to during argument, and would have been the subject of cross-examination if Mr Makki had submitted himself to cross-examination. He referred us to his written closing submissions to the judge, paragraph 13.4, in which the point is made that the Arabic contracts were not mentioned in terms until the private examination. More substantially, the judge relied on the significant differences between the Arabic and the American contracts: they provided for transfer of ownership at different dates to different transferees. The judge was entitled to attach significance to this, which is not accounted for by saying that the American contracts superseded the Arabic as being better drawn versions of very basic documents. A further very telling point was the inconsistency between Mr Makki's assertion in March 2004 that he was the beneficial owner of Weybridge until 12 August 2003 and the Arabic contracts, if genuine, under which beneficial ownership would have passed from him on 5 June 2003. Mr Al-Eid's failure to transfer the shares until 12 August 2003 could not have affected the beneficial ownership, if the Arabic contracts were genuine. It would only affect legal title, not beneficial ownership. Mr Page's submissions fail to meet this point.
- The circumstances in which the contracts signed on 22 February 2004 came into existence were revealed by an email dated 15 February 2004 from Mr Makki to the US attorneys who drafted them, Brown & Bain in Arizona. This is set out in full in the judgment at paragraph 282, and the context is fully described in paragraphs 282 to 284. It seems to me, as it did to the judge, that this sequence, and the terms of the email, constitute powerful evidence showing that Mr Makki was embarking on the creation of documents designed to make it appear, contrary to the facts, that in the summer and autumn of 2003 he, through Pacifica at one end and DUSA at the other, had been trading at arms' length with entities owned and controlled by Mr Al-Eid, namely Weybridge, Hillside and Globenet. There are at least two significant features of these documents created in February 2004, at a time when Daltel and Pacifica were already in liquidation and a winding-up petition had been presented against Globenet, and when, of course, the whole of the relevant trading was past history. First, he states that Community was involved, but no other evidence suggests that it was. Secondly, the sale of Hillside was to be backdated to 7 August 2003 and that of Weybridge and Community to 12 August 2003. In order to be a consistent story as regards arms' length dealing throughout the trading of Pacifica, ownership of Weybridge would have had to have passed to Mr Al-Eid before August 2003, since the relevant trading in respect of Pacifica started in June. Thus, Mr Makki's story advanced on 9 March 2004 did not suffice for his purposes, and gave rise to the need to be able to show an earlier change of ownership of Weybridge. That is a probable explanation for the later creation of the Arabic contracts, which are said to date from June 2003. Although Mr Makki did mention on 9 March 2004 that there were earlier agreements which had been signed he said no more about that until his private examination a month later, when he said he had sold the companies to Mr Al-Eid in June 2003.
- So far as the sale of Globenet was concerned, this had to have taken place before 28 September 2003 because it started trading on that date, and it was essential for Mr Makki to be able to say that it was not his company while it was trading. This is dealt with at paragraphs 268 to 273, 277 to 278 and 291 to 292 of the judgment. Mr Makki gave instructions to English solicitors, Landwells, on 25 September 2003, for the preparation of such a contract. Their draft showed a price of $500,000 which, as the judge said, must have come from their client, especially as he did not comment on it or alter it to what he now says had been the agreed price since June 2003 (£800,000) until late October. It seems to me that the judge was entirely justified on this material to conclude, beyond reasonable doubt, that there never was a contract for the sale of Globenet to Mr Al-Eid and that the document which appeared to be such a contract was a fabrication.
- The exposure of Mr Makki's case as to the depository agreement as false seems to me to be one of the most telling factors in favour of the judge's conclusion. Irwin Mitchell provided an account in some detail of how it came to be prepared as it was, in July 2003, in a letter to Jones Day dated 19 November 2004. It transpired that Brown & Bain had sent Mr Makki a first draft of the agreement on 16 January 2004, so Mr Makki's instructions to Irwin Mitchell on this point were shown to have been invented. Even though this was not the only basis for Mr Makki's contention that DUSA owned the money in the account, the demonstration that this, too, was a fabricated document is another piece of powerful evidence against Mr Makki on which the judge was entitled to rely.
- Mr Page says, of the evidence about the Hillside transfer register, that Mr Al-Eid might have asked for his name not to appear, and that the date was entered incorrectly. Neither Mr Makki nor Mr Al-Eid says so in Mr Makki's affirmations or Mr Al-Eid's witness statement. This is therefore pure speculation, and provides no answer to the probative value of the custody of the document or its contents in support of the Claimants' case.
- The lack of any documentation showing Mr Al-Eid taking any part in the business of the companies, and the clear evidence that Mr Makki did continue to run the businesses, might in other circumstances be regarded as not of particular significance. It is consistent, to some extent, with Mr Al-Eid's story in his witness statement, which is that he left the management of the businesses to Mr Makki in the first instance (which turned out to be the whole trading period of the companies). It is difficult to see, however, how that story can be reconciled with Mr Makki's account of the reason for the loss made by Weybridge on the resale of the airtime, which is that Mr Al-Eid made errors in calculating the rates to be charged on the sale to DUSA. On Mr Al-Eid's evidence, Mr Makki was handling that aspect of Weybridge's business, as well as all others, on Mr Al-Eid's behalf. It seems to me that the judge was entitled to regard this aspect of the case as contributing to the material supporting his conclusion.
- I have not mentioned every point taken by Mr Page in his written and oral submissions on this aspect of the case. Nevertheless, having reviewed at length his full written submissions, on which, on this aspect of the case, he largely rested his case in oral submissions, I am satisfied that they do not meet the material factors justifiably relied on by the judge for his conclusion that, even without reference to the evidence of Mr Abdelmawla, he could be satisfied beyond reasonable doubt that Mr Al-Eid's involvement in the business was a fiction, and that Mr Makki owned and controlled all the relevant companies throughout the relevant time.
- That being so, it is not strictly necessary (any more than it was for the judge) to consider the position as regards Mr Abdelmawla's evidence. Nevertheless, as it took up a significant part of the time of the hearing before us, I will say something about it.
- Mr Al-Eid was presented, by himself and Mr Makki, as a Syrian businessman with interests in the travel and tourism business, financially independent with substantial means, who visited Beirut regularly on business, where he met Mr Makki. It was said that he was interested in going into the telecommunications business, reselling airtime, and took advantage of his acquaintance with Mr Makki in this respect, when Mr Makki offered to sell him companies active in the business. He said that he paid $75,000 cash for Hillside, Community and Weybridge, and agreed to pay £800,000 for Globenet, though this was never paid. He said that he was not willing to disclose anything about his own means, though he did exhibit a bank reference in extremely general terms which, oddly since he lives in Syria, was from a bank in Beirut.
- The Claimants sought to investigate whether this was a true picture not only by reference to the documents which I have mentioned, but also by enquiry in Syria. They instructed (indirectly) Mr Abdelmawla to investigate Mr Al-Eid and identify his business activities. Mr Abdelmawla lives in Syria though it seems that he has a Liberian passport as well as a Syrian one. Mr Abdelmawla said in evidence that his enquiries led him to think that Mr Al-Eid worked as a driver of taxis or buses at a very modest salary, and lived in a poor suburb of Damascus. He gave evidence of a number of statements which were pure hearsay, in many cases second or third hand, not at all specific and not capable of being tested. The judge in effect rejected that evidence, by placing no weight on it.
