B e f o r e :
MR JUSTICE DAVID RICHARDS
|| (1) Daltel Europe Limited (In Liquidation)
(2) James Earp, Robert Harry Pick and Nicholas Stewart Wood (The Liquidators of Daltel Europe Limited)
(3) Pacifica Limited (In Liquidation)
(4) James Earp, Robert Harry Pick and Nicholas Stewart Wood (The Liquidators of Pacifica Limited Europe Limited)
(5) Globenet Limited (In Liquidation)
(6) James Earp and Nicholas Stewart Wood (The Liquidators of Globenet (UK) Limited)
||(1) Hassan Ali Makki
(2) Weybridge Management LLC
(3) Daltel USA LLC
Robert Anderson (instructed by Jones Day) for the Claimants
Hugo Page QC (instructed by Irwin Mitchell) for the Defendants
Hearing dates: 18, 19, 20, 21, 24, 25, 26, 27, 28, 31 January, 2, 7, 8, 9, 10 and 11 February 2005
HTML VERSION OF JUDGMENT
Crown Copyright ©
Mr Justice David Richards:
- These are two applications by the claimants in this action for the committal of the first defendant Hassan Ali Makki for alleged contempt of court. The claimants are three companies now in compulsory liquidation and their respective liquidators. Mr Makki was the sole controller of the companies, although the period of his control of one of the companies is a major issue in these applications.
- The alleged contempts fall into two distinct categories. First, Mr Makki is alleged to have been in breach, and in some cases still to be in breach, of search and freezing orders made in the action on 27 February 2004 in a number of different respects. These alleged breaches form part of an application dated 21 September 2004 (the September application) and the whole of an application dated 21 December 2004 (the December application). The first application also raises the second distinct category of contempt. It is alleged that the defences filed in the action by Mr Makki, and by another defendant controlled by him, contain false statements which were verified by Mr Makki without an honest belief in their truth. This part of the application is brought under CPR Part 32.14, with the permission of the court granted by Mann J on 17 September 2004.
- It is common ground that the application under CPR Part 32.14 raises for decision virtually all the major issues of fact in the action.
- Before dealing with the alleged contempts, it is necessary to summarise the facts relating to the three claimant companies and the claims made in the action.
- Each of the claimant companies is incorporated in England and Wales and carried on a telecommunications business. Each had obtained a licence from the regulatory authority under section 7 of the Telecommunications Act 1984 to offer telecommunication services. British Telecommunications plc (BT) was accordingly obliged to provide each company with interconnection facilities. This meant that their telecommunications switches were physically connected to the BT telephone network and were entitled to route incoming and outgoing calls via the BT network. This enabled the companies, in effect, to sell access to the BT network to end-users or to other telecommunications operators. Daltel Europe Limited (Daltel) did this by the sale of pre-paid telephone cards and by routing calls from the residential subscribers of an associated company, Apple Telecommunications Europe Limited (ATEL). Pacifica Limited (Pacifica) and Globenet (UK) Limited (Globenet) had no retail customers and routed calls to the BT network on a wholesale basis, directly or indirectly, from Arbinet-theexchange Limited (Arbinet). Arbinet is a New Jersey company which operates a global exchange to facilitate the sale and purchase of voice telephone minutes. It is in issue both in these applications and in the action (i) whether Pacifica and Globenet dealt directly with Arbinet or with companies which in turn dealt directly or indirectly with Arbinet and (ii) whether the intermediate companies (if any) were owned or controlled by Mr Makki or by a third party.
- There are many references in the evidence to the sale of airtime by BT to the claimant companies and to the onward sale of airtime by them to other entities. In turn this led to submissions on behalf of the claimants based on the notion that "airtime" was an asset to be bought and sold. Mr Page QC appearing for Mr Makki submitted, correctly in my judgment, that this was not an accurate legal analysis. The interconnect agreements between the claimant companies and BT give those companies access to the BT network for which they agree to pay on a time basis in accordance with contractually binding tariff tables. In that respect it is no different from any ordinary customer's use of the BT or other networks. Essentially BT is providing a service for which it makes charges. The same was true of the companies which, by virtue of their interconnect agreements, were able to charge for access to the BT network. It is convenient to speak in terms of the sale and purchase of airtime, and I will do so in this judgment, but it is no more than convenient shorthand.
- The businesses of these companies were straightforward. Their principal costs were the amounts due to BT, which were charged on a time basis and payable on credit terms. The income of Daltel comprised the amounts received from the sale of pre-paid cards and the amounts due from ATEL, and the income of Pacifica and Globenet comprised the amounts payable by Arbinet or the intermediate company with which they dealt. The businesses could be run from small offices with a small number of employees. Apart from the telecommunications licences and interconnect agreements, the only essential assets were capacity on a telecommunications switch, which I will describe later in this judgment, and computer facilities.
- It is common ground that, at all material times, Mr Makki was the sole shareholder of Daltel and Pacifica and was in control of their day-to-day affairs.
- The position as regards Globenet is different. Although Mr Makki accepts that he incorporated Globenet, he says that he had sold it before it started trading on about 28 September 2003. The returns filed with the registrar of companies show that he resigned as a director on 25 September 2003 when Hillside Trading Group LLC (Hillside), a company incorporated in Delaware, was appointed in his place.
- 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 truth of these claims regarding the change of control and ownership of Globenet, Hillside and Weybridge is the central issue in the committal application under CPR Part 32.14.
- It is not in dispute that Daltel traded with BT between December 2002 or January 2003 and August 2003, resulting in unpaid indebtedness of some £1.7 million. BT suspended Daltel's interconnect services for non-payment of charges on 15 August 2004. Equally it is not in dispute that Pacifica traded with BT, resulting in substantial unpaid indebtedness. The precise amount is in dispute but it is accepted to be of the order of £3.9 million. As to the period of Pacifica's trading, although there is a difference on the statements of case, it is, I think, agreed that it was from June to August 2003. Its interconnect services were suspended by BT on 27 August 2003. Globenet traded with BT from about 28 September to about 28 October 2003, resulting in unpaid indebtedness of nearly £3.69 million. The claimants' evidence is that Pacifica and Globenet made no payments to BT and that Daltel paid approximately £280,300. There is no contrary evidence adduced by Mr Makki. The total unpaid debts from the three companies to BT are of the order of £9.3 million.
- Daltel and Pacifica were each ordered to be wound up on 19 November 2003 on petitions presented by BT and Globenet was wound up on 10 March 2004, also on a petition by BT. None of the petitions was opposed. There are no assets available to the companies or their creditors, other than claims in the action and/or, as Mr Makki says, the claims for unpaid debts against the companies with which they dealt.
Claims against Mr Makki
- It is the claimants' case that between 15 July and 30 October 2003 Arbinet paid sums totalling $6,278,818, which were due to one or more of the claimant companies (all references in this judgment to $ are to US dollars). Instead of being paid to the companies and used to pay debts due to BT, at least $5 million was paid to or for the benefit of Mr Makki between 15 July and November 2003. It is common ground that neither Pacifica nor Globenet maintained a bank account and the claimants allege that sums due to them from Arbinet were paid into Daltel's dollar account with Barclays Bank in London. Between 15 July and 30 October 2003 a total of $4,695,397 was paid by Arbinet into Daltel's dollar account. Between July and September 2003 sums totalling $2,152,388 was transferred from this account to accounts at various banks in Beirut held in the joint names of Mr Makki and his father. On 3 November 2003, a further sum of $1.5 million was transferred from Daltel's dollar account to an account with Barclays Bank in Geneva in the name of Daltel USA LLC (Daltel USA), a Delaware company which was at all times controlled by Mr Makki. A separate amount of $1.4 million was paid by Arbinet into Daltel USA's account in Geneva. In November 2003 a sum of $2.8 million was transferred from the Geneva account to an account in Beirut in the joint names of Mr Makki and his father.
- Put shortly, the claimants' case is that Mr Makki carried on the business of the companies fraudulently, obtaining connection services to the BT network on credit and diverting the income of the companies to himself, leaving the companies without funds to pay BT.
- This is denied by Mr Makki. He says that the relevant circumstances were different as regards each of the companies. He accepts that he controlled Daltel at all material times, but its business was unprofitable because he had intended that it should use Arbinet circuits for the onward transmission of calls but for technical reasons was unable to do so and so had to use the BT network at higher cost. He also accepts that he controlled Pacifica. His case is that it did not deal with Arbinet but sold airtime to Weybridge, which at all material times was owned and controlled by Mr Al-Eid. He says that Weybridge sold the airtime to Daltel USA, which remained under Mr Makki's control, but did so at a loss apparently due to errors made by Mr Al-Eid in drawing up the rate sheet for the interconnect agreement between Weybridge and Daltel USA. He accepts that Daltel USA has not paid for the airtime. Weybridge failed to pay Pacifica which was therefore left without funds to pay BT.
- As regards Globenet, I have already mentioned Mr Makki's case that he did not control it while it was trading, but had already sold it to Mr Al-Eid or to Hillside, which was by then controlled by Mr Al-Eid. He was not privy to Globenet's arrangements with BT or with Weybridge. Again, airtime was acquired by Daltel USA from Weybridge and sold to Arbinet. Again, he accepts that Daltel USA has not paid for the airtime.
- Mr Makki does not dispute the payments summarised above but it is his case that all the dollar sums paid by Arbinet were for airtime sold by Daltel USA to Arbinet. Daltel USA had purchased the airtime from Weybridge, which in turn had acquired it from Pacifica and Globenet. The sums paid did not therefore represent the funds of Daltel, Pacifica or Globenet, but belonged to Daltel USA. Mr Makki alleges that all sums credited to Daltel's dollar account were held for Daltel USA, as confirmed by a depository trust agreement.
Search and freezing orders
- The claimants issued the present proceedings against Mr Makki on 26 February 2004. The principal claims are in respect of alleged fraudulent or wrongful trading under sections 213 and 214 of the Insolvency Act 1986 and breach of fiduciary duty. On the same day they applied for a freezing order and a search order, which were granted by John Jarvis QC (sitting as a Deputy Judge of the Chancery Division). Both orders follow the standard forms annexed to the Practice Direction for CPR Part 25 subject to modifications appropriate to the circumstances of this case. The search order provided for a search party comprising a supervising solicitor, an independent computer specialist, and representatives of the claimants and their solicitors.
- The orders were served at about 10.30am on 27 February 2004 as Mr Makki arrived at his office. The supervising solicitor's report to the court shows that before any other member of the search party was admitted to Mr Makki's office, the supervising solicitor spent about 1½ hours with him explaining the terms of the order and arranging for him to instruct solicitors. Mr Makki instructed Irwin Mitchell, who had not previously acted for him or any associated companies. Fortunately, Peter Wylde, an experienced litigation partner, was able to come immediately to Mr Makki's office. He arrived with two colleagues at noon and spent about 20 minutes with the supervising solicitor and Mr Makki, before spending 50 minutes privately with Mr Makki. The supervising solicitor extended the period of two hours from service of the orders allowed under the orders for taking legal advice. Compliance with urgent requirements in the freezing order to give disclosure and to sign letters of instruction to various banks started at 1.10pm.
- Execution of the search order started at about 2.30pm. The independent computer specialist started work on the computers in Mr Makki's office, and a solicitor from Jones Day, in the presence of a solicitor from Irwin Mitchell, began a search of the office. In the meantime, the remaining parties moved to Mr Makki's flat, arriving at 3.15pm. Mr Makki spent about 20 minutes privately with Mr Wylde and a colleague before they were joined by the supervising solicitor, and by Sion Richards, who is a partner in the claimants' solicitors Jones Day, and another solicitor from Jones Day. They remained at Mr Makki's flat until 6.30pm, and then returned to his office. The search of the office had continued throughout the afternoon. Mr Makki left the office at 8pm to go home. The search concluded at 8.30pm, except that it had been agreed that the independent computer specialist would return at 9pm, once ATEL's employees had left, to image the computers used by them. He was unable to complete this work because he could not image the server. Arrangements were made for him to return on Monday 1 March 2004 and he was able to complete the imaging process on 2 or 3 March 2004. In the course of 27 February Mr Makki was able to talk privately to Mr Wylde as and when he needed to take advice. I have set out this detail not only because it is informative to understand the realities of a search order, but also because it is relevant to Mr Makki's state of mind on 27 February 2004 and therefore to the contempts alleged against him.
- The orders required the disclosure of an extensive range of information concerning, among other things, assets owned or controlled by Mr Makki, assets of the claimant companies, records of or relating to the companies and their assets, the funds transferred from Daltel's dollar account and the ownership of Hillside and Weybridge. They required the delivery up of a wide range of records and made provision for documents on the computers at or accessible from Mr Makki's office and home to be copied and inspected. In compliance with the orders, Mr Makki served an affirmation on 9 March 2005 confirming the information already provided and containing additional information. In accordance with the terms of the freezing order, Mr Makki signed letters of instruction to those banks in Beirut then known to the claimants, requiring transfer of the funds to an account in London in the name of the liquidators. No funds have been transferred, as a result of contrary instructions given by Mr Makki's father.
The alleged contempts
- In the September application, 13 breaches of the search and freezing orders are alleged. They relate to two separate topics, the non-disclosure and disposal of an apartment in Beirut and the non-disclosure of records held on the telecommunications switches used by the claimant companies. It also raises the case made under CPR Part 32.14 for which Mann J had given leave, alleging that a total of 16 statements in Mr Makki's defence and 6 statements in the defence of Daltel USA were deliberately false.
- The discovery by the claimants of further matters in December 2004 led them to issue the December application. This application alleges six breaches of the search and freezing orders, all of which concern accounts at three banks in Beirut.
- By way of further detail, the alleged contempts so far as they involve breaches of the freezing and search orders fall into a number of distinct categories. First, on 27 February 2004 Mr Makki failed to disclose his ownership of an apartment in Beirut bought in July 2003 for over $900,000, which had been paid out of funds transferred from Daltel's dollar account to one of the joint accounts in Beirut. The fact that it had been purchased out of such funds, but not Mr Makki's ownership, was disclosed the following day. However, on that day and without notice to the claimants, Mr Makki's father, using a power of attorney granted in July 2003, transferred the apartment from Mr Makki into the name of Mr Makki's mother.
- The second category relates to a US dollar account or sub-account in the joint names of Mr Makki and his father at Banque de Liban et D'Outre Mer (BLOM Bank) in Beirut. The freezing order referred in terms to this account (the BLOM dollar account) and Mr Makki confirmed its existence on 27 February 2004. The balance in the account derived from funds paid out of Daltel's dollar account. In December 2004 the claimants discovered that, after service of the freezing order, Mr Makki's father had given instructions to the bank for the transfer of funds from the account and that the instructions had been given on his behalf and as attorney for Mr Makki. When the bank refused to comply with the instructions Mr Makki's father had brought proceedings in Beirut both in his own name and in the name of Mr Makki, using his power of attorney. He sought an order for the transfer of the account balance at his direction. Mr Makki's own lawyer in Beirut, Adnan Nawfal, had lodged submissions on his behalf with the court, supporting his father's application. Thirdly, Mr Makki failed to disclose another account in the joint names of his father and himself with BLOM Bank, denominated in Lebanese pounds (the Lebanese pound account). The claimants discovered in December 2004 that it had existed and that in April 2004 BLOM Bank had acted on an instruction by Mr Makki's father to pay out the balance, with a US dollar value of $51,817.
- Fourthly, on 27 February 2004 Mr Makki failed to disclose the existence of a US dollar account in the joint names of Mr Makki and his father with Banque de la Mediterranean in Beirut. It was disclosed on 28 February 2004, when the claimants were also informed that the balance had been about $1 million when Mr Makki last checked, in January 2004. They were also told that the balance had derived from funds paid out of Daltel's dollar account. Fifthly, Mr Makki has failed to provide any information on dealings or balances on the joint accounts at BLOM Bank, Banque de la Mediterranean and Arab Bank in Beirut. Sixthly, Mr Makki failed to disclose the existence of computerised records and other information held on the two switches owned or used by Daltel, Pacifica and Globenet and failed to provide the information necessary to access the records and information. The claimants gained access to them by other means in June and August 2004.
- Mr Makki denies each of the breaches, except to a very limited extent, and I will not at this stage summarise his grounds of defence.
- The application to commit Mr Makki under CPR Part 32.14 relates to the allegations in his defence and the defence of Daltel USA that he did not at the material times control Globenet, Weybridge and Hillside but had sold them to Mr Al-Eid, and that there were dealings involving the sale of airtime by Pacifica and Globenet to Weybridge. It is said the Mr Makki knew these allegations to be false when he signed the statement of truth of the defences.
(i) Burden and standard of proof
- The allegations of contempt of court against Mr Makki are stated in the September and December applications. Mr Anderson told me that they are all pressed against Mr Makki and none has been amended. The claimants may not extend the scope of their case beyond the allegations as so stated.
- The burden lies on the claimants to establish the facts constituting an alleged contempt beyond reasonable doubt, so that the court is sure of those facts. I have very much borne this in mind in making all my findings, whether or not I have expressly qualified them in that way. In the present case, a number of the allegations rest on inference. If, after considering the evidence, the court concludes that there is more than one reasonable inference to be drawn, and at least one of them is inconsistent with a finding of contempt, the claimants fail. This aspect is complicated in this case by the fact that Mr Makki has submitted several affirmations in his defence from himself, Mr Nawfal and Mr Al-Eid but they have declined to be cross-examined. The matters of inference are in many cases addressed by these affirmations and the allegations are denied. The denials cannot however be tested. The burden remains on the claimants and, if after considering all the evidence including Mr Makki's affirmations and attaching to them such weight as is appropriate, I conclude that an innocent explanation of an alleged contempt is a reasonable possibility, the claim must fail.
- The criminal standard of proof applies to all matters which are adverse to the respondent or which may lead it to view his conduct in a more serious light. This approach was approved by the Court of Appeal in Gulf Azov Shipping Co Ltd v Idis  EWCA Civ 21. Lord Phillips MR, with those judgment Simon Brown and Longmore LJJ agreed, cited with approval the following passage from the judgment at first instance of Moore-Bick J:
"It was common ground that the standard of proof is that which applies in criminal proceedings and therefore the applicant, on whom the burden of proof lies, must make the court sure of the facts which are alleged to constitute the contempt. This much was common ground, but the principle goes further than that. When the court is concerned with the circumstances in which a contempt has been committed and thus with the gravity of the defendant's conduct, it must be satisfied to the point of being sure of any matters which it would regard as adverse to the defendant or which would tend to lead to it to view his action in a more serious light and so affect its view of the appropriate penalty: see Z Bank v D1  1 Lloyd's Rep 656,667."
Further guidance of importance to the present case is given by Lord Phillips. After citing the above passage, he continues in paragraphs 17 and 18:
"Mr Bhalla accepts that this was indeed the test that the Judge should have applied, but he has submitted that, when the evidence is considered, the Judge cannot have applied that test but was satisfied with a lesser standard of proof. Mr Bhalla has sought, by analysis of the individual heads of contempt found by the Judge, to show that the standard of proof, the criminal standard, that had to be applied was not satisfied.
As to that exercise, I would make this observation. It is not right to consider individual heads of contempt in isolation. They are details on a broad canvas. An important question when that canvas is considered is whether it portrays the picture of a Defendant seeking to comply with the orders of the Court or a Defendant bent on flouting them. It is right that the individual details of the canvas should be informed by the overall picture. But, having said that, each head of contempt that has been held proved must be established beyond reasonable doubt."
- Numerous allegations of contempt are made against Mr Makki. Many of the allegations of breach of the search and freezing orders are of non-disclosure of assets and records, and in the case of the Merjan property, there is the added allegation that advantage was taken of the non-disclosure to dispose of the property. There is a common thread: the claimants' case is that the only valuable assets disclosed by Mr Makki on 27 February 2004 were those which he could see, from the terms of the order, were already known to the claimants. Nonetheless as Lord Phillips makes clear, each head of contempt must be established beyond reasonable doubt.
(ii) Canadian Imperial Bank of Commerce v Bhattessa
- On one issue Mr Anderson submitted that either a persuasive or an evidential burden lay on Mr Makki. He relied on the decision of the Court of Appeal (Sir Stephen Browne P, Evans and Peter Gibson LJJ) in Canadian Imperial Bank of Commerce v Bhattessa (unreported 21 April 1993). That case concerned an application to commit for breach of a freezing order. It was established that the respondent had dealt with his assets but it was submitted on his behalf that the applicant had failed to establish that the effect had been to reduce the value of his assets below the level specified in the freezing order. The respondent gave no evidence, as to the total value of his assets or otherwise. As a practical matter, it was impossible for the applicant to establish this point, as the facts concerning the respondent's assets and their value was known only to him. It was held at first instance, and affirmed on appeal, that the burden lay on the respondent to establish that his dealings had not reduced his assets below the specified level.
- Giving the judgment of the court, Sir Stephen Brown P said:
"Miss Andrews has submitted that the judge was wrong in his approach and that he should have approached the matter on the basis that the burden of proving that the defendant's assets had been reduced below £242,500 lay on the Plaintiff and that notwithstanding any difficulties arising about that matter, nevertheless, the notice of motion must be deemed to be defective. She said the judge was wrong in not approaching the matter on that basis. She also submits that the judge was wrong in relying upon R v Edwards and in saying that the evidential burden of proving compliance with the proviso rested on the defendant. I disagree with these submissions. From a practical point of view, the whole would be inoperable if that were to be the correct approach in this case. In this case, there was overwhelming evidence of very substantial dealings indeed, by this defendant at a time when there were outstanding claims against him by the Canadian Imperial Bank of Commerce. Furthermore there was subsequently an unsatisfied judgment. In these circumstances, I have no doubt that the learned judge was correct in his approach. Accordingly, I would dismiss the appeal in relation to the finding of the contempt."
- The reliance on the decision in R v Edwards  1 QB 27 demonstrates two points. First, the imposition of a burden on the respondent depends on the existence of what is in effect a proviso in the freezing order, that a disposal which does not reduce the value of assets below a specified amount is permissible. It does not depend on the facts being peculiarly within the knowledge of the respondent, although that is a powerful practical consideration. Giving the judgment of the Court of Appeal in R v Edwards, Lawton LJ said at pp 39–40:
"In our judgment this line of authority establishes that over the centuries the common law, as a result of experience and the need to ensure that justice is done both to the community and to defendants, has evolved an exception to the fundamental rule of our criminal law that the prosecution must prove every element of the offence charged. This exception, like so much else in the common law, was hammered out on the anvil of pleading. It is limited to offences arising under enactments which prohibit the doing of an act save in specified circumstances or by persons of specified classes or with specified qualifications or with the licence or permission of specified authorities. Whenever the prosecution seeks to rely on this exception, the court must construe the enactment under which the charge is laid. If the true construction is that the enactment prohibits the doing of acts, subject to provisoes, exemptions and the like, then the prosecution can rely upon the exception.
In our judgment its application does not depend upon either the fact, or the presumption, that the defendant has peculiar knowledge enabling him to prove the positive of any negative averment. As Wigmore pointed out in his great Treatise on Evidence (1905), vol. 4, p. 3525, this concept of peculiar knowledge furnishes no working rule. If it did, defendants would have to prove lack of intent. What does provide a working rule is what the common law evolved from a rule of pleading. We have striven to identify it in this judgment. Like nearly all rules it could be applied oppressively; but the courts have ample powers to curb and discourage oppressive prosecutors and do not hesitate to use them.
Two consequences follow from the view we have taken as to the evolution and nature of this exception. First, as it comes into operation upon an enactment being construed in a particular way, there is no need for the prosecution to prove a prima facie case of lack of excuse, qualification or the like; and secondly, what shifts is the onus: it is for the defendant to prove that he was entitled to do the prohibited act. What rests on him is the legal or, as it is sometimes called, the persuasive burden of proof. It is not the evidential burden."
- Secondly, as appears from the above-cited passage, it was a legal or persuasive burden, not an evidential burden, which was imposed on the respondent. In Great Future International Ltd v Sealand Housing Corporation, Lewison J proceeded on the basis that, in the light of decisions such as R v Lambert  2 AC 545 and R v Carass  1 WLR 1714 on the application of article 6.2 of the European Convention on Human Rights to reverse burdens, the burden on the respondent upheld in CIBC v Bhattessa should be treated only as an evidential burden, requiring the respondent to lead evidence which raises an issue fit for consideration by the court. Since Lewison J's decision, R v Carass has been overruled and the question of whether the burden is persuasive or evidential would require consideration in the light of the decision of the House of Lords in Sheldrake v DPP  1 AC 264.
- The particular matter to which Mr Anderson sought to apply the decision in CIBC v Bhattessa concerned the joint account at Banque de la Mediterranean which Mr Makki failed to disclose on 27 February 2004 but which was disclosed the following day. Assuming that I find the initial non-disclosure to be deliberate, the claimants submit that I should infer not only that the purpose of the delayed disclosure was to investigate ways in which the funds in the account could be moved out of the reach of the claimants but also that Mr Makki in fact transferred the balance from the account. It was submitted that, in the light of (a) the evidence as regards actual or attempted dealings with other assets and collusion between Mr Makki and his father, (b) the failure of Mr Makki to provide any bank statements relating to this account (he says that he is unable to do so, for reasons which are dealt with later) and (c) the fact that the claimants have no means of knowing the true position, the onus, whether legal or evidential, of showing that there has not been such dissipation lies on Mr Makki.
- I do not accept this submission. In my judgment the decision in CIBC v Bhattessa rests on what is in effect an exception in a freezing order, permitting the respondent to deal with his assets provided that the value of his assets is not reduced below the specified level. The Court of Appeal cited with approval a passage from the judgment of Harman J at first instance in which he said that if the respondent had led evidence to establish that the value of his remaining assets exceeded £242,500 "it would have been a defence to this charge because he would have proved that he was within the exception". This is the analysis of the decision in Gee: Commercial Injunctions (5th ed) para 4.011. It does not rest on a principle that the persuasive or an evidential burden lies on the respondent if the relevant facts are peculiarly within his knowledge. It would be contrary to the common law principles explained in R v Edwards and R v Hunt  AC 352 if it did.
- It follows that the claimants cannot rely on CIBC v Bhattessa to impose on Mr Makki a burden, whether persuasive or evidential, to show or lead evidence that there was no transfer of funds from the account in breach of the freezing order.
(iii) Mental Element
- Submissions were made by both parties on the mental element required to be shown for a finding of contempt in respect of a breach of an order of the court. Mr Anderson submitted that if Mr Makki or an agent acting on his behalf is shown to have breached the orders, he is in contempt of court. It is not necessary to prove any intent on his part to act in deliberate and knowing breach of the order. In support he cited the well- known passage from the judgment of Warrington J in Stancomb v Trowbridge Urban District Council  2 Ch 190 at 194:
"In my judgment, if a person or a corporation is restrained by injunction from doing a particular act, that person or corporation commits a breach of the injunction, and is liable for process for contempt, if he or it in fact does the act, and it is no answer to say that the act was not contumacious in the sense that, in doing it, there was no direct intention to disobey the order. I think the expression "wilfully" in Order XLII., r. 31, is intended to exclude only such casual or accidental and unintentional acts as are referred to in Fairclough v Manchester Ship Canal Co. I think this view, though not of course expressed in the same words, is to all intents and purposes the view expressed in Attorney-General v Walthamstow Urban Council. In my opinion, further, the act need not be done by the person himself. In the case of a corporation it cannot be done by the corporation itself, at any rate in the case of such a corporation as an urban district council. Such a body can only act by its agents or servants; and I think, if the act is in fact done, it is no answer to say that, done, as it may be, by an officer or servant of the council, the council is not liable for it, even though it may have been done by the servant through carelessness, neglect, or even in dereliction of his duty. That seems to me to follow from Rantzen v Rothschild."
The decision in that case and the above-cited passage had, as Lord Wilberforce put it in Heatons Transport (St Helens) Ltd v Transport and General Workers' Union  AC 15, acquired high authority. It was cited with approval by him, giving the joint opinion of the House of Lords, and it was expressly held to be good law by the House of Lords in Director of Fair Trading v Pioneer Concrete (UK) Ltd  1 AC 456.
- Mr Page submitted that not only deliberate, as opposed to accidental, conduct is necessary to establish contempt, but it must also be shown that the respondent knew that his conduct was in breach of the order. He relied on the decision of the Court of Appeal in Irtelli v Squatriti  QB 83 and submitted that Warrington J's statement was applicable only to bodies corporate.
- This issue has in recent years been considered in at least three first instance decisions, by Jacob J in Adams Phones Ltd v Goldschmidt  4 All ER 486, Neuberger J in Bird v Hadkinson  BPIR 653 and Moore-Bick J in Gulf Azov Shipping Co Ltd v Idisi  EWHC 201 (Comm). In all three cases the conclusion reached was that a deliberate intention to breach the order was not a necessary element for a finding of contempt of court. The judges in those cases concluded that it was impossible to reconcile Irtelli v Squatriti with authorities such as Stancomb, Heatons Transport, and Director General of Fair Trading v Pioneer Concrete (UK) Ltd.
- The Court of Appeal in Gulf Azov considered that it was not a relevant issue, in the light of the findings of Moore-Bick J and the way in which the claimants put their case which was firmly based on knowing and deliberate breaches. The position is not significantly different in the present case. The claimants' primary case is that Mr Makki has deliberately flouted the search and freezing orders in a number of respects. As will appear, my findings make it largely unnecessary to consider their alternative case that he is liable for the actions of his father in using a power of attorney to transfer the Merjan property and to give instructions to BLOM Bank, and for the actions of Mr Nawfal in support of the instructions to the bank, even if he had no knowledge of them.
- If it were necessary to do so, I would consider it right to follow the decisions of Jacob J, Neuberger J and Moore-Bick J. Indeed, it seems to me that the issue is concluded by the decisions of the House of Lords in Director General of Fair Trading v Pioneer Concrete and M v Home Office  1 AC 377, if not also by the decision in Heatons. I would add only these observations. First, Warrington J's statement of principle was expressed in general terms, not restricted to corporations, and was approved without qualification by the House of Lords in Heatons Transport and in Director General of Fair Trading v Pioneer Concrete. There are similar decisions and statements of principle in many other authorities, including those referred to by Lord Wilberforce in Heatons and, since the decision in Heatons, in Spectravest Inc v Aperknit Inc  FSR 161 (Millett J), Miller v Scorey  1 WLR 1122 at 1132 (Rimer J), and P v P (Contempt of Court: Mental Capacity)  3 FCR 546 at 553 (Judge LJ). The point was clearly made by Lord Oliver of Alymerton in Attorney General v Times Newspapers Ltd  1 AC 191 at 217-218, in a passage cited and applied by Lord Woolf giving the leading speech in M v Home Office  1 AC 377.
- Secondly, it is true that Stancomb, Heatons Transport and Pioneer Concrete are cases involving the liability for contempt of a body corporate, be it a company, local authority or trade union (treated by statute as a body corporate for relevant purposes). A body corporate by itself can act only by individuals. As Lord Nolan said in Director of Fair Trading v Pioneer Concrete (UK) Ltd at p 474:
"A limited company, as such, cannot carry on business. It can only do so by employing human beings to act on its behalf. The actions of its employees, acting in the course of their employment, are what constitute the carrying on of business by the company."
If it were the case that in all the relevant authorities the conduct of the employees or agents by whom the body corporate acted was a deliberate and knowing breach of an order, Warrington J's statement of principle might be regarded as a particular response to the unique position of corporations. In the Heatons Transport and Pioneer Concrete cases, the conduct of the employees or agents did involve a knowing and deliberate breach of the order. However, it is not clear that this was the case in Stancomb v Trowbridge UDC. Nor would this explanation fit the cases where innocent principals who are individuals are held in contempt by reason of their agent's act. In Rantzen v Rothschild (1865) 14 WR 96, to which Warrington J referred, a foreman overseeing demolition works unwisely took the advice of a passing policeman that he could safely disregard an order restraining further interference with a party wall. The foreman was described by Stuart V.C. as guilty of gross contempt of court, although it may be doubted that he was intending to flout the court's order. Nonetheless, the defendants, who were personally innocent, were held in contempt by reason of their agent's conduct.