- In addition, however, Mr Abdelmawla put in evidence a number of documents which he had obtained from various official and other sources. The most relevant ones were as follows:
i) A copy of Mr Al-Eid's national union membership card describing him as a driver. Mr Page does not deny that Mr Abdelmawla is a member of the union and thereby entitled to drive in the course of his work
ii) Information provided by the Social Security Establishment showing that he had been a driver earning the equivalent of $59 per month during 2004, but that he had resigned in November 2004 from his employment with Jawadean Tours. This is the company in which Mr Al-Eid claims to have a financial interest, though no details of that interest have been provided.
iii) Information inconsistent with Mr Al-Eid's claim to be an architect or accountant.
iv) Evidence that Jawadean Tours owned a tourist bus, registration 626517, which was confirmed by a vehicle registration certificate produced by Mr Al-Eid himself; the Transport Administration said that Mr Al-Eid was registered as the driver of this bus.
- Mr Al-Eid himself produced a document from the Ministry of Rations and Internal Trade showing Mr Al-Eid as having started a general trading business on 26 December 2004.
- Mr Abdelmawla was challenged as to how he had got hold of some of these documents, and what they were. For example, he had said that he produced a copy of the union card, but it turned out to be a duplicate, as it were, rather than a photocopy. The judge was struck by the fact that the challenge to Mr Abdelmawla on these counts, like the complaints made to the authorities about the information provided to Mr Abdelmawla, was not on the basis that the information provided was not correct, or was not what the relevant body's records showed. The judge therefore concluded, rightly in my view, that, whatever might be said about Mr Abdelmawla's own credibility, there was no reason to doubt these particular pieces of information about Mr Al-Eid. An issue arises as to their admissibility as hearsay, but I will come to that later.
- The third category of Mr Abdelmawla's evidence was of direct conversations with Mr Al-Eid and with Mr Makki. The judge sets out the evidence on this in paragraphs 370 to 372 of his judgment. Mr Al-Eid agreed that he had had conversations with Mr Abdelmawla. Mr Makki did not dispute having had a conversation with Mr Abdelmawla. Mr Abdelmawla's evidence was that both Mr Al-Eid and someone who was said to be his lawyer said things to Mr Abdelmawla from which the only reasonable inference was that Mr Makki had rewarded Mr Al-Eid substantially for what he had done. Conversely Mr Al-Eid said that Mr Abdelmawla had tried to bribe him. The judge accepted Mr Abdelmawla's evidence as to what had passed between him and each of Mr Al-Eid and Mr Makki, and concluded that Mr Makki had bribed Mr Al-Eid to play his part in the documentation and to give evidence.
- Mr Page submitted that the judge had been wrong to place any reliance at all on the evidence of Mr Abdelmawla. He said that Mr Abdelmawla had been, or could be, shown to be a wholly unreliable witness. This turned mainly on circumstances relating to Mr Abdelmawla giving evidence by satellite link from Syria rather than in court in London.
- Mr Abdelmawla made three affidavits in relation to the committal applications. He said that he was willing to be cross-examined and to attend court in London for the purpose. He said that he had intended to travel to London from Syria on 13 January 2005 for this purpose, but that he was prevented from leaving. If he had been able to travel then, he would have arrived in England before the start of the hearing, on 18 January. Eventually he gave evidence by satellite link on 7 February. We have a transcript of his evidence and, because it was taken in that way, we have also had the unusual experience, for an appellate court, of being able to see the witness as he gave evidence, because it was recorded on videotape. At Mr Page's invitation, we viewed some 5 minutes of the evidence, of which he had also shown us the transcript, in support of his case that Mr Abdelmawla was a thoroughly shifty and unreliable witness. Mr Abdelmawla's evidence was the last evidence given. Indeed, because of the delays which occurred in attempting to set up the arrangements for him to give evidence by satellite link, Counsel had already made much of their closing submissions to the judge by the time he gave evidence. If it had not been possible to take his evidence on that day, the trial would have proceeded without his oral evidence. There was no possibility of adducing further evidence after his evidence was complete. Mr Makki's representatives asked the judge to consider a letter which came to their hands later, but he refused on the basis that its authenticity was not accepted and it could not be tested.
- The circumstances in which Mr Abdelmawla came to give evidence in this way are described in outline in paragraphs 98 to 105 of the judgment. Mr Page submitted that the judge was wrong to have accepted that Mr Abdelmawla was prevented from coming to England to give evidence, and that he should have regarded his evidence about the circumstances in which Mr Abdelmawla said he had tried to come and been prevented from coming as wholly unreliable, and should on that basis have disregarded anything else that Mr Abdelmawla said.
- Mr Page submits that Mr Abdelmawla's final position on his evidence as regards the circumstances in which he says he tried to come to London was as follows. On 10 January he bought an open ticket to travel to London from Damascus from Sary Travel, but did not collect it. On 12 January he was asked when he would be coming to London, not having, by then, a reservation on any flight. He went to the airline office of Syrian Arab Airlines (SAA) and obtained a slip of paper confirming the time of a flight, though not a reservation. As it happened flight RB213, which would normally have left on 12 January, had been delayed and was due to leave on 13 January. Late on the night of 12-13 January he was given a ticket by Sary Travel, without a reservation but with status marked as OK which suggests that there was a reservation. On the morning of 13 January he went to the airport but was prevented from leaving by immigration control, before he had attempted to check in for the flight. He took a copy of the ticket and returned the original to Sary Travel on 15 January. Two days later he was asked for the copy ticket. He sent a poor copy of a passenger coupon, but this turned out on close examination to be for a Damascus / Cairo ticket which Mr Abdelmawla had used in December. Sary Travel wrote a letter confirming that they had issued to him a ticket for travel to London with the number shown on this passenger coupon, whereas the Cairo ticket had been issued by SAA, not by themselves. The audit copy of the Cairo ticket was put to him in cross-examination. Thereafter a copy of the passenger coupon for another hand-written ticket for the flight to London was produced. Mr Abdelmawla has not produced the copy which he said he had made of the London ticket itself, nor the originals of the passenger coupons. The new ticket appears to be dated 10 January but to be for RB213 on 13 January, though it was not known on 10 January that RB213 would be leaving on 13 January. Sary Travel's letter is not correct, in that the ticket to which it refers by number was not for travel to London and was not issued by them.
- The copy handwritten passenger coupon for the flight to London was produced to Irwin Mitchell after Mr Abdelmawla had given evidence. On 11 February, which was the last day of the hearing, the Claimants were hoping to obtain a letter from SAA about the ticket. The judge gave them permission to adduce such a letter in evidence if they received it, and both parties would have been able to make submissions on it. In fact the Claimants did not receive such a letter. Mr Makki's solicitors, on the other hand, did do so. They wrote to SAA in Damascus (its finance director Mr Ghassan Habeeb) on 11 February sending a copy of the handwritten passenger counterfoil, and asking various questions about its authenticity. They then sought to put in evidence the reply, dated 14 February, in two forms, one without any heading other than "Syrian Arab Airlines", typed, and the other with a more formal heading "Syrian Arab Airlines" and a Damascus post box address. The letter said that the ticket was not authentic, and gave a number of details in support of this. Irwin Mitchell sought to put this in evidence by an affidavit made on 15 February. The Claimants objected, on the basis that they did not accept the authenticity of the reply. The judge refused to admit it in evidence, because of the doubts as to its authenticity, which Mr Anderson had detailed in written submissions: see paragraph 11 of the appendix to the judgment.
- Mr Page's application to adduce further evidence goes to this same point. The evidence in question is a letter from SAA in London dated 8 June 2005. It is written as from F Alkaed, described as Financial Manager, but it is not signed. It is addressed, oddly, to "Irwinmitchell Mr J De Jonge" and starts "Dear James, Further to our conversation yesterday". Mr James de Jonge is an employee of Risk Analysis, a company retained by Jones Day to carry out investigations on behalf of the Claimants. The inference is, therefore, that, after Mr de Jonge had a telephone conversation with F Alkaed at the SAA office in London, Mr Alkaed took the steps described in his letter, and wrote the letter to confirm what he had done and discovered, but that by mistake he sent it to Irwin Mitchell instead of to Mr de Jonge. What Mr Alkaed says he has done is to check with Mr Habib "our financial director in Damascus", and he has been told that "the letters are authentic, issued by his department and signed on his behalf".
- Irwin Mitchell had written to SAA in London themselves previously. On 12 May they received a letter signed by Colette Garabet, described as PA, saying that "the letter attached [i.e. the 14 February letter with the more formal heading] is authentic, and signed by our financial director Mr Gh Habeeb".
- Mr Page needs to have admitted not only the letter of 8 June, of course, but also the letter to which it refers, dated 14 February. The point to which these go is not any of the issues in the proceedings, but the credibility of Mr Abdelmawla. If these letters had been in existence when Mr Abdelmawla was giving evidence they could, of course, have been put to him. It does not follow that it is appropriate to allow them to be adduced on appeal, even though there were unavoidable practical reasons why they could not have been produced at the time Mr Abdelmawla was giving his oral evidence on 7 February.
- In relation to a case of contempt, whether criminal or civil, it has been held that the rules as regards the admission of new evidence on appeal ought to be those applying to criminal proceedings, rather than the normal test in civil proceedings based on Ladd v. Marshall  1 WLR 1489: see Irtelli v. Squatriti  QB 83. The relevant criteria are set out in section 23 of the Criminal Appeal Act 1968, as amended. These include whether the evidence appears to the court to be capable of belief, and whether it appears to the court that the evidence may afford any ground for allowing the appeal. For my part, I would not allow the letter dated 8 June 2005 in as additional evidence on the appeal. It is peripheral in that it does not go to an issue in the proceedings, but only to the credibility of one of the Claimants' witnesses. In particular, having come to the conclusion that I have expressed, that the Claimants' case is fully proved, in the relevant respect, by evidence other than that to which Mr Abdelmawla spoke, it follows that, even if Mr Abdelmawla were not to be believed, the rejection of his evidence would not afford a ground for allowing the appeal. Even if the credibility of Mr Abdelmawla were still an issue on which the appeal turned, it would seem to me difficult to justify the admission of this evidence, which would be one more piece in the attack by Mr Page on the credibility of the witness. The judge saw Mr Abdelmawla, having seen all the other witnesses who gave evidence, and having read all the evidence and the relevant documents in a way which is not in practice open to an appellate court. It seems to me unlikely that this one item by itself could make a difference to the view taken of Mr Abdelmawla's credibility. The judge himself recognised that there were substantial points among those which Mr Page made based on the evidence about Mr Abdelmawla's air ticket: see paragraph 9 of the appendix to the judgment. He also recognised that Mr Page had not had the opportunity to cross-examine Mr Abdelmawla on the new ticket or to deal with it fully, and for that reason he approached Mr Abdelmawla's evidence with caution: paragraph 12 of the appendix and paragraph 338 of the judgment itself.
- Leaving aside, therefore, the late evidence as to the authenticity of the London ticket, Mr Page nevertheless has, as the judge said, substantial material for saying that Mr Abdelmawla was not telling the truth about the circumstances in which he did not come to London to give evidence. There are many inconsistencies in his evidence. For example, he did not produce the copy which he said he had made of the original London ticket (as opposed to the passenger coupon), nor the original of the passenger coupon of either the London or the Cairo ticket. It is said that it would be strange, to say the least, to be prevented from leaving the country by immigration authorities before having checked in for the flight. It is said that the letter from Sary Travel is not capable of an honest explanation: either they knew the ticket referred to was a Cairo ticket and nevertheless said it was for London, or they wrote a letter at Mr Abdelmawla's request without seeing the ticket in question, which had not been issued by them, and taking his word for it. When shown the audit coupon of the Cairo ticket, which he had not seen before it was put to him in cross-examination, he did not say that it was the wrong ticket, but asserted that something had been done to it, i.e. it had been tampered with. The handwritten London ticket is internally inconsistent: if it was truly dated 10 January it could not have been for RB213 departing on 13 January. Mr Abdelmawla's account given before the first ticket was exposed as being for Cairo was inconsistent with the handwritten ticket having been the true ticket.
- As against all of that, the judge referred at paragraph 10 of the appendix to a number of points made by Mr Anderson in favour of an innocent explanation, of mistake and confusion. He also had to consider why Mr Abdelmawla should have been so anxious to avoid coming to London in order to be cross-examined, when he was willing to be cross-examined in Syria. Mr Page's answer to this was that on 10 January Mr Makki served evidence in reply which attacked Mr Abdelmawla personally in a number of respects, and that Mr Abdelmawla would not have wanted the Syrian authorities to see the results of his being cross-examined on these points. As to his agreeing to give evidence by a remote link, Mr Page commented that he could hardly refuse, once the possibility had been raised. Mr Page said that the judge had only Mr Abdelmawla's own word for it that he had been instrumental in helping to overcome the numerous obstacles that lay in the way of making the use of a satellite link possible.
- Powerfully as Mr Page made his points about Mr Abdelmawla, and despite the fact that we have seen a short extract from Mr Abdelmawla's evidence given as the judge saw it, it seems to me that it would be wrong to interfere with the judge's findings as to Mr Abdelmawla's credibility. He saw the whole of Mr Abdelmawla's evidence, in the context of the evidence as a whole. It was for him to assess the credibility of the witness. He did so and I can find no basis for Mr Page's submission that in doing so he misdirected himself. Plainly he did not do so expressly, so Mr Page's submission has to be that his conclusion is one which simply cannot stand with the material before him. I do not accept that submission. In my judgment the judge came to a conclusion which was open to him as to the credence to be given to Mr Abdelmawla's evidence. He regarded it with caution. That was a proper approach.
- The next question concerns the evidence which Mr Abdelmawla introduced, which I have already mentioned, such as the copy of Mr Al-Eid's union card. Looking at this material in more detail than at paragraph 120 above, the material is as follows.
- According to the Damascus Traffic Police Administration, Mr Al-Eid was not registered as the owner of any vehicle, but he was registered as the driver of a tourist bus, with a given registration number, which itself was registered as owned by Jawadean Tours. Mr Al-Eid did not deny that the bus is owned by Jawadean Tours nor that he is registered as its driver.
- According to information from the Damascus Countryside Chamber of Commerce and the Damascus Chamber of Commerce, Jawadean Tours is owned by one Yassin Ali Karki. Mr Al-Eid did not dispute this, but said that he is a shareholder in it and its sales and marketing director. He produced a document apparently signed by Mr Karki and stamped by Al-Jawadean Tours, dated 9 December 2004, stating that it is a company in the field of tourist transportation operating inside and outside Syria and owning about 20 modern buses, operating also in air ticket sales and hotel reservations, and with a turnover of $1 million a year, that Mr Al-Eid is a shareholder, and has been since 2002, and is the sales and marketing director.