- Thirdly, while there are statements in the judgments in Irtelli v Squatriti which indicate that a necessary element of civil contempt is a knowing breach of the order, the true basis of the decision may be that the alleged contemnors, one of whom spoke no English, did not know or understand the terms of the order: see the judgment of Sir Donald Nicholls V-C at p. 93. Further, only the alleged contemnors were represented on the appeal and neither Stancomb v Trowbridge UDC nor Heatons Transport were cited. In re Supply of Ready Mixed Concrete  QB 213 was cited and even in that decision, which was overruled by the House of Lords in Pioneer Concrete although not on this point, Lord Donaldson MR said at p 239:
"It is an essential prerequisite to a finding of contempt that the factual basis shall have been proved beyond all reasonable doubt and that there shall have been mens rea on the part of the alleged contemnor. Mens rea in this context does not mean a wilful intention to disobey the court's order, but an intention to do the act which constitutes the disobedience with knowledge of the terms of the order, although not necessarily an understanding that the act is prohibited."
- It seems clear that a wilful intention to disobey the court's order is not required for a finding of contempt, but a committal to prison for contempt will almost certainly require a knowing and deliberate breach of an order. As Lord Phillips MR said in Gulf Azov Shipping Co Ltd v Idisi, "Such a course is only appropriate where there is serious, contumacious flouting of the orders of the Court" (para 72) and the same would be true for an order debarring a defendant from actively defending the proceedings (para 15). See also Fairclough v Manchester Ship Canal Co (1897) 41 Sol.Jo 225,  WN7.
(iv) Liability for the acts of agents
- As an alternative to their primary case that Mr Makki personally and deliberately acted in breach of the orders or caused others to do so on his behalf, the claimants submit that he was in breach of the orders by reason of the actions of his agents. This applies in particular to the transfer on 28 February 2004 of the Merjan property by his father, using the power of attorney granted by him in July, and the actions of Mr Makki's lawyer, ostensibly on his behalf, in support of his father's legal proceedings in Beirut relating to the joint dollar account at BLOM Bank.
- The orders included the standard wording which restrained Mr Makki from doing a prohibited act "himself or in any other way. He must not do it through others acting on his behalf or on his instructions or with his encouragement". Mr Page submitted that in a criminal case, including contempt, there is no vicarious liability. In making this submission he was not seeking to distinguish between civil and criminal contempts. He argued that decisions such as Director General of Fair Trading v Pioneer Concrete were concerned with the attribution of an agent's acts and state of mind to a corporate respondent. There was no need to make any such attribution in the case of an individual, and the only state of mind which mattered was Mr Makki's. If he did not know of his agents' conduct, there could be no contempt. Moreover his agents must have had the requisite state of mind and there was no evidence of that.
- In my judgment the submission is wrong, contradicting authorities over many years as well as the express terms of the orders ("through others acting on his behalf"). It is true that many of the authorities, to which I have referred in the context of the mental state which must be proved, relate to corporate respondents. As explained by Lord Nolan in Director General of Fair Trading v Pioneer Concrete, the act of an employee is the act of the corporation because the corporation can act only through others. But it does not follow that an individual respondent cannot be in breach of an order and therefore in contempt of court by reason of his agent's or employee's actions. Rantzen v Rothschild is a clear example of such a case, even though the individual respondents were innocent of any wrongdoing. Rantzen v Rothschild was expressly applied by Warrington J in the passage in his judgment in Stancomb v Trowbridge Urban Council approved by the House of Lords in the Pioneer Concrete case. The principles in that passage are expressed to apply to both individuals and corporations. It would of course be relevant to the appropriate penalty if the respondent had no knowledge of his agent's actions. Any steps taken by him to ensure that his agent did not act in breach of the order, or the failure to take such steps, would also be relevant.
(v) Hearsay evidence
- A separate and important issue arising in this case concerns the use of hearsay evidence. As will be seen, in certain respects, the claimants rely on hearsay evidence. The most prominent example is evidence given by Albicha Abdelmawla Albacha (Mr Abdelmawla) of the results of enquiries made by him and others into the personal circumstances of Mr Al-Eid. While some of it consists of evidence of information said to be held on official records, a large amount comprises statements made by, in many cases, unnamed persons who have not themselves given evidence, still less been available for cross-examination. There is also some hearsay evidence in relation to the case concerning the Merjan property. It is of a rather different character, in that the original seller of the property has given an oral account of the negotiations leading to the sale, not only to a Lebanese lawyer engaged by the claimants, Dr Muhamad Mugraby, but also to Jones Day and there is a contemporaneous note of what he said. He was not however prepared to become directly involved in these proceedings and declined to give a written statement. The claimants also exhibited transcripts of the interviews of Robert Powell, a telecommunications consultant who carried out work for the claimant companies, with the liquidators. In the event, however, the claimants made no use of them at the trial and they do not require further consideration.
- Mr Page submitted that I should exclude all this evidence under CPR Part 32.1(2). As hearsay, it was not suitable for admission in quasi-criminal proceedings and should be excluded to the same extent that it would be excluded by the rules of evidence in a criminal case. Basing himself on the rules in criminal proceedings as they stood at the time of the hearing, he submitted that all the evidence referred to above should be excluded. Further, as committal proceedings even for civil contempt are treated as criminal proceedings for the purpose of article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms as scheduled to the Human Rights Act 1998, this was the only way in which to give effect to the requirement of article 6(3).
- It is necessary to take this issue in a number of stages. First, as a matter of law leaving aside article 6, committal proceedings for civil contempt are civil proceedings for the purposes of the Civil Evidence Act 1995. Mr Page did not contend otherwise. Committal proceedings may result in the imprisonment of the alleged contemnor. They therefore share some of the characteristics of criminal proceedings, such as the requirement to establish facts beyond a reasonable doubt and the principle that the alleged contemnor is not a compellable witness. Nonetheless they are, as a general proposition, civil proceedings and were held specifically to be so by the Court of Appeal for the purposes of the admissibility of hearsay evidence under the Civil Evidence Act 1968: Savings & Investment Bank Ltd v Gasco Investments (Netherlands) BV  Ch 422. There is nothing in the Civil Evidence Act 1995, which now governs the admissibility of evidence in civil proceedings, to suggest a different result.
- Under section 1(1) of the Civil Evidence Act 1995, evidence is not to be excluded in civil proceedings on the ground that it is hearsay. However, under section 4(1) it is for the court to decide "the weight (if any)" to be given to any hearsay evidence. That formulation is very important because it clearly contemplates that the court may decide to attach no weight to particular evidence. The scheme of the statute is therefore, by making all such evidence admissible, to do away with argument on the requirements for admissibility, and instead to focus attention on the question of weight in the individual circumstances of the evidence and the case. A non-exhaustive list of factors for consideration by the court in this exercise is set out in section 4(2). By expressly providing that the court may attach no weight to particular evidence, the Act enables the court to achieve the same result, where it is just to do so, as if the evidence had been inadmissible or excluded on some other basis.
- In my judgment, this provides the answer to Mr Page's submission that the hearsay evidence should be excluded under CPR Part 32.1(2), still leaving aside article 6. In view of the court's duty under section 4 to consider and decide the weight, if any, to attach to the evidence, there is no need to exclude it under Part 32 and it would be inappropriate to do so.
- Part 32.1(2) is primarily a case management power. It enables the court to exclude evidence so as, for example, to confine it to particular issues or to control the proliferation of evidence on an issue where significant evidence has already been adduced and the addition of further evidence would involve a disproportionate use of the parties' and the court's resources. In Post Office Counters Ltd v Mahida  EWCA Civ 1583 at para 24, Hale LJ said:
"The power of the Civil Procedure Rules to exclude evidence even if it is admissible is principally a case management power designed to allow the court to stop cases getting out of hand and hearing becoming interminable because more and more admissible evidence, especially hearsay evidence, is sought to be adduced."
No doubt the power to exclude evidence may be used for other purposes which are not connected with case management, for example to ensure compliance with the European Convention on Human Rights. However, in the light of the approach adopted by the Civil Evidence Act 1995, it seems to me that it would rarely be a proper use of the power under Part 32.1(2) to exclude hearsay evidence which was relevant to the issues for decision on the ground that it was hearsay.
- In Polanski v Conde Nast Publications Ltd  1 WLR 637, the House of Lords considered the approach underlying the Civil Procedure Act 1995 and its interplay with CPR Part 32.1. The case was primarily concerned with whether the claimant should be permitted to give oral evidence by video link from Paris in circumstances where he was unwilling to enter the United Kingdom for fear of extradition to the United States. Reversing the Court of Appeal, the House held that he should be entitled to do so. The Court of Appeal had proceeded to consider whether, having refused to permit video link evidence, his witness statements should be excluded under CPR Part 32.1, if he sought to adduce them as hearsay evidence but failed to attend for cross-examination pursuant to a requirement under CPR Part 33.4. Although not arising for decision, the majority in the House of Lords disagreed with the view of the Court of Appeal that the court would in those circumstances be bound to exclude the witness statements as evidence. Lord Nicholls of Birkenhead said at paragraph 36:
"I agree with the Court of Appeal that the court's case management powers under CPR r 32.1 are wide enough to enable the court to make the orders indicated by the Court of Appeal in this passage. But I do question whether in the present case, had a VCF order been refused, the court would have been "bound" to make an order excluding Mr Polanski's statements from evidence if he did not present himself in court for crossexamination. Such an exclusionary order should not be made automatically in respect of the non-attendance of a party or other witness for cross-examination. Such an order should be made only if, exceptionally, justice so requires. The overriding objective of the Civil Procedure Rules is to enable the court to deal with cases justly. The principle underlying the Civil Evidence Act 1995 is that in general the preferable course is to admit hearsay evidence, and let the court attach to the evidence whatever weight may be appropriate, rather than exclude it altogether."
Baroness Hale of Richmond reviewed the Act and said at paragraph 74:
"The substantive law following the 1995 Act, therefore, is that relevant hearsay is always admissible; there are various procedural safeguards aimed at reducing the prejudice caused to an opposing party if he is not able to cross-examine the maker of the statement; but the principal safeguard is the reduced – even to vanishing – weight to be given to a statement which has not been made in court and subject to crossexamination in the usual way. The court is to be trusted to give the statement such weight as it is worth in all the circumstances of the case."
As to Part 32.1 she said at paragraph 78:
"It is well within this objective to seek to get the parties to agree as many facts as possible, to limit the number of witnesses who may be called to give evidence on a particular issue, or to restrict the amount of documentary evidence placed before the court. But it would be a strong thing indeed to use such case management powers to exclude the admissible evidence of one of the parties on the central facts of the case. There may be circumstances in which this could be done. The unreasonable refusal of that party to subject himself to crossexamination may be one of them. It might be grossly unjust to the other party, even contrary to his right to a fair trial under article 6 of the European Convention on Human Rights, to decide a claim principally on the untested evidence of a party who had not been subject to cross-examination of any sort." I see these statements as underlining the principle that save in exceptional circumstances the right approach to hearsay evidence is not to exclude it under CPR Part 32.1 but to asses the weight, if any, to be given to it in accordance with section 4 of the Civil Evidence Act.
- Mr Page drew attention to certain passages in Savings & Investment Bank Ltd v Gasco Investment (Netherland) BV. Purchas LJ said at p436:
"The danger of admitting hearsay evidence in the case of some interlocutory motions may be avoided by the exercise by the court of its discretion to exclude it; and its admission in others may be very much in the interests of justice."
Nicholls LJ said at p 447:
"… if hearsay evidence is admitted, the court is well able to ensure that this does not work unfairly against the person alleged to be in contempt, either in terms of that person's ability to answer matters which are deposed to on information and belief or in terms of the judge being satisfied that the high standard of proof required on contempt applications has been attained." (emphasis added)
At p 448 Russell LJ said:
"Reliance upon hearsay evidence is not mandatory and the court can be trusted to ensure, so far as humanly possible, that no injustice results from the admission of such evidence."
- Although made in the context of the issue as to whether committal proceedings were interlocutory, in which hearsay evidence would be admissible under RSC Ord 41 r 5(2), these are statements of broad principle which are relevant whenever the court is considering hearsay evidence. Only Purchas LJ refers to exclusion and, in the context of Civil Evidence Act 1995, his proper concerns as to the danger of admitting hearsay evidence are met by the court's duty under section 4. The statements of Nicholls and Russell LJJ can be directly applied, as it seems to me, to the exercise of the court's function under section 4. The passage emphasised in Nicholls LJ's statement is particularly in point in this case. Mr Makki takes objection to the hearsay evidence of the seller of the Merjan property, and takes issue with certain aspects of his account. He has given evidence in his affirmations but declines to be cross-examined. He is well able to answer the seller's hearsay evidence and has had every opportunity of doing so, orally as well as in writing. Rather different considerations may apply to at least some of the evidence given by Mr Abdelmawla. I shall deal with the question of weight, if any, to be given to particular items of hearsay evidence as they arise in the context of the allegations to which they relate.
- A distinct point on the use of hearsay evidence arises in the application under CPR Part 32.14. As Sir Richard Scott V.C. explained in Malgar Ltd v R.E. Leach (Engineering) Ltd  FSR 393, Part 32.14 does not create a new category of contempt of court; the statutory power to make the Civil Procedure Rules confers no power to do so. It simply provides a procedure for dealing with allegations of a particular example of contempt, the making of a deliberately false statement of truth. The making of such a statement falls within the general category of contempt comprising actions which interfere with the administration of justice. Putting forward a deliberately false case has long been recognised as a contempt of court: see Weisz, ex parte Hector MacDonald Ltd  2 KB 611.
- It follows that a contempt to which Part 32.14 applies is a criminal, not a civil, contempt. This is the view adopted, correctly I believe, by the editors of both Civil Procedure (2005 Vol 1 para sc 52.17) and Aldridge, Eady & Smith on Contempt (third cumulative supplement to 2nd edition para 11–55b). The distinction between civil and criminal contempt is now much reduced and for many purposes it makes no difference at all. There are, however, some consequences which remain. One consequence identified in Aldridge, Eady & Smith is that in the case of criminal contempt, hearsay evidence is not admissible except to the extent permitted in criminal proceedings, whereas in the case of civil contempt, hearsay evidence is admissible under the Civil Evidence Act 1995. These points are not made specifically in the context of an application under Part 32.14
- It could therefore be concluded that on an application under Part 32.14 hearsay evidence is admissible only as permitted in criminal proceedings. While Mr Page on behalf of Mr Makki submitted that I should exclude all hearsay evidence adduced by the claimants, he did not put his argument on this basis. He accepted that the present proceedings were civil proceedings for the purpose of the Civil Evidence Act but he argued that the court should apply the criminal rules as to hearsay evidence by analogy.
- Notwithstanding Mr Page's position, I have thought it right to consider whether hearsay evidence is admissible under the Civil Evidence Act on the application under Part 32.14. The issue is not whether the alleged contempt is to be characterised as civil or criminal, but whether the present proceedings are civil proceedings for the purposes of the Civil Evidence Act. In my judgment an application under Part 32.14 constitutes "civil proceedings" within the Civil Evidence Act 1995, even though the contempt, if established, falls to be categorised as criminal. In considering whether an application to commit for breach of undertakings constituted "civil proceedings" in Savings and Investment Bank Ltd v Gasco Investments (Netherlands) BV, Nicholls LJ said at p 441:
"I start by noting that the Act does not contain any material definition of "civil proceedings" save that section 18 states that the expression includes "civil proceedings in any of the ordinary courts of law." Secondly, it is to be noted that the committal applications have been brought against Mr Raper and Mr Allen in the High Court, and the procedure applicable to them is governed by the Rules of the Supreme Court: see Ord. 45 rr 5 and 7 and Ord. 52. Save for some exceptions which are not material for present purposes, the Rules of the Supreme Court are expressed not to apply to any criminal proceedings: Ord. 1, r. 2 (3). Those rules, therefore, proceed on the assumption that committal proceedings such as those brought against Mr Allen and Mr Raper are not criminal proceedings. That is the position today, and that was the position under the rules when the Act of 1968 was enacted. It seems to me that against that background, prima facie these committal applications are "civil proceedings" for the purposes of that expression in the Act of 1968."
He went on to consider whether any other factors displaced his prima facie view and concluded that they did not. These included the fact that the application was made not against the company which had given the undertaking but against its directors. He said that his conclusion would have been the same even if the application had been made against non-directors solely on the ground of knowingly assisting in a breach of the undertaking, which falls into the category of criminal contempt.
- Likewise, an application under Part 32.14, is made pursuant to and in accordance with the Civil Procedure Rules. The importance of the choice of civil procedure in determining whether particular proceedings are criminal or civil appears from the decision of the House of Lords in R (McCann) v Manchester Crown Court  1 AC 787 at paras 22, 52–55 and 97. There can, I think, be no doubt that the civil appeals procedure would apply to an appeal from an order under Part 32.14. Further an application under Part 32.14 is concerned with statements of case filed in civil proceedings. A major aspect of the application is whether the averments in the statements of case are true, an issue on which hearsay evidence is admissible in the action itself.
- In this case the application has without objection been combined in a single application notice with an application concerned with breaches of orders which, on the authority of Savings and Investment Bank v Gasco, is unquestionably a civil proceeding. Although Sir Richard Scott V-C in Malgar Ltd v R.E. Leach (Engineering) Ltd was not concerned with the admissibility of evidence, he said at p 396, while considering the nature of the jurisdiction under Part 32.14:
"I repeat that these are not proceedings brought for the furtherance of private interests. They are brought in the public interest and are in some respects like criminal proceedings. Nonetheless they are civil proceedings to which the overriding objective set out in CPR rule 1 is therefore applicable."
- I therefore conclude that the application under Part 32.14 constitutes civil proceedings for the purposes of the Civil Evidence Act 1995 and that hearsay evidence is admissible on the application in accordance with the provisions of that Act.
- There remains to be considered the impact of article 6 of the European Convention on Human Rights. Mr Page relies on article 6(3)(d) which provides:
"Everyone charged with a criminal offence has the following minimum rights:
(d) to examine or have examined witnesses against him…"
Article 6(3), unlike article 6(1), applies only to a criminal charge. The first issue is therefore whether committal proceedings for civil contempt are for these purposes subject to article 6(3), although generally under domestic law they constitute civil proceedings.
- In Berry Trade Ltd v Moussavi  1 WLR 1910, the Court of Appeal expressly proceeded on the basis that an application for committal for breaches of search and freezing orders constituted a criminal proceeding for the purposes of article 6(3). In Great Future International Ltd v Sealand Housing Corporation  EWHC 124 (Ch), Lewison J followed the approach adopted in Berry Trade Ltd v Moussavi and treated a committal application for breach of a freezing order as criminal proceedings for the purposes of article 6. In Raja v Hoogstraten  EWCA Civ 968, Chadwick LJ, with whom Pill and May LJJ agreed, said at para 40:
"It was accepted on behalf of the claimants on this appeal – although after some hesitation – that the whole of article 6 is engaged in relation to committal proceedings – that is to say, that committal proceedings are of a criminal nature. In my view, an argument to the contrary could not have been sustained."
I proceed on the basis that the whole of article 6 applies to this application and I did not understand Mr Anderson to argue the contrary.
- Mr Page submitted that article 6(3) requires that no hearsay evidence should be admitted in criminal proceedings if the defendant does not have an opportunity to cross-examine the maker of the statement. He relied principally on the decision of the European Court of Human Rights in Luca v Italy App 33354/96. It concerned the use of a statement by a co-accused to secure the defendant's conviction in circumstances where the co-accused invoked the privilege against self-incrimination and could not therefore be cross-examined on behalf of the defendant. The defendant was convicted solely on the basis of the statement and in those circumstances the court held that there had been a violation of article 6(3)(d) and a denial of a fair trial. It said at para 40:
"Where a conviction is based solely or to a decisive degree on depositions that have been made by a person whom the accused has had no opportunity to examine or to have examined, whether during the investigation or at the trial, the rights of the defence are restricted to an extent that is incompatible with the guarantees provided by Art.6"
The general approach of the court was stated in paras 37–39:
"As the requirements of Art.6(3) are to be seen as particular aspects of the right to a fair trial guaranteed by Art.6(1), the Court will examine the complaints under those two provisions taken together.
The Court reiterates that the admissibility of evidence is primarily a matter for regulation by national law and as a general rule it is for the national courts to assess the evidence before them. The Court's task under the Convention is not to give a ruling as to whether statements of witnesses were properly admitted as evidence, but rather to ascertain whether the proceedings as a whole, including the way in which evidence was taken, were fair. The evidence must normally be produced at a public hearing, in the presence of the accused, with a view to adversarial argument. There are exceptions to this principle, but they must not infringe the rights of the defence. As a general rule, Art.6(1) and (3)(d) require that the defendant be given as adequate and proper opportunity to challenge and question a witness against him, either when he makes his statement or at a later stage."
- This issue has been considered by the European Court of Human Rights in a number of other decisions. These decisions and the impact of article 6(3)(d) have been considered by the Court of Appeal (Criminal Division) in several cases, including R v M  EWCA Crim 357, R v Arnold  EWCA Crim 1293 and R v Sellick  EWCA Crim 651. In the last of these three cases, the court reviewed the Strasbourg decisions and derived 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 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."
- R v M concerned a statement made to the police which was admitted under sections 23 and 26 of the Criminal Justice Act 1988. It was the sole evidence against the defendant who was convicted of murder. The Court of Appeal ruled that in the particular circumstances of that case it should not have been given in evidence, but it refused to accept, as did the Court of Appeal in R v Sellick, that there was an absolute exclusionary rule even in cases where the evidence was the sole basis for a conviction. At paragraph 60 of its judgment, the court said:
"In R v Gokal  2 Crim App R 266 this court, considering in advance of the Human Rights Act the assistance from the European cases then available, and with express reference to the Unterpertiner case and the Kostovski case, concluded that, when considering the question of the likelihood or otherwise that the defendant could controvert the statement of one absent witness, the court should not limit itself to the question of whether the accused himself could give effective evidence so as to do so; it should also consider the reality of his opportunity to cross-examine or call other witnesses as to the relevant events, or to put the statement makers credibility in issue by other means. That being so, we would not subscribe to any formulation of the approach to be adopted which states without qualification that a conviction based solely or mainly on the impugned statement of an absent witness necessarily violates the right to fair trial under Article 6."
- The Court of Appeal in R v Sellick generally endorsed the note of warning given by the court in R v Arnold:
"Very great care must be taken in each and every case to ensure that attention is paid to the letter and spirit of the Convention and judges should not easily be persuaded that it is in the interests of justice to permit evidence to be read. Where that witness provides the sole or determinative evidence against the accused, permitting it to be read may well, depending on the circumstances, jeopardise infringing the defendant's Article 6(3)(d) rights; even if it is not the only evidence, care must be taken to ensure that the ultimate aim of each and every trial, namely, a fair hearing, is achieved."
- In the case against Mr Makki, the hearsay evidence given by Mr Abdelmawla and the hearsay evidence of the seller of the Merjan property is by no means the sole evidence against him on the issues to which they relate, nor would findings against him on those issues necessarily be based to a decisive degree on such evidence. Moreover, in both cases it would have been possible for Mr Makki to call other witnesses as to the relevant matters. As appears from the above citations and the Strasbourg authorities, the overriding duty of the court is to ensure a fair trial. As Nicholls LJ observed in the passage from his judgment in Savings & Investment Bank Ltd v Gasco Investments (Netherland) BV which I have already cited, "if hearsay evidence is admitted, the court is well able to ensure that this does not work unfairly against the person alleged to be in contempt". This is consistent also with the approach adopted by the Court of Appeal (Criminal Division) in R v Owen  EWCA Crim 1018. The Court of Appeal in that case also suggested that article (6)(3)(d) is a procedural provision, requiring only that "witnesses", that is those who have provided witness statements, be available for cross-examination, and that it is not an evidential provision, like the rules relating to hearsay evidence. This was not the subject of any submissions to me, nor was it the basis of the decision in R v Owen, so I do not consider it further. I will consider in due course the weight, if any, to be given to the items of hearsay evidence, but I am satisfied that article 6(3)(d) does not require a blanket exclusion of this evidence.
CPR Part 32.14
- That part of the September application which deals with statements made in the defences of Mr Makki and Daltel USA is made under CPR Part 32.14. It provides:
"(1) Proceedings for contempt of court may be brought against a person if he makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth.
(2) Proceedings under this rule may be brought only –
(a) by the Attorney General; or
(b) with the permission of the court."
This provision had no equivalent in the Rules of the Supreme Court but its introduction did not effect any substantive change in the law: Malgar Ltd v Leach (Engineering) Ltd  FSR 393. That case was the first application to the court for permission under Part 32.14(2)(b) and Sir Richard Scott V-C explained that it was an instance of the general principle that an actual or attempted interference with the administration of justice may constitute a contempt of court. He further explained why an application could be brought only by the Attorney General or with the permission of the court:
"The reason for that is the nature of the proceedings. These are not proceedings where the alleged contempt consists of the breach of an order obtained by an individual in protection or furtherance of his own private rights. It is a case of an allegation of public wrong, not private wrong. Interference with the course of justice is plainly a public wrong and it is right therefore that there should be a public control over the launching of proceedings for this species of contempt. The Attorney-General has a public function which needs no further explanation. The court from which permission is sought will be concerned to see that the case is one in which the public interest requires the committal proceedings to be brought. I repeat that these are not proceedings brought for the furtherance of private interests. They are brought in the public interest and are in some respects like criminal proceedings. Nonetheless they are civil proceedings and they are civil proceedings to which the overriding objective set out in CPR rule 1 is therefore applicable. The overriding objective enjoins the court to deal with cases justly, ensuring so far as practicable that the parties are on an equal footing, that expense is saved and that the case is dealt with in ways which are proportionate to the money involved, to the importance of the case, the complexity of the issues and the financial position of each party. These are general imperatives which are as relevant in my opinion to an application for permission under CPR rule 32.14 as to any other form of civil proceedings."
- The application in that case related to statements made in the defence and in witness statements made in opposition to the claimant's application for summary judgment. They dealt with issues on which the defendant then submitted to judgment, but the action continued on other issues. Sir Richard Scott V-C emphasised the importance of statements of truth:
"I agree with [counsel for the claimant] about the importance of statements of truth and I certainly agree that it is important that flagrant breaches of the obligation to be responsible and truthful in verifying witness statements should be policed and enforced if necessary by committal proceedings."
However, he refused permission because the allegedly false statements had been quickly abandoned and the case that they were deliberately false was by no means overwhelming, such that it did not show an attempt to interfere with the course of justice of a sufficient seriousness to warrant committal proceedings. With the action proceeding to trial on the other issues, committal proceedings would constitute an undesirable and unnecessary interference in those proceedings, obstructing the sensible disposal of the remaining issues.
- In giving permission for the application in this case, Mann J had all these considerations well in mind. Adopting the guidance given by Blackburne J in Kabuskiki Kaisha Sony Computer Entertainment v Ball  EWHC 1984 (Ch), he concluded that there was a real prospect of establishing (a) the falsity of the statements in question, (b) that the statements have or, if persisted in, would be likely to have interfered with the course of justice in some material respect and (c) that at the time they were made the maker of the statement had no honest belief in the truth of the statement and knew of its likelihood to interfere with the court of justice.
- Mann J considered, rightly in my view, that the impugned statements went to the heart of the case against Mr Makki and his defence to it. This was certainly the view of Mr Page in his skeleton argument for the directions hearing before Peter Smith J. Paragraphs 5 and 6 state:
"5. There are two factual issues which are the key to the proceedings. They may in fact be the only factual issues which matter:
(1) Were the arrangements for the sale of the airtime by Daltel, Pacifica and Globenet (as Mr Makki says) honestly entered into and (in the case of Pacifica and Globenet) did they comprise valid arm's length contracts involving a third party owned company, Weybridge, or on the other hand were they (as the Claimants say) simply a scheme designed to defraud BT and the Claimants?
(2) Did Mr Makki or Mr Al-Eid own and control Globenet?
6. It is and has been from the outset central to Mr Makki's defence that Mr Al-Eid was a genuine participant in the transactions. It is and has been from the outset central to the Claimant's case that he is not."
These are essentially the issues that arise on the application under Part 32.14 and, as Mr Page pointed out in paragraph 28 of his skeleton, the application would cover "at least 90% of the ground to be covered by the trial" of the action.
- Mann J was however equally alert to the dangers associated with carving out issues ahead of the trial of an action and seeking to establish, to the criminal standard of proof, the deliberate falsity of certain statements in a defence or other statement of case. He said at paragraph 15 of his judgment:
"One thing which has particularly concerned me is the extent to which there should be allowed to be satellite litigation, particularly at this stage of the proceedings, and particularly where that satellite litigation relates to matters which are serious issues in the proceedings and in the context of which those issues will be dealt with and considered at something short of a full trial. It is inherently undesirable to have satellite litigation which is time consuming and distracting when it comes to pursuing proceedings to a full trial, and it is capable of occupying and using up an inordinate amount of court resources sometimes to no particular purpose. I must be particularly alert to ensure that that factor does not come into play so as to make the proceedings inappropriate, at least at this stage. It seems to me that in a large number of instances where the point might be taken, if not in the majority of instances where points might be taken about statements in pleadings at an early stage, it is inherently undesirable that they be taken in contempt proceedings. They will be dealt with in due course in the course of the proceedings and no doubt a trial judge will find for or against the relevant party in relation to the allegations. If the trial judge decides for the party in relation to the allegations, then there never was anything in the contempt claim. If he or she decides against that party at a trial, then a decision can be taken in the light of those findings as to the extent to which it is necessary and appropriate to take the matter further and to raise the matter again in contempt proceedings. That would seem to me to be the normal and more usual course."
- Notwithstanding these concerns, Mann J concluded that it was an appropriate case for permission to be given, for two reasons in particular. First, the relevant statements were central to the defence and, if deliberately false, were a flagrant breach of the obligation to give a statement of truth. Their centrality meant that findings against Mr Makki could well bring the proceedings to an earlier conclusion. Secondly, the alleged falsity of the statements raised virtually the same issues as arose under an alleged failure to give truthful information pursuant to the search order. The claimants proposed to raise the alleged breach in their contempt application and they did not require permission to do so. It was, in turn, just one issue out of many arising from the search and freezing orders.
- Having now heard the committal applications, I fully endorse Mann J's conclusion that this was an appropriate case for permission to be given under CPR Part 32.14, for the reasons which he gave. Equally, however, I would strongly support his concerns about the dangers that applications under Part 32.14 will create substantial satellite litigation which may significantly hinder the efficient and economic disposal of claims. Allegations that statements of case and witness statements contain deliberately false statements are by no means uncommon and, in a fair number of cases, the allegations are well-founded. If parties thought that they could gain an advantage by singling out these statements and making them the subject of a committal application, the usual process of litigation would be seriously disrupted. In general the proper time for determining the truth or falsity of these statements is at trial, when all the relevant issues of fact are before the court and the statements can be considered against the totality of the evidence. Further, the court will then decide all the issues according to the civil standard of proof and will not be applying the criminal standard to isolated issues, as must happen on an application under CPR Part 32.14. It is quite feasible that such an application would fail because the evidence was not sufficient to remove a reasonable doubt, but on the same evidence the statements could be found at trial on the balance of probabilities to be deliberately false. This presents no conceptual difficulty to lawyers but as well as being wasteful, it is liable to confuse the parties and a wider public.
- Turning to the mental element to be established in a committal application under Part 32.14, it is clear that not only must the impugned statement be false, but it must be shown that the respondent who verified it had no honest belief in its truth. In most cases, including the present, that is the same as saying that he knew the statement to be false. In addition, because a contempt falling within Part 32.14 is an example of the broad contempt comprising an interference or attempted interference with the administration of justice, Sir Richard Scott V-C in Malgar Ltd v R. E. Leach (Engineering) Ltd considered that it must also be shown that the respondent knew that the false statement was likely to interfere with the course of justice. There was no separate argument before me on this requirement. If the relevant statements were deliberately false, it was obvious that they were likely to interfere with the course of justice. This would have been obvious to Mr Makki, and Mr Page did not submit otherwise. If the statements were deliberately untrue, it would be fair to say that their purpose was to interfere with the course of justice.
The trial of the contempt applications
- The trial of the September application was fixed with a 10-day estimate. The estimate assumed that Mr Makki would be available for cross-examination on his affirmations, but in the event he declined to give oral evidence. Mr Makki did not object to the December application being heard at the same time, but it required a significant amount of new evidence and it appreciably extended the scope of the trial. Because of the application under CPR Part 32.14 the scope of the contempt trial already included the major part of the factual issues in the action.