- Mr Abdelmawla put in evidence what he described as a copy of Mr Al-Eid's membership card of the National Union, which he said he had obtained from the Land Transportation Union of the National Union of Labour Syndicates. It turned out that this was, as it were, a duplicate rather than a true copy. Mr Abdelmawla said it set out the information which, according to an employee of the union, was written on Mr Al-Eid's union card. This included that Mr Al-Eid is a member of the union and, as such, entitled to drive as part of his work. Mr Al-Eid did not dispute these facts. The judge did not accept this part of Mr Abdelmawla's evidence as proving anything else to a level such that he could place any weight on it. I therefore need say no more about that.
- Mr Abdelmawla also made enquiries at the Social Security General Establishment about Mr Al-Eid. He said that in October 2004 an employee of that establishment issued a form to him, completed by reference to the records held in relation to Mr Al-Eid. This refers to Mr Al-Eid as a driver, working with Jawadean Transportation, with a salary on 1 January 2004 at a rate of 3030 Syrian lire, equivalent to $59. He said that he went back to the Establishment in November 2004 and was then told, by the same employee, that Mr Al-Eid had lodged a letter of resignation from his employment with Jawadean Tours. On this occasion he received a letter officially signed stating that, from the establishment's computer records, Mr Al-Eid was working for "Yassin Kraki" from 20 April 2002 up to 30 October 2004.
- Mr Al-Eid denied having sent a letter of resignation and said it was a forgery. In that context he produced the document to which I have referred at paragraph 121 above dated 9 December 2004. He did not deny that the information recorded (apart from the resignation) was in fact recorded at the Establishment or that it was correct.
- Thus, of these various items of evidence produced by Mr Abdelmawla, only selected details of the substance of the information were in dispute. In particular, it was accepted that Mr Al-Eid worked for Jawadean Tours, that he drove one of their tourist buses, and had the union membership which he needed to allow him to do so, and that Jawadean Tours was owned by Mr Karki, and there was no challenge to the proposition that Mr Al-Eid worked for Jawadean Tours (in whatever capacity) for the equivalent of about $59 per month. Although it was asserted that he also worked as sales and marketing director and owned shares in the business, no details of his work or salary as director, or of his shareholding nor any relevant financial details (amount, cost, value or dividends) were given in Mr Al-Eid's evidence, any more than any other details of his financial position.
- The judge considered this evidence and concluded, at paragraph 366, that he accepted that the information said to have been obtained from the Social Security General Establishment was provided by an employee of that body, and recorded correctly information held by that body in respect of Mr Al-Eid, including the salary rate of 3030 Syrian lire. The judge said that he regarded this category of Mr Abdelmawla's evidence as being of sufficient substance to call for a response or rebuttal, that Mr Al-Eid had provided none, or not sufficiently, given that he was not prepared to be cross-examined, and that he should therefore accept the evidence. He went on, at paragraph 368, to conclude that he knew enough about Mr Al-Eid to be satisfied that there was no realistic possibility that he could have bought the three companies for $75,000 in cash, or Globenet for £800,000 (even though not actually paid) or to control the business of an airtime reseller in London. As he said:
"Even if Mr Al-Eid was not just a driver for Al-Jawadean Tours, but also had some interest in it or even was its "sales and marketing director", the notion of his involvement with a telecommunications company in London like Globenet is fanciful."
- Mr Page submitted that none of this evidence adduced by Mr Abdelmawla was admissible, being hearsay. This depends on his proposition that the court should apply the test applicable in criminal proceedings. If the Civil Evidence Act 1995 applies, then it is admissible but the court has to consider its weight. In that case Mr Page had submissions on its weight, which are no doubt much the same as he made to the judge. Since the decision of the case does not depend on it, I need say no more than that I consider that the judge was entitled to place weight on the material in this category to which he did attach importance; having done so, I agree with him that they compelled the conclusion that he did reach.
- There is also the third category of Mr Abdelmawla's evidence, namely his conversations with Mr Al-Eid himself, Mr Makki and a lawyer apparently acting for Mr Al-Eid. This was accepted by the judge as showing that Mr Makki had bought Mr Al-Eid's evidence. It was evidence which, undoubtedly, called for a response by way of evidence capable of being tested by cross-examination. In the absence of cross-examination of Mr Al-Eid and Mr Makki on these points, it seems to me that the judge was well entitled to place weight on this evidence from Mr Abdelmawla and that on that basis the conclusion followed.
- Thus, on each of the points taken on appeal against the judge's findings that Mr Makki was in contempt of court, I am satisfied that the judge was entitled to reach the conclusions that he did. I would dismiss the appeal insofar as it challenges the findings of contempt.
The sentences of imprisonment
- Even on that basis, Mr Page challenged the sentences passed in a number of respects. The sentences aggregated at 12 months, because the judge made one of them consecutive to another. They were as follows:
i) For the Merjan property contempts, 7 months;
ii) For the BLOM dollar account contempts, 4 months;
iii) For the Banque de la Mediterranean contempts, 28 days;
iv) For the contempts relating to the information on the switches, 28 days;
v) For the contempts relating to the disclosure of the ownership of certain companies, 28 days;
vi) For the contempts consisting in the dishonest verification of statements of case by statements of truth, 5 months.
The first five of these were to run concurrently, but the sixth was to run consecutively to the 7 month sentence imposed under (i) above.
- The judge dealt with sentence in a separate judgment delivered, following argument, a week after the main judgment had been handed down. Mr Makki had had the opportunity to give instructions to his solicitors and to Mr Page on the point. The judge noted that he did not, by evidence or through Counsel, express any apology, remorse or regret. Nor did he say anything as to what, if anything, he might do in an attempt to remedy the effects of any of his breaches of the orders.
- Mr Page challenged the sentences under (i), (ii), (iv) and (vi) individually, and also the proposition that the sixth sentence should be consecutive.
- In relation to the Merjan property Mr Page submitted that seven months is excessive, particularly because, he said, Mr Makki did not have it within his power to purge the contempt, in the sense of getting the property back. He had given no indication that he had tried to get it back. It seems to me that, on the basis of the judge's findings that Mr Makki had deliberately concealed the existence of this valuable asset on 27 February, and that, before anything about it was revealed on 28 February, he had caused things to be done which put the asset out of the Claimants' reach, the judge was entitled to regard this as a particularly serious contempt, and to disregard the suggestion that the sentence should be shorter than it might otherwise have been because Mr Makki could not do anything to remedy the effects of the breach.
- In relation to the BLOM dollar account, Mr Page submitted that a sentence of imprisonment was not appropriate because Mr Makki had purged his contempt by revoking his power of attorney and his offer of an indemnity to the Bank, and his support for his father's action. He said that it would be appropriate that a contemnor who had purged the contempt should not be at risk of imprisonment, so as to provide a proper incentive for purging the contempt. The judge did take into account the fact that Mr Makki had done the things I have mentioned, in considering whether to commit Mr Makki for these contempts and if so for what period. He also noted that Mr Makki had not made any submissions to the Lebanese court with a view to preventing the transfer of funds out of this account.
- As regards the breaches relating to the information on the switches, Mr Page submitted that the judge was wrong to treat this as a serious breach at all. He said that it consisted of failure to disclose to the Claimant something which they, or at any rate BT who stood behind the liquidators, already knew, it was not motivated by any desire to destroy evidence, and it caused no delay, additional cost or inconvenience, as could be seen by the lack of urgency with which the Claimants treated the point. He submitted that it was no more than a technical breach of the order with no real consequences.
- Lastly, as regards the issues concerning the ownership of Weybridge, Hillside, and Globenet, and the alleged involvement of Mr Al-Eid, Mr Page submitted, first, that as regards CPR 32.14 the normal sanction against a party who lies to support his case is an order for indemnity costs, to which Mr Makki is in any event subject, secondly that there is a striking contrast between 28 days imposed in this respect for the breach of the freezing order and 5 months imposed under CPR 32.14, and thirdly that, because the contempts are connected and arise out of and relate to the same series of events, there is no justification for imposing consecutive, rather than concurrent sentences, especially as the matters in issue give rise both to a 28 day and to a five month sentence. Arising from precisely the same matters (albeit at different stages of the litigation) he submitted that they ought to have been concurrent. Further in support of his submission that the five month sentence should in any event not have been consecutive, he submitted that an overall sentence of 12 months was manifestly excessive.
- In support of his contention that committal was not an appropriate remedy against a party who lies in support of his case, Mr Page cited from the judgment of Park J in Microsoft v Backslash 19 November 1998. I do not doubt that what the judge said in that case was an appropriate position to take on the facts of that case, which did not, of course, involve the verification of a dishonest statement of case by statements of truth, since the Civil Procedure Rules had not yet come into effect. This case is very different in a number of respects, including the nature and circumstances of the dishonesty, and the absence of any regret or apology. I do not accept that there is any general principle that committal is not an appropriate remedy under CPR 32.14.
- Mr Page also cited Shalson v. Russo, a decision of Neuberger J given on 9 July 2001. The judge identified three factors relevant to sentencing for contempt: coercion, punishment and deterrence. Mr Justice David Richards referred to this case in paragraph 9 of his judgment on sentence, and relied on it for the importance, in an appropriate case, of punishment, either in addition to that of coercion, or even if the element of coercion does not arise. It seems to me that he was fully justified in proceeding on that basis, and therefore in imposing the sanction of committal whether or not Mr Makki had taken belated steps to bring to an end his non-compliance with the order.
- It seems to me that Mr Page is entitled to submit that the contempts as regards the information on the switches are less serious than some of the other contempts. But I do not accept that they are not serious, and in particular I do not accept that the knowledge of BT is of any relevance, nor that it is a mitigating factor that the Claimants may not have treated the matter with great urgency.
- I see some force in Mr Page's point that it is, in one sense, odd that Mr Makki's dishonest response in his affirmation to the questions concerning the ownership of Weybridge and other companies should attract a sentence of 28 days, whereas his breaches under Part 32.14 give rise to a five month sentence, and also that these two should not be concurrent with each other. As to that, however, the judge dealt with all the sentences together, in paragraph 16 of his judgment on sentence. He will have had in mind, when deciding on a 28 day sentence for the one, that he was about to impose a five month sentence for the other. It may be that the main oddity is that the first sentence was not heavier, rather than that the second was not lighter. As for the question whether they should have been concurrent with each other, it would have been open to the judge to say that they should be, but it does not at all follow that they would or should have been concurrent with the other sentences as well. That is a separate question.
- No authority was cited to us on the use of consecutive, rather than concurrent, sentences for contempt, and none is noted in Arlidge Eady & Smith on Contempt, 3rd edition (2005) which was published at about the time of the hearing before us. It seems to me that the judge was well entitled to decide that the contempts to which rule 32.14 apply are of a different category from the breaches of the freezing and search orders, and to apply the sentences on a consecutive basis accordingly.
- Looking at the length of the longer sentences overall, and at the aggregate twelve month term, it does not seem to me that, in the circumstances of this case, these were, separately or together, manifestly excessive. As the judge said, the contempts were serious, deliberate, in some cases prolonged, and fully justified his words in paragraph 5 of his judgment on sentence:
"Each of the breaches of the search and freezing orders was, taken individually, very serious, but taken together they disclose a long-running and determined effort to flout and frustrate the search and freezing orders. The deliberately false statements in the defences represented the great majority of the allegations of fact on which Mr Makki and the Third Defendant relied. In my judgment it was a serious attempt to mislead the court."
- I accept that an aggregate sentence of twelve months is fairly long, the statutory maximum being 2 years. I do not accept that, whether viewed on their own or, for example, looked at by a notional comparison with an even worse set of contempts for which a two year sentence might be appropriate, twelve months is manifestly excessive.
- I would dismiss the appeals against sentence.
The appeal against the costs order
- Mr Makki also seeks permission to appeal against the costs order made by the judge. The judge's order as to costs was that Mr Makki should pay the Claimants' costs on an indemnity basis, except for their costs of one half day of the hearing, and for certain costs (in respect of time out of court) relating to the issue of Mr Abdelmawla's flight tickets, and he also ordered Mr Makki to pay the Claimants £350,000 on account of costs by 7 June 2005. Mr Page submitted (a) that the half day disallowance does not fairly represent the time taken on the issues on which Mr Makki succeeded, (b) that he should have been awarded his own costs of the contempt allegations on which he won and (c) that the judge's order leaves Mr Makki paying for preparatory costs of the Claimants on issues on which he succeeded. He also said that the £350,000 interim payment assumed that the Claimant's costs claim need be discounted by only 30% for assessment, which was unreasonably low, and 50% would have been appropriate.
- All of these points are matters for the judge's discretion as to costs. He refused permission to appeal. In my judgment he was right to do so, and I would do the same, on the basis that there are no grounds for a successful appeal on any of these points.
The appeal against the order for summary judgment under Part 24
- I turn next, and last, to the separate application for permission to appeal against Mr Justice David Richards' later judgment on the Claimants' application for summary judgment under CPR Part 24, given on 21 October 2005 after a two day hearing in July. We heard argument on this as if permission to appeal had been granted.
- The Part 24 application was made in unusual circumstances. Normally, when a court is considering whether to give judgment under Part 24, whether for the Claimant or the Defendant, it will not have heard any oral evidence. It will have the allegations in the Particulars of Claim and any Defence, and it will have evidence in the form of one or more witness statements from the applicant and perhaps from the respondent. In the present case, on the Part 24 application itself, the judge had only written evidence, but he had, of course, had oral evidence on the committal application and he was entitled to take into account the conclusions that he had come to and in particular the findings of fact that he had made when deciding that application: those were matters as to which Mr Makki was bound, subject of course to appeal.
- There is no reason why an application should not be made under Part 24 in such circumstances. However, the essential nature of the Part 24 application was the same despite it being heard with the benefit, so far as relevant, of findings made as a result of the earlier hearing. In order to give judgment for Pacifica and Globenet under Part 24, the judge had to be satisfied that the Defendant had no reasonable prospect of successfully defending the relevant issue, and that there was no compelling reason for the matter to go to trial. The application was limited to the claims that Mr Makki was liable to pay the sums of US$3,650,000 and US$1,419,929.35 to Pacifica and Globenet respectively.
- The judge's order declared that Mr Makki was liable to pay those sums and included consequential orders. As mentioned above, these sums were paid, in one case from the Daltel London dollar account and in the other from the DUSA account in Geneva, directly or indirectly to joint accounts in the names of Mr Makki and his father in Beirut. The Claimants' case was that, before being transferred away, these were moneys belonging to Pacifica and Globenet respectively, not to DUSA, and that the transfers were in breach of Mr Makki's fiduciary duties owed to Pacifica and Globenet. The judge accepted this contention.
- Mr Makki's defence was that, although DUSA owed debts to Pacifica and Globenet for the use of their airtime, the money in question belonged to DUSA because it was paid to that company by Arbinet under the contract between the two of them, and DUSA had never parted with the money, which belonged to it in the accounts in London and Geneva respectively. The judge considered that Mr Makki had no reasonable prospect of succeeding in establishing that defence at trial.
- In order to consider and deal with Mr Page's challenge to the judge's judgment on this, it is necessary first to examine the way in which the case is put in the Particulars of Claim.