- In the event the trial took longer than originally anticipated, both because of the issues raised by the second application and because of a number of factors beyond the parties' control. Chief among these were the difficulties encountered in enabling one of the claimants' witnesses to give oral evidence. In the end, the diplomatic and technological problems were overcome and he gave evidence from Damascus for a day by satellite television link. Another factor was the very late service of expert evidence on the switches on behalf of Mr Makki. The claimants accepted that this was not due to any fault on the part of Mr Makki, his legal team or the expert. There were necessarily a number of unavoidable interruptions and, making allowance for these, the trial lasted 12 full days.
- There was a very considerable amount of affidavit evidence and documents before the court. All the claimants' witnesses were made available for cross-examination, and four were cross-examined by Mr Page on behalf of Mr Makki. They were Mr Richards of Jones Day, Gerald Sherlock, an employee of BT with great experience and expertise in telecommunications switches, Dr Mugraby, the claimants' lawyer in Beirut, and Mr Abdelmawla. It was Mr Abdelmawla who gave evidence from Damascus.
- Of Mr Makki's witnesses, only Dr Stephen Castell, the telecommunications expert, gave oral evidence. Several affirmations were provided by Mr Makki, by his lawyer in Lebanon, Adnan Nawfal, and by Mr Al-Eid, but none of them gave oral evidence.
- Directions for the September application were given by Peter Smith J. They provided for Mr Makki to file affidavits in answer to the claimants' evidence, but made no order for the attendance of deponents for cross-examination. In his judgment Peter Smith J explained:
"I am not giving any directions as to the witnesses attending and providing evidence for cross-examination, the reason being that, because it is a committal application, I do not think I can do so, because requiring a person to give evidence removes that person's right to decline to answer questions that might incriminate him: and the Phillips v Symes case says that it is not permissible. But, as that case does demonstrate, witnesses who provide statements, whether hearsay or otherwise, and who do not attend for cross-examination will undoubtedly find that their evidence is given less weight than someone who provides a witness statement and attends for cross-examination. But that, of course, is a matter for the judge who hears the committal application and for him to assess what procedural format the evidence takes and what weight he gives to witnesses who are cross-examined or not."
This was treated by both sides as a direction that affidavits or affirmations were to be evidence at this trial, even though the deponents did not attend for cross-examination. I do not think that Peter Smith J was in fact giving that direction; it was, he said, for the judge hearing the committal application to decide the procedural format which the evidence should take. However, both parties prepared for the hearing on the basis that all the affirmations filed by or on behalf of Mr Makki were to be read and treated as part of the evidence and there was no application to exclude any affirmations in the absence of the deponent's attendance for cross-examination.
- I should say, however, that in my view there is no principle that on a committal application a respondent is entitled to rely on affirmations by himself or others made in opposition to the application, without the attendance of the deponents for crossexamination. The relevant principles have been considered in a number of authorities, including Comet Products (UK) Ltd v Hawk Plastics Ltd  2 QB 67 (CA), Memory Corporation v Sidhu  Ch 645 (Arden J), Great Future International Ltd v Sealand Heating Corporation  EWHC 124 Ch (Lewison J) and Phillips v Symes  EWCA Civ 1769 (CA). In Great Future International Ltd v Sealand Housing Corporation, Lewison J derived the following propositions from the authorities:
"1) the defendant is not a compellable witness;
2) if the defendant chooses to give evidence, the court may, as a matter of jurisdiction permit him to be crossexamined;
3) the court will normally exercise its discretion in favour of cross-examination, if the cross-examination can be limited to the alleged contempt;
4) if the defendant adduces evidence and declines to submit to cross-examination, the court may give his evidence very little weight;
5) the defendant cannot be made to answer questions at an interim stage, the answers to which may expose him to an application to commit for contempt."
As to the first two propositions, Megaw LJ said in Comet Products v Hawk Plastics at p 75:
"I find it difficult to think that there are any circumstances in which one whose committal is sought for a breach of an order of the court in civil proceedings could be compelled by the party seeking committal to give evidence against his will. To that extent, he is not a compellable witness. Where, however, the person whose committal is sought in civil contempt proceedings has voluntarily given evidence, I see no reason why he should be entitled, as of right, to decline to be crossexamined.
I do not think that any such implication is to drawn from the terms of R.S.C., Ord. 52, r.6(4) I do not think that where statute does not expressly so provide, a defendant in civil contempt proceedings should be treated as being entitled to a right such as is given by the Criminal Evidence Act 1898 to a defendant in a criminal trial; that is, to make an unsworn statement without the disadvantage of subjecting himself to cross-examination"
- In Crest Homes plc v Marks  AC 829 at 858, Lord Oliver of Alymerton, giving the only reasoned speech, regarded it as clearly established that although an alleged contemnor is not a compellable witness, if he gives evidence he can be crossexamined on it in relation to the alleged contempt. See also Re B (a Minor)(Contempt of Court: Affidavit Evidence)  1 WLR 627 at 639.
- It is not, I think, the case, nor do I read Lewison J as suggesting, that a respondent who refuses to be cross-examined on his affidavit sworn in opposition to the committal application can nonetheless require his affidavit to be treated as being evidence before the court and taken into account. The court is entitled, if it considers it appropriate, to require him to attend for cross-examination if he is to rely on an affidavit sworn in opposition to the committal application. The same applies to other affidavits or witness statements made by him on which he may seek to rely, unless it is itself the subject of the committal application (see Phillips v Symes). In all this, there is no difference from the position of a defendant in a criminal trial. A defendant cannot be compelled to give evidence but, if he chooses to do so, the prosecution is entitled to cross-examine him. He may refuse to answer questions put to him on grounds of self-incrimination, but that is an objection taken on a question-by-question basis and is not a ground for a general refusal to submit to cross-examination. Likewise on a committal application a respondent may refuse to answer questions on grounds of self-incrimination, and this extends to cases where the alleged contempt comprises disobedience to orders of the court in the same proceedings: Phillips v Symes at para 54(iv), following Memory Corporation v Sidhu in preference to views expressed in Cobra Golf Ltd v Rata  Ch 109.
- There is nothing in Phillips v Symes which changes the applicable principles on these issues. It was a case of considerable procedural complexity and the primary concern of the Court of Appeal was to keep separate the various different applications so that (i) Mr Symes was not made a compellable witness in relation to contempt allegations against him and (ii) his cross-examination on those allegations, if he chose to give evidence, should be confined to those issues and not blended with a general crossexamination in aid of execution of the judgment in the main action. While the judgment is clear that Mr Symes could not directly or indirectly be compelled to give evidence on the new contempt allegations, there is nothing in it to suggest that he could choose to file and rely on affidavits on those allegations but refuse to be crossexamined on them. On the contrary, the directions given by the Court of Appeal envisaged that if he chose to give evidence on the new contempt allegations he would be cross-examined: see paragraphs 58–59 and 66–67. The only qualification was that he should be entitled to rely without cross-examination on the affidavits which had been filed by him in purported compliance with the earlier orders and undertakings, in support of a submission that he had complied with those orders and undertakings. That is very different from saying that he was entitled to rely without crossexamination on any affidavits which he might file in opposition to the committal application.
- Mr Makki, Mr Nawfal and Mr Al-Eid all declined to be cross-examined. The only explanation provided to the court was in Mr Page's opening skeleton:
"Mr Makki is not attending for cross-examination because the evidence put forward by the claimants is not sufficient to require him to answer it by oral evidence. Mr Al-Eid does not wish to attend court in England and is not a compellable witness. Mr Nawfal's evidence consists largely in the exhibition of third party documents and to bring him from the Lebanon would be disproportionate."
It is to be noted that Mr Makki does not rely on the privilege against selfincrimination. I regard the explanations given for the failure of Mr Makki and the other witnesses to give oral evidence as wholly inadequate. It is highly surprising if Mr Makki thought the claimants' evidence was insufficient to require him to give oral evidence. There would have been no difficulty for him in travelling to London from Beirut or giving evidence by video link. As to Mr Nawfal, there is in my view no basis for the view that the content of Mr Nawfal's affirmations, which in significant respects went much further than merely exhibiting third party documents, made it "disproportionate" to bring him from Lebanon to give evidence. He could in any case have given evidence by video link.
- Mr Makki could not compel Mr Al-Eid to give oral evidence, but his willingness to swear affirmations is to be contrasted with his reluctance to give oral evidence. I had no statement from Mr Al-Eid about his attitude to giving oral evidence. While the claimants and Mr Abdelmawla were making herculean efforts to arrange for Mr Abdelmawla to give evidence from Syria, there was no sign of any similar attempt as regards Mr Al-Eid. I suggested to Mr Page that if the problems were overcome, it might well be that the facilities would also enable Mr Al-Eid to give evidence. A few days later a letter from Mr Al-Eid's lawyer in Syria was produced in which he stated that:
"I do not think my Client will object to giving evidence through Video Link on condition that you obtain clear and specific permission from the following government departments:
1. Ministry of Justice
2. Ministry of Foreign Affairs
3. Ministry of Interior
4. Ministry of Security & Intelligence
A final decision will be made once we have received the above clearances."
I am not in the least satisfied that Mr Al-Eid had any serious intention of giving oral evidence or that Mr Makki had any wish for him to do so.
- There was no written evidence from Mr Makki's father, although there was a short affirmation from his lawyer in Beirut, Kamal Abou Zahr, which was largely hearsay based on what he had been told by Mr Makki's father. The claimants did not seek to cross-examine Mr Zahr.
- An important issue is accordingly the weight to be given to the evidence of Mr Makki, Mr Nawfal and Mr Al-Eid in their affirmations. At the directions hearing, Peter Smith J gave a clear and pertinent warning on this question in the passage which I have already cited from his judgment. In Comet Products (UK) Ltd v Hawk Plastics Ltd the Court of Appeal decided that, in view of the breadth of the proposed crossexamination, the defendant could rely on his affidavits without submitting to crossexamination, but Lord Denning MR warned at p 75:
"Seeing, however, that cross-examination is not to be allowed, it means that the judge might think it right to disregard the affidavit or to give it very little weight. That would be for him."
And Megaw LJ said at p 77
"The effect, of course, may well be that the contents of Mr Hawkins' affidavit, insofar as the defendants seek to rely on the contents of the affidavit, may be regarded by the judge as being of little or no weight."
In Phillips v Symes the Court of Appeal made the same point even in relation to the affidavits sworn in purported compliance with earlier orders and undertakings, on which Mr Symes could rely without submitting to cross-examination: para 54 (ii).
- The claimants submit that I should place no weight at all on the affirmations of Mr Makki, Mr Al-Eid and Mr Nawfal, unless independently corroborated by other reliable evidence. There is obvious force in the submission, but I do not think that I should adopt so absolute an approach. Its effect would be the same as if the affirmations had not been filed and read, when the claimants as well as Mr Makki have proceeded on the basis that they are in evidence. 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.
- Not only have Mr Makki and his other witnesses of facts declined to give oral evidence, they have also sought to discredit the claimants' two witnesses from Lebanon and Syria, Dr Muhamed Mugraby and Mr Abdelmawla.
- In the case of Dr Mugraby this took the form of allegations by Mr Nawfal in his affirmations. In his first affirmation made in late October 2004, at a time when he knew that Dr Mugraby was acting for the claimants but before he had provided an affirmation, Mr Nawfal stated that Dr Mugraby had been disciplined by the Lebanese Bar Association and was currently barred from practising law in Lebanon for three years from 4 April 2002 for slander, unethical behaviour and lack of respect for judges, that he was facing criminal charges in Lebanon and that he had been arrested on 9 August 2003 and held for three weeks. In a later affirmation, he said that Dr Mugraby had been permanently struck off by the Lebanese Bar Association in January 2003. These are half-truths. The evidence establishes that Dr Mugraby is a prominent Lebanese lawyer who has been very active in human rights case during the period of Syrian military involvement in Lebanon. His arrest in August 2003 caused international protest, including letters to the Lebanese Government from the International Bar Association, the International Commission of Jurists and the Law Society. He is entitled to, and does, practice as a lawyer in Lebanon. He gave oral evidence and was cross-examined in these proceedings but not on any of this material. Mr Nawfal, as already mentioned, declined to give oral evidence.
- Mr Abdelmawla has been the subject of a series of criminal complaints to the Lebanese and Syrian authorities by Mr Nawfal for Mr Makki and by a Syrian lawyer for Mr Al-Eid.
- Mr Nawfal made a complaint to the Lebanese authorities in late August 2004. On 23 October 2004 Mr Al-Eid filed a criminal complaint with the Syrian authorities, containing allegations of bribery, threats and fraud and quoting extensively from Mr Abdelmawla's first affidavit in these proceedings. On 25 October 2004 the attorney general in Damascus commenced criminal proceedings in Damascus. These had not been served on Mr Abdelmawla when he swore his second affidavit on 2 December 2004, although Mr Makki and Mr Al-Eid state in affirmations that they were served on 2 November 2004 and that Mr Abdelmawla failed to attend two court hearings in December 2004, which were adjourned to February 2005. On 2 December 2004, Mr Al-Eid filed a further complaint with the Syrian authorities, alleging that Mr Abdelmawla was falsely holding himself out as a Syrian-qualified lawyer as well as other offences. Mr Abdelmawla was interviewed by the police on 6 December 2004 and on 7 December 2004 Mr AL-Eid filed a further complaint. On 27 December 2004 Mr Al-Eid filed a new complaint in the same form as the 7 December complaint. Mr Nawfal's evidence was that, following conclusion of the police investigation on 20 December 2004 a warrant for Mr Abdelmawla's arrest was issued, valid for 30 days.
- The allegation has been clearly made by the claimants that these complaints were made with a view to inducing Mr Abdelmawla to stop his enquiries and, if that failed, to prevent him from coming to London to give oral evidence. The allegation is denied by Mr Makki and Mr Al-Eid in their affirmations. They point out that if there are grounds for suspecting Mr Abdelmawla of criminal offences, they are entitled to file the appropriate complaints. While that is of course true, it does not follow that the true reason for the complaints is not as alleged by the claimants.
- Mr Makki and Mr Al-Eid have declined to be cross-examined. Looking at the objective facts, as well as taking account of findings which I later make, I consider it very likely that the complaints were designed to deter Mr Abdelmawla from pursuing his enquiries and to prevent him from leaving Syria.
- When the case was opened, it was disclosed that Mr Abdelmawla had tried but failed to board a flight on 13 January 2005 from Damascus to London. In view of the criminal complaints and proceedings in Syria, this did not seem altogether surprising. It was intimated that an application would be made for Mr Abdelmawla to oral evidence by video link. Mr Page stated that his side suspected that Mr Abdelmawla was unwilling to come to London for cross-examination. On day three of the trial, Mr Page stated they had received information suggesting that the real reason for Mr Abdelmawla's inability to leave Syria was an outstanding telephone bill. On 21 January 2005 Mr Makki's eighth affirmation was filed in which he recounted information provided to him by Mr Al-Eid. He said that Mr Al-Eid had been told by the Syrian Ministry of Interior on 19 January 2005 that Mr Abdelmawla was prohibited from leaving Syria due to a complaint from the Public Institution of Telecommunications about an unpaid bill for the Syrian pound equivalent of $30,000. Mr Abdelmawla denied that he had any such indebtedness.
- The claimants applied for an order under CPR Part 32.3 for Mr Abdelmawla to give evidence by video link. This was opposed by Mr Makki, surprisingly as his position was that he was extremely keen to cross-examine Mr Abdelmawla. It was common ground on the evidence that he was unable to leave Syria, whatever the true reason, and I acceded to the application.
- It is part of the attack on Mr Abdelmawla that he was in fact unwilling to come to London to give evidence and that he gave false evidence about his attempt to fly to London on 13 January 2005, first allowing what he knew to be the wrong ticket to be put in evidence and then putting a forged ticket in evidence. I deal with that allegation later in the judgment in the context of his evidence.
- After I made the order for his evidence to be taken by video link, there followed a protracted period while great efforts were made by the claimants, their solicitors, BT and Mr Abdelmawla to overcome the technical and diplomatic difficulties involved. It transpired that there were no available video-conferencing facilities in Syria, but it proved possible to have a satellite television link between Syrian Television and BT. There was no precedent known to the Foreign and Commonwealth office or the British Embassy in Damascus for evidence in UK court proceedings to be taken by video link from Syria. Ultimately, it appears that Mr Abdelmawla played an important role in obtaining approval from the Syrian authorities in the short time available.
- I turn now to the alleged contempts, dealing first with the alleged breaches of the search and freezing orders.
The Merjan Property
- The Merjan property is an apartment on the third floor of Merjan Building, Middle East Street, Beirut. It is undisputed that it was purchased in the name of Mr Makki on 4 August 2003 at a price of either $950,000 or $925,000 (the precise amount is in dispute). The purchase price was provided by transfers of $200,000 on 21 July 2003 and $750,000 on 30 July 2003 from Daltel's dollar account to an account at Arab Bank in Beirut in the joint names of Mr Makki and his father. Mr Makki authorised the transfers. The sale contract was signed on behalf of Mr Makki by his father, using a general power of attorney executed by Mr Makki on 19 July 2003. On 28 February 2004, the day after service and execution of the freezing and search orders, the property was transferred from Mr Makki's name into the name of his mother, Fatima Said Makki. The transfer was executed on Mr Makki's behalf by his father, using the same power of attorney.
- The freezing order required Mr Makki:
i) not in any way to dispose of, deal with or diminish the value of his worldwide assets up to a value of £6 million: para 4;
ii) to disclose to the best of his ability to the claimants' solicitors, within two hours of service of the order, details of the whereabouts of certain identified payments from Daltel's dollar account, including the payments of $200,000 and $750,000 on 21 July and 30 July 2003 respectively: para 8 (1)(a);
iii) to disclose to the best of his ability to the claimants' solicitors, within four hours of service of the order, details of all real property: para 8 (1)(d);
iv) within seven working days after service of the order, to swear and serve an affidavit setting out the information required under paragraph 8 and, to the best of his ability, details of all assets worldwide exceeding £1,000 in value whether in his own name or not, giving the value, location and details of such assets: para 9;
- Mr Makki did not disclose on 27 February either his ownership of the Merjan Property or the fact that the two payments of $200,000 and $750,000 from Daltel's dollar account had been used to purchase it. No mention at all was made of the property on 27 February 2004. On Saturday 28 February 2004 a partner in Mr Makki's solicitors spoke twice to representatives of the claimants' solicitors. In the first call at about 10.30am the existence of a joint account in the names of Mr Makki and his father at a branch of Banque de la Mediterranean in Beirut was disclosed. In the second call, at about 1.40pm, it was disclosed that monies from a joint account at Arab Bank in Beirut had been used by Mr Makki's father to purchase the Merjan property. His solicitor said that Mr Makki did not know in whose name the property was held or the price paid for it, as he was not involved in the mechanics of the purchase.
- Jones Day wrote to Irwin Mitchell requesting full details of the property and its purchase, and seeking an explanation as to why Mr Makki had not disclosed it on 27 February 2004. Irwin Mitchell replied on 2 March 2004 stating:
"the property purchased by our client's father was Third Floor, Merjan Building, Middle East Street, Beirut. Our client is familiar with the building but he has no details of the purchase. Based on his guess as to the size of the building he imagines that the purchase price would be in the region of US $750- 900,000. The property was purchased by our client's father. Our client does not know in whose name the purchase was effected, or whether there have been any subsequent changes in the title. Our client knows very little about the purchase. The questions posed by Mr Richards were posed in the hallway at our client's business premises at the end of a shocking, confusing and exhausting day. Our client was understandably tired and had had to concentrate in a very short period on a number of matters and had been closely questioned on various issues. Again therefore, our client made a genuine and honest mistake, which he rectified promptly on Saturday morning and for which he apologises."
In his affirmation served on 9 March 2004, Mr Makki stated:
"Further, as disclosed to the claimants' solicitors some money was used in the purchase of a property at 3rd Floor, Merjan Building, Middle East Street, Beirut but I initially had few details. I was informed by my father by telephone last Friday (5 March 2004) that money from the Arab Bank account referred to above was used by my father to purchase this property which is a flat, 3rd Floor, Merjan Building, in August 2003. I was prevented by clause 20 of the Search and Seize Order from speaking with anyone (including my father) about these proceedings other than for the purpose of obtaining legal advice until 4.30pm Thursday 4 March 2004. When I spoke with my father the following morning, he provided me with some information concerning the purchase of the property. He informed me that the purchase price of the property (which is a 3 bedroom flat) was US$925,000. He said that the property was purchased by him but in my name. However, he was recently advised by his lawyer in Beirut to transfer the property from my name into his own name and he did so using a power of attorney he has held since for me since June or July 2003. He did so because he is upset with me because business loans which he has made to me have increased hugely in the last few months and I now owe him approximately £900,000 and he wanted to make sure that those obligations towards him are protected, and met. My father is the head of the family and very much in control of the family finances although he is now 76 years of age. He is a strong character. I am the youngest of seven children (I am 33 years of age) and my father has assisted me in business ventures over the last 10 years. My father had loaned me about £500,000 by last August and he told me that it was his intention to provide me with a flat when those business loans were paid off but the loans had increased in amount to about £900,000 by mid-January 2004 and that is why, my father says, he transferred the property back into his own name because he is concerned about the amount of my obligations to him. I should add that in the past my father has also brought properties for some of my siblings. My father also informed me that money from each of the three accounts in Beirut was used towards the cost of some refurbishment to the Merjan property, the estimated cost of which to date according to my father is US$300,000. The flat is approximately 500 square metres and has required a complete fit-out."
- On 10 March 2004 Jones Day wrote again to Irwin Mitchell to request further information on the property including details of (a) the date of the original purchase, (b) the legal and/or beneficial owners at the time of purchase, (c) the date on which the property was subsequently transferred, and (d) the legal and/or beneficial owners of the property following such transfer. In its reply on 12 March 2004, other than repeating that the property was originally purchased in August 2003, Irwin Mitchell stated that Mr Makki did not know the answers to Jones Day's questions and that the claimants should contact Mr Makki's father to obtain this information.
- It was as a result of enquiries on their behalf made by Dr Mugraby in about August 2004 that the claimants discovered further details of the purchase including its date (4 August 2003), the existence and use of the power of attorney dated 19 July 2003, and details of the subsequent transfer. In particular they discovered that it had been transferred on 28 February 2004, the day after service of the search order, into the name of Mr Makki's mother. It is the claimants' case that Mr Makki was in breach of the freezing order in (i) failing to disclose within two hours of service of the order that the sums of $200,000 and $750,000 transferred out of Daltel's dollar account had been used to purchase the Merjan property, (ii) failing to disclose within four hours of service of the order his ownership of the Merjan property, and (iii) transferring the Merjan property into his mother's name on 28 February 2004.
- Mr Makki accepts, as he must, that on 27 February 2004 he did not disclose his ownership of the Merjan property or the use of money from Daltel's dollar account to purchase it. He states in his affirmations that on 27 February 2004 he had forgotten that the payments from Daltel's dollar account had been used to make the purchase and that, as soon as he remembered it, he informed his solicitors on 28 February 2004 who in turn told the claimants' solicitors. As to his ownership of the property, he did not know that it had been purchased in his name or that it was in any way his property, nor did he know that on 28 February 2004 it was transferred from his name to his mother's name. Either there was no breach of paragraphs 8(1)(a) or 8(1)(d) because the information he gave was, to the best of his ability, true or any breach was entirely innocent because either he had forgotten the relevant information (the use of the payments) or he had no knowledge of it (ownership of the property). As to the transfer of the property to his mother, he played no part in it and did not know that it had occurred. Again, either there was no breach of paragraph 4 of the freezing order or, if there was a breach because the transfer was made by his father as his agent, it was entirely innocent because he knew neither that the property was in his name nor that it had been transferred.
- The substantial issues of fact are, first, did Mr Makki know and have in mind on 27 February 2004 that the payments of $200,000 and $750,000 from Daltel's dollar account had been used to purchase the Merjan property. Secondly, did Mr Makki know and have in mind on 27 February 2004 that the property was owned in his name. Thirdly, did he instigate the transfer of the property from his name into his mother's name on 28 February 2004 or know that it was being done.
- I will first consider the circumstances of the purchase of the Merjan property and Mr Makki's involvement in it and knowledge of it.
- The undisputed facts are as follows. During July 2003 the owner of the Merjan property, Hussein Hoteit, negotiated the sale of the property. The negotiations were conducted with either Mr Makki or with his father Ali Makki or the latter's lawyer. It is a matter of dispute as to which of these negotiated with Mr Hoteit. Mr Makki's position is that it was his father and that he himself had nothing to do with the negotiations. I return to this below. On 19 July 2003 Mr Makki executed the power of attorney in favour of his father. It is drafted in wide and general terms and does not refer to the Merjan property or any other specific property. On 20 July 2003 Mr Makki left Lebanon for London. If Mr Makki only rarely left Lebanon, the grant of a general power of attorney might just be a sensible measure of no particular significance in this case. However, Mr Makki had lived in London for some years, but there is no evidence of any earlier power of attorney. On 21 July 2003 Mr Makki authorised the transfer of $200,000 from Daltel's dollar account to the joint account at Arab Bank in Beirut. This reduced the balance on Daltel's account to $60,519. On 30 July 2004 a payment of $715,713 from Arbinet was credited to the account and on the same day Mr Makki authorised the transfer of US $750,000 to the joint account. On 4 August 2003 a deed of purchase for the property between Mr Hoteit as vendor and Mr Makki as purchaser was signed, with Ali Makki using the power of attorney to sign on behalf of Mr Makki. The deed stated the price to be 625,000 Syrian lire, but it is common ground that the actual price agreed and paid was much larger. It was either $925,000 as Mr Makki contends, or $950,000 as the claimants say. Whichever amount it was, it is agreed that it was paid out of the joint account at Arab Bank.
- Leaving out of account all evidence of any negotiations with Mr Hoteit, and basing an analysis purely on the undisputed facts, I would in the absence of credible evidence to the contrary find irresistible a conclusion that Mr Makki (i) knew that an agreement had been reached for the purchase by him of the property, (ii) executed the power of attorney on 19 July 2003 to enable his father to sign the deed of purchase on his behalf because he knew that he was leaving Lebanon the next day and would be away when the deed was to be signed, (iii) authorised the transfers on 21 July and 30 July 2003 from Daltel's dollar account to fund the purchase and (iv) knew that the property had been transferred to him.
- In his affirmations, Mr Makki accepts that he knew that the property had been purchased using the funds in the joint account, but otherwise denies all knowledge or involvement. In his first affirmation on this application, he states:
"It is correct that I knew that my father had purchased the Merjan property in 2003 using the money in the joint account. He must have done this using my July 2003 power of attorney. I had no say in the purchase and nothing to do with it. It was simply something my father decided to do for the family and is by English standards very autocratic. Our traditions in the Lebanon are different. I was not aware at that time the purchase had been in my name."
In response to evidence of Mr Richards of Jones Day, he stated in a further affirmation:
"Mr Richards suggests that the transfers of funds on 21st and 30th July 2003 were earmarked for the purchase of the Merjan property. That is not correct. First, the price was $925,000 not $950,000. Second, inspection of the US$ account statement shows that the amount of the transfers to Beirut was determined by the sums paid in by Arbinet, not by the price of the property. After the second payment on 30th July 2003, the balance on the US$ account was reduced to $25,420. I was simply transferring all the available funds to Beirut to take advantage of the interest rates there. The transfers continued in exactly the same way after the purchase of the property, the next being a second transfer of $750,000 on 15th August 2003."
He states that he was given details of the purchase, including the fact that it had been purchased in his name, by his father on 5 March 2004. On 27 February 2004 he did not know that he owned any real property. He continues:
"At the time of the purchase in 2003 I did not ask my father in whose name the property had been purchased. My father has previously purchased property for the family. Neither I nor other members of my family asked in whose name it was purchased. Such a question would be considered rude."
- There is no other evidence to support these statements. It is not supported by any contemporary documents and Ali Makki has not given any written or oral evidence. Mr Makki was not prepared to give oral evidence and be cross-examined on his affirmations. In those circumstances, I am not prepared to attach any significant weight to his evidence on this issue.
- I am entirely satisfied that Mr Makki knew in July 2003 that he was purchasing the Merjan property in his own name and that he arranged to pay for it by the two transfers totalling $950,000 from Daltel's dollar account. I am equally satisfied that he knew that the purchase took place as planned and that thereafter he was the owner of the property.
- I should deal here with the evidence concerning the negotiations with Mr Hoteit. Dr Mugraby gave evidence in his first affirmation of conversations with Mr Hoteit. His evidence of a telephone conversation on or about 9 September 2004 is:
"On or about the 9 September 2004 I called Mr Hoteit. I started the conversation by asking if I was speaking to Mr Hussein Hoteit and he said that he was. I identified myself and told him that I had got the number from his relative who was known to my nephew. I asked Mr Hoteit whether he had a minute for a short enquiry and he confirmed that he had. I asked him if he was the builder of the two Merjan buildings and he responded in the affirmative. I asked him if he would tell me how much he sold the third floor property to Hassan Makki for and he confirmed that it had been sold for $950,000. I asked him whether it was Hassan Makki who made the deal for the purchase of the property or whether it was his father. Mr Hoteit answered that it was Hassan Makki that came to see him personally and made the deal. I asked him how he had been paid (i.e. whether it was by cash or cheque) and he confirmed that he had been paid by a cheque drawn on the Arab Bank. I asked whether he would mind if I paid him a visit and he said he did not mind at all."
His account of a meeting on 6 October 2004 with Mr Hoteit is:
"I was unable to see Mr Hoteit until 6 October 2004. I attended him at his offices in Sakiet el Janzeer in Beirut around the corner from the Carlton Hotel. I informed him that I wanted to discuss the purchase of the third floor flat at Merjan 2 with him in a bit more detail. He informed me that about three weeks before the actual sale took place Hassan Makki had been to see the flat and later came to see him personally to negotiate the terms of purchase. Hassan Makki had tried to make a deal supported only by a deposit. However Mr Hoteit had informed him that he was not willing to accept a deposit and would not sign a contract until the purchase price had been paid in full. At that meeting they agreed the price of the purchase. Mr Hoteit informed me that Hassan Makki had told him that he had to travel to London on business but he would complete the deal with him as soon as possible. About two or three weeks later, Mr Hoteit stated that Hassan Makki sent his father (whom Mr Hoteit considered to be a mere messenger) with a banker's cheque drawn by the Arab Bank in the amount of $950,000. Mr Makki's father informed Mr Hoteit that he had a power of attorney and would execute the sale contract on Hassan Makki's behalf. Consequently, they attended the Notary Public and executed the contract of sale on 4 August 2003."
- On 24 November 2004 a conference call took place between Mr Hoteit in Beirut and Mr Richards, Alain Checri, a partner in Jones Day who is Lebanese and fluent in Arabic, and Dr Mugraby, all of whom were in Jones Day's offices in London. Mr Checri took a contemporaneous note of the conversation, in which Mr Hoteit is referred to as Abu Ahmad for reasons given in the note. The material part is as follows:
"Mr Mugraby asked Abu Ahmad to confirm his previous conversation with him during which Abu Ahmad had stated that he had met in person with one Hassan Makki. Abu Ahmad confirmed that Mr Hassan Makki and himself had met in person to discuss the purchase of a property in Lebanon and agree the price for such purchase (the Property). During the meeting, Mr Hassan Makki offered to pay Abu Ahmad a deposit. Abu Ahmad rejected the offer of a deposit.
Mr Mugraby then asked Abu Ahmad who had executed the purchase agreement for the Property and when this had taken place by reference to the earlier meeting with Mr Hassan Makki. Abu Ahmad responded that approximately 15 days following his meeting with Mr Hassan Makki, Mr Ali Makki, father to Mr Hassan Makki executed the purchase agreement for the Property and registered such purchase. Mr Mugraby then asked whether Mr Hassan Makki was present on the date of execution to which Abu Ahmad responded negatively. Mr Mugraby asked whether Abu Ahmad knew where Mr Hassan Makki was at that time and whether he was in London. Abu Ahmad responded that he did not know whether Hassan Makki was in London or elsewhere and that this had no bearing on him. Abu Ahmad went on to say that during his meeting with Mr Ali Makki, the latter had presented a cheque to Abu Ahmad drawn on the Arab Bank and that the registration of the Property had been carried out by Mr Ali Makki."