- At paragraph 11, it is alleged that, by virtue of facts already set out concerning the relationship between Mr Makki and Daltel, Pacifica and Globenet, Mr Makki owed each of Pacifica and Globenet fiduciary duties to act bona fide in the interests of those companies and not to allow his personal interests to conflict with the interests of those companies and his duties to them. At paragraph 12 a duty of skill and care to the same companies was alleged. At paragraph 13 it was alleged that Mr Makki was a trustee of the assets of the companies and answerable to the relevant company in respect of any misapplication of the company's assets in which he participated and/or which he knew or ought to have known to be a misapplication.
- Moving to the facts of the relevant transactions, at paragraph 16 it is alleged that airtime purchased by Pacifica and Globenet from BT was sold by Pacifica and Globenet, at a discount to the price at which it had been bought from BT, directly or indirectly to Arbinet. At paragraph 17 it is said that by reason of such sales, Arbinet paid US$6,278,818 to Pacifica and Globenet.
- At paragraph 21 the two transfers of funds are alleged. It is said that Pacifica and Globenet caused $3,650,000 received from Arbinet to be paid to accounts not in the name of Pacifica or Globenet but in the name of Mr Makki and or a third party or third parties on his behalf, and that Pacifica and Globenet similarly arranged for $1,419,929.35 owed by Arbinet to be paid to accounts not in the name of Pacifica or Globenet but of Mr Makki and or a third party or of third parties on his behalf.
- Next, at paragraphs 22 to 24, there are allegations of fraudulent trading and wrongful trading which are not relevant to the Part 24 claim; nor are the alternative cases under Insolvency Act 1986 sections 127, 238 and 423, which appear at paragraphs 26 and 27.
- At paragraph 25 it is alleged that the two payments or transfers were made or caused to be made by Mr Makki in breach of the duties alleged at paragraphs 11 and 12 and/or in breach of trust, there being no proper or legitimate basis for Pacifica or Globenet to make such payment or transfer to or for the benefit of Mr Makki.
- At paragraph 30 it is alleged that, by virtue, among other things, of the matters alleged at paragraph 25, Mr Makki is liable to Pacifica and Globenet for damages or equitable compensation for breach of duty or breach of trust. Mr Anderson argued that it is on this basis, which is reflected in paragraph 5 of the prayer for relief, that the judge gave judgment under Part 24.
- In the application under Part 24, the claim was said to be for declarations and orders that Mr Makki holds the two sums transferred (which are identified by reference to paragraph 21 of the Particulars of Claim) upon constructive trust for the relevant company and that the relevant claimant is entitled to trace the sums in equity into any assets which represent or contain the proceeds of those sums, and for damages or equitable compensation for breach of fiduciary duty, or breach of trust, in respect of the facts and matters set out at paragraphs 21 and 25 to 32 of the Particulars of Claim.
- Mr Page submitted to us, as he had to the judge, that the claim was limited to the matters alleged in paragraphs 16 and 21 of the Particulars of Claim. In agreement with the judge I reject that submission. Paragraph 21 is referred to only to identify the sums paid, not to limit the basis of the claim.
- More substantively, he submitted that the claimants had put their application on the basis of a case that the involvement of DUSA was a sham, but that this had been abandoned at the hearing, and that it had been replaced by a case suggested by the judge which had not been pleaded and was not supported by the necessary evidence, that DUSA, when entering into its agreement with Arbinet under which it received the sums claimed, was acting as an agent or trustee for Pacifica and Globenet.
- The evidence before the judge on the application started with a witness statement of Steven Richards, referring to other evidence on the committal application, but saying in particular, at paragraph 7.3.3, that airtime bought by Pacifica and Globenet was sold at a loss, and the proceeds transferred to accounts in the names of Mr Makki and his father in Beirut. Mr Makki put in a witness statement in answer dated 1 June 2005. In this he said that DUSA entered into an agreement with Arbinet dated 3 June 2003, that money was paid by Arbinet under this agreement which was owed to DUSA, and therefore, when paid, belonged to that company, and not to Pacifica or Globenet. In reply Sion Richards put in a witness statement dated 5 July 2005 in which he asserted that there was no genuine trading relationship between DUSA and either Pacifica and Globenet, that the involvement of DUSA was a sham and that Mr Makki traded with Arbinet as owner and controller of Pacifica and Globenet. Mr Makki responded with a witness statement dated 15 July in which he denied the sham allegation and said the contract between Arbinet and DUSA was a genuine contract.
- In his skeleton argument for the hearing before the judge, Mr Anderson said that Mr Makki would need to show that Pacifica and Globenet resold airtime to DUSA genuinely and validly, and that Mr Makki's case, which had been that the airtime was resold via Weybridge to DUSA, had been rejected on the committal application and could not now be asserted. He also pointed out that on the earlier application the judge had held that the interconnect agreements which Mr Makki had said existed between Pacifica and Weybridge and between Weybridge and DUSA were fictitious, and that there never was an agreement between Globenet and Weybridge.
- For his part, Mr Page asserted in his skeleton argument that Arbinet dealt and intended to deal with DUSA, knowing nothing of Pacifica and Globenet, and he relied on the absence from the Particulars of Claim of any allegation that DUSA was acting as an agent or trustee in entering into its contract with Arbinet.
- The claimants do not allege that the contract between Arbinet and DUSA was a sham, in the sense that both the parties to it intended a result other than that which appears from the document. Plainly Arbinet did intend to enter into that agreement, and paid in pursuance of it.
- The judge dealt with Mr Page's argument to the effect that DUSA was fully entitled to the money paid by Arbinet, though owing sums to Pacifica and Globenet for the use of their airtime, in paragraphs 18 to 21 of his judgment:
"18. In my judgment it is not sufficient for Mr Makki to point to the existence of a contract between Arbinet and DUSA which was not a sham contract. If DUSA had no right to use the interconnect services of Pacific and Globenet to gain access to the BT network for the purpose of performing its contract with Arbinet, it equally had no right to retain sums paid to it by Arbinet for such access but held those sums for Pacifica and Globenet.
19. Unable to point to any express agreements entitling DUSA to use the interconnect services of Pacifica and Globenet, Mr Page relied on his submission that contracts should be implied. In my judgment Mr Makki has no reasonable prospect of establishing any such implied contracts. Such contracts may readily be inferred as between parties dealing in good faith. However, Mr Makki's invention of an elaborate defence, involving a fictitious sale of Weybridge to Mr Al-Eid to make it appear as an independent third party and a bogus agreement between Weybridge with Pacific, demonstrates that there was no dealing in good faith between DUSA and Pacifica or Globenet. If there had been, Mr Makki would have had no need to rely on his concocted defence. I do not consider that at trial he has any prospect of establishing a basis on which any agreement would be implied.
20. Alternatively, Mr Page submitted that it could be inferred that Pacifica and Globenet had consented to DUSA using their interconnect services. For this purpose, he relied on the common control of Mr Makki, although as regards Globenet Mr Makki's case had been that he did not control it. In different circumstances, common control could provide a proper basis for inferring consent. To be effective, such consent would have to be given in good faith and with a proper regard to the interests of the consenting company. There is no basis for inferring consent by Pacifica and Globenet in the circumstances of this case. Mr Makki's defence, relying on the fictitious agreement between Pacifica and Weybridge and on the false claim that Globenet was owned and controlled by Mr Al-Eid, was wholly inconsistent with any such consent and demonstrates that Mr Makki did not in good faith consent on behalf of Pacifica and Globenet. Nor, in any event, could he have lawfully consented to a gratuitous use of the interconnect services, in view of the substantial sums which were due to BT and would become due to BT as a result of such use. Pacifica and Globenet would have had no means of paying those sums.
21. I conclude therefore that Mr Makki has no prospect of establishing that DUSA had, at any time, any entitlement to make use of the interconnect services of Pacifica and Globenet. DUSA had no right to retain the sums paid to it, or to its order, by Arbinet. Pacifica and Globenet were entitled to those sums and it was a breach of fiduciary duty by Mr Makki to divert them to the bank accounts in Beirut in the joint names of his father and himself."
- The judge went on to give two further reasons for holding Mr Makki liable, though in the first case only to the extent of the $3,650,000, as follows.
"22. I will note here an alternative submission by Mr Anderson for the claimants. If there had been an arguable basis for an implied agreement, DUSA would have owed sums to Pacifica and Globenet. Sums were paid by Arbinet to the credit of the Daltel dollar account. Mr Makki pleaded and gave affidavit evidence that the funds in that account were held for DUSA and relied on the depository trust agreement. I found that agreement to be a bogus agreement, created by Mr Makki for the purposes of his defence. In those circumstances, Mr Anderson submitted, the proper inference would be that the sums were paid to the Daltel dollar account for the benefit of Pacifica and Globenet in or towards discharge of amounts due to them. Neither of those companies had dollar accounts. If I had accepted Mr Page's submission of an implied agreement, I would also have accepted this submission by Mr Anderson. Even on that basis, the claimants would be entitled to summary judgment in respect of $3,650,000.
23. In the absence of any arguable basis for the case that DUSA was entitled to use the interconnect services of Pacifica and Globenet, the claimants also succeed in their submission that DUSA was no more that a front for misappropriation by Mr Makki. All the evidence, read in the light of my findings on the committal application, indicates that DUSA had no bona fide role and Mr Makki has adduced no plausible evidence which has any reasonable prospect of establishing otherwise."
- Mr Page criticised the judge's reasoning. As regards the principal ground for decision, in paragraphs 18 to 21, he said that it was not open to the judge for three reasons: (1) there was no allegation of such a trust in the pleadings or the evidence; (2) Pacifica and Globenet, being owned and controlled by Mr Makki, must have consented to the use of their services being provided to Arbinet when the physical connection was made to Arbinet through the London switches, and even if Mr Makki had been acting in bad faith in that respect (which was not argued or proved) that would not affect the validity of his acts in consenting to the connection; (3) even if Pacifica and Globenet did not consent to the use of their services, that would not by itself make DUSA a trustee.
- He pointed out that the dates at which it would be relevant to consider Mr Makki's state of mind for the purposes of this allegation would be when DUSA entered into the agreement with Arbinet, and when each of Pacifica and Globenet started its trading. He submitted that the only allegations as to Mr Makki's state of mind at these dates were in paragraphs 22 and 24 of the Particulars of Claim, dealing with fraudulent and wrongful trading, which were expressly not relied on for the purposes of the Part 24 application. Nothing in the committal application had turned on Mr Makki's state of mind at the stage when the airtime services were in fact provided. He said in his skeleton argument: "it does not follow, from the fact that Mr Makki decided to cover his tracks later, that he was acting in bad faith at the outset".
- In paragraph 317 of the judge's judgment on the committal application he had said: "I am entirely satisfied that Weybridge would never have issued any invoices to DUSA and that Mr Makki never had any intention of using the money to pay BT". Mr Page told us that, when directions were given for the hearing of the Part 24 application, he objected to the judge hearing it, and that one of his reasons was that the judge had apparently decided, in this sentence, a point which was not relevant to the committal application, and was not in issue before him, but might be relevant to the Part 24 application. His opposition to the judge hearing the application was unsuccessful but he told us that the judge did agree that this point had not been necessary for his decision and that the comment would not be treated as binding on the hearing of the Part 24 application. On that basis, he went on to argue that there was no evidence before the judge as to Mr Makki's state of mind at the earlier stage, and that it could not be assumed that his intention at that stage was improper.
- He also argued that, even if it had not been in Pacifica's best interests to agree to its airtime being resold, directly or indirectly to DUSA, it must in fact have made such an agreement, and such an agreement would be binding, being approved by the shareholders, unless it had been a fraud on the company's creditors, which was alleged in the Particulars of Claim but was an issue expressly excluded from the application before the judge and reserved for trial. Mr Page showed us some authority on this point.
- Even absent agreement by Pacifica to the use of its services, he submitted that DUSA's actual use of the airtime did not by itself make that company a trustee of the sums received for Pacifica.
- Turning to the judge's further reasons, in paragraphs 22 and 23 of the judgment, he submitted that the fact that DUSA caused money due to it to be paid into the Daltel dollar account could not show that this was paid to the order of or for the benefit of Pacifica or Globenet. Nor could the existence of DUSA be simply ignored, in effect piercing the corporate veil, which was not a basis on which the Claimants had put their case forward.
- Because Mr Makki's application for permission to appeal on the Part 24 judgment was brought only shortly before the hearing of the appeal against the committal order, Mr Anderson did not have the opportunity to put in a skeleton argument of his own on the summary judgment aspect. In his oral submissions he characterised Mr Page's position as being an extravagant pleading point, and submitted that the judge's findings on the committal application showed that the centre of Mr Makki's defence was a dishonest sham, so that judgment on the substance of the claims in respect of the two sums of money was inevitable. He submitted that Mr Makki could not overcome the fact that there was no agreement entitling DUSA to use the airtime by invoking an implied agreement, when the alleged express agreement had been rejected as fictitious.
- He further submitted that the allegations in the Particulars of Claim do include the claim on the basis of which the judge found in favour of Pacifica and Globenet, for example because of the allegations against Mr Makki of breach of fiduciary duty to Pacifica and Globenet in causing the sums payable by Arbinet for what was in fact the use of Pacifica and Globenet's airtime to be paid away for his own benefit. In circumstances in which Mr Makki owned and controlled each of the entities involved, so that DUSA knew of the duties he owed to Pacifica and Globenet, and of the absence of any agreements entitling them to use the airtime, he submitted that DUSA was on notice of the breach of duty involved in the transfer of the money to Beirut. He also submitted that, if it were necessary for the judge to find that Mr Makki was acting in deliberate breach of his fiduciary duty in June 2003, and thus dishonestly at that time, there was ample material on which he could do so, not least because of his having sold the airtime on to Arbinet at much less than the rate payable to BT. The relative rates were such that £7.6 million is due to BT from Pacifica and Globenet whereas only some $6 million was paid by Arbinet for the use of the same airtime. (Additional sums are due from Daltel to BT, but the airtime for which this is due was not sold on to Arbinet, and is not relevant to this appeal.) Mr Anderson submitted that this could not be consistent with honesty. Mr Makki had said that the low rates were set by Mr Al Eid, through negligence, but on the basis that it was Mr Makki himself who arranged the onward sale, Mr Anderson's submission was that negligence was not a tenable hypothesis: it must have been intentional.
- As for Mr Page's submission that Pacifica and Globenet had consented to the use of their service by DUSA through agreeing to the physical interconnects, Mr Anderson submitted that this was fallacious, because DUSA was not in fact involved in the interconnection. Only Pacifica and Globenet on the one hand and Arbinet on the other were involved. Pacifica and Globenet might therefore have agreed to the use of their services by Arbinet, but that could not justify a proposition that they were not entitled to receive the sums payable by Arbinet in return for such use.