- It is accepted for Mr Makki that Mr Checri's note is an accurate summary of the conversation with Mr Hoteit, but Mr Makki takes issue with the account given then and earlier by Mr Hoteit. In his fifth affirmation, he denies negotiating a price with Mr Hoteit and says that he believes that it was negotiated between his father and Mr Hoteit's lawyer. Mr Makki's lawyer in Lebanon, Adnan Nawfal, states in his fourth affirmation that he met Mr Hoteit on 13 January 2005 and describes the material part of their conversation:
"Mr Hoteit confirmed that during the conference call with Dr Mohammad Mugraby he believes he was somewhat confused as to whether it was Mr Makki senior or Mr Makki junior that Mr Mugraby was referring to:
Mr Hoteit stated that he believes that he did not meet Mr Hassan Ali Makki on or before 4 August 2003, and that all negotiations for the purchase of the 3rd floor Merjan 2 apartment were conducted between Mr Ali Makki and his lawyer.
Mr Hoteit confirmed that during the negotiations with his lawyer neither himself nor his lawyer were aware as for whom was the property being purchased, or to whose name it was going to be registered in.
Mr Hoteit further confirmed that Mr Mohammed Mugraby visited him in his office approximately 6 weeks ago, and asked him to sign a Witness Statement in Arabic. Mr Hoteit refused to sign it on the basis of its inaccuracies, and that he did not want to be involved in any litigation. This is exhibited at pages 1–2."
In response to this last paragraph, Dr Mugraby stated in his second affirmation that he called on Mr Hoteit on 8 December 2004 and asked him to sign a brief statement to the same effect as the telephone conversation. He gave Mr Hoteit a copy of the draft statement in English with an Arabic translation. Dr Mugraby continues:
"Mr Hoteit told me quite frankly that signing such a statement could involve his incurring legal obligations within foreign proceedings which he did not understand or know anything about and, for those reasons, he would prefer to consult his lawyers before deciding whether he was prepared to do so."
Mr Nawfal was not made available for cross-examination. His evidence as to his conversation with Mr Hoteit, with its suggestions that Mr Hoteit was confused during the conference call with Jones Day as to whether Dr Mugraby was referring to Mr Makki or his father, that the negotiations were between Mr Hoteit's lawyer and Ali Makki and that he refused to sign a draft statement partly because of its inaccuracies, could not be tested. I attach little weight to Mr Nawfal's evidence on this.
- Mr Checri's note clearly distinguishes between Mr Makki and his father and suggests no ground for thinking that Mr Hoteit was confused.
- Dr Mugraby was cross-examined. A number of points arising from his oral evidence need to be considered. The first relates to the price for the property which Mr Makki says was $925,000. Dr Mugraby gives evidence in his affirmation that Mr Hoteit "confirmed" the price as $950,000 in their conversations in September and October 2004. It is alleged and submitted for Mr Makki that Mr Hoteit did not give this figure and that Dr Mugraby put it in his affirmation in order to bolster the claimants' case. The significance is that it exactly matches the total of the two transfers from Daltel's dollar account in late July 2003. Dr Mugraby twice said in cross-examination that Mr Hoteit mentioned it every time they spoke, except in a brief chance meeting on 30 December 2004. However, Mr Checri's note of the conference call does not mention it and in view of its significance I am satisfied that it would have been included, if Mr Hoteit had mentioned it. Dr Mugraby was therefore wrong at least to that extent, but it does not necessarily follow that he was wrong to say that Mr Hoteit mentioned it on earlier occasions, still less that Dr Mugraby deliberately inserted the figure to bolster the claimants' case. More surprising is the fact that the figure is not mentioned in the draft statement prepared by Dr Mugraby for Mr Hoteit. Dr Mugraby's explanation was that the purpose of the statement was to confirm that Mr Hoteit negotiated with Mr Makki, not his father, and in any event Dr Mugraby was not himself aware of the transfers in late July 2003 or that the price of $950,000 was significant. I am certainly not satisfied that Dr Mugraby deliberately falsified his evidence on the question of price, which may well be correct, but I do not feel entirely sure that Mr Hoteit mentioned or confirmed a price of $950,000.
- A second issue is the explanation given by Dr Mugraby to Mr Hoteit for asking for information. Dr Mugraby said that he could not remember exactly what he told Mr Hoteit on this, but accepted that at least initially Mr Hoteit may have thought that Dr Mugraby was interested in buying an apartment in the Merjan Building. When asked whether he had told Mr Hoteit that the information being given by Mr Hoteit was going to be used in court against Mr Makki, he said that he did not believe so. Only a little later he said that he told Mr Hoteit when he called from Jones Day's offices on 24 November 2004 that it was in connection with a law suit against Mr Makki. However, Mr Checri's note records only that Dr Mugraby said that Jones Day was the firm that he was dealing with "in the context of the matters discussed previously" between them. Dr Mugraby tried to distance himself from his earlier evidence that he had not mentioned the proposed use of the information. The draft statement provided by Dr Mugraby has no heading or other indication that it is for use in proceedings against Mr Makki. However, it is clear not only from Dr Mugraby's evidence but also from Mr Nawfal's affirmation that Mr Hoteit refused to sign the statement at least partly because he did not want to be involved in any litigation.
- I am satisfied that at least by the time of the conference call on 24 November 2004, Mr Hoteit must have known that he was providing information in the context of a dispute, probably with Mr Makki. Why else would Jones Day be involved in a conference call from London, seeking details of the sale in July 2003 and asking whether it was negotiated by Mr Makki or his father? Mr Page submitted that it is probable that Mr Hoteit was being encouraged to assist Dr Mugraby by the promise of a sale. There is no evidence for this suggestion, and it is not mentioned by Mr Nawfal in his account of his conversation with Mr Hoteit.
- The upshot is that there is an unchallenged note by a solicitor of the conference call on 24 November 2004 in which Mr Hoteit is recorded as saying that he negotiated the sale of the Merjan property with Mr Makki and later dealt with Ali Makki in relation to completion of the sale. The note is inconsistent with any suggestion that Mr Hoteit could be confused as to whether he was being asked about Mr Makki or his father. The one ground put forward in cross-examination, though not in evidence, for possible confusion, being the apparent similarities of their names, was convincingly dealt with by Dr Mugraby.
- As against the clear statements undoubtedly made by Mr Hoteit in the conference call, the only evidence that it was Mr Makki's father, not Mr Makki, who negotiated the purchase of the property, are Mr Makki's affirmations and Mr Nawfal's evidence of his conversation with Mr Hoteit. Neither of them has made himself available for cross-examination. Mr Hoteit's unwillingness to become involved as a witness is understandable, if unfortunate. The refusal of Mr Makki and his Lebanese lawyer to be cross-examined on their evidence in a case against Mr Makki is of a quite different character. I consider it to be very telling and reduces to a very great extent any weight to be attached to their otherwise unsupported evidence. Not having made a statement in these proceedings, Mr Hoteit is not of course open to any sanctions if his statement is untrue, but, as I have found, he had no motive for giving an untruthful account. The same is not true of Mr Makki. There is of course no evidence from Mr Makki's father who is said to have negotiated with Mr Hoteit either directly or through his lawyer.
- Mr Page also submitted that the timing of statements from Arbinet made it unlikely that Mr Makki had negotiated the purchase of the Merjan property. The statements from Arbinet showing that over $700,000 would be due to Pacifica on 30 July 2003 would have been issued on 16 July and probably not received until 17 July 2003. Mr Hoteit left Beirut on 17 July, leaving virtually no time for negotiations for the purchase of the Merjan property. However, I see no reason why these negotiations should not have occurred earlier. Mr Makki knew that Pacifica had been selling substantial amounts of airtime to Arbinet, even if he did not know the precise amount which would be payable on 30 July 2003.
- In these circumstances I am satisfied beyond a reasonable doubt that it was Mr Makki, not his father, who negotiated with Mr Hoteit for the purchase of the property. Having regard to the circumstances in which Mr Hoteit discussed the matter in the conference call with Jones Day in November 2004, and the matters listed in section 4(2) of the Civil Evidence Act 1995, I consider it right to accord considerable weight to the hearsay evidence of Mr Hoteit, as recorded in Mr Checri's note of the conference call. As to article 6(3)(d) of the European Convention of Human Rights, there is in my view no reason to exclude this evidence. It is not by any means the sole basis, or even the basis to a decisive degree, for my findings as regards the Merjan property. Further, Mr Makki was in a position to adduce direct evidence from his father or from his father's lawyer to rebut Mr Hoteit's hearsay evidence.
- This finding provides, of course, further support for the conclusion that Mr Makki knew that he was the purchaser of the Merjan property. Even without this finding I am entirely satisfied for the reasons already given that the evidence establishes his knowledge of his purchase beyond any reasonable doubt. It follows that I reject Mr Makki's evidence that he did not know that the property had been purchased in his name until his father told him on 5 March 2004.
- The issue then is whether his failure to disclose his ownership of the Merjan property on 27 February 2004 was a deliberate breach on his part of the freezing order. For the reasons given below, I am completely satisfied that it was a deliberate breach.
- First, I am satisfied that he did not forget it but was well aware of it on 27 February 2004. It is not, of course, his case that he did forget it; his case is that he did not know about it. It is simply incredible that he would have forgotten about an apartment bought for over $900,000 only six months earlier, which was the only property in Lebanon or elsewhere owned by him. Moreover, he did disclose on 27 February 2003 that he was engaged in an inheritance dispute to establish an interest in property left by his grandfather. This was a considered answer given after he had been asked specifically about any interests in real property. It would be extraordinary if he had remembered the inheritance dispute but forgotten about his apartment.
- Secondly, I am equally satisfied that he understood that the order required him to disclose any real property which he owned. Again, he does not in his evidence suggest otherwise but he does rely on the tiring and stressful circumstances of 27 February 2004 to explain that he had forgotten that funds from Daltel's dollar account had been used to purchase the property. I have summarised earlier in this judgment the events of 27 February 2004. Mr Makki spent nearly two hours with the supervising solicitor and a further 50 minutes with Irwin Mitchell who were instructed that morning, before representatives of Jones Day were permitted to enter his office. He took advice privately from them in the course of the day. The supervising solicitor told Mr Richards at 12.20pm that he had taken Mr Makki through the freezing order. There is no reason to suppose that Irwin Mitchell did not in accordance with their duties explain the terms of the search and freezing orders to Mr Makki. Mr Makki accepts that Mr Richards specifically asked him if he owned any real property. He sufficiently understood the point to say that he did not own any real property but that he was involved in the inheritance dispute.
- There was a fair amount of dispute about the number of times that Mr Richards had asked Mr Makki about ownership of real property and whether funds from Daltel's dollar account had been used to buy real property. Mr Page for Mr Makki took issue with Mr Richards' evidence that he posed these questions at least four times. I do not consider the exact number of questions to be of any significance. What is clear from the evidence is that during the day these points were put to Mr Makki. For example, Mr Richards' contemporaneous notes show that at 4.20pm he specifically asked Mr Makki about assets falling within paragraph 8(1)(d) of the order. Another note of that discussion shows that Mr Makki's solicitor said, after taking instructions privately, that they had one more thing to disclose and described the dispute about his grandfather's property. Mr Richards then asked: "other than that he has no other assets, beneficial interests" to which Mr Makki replied "No, none". Another note records the following exchange between Mr Richards and Mr Makki in the evening:
"SR: There are no assets that relate to monies being used from the accounts?
SR: No hotel or other property?
I reject Mr Page's explanation that Mr Makki may not have picked up the point of the question, which was given at the end of a very tiring day and which was preceded and followed by questions about documents. Mr Makki gave no evidence to support the explanation; although the relevant note was not disclosed until 10 January 2005, Mr Makki provided further affirmations on other subjects on 28 January and 7 February 2005 without mentioning the explanation. The suggested explanation is also inconsistent with a letter from Irwin Mitchell dated 2 March 2004.
- In cross-examination, Mr Richards gave evidence, which I accept, that he was absolutely convinced that Mr Makki would have assets and, to ensure that there was no mistake, he asked him on a number of occasions whether he had assets.
- I readily accept that the execution of a search order is a very stressful occasion for a defendant, who without warning has to open his premises, papers and computers to inspection by a group of strangers and who has to answer questions and provide information in a very short time. For this reason, among others, the role of the supervising solicitor and access to competent legal advice are vital. Fortunately, in this case, Mr Makki had those protections in full measure. I am satisfied that on 27 February 2004 Mr Makki fully understood his obligations under the orders.
- Accordingly, I find that Mr Makki breached paragraph 8 (1)(d) of the freezing order in not disclosing his ownership of the Merjan property to the claimants' solicitors within four hours after service of the order on him. I also find that it was a deliberate breach. He knew that he was required to disclose it and chose not to do so.
- The next issue is whether he was also in deliberate breach of paragraph 8(1)(a) of the freezing order in not disclosing that the payments of $200,000 and $750,000 on 21 July and 30 July 2003 from Daltel's dollar account had been paid to the joint account at Arab Bank in Beirut and then used either in whole or as to $925,000 in payment of the price for the Merjan property. Mr Makki accepts that he knew that the payments had been used in this way and he accepts that he was in breach of this part of the order. However, he says that the breach was innocent. In the stressful circumstances of the execution and service of the orders he forgot it, but made disclosure the following day through his solicitors after he had recalled it. In the light of my finding that on 27 February 2004 he knew that he owned the Merjan property but deliberately concealed it, it is almost inconceivable that he had temporarily forgotten how it was paid for. I am entirely satisfied that on 27 February 2004 he was well aware of that fact and deliberately failed to disclose it. For the reasons already given, I do not accept that he forgot it in the stressful circumstances of the day.
- The final issue in relation to the Merjan property is its transfer from Mr Makki to his mother. It is not disputed that the transfer document was executed on Saturday 28 February 2004 in Beirut on Mr Makki's behalf by his father, using the power of attorney given on 19 July 2003. I have found that Mr Makki knew on 27 February 2004 that he owned the Merjan property and deliberately failed to disclose it. That deliberate concealment is followed the next day by a transfer of the property from him to his mother. The disclosure made to Jones Day was both very limited and misleading. All that they were told was that the payments from Daltel's dollar account in July 2003 had been used by Mr Makki's father to purchase the property but he did not know in whose name it had been purchased. This was confirmed in his solicitor's letter on 2 March 2003, when they added that Mr Makki did not know whether there had been any subsequent changes in title. Only in his affirmation on 9 March 2004 did Mr Makki disclose that the property had been purchased in his name, but that his father had recently transferred it to himself.
- In the absence of credible evidence of a different explanation, I would be satisfied beyond any reasonable doubt that at some point after the end of the search on 27 February 2004, Mr Makki contacted his father and told him to use the power of attorney to transfer the property to his mother, and then proceeded to drip-feed information, often untrue, to his solicitors who passed it on to Jones Day. In this way, he hoped to put the property out of the claimants' reach.
- The explanation put forward by Mr Makki is that he had nothing to do with the transfer, which occurred as follows. According to Mr Makki's affirmation dated 9 March 2004, he was told by his father on 5 March 2004 that he had recently been advised by his lawyer to transfer the property into his own name because he was concerned about debts approaching £900,000 owed to him by Mr Makki. There was no suggestion of any connection with the freezing order or the effect of Mr Makki's instructions to banks in Beirut, nor was the date of transfer given.
- There is no evidence from Ali Makki. However, his lawyer in Lebanon, Mr Zahr, provided a short witness statement and the claimants did not seek to cross-examine him. The contents of the statement are almost entirely hearsay, being based on instructions from Ali Makki. He says that Ali Makki first became aware of the proceedings in England when on the morning of 28 February 2004 he visited his branch of BLOM Bank and was told about the court order and the instructions signed by Mr Makki to transfer funds. He was surprised and displeased by this and spoke to his son to find out what was happening but his son said that he could not discuss it. Mr Zahr then gives almost his only piece of direct evidence:
"On the same day Mr Ali Makki called me to inform me and to discuss the events of that morning. I gave him legal advice, the content of which is privileged."
He then refers to the transfer of the property and a conversation between Mr Makki and Ali Makki on 5 March 2004. Mr Zahr also states:
"Mr Hassan Makki admits that he is indebted to my client, in substantial amounts of money.
The Merjan property was therefore transferred out of Mr Hassan Makki's name to protect my client's financial position, and to part satisfy the debt due from the First Defendant to my client. My client informed me that he had purchased the property in the name of his son but that he wished to transfer it out of his son's name because he was unhappy with the amount outstanding and wanted to make sure he was protected."
- The explanation put forward is therefore that Ali Makki acted independently of Mr Makki in transferring the property into his wife's name in order to provide protection in respect of the substantial debts said to be owed by Mr Makki to him. Mr Zahr gives no evidence of these debts. In his affirmation dated 9 March 2004 Mr Makki stated that his father had lent him a total of £900,000, of which £400,000 had been lent between August 2003 and January 2004. Mr Makki gives some evidence in his first affirmation in this application of advances made by his father, but apart from £20,000 they are not said to have been made to Mr Makki. Instead, he states that they were made to companies said to be owned by Ali Makki, with a further £120,000 paid to solicitors for the purpose of litigation with BT but the borrower is not stated. There is no documentary evidence in respect of any of these alleged loans.
- In circumstances where Mr Makki declines to be cross-examined, Ali Makki gives no evidence at all, and the relevant evidence of Mr Zahr is entirely hearsay based on information from Ali Makki, I do not consider that there is any credible evidence to support Mr Makki's denial of involvement in the transfer or his case that his father arranged the transfer in order to provide protection against debts alleged to be due from him to his father. The explanation and the evidence are flimsy and unconvincing.
- I am satisfied beyond any reasonable doubt that Mr Makki procured his father to transfer the property to his mother, in deliberate breach of the freezing order and with a view to frustrating the order as regards the property. This makes it unnecessary to consider the claimants' alternative case that Mr Makki was in any event in contempt of court by reason of his father's actions as his agent under the power of attorney.
- I should note here a submission made by Mr Page that the claimants have not shown that, if Mr Makki had informed them about the Merjan property, it would have made any difference. Mr Page accepted that this submission relates only to any sanction to be imposed by the court. The point made is that the claimants have done nothing in Lebanon to protect their position and even if disclosure had been made on 27 February 2004 the probability is that nothing would have been done in time to prevent the transfer to Mr Makki's mother. In the light of my finding that it was Mr Makki who procured the transfer into his mother's name, this submission has, I think, lost any relevance. In any event, I find it hard to follow. It was the obligation of Mr Makki, not the claimants, to prevent dealings with his property. Knowing that his father held his power of attorney, he should have taken immediate steps to revoke it or to ensure that it could not be used inconsistently with the order. On his case, he was told that on 5 March 2004 by his father that the property had been transferred out of his name, but he did nothing to reverse it or prevent formal registration of the transfer which occurred on 9 March 2004. He did not inform the claimants about the transfer until service of his affirmation on 9 March 2004.
BLOM Bank dollar account
- Before the search and freezing orders were made, the claimants knew from the records for Daltel's dollar account that a total of $2,152,388 had been transferred to accounts in Beirut with BLOM Bank SAL and Arab Bank plc. Paragraphs 6.3.2 and 6.3.3 of the freezing order specifically provided that the freezing injunction in paragraph 4 of the order applied to any money in any account controlled by Mr Makki at BLOM Bank or Arab Bank in Beirut. During the execution of the orders on 27 February 2004, Mr Makki confirmed the existence of these two accounts which he said were held in the joint names of his father and himself. In accordance with paragraph 14 of the order he signed irrevocable instructions to the banks for the transfer of the balances on the accounts to an account controlled by the liquidators. These instructions were faxed to the banks on the same day and the signed originals sent by courier.
- In his affirmation of 9 March 2004 Mr Makki confirmed that he had sent letters seeking information concerning these accounts to the banks and to his father, as requested by Jones Day, but stated that he had received no replies. He went on to say that other than inter-account transfers, he believed that withdrawals would have been made from the accounts by his father for ordinary family living expenses and certain business expenses. In this context he also gave some information about the purchase of the Merjan property. As to the balances on the accounts, he stated that the banks do not provide account statements. Instead there are passbooks, which his father held. His father informed him on 5 March 2004 that the balances on the accounts at BLOM Bank and Arab Bank were about $1 million and $9,000 respectively.
- Although the banks received the irrevocable transfer instructions which Mr Makki was required to sign, no transfers have been made pursuant to them, because Mr Makki's father has refused to give his consent. Without his father's consent, none of the banks is prepared to act on Mr Makki's instructions. Jones Day attempted in correspondence with Ali Makki and his lawyer Mr Zahr in March 2004 to obtain his consent but this was refused.
- The present application arises out of information received by the claimants on 17 December 2004, from which it appeared that Ali Makki had given transfer instructions to BLOM Bank not only on his own behalf but also as agent for Mr Makki under the power of attorney. It further appeared that Ali Makki had brought proceedings in Lebanon against BLOM Bank for an order for the transfer out of the balance on the joint account in accordance with his instructions and that Mr Makki had lodged submissions in support of his father's application
- The allegation in paragraph 6 of the December application is that Mr Makki has failed to comply with paragraph 4.2 of the freezing order in that he has disposed of and/or dealt with his assets by giving instructions to BLOM Bank to pay away all monies held in the dollar account.
- The facts, which are undisputed, are as follows. On 1 March 2004 Ali Makki wrote to BLOM Bank confirming his oral instruction that it should not act on Mr Makki's instructions for the transfer to the liquidators' account. One of the stated grounds was "because I hold a comprehensive general power of attorney for my son, Hasan Ali Makki, and a document, and this qualifies me to reject any transaction my said son may request." This is the power of attorney dated 19 July 2003, which had been used in relation to the Merjan property and a copy of which had been supplied by Ali Makki to the bank. He continued:
"Pursuant to this, and after recording my reservations, originally on my own behalf, and as attorney for my son, Mr Hasan Ali Makki, I confirm my notice to you, in writing this time, of what is summarised above, and I reserve my right, originally and as attorney, to engage in transactions on the joint account referred to, and to reject the implementation of the content of the document you have reported, whose authorship is attributed to my son, Mr Hasan Ali Makki. Therefore I adhere to my application to you to refrain from implementing this application, and I also hold to all my rights expressed in the Law of Banking Secrecy in Lebanon."
- On 5 March Jones Day sent a copy of the freezing order to Ali Makki's lawyer, Mr Zahr. On or about 24 May 2004 Ali Makki issued a summons before the Judge for Summary Jurisdiction in Beirut against BLOM Bank, seeking an order for the release of the funds in the account. It recited that Ali Makki had requested the bank to allow him to withdraw some funds but that the bank had refused by reason of Mr Makki's instructions for a transfer to the liquidators' account. It further recited:
"It should be noted that the plaintiff holds a comprehensive general absolute power of attorney allowing him to represent his son (his partner in the account) in a comprehensive representation (attached herewith is a copy of the said power of attorney – Document number 4).
In spite of this, that is even though the plaintiff is the general attorney for his son, his partner in the joint account, and even though he informed the defendant that he required it, originally and as attorney, to enable him to withdraw the funds because he needed them, the defendant refused to enable him to do so."
- The bank's defence filed in June 2004 relied on the contrary instructions received from Mr Makki for transfer to the liquidators' account. On 11 June 2004 Mr Zahr sent copies of the summons and the bank's defence to Mr Nawfal, Mr Makki's lawyer in Lebanon. He asked Mr Nawfal whether Mr Makki had any objection to his father acting alone in conducting transactions on the joint account, including withdrawing, receiving and transferring all or some of the sums in it, and whether he was in dispute with his father regarding the latter's right to use the account at his sole will.
- Mr Nawfal replied by a letter dated 14 June 2004, in which he stated:
"In fact, following my reference to my client, he has informed me that he denies any dispute with his father Mr Ali Jameel Makki, absolutely.
My client has informed me that he owes his father more than the value of this account, and on this basis I wish to inform you that my client is not opposed to the withdrawal by your client of all or part of the assets in this account and to receive their value by the means he considers appropriate, including market transfers.
Not only this, I request the Lebanon and Overseas Bank, in my capacity as the attorney for Hasan Ali Makki, that it will cooperate with your client and enable him to deal freely and by his sole action on the said account, without the need for referring to my client, and particularly as he is permanently travelling."
- The reply filed in the court proceedings on behalf of Ali Makki placed significant reliance on the power of attorney held by Ali Makki and on Mr Nawfal's letter. On 6 July 2004, the court ordered the joinder of Mr Makki as a party. Mr Nawfal filed a memorandum dated 13 July 2004 on behalf of Mr Makki, who is referred to as "the included person". It is signed by Mr Nawfal "as attorney" and his power of attorney is included in the file. The first paragraph states:
"Pursuant to your decision as chairman to include the person to be included, Hasan Ali Makki, he declares as follows."
It is also stated that the joint account "was opened essentially with funds of the plaintiff [Ali Makki] who mostly added to it". Mr Makki's position on his father's claim is stated as follows:
"The included person had previously replied by a letter [14 June 2004] the plaintiff's attorney deposited in the file in this case, as is clear in the documents served on him.
The included person accepts what is stated in this memorandum and confirms that he has no dispute with his father (this did not occur essentially in his upbringing, education and environment).
The included person also considers the defendant liable for its illegal freezing of the account referred to, and on this basis is responsible for not enabling the plaintiff to make transactions on the said account in accordance with the provisions of the contract that joins him and me and the defendant.
The included person does not wish to close the account that is the subject of the case. Rather he agrees that his father, the plaintiff, should make transactions with its assets and use it in accordance with the provisions of the contract opening that account and the law. The included person does not wish to enter into litigation against the defendant bank, and asks it to apply those legal provisions."
- This memorandum, like those on behalf of Ali Makki, makes no reference to the freezing order or Mr Makki's obligations under it. As to the circumstances in which Mr Makki had given the transfer instructions pursuant to the order, Mr Nawfal filed a short memorandum on 19 July 2004 giving the following evidence of Mr Makki:
"The person it has been decided to include was compelled to sign a document related to the transfer and he was given a period of grace of four hours to sign.
However the person it has been decided to include did not send that document to the bank by fax or by any other means."
While these statements are strictly true as far as they go, they do not explain the real circumstances in which the instructions were given and in my view present a misleading picture to the court in Beirut.
- On 8 November 2004 Mr Nawfal wrote as follows to BLOM Bank:
"In my capacity as attorney for Mr Hassan Ali Makki, please note the following:
In relation to the joint bank savings account between my client and his father, Mr Ali Makki, held with you, number 003/02/350/0230869/1/5 (42533), I wish to confirm to you that my client is not the person who sent the request for the transfer by fax and he has not sent you at any time any request for payment or transfer by fax.
In all cases, my client absolves you of any liability towards the third party whose name is recorded on the fax [i.e. the liquidators], which is the subject of the case pending between my client's father and you before the Judge for Summary Affairs in Beirut, Chairman Mahmoud Makkiya.
That is, my client approves what his father is requesting in the said case, in which he has been included, and he absolves you from any liability that may arise from your implementation of these requests, and he will bear full responsibility in this respect whatever its source.
Finally, the retention of the funds belonging to my client's father present in that account and frozen with you without ceiling or time restriction is unacceptable, is not justified, and may not continue in the light of my client bearing full responsibility in this regard as stated above."
- Mr Nawfal filed a further memorandum dated 13 November 2004 for a hearing on 7 December 2004 (referring to Mr Makki as "the person it is requested to include" or in similar terms):
"Further to his previous statements and in explanation of the truth and the law the person it is requested to include declares as follows:
The person whose inclusion is requested did not send the request for the transfer by fax to the defendant and did not send to it at any time any application for payment or transfer by fax.
He sent a letter to this effect to the defendant removing from it any liability towards the third party whose name is recorded in the fax, which is the subject of the action pending between the father of the person whose inclusion is requested, who is present, and the defendant before you.
We confirm that the retention of his father's funds in that account and frozen by it without a ceiling or time limit is unreasonable and unjustified and should not continue in the light of the person whose inclusion is requested bearing every liability in that regard. (Attached is a copy of the said letter – Document number 1).
Finally, the person whose inclusion is requested adopts his father's requests recorded in the summons and memoranda."
- Copies of these documents were received on 17 December 2004 by Jones Day from the claimants' Lebanese lawyers. The claimants were represented at a hearing on 21 December 2004 and the case was adjourned to 21 January 2005. I do not know what has since occurred in the proceedings.
- Mr Makki has responded to the contempt application with affirmations by himself and Mr Nawfal. As regards Mr Nawfal's letter dated 14 June 2004, Mr Makki stated:
"In relation to my participation in the proceedings between my father and Blom Bank concerning the dollars in the Joint Lebanese Dollar Account, I did speak with Mr Nawfal, my lawyer in Beirut, leading to his letter to my father's lawyer dated 14 June 2004 at page 51 of Exhibit "SR7". I did inform him, as stated in that letter, that I had no dispute with my father and that is the case. It is also true that I informed him that I owed my father more than the value of the account and that is true. I note from my father's lawyer's letter to Jones Day at page 138 of "SR7" that my father estimated on 18 March 2004 that I was indebted to him in the sum of about £900,000 (English pounds), if not more. In the letter at page 51 of "SR7", my lawyer continued that "on this basis I wish to inform you that my client is not opposed to your client using and making transactions on the joint account referred to …" I did not give Mr Nawfal instructions to write that nor was I aware that he had written it until I saw the letter very recently when it was served as part of Exhibit "SR7" on Irwin Mitchell."
As to the memoranda dated 13 July and 19 July 2004 filed on his behalf in his father's case, he stated:
"I note from the first memorandum of pleading that my lawyer (see page 59 of Exhibit "SR7") also said that the money should not be frozen and my father should be able to make transactions on the account. I was not aware that my lawyer had written that. I did not give him instructions to say that."
- As to Mr Nawfal's letter to BLOM Bank dated 8 November 2004 and the memorandum dated 30 November 2004, Mr Makki stated that he did not see either of them and gave no instructions for them to be sent. Finally, he stated in paragraph 20 of his affirmation:
"I am able to confirm that I do not continue to support my father's application to withdraw the money from BLOM Bank and that I withdraw my consent to the payment out, I am willing to provide confirmation to the Courts in Lebanon (if required) that I accept that I am bound by the terms of the Freezing Order and that I did sign the irrevocable letters of instruction (under the terms of a High Court Order which required me to sign them within 4 hours) and they were sent to the banks by Jones Day and remain irrevocable. I also withdraw my offer to indemnify Blom Bank from any liability it may have towards the Claimants."
- In his affirmation, Mr Nawfal stated:
"I make this affirmation in relation to my client's participation in the proceedings between his father and Blom Bank concerning the Joint Lebanese Dollar Account. I did speak with my client before I sent the letter to my client's father's lawyer dated 14 June 2004 at page 51 of Exhibit "SR7". Prior to sending that letter, I was informed by my client, as is stated in that letter, that he had no dispute with his father and I still believe that to be the case….
At the time of writing the letter of 14 June 2004, my client also informed me that he owed his father more than what he believed to be the value of the Joint Lebanese Dollar Account. In that letter, I also wrote that my client was not opposed to his father using and making transactions on the Joint Lebanese Dollar Account. I did not receive instructions to write that nor would my client have been aware that I had written it as I did not send him copies of correspondence. I should say that throughout the last several months my client has shown little or no interest at all in the proceedings here and he has been preoccupied, it appears, in particular, by the proceedings in England. It is not easy to obtain instructions from him."
As to the memoranda dated 13 July, 19 July and 13 November 2004 filed in the proceedings and his letter to BLOM Bank dated 8 November 2004, Mr Nawfal states that he did not receive instructions to write any of them nor did he send copies of them to Mr Makki.
- Mr Nawfal provided a further affirmation, to which he exhibited a copy of a letter dated 14 January 2005 to the Beirut court which he said he had lodged on 24 January 2005 and a copy of a revocation by Mr Makki dated 14 January 2005 of the power of attorney dated 19 July 2003 in favour of Ali Makki. In his letter to the Beirut court, Mr Nawfal states that he has received instructions from Mr Makki that he does not support his father's application, that he has confirmed that he is bound by the terms of the freezing order and that he did sign the irrevocable letters of instructions. These letters were sent to the banks with his knowledge and remain irrevocable.
- It seems to me clear that the dealings with BLOM Bank in relation to the dollar account involved breaches of paragraph 4.2 of the freezing order in that by his agent, Mr Nawfal, Mr Makki has given instructions to BLOM Bank to pay out the balance on the account as directed by Ali Makki. It was not argued by Mr Page that the giving of instructions did not contravene paragraph 4.2 unless the instructions were acted on and the funds transferred. Mr Page's submissions were that the instructions, as well as Mr Nawfal's support on Mr Makki's behalf for Ali Makki in the proceedings in Beirut, were taken without the knowledge or consent of Mr Makki and, in any event, any contempt has been purged.
- The breaches of paragraph 4.2 alleged in the December application notice are "giving instructions to BLOM Bank to pay away all monies held" in the dollar account. The steps taken to support Ali Makki in his proceedings against BLOM Bank do not fall within that allegation, but they are part of the course of conduct which includes the letters dated 14 June 2004 to Mr Zahr and 8 November 2004 to BLOM Bank. Ali Makki's letter dated 1 March 2004 to BLOM Bank, written as attorney for Mr Makki as well as on his own behalf, does not fall within the alleged breach because it does not contain an instruction to pay out the balance on the credit, but countermands Mr Makki's instructions.
- The most important issue is the question of fact as to whether Mr Nawfal acted with Mr Makki's knowledge or consent. Since this would involve an adverse finding against him, the onus of proof is on the claimants to establish it to the criminal standard. That it is put forward by Mr Makki as a defence does not, I think, alter the persuasive or evidential burden. The fact that an agent takes action on behalf of his principal does not involve a presumption of fact that it was taken with the principal's knowledge and consent, although of course as a matter of law it is the act of the principal provided that it is within the scope of his authority. However, the circumstances may be such that, in the absence of credible evidence to the contrary, the only reasonable inference from the agent's conduct is that it was undertaken with the knowledge and consent of the principal.
- The claimants rely first on a submission that it is almost incredible that Mr Nawfal as Mr Makki's lawyer would have given instructions to BLOM Bank or submitted memoranda of support for Ali Makki's position in the proceedings without express instructions from Mr Makki. Further, Mr Nawfal not only took those steps, he also offered on behalf of Mr Makki an indemnity to BLOM Bank against any liability to the claimants arising from its implementation of Ali Makki's instructions. I agree with Mr Anderson that it seems almost inconceivable that a lawyer would take such steps without his client's express consent. Secondly, it is clear from Mr Nawfal's letter of 14 June 2004 that he had spoken to Mr Makki before writing the letter and had discussed Mr Zahr's letter of 11 June 2004 and the summons enclosed with it. He states in the letter that Mr Makki has informed him that he denies any dispute with his father. He also states that Mr Makki has informed him that he owes his father more than the value of this account and the same sentence continues:
"…and on this basis I wish to inform you that my client is not opposed to the withdrawal by your client of all or part of the assets in this account and to receive their value by the means he considers appropriate, including market transfers."
Reading the letter there can be no serious doubt that the cited passage, and the last paragraph which contains an instruction to BLOM Bank, were written on the basis of Mr Makki's instructions.
- Mr Makki and Mr Nawfal give evidence to the contrary in their affirmations, and say that, with the exception of those parts of the letter of 11 June 2004 which in terms state that Mr Makki has informed Mr Nawfal of certain matters, all the letters and memoranda were written without Mr Makki's instructions and he had no knowledge of them because Mr Nawfal did not send him copies. Neither of them, however, is willing to be cross-examined on this evidence. I have no hesitation in rejecting their evidence.
- Mr Page suggested that a legal culture existed in Lebanon where such actions would not be extraordinary. He based this solely on evidence in cross-examination from Mr Richards that some of the statements made in a submission to the Money Laundering Commission in Lebanon by the claimants' Lebanese lawyers had not been checked with the claimants and were untrue. This evidence is not an adequate basis for the submission. There was no suggestion that the lawyers did not have instructions to make the submission to the Commission.
- I am entirely satisfied that the letters dated 14 June and 8 November 2004, as well as the memoranda filed with the court, were written on the express instructions of Mr Makki. Those letters were in my judgment a deliberate and very serious breach of the freezing order. Mr Makki has filed evidence detailing steps taken in January 2005 to withdraw his support of his father's proceedings. I am satisfied that these steps were taken only because his previous support had been discovered by the claimants. These findings make it unnecessary to consider the claimants' alternative case that Mr Makki was in contempt of court simply by reason of Mr Nawfal's actions as his agent.
BLOM Bank: Lebanese pound account
- The documents supplied to Jones Day on 17 December 2004 also disclosed that there was another joint account in the names of Mr Makki and his father at BLOM Bank, denominated in Lebanese pounds. This had not been disclosed by Mr Makki. Mr Makki's father gave instructions for the transfer of the balance on that account. The bank complied with the instruction on 20 April 2004 and the amount transferred was 79,580,925 Lebanese pounds equivalent to $51,817. The instruction was given by Ali Makki not only on his own behalf but also as agent for Mr Makki, using the power of attorney dated 19 July 2004.
- The contempts alleged against Mr Makki are, first, that he failed to comply with paragraph 9.2 of the freezing order in that he failed within seven working days or at all to set out in an affidavit details of his interest in this account and, secondly, he breached paragraph 4.2 by disposing of the monies contained in the account. Paragraph 6.3 of the order provided specifically that the freezing injunction applied to any account controlled by Mr Makki at BLOM Bank in Beirut.
- There is no doubt that paragraphs 4.2 and 9 applied to this account. The disclosure obligation in paragraph 9.2 applied to all assets worldwide exceeding £1,000 in value whether solely or jointly owned. It has not been suggested that the balance on the account was less than the equivalent of £1,000 at any material time. Mr Makki's affirmation of 9 March 2004 referred to an account at BLOM Bank, described as "account number 003 023 500 230 86915 held in the joint names of me and my father, Mr Ali Makki". He stated that his father had told him on 5 March 2004 that "the balance of the BLOM Bank account is about US $1M".
- While the claimants allege that the Lebanese pound account should have been, but was not, disclosed by Mr Makki, Mr Page submits that it was not a separate account from the dollar account but both were sub-accounts of a single account which was disclosed. The claimants say that they are separate accounts for the purposes of disclosure. The claimants rely, first, on Mr Makki's affirmation which refers to account number 003 023 500 230 86915 with a US dollar balance, whereas the Lebanese pound account's number was different in that the last digit was 6, not 5. Secondly, they rely on Mr Zahr's statement in his submission dated 16 June 2004 on behalf of Ali Makki to the Lebanese court that:
"The plaintiff [Ali Makki] and his partner [Mr Makki] opened the account that is the subject of the present case, which is in the US dollars, with the defendant's branch in Al-Rawcheh. They also opened with the defendant another account in Lebanese lire with the same branch too."
The submission goes on to state that Ali Makki withdrew the full value of the "joint account in lire". Thirdly, they rely on a letter dated 12 March 2004 from BLOM Bank to Ali Makki which refers to "the two joint accounts opened in your name and the name of your son, Mr Hasan Makki as serial number 0230869" and repeatedly refers to "the two aforementioned accounts". There therefore seems to be a view shared by the bank and Ali Makki's lawyer that there were two accounts.
- In support of his submission, Mr Page relied first on the account opening form. It is dated 14 July 2003, a very short time before the transfers from Daltel's dollar account. It is in the joint names of Mr Makki and his father and, crucially, the account number is 230869. Suffixes, in this case 15 and 16, can be added to denote sub-accounts in different currencies. Secondly, he relied on the instruction to BLOM Bank signed by Mr Makki pursuant to the freezing order. The bank acted on this instruction to freeze, initially, the Lebanese pound account as well as the dollar account.
- In my judgment, Mr Anderson's submissions are correct on this issue. Mr Makki did not disclose the existence of a joint account or sub-account denominated in Lebanese pounds. He disclosed a joint account or sub-account, with its own unique number, with a dollar balance. I can hardly suppose that if the reverse had been the case and Mr Makki had disclosed the Lebanese pound account but had failed to mention the dollar account, with its far larger balance, it could seriously be said that he had disclosed the dollar account or sub-account. The freezing order in my view required disclosure of each of these accounts or sub-accounts.
- Mr Page can obtain no assistance from the instruction to BLOM Bank signed by Mr Makki because it applies in terms to "[a]ny account in my name, or controlled by me and whether in my sole name or held jointly including but not limited to" the dollar account identified by its unique number ending with the suffix 15.
- However, Mr Makki could disclose an asset only if he knew about it. Mr Makki's case on the evidence is that he had no knowledge about the Lebanese pound account when he made his affirmation on 9 March 2004. He states:
"I was aware that my father and I opened a joint account with Blom Bank. I never transferred Lebanese Pounds into the account, nor withdrew Lebanese Pounds from it and was not aware that there were any Lebanese Pounds in the account."
He did not of course make himself available for cross-examination, so that this evidence is untested. The claimants cannot establish Mr Makki's knowledge by relying on the passage quoted above from Mr Zahr's submission dated 16 June 2004. Although it states that Mr Makki and his father opened two accounts, one in dollars and the other in Lebanese pounds, the account opening form in evidence does not distinguish between the two.
- I am left with real doubt as to whether he did know about the Lebanese pound account on 9 March 2004. There is no evidence about its inception or operation. Unlike the other accounts in Beirut there is nothing to show him making transfers to it. It is of course in his name, and it may therefore be improbable that he had no knowledge of it. But if he did know about it, I can think of no plausible reason why on 28 February 2004 he should disclose the Banque de la Mediterranean account, which had a large balance, but conceal this account which in the context of this case had a relatively small balance. I have therefore concluded that it is not established beyond reasonable doubt that he knew about the Lebanese pound account when he made his affirmation on 9 March 2004. Paragraph 9.2 of the freezing order required him to give details of all his assets "to the best of his ability". In the circumstances there was therefore in this respect no breach of paragraph 9.2.
- The other alleged contempt is that he breached paragraph 4.2 by giving instructions to BLOM Bank to pay out the balance on this account. If he obtained knowledge of the account after his affirmation and then gave the transfer instructions, a deliberate breach of the order would be made out. There is no written instruction in evidence. The principal source of evidence on the transfer instruction is a submission of Mr Zahr on behalf of Ali Makki to the court in Beirut. In his submission dated 16 June 2004, Mr Zahr referred to the instruction for withdrawal of the balance on the Lebanese pound account, stating "the plaintiff withdrew the full value of the joint account in lire from the defendant bank". It is arguably a fair inference that, as with the other instructions, Ali Makki gave this instruction both on his own behalf and as attorney for Mr Makki, but Mr Zahr does not actually say so. Mr Zahr exhibits a document which he describes as a copy of "the notice of withdrawal of the value of the joint account (with his son Hasan) from the defendant bank." However, the words "with his son" refer to the joint account not to the notice of withdrawal and in any event the exhibited document is not a withdrawal instruction but a debit advice. The recipient of the cash is not identified. The debit note names Mr Makki and his father, but, as they were the named account holders, it could be expected to do so and it cannot be assumed to identify them as the persons who gave the instructions or received the cash. Mr Zahr's statement that "[t]he plaintiff withdrew the full value of the joint account in lire" is inconsistent with Mr Makki having done so. Mr Anderson also relied on the closeness of the relationship between Mr Makki and his father to suggest that it was not plausible that Mr Makki would not have known that his father was proposing to withdraw the balance on the Lebanese pound account.
- In my judgment, the totality of this evidence is not sufficient to support a finding beyond a reasonable doubt either that Mr Makki was party to or had a prior knowledge of the withdrawal instruction to BLOM Bank or that Ali Makki gave the instruction as agent for Mr Makki as well as on his own behalf. Accordingly I reject the allegations of contempt as they relate to the Lebanese pound account.
Banque de la Mediterranean
- When responding to the requirements of the freezing order on 27 February 2004 Mr Makki did not disclose either the existence of an account at Banque de la Mediterranean in Beirut or that some of the payments listed in paragraph 8(1) of the order had been made to such an account. At about 10.20am on Saturday 28 February 2004 a solicitor with Irwin Mitchell informed Mr Richards of Jones Day of a joint account in the names of Mr Makki and his father at the Verdun Branch of Banque de la Mediterranean in Beirut. He said that the current balance was unknown but that when Mr Makki was last in Beirut, at the beginning of January 2004, the balance was about $1 million. It had derived from some of the transfers listed in the order and when Daltel USA's account in Geneva had been closed the balance had been transferred to Banque de la Mediterranean, not BLOM Bank, as Mr Makki had said the previous day. This was confirmed by Mr Makki in his affirmation of 9 March 2004, in which he clarified that the bulk of the sum of $1.5 million referred to in paragraph 8(1)(a)(v) of the freezing order, and the sum of $1.4 million referred to in paragraph 8(1)(b) (wrongly described as £1.4 million), were transferred in one payment to the account at Banque de la Mediterranean in November 2003.
- At that time the claimants were prepared to accept that this had been an oversight on Mr Makki's part. This assessment was, however, urgently reconsidered in the light of the discovery from the papers received on 17 December 2004 that on 1 March 2004 Ali Makki had blocked the transfer of funds from the BLOM Bank accounts and on 28 February 2004 had used his power of attorney to transfer the Merjan property. The funds in the BLOM Bank accounts could not be withdrawn on 28 February 2004 because that bank had already received by fax the instruction signed by Mr Makki. The position was different in relation to the Banque de la Mediterranean account. The disclosure of the account was made at 10.20am on 28 February 2004, which was 12.20pm in Beirut. Banks in Beirut are open for business on a Saturday morning, but not in the afternoon. There was the opportunity to take steps to withdraw funds from the Banque de la Mediterranean account, before disclosure was made. They concluded that Mr Makki's failure to disclose it on 27 February 2004 must have been deliberate, to provide time for a withdrawal to be made.
- The claimants have been unable to test this thesis against statements or other records for the account, because Mr Makki insists that he has none and that, because of Lebanese banking rules, he cannot obtain them from the bank for disclosure to the claimants without Ali Makki's consent, which the latter refuses to give. As it is, Mr Makki signed an instruction for the transfer of the balance to the liquidators' account but the bank has not complied with it.
- The claimants allege that Mr Makki is in contempt of court in that in breach of paragraph 8(1)(d) of the freezing order he failed within 4 hours of service of the order to provide details of the account at Banque de la Mediterranean. Paragraph 8(1)(d) required disclosure of details of, amongst other things, all bank accounts with a balance in excess of £50,000.
- The claimants submit that the only inference which can be drawn from the circumstances is that Mr Makki deliberately concealed the account at Banque de la Mediterranean, in the hope that steps could be taken to dissipate the balance on the account. They point out that the only assets disclosed on 27 February 2004 by Mr Makki were already known to the claimants and expressly referred to in the freezing order. Neither the Merjan property nor the account at Banque de la Mediterranean feature in the order and were not disclosed until 28 February 2004.
- Mr Makki's explanation in his sixth affirmation is that in the exhausting and stressful circumstances of 27 February 2004, he overlooked the existence of the account at Banque de la Mediterranean. It was only after the search party and his own solicitors had left that he began to recollect the instructions he had given to Barclays Bank in Geneva for transfers to accounts in Beirut. He called Irwin Mitchell the following morning. He has not made himself available for cross-examination on this evidence.
- I am satisfied beyond any reasonable doubt that Mr Makki deliberately concealed the account at Banque de la Mediterranean on 27 February 2004, just as he concealed the Merjan property. While I would find it possible that in the circumstances of that day he would forget an account with a balance of, say, $50,000, I find it wholly implausible that he would forget an account which, when he last looked, had a balance of about $1 million. Mr Makki's evidence of his assets does not disclose great wealth, apart from the funds and other assets derived from the payments in issue in these proceedings. It was less than two months earlier that he had checked the balance and found it was about $1 million. Paragraphs 8(1)(a)(v) and 8(1)(b) of the freezing order specifically directed him to the payments totalling $2.9 million made from the Geneva account in November 2003, only four months earlier. The payments had been made to Banque de la Mediterranean on Mr Makki's instructions. I do not believe his explanation, on which he is not prepared to be cross-examined.
- This establishes a serious breach of the order. I am also satisfied that the motive was to buy time to consider and investigate whether he could take steps to transfer the balance. There is no other plausible explanation.
- Mr Anderson invited me to infer that in fact the balance was dissipated. I do not consider that the evidence can justify that finding. It is of course entirely possible that it was dissipated but I cannot be satisfied of that beyond a reasonable doubt. Mr Anderson in particular relied on Mr Makki's failure to adduce any bank statements or other records in evidence to show what happened, but as explained in the next section it is not established that Mr Makki is able to do so.
- In any event, it would involve a shift in the burden of proof. The evidence adduced in support of a case of dissipation is not sufficient to establish it. The case cannot be made good by a failure by the respondent to adduce some exculpatory evidence, even assuming that he had it. Moreover, dissipation would be a breach of paragraph 4.2 of the freezing order but it is not one of the breaches alleged in the December application. It is not therefore an allegation which Mr Makki was required to meet.
Non-disclosure of bank statements
- Other than the information provided by Mr Makki in his affirmation on 9 March 2004 and information gleaned from the court proceedings in Beirut, the claimants have no further information concerning the accounts with banks in Beirut. They have no information on current balances or transfers made over the last year. No bank statements or other records have been disclosed to them and it is alleged in the December application that Mr Makki is in breach of the search and freezing orders in not delivering up statements or other records in relation to the accounts. Mr Makki maintains that he has no bank statements or other records and that he cannot obtain them from the banks without his father's consent. It seems extraordinary that a joint account-holder is not entitled to statements and records without the other accountholder's consent, but it is said that this is the effect of Lebanese banking law in circumstances where the bank knows that the joint account-holder will disclose them to a third party, in this case the claimants. Mr Makki has consistently maintained this position since March 2004. This has been covered in correspondence, involving the Lebanese lawyers for both the claimants and Mr Makki, and is the subject of an affirmation by Mr Makki's lawyer. The claimants had understood that it had been accepted on Mr Makki's behalf that under Lebanese law he was entitled to the information from the banks, even if he was obliged to pass it immediately to the claimants. However, on reading the relevant correspondence, it is clear that this has never been accepted and that Mr Makki and his lawyer have always asserted the contrary. In those circumstances, the claimants have not proceeded with this part of their application.
Information held on switches
- This category of alleged contempts relates to Mr Makki's alleged failure to disclose various documents and other information held on two telecommunications switches used by the claimant companies or to permit or provide access to the switches. This involves alleged breaches of a number of the terms of the search and the freezing orders.
- It is common ground that Pacifica and Daltel Europe operated on a switch identified as AC52 and Globenet operated on a switch identified as AC85. These two switches were housed at premises in London owned by their manufacturers European Computer Telecoms AG (ECT). It is also common ground that the two switches contained information relating to calls routed via the switch. This information was expressed in different formats, including Call Detail Records (CDRs) and statistical summaries, to which I refer in more detail below. The identity of the entities shown in the switch documents is disputed.
- Before analysing the alleged breaches of the orders, it is useful to describe in general terms what a switch is and how it operates. Mr Sherlock's affirmation is particularly helpful on this subject. A switch is a piece of telecommunications equipment about the size of a large refrigerator which is used to route telecommunications traffic, including telephone calls. The switch operates as a telephone exchange: incoming calls are routed by the switch to either a carrier (such as BT), which carries the call to its destination (domestic or international), or to another switch. The incoming calls may come from end-users whose calls are carried over a telephone network or from another switch (such as Arbinet).
- The switch generates information relating to this traffic, which may be accessed and stored in computerised form. This information may be expressed in a number of ways, including statistical summaries, such as reseller summaries, and in the form of detailed CDRs. CDRs are essentially spreadsheets, which provide a detailed breakdown of information for each call routed by the switch, showing the origin of the call, its onward destination, its time, its cost and its duration. This information is stored on a computer server which forms part of the switch. One point of dispute in this case is whether the CDRs were "deleted" from the switches so that Mr Makki could not access them. I shall come to this point in due course.
- The switches could be operated or configured either by ECT (which built and housed the switches) or by a switch owner. The switch owner in turn could access the switches remotely either via a dedicated terminal (Mr Sherlock said that BT used a dedicated terminal for at least one of its switches) or by accessing a router containing a modem via the internet. I shall examine in more detail later how access could be affected to the two switches in this case.
- The switch owner may operate the switch itself or lease all or part of the capacity on a switch to one or more other operators. The owner would charge the lessee for usage of the switch and may record the lessee as a "reseller" on the switch. Tariff tables may be loaded onto the switch to record the cost and revenue of a reseller's transactions. Invoices may be generated by combining tariff tables with call records. One switch may have more than one reseller and more than one set of tariff tables. Where different resellers are defined in a switch, they would be separately recorded in the CDRs and separate financial information could be generated for each.
- It should be noted that resellers might not necessarily be identified by their corporate names and this appears to have been the case for both AC52 and AC85. This leads to a dispute between the parties: in the case of both switches, there is a reseller called "Wholesale" whose sole customer was Arbinet. Mr Makki contends that this reseller was in both cases Weybridge; the claimants contend that in the case of AC52, "Wholesale" was Pacifica and in the case of AC85 "Wholesale" was Globenet.
- There is a dispute as to the ownership of the switches. Mr Makki asserts that ATEL and Daltel USA were the owners of AC52 and AC85 respectively while it is the claimants' case that Daltel owns AC52 and Globenet owns AC85. The parties were agreed that I need not resolve this dispute. I therefore proceed on the basis, where relevant, that it is not established that Daltel and Globenet owned the switches and on the basis that Mr Makki honestly believed that the switches were owned by ATEL and Daltel USA. The question goes to an issue as to ownership of the records held electronically on the switches, which may have a bearing on whether those records are "listed items" for the purposes of the search order.
- In support of their case, the claimants relied principally on affirmations provided by Mr Sherlock and Mr Richards. Mr Sherlock was involved in the case because of his experience in the use of switches; indeed, Mr Sherlock frequently has access to a BTowned switch (AC84) housed at ECT's premises and has regular dealings with ECT. Both Mr Sherlock and Mr Richards were cross-examined and I find that they were both honest witnesses.
- Mr Makki relied on affirmations provided by himself and expert evidence provided by Dr Stephen Castell. Dr Castell gave oral evidence. He is a consultant in computer and telecommunications systems and software development, and is Chairman of an IT consultancy firm. He has been instructed as an expert witness in other information technology and telecommunications cases and was instructed in that capacity by Mr Makki. Due to circumstances beyond the control of Mr Makki or Dr Castell, he was instructed very late in these proceedings and consequently the time he had to examine the issues presented to him by Mr Makki was very limited. He did not have an opportunity to examine the AC85 switch and he was not instructed to do so. Dr Castell acknowledged these limitations in his report. I found Dr Castell to be an honest and conscientious witness, but in considering his evidence I am conscious of the limitations on its scope and the circumstances in which his report was produced.
- No evidence was called from anyone at ECT, although such evidence would have been relevant as in some respects the procedures of ECT were in issue. Mr Anderson submitted that ECT had effectively been gagged by Mr Makki's solicitors and that the claimants were unable to secure ECT's co-operation thereafter. Mr Anderson pointed to a letter dated 18 October 2004 from Irwin Mitchell to ECT querying the basis on which ECT permitted the claimants to have access to the switches and requesting an undertaking that no further information or access to data on the switches would be allowed without the consent of the switch owners or a court order. There is no record of ECT's response.
- The claimants did not seek a witness summons to compel evidence from ECT. Instead they relied on evidence given by Mr Sherlock as to the procedures of ECT.
(iii) Search order: relevant provisions
- The relevant paragraphs of the search order are paragraphs 16, 17 and 19. Paragraph 16, under the heading "Searching computers and other electronic equipment", provides as follows:
"16.1 The Respondent must immediately permit the Independent Computer Specialist to make two electronic copies (or images) of any or all of the documents (whether they 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. The Respondent shall permit the Independent Computer Specialist to remove the outer casing of any computer or other electronic data storage device in order to copy the data and/or documents and shall supply him with all passwords or other information reasonably required by the Independent Computer Specialist in order to enable him to make such copies. The Independent Computer Specialist shall immediately hand over the electronic copies to the Supervising Solicitor who will then keep them safely at his premises.
16.2 The Respondent must also immediately after the Independent Computer Specialist has made the copies provided for in paragraph 16.1 above give the search party effective access to the computers, computer disks, mobile telephones, telephones, personal organiser or other electronic equipment situated on or accessible from the premises, with all necessary passwords and/or software and/or other information, to enable them to be searched and shall permit them to be searched. If they contain any listed items the Respondent must cause the listed items to be displayed and/or printed out so that they can be read and copied. The Respondent must provide the Applicant's solicitors with copies of all listed items contained in the computers.
16.3 All reasonable steps shall be taken by the Applicant, the Applicant's solicitors and the Independent Computer Specialist to ensure that no damage is done to any computer data. The Applicant and his representatives may not themselves search the Respondent's computers unless they have sufficient expertise to do so without damaging the Respondent's system.
16.4 To the extent that the search provided for by paragraph 16.2 above cannot be completed within the time considered to be reasonable by the Supervising Solicitor, the Respondent shall permit the search for listed items stored on the copies obtained pursuant to paragraph 16.1 above to be conducted at the Supervising Solicitor's premises. The Respondent shall be entitled to be present at such searches and shall be entitled to have his legal representatives present at such searches."
Paragraph 17 is one of a number of orders under the general heading of "Provision of Information" and provides:
"The Respondent must immediately inform the Applicant's solicitors (in the presence of the Supervising Solicitor) so far as he is aware where all the listed items are."
Paragraph 19 required the information provided under paragraph 17 to be set out in an affidavit sworn by Mr Makki and served within seven days of service of the order.
- The "listed items" are defined in schedule B to the search order. They include, so far as relevant:
"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."
- I will consider in turn the alleged breaches, each of which relates to a different paragraph.
(iv) Alleged breach of paragraph 17 of the search order
- The allegation in paragraph 6 of the September application is:
"The First Defendant has failed to comply with paragraph 17 of the search order in that on the day of the search the First Defendant did not immediately or at all inform the Applicant's solicitors so far as he was aware of where all the listed items were in that he did not disclose the whereabouts of the information held on the Switches."
It is common ground that Mr Makki did not make any reference to information held on the switches on 27 February 2004. In fact his first reference to any such information was during his examination under section 236 of the Insolvency Act 1986 on 6 April 2004.
- Two issues arise in determining whether there was a breach of paragraph 17. The first issue is whether the information held on the switches (switch information) came within the definition of listed items contained in schedule B to the order. If so, the second issue is Mr Makki's stated knowledge on 27 February 2004.
- For present purposes it is agreed that switch information comprised two categories of records: CDRs, which I have described, and summary statistical records. The summary records show, for example, as regards any given period and any particular destination zone, the number of calls, call times, costs, revenue and other information. Dr Castell exhibited an example of a summary which he was able to generate remotely from Apple's offices with the assistance of Mr Makki. The summary records are relevant to the commercial operation of a reseller's capacity on the switch, enabling for example overall margins or VAT to be calculated. The claimants submit that both CDRs and summary statistical records fall within each of paragraphs 4, 6 and 8 of schedule B and there was also reliance in the claimants' opening on paragraph 5.
- Paragraph 4 of schedule B covers "books, papers or records" of Daltel, Pacifica or Globenet. It appears clear that the switch information were at least records, a word of very wide meaning and I did not understand Mr Page to submit the contrary. His submission on paragraph 4 was that, while the information was held electronically on the switches, it did not constitute records of the claimant companies because they did not own such electronic records. The electronic records were owned by the owners of the switches, which on his case were ATEL and Daltel USA. He accepted that once printed out and held by a claimant company they would be records of that company. In my view, ownership of the hardware on which the records are stored does not determine this question. 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. It can be tested in this way. The accounting records of many businesses are maintained on a day to day basis by accountancy firms, almost certainly on computers belonging to the firms. Provided that the client company has electronic access to the records and/or a right to demand the records in hard copy, they are in my view records of the business. Similarly the holder of an electronic bank account will, through the use of a password or other checks, be entitled to view and print off records of his account. Although held on the bank's computer system, they are his records. Ownership of the hardware is not a decisive, or even a relevant, factor.
- There were not in evidence any written agreements between the switch owners and the claimant companies. Both the owners and the claimant companies were, subject to the disputed ownership of Globenet, under the common control of Mr Makki and I very much doubt whether there were any written agreements. It is not therefore possible to point to an express right of access to the records held on the switches. However, the nature of switch operations and the purposes for which CDRs and statistical summaries are held make it inconceivable that a reseller would not have a right of access to them and a right to print them. Although Mr Page submitted in reply that a right of access did not satisfy the test of necessity for an implied term, he was in my judgment correct when he earlier said in his closing speech that the users were entitled to access to the switch records.
- I therefore conclude that the switch records come within paragraph 4 of schedule B. In my judgment they also fell within paragraph 6. The submission that they are not "records of" the companies is not applicable because paragraph 6 is directed to "records that relate to" the companies. Ownership of the records is therefore clearly not relevant. As the switch records contain details of the cost and revenue generated by calls, they are properly described as "accounting or financial records", which relate to the claimant companies.
- In opening Mr Anderson submitted that paragraph 5 was also applicable, because the records related to assets of the claimants in the form of airtime. Mr Page submitted, correctly in my view for the reasons given earlier in this judgment, that "airtime" was not an asset of the companies. While the debts payable to claimant companies in respect of calls routed by them were assets, it is the claimants' case that those debts were paid and the resulting monies misappropriated by Mr Makki. The debts having been paid and thus extinguished, the switch information would not relate to assets of the companies. Mr Anderson points out that it is Mr Makki's own case that the debts are still owed by Weybridge and, if that is right, these records do fall within paragraph 5. However, I am certainly not finding on this application that Mr Makki's account is correct and the court cannot make a finding of a breach of an order on a factual basis which is not established.
- Precisely the same point applies to paragraph 8.3 of schedule B which concerns documents relating to Weybridge. It is the claimants' case that Weybridge played no part in the relevant transactions and that the switch records do not in any way relate to it.
- Paragraph 8.1 of schedule B refers to any documents relating to Daltel USA LLC and/or any other entity that uses or trades under the name of "Daltel". It is common ground that ATEL and Daltel used or traded under the name "Daltel". Accordingly, all switch information relating to ATEL and Daltel as well as to Daltel USA constituted listed items to which paragraph 17 of the search order applied. It should be acknowledged that information relating to ATEL does not appear to be much in point to the issues as they have developed in this case. It is not suggested by any party that ATEL played any part in the transactions in dispute. As to Daltel USA, it is the claimants' case that, like Weybridge, it played no part in the transactions and the switch information did not relate to it. I cannot be satisfied that any switch records relate to Daltel USA. Mr Anderson also submitted that if, as Mr Makki contends, AC52 is owned by ATEL, all information stored on it falls within paragraph 8.1. I do not accept this submission. The requirement of paragraph 8.1 is that documents should "relate to" the relevant companies. Ownership of the documents, or ownership of the switch storing them, does not mean that they relate to the owner.
- The second issue in determining whether there was a breach of paragraph 17 is Mr Makki's state of knowledge on 27 February 2004. Paragraph 17 required him to disclose " so far as he is aware where all the listed items are". Mr Page submitted that Mr Makki's obligation arose only if (i) he knew that a particular item was a listed item as defined and (ii) he knew where it was. Strictly speaking, I consider that the words "so far as he is aware" relate only to the whereabouts of the items and it is Mr Makki's responsibility to understand the meaning of listed items and, if in doubt, to seek clarification. However, in practice, if he genuinely did not realise that an item was a listed item, his breach of the order would not be treated as contumacious.
- Evidence adduced by the claimants, in particular Mr Sherlock's affidavit and some exhibited e-mails between ECT and Mr Makki, demonstrate a considerable degree of understanding of the switches and their operation on Mr Makki's part. The switches were at the heart of the businesses run by Mr Makki through Daltel, Pacifica, Daltel USA (on his evidence) and Globenet (on the claimants' case). Mr Makki was able to provide essential assistance to Dr Castell in generating summary statistical information from the switches. In his section 236 examination, to which Mr Page referred in this context, he stated that statistical information could be obtained from the switches for the purpose of preparing invoices and the CDRs were sent with invoices.
- CDRs and other switch information are the only records directly available to a switch user such as Pacifica of business conducted through a switch. The user needs them, for example, as a check against invoices from BT or other carriers. In these circumstances, and in the absence of credible evidence to the contrary, the inference is overwhelming that Mr Makki knew that the switches generated records and would not have forgotten it on 27 February 2004, particularly after the effect of the order was explained by the supervising solicitor and his own solicitor.
- Mr Page made a number of submissions that this inference could not properly be drawn beyond a reasonable doubt. First, he submitted that there was no evidence before the court about what, if anything, went through Mr Makki's mind concerning switch information on 27 February 2004. He submitted that it was likely, or at least possible, that he did not give switches a thought. This is making bricks without straw. There is no evidence from Mr Makki that he did not give it a thought on 27 February 2004. Any fair reading of paragraphs 61–68 of his third affirmation indicates that he did think about the switch information but believed that he did not need to disclose its existence because (i) he believed "at the time of the Search Order" that the records on the switches were the property of the switch owner and did not therefore require disclosure (paragraph 62) and (ii) he believed that he did not have access to CDRs which were more than 90 days old.
- I am entirely satisfied that Mr Makki knew on 27 February 2004 that the switches recorded information relating to the transactions and business of Daltel, Pacifica and Globenet. I do not accept that Mr Makki could have believed or did believe that paragraph 17 and schedule B required disclosure only if a claimant company owned the switch. The supervising solicitor states in his report to the court that he explained to Mr Makki that he was required to inform the claimants immediately where the listed items were, explained that the definition of listed items was extremely wide and took Mr Makki and Mr Wylde through the definition in general terms. I should say here that this involves no criticism of Irwin Mitchell or the advice given to Mr Makki, which remains privileged. Their advice could only be as good as the information given to them by their client and there is no evidence that he discussed switch records with them.
- Mr Makki's point about the CDRs being inaccessible after 90 days has more to it. It is the case that the CDRs on AC52 were archived after 90 days, on a day by day basis. Although retrievable with ECT's assistance, they were not accessible from ATEL's offices. Mr Makki's evidence in his fifth affirmation is that all CDRs were deleted from the servers after 90 days and this had been the case since he became an ECT customer in 1998. He goes on to say that he believed this to be the case with AC85, although he now accepts that in fact they remained accessible from ATEL's offices. The claimants countered this with Mr Sherlock's evidence that in his dealings with ECT in relation to BT's switch AC84, the 90-day archiving function would be activated only on the switch-user's express instruction. The difficulty I have with Mr Sherlock's evidence is that it relates only to one company's experience with one switch. Evidence could have been obtained from ECT, by the use of a witness summons if necessary, either as to what in fact occurred with Mr Makki in relation to AC52 and AC85 or as to their standard procedure. I do not feel justified in concluding beyond a reasonable doubt that Mr Makki knew either that CDRs on AC52 which were more than 90 days old could be accessed with ECT's assistance or that CDRs were not being deleted on AC85.
- However, this does not assist Mr Makki as regards the summary statistical information, as he makes clear in his fifth affirmation (paragraph 23).
- I am satisfied to the necessary standard that Mr Makki was well aware on 27 February 2004 that records existed on the switches and were covered by paragraph 17 of the order but chose not to disclose them. It was in keeping with his general approach on that day to restrict disclosure to matters which he could see, from the terms of the orders and the questions put to him, were known to the claimants. I am satisfied that Mr Makki was in deliberate breach of paragraph 17 in this respect. He made no reference to switch records in his affirmation of 9 March 2004, which I am also satisfied was deliberate, and it follows that he was also in breach of paragraph 19 of the search order.
- A deliberate breach of an order is a very serious matter, but Mr Makki relies on two factors to suggest that it should be regarded as trivial in this instance. First, he states his belief that the claimants knew that these records existed. No doubt technical personnel at BT would know that records are held on switches, including those who provided witness statements in support of the application for the search and freezing orders. Their statements do not however mention such records and there is no evidence or reason to believe that the liquidator knew of them. The answers given by Mr Richards in his cross-examination (day 4 pages 479 and 497) relied on by Mr Page do not in my judgment establish that he had such knowledge. The clear thrust of his evidence was that he knew about the existence of the switches and was interested in them as possible assets of the claimant companies, but did not know that they were likely to contain material information.
- Secondly, the non-disclosure is said to have caused no damage or inconvenience, and the information in some records was wrong. At worst, there was a delay in disclosure. It is true, so far as is known, that the switch information was not interfered with and was recovered by technical experts from BT in June and August 2004. However, the submission ignores the purpose of this order. It was a search order and one of its significant purposes was to recover as much information and as many of the records of the claimant companies as quickly as possible to enable the liquidators to fulfil their duties. The recovery of information and records in a liquidation is an urgent matter, as the court had recognized by making the search order. It required to be promptly obeyed. Mr Makki seeks to criticise the claimants for their delay in recovering the switch information, but in my view this can neither be sustained nor provide any excuse for Mr Makki. He first disclosed the existence of CDRs on the switches at his private examination on 6 April 2004 but said that they were deleted after 90 days. He made no mention then or later of the summary statistical information. In May 2004 the claimants tried to gain access to the switches but ECT initially refused permission. On 25 May 2004 Jones Day sought Mr Makki's permission but it was not given. ECT gave access to the switches to BT in June and August 2004, which led to a strong complaint to ECT on Mr Makki's behalf.
- As an aspect of the second submission, it was asserted that BT itself had in its own records all the information appearing in the switch records. This is not the case. While BT's records will contain some information on calls routed to it as carrier, there is no evidence or reason to think that they contain information, particularly billing information, as between for example Pacifica and Arbinet or Weybridge.
- Mr Makki places some reliance on an arrangement reached during the search on 27 February 2004 that ATEL documents would not be immediately delivered up, in order not to disturb the business of that company. In my view this has only a marginal significance. It does not affect the operation of paragraph 17 which requires only the disclosure of the location of listed items, and it applies only to ATEL documents, whereas the switch information in issue concerned not ATEL but the claimant companies. (v) Alleged breach of paragraph 16.1 of the search order
- It is alleged in paragraph 4 of the September application that:
"The First Defendant has failed to comply with paragraph 16.1 of the search order in that the First Defendant did not immediately or at all permit the Independent Computer Specialist to make two electronic copies (or images) of all or any of the documents (whether listed items or otherwise) held on switches AC 52 and AC85 situated at Telehouse, 65 Clifton Street ("the Switches"), which were accessible from the premises."
It is common ground that no copies or images were made of any documents held on either switch by the independent computer specialist.
- Although the obligations imposed by paragraphs 16.1 and 17 are very different, there are some common issues. Mr Makki's knowledge of the existence of records on the switches, whether he acted deliberately in not disclosing them or giving access to them and whether the consequences of any breach were trivial all arise in relation to paragraph 16.1 and I have already given my conclusions on those issues. The definition of listed items does not arise because paragraph 16.1 applies in terms to documents whether or not they are listed items. The two issues specific to paragraph 16.1 which have arisen are (i) whether the switch records were, within the meaning of the paragraph, held on "computers or electronic data storage devices" situated on or accessible from the premises, and, if so, (ii) whether Mr Makki was in breach of the obligation to "permit" the records to be copied. Both issues raise questions of the proper meaning of paragraph 16.1
- The whole of paragraph 16 is concerned with records and documents held in electronic form. It is structured so as to operate in two stages. First, the independent computer specialist is to take electronic copies, which may be on an indiscriminate basis, of all or any documents held on the relevant computers and storage devices. It is clearly contemplated that the computer specialist will or may copy the hard drives of computers and devices and for this purpose he is permitted to remove their outer casings. Equally it contemplates that any disks on the premises may be copied, as they are electronic storage devices. Secondly, under paragraph 16.2 access to all computers and other equipment is to be given to the search party (defined in paragraph 5) who are to be permitted to search them. Additionally, Mr Makki is required to display and/or print any listed items held on them and to provide copies of all such listed items.
- Both paragraphs 16.1 and 16.2 refer to computers and other devices or equipment "accessible from", as well as situated on, the premises. This is a change to the wording contained in the standard form search order annexed to the Practice Direction supplementing CPR Part 25. Paragraph 17 of the standard form order is similar to paragraph 16.2 but refers only to "the computers on the premises". The practice direction makes clear that the standard form may be modified.
- The difficulty with the extension of paragraph 16 to all computers accessible from the premises is to understand how far it goes. Mr Page submitted that, read literally, it applied to all documents on the world wide web. It would require Mr Makki to permit copying of and access to documents and equipment which, even if personal to him, were wholly unconnected with the claimant companies or his assets. Mr Page's submission was that these problems could be addressed only by excluding any documents or equipment accessible only via the internet. Any documents or equipment connected by a permanent link, not involving the internet, would be covered by the order. This limitation would have to arise by implication, as it is not expressed in the order but, Mr Page submitted, it was necessary to avoid oppressive and absurd results.
- While the terms of paragraph 16 are capable of giving rise to these difficulties, its application in this case is not in my judgment to be determined by reference to hypothetical examples of an extreme sort which do not arise on the present facts. At issue here is not unrelated material on the web or even in a personal document to which Mr Makki has access. The issue is whether information held on the switches falls within paragraph 16.1. Suppose that the search party had known that the switches contained records and the computer consultant sought access to them, it would be absurd if Mr Makki could have prevented him from making copies of them. It would be an exception which is not to be found in the language of paragraph 16.1 and which on the facts would have no justification.
- Further, there is a clear distinction between access to the switch records and access to the world wide web. In his first affirmation in opposition to this application, Mr Makki stated that he did not believe that it was possible to access either of the switches over the internet. His evidence was that access was possible through a server in Mr Makki's office using a router and an internet browser. Technically, therefore, there was an internet connection but it was via a dedicated router, and using a unique user name ("hassanm"). Mr Sherlock's evidence is to much the same effect. Information on AC85 could be accessed via the internet to the router attached to the switch. There is in evidence an e-mail dated 5 February 2004 from ECT to Mr Makki which gave detailed instructions for accessing a switch via the router. Mr Sherlock's evidence establishes that the router connected to AC52 had a permanent link to Mr Makki's office, thereby avoiding the need for internet access and effectively making the router and access to AC52 part of the office computer network. An application of paragraph 16.1 to the information on the switches does not, even in theory, lead to the open-ended result threatened by Mr Page.
- The meaning of "permit" in paragraph 16.1 and the extent of the obligation imposed on Mr Makki by paragraph 16.1 is the second specific issue which arises. The claimants submit that Mr Makki was required to disclose the fact that information was held on the switches and the password which would have enabled the computer specialist to access it. Mr Page submitted that Mr Makki would not breach the obligation to permit copies to be made, unless he failed to respond to a request for information as to, for example, where documents were held. He had no obligation to volunteer any information. Mr Page submitted that the dictionary meaning of the word permit was to give consent to, which necessarily involved a prior request.
- I do not accept Mr Page's submission. The primary meaning of the word permit is allow, which does not necessarily require a prior request. Its meaning for present purposes is to be found from its use in the context of paragraph 16.1 and the purpose of the order. If, for example, Mr Makki had a laptop computer hidden in his office, the computer specialist could not copy the documents held on it unless Mr Makki disclosed its existence. It is a necessary part of permitting those documents to be copied that Mr Makki should inform the specialist that it exists and produce it. It would reduce paragraph 16.1 to a child's game if Mr Makki's obligation depended on being asked a question such as "are any computers hidden in this office". In my judgment it makes no difference that the switch was not in Mr Makki's office but was accessible from it. If anything the extension of the order to computers in remote locations adds to the need for Mr Makki to disclose their existence. Any theoretical objections that this creates an open-ended obligation can in my view be discounted. This application is concerned with a computer storage device which was central to the claimant companies' business and to records of those businesses. There is a contrast in the operative language in paragraphs 16.1 and 16.2, with the latter requiring Mr Makki to "give the search party effective access" to the computers and other equipment, this being wording in the standard form order. While more obviously imposing an active, rather than responsive, obligation, this difference in language cannot in my view reduce paragraph 16.1 to the purely reactive obligation for which Mr Page contends.
- Having regard to my conclusions on Mr Makki's knowledge and state of mind on 27 February 2004, I am satisfied that he knew full well that he should make known the existence of records on the switches and failed to do so pursuant to paragraph 16.1 as well as paragraph 17. It does not detract from my conclusion if I say that it would be better if a provision such as paragraph 16.1 was drafted so as to impose an obligation to give effective access to computers, rather than to permit copying.
(vi) Alleged breach of paragraph 16.2 of the search order
- In paragraph 5 of the September application, the claimants allege a wholesale breach of paragraph 16.2 in relation to the switches and information held on them. It is common ground that Mr Makki did not give the search party access to the switches or the information on them and did not cause any part of the switch information to be displayed or copied. But for one point, my conclusions and findings on the issues raised in relation to paragraphs 16.1 and 17 would mean that Mr Makki had also failed to comply with paragraphs 16.2.
- The point specific to paragraph 16.2 is that the obligation in the first sentence is expressly qualified by the words "immediately after the Independent Computer Specialist has made the copies provided for by paragraph 16.1 above" which must, I think, also qualify the obligations in the second and third sentences. As I earlier observed, the structure of paragraph 16 is that, first, the independent computer specialist is to take electronic copies of the data held on the computers and then the search party is to be given access to them. No doubt the claimants in framing this order contemplated that the first part would be accomplished in good time to allow the search party to have access to the computers and to be provided with copies. It is common ground that by the end of the search on 27 February 2004 the computer specialist had not completed the task of copying documents on the computers. Details are given by the supervising solicitor in his report. It follows therefore that the time for performance by Mr Makki of his obligations under paragraph 16.2 had not arrived. For that reason I hold that a breach of paragraph 16.2 is not established. In fairness to Mr Makki, it should also be said that, as appears from the supervising solicitor's report and other evidence, he was not asked by the search party to give access to the computers to the search party or to display or supply copies of listed items. The search party, Mr Makki and his solicitors were busy until 9pm on 27 February 2004 dealing with other aspects of the orders.
(vii) Alleged breaches of paragraphs 12, 15, 16 and 18 of the freezing order
- Paragraphs 12, 15, 16 and 18 of the freezing order provide as follows:
"12. The Respondent shall within 2 business days deliver up to the Second, Fourth and Fifth Applicants pursuant to section 234 of the Insolvency Act 1986 any property, books, papers or records of the First and Third Applicants and/or Globenet (UK) Limited.
15. The Respondent must within 7 days of the service of this Order swear and serve on the Applicant's solicitors an Affidavit setting out what documents he has in his possession, power or control (whether such documents are in England and Wales or not) that (1) relate to or evidence the existence, location or value or details of any of his assets ("the Asset Documents") or that (2) relate to or evidence the existence, location or value or details of the Company Assets or relating to what has become of the Company Assets or that (3) are books, papers or records of the First and Third Applicants and/or Globenet (UK) Limited ("the Company Asset Documents").
16. The Respondent must within 7 days of the service of this Order swear and serve on the Applicant's solicitor an Affidavit setting out the location of all Asset Documents and Company Asset Documents including but not limited to the address of such premises where such documents are located. If any of these documents are held in the custody of third parties on behalf of the Respondent or to the order of the Respondent (including documents in respect of which the Respondent is entitled to the delivery of copies on the payment of a fee, such as bank statements) whether in England or abroad, then the Respondent must give the name, addresses, telephone numbers and fax numbers of all such third parties and state what documents they hold.
18. The Respondent must (where possible) immediately deliver up to the Applicant's solicitors all the Asset Documents and Company Asset Documents or copies of those documents. Where it is not possible to make immediate delivery up of Asset Documents and Company Asset Documents the Respondent must deliver up such documents to the Claimant's solicitors as soon as possible and in any event within 10 working days from the date of service of this Order. In the case of bank accounts, these documents must include bank statements showing the state of the account at the date of this Order."
- It is alleged that by failing to deliver up copies of the switch records within two business days and by failing to set out details of the switch records in his affirmation of 9 March 2004, Mr Makki was in breach of paragraphs 12 and 15 of the freezing order. This raises the same issues as the allegation of the breach of paragraph 17 of the search order. The requirement in paragraph 15 that the records be within the possession, power or control of Mr Makki is satisfied because he was able to access them from his office. For the reasons given earlier, I find that Mr Makki was in deliberate breach of the order in paragraphs 12 and 15 with respect to the switch records comprising the summary statistical information.
- The claimants allege breaches of paragraphs 16 and 18 of the freezing order on the grounds that the switch records were "Company Asset Documents" and Mr Makki failed to state their location in his affirmation of 9 March 2004 or to deliver them up to the claimants' solicitors. Company Asset Documents are defined in paragraph 15 of the freezing order and in my judgment the switch records fall within paragraph 15(3) for the reasons already given in relation to "listed items" and also within paragraph 15(2). The latter is applicable because although on the claimants' case the amounts due from Arbinet had been paid to the claimant companies and were therefore no longer assets of those companies, the definition of "Company Assets" in paragraph 29 includes also any and all payments made by or to the claimant companies. The switch records therefore related either to the payments made by Arbinet or, if Mr Makki is right, to the debts due from Weybridge. On either basis they related to Company Assets as defined. I therefore hold that Mr Makki was in breach of paragraphs 16 and 18 of the freezing order as regards switch records comprising the summary statistical information.
- Breaches of paragraphs 12, 15 and 16 were also alleged on the basis that Mr Makki failed to deliver up, or set out in his affirmation details of, the books, papers and records of Globenet. This has not been the subject of submission by either the claimants or Mr Makki and I do not therefore propose to treat it as a live issue.
- The overall result on the switch information is therefore that I find that Mr Makki was in deliberate breach of paragraphs 16.1, 17 and 19 of the search order and paragraphs 12, 15, 16 and 18 of the freezing order, in each case as alleged by the claimants.
Conclusion on breaches of the search and freezing orders
- I am satisfied beyond reasonable doubt that Mr Makki was in deliberate breach of his obligations under the search and freezing orders with regard to the Merjan property, the BLOM Bank dollar account, the account at Banque de la Mediterranean and the switch information in the various respects which I have indicated. Each of these breaches 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.
Alleged false statements in the defence
- In their application under CPR Part 32.14, the claimants allege that some 16 statements made in Mr Makki's defence and 6 statements made in Daltel USA's defence are deliberately false and that, when Mr Makki signed the statements of truth verifying the defences, he knew the statements were false. The statements contain essentially three allegations, each of which is said to be deliberately false. The first is an allegation that at all times during the periods of trading by Pacifica and Globenet, Hillside and Weybridge were owned and controlled not by Mr Makki but by Mr Al- Eid. The second is an allegation that throughout its period of trading Globenet was not owned or controlled by Mr Makki but by Mr Al-Eid. The third is an allegation that Pacifica (which Mr Makki accepts was under his control at all material times) and Globenet sold all their airtime to Weybridge.
- On the basis of these allegations Mr Makki's defence, or a significant part of it, is that he had, first, no responsibility for Globenet's trading and its insolvency and, secondly, no responsibility for Weybridge's inability to pay the amounts due from it to Pacifica which has resulted in Pacifica's insolvency. It is important to Mr Makki's defence of the claims in relation to Pacifica to establish both the allegation that Mr Al-Eid owned Hillside and Weybridge and the allegation that Pacifica traded with Weybridge. It is hard to see that one allegation without the other will be of much help to him. If Pacifica traded with Weybridge, but Weybridge was owned by Mr Makki, the interposition of Weybridge in the trading chain provides no obvious defence to him. Equally, unless Pacifica traded with Weybridge, the ownership of Weybridge is irrelevant. As allegations of fact, they are not however mutually dependent. It is possible for one of them to be true and the other false. So, for example, Pacifica could have traded with Weybridge, but both of them could have been under the common ownership or control of Mr Makki.
- I propose to deal first with the allegations concerning the ownership of Weybridge, Hillside and Globenet. They are so connected that it is difficult to address them separately. I will then deal with the allegations that Pacifica and Globenet sold their airtime to Weybridge.
(i) Ownership of Weybridge, Hillside and Globenet
- The evidence adduced by the claimants in support of their case as to the ownership of Weybridge, Hillside and Globenet can be conveniently divided into two categories. First, there is evidence derived from documents and other information recovered by the claimants on execution of the search order and by the liquidators of the companies in the course of carrying out their duties. Secondly, there is the evidence given by Mr Abdelmawla who was engaged by the claimants to make enquiries in Syria as to Mr Al-Eid and his circumstances.
- These two categories of evidence are very different. The claimants submit that the first category establishes that during the material periods Mr Al-Eid had no part in the ownership or control of Weybridge, Hillside and Globenet and that they were in fact controlled by Mr Makki. This part of their case does not depend at all on any evidence as to Mr Al-Eid's circumstances or whether it is credible that a person in his circumstances could have acquired the companies or been involved in running them. The second category of evidence is concerned exclusively with Mr Al-Eid and his circumstances and with statements alleged to have been made by him or on his behalf, which, the claimants submit, show that it is not credible that Mr Al-Eid had any involvement with the companies.
- Mr Page, on behalf of Mr Makki, submitted that the claimants were not entitled to rely on the first category of evidence independently of the second, but could do so only by way of corroboration of the case sought to be made on the evidence regarding Mr Al-Eid's personal circumstances. Accordingly, if that evidence was not accepted, the claimants could not rely on the first category of evidence. Mr Page submitted that this was the basis on which the claimants' case had been opened, both in their written opening and orally, and that they could not go back on it. If the case had not been put in this way, consideration would have been given to call Mr Makki to give oral evidence, although Mr Page was careful to say that he was not in a position to say that Mr Makki would in fact have given oral evidence.
- I do not accept this submission. It is right to say that the evidence concerning Mr Al- Eid has played a prominent part in this part of the claimants' case, both in the evidence put before Mann J in September 2004, when permission to make this application was sought, and in the evidence and submissions in support of the application itself. However, I did not read the claimants' written opening nor understand Mr Anderson's oral submissions in opening as restricting the other evidence to the role of support or corroboration of the evidence concerning Mr Al- Eid, nor do I so now after re-reading them in the light of Mr Page's submission. For example, paragraphs 28–30 of the claimants' written opening submissions state:
"28 Thus, Makki's explanation for the failure of both Pacifica and Globenet (which collectively owe BT the sum of approximately £7,000,000) is based on his assertion that (save for limited technical issues) Al-Eid was entirely responsible for the trading activities and business arrangements of both Weybridge and Globenet and that the independent acts and/or omissions of Al-Eid were causative of the losses ultimately suffered by BT. These "facts" are central to his Defence in these proceedings. In fact, they are nothing more than an ex post facto fabrication.
29 If Makki is to be believed, Al-Eid is a very wealthy Syrian businessman with a detailed knowledge of the telecoms market. In fact, the Claimants' enquiries and the surrounding evidence have established beyond doubt that Al-Eid is an impoverished taxi/bus driver living in straitened circumstances in a poor suburb of Damascus.
30 Without necessarily rehearsing in this skeleton all of the evidence gathered by the Claimants on this issue, the Claimants will rely, in particular, on the matters set out below."
- There then follow 18 pages of submissions and references to the evidence under nine separate headings, of which only the first section of just over five pages deals with Mr Al-Eid's circumstances. The conclusion in paragraph 63 is stated as follows: "The Claimants submit that the only conclusion that can be drawn from this substantial body of evidence is that the Al-Eid story is a work of complete fiction, whose only purpose is to attempt to distance Makki from the trading of the airtime and to justify ex post facto his retention (through Daltel USA) of the substantial sums paid for such airtime by/through Arbinet." The claimants clearly rely on the totality of the evidence to establish their case, and there is nothing in the written opening to suggest that one part of the evidence is to stand only as corroboration of another.
- Mr Page relied also on oral submissions made by Mr Anderson in opening. While it is the case that Mr Anderson on occasions referred to the evidence which did not deal with Mr Al-Eid's circumstances as "corroborative" of the claimants' case, the claimants' position was clearly stated by him (at day 6 p. 654):
"It would be my submission that all of that evidence provides – it is not only independent evidence itself as to the nature of the fraud and the fact that the Al-Eid story is a fiction, but it obviously also supports, indirectly, the evidence of Mr Albacha."
On the same day (at pp 655–656), Mr Anderson made the same point and then stated that he would consider whether there was sufficient evidence on which to invite the court to find against Mr Makki on this alleged contempt, even if Mr Abdelmawla was not able to give oral evidence. Mr Page relies also on that statement, but it was not made on the basis that the other evidence was simply corroboration of Mr Abdelmawla's evidence. On day 11 Mr Anderson made clear that he would proceed even if Mr Abdelmawla did not give oral evidence.
- I should also mention the evidence in support of the committal application. In his affidavit of 16 September 2004, Mr Richards of Jones Day summarised the results of enquiries by them undertaken into Mr Al-Eid's circumstances and stated (para 148):
"On the basis therefore of Mr Albacha's evidence alone, it seems beyond doubt that Mr Al-Eid had no genuine involvement in the trading of airtime and that the sale agreements entered into between himself and Mr Makki (for the sale of Hillside, Weybridge, Globenet and Community) were not genuine and would have been signed by Mr Al-Eid (if indeed, it was Mr Al-Eid who signed them) at a time when Mr Makki knew that they did not relate to genuine transactions and were simply a tool in his deception."
Mr Richards continues in paragraph 149 by drawing attention to the lack of any contemporaneous correspondence or other documents with Mr Al-Eid during the material period and states that its absence "evidences the reality that no genuine, business relationship in fact existed between Mr Makki and Mr Al-Eid". In paragraph 150 he states that:
"This clear conclusion is further supported and strengthened when one considers both the collective information obtained by the Liquidators as a result of their investigations to date (as set out above) and the numerous and unexplained inconsistencies in statements provided by Mr Makki."
There then follows over six pages of evidence, unrelated to Mr Abdelmawla's evidence, in support of that conclusion.
- Similarly, in his affidavit in reply, Mr Richards details over 11 pages a substantial amount of evidence in support of the claimants' case that the introduction of Mr Al- Eid was a fiction designed by Mr Makki to conceal his misappropriation of funds belonging to the claimants companies. None of this evidence is concerned with Mr Al-Eid's circumstances or results from Mr Abdelmawla's enquiries.
- I am satisfied that the claimants' case has never been made on the basis that the evidence of Mr Al-Eid's circumstances is its primary support and that the remaining evidence is just corroboration, nor in my judgment could Mr Makki have reasonably thought it was made on that basis.
- I will consider first the evidence which does not concern Mr Al-Eid's circumstances.
- First, the claimants rely on the various written agreements for the sale of the relevant companies and the circumstances in which they were provided by Mr Makki or otherwise became available to them. The search order made on 27 February 2004 required Mr Makki within four 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, shareholder and directors of Weybridge and Hillside. He was also required within seven days to set out this information in an affidavit. This was included in the order because Mr Makki had informed the official receiver that Pacifica had dealt with Weybridge and because Hillside was shown in returns to Companies House as a director and shareholder of Globenet.
- In his affirmation made on 9 March 2004 pursuant to the freezing order Mr Makki stated:
"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 1003 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 sale agreements provided by Mr Makki were, in the case of Hillside, expressed to be between Mr Makki as seller and Mr Al-Eid as buyer and dated "as of 7 August 2003" and, in the case of Weybridge, expressed to be between Mr Makki as seller and Hillside as buyer and dated "as of 12 August 2003". The latter agreement also covers the sale of Community by Mr Makki to Hillside. Both agreements bear the signatures of Mr Makki and (according to Mr Makki's evidence) Mr Al-Eid and all the signatures are dated 22 February 2004. The recitals to both agreements state that Mr Makki sold and conveyed to the buyer his entire interest in Hillside and in Weybridge and Community on 7 August and 12 August respectively and that Mr Makki and the buyers "desire to memorialize herein the terms and conditions" of the sales. The consideration stated was US$25,000 for each company. I will come later to the circumstances in which these agreements were prepared and signed. The earlier sale agreements referred to by Mr Makki in his affirmation were not produced.
- In the course of his private examination under section 236 of the Insolvency Act 1986 on 6 April 2004, Mr Makki stated that he had sold Weybridge, Hillside and Community to Mr Al-Eid in June 2003. This, he said, had been documented in contracts in Arabic drafted by Mr Al-Eid's cousin who was a solicitor. In his witness statement dated 1 November 2004 (later confirmed in an affirmation) he stated:
"The deal with Al-Eid was concluded in June 2003. Mr Al-Eid informed me that his cousin, who is a lawyer in Syria, had drawn up a very basic Arabic contract for the sale of the companies. I did not think it necessary at that time to study the paperwork carefully or ensure that it was looked at by a US or UK based lawyer, but only thought of this subsequently. However, I signed the Arabic document and believed that this gave effect to the sale."
- On 9 June 2004 Mr Makki's solicitors supplied a copy of a contract in Arabic. It is expressed to be made between Mr Makki as seller and Mr Al-Eid as buyer and it is stated to be executed on 5 June 2003. It provides for the sale of Hillside, Weybridge and Community to Mr Al-Eid, with control passing immediately to him (clause 4) and payment of the total purchase price of $75,000 to be made by 31 October 2003. The contracts in English signed on 22 February 2004 contain no reference to or suggestion of any earlier agreement, let alone a written contract. There are material differences between the Arabic contract and the English contracts. While the latter provide sequentially for the sale of Hillside to Mr Al-Eid and the sale of Weybridge and Community to Hillside, the Arabic contract provides for the sale of all three companies to Mr Al-Eid. The Arabic contract provides for control to pass immediately to Mr Al-Eid whereas the English contracts provide that the sales occurred on 7 and 12 August 2004. Mr Makki's explanation in his witness statement dated 1 November 2004 for the occurrence of the sales on those dates is as follows:
"Mr Al-Eid told me that on 7 August 2003 he arranged for the transfer of his shares in Hillside to himself. He had, of course, already paid for the company in July 2003. He also told me that on 12 August 2003 Hillside acquired all of the shares in CTL and Weybridge. Mr Al-Eid told me that these were the dates on which the transfers had been affected when I met him in Beirut in August 2003. He did not give me an explanation regarding the reasons that he had decided to wait for two months before effecting the transfer, but I did not think it was particularly significant."
A similar account is given by Mr Al-Eid.
- As to the sale of Globenet, an agreement dated 25 September 2003 between Mr Makki and Hillside was found in Mr Makki's office on 27 February 2004, together with a copy of an unstamped stock transfer form for the transfer of two shares of £1 each in Globenet from Mr Makki to Hillside. It is dated 25 September 2003 and the consideration is stated to be £800,000. On 26 September 2003 a form 288b giving notice that Mr Makki had ceased to be a director of Globenet and a form 288a giving notice of the appointment of Hillside as a director of Globenet were lodged with the registrar of companies, as evidenced by the Companies House receipt on each form. Both are signed by Mr Makki and dated 25 September 2003. It is not clear who signed the form 288b on behalf of Hillside, but it is clearly not Mr Al-Eid, judging by the signatures on his affirmations. The annual return for Globenet dated 1 December 2003 and lodged at Companies House on 31 January 2004 shows Hillside as the only director and shareholder.
- In his witness statement dated 1 November 2004, Mr Makki explained that a contract had been drawn up by a firm of solicitors in London, Landwell. Mr Makki had sent it to Mr Al-Eid and he believed that it was signed on 23 or 24 September 2003. The agreement as found in Mr Makki's office was signed by Mr Makki but sealed, without any signature, by Hillside.
- It is clear from the terms of the agreement that, although dated 25 September 2003, it was drafted on the basis that it was to be signed after 31 October 2003: see, in particular the recitals and clause 3. It is also clear from e-mail correspondence between Mr Makki and Landwell, found on the personal computer in Mr Makki's office, that the agreement was not signed until after the end of October 2003. No objections on grounds of privilege have been raised to the use of this correspondence. Landwell were instructed on or about 25 September 2003 and in an e-mail on that date Shirley Brookes of Landwell told Mr Makki that she would send him draft heads of terms. Evidently a letter setting out the terms was then drafted and provided by Shirley Brookes because on 26 September 2003 Mr Makki e-mailed her to say that:
"Hillside Trading Group LLC have agreed to the Terms and Conditions set out in your letter, and they have signed it. I am off to Lebanon tonight…"
In e-mails dated 20 October and 30 October 2003, Mr Makki made detailed comments on a draft sale contract for Globenet. His amendment included an alteration in the price from $500,000 to £800,000.
- Mr Makki gave evidence in his private examination on 6 April 2004 that Globenet was sold to Mr Al-Eid in June 2003 as part of the same transaction as the sales of Hillside and Weybridge. On 16 June 2004 Mr Makki's solicitors sent a copy of a contract in Arabic between Mr Makki as seller and Mr Al-Eid as buyer for the sale of Globenet (then called Easynet International Limited). It bears the signature of Mr Makki and, according to the evidence of Mr Makki and Mr Al-Eid, the signature of Mr Al-Eid and it is stated to have been executed on 5 June 2003. The agreement provides for the sale of Mr Makki's shares and rights in respect of Globenet as of the date of the agreement and for control to pass from that date (see the recitals and clauses 2 and 4). The purchase price is stated to be £800,000, payable by 31 October 2003. There is no reference to the Arabic contract in the contract drafted by Landwell nor in the e-mails between Mr Makki and Landwell in September and October 2003. The Arabic contract is substantially inconsistent with the contract drafted by Landwell. The letter provides for the sale to Hillside, not to Mr Al-Eid, and it is expressed to take effect on 25 September 2003, not on the date of the Arabic contract, which is stated as 5 June 2003.
- Although the e-mails between Mr Makki and Landwell in September 2003 referred to a letter drafted by Landwell on 25 or 26 September 2003 which set out the terms of the sale, it was not found on execution of the search order, nor provided by Mr Makki as part of his disclosure for the purposes of the action. However, he exhibited to an affirmation dated 7 January 2005 two versions of a letter dated 25 September 2003 from Mr Makki to Hillside. The first is signed by Mr Makki but is not signed on behalf of Hillside. It is drafted expressly as an agreement in principle, which is subject to contract and not intended to be legally binding. The stated consideration, which appears in square brackets, is $500,000 payable on completion of the sale. The second version is significantly different in a number of respects. First, the letter is expressed to be legally binding, and states that it will be superseded by English contracts being prepared by solicitors in London. Secondly, it is stated to be "Further to the Arabic contracts dated June 2003" and its purpose is to confirm the basis on which it was agreed that Hillside would purchase Globenet. Thirdly it states that the consideration agreed for the sale of Globenet was £800,000, payable by 31 October 2003. Fourthly, it is signed not only by Mr Makki but also on behalf of Hillside. According to the evidence of Mr Makki and Mr Al-Eid, the latter signature is that of Mr Al-Eid.
- In his affidavit of 7 January 2005, Mr Makki gives his explanation of the two versions:
"On 24 September 2003 I held a meeting with Shirley Brooke of Landwell solicitors in London. On 25 September she forwarded to me (inter alia) a draft letter of intent to be sealed by Hillside (HAM4 p4-p5). I have no other communication with her relating to the letter of intent. Though the letter was drafted to refer to a price of $500,000, I amended one copy of it to £800,000, pursuant to my agreement with Mr Al-Eid. I took the letter to Beirut with me on 26 or 27 September 2003 and Mr Al-Eid signed the £800,000 letter (HAM4 p6-p7). It is correct that the actual agreement was signed one month later, and I apologise for the error in my original witness statement."
- It is the claimants' case that the Arabic agreements which purport to be made with Mr Al-Eid for the sale of Globenet, Hillside, Weybridge and Community are later fabrications, designed by Mr Makki to present a false case that Mr Al-Eid had owned and controlled those companies at all material times during the periods that Pacifica and Globenet traded.
- They base this case on a number of grounds. First, if these agreements had in truth been made, there is no reason why Mr Makki would not have exhibited the agreement relating to Hillside and Weybridge, rather than the agreements signed on 22 February 2004, to his affirmation dated 9 March 2004. There is no explanation for not referring to the Arabic contracts until his private examination on 6 April 2004 and not producing them until June 2004. Secondly, there are clear and substantial inconsistencies between the Arabic and English contracts, to which I have referred. Thirdly, there is no satisfactory explanation as to why the agreement for the sale of Globenet prepared by Landwell and the agreements signed on 22 February 2004 make no reference to the allegedly earlier Arabic contracts. Fourthly, Mr Makki has given no explanation as to why he asserted in his affirmation dated 9 March 2004 that he was the beneficial owner of Weybridge until 12 August 2003 if he had sold it by a contract made in June 2003.
- Fifthly, the claimants point to an obvious reason for fabricating the Arabic contracts. A sale of Hillside and Weybridge in August 2003 directly or indirectly to Mr Al-Eid, as appeared to be the case from the agreements dated 22 February 2004 and Mr Makki's affirmation dated 9 March 2004, was of little use to him by way of defence to Pacifica's claims. Pacifica traded between June and August 2003. Three invoices provided by Mr Makki to the official receiver showed airtime provided by Pacifica to Weybridge in June (£586,178), July (£2.3 million) and August (£1.26 million). Even if Mr Makki had genuinely sold Weybridge on 12 August 2003, the bulk of the trading with Weybridge occurred while it was still owned by Mr Makki. A sale of Hillside and Weybridge was therefore needed, at the latest, in early June 2003 if this defence was to be made good.
- Sixthly, as regards the Arabic contract for the sale of Globenet, Landwell drafted a sale agreement to Hillside without any reference to the Arabic contract and in ignorance of its terms. Mr Makki accepts that they prepared the draft non-binding letter of intent dated 25 September 2003. Not only was it expressed to be non-binding but it referred to a price, in square brackets, of $500,000. Further, their draft of the sale contract also included that price and it was not changed until Mr Makki gave his second set of comments on 30 October 2003. It is incomprehensible that Mr Makki would have sold Globenet for £800,000 in June 2003, but not instructed Landwell until 30 October 2003 that it was the agreed price. Indeed, for a price of $500,000 to have been included in the letter of intent and in the draft contract, he must have given that figure to Landwell.
- Mr Makki relies on the second version of the letter of intent to show that the October agreement gave effect to the Arabic contract. The claimants submit that it is also demonstrably a later fabrication, designed to give some credence to the Arabic contract. First, Mr Makki stated in his e-mail on 26 September 2003 to Landwell that Hillside had agreed to "the Terms and Conditions set out in your letter, and they had signed it", but the version put forward by Mr Makki as signed by Mr Al-Eid on behalf of Hillside is, as already discussed, significantly different from the letter prepared by Landwell. Secondly, Mr Makki clearly did not pass a copy of this version to Landwell, as otherwise they would have amended the draft sale contract to include its terms, particularly the price of £800,000. Thirdly, the letter prepared by Landwell was signed by Mr Makki. He would not have done so if he was preparing a revised version. Fourthly, if he wanted a revised and legally binding version, there was no good reason for not requesting Landwell to draft it. Fifthly, these letters of intents were not disclosed or produced in evidence by Mr Makki until January 2005.
- Mr Makki has put forward no explanation for many of these matters, and no convincing explanation for any of them. I am satisfied beyond any reasonable doubt that he has fabricated the Arabic contracts and the second version of the letter of intent, in order to provide a defence as regards Pacifica and to bolster his defence as regards Globenet. I am equally satisfied that the affirmation evidence of Mr Makki and Mr Al-Eid as regards the Arabic contracts is deliberately untrue.
- Apart from the Arabic contracts, Mr Makki relies on the agreements signed on 22 February 2004 for the propositions that Mr Al-Eid owned Hillside from 7 August 2003 and that, through Hillside, Mr Al-Eid owned Weybridge from 12 August 2003. There is no contemporaneous evidence of any sale of those companies to Mr Al-Eid in August 2003. The only evidence put forward, apart from the agreements signed on 22 February 2004, are the untested affirmations of Mr Makki and Mr Al-Eid which in any event are directed to the alleged sales agreed in June 2003. He also relies on the agreement dated 25 September 2003 for the proposition that Hillside owned Globenet from that date.
- Having found the Arabic contracts to be fabrications and the affidavit evidence of Mr Makki and Mr Al-Eid in that respect to be dishonestly untrue, it may not be necessary to consider further Mr Makki's case that Mr Al-Eid ever owned or controlled Hillside, Weybridge or Globenet. Nevertheless, there is a very substantial body of other evidence which, in my judgment, establishes beyond any reasonable doubt the falsity of his case.
- There are, first, the circumstances in which the agreements signed on 22 February 2004 for the sale of Hillside, Weybridge and Community were created. Winding-up orders had been made against Daltel and Pacifica on 19 November 2003 and a winding-up petition had been presented against Globenet on 27 January 2004 for hearing on 10 March 2004. At 5.33 pm on Friday 13 February 2004 Company Express (Delaware) Limited, the registered agents in the United States for Daltel USA, Weybridge, Hillside and Community, e-mailed to Mr Makki that they had received a request for the principal address, and for the identities and addresses of the members and managers, of Daltel USA and Weybridge. They requested instructions as to how to respond. Mr Makki replied later that day that he would advise Company Express on Monday 16 February. On 15 February 2004 he sent an e-mail to Brown & Bain PA, a firm of lawyers in Phoenix, Arizona, who had previously acted for Hillside. This e-mail is relied on by the claimants as setting out the scheme by which Mr Makki sought to conceal his fraudulent misappropriation of the funds of Pacifica and Globenet. It starts with a chart setting out the business structure and continues:
"Below are some facts/info relating to the above structure. While, I have an agreement with all of the above companies, I need to document them, in a very tight contract(s).
1. Daltel USA LLC has an interconnect contract with Arbinet.
2. Arbinet sends the calls/traffic to Daltel USA LLC.
3. Daltel USA LLC send the traffic/calls to Community Technology LLC.
4. Community Technology LLC sends the calls/traffic to Weybridge Management LLC.
5. Weybridge Management LLC send the calls/traffic to either Globenet UK Ltd, or Pacifica Ltd.
6. Pacifica Ltd, and Globenet UK Ltd, sends these calls to BT for termination to their final destination.
7. Pacifica Ltd, and Globenet UK Ltd, are 2 separate legal entities incorporated in the UK.
8. Pacifica Ltd has a standard interconnect agreement with BT.
9. Globenet UK Ltd also has a standard interconnect with BT.
10. BT invoices Pacifica Ltd for the cost of the calls. Pacifica then invoices Weybridge Management LLC, which in turn invoices Community Technology LLC, and then finally Community Technology invoices Daltel USA LLC.
11. All of the above companies share a telecom switch in London. This switch is owned by Daltel USA LLC.
12. Daltel USA LLC's switch has been partitioned to accommodate the other companies.
13. Pacifica Ltd is my company in London.
14. Globenet (UK) Ltd was also mine, but I sold it to Hillside Trading Group LLC, on the 25th of September 2003.
15. Daltel USA LLC is mine.
16. Weybridge Management LLC, and Community Technology LLC were both incorporated on my behalf by company express in Boston. However, both companies were sold on to a third party last year, in the summer.
1. I need to document the sale of the companies from my self to this third party individual.
2. This person has bought the companies, in its entirety. (ALL OF THE SHARE).
3. This contract has to be personal to this third party.
4. To also hold me and my other companies harmless against any proceedings.
5. I need it to be very tight.
1. I need an interconnect contract between Daltel USA, LLC, and Community Technology LLC.
2. I need an interconnect contract between Community Technology LLC, and Weybridge Management LLC.
As per above, Daltel USA LLC owns and operates the switch in London, that has been partitioned to accommodate Community, and Weybridge, Pacifica, and Globenet.
1. I need an individual contract between each of the above companies.
2. I need to charge then a fee of $5000 per circuit per month.
3. This contract does not form and sort of joint venture, partnership….etc.
4. The contract has to be very clear as to the ownership of the switch.
5. I think the contracts between the US companies have to be subject to the exclusive laws of Delaware???
Any other terms/contract you might think would be appropriate, please feel free to document, I will call you to discuss the reasons I am documenting this." This e-mail was recovered on execution of the search order and, although an objection was initially raised on Mr Makki's behalf that it was privileged, Mr Page confirmed that the objection is not maintained.
- There are other aspects of this e-mail to which I shall return, but Mr Makki accepts that the contracts for the sale of Hillside, and Weybridge and Community, dated as of 7 and 12 August 2003 and signed on 22 February 2004 were drafted by Brown & Bain. Paragraph 16 refers to the sale by Mr Makki of Weybridge and Community "to a third party last year, in the summer" and his instructions under "Requirement 1" are for a contract to document this sale. While further instructions must have been given, it may be noted in passing that the e-mail, like the contracts as signed, make no reference to the Arabic contract for the sale of those companies. It is clear that an Arabic contract was never mentioned to Brown & Bain.
- As promised on 13 February 2004, Mr Makki e-mailed to Company Express on 16 February 2004 with instructions for dealing with enquiries. With respect to Weybridge he wrote "I am trying to get hold of the owners for their instructions" but in the meantime any queries were to be addressed in writing to its registered office address in Delaware. On 17 February Company Express received a further request, for a business address for Hillside. Later that day Mr Makki e-mailed to Company Express:
"I am travelling to Lebanon on business. Upon my return on Monday 23rd, I shall furnish you with all the documents relating to the sale of Hillside Trading Group LLC, Weybridge Management LLC.
In the meantime, I will be happy to pay you for the time taken out to deal with these queries. Do you have any money from money on account for disbursements?"
The agreements 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, were signed by Mr Makki and (according to Mr Makki's evidence) by Mr Al-Eid on 22 February 2004.
- The claimants submit that it is apparent from this sequence of e-mails that Mr Makki was prompted to prepare written agreements for the sale of Hillside, Weybridge and Community directly or indirectly to Mr Al-Eid, by the knowledge that enquiries were being made about those companies. I have no doubt that this is correct.
- It is pointed out for Mr Makki that no attempt was made to back-date the written agreements, as they are stated to be signed on 22 February 2004, and it is submitted that, as the companies were all Delaware companies it was natural to try and complete the documentation of the sales by contracts drawn up by US lawyers. However, Mr Makki fails to provide any credible explanation as to why, if any sales took place in June or August 2003, they were not at that time documented by contracts drawn up by US lawyers. The only explanation given by him relies on the Arabic contracts. He states in his first affirmation in response to the September application:
"I did not think it necessary at that time [June 2003] to study the paperwork carefully or ensure that it was looked at by a US or UK based lawyer, but only thought of this subsequently" (para 111)
"After the sale [of Globenet to Hillside], I asked Messers Brown and Bain to draw up proper commercial documents in relation to the sale of CTL, Hillside and Weybridge, as I was worried that the Arabic contracts I had signed might be too informal." (para 111)
- I am satisfied that, faced with the imminent threat of the disclosure that he owned and controlled Hillside and Weybridge, Mr Makki took rapid steps to insert Mr Al-Eid, and in the meantime put Company Express off with excuses until the necessary documentation was in place. I am entirely satisfied that the agreements signed on 22 February 2004 did not in truth reflect or document any earlier agreements for the sale of Hillside, Weybridge and Community to Mr Al-Eid, whether made in August 2003 or at any other time.
- Secondly, Hillside's own records contradict Mr Makki's case that he sold Hillside to Mr Al-Eid in either June or September 2003. Mr Richards states that Hillside's company books were seized from Mr Makki's office on 27 February 2004 and he exhibits what he states to be a copy of the transfer register. Mr Page submitted that there is nothing on the exhibited copy to link it to Hillside and that Mr Richards did not explain why he thought it was Hillside's transfer register. In his evidence (fifth affirmation para. 20) Mr Makki dealt with it without any suggestion that it was not Hillside's transfer register and I see no reason to doubt that it is its transfer register.
- The claimants submit that it is telling that Mr Makki should in February 2004 be in possession of the company records of a company which he says he had sold some months earlier. Mr Page is right when he submits that custody of the company records does not prove ownership of the company, but it is nevertheless a relevant fact that Mr Makki still had them.
- The only entry in the transfer register shows a transfer on 25 September 2003 of the entire membership interest to Ali Hammad, of Beirut. In his evidence on this point Mr Makki states that Mr Al-Eid instructed him to put Ali Hammad's name in the register and that he believed him to be Mr Al-Eid's agent. There is no documentary evidence of this and it is not addressed by Mr Al-Eid in his affirmations. He does however state in his first affirmation that on 7 August 2003 he arranged for the transfer of the shares in Hillside to himself. Mr Makki also states that he was told by Mr Al-Eid that he had arranged on 7 August 2003 for the transfer of the shares in Hillside to himself. Not only is this inconsistent with the entry of Ali Hammad's name on the register but it is inconsistent with the date of transfer shown in the register as 25 September 2003. Mr Page submitted that one possible explanation is that Mr Al-Eid may have been incorrect when he informed Mr Makki that the shares had been transferred in August, although that would not explain Mr Al-Eid's own evidence. Another possible explanation suggested by Mr Page is that the entry in the register is wrong. This latter explanation would, if true, be within Mr Makki's own knowledge as he had custody of the register but he gives no evidence of it.
- Thirdly, the agreement dated 25 September 2003 for the sale of Globenet to Hillside was clearly prepared by Landwell during September and October 2003 and not signed before November 2003. Mr Makki originally put it forward as having been made on 25 September 2003 which is the date that it bears. The claimants submitted that this too was a later, dishonestly back-dated document. However, as I have mentioned, the agreement is expressly drafted on the basis that it was to be signed on a date after 31 October 2003 but taking effect on 25 September 2003.
- There are nevertheless two important points about the agreement. First, in view of the non-binding letter of intents dated 25 September 2003 and the fact that the price in the draft agreement was not amended to £800,000 until the end of October 2003, there is no basis for concluding that there was a binding contract of sale on 25 September 2003 or at any time before the end of October, if indeed there ever was a binding contract. The unstamped stock transfer form dated 25 September 2003 was found on execution of the search order with the sale agreement in a Landwell folder and there is no evidence that it was prepared any earlier than the final form of the agreement. The appointment of Hillside as a director in place of Mr Makki on 25 September 2003 does not establish a change of ownership. Accordingly, for the period of Globenet's trading, it remained in the ownership of Mr Makki. Secondly, and perhaps even more significantly, there is nothing in the sale contract, the transfer form or the appointment of Hillside as a director of Globenet to link Hillside or Globenet with Mr Al-Eid.
- Fourthly, there is no documentary or contemporaneous evidence of any involvement by Mr Al-Eid in any aspect of the management of Globenet, Hillside, Weybridge or Community or their businesses. The only exceptions are two interconnect agreements which, on Mr Makki's evidence, are signed by Mr Al-Eid but whose authenticity is challenged by the claimants. I deal with these agreements later. There is no reference in any document to Mr Al-Eid. Brian Powell, the specialist telecommunications consultant, engaged by Mr Makki to provide assistance in relation to companies controlled by him was given instructions by Mr Makki in September 2003 in relation to Weybridge and Community. In his interviews with the liquidators Mr Powell stated that he had never heard of or had contact with Mr Al-Eid. Although this is hearsay, and Mr Powell was not tendered for cross-examination, neither Mr Makki nor Mr Al- Eid takes issue with it in their evidence in response. Mr Page submitted that, as Mr Makki was in England and had a past relationship with Mr Powell, it was logical for Mr Makki to deal with Mr Powell at Mr Al-Eid's request. There was no need to tell Mr Powell, who was a consultant on technical issues, that Mr Makki was no longer the owner of the companies. I find this explanation unconvincing.
- Fifthly, in contrast to the absence of any contemporaneous evidence showing Mr Al- Eid's involvement with the companies, there is significant evidence of Mr Makki's continued involvement with them. E-mails in September and October 2003 show that Mr Powell was dealing with Mr Makki in relation to Weybridge and Community. When BT provided a non-disclosure agreement for Weybridge to Mr Powell, he simply passed it on to Mr Makki with a request that Mr Makki should print off two copies and "have an officer of the company sign both". Mr Makki's evidence in his affirmation is that his instruction to Mr Powell to deal with BT was based on oral instructions which he had received from Mr Al-Eid.
- Mr Makki passed the non-disclosure agreement on to Company Express with instructions for it to be signed by "the officer for Weybridge". On 17 November 2003, Company Express returned three copies of the agreement to Mr Makki "signed by your nominee Manager, Thomas James Day". Other dealings with Company Express showed that they continued to deal with Mr Makki in relation to these companies. Their invoice for signing these agreements was sent to Mr Makki. When approached in February 2004 for details of Weybridge and Hillside, they dealt exclusively with Mr Makki and took their instructions from him. It was not until 14 June 2004 that Mr Makki informed Company Express that "as of last June 2003" he had sold all interests and benefits in Hillside, Weybridge and Community to Mr Al-Eid and that all correspondence should be sent to him at an address in Damascus. This was after service of the claimants' application to join Weybridge as a defendant to the proceedings.
- Mr Makki was sent and paid invoices for services provided to Weybridge and Globenet. He was invoiced by Mr Powell and Company Express for their work for Weybridge in October and November 2003. Mr Page submits that there is nothing sinister in this, as the amounts were comparatively small and Mr Makki could recover them Mr Al-Eid. Numerica Business Services Limited sent its invoice for services provided to Globenet in September, October and November 2003 to Mr Makki, again for a relatively small sum. Invoices dated 30 November 2003 and 26 January 2004 and totalling £10,115 were sent by Steptoe & Johnson, a firm of solicitors, to Mr Makki in respect of work for Globenet. These related to work carried out in October 2003 to January 2004. Steptoe & Johnson were engaged to act for Globenet following BT's decision to disconnect Globenet's services on 28 October 2003.
- It is clear that Mr Makki was closely involved on Globenet's behalf following BT's disconnection of its service, although on his account he had sold Globenet to Mr Al- Eid in June 2003. Mr Makki's evidence in his affirmations is that he became involved on Mr Al-Eid's behalf, mainly because he had not yet been paid the price of £800,000. Mr Page referred me to an internal BT e-mail exhibited to one of Mr Richards' affidavits, which records the following communications from Mr Makki on 28/29 October 2003:
"Call to BT Wolverhampton Interconnect Repair Team from Hassan Makki wanting to know why all links had been lost. He was informed that BT had removed the links from service and to contact his BT Commercial manager for further info.
Overnight no contact from Mr Makki
Mr Makki called me at 09.20 Wednesday 29 October 2003, he asked me what had happened to the Globenet (UK) capacity, why has it been removed from service? I asked him if he had any involvement with this company as I had received written confirmation that he had sold the company. He confirmed he had sold his interest to a Mrs Woods. I explained that due to customer confidentiality I was unable to discuss another customers business with him.
He became rather agitated, "They were going to pay me £800k for this business tomorrow and now they will not pay me anything until service has been restored", and he continued "the bastards have got my switches" I explained that I would be happy to explain the situation with the new owner, Mrs Woods if she contacted me. We had been informed all contact was to be with a Mr S Wood?"
- The claimants relied on the communications with "Mrs Woods" which then followed. Though tortuous, they are revealing. On 3 November 2003 Steptoe & Johnson emailed to Mr Makki copies of letters which they had sent to BT and Oftel and continued:
"Bearing in mind that this letter has been filed on behalf of Globenet, we think it would be prudent to copy in the directors of Hillside Trading Group, i.e. Amanda Wood (and whoever else you think appropriate). Please could you provide me with Amanda Wood's email address so that I can forward all copy correspondence to her."
The response to this e-mail came on 4 November 2003 from "Admin [email@example.com]" and simply forwarded an e-mail dated 5 October 2003 from Mr Powell to BT, which had been copied to "firstname.lastname@example.org; hassan makki".
The text is addressed to Oftel and BT with copies to "Mr S Woods, Globenet (UK) ltd; Mr H Makki, Easynet International Limited" and, so far as relevant reads as follows:
"Easynet International Ltd has been purchased by Globenet (UK) Limited. The purchase is an outright purchase of the entire company assets plus its share capital and includes the Annex II status and BT Interconnect Contract (NCC-SIA) that existed between BT and Easynet International Ltd and all the number ranges allocated by Oftel.
The purchase was completed on 1st October 2003 and the change of name was effective from 24th September 2003 when Easynet International Ltd changed to Globenet (UK) Ltd. (Change of name Certificate faxed to you).
The new contact details for Globenet (UK) Ltd are as follows:
Globenet (UK) Ltd
1000 Great West Road
The company contact is: Mr. S Woods
Email for general enquiries: email@example.com"
- Steptoe & Johnson sent an e-mail to "Amanda Wood (firstname.lastname@example.org)" with a copy to Mr Makki, stating:
"As you know, we have been acting on behalf of Globenet in respect of its dispute with BT, pursuant to instructions received from Mr Makki under the power of attorney which you granted him on behalf of Hillside Trading Group LLC. We understand from Mr Makki that you may be in London next week and would like to meet with you in order to take instructions as to how you wish us to proceed in this matter. Alternatively if you are not coming to London, then I would be grateful if you could forward me your contact details and an appropriate time for me to call you next week.
I attach the latest letter received from BT in respect of Globenet which requests that we disclose the name of the directors of Hillside and which further points out that certain invoices are now due for payment but remain unpaid. We are not intending to respond to this letter until we have spoken with you."
- There is no evidence from Amanda Wood nor any evidence as to her identity, occupation or other circumstances. Mr Makki gives no evidence about her, except that in his private examination he said that Sian Amanda Wood was an original nominee shareholder of Globenet or Hillside. It is the claimants' case that "email@example.com" is in fact an address for Mr Makki. By fax on 17 September 2003 Mr Makki requested the registration of the domain name www.globenetuk.com with VTL (UK) Limited. VTL through its solicitors has provided information, which is not disputed by Mr Makki, that the domain name was set up and registered in Globenet's name on 17 September 2003 and that two e-mail addresses were set up, of which one was firstname.lastname@example.org. VTL had no record of the individuals using it.
- In the e-mail dated 4 November 2004 to Steptoe & Johnson quoted above, the new contact address for Globenet was given as 1000 Great West Road, Brentford. That address was provided under a "virtual office agreement" with Regus UK plc commencing on 16 September 2003, in which the client is named as Mr Makki of Globenet and the client's e-mail address is given as email@example.com. The monthly charges were not paid and on 3 December 2003 Regus e-mailed Mr Makki, following a call to him, detailing the overdue invoices. The e-mail was sent to firstname.lastname@example.org and email@example.com. On 8 December 2003 Mr Makki e-mailed Regus stating:
"Please note I have sold the company hook, line and sinker.
All queries should be sent to firstname.lastname@example.org. Please send them an e-mail ASAP."
Later that day Regus e-mailed email@example.com, addressing Amanda and stating that her details had been provided by Mr Makki. It was not sent to Mr Makki's email address at appletelecom or to any other e-mail address. An unsigned reply was sent to Regus on the same day from "Admin [mailto: firstname.lastname@example.org]". On 9 December 2003 Regus replied with a request for address details and a contact name and number. An unsigned reply on the same day states that "We will forward our address for you in Delaware."
- All the above e-mails were retrieved from one of Mr Makki's computers during the search on 27 February, including those not addressed to him but only to email@example.com. His explanation is as follows:
"It is true that on behalf of Mr Al-Eid I instructed Netcom to register the domain name www.globenetuk.com. This had 2 purposes. The first was that when Globenet was up and running it was required to advertise that it provided telecommunication services to the general public otherwise it would lose its Annex II status. The second purpose was for emails. All emails that were sent to Globenet were always read by Mr Al-Eid. I gave him instructions on how to access and send emails. This could easily be done from Syria from any PC by simply logging onto the internet then typing the URL www.mail2web.com, then double clicking the advanced login, then finally proceeding to type in the Server name or IP address (popd.globenetuk.com), followed by the user name or login name (admin+globenetuk.com) and finally the password. This procedure gave him complete control. This is exhibited at pages 1–3."
The exhibited pages are standard instructions downloaded and printed off on 7 January 2005, showing no connection with Mr Al-Eid. Mr Al-Eid has given no evidence that he accessed this e-mail address or even that he knew of its existence, and there is no other evidence to corroborate Mr Makki's explanation.
- Mr Makki gave no evidence as to who wrote and sent the unsigned e-mails to Regus from firstname.lastname@example.org, or the unsigned e-mails to Steptoe & Johnson from the same address. There is no evidence, from Mr Al-Eid or otherwise, that they were written by Mr Al-Eid or on his instructions.
- In my judgment, it is absolutely clear that email@example.com was one of Mr Makki's e-mail addresses and that he wrote and sent the unsigned e-mails from that address. I am satisfied that his untested evidence that he set the arrangements up for Mr Al-Eid, who accessed the address remotely from Syria, is entirely untrue.
- The evidence is overwhelmingly that throughout the period when Globenet, Hillside and Weybridge are alleged to have been owned and controlled by Mr Al-Eid, they were in fact controlled and managed by Mr Makki and that Mr Al-Eid had no involvement of any kind in their businesses.
- The totality of this evidence satisfies me beyond reasonable doubt that Mr Makki's pleaded case that Mr Al-Eid, not Mr Makki, owned and controlled Weybridge and Globenet at all material times is deliberately false, and that Mr Makki knew that it was false when he signed the statements of truth for his own defence and for the defence of Daltel USA. In my judgment, it represents a very serious attempt to interfere with the course of justice by inventing a defence to the claims in this action. It also follows that Mr Makki committed a deliberate breach of paragraphs 18 and 19 of the search order when he told the search party that Mr Al-Eid was the sole legal and beneficial shareholder and director of Hillside and Weybridge and when he confirmed that statement in his affirmation of 9 March 2004.
- Before considering Mr Abdelmawla's evidence, it is convenient to address the other category of allegedly false statements, to the effect that Pacifica and Globenet sold their airtime to Weybridge.
(ii) Sale of airtime to Weybridge
- The statements in Mr Makki's defence that Pacifica and Globenet sold airtime to Weybridge are of course inextricably linked with Mr Makki's case that Weybridge was, throughout such trading, owned by Mr Al-Eid. It does not assist Mr Makki to establish the existence of such trading if it was with a company owned and controlled by himself. Nonetheless, it would be possible for there to be such trading, even though Weybridge was owned by Mr Makki, and seven of the impugned statements in the defences are alleged to be false wholly or partly on the ground that such trading did not occur.
- In a statement given to the official receiver on 22 January 2004, Mr Makki stated that Pacifica had been involved in the wholesaling of airtime to Weybridge at a margin of around six per cent over the price charged by BT. Invoices were sent to Weybridge but were not paid. He stated that he had the invoices on a personal computer and undertook to provide all the documentation relating to the invoices to the official receiver. Subsequently he supplied three documents purporting to be the invoices for the whole period of trading. He also supplied an interconnect agreement dated 14 May 2003 between Pacifica and Weybridge.
- There are two points in particular to note about the agreement. First, it is signed and dated 14 May 2003 by Mr Makki on behalf of Pacifica but it is not signed on behalf of Weybridge. Secondly, it proceeds on the basis that each party has its own switch which will need to be physically connected. Clause 1.1, defining the services to be provided under the agreement, provides that the parties will connect their respective telecommunications systems as set out in schedule B. Schedule B sets out the technical requirements for such interconnection. However, the alleged trading of Pacifica and Globenet with Weybridge was on the same switch (AC52) and required no physical connection between switches. According to Mr Makki's affirmation, he had always intended that Weybridge should be "a switchless reseller".
- On 15 February 2004 Mr Makki sent the e-mail to Brown & Bain which I have earlier set out. In that e-mail Mr Makki describes a chain of trading which runs BT– Pacifica/Globenet – Weybridge – Community – Daltel USA – Arbinet. He instructed Brown & Bain to prepare interconnect agreements between Weybridge and Community and between Community and Daltel USA. This e-mail was sent months after the trading had occurred. By then Mr Makki would have known exactly what the chain of trading had been. He stated that Community was part of it and gave instructions for agreements to be drafted, but it is inconsistent with his case in these proceedings which is that Community formed no part of the chain. In an affirmation in these proceedings he describes this as "the only discrepancy" in an otherwise correct statement in the e-mail of the trading arrangements part of which he wished to memorialise. He comments that it is a document which he did not expect to come to light.
- On 16 June 2004 Irwin Mitchell supplied to Jones Day the interconnect agreement dated 14 May 2003 between Pacifica and Weybridge and an interconnect agreement dated 9 June 2003 between Weybridge and Daltel USA. The latter would of course be inconsistent with Community's involvement in the chain. Irwin Mitchell commented that they had recently received these documents from Mr Makki. Unlike the copy of the interconnect agreement between Pacifica and Weybridge supplied to the official receiver in February 2004, this second version purports to be signed on behalf of Weybridge, by Mr Al-Eid. The agreement with Daltel USA also bears Mr Al-Eid's signature on behalf of Weybridge, but it is not signed on behalf of Daltel USA. Both are dated by Mr Al-Eid, although the dates cannot be read, at least without translation. In his affirmation, Mr Al-Eid stated that he signed them and returned them to Mr Makki in June 2003.
- A major issue addressed by Mr Sherlock and Dr Castell in their written and oral evidence was whether the configuration of the switches showed that Weybridge was or was not "present" on the switches. This centred on the identity of a reseller on the switch called Wholesale. It is the claimants' case that this was Pacifica or Globenet, depending on the switch, while Mr Makki contends that it was Weybridge. Mr Sherlock accepted that it could be Weybridge. I do not regard the technical evidence as conclusive one way or the other. While on balance it may favour the claimants' case, it does not establish beyond a reasonable doubt that Mr Makki's case is false. It certainly does not establish Mr Makki's defence, but equally it does not destroy it. I do not therefore consider that the issue can be decided wholly or partly on the technical evidence, which for the present purposes of establishing a case beyond reasonable doubt must be regarded as capable of being consistent with either party's evidence.
- However, I am satisfied beyond a reasonable doubt on the remaining evidence that Mr Makki's case is deliberately false. Most obviously this follows from my findings that Mr Makki's case that Mr Al-Eid was the owner and controller of Weybridge at any material time is deliberately false. If, as I have found, Mr Al-Eid had nothing to do with Weybridge, the evidence of Mr Makki and Mr Al-Eid that Mr Al-Eid signed the interconnect agreements in June 2003 on behalf of Weybridge is also false. The agreements are the basis of Mr Makki's case that Pacifica traded with Weybridge, but they are fictitious and leave only the invoices and the affirmations of Mr Makki and Mr Al-Eid to provide any other support. They were not prepared to be cross-examined and, in the light of my other findings I have no hesitation in rejecting their evidence. Equally I am satisfied that the invoices were prepared by Mr Makki in about January 2004 to give some support to his case.
- These conclusions are further strengthened, first, by Mr Makki's e-mail to Brown & Bain with its description of Community as part of the trading chain; secondly, by the fact that the interconnect agreement supplied in January or February 2004 was not signed by Mr Al-Eid but the version produced in June 2004 had been signed by him; and thirdly, by the fact that the interconnect agreement was in a form which was inconsistent with Mr Makki's case of "switches reselling" between Pacifica and Weybridge.
- The application by Mr Makki of the funds generated by the airtime trading provides further substantial support for this conclusion. His case is that Weybridge sold all the airtime purchased from Pacifica and Globenet to Daltel USA which in turn sold it to Arbinet. It is common ground that he owned and controlled Daltel USA. It is also common ground that Arbinet paid at least $5 million to Daltel USA or to its order. If the trading chain alleged by Mr Makki was genuine, Daltel USA should have paid the monies it received from Arbinet, less its profit margin, to Weybridge or directly to Pacifica and Globenet.
- In fact, no such payments were made. Instead at least $5 million received from Arbinet was paid by Mr Makki, almost immediately after receipt, into joint accounts held in his and his father's name with banks in Beirut or otherwise dissipated. Mr Makki has provided no plausible or credible explanation as to why the funds received from Arbinet were transferred to these accounts in Beirut, rather than retained by Daltel USA and used to pay Weybridge, if his account were genuine. Mr Page's submissions are as follows:
"The claimants are quite probably correct in stating that Mr Makki should not have paid these monies into Lebanese joint accounts. However, the claimants have no locus standi to complain about that. The money is not their money, nor are they creditors of DUSA.
If the companies' trading had been allowed to continue, then Weybridge would have issued its invoices to DUSA and the Arbinet monies would have been used to pay them. However BT did not allow trading to continue, preferring to put the claimant companies into liquidation and sue for fraud. This has resulted in Mr Makki's father refusing to allow the banks to comply with Mr Makki's instruction to repatriate the funds."
I am entirely satisfied that Weybridge would never have issued any invoices to Daltel USA and that Mr Makki never had any intention of using the money to pay BT. Pacifica traded from June to August 2003 and Globenet traded from late September to the end of October 2003 without any invoices being issued by Weybridge and without any payment to BT or to Weybridge, Pacifica and Globenet.
- Mr Makki has repeatedly relied on the existence and effect of a purported depository agreement entered into between Daltel and Daltel USA to assert that the monies paid by Arbinet into Daltel's dollar account were held on trust foe Daltel USA. This can be seen, for example, in paragraphs 41 and 42 of Mr Makki's initial affirmation in response to the September application. In correspondence, his solicitors gave considerable detail about the making of the depository agreement. However, Mr Makki received an e-mail on 16 January 2004 from Brown & Bain, under the subject heading "Depository Agreement" stating "Hassan: here is the first draft of the agreement, please call me with any questions".
- Faced with this evidence, Mr Makki simply stated in his next affirmation that it was correct that the depository agreement was not signed until early 2004 and that this was an error in his instructions to his solicitors. I do not accept this explanation. Nor do I accept the submission made on his behalf that the agreement documents an earlier agreement which already existed. It is clear, in my judgment, that the depository agreement was drawn up in January 2004 and back-dated to 10 July 2003 to fit in with Mr Makki's version of events.
(iii) Mr Abdelmawla's evidence
- My conclusion on the ownership of Hillside, Weybridge and Globenet make it unnecessary to consider the evidence of Mr Abdelmawla, but in view of the prominent part which it played in the claimants' case, his cross-examination and the extensive submissions of counsel for both sides, I think it right to deal with it.
- The claimants' case that Mr Al-Eid had no involvement in Weybridge, Hillside and Globenet is partly based on their evidence as to Mr Al-Eid's own circumstances. As it is succinctly put in their skeleton argument:
"If Makki is to be believed, Al-Eid is a very wealthy businessman with a detailed knowledge of the telecoms market. In fact, the claimants' enquiries and the surrounding evidence have established beyond a doubt that Al-Eid is an impoverished taxi/bus driver living in straitened circumstances in a poor suburb of Damascus."
The enquiries were made on behalf of the claimants by Mr Abdelmawla. They had been unable to contact Mr Al-Eid on a mobile phone number, which had been provided by Mr Makki. In response to their request for assistance in arranging a meeting, Mr Makki's solicitors wrote on 11 June 2004 to suggest that the claimants had made no real effort to contact Mr Al-Eid and asked whether they had thought of instructing enquiry agents. On Mr Makki's instructions they disclosed a PO Box address for Mr Al-Eid in Sit Zeinab, Damascus, Syria. Mr Al-Eid did not respond to letters sent to him at that address.
- Accordingly, the liquidators instructed Risk Analysis, a London-based firm, to conduct an investigation in respect of Mr Al-Eid. Through an intermediary, Risk Analysis instructed Mr Abdelmawla. A total of three affidavits of Mr Abdelmawla were filed by the claimants. The first two detail the enquiries carried out by him and his agents and the results of those enquiries. As I have already mentioned, he was also cross-examined by satellite link from Damascus.
- A substantial attack has been made on the credibility of Mr Abdelmawla. Documents produced by him which apparently refer to Mr Al-Eid are said to be forgeries and accounts he gives of conversations with Mr Al-Eid and his lawyer are said in part to be untrue.
- In support of this approach, Mr Page directed a substantial part of his crossexamination of Mr Abdelmawla and his closing submissions to matters which are not related to the issues on these applications. There are in particular three matters on which Mr Page focussed his attention, which I shall consider before turning to Mr Abdelmawla's evidence on Mr Al-Eid. The first, trailed in evidence filed on behalf of Mr Makki a few days before the hearing began, was the website for Mr Abdelmawla's law firm. It was said to have contained untrue entries. Mr Abdelmawla's evidence in response, filed during the hearing, alleged that the printed-out web-pages put in evidence by Mr Makki had been falsified. He exhibited print-outs of the web-pages which he said were genuine, but Mr Makki's riposte was that Mr Abdelmawla had caused the website to be changed to remove the untrue entries.
- The second and third matters arose out of the application to take Mr Abdelmawla's evidence by video link. Earlier in this judgment I explained that Mr Abdelmawla had been expected to attend court in London for cross-examination. At the start of the hearing Mr Anderson explained that their information was that Mr Abdelmawla had been prevented from boarding a flight from Damascus on 13 January 2005. He was told by the police authorities at the airport that he was not allowed to leave Syria. This did not appear entirely surprising in view of the criminal complaints to the Syrian and Lebanese authorities, and the criminal proceedings and arrest warrant in Syria, to which Mr Makki's evidence referred.
- Mr Page questioned whether Mr Abdelmawla had been prevented from leaving Syria and whether in truth he was willing to give oral evidence in London. The evidence in support of the application for his oral evidence to be given by video link put forward an explanation for his inability to leave Syria. A combination of the criminal proceedings in Syria and questions raised with the government of Liberia meant that he could not travel on his Syrian or Liberian passport. This was challenged by Mr Page in cross-examination.
- Mr Makki put forward evidence of an alternative reason why Mr Abdelmawla was not permitted to leave Syria, namely an unpaid telephone bill. Mr Makki's evidence was that Mr Al-Eid had been given this information by the Syrian Ministry of Interior and by the Public Institution of Telecommunications, and that the latter had lodged a complaint with the Ministry of Interior on 14 December 2004, requesting it to place travel restrictions on Mr Abdelmawla, his mother and his sisters. A number of affidavits in rebuttal were filed by the claimants, and Mr Abdelmawla was crossexamined on the issue by Mr Page.
- Mr Makki's case on this point was therefore that Mr Abdelmawla was prevented from leaving Syria, but only because of an unpaid bill which he could easily discharge. The other reasons put forward were untrue.
- The third matter relates to whether Mr Abdelmawla had, as he claimed, a ticket for a flight from Damascus to London on 13 January 2005. This was an issue which developed during the hearing. It is Mr Makki's submission that Mr Abdelmawla lied when he said that he had a ticket, put forward as evidence a ticket which he knew to be the wrong ticket and, when this was discovered, put forward a forged ticket.
- The three matters are connected. If Mr Abdelmawla was in fact unwilling to give evidence in London, there has to be some reason for the late change in his position. Mr Page submits that the reason was that on 10 January 2005 Mr Makki served his reply evidence which included for the first time in these proceedings the website material and the allegations of forgery in relation to the documents obtained by Mr Abdelmawla in Syria. As Mr Page put it, "now he was under personal attack, and he knew that at least some of it would succeed." He could not tell Risk Analysis of his change of heart, so he invented the story that he had tried to fly but had been prevented and deliberately put forward the wrong ticket as evidence. As for Mr Abdelmawla's willingness to give evidence by video link, the suggested explanation is that he could hardly refuse once the possibility was put to him.
- I find this suggestion of a change of heart by Mr Abdelmawla, and the reason put forward for it, entirely unconvincing. First, all the allegations about his false claim to be a qualified Syrian lawyer and the contents of his website had been made in full to the Syrian authorities on 2 and 7 December. These complaints were well known to him long before 13 January 2004. Criminal complaints about his conduct in investigating Mr Al-Eid had been made to the Syrian authorities in October 2004.
- Secondly, it is Mr Makki's case, as well as the claimants' case, that Mr Abdelmawla was not allowed to leave Syria in January 2005 although they differ as to the reason. If in truth he did not want to come to London to give evidence, he had the best possible reason for not attempting to do so. Thirdly, if he was so reluctant to give evidence, why did he willingly give oral evidence by video link? Mr Page's suggestions are not persuasive. Mr Abdelmawla did not just agree to the suggestion of a video link, he went to great lengths to obtain the necessary permission from the Syrian authorities. This is in marked contrast to Mr Al-Eid. Moreover, if he was concerned that cross-examination in London would expose him as a liar and a forger, the risks were if anything greater if he gave his evidence in Damascus. His alleged conduct of falsely claiming to be a Syrian-qualified lawyer and forging official Syrian documents took place in Syria and, if true, were offences under Syrian law.
- I am satisfied, particularly after hearing his cross-examination, that Mr Abdelmawla has been at all times, both before and after 13 January 2005, willing to give oral evidence and to travel to London to do so. I am therefore satisfied that he had no motive for giving false evidence on this subject or for putting forward a forged air ticket. However, the lack of any apparent motive cannot itself be decisive, if the evidence demonstrates that in fact he did lie or forge documents.
- The trail of evidence concerning Mr Abdelmawla's air ticket is complex and developed during and after the hearing. I summarise the evidence and the detailed issues arising from it in the appendix to this judgment.
- As I make clear in the appendix, there are a number of serious points arising from the evidence which give some support to Mr Makki's submissions. Other serious points favour the claimants' position. Because of the way the evidence developed, for which the claimants bear responsibility, it was impossible for all the evidence to be the subject of full investigation. In particular, the ticket said by Mr Abdelmawla to be a copy of the true ticket for use on 13 January 2005 was not produced until day 13 of the hearing. It undoubtedly raises issues but by then Mr Abdelmawla had been crossexamined and there was no prospect of reopening his cross-examination. Mr Makki produced after the hearing a letter, in two versions, from Syrian Arab Airlines which, if genuine, casts the gravest doubts over Mr Abdelmawla's account. There are however real issues raised as to the authenticity of the letters.
- If Mr Abdelmawla's air ticket was an issue in the contempt applications, it would probably have been necessary to adjourn the hearing. It is however an issue which goes only to Mr Abdelmawla's credibility, albeit one which is alleged to show that he has committed perjury and forgery. Neither side sought or suggested an adjournment.
- I am not satisfied on the balance of probabilities that Mr Makki's allegations on the tickets are made out. I have for reasons already given concluded that there is no convincing case for any motive on Mr Abdelmawla's part for putting forward a false case of willingness to come to London for cross-examination and false evidence in support of it. While Mr Page has raised serious points on the evidence, they are not sufficient to establish the allegations, in the light of the points going the other way and the lack of any motive on the part of Mr Abdelmawla.
- Given however that, through no fault of Mr Makki and his advisers, it was not possible to cross-examine Mr Abdelmawla on the ticket now put forward as the true ticket or to deal with the letter said to come from Syrian Arab Airlines, I consider it only right to adopt a cautious approach to the evidence given by Mr Abdelmawla.
- As regards the claim that Mr Abdelmawla was prevented from leaving Syria by an unpaid telephone bill, the bill was said to have been incurred by Mr Abdelmawla's father between 1996 and 1998 and to have become the liability of Mr Abdelmawla, his mother and his sisters as his father's heirs. Mr Makki adduces no evidence of any steps to enforce the alleged liability until December 2004 when, instead of disconnecting Mr Abdelmawla's existing lines or obtaining a judgment for payment, the alleged request is made to prevent him from leaving the country. The evidence establishes that the relevant number is registered with an unconnected third party. When Mr Page put to Mr Abdelmawla a document which purported to show that the relevant telephone number was in his father's name from 1964 to 1998, his evidence was that seven-digit telephone numbers were not issued in 1964. In the light of all the evidence, including in particular the comprehensive rebuttal in paragraph 8 of Mr Abdelmawla's third affidavit, and for the reasons summarised in paragraph 7.2 of Mr Anderson's closing submissions, I am satisfied that Mr Makki's evidence on this issue is untrue. I reject his evidence that Mr Al-Eid obtained any information about an unpaid bill from the Ministry of Interior or the telephone company and I find that the documents exhibited by Mr Makki are not authentic.
- I also find that Mr Abdelmawla was not able in January 2005 to leave Syria, on account of the criminal proceedings instigated by Mr Al-Eid and the existence of inquiries as regards his Liberian diplomatic passport.
- As regards the website there is also a great deal of detail, which I summarise in the appendix to this judgment. The central issue is whether Mr Abdelmawla falsely claimed on the website to be a Syrian-qualified lawyer and then arranged for the website to be altered, while lying in these proceedings that no alteration had been made. If this had been an issue in the proceedings, disclosure and technical evidence might have assisted its resolution. The issue was however, raised at a very late stage by Mr Makki, only a few days before the start of the hearing, even though Mr Makki had possessed the evidence on which he relied since late November 2004. As it is, the principal conflict is between the evidence of Mr Makki that in November 2004 the website was in the form exhibited to the affirmations by Mr Nawfal and Mr Makki and the evidence of Mr Abdelmawla that it was in the form exhibited by him.
- Mr Abdelmawla gave oral evidence and was cross-examined on these allegations. In my judgment his cross-examination did not establish the truth of the allegations. Mr Makki and Mr Nawfal refused to be cross-examined on these or any other allegations. As my earlier findings make clear, I am satisfied beyond reasonable doubt that Mr Makki has forged documents and put forward a defence and given affidavit evidence which was deliberately false. Mr Makki seeks to rely on what he says is the corroboration of three independent Lebanese lawyers that the website in November 2004 was in the form put forward by him. He exhibits a print-out dated 26 November 2004 which he says was certified by them on that date. Although said to have been available since 26 November 2004, it was not exhibited in the evidence served on 10 January 2005 but appeared only on 4 February 2005 as a response to Mr Abdelmawla's allegation of manipulation of the downloaded web-pages.
- The onus of establishing this allegation against Mr Abdelmawla lies on Mr Makki, but only on the balance of probabilities. As I have mentioned, I do not have the benefit of all the evidence which might well be available on a trial of this issue. However, taking account of all the factors mentioned above and including the detailed points referred to in the appendix, I reject Mr Makki's allegations concerning the website.
- I turn therefore to the evidence of Mr Abdelmawla on the issues in the case. His evidence can conveniently be divided into three categories. First, there are the results of enquiries made by Mr Abdelmawla and his agents with unnamed neighbours and others in Sit Zeinab and other parts of Syria. Secondly, there are documents which on Mr Abdelmawla's evidence were provided to him by government departments and other institutions in Syria. Thirdly, there is his direct evidence of telephone conversations with Mr Al-Eid and persons said to be acting on his behalf. I will consider each of these categories in turn.
- Much of the evidence of Mr Al-Eid's circumstances falls into the first category. His address in August 2004 is given as Abdul-Hamid Albarade'ey Building, Zahera Quarter, Sit Zeinab District, Reef Damascus, Syria. This was said by Mr Abdelmawla to be the result of "protracted enquiries within Sit Zeinab". The nature of the enquiries and the sources of the information are not disclosed. He states in his first affidavit that "while my men were conducting surveillance they observed Mr Shilash Eid and his family going home" to the above address. There is no evidence from these men nor are they identified nor is there evidence of the basis on which they identified the man entering the building as Mr Al-Eid. There is no documentary evidence which links Mr Al-Eid to this address. Mr Abdelmawla did not himself see Mr Al-Eid going to this address, but he did take photographs of its exterior which are in evidence. He describes it as "very old extremely basic accommodation comprising two small rooms and a kitchen…in the poor Zahera Quarter of Sit Zeinab", for which a rent of 4,000 Syrian pounds (about $80) per month was paid. The photographs seem to bear out the general description of the property and the neighbourhood.
- In an affirmation, Mr Al-Eid denied that he lived in the property identified by Mr Abdelmawla and asserted that he owned a plot of land in Sit Zeinab on which a threestory house was being built, of which the first floor had been completed early in 2004. The claimants made enquiries of the construction engineers said by Mr Al-Eid to be responsible for designing and overseeing the construction of the house. The claimants put in evidence a written statement by the engineer in which he confirmed that Mr Al- Eid owned the plot of land, that the ground floor of a three-story house had been built and that Mr Al-Eid had lived in it for about a year.
- While the claimants submit that a man living in a relatively modest property of that sort would not be investing £800,000 in a telecoms company in England, this evidence clearly undermines the earlier evidence of Mr Abdelmawla on the location and standard of Mr Al-Eid's home.
- Mr Abdelmawla's evidence in his first affidavit that Mr Al-Eid had moved to Sit Zeinab to work as a taxi driver some years earlier was based on "enquiries with a local grocer and six neighbours" with neither the sources of information nor the persons making the enquiries being named. The only exception was that Mr Abdelmawla himself had spoken to the grocer and to one of the neighbours. The grocer subsequently refused to give written evidence. Mr Abdelmawla states that his men observed Mr Al-Eid driving a taxi, later found to be registered in the name of Ahmad Al-Sultan. He spoke to Mr Al-Sultan by telephone, who confirmed that Mr Al-Eid had driven his car as a taxi but would not provide written evidence to this effect. Mr Al-Eid was said to earn about 10,000 Syrian pounds (equivalent to $200) per month as a driver, but no source for this information is given, except perhaps an unnamed neighbour.
- Mr Abdelmawla states in his first affidavit that Mr Al-Eid has basic elementary education, does not speak any foreign language and "is almost known to be illiterate". No source for this information is given.
- Other information given by unnamed "close neighbours and acquaintances of Shilash Eid" was that during taxi trips to Damascus airport in the summer of 2003, Mr Al-Eid had picked up a businessman who lived and worked in London called Hassan Makki, that Mr Makki had asked him to be his personal driver for a few days while he was in Damascus and had asked him to apply for a passport, and that Mr Makki had been seen visiting Mr Al-Eid at his home. The neighbours reported that Mr Al-Eid had told them that Mr Makki had made him sign papers written in a foreign language and a power of attorney and had assured Mr Al-Eid that he was going to make him a rich man. The grocer had also seen Mr Makki when he visited Mr Al-Eid.
- I do not regard this first category of evidence as carrying any weight. It is all at least second-hand hearsay, most of it comes from unnamed sources, and in some cases it comes through a second unnamed source. None of the sources has provided any evidence. The only two who were asked to do so, the unnamed grocer and Mr Al- Sultan, refused. The danger of placing any weight on evidence of this sort is illustrated by the development of the evidence on Mr Al-Eid's house. The initial evidence, that he lived in what appears to be very poor accommodation, cannot stand with the subsequent evidence adduced by the claimants from the construction engineer. If the earlier evidence is rejected, as I consider it must be, it undermines any reliance on similar evidence based on the reports of unnamed neighbours. I have to say that, even without the evidence of the construction engineer, I regarded the whole of the first category of evidence as carrying no weight. It is evidence of a character which is simply impossible for a party to test or for the court to assess. Rather than evidence on which any findings could be based, it is really the work in progress of an enquiry agent which may be thought by his client to make further enquiries worth pursuing.
- It is said on behalf of the claimants that it was open to Mr Makki to lead evidence from Mr Al-Eid to deny the allegations made about him and his circumstances and to call Mr Al-Eid for cross-examination. Affirmations by Mr Al-Eid containing denials were filed but he declined to give oral evidence. In my judgment that does not however add any weight to this first category of evidence. It is easy to say that all that is needed is for Mr Al-Eid to give evidence and the matter can then be cleared up, but in my view an individual should not have to give an explanation of his personal circumstances except in response to allegations which are based on evidence of some substance. To hold otherwise is to reverse the onus of proof in circumstances where the evidence itself is insufficient to form any part of the basis for a finding.
- Mr Page submitted that I should exclude this evidence under CPR Part 32.1 (2). I have considered that submission more generally and concluded that the right approach is not formally to exclude it but to deal with it as a matter of weight. It is clear from section 4 of the Civil Evidence Act 1995 that the court is entitled to place no weight on particular evidence, and I consider it right to place no weight on this first category of Mr Abdelmawla's evidence. No submissions were advanced by either party specifically on the matters set out in section 4(2), which is a non-exhaustive list of the matters to which the court may have regard in considering issues of weight. My conclusion is based primarily on the following considerations:
i) It is all hearsay. Mr Abdelmawla has no personal knowledge of the matters of which he gives evidence.
ii) With the exception of Mr Al-Sultan, all the sources are unnamed.
iii) Some of the evidence was relayed from unnamed sources to Mr Abdelmawla by unnamed intermediaries.
iv) None of the sources has given evidence or provided any written statement.
v) Two of the sources were asked to provide statements but refused.
vi) There is no evidence of the basis on which Mr Abdelmawla's own agents identified the man entering Abdul-Hamid Albarade'ey Building as Mr Al-Eid. The later evidence regarding Mr Al-Eid's residence makes this evidence in any case unreliable. It may also suggest that the enquiries were directed at the wrong person.
vii) No sources, even unnamed ones, are provided for some of the information.
viii) All the evidence is given in a very summary form, with a number of sources (for examples "neighbours") being given for much of it. There is no attempt to record what each source said and the questions which were put to each of them.
ix) Overall it is impossible to assess the reliability of the evidence.
- I reach these conclusions without any assessment of the reliability and credibility of Mr Abdelmawla personally. There was a sustained attack on his credibility which I must consider in the context of the other categories of his evidence, but assuming that he has truthfully recorded what others have told him, I conclude that no weight should attach to it.
- The second category of evidence given by Mr Abdelmawla related to enquiries made to government departments or other official sources in Syria and includes documents produced, or said to be produced, by them. In his first affidavit, he stated that enquiries directed to the Damascus Chamber of Commerce, the Federation of Syrian Chambers of Commerce, the Syrian Trade Directory and the Damascus Municipality showed that Mr Al-Eid was not registered as a director or shareholder or as a holder of any licence. In his first affirmation, Mr Al-Eid did not take issue with this statement, but stated that:
"I worked as an architect for the local government for 13 years before becoming involved in general trading and in the travel and tourism business. This travel and tourism business involves transportation and guided tours to the Dead Sea, the Red Sea and Petra in Jordan and to the Roman ruins in Lebanon. We also arrange transportation for worshippers from Lebanon to Syria, and from Syria to the Holy city of Najaf in Iraq. I have various interests in various businesses, with different levels of income. I am financially independent, with substantial means but having taken legal advice I am not willing to disclose full details at this stage. A reference from one of my bankers in Beirut, the Lebanon and Gulf Banks is exhibited at page 1."
Later in the same affirmation he stated:
"I deny absolutely the suggestion that I am an impoverished taxi driver. I have an interest in a travel company which has a turnover in excess of 1 million dollars a year."
- In his second affirmation, Mr Abdelmawla detailed the further and rather more extensive enquiries that he had made. He made enquiries at the Damascus Traffic Police Administration where he learnt that Mr Al-Eid was not registered as the owner of a vehicle but was the driver of a tourist bus and he was given its registration number. He inspected the vehicle registration ledger at the Traffic Administration which recorded the owner of the vehicle as Jawadean Tours and Mr Al-Eid as its driver. Mr Al-Eid accepts in his second affirmation that Jawadean Tours owns this vehicle and he does not deny, or produce any evidence to show that he is not, recorded as its driver in the vehicle registration ledger.
- Mr Abdelmawla gives evidence that the Vice President of the Damascus Countryside Chamber of Commerce told him orally that Jawadean Tours is an establishment owned by Yassin Ali Karki, that it was registered in 1986 and that it is classified as a second tier entity (a medium-sized establishment), with an office in Sit Zeinab and a branch office in Amajeh, Damascus. The status of "Al-Jawadean Tours" as a "company owned by Mr Yassin Karki" with its address in Sit Zeinab was confirmed in an e-mail dated 2 October 2004 from the President of the Damascus Chamber of Commerce. Mr Al-Eid does not take issue with any of this in his affirmations. However, he asserts that he is a shareholder, and the sales and marketing director, of Al-Jawadean Tours. He also produces a document dated 9 December 2004 purporting to be signed by Mr Karki (or Karaki) and stamped by Al-Jawadean Tours which states that it is a company in the field of tourist transportation operating within and outside Syria and owning about 20 modern buses. It is also engaged in air tickets sales and hotel reservations, and has a turnover of over $1 million per year. It states that Mr Al- Eid has been a shareholder since 2002 and is the sales and marketing director. Mr Abdelmawla gives evidence of a conversation with Mr Karki when he pretended to put forward a business proposal for nine tours and asked for the names of the drivers and Mr Karki named Mr Al-Eid as one of the drivers. In a later telephone call in late October Mr Karki refused to disclose the names of any drivers.
- Mr Abdelmawla gives evidence of enquiries which he made to the Land Transportation Union of the National Union for Labour Syndicates. An employee told him that Mr Al-Eid became a member on 14 December 1998. His affidavit (para 13) continues:
"It is also evident from the copy of Mr Al-Eid's National Union Membership Card (see pages 10–13) obtained from the Land Transportation Union which lists the details Mr Al-Eid submitted for his ID card that he renewed his membership (number 24634/2004) on 2nd September 2004."
- The document records Mr Al-Eid's type of work as driver. A reader of this paragraph would reasonably believe that the exhibited document was a photocopy of Mr Al- Eid's union card. Mr Al-Eid stated in his affirmation that it was a forgery, although he did not comment on whether he was a union member or produce a copy of a union card. It transpired during the hearing that Mr Abdelmawla had not obtained a photocopy of Mr Al-Eid's union card. His oral evidence was that at his request a union employee wrote on a blank card the information which it was said had been written on Mr Al-Eid's union card. It was therefore said to be a duplicate of Mr Al- Eid's union card. I am satisfied that Mr Abdelmawla did not intend to mislead the court in the way that the copy of the union card was presented. Mr Page has made clear in his submissions that it is not denied that Mr Al-Eid is a member of the union, thus entitling him to drive as part of his work. Beyond that. I cannot regard the evidence of Mr Al-Eid's details (if any) held by the union as reliable and I take no account of it.
- Mr Abdelmawla also gave evidence that he made enquiries at the Social Security General Establishment. He says in his second affidavit that on 17 October 2004 he was issued with a form by that Establishment relating to Mr Al-Eid. It is a pre-printed form. Some, but not all, of the personal details have been completed. It is stamped in three places and one stamp is counter-signed by, according to the document, the Director Social Security, Damascus Rural Branch. It is also signed by Roumi al-Ghazi who, according to Mr Abdelmawla's evidence, is an official at the Establishment and filled in the form from records kept by the Establishment. The form itself is addressed to Migration and Passport Department and states that the information was supplied in response to the application of Mr Al-Eid. Mr Abdelmawla's explanation in crossexamination was that in fact anyone can obtain this sort of information and the official filled in the form knowing that he was not Mr Al-Eid.
- The form refers to the application of "the worker [which is crossed out] driver Shalash Al-Eid" and states that he "works with the employer Yaseen Zaki, Jawadean Transportation, subscribing as number 721399 with effect from 20/4/2002 pursuant to Form 1 dated [blank], and his salary on 1/1/2004 was 3030 Syrian lire pursuant to Form 2 of year [blank] received as number [blank] dated [blank]. He is still at work, as nothing has been received that indicates that he has left work". Mr Abdelmawla was challenged in cross-examination on the basis that he had supplied the information to the official which was then written in by her, in order to obtain a document to prove that Mr Al-Eid was a driver, and that he had invented the salary of 3030 Syrian lire (about $59). It was put to him that the blanks were not filled in because he did not have the relevant information.
- Mr Abdelmawla's evidence is that he was asked to obtain a further document from the Social Security Establishment and have it "legalised" by the Foreign Ministry. When he went to the Establishment in early November 2004, he was told by Roumi al-Ghazi that Mr Al-Eid had lodged a letter of resignation from his employment with Al- Jawadean Tours which was recorded in the files. Mr Abdelmawla exhibits what he says is a certified copy of the letter of resignation provided to him by the establishment. It was suggested to him in cross-examination that it was not signed by Mr Al-Eid (it is fair to say that the signature looks very different from the signatures on his affirmations) and that Mr Abdelmawla had manufactured it. Mr Abdelmawla also exhibits a further document which he says was provided to him by the Establishment. On one side there is written in Arabic:
"To: Social insurance
Applicant: Shilash Al-Eid
Please issue me a statement of my services and a statement of dismissing in your company to present them to the bar association"
Mr Abdelmawla's oral evidence was that this was written out at his dictation, handed to an official who signed it and gave it a number, and then taken to the manager who stamped it as approval for the release of the information. Mr Abdelmawla took it to Roumi al-Ghazi who wrote on the reverse side in Arabic:
"To the bar association
Upon reviewing our computer operator, it was found that the above mentioned person was working for Yassin Kraki, under no. 16291/721399 from 20.04.2002 up to 30.10.2004"
Another official signed it and finally the head manager stamped and signed it. It was addressed to the bar association at Mr Abdelmawla's request.
- The issue which I have to decide is whether I am satisfied that these documents record genuine information held by the Social Security Establishment. The alternative would be that they record false information supplied to the officials by Mr Abdelmawla or that the officials made a mistake. It was not suggested that the two documents dated 17 October and 21 November 2004 were not issued by the Establishment.
- I consider Mr Al-Eid's reaction to them as particularly telling, both in his evidence in these proceedings and in an official complaint he made in Syria. In his second affirmation, he says that the letter of registration supposedly signed by him is a forgery and he exhibits Mr Karki's letter of 9 December 2004 in which he states that Mr Al-Eid is still the sales and marketing director on 9 December 2004. He makes a number of points about the documents (for example that he did not apply for the information on 17 October 2004). What he does not do is to deny that the Social Security Establishment holds this information or, as he could have done, produce any document from the Establishment stating what its records show.
- In his official complaint, he objected to the document dated 21 November 2004 on a number of grounds. These were that he did not write, sign or submit the application, that there is no body called "the bar association" as opposed to "the Bar Association of Syria", that he has no relationship with the Bar Association of Syria and that there is no request, lawsuit or application before it. The extraordinary feature is that no complaint is made that the Social Security Establishment has issued false information. If the information were false, it would be the obvious subject for complaint, rather than issues such as the existence and name of the bar association.
- Finally, I have heard Mr Abdelmawla give evidence on how these documents were obtained, but I heard no oral evidence from Mr Al