- In relation to the judge's alternative basis for decision in paragraph 22, Mr Anderson pointed out that Mr Makki's reliance on the depositary agreement for saying that the money in the account belonged to DUSA had been demolished by the finding that that agreement was a later fabrication, and that therefore there was no other basis for saying that the contents of the account belonged to DUSA.
- Understandably, in the light of the judge's findings on the committal application, Mr Anderson relied heavily on those findings to say that there was no prospect that Mr Makki could succeed at trial in showing any honest explanation for his dealings. Looking at the matter from a practical point of view, there might be something to be said for that, especially if one were to suppose that, faced with a 12 month sentence of imprisonment if he were to return to this country, it may be relatively unlikely that Mr Makki would attend to give oral evidence at the trial if one were to take place. However, it seems to me that Mr Page is right to submit that the summary judgment needs to be justified by reference to the case alleged in the relevant parts of the Particulars of Claim and to the evidence on the material issues, taken, of course, with the judge's findings on those issues, so far as they were relevant to the committal application. Moreover, the relevant allegations are of dishonesty against Mr Makki. Although he has been properly accused, and found guilty of, dishonesty in other respects, it is no mere technical pleading point to insist on a different allegation of dishonesty being made against him expressly and in a proper manner before the court embarks on a consideration of the question whether he has a reasonable prospect of defending it.
- Mr Page is correct in submitting that there is no allegation in the Particulars of Claim that DUSA, in its dealings with Arbinet, was acting as agent or trustee for Pacifica and Globenet. He is also justified in pointing out that, although general allegations of fiduciary duty on the part of Mr Makki are made in paragraph 11, and although the sale on of the airtime (direct or indirect) is alleged in paragraphs 15.2 and 15.3, and that this was at a discount (paragraph 16), the only relevant allegation of a breach of Mr Makki's fiduciary duties is in relation to the transfer of the money, as set out in paragraphs 25 to 27. It is not alleged that whatever he did as regards the sale on of the airtime was itself a breach of fiduciary duty.
- It may well not be difficult for the Claimants, knowing what they now do, to allege that Mr Makki was acting in breach of fiduciary duty in setting up the sale of the airtime by Pacifica and Globenet in the way that he did, but that is not alleged in the Particulars of Claim as they stand. Of course, a great deal has happened in the case since the Particulars of Claim were drafted in March 2004, and the Claimants would now be in a position to make more detailed and focussed allegations than they could have done then.
- In the course of dealing with the committal application the judge had to consider the basis on which Mr Makki had traded on behalf of Pacifica and Globenet, because of his contention that Pacifica and Globenet both traded with Weybridge, which he said was owned by Mr Al-Eid. The judge rejected the contention that Weybridge was owned by Mr Al-Eid and the contention that it had any genuine part to play in the course of the dealings with the airtime. He held that the interconnect agreement between Pacifica and Weybridge produced by Mr Makki was not a genuine document, but a later fabrication. He did not have to consider the position as regards DUSA and its dealings with Arbinet. It was in this context that he said, in paragraph 317, that which I have quoted at paragraph 187 above. On the basis that the judge accepted that this was not to be regarded as a finding which bound Mr Makki for the purposes of the Part 24 application, it seems to me that it must be ignored.
- If the Part 24 application had been based on a statement of case which alleged, for example (even if as one of a number of possibilities) that DUSA had no right to deal with Pacifica and Globenet's airtime, that Mr Makki was acting in breach of fiduciary duty in enabling DUSA to sell it to Arbinet, and that DUSA was to be taken to be acting as agent or trustee for Pacifica and Globenet, then it seems to me that, subject to any additional evidence that might have been put before the court, it might well have been open to the judge to hold that the money paid by Arbinet did indeed belong to Pacifica and Globenet, and that all the other consequences followed as alleged on behalf of Pacifica and Globenet.
- As it is, it seems to me that it was not open to him to find that Mr Makki had no reasonable prospect of defending a claim that the Arbinet payments belonged to Pacifica and Globenet rather than to DUSA. The case based on trusteeship was not alleged in the Particulars of Claim, nor was it alleged that, in making whatever arrangements he did make for DUSA to be able to sell the airtime to Arbinet and to deliver on its contract, he was acting in breach of his fiduciary duties to Pacifica and Globenet. There is force to Mr Page's comment that there are allegations in the Particulars of Claim relevant to that position, namely the allegations of an intention to defraud creditors, but that they were specifically (and understandably) excluded from the scope of the Part 24 application. It is not right to bring those matters into account on the application, having excluded them expressly.
- Part 24 allows the court to give judgment for the Claimant on the whole of a claim or a particular issue if it considers that the Defendant has no reasonable prospect of successfully defending the claim or issue, and there is no compelling reason for the matter to go to trial. In the present case it is not a question of giving judgment on the whole claim, but on a particular issue, or issues. It seems to me that this language presupposes that the issue is one which has been properly raised in the Particulars of Claim. Of course, the relief sought by Pacifica and Globenet by way of the Part 24 application is relief included within the terms of the prayer for relief in the Particulars of Claim, but the basis on which it is sought does not seem to me to have been asserted in the parts of the Particulars of Claim on which reliance was placed for the purposes of the application.
- Accordingly, it seems to me that the principal basis for the judge's judgment on this application was one which was not open to him, as the case stood. The conclusion that DUSA held the money which it received from Arbinet on trust for Pacifica and Globenet may be a sound one, but it was not open on the Particulars of Claim. I also agree with Mr Page that it was not a necessary conclusion from anything which the judge had had to decide for the purposes of the committal application. Even on the basis that there was no express interconnect agreement between DUSA and either Pacifica or Globenet, it might be arguable that an agreement was to be implied, from the fact of the actual interconnection arrangements, under which DUSA would be obliged to pay for the airtime, but would not be bound to account to Pacifica and Globenet for the sums received from Arbinet.
- Mr Page cited Rolled Steel Products (Holdings) Ltd v. British Steel Corporation  Ch 246 for the proposition that, absent insolvency and an intention to defraud creditors, and leaving aside questions of ultra vires properly so-called, the consent of the shareholders can bind a company to any transaction, even if it is not in the company's best interests. Mr Anderson accepted that proposition, but sought to avoid its consequences by submitting that there was no arguable basis for saying that Pacifica and Globenet, through Mr Makki, did consent to the use of their airtime by DUSA and Arbinet. It seems to me that, whatever may be the practical prospect of Mr Makki succeeding at trial on this, since the point has not been made in the statement of case or in the evidence, it is not an issue on which judgment can be given against Mr Makki under Part 24.
- The same is true of the judge's other grounds for giving judgment, set out in paragraphs 22 and 23 of the judgment.
- In those circumstances and for those reasons, I would grant permission to Mr Makki to appeal against the order under Part 24, and would allow that appeal.
- In summary, therefore, I would dispose of the several applications and appeals as follows:
i) The application for an extension of time (if necessary) for appealing against the finding of contempt was granted at the hearing of the appeal.
ii) I would grant permission to amend the appellant's notice to raise the additional grounds of appeal about the admissibility of hearsay evidence on a committal application.
iii) I would dismiss the application to adduce additional evidence on the appeal against the committal order.
iv) I would dismiss the application for permission to appeal on the costs order in relation to the committal applications.
v) I would grant permission to appeal in relation to the order under Part 24.
vi) I would dismiss the appeal against the committal order, both as regards guilt and as regards sentence.
vii) I would allow the appeal against the order under Part 24.
Lord Justice Wilson
- I agree.
Lord Justice Auld
- I also agree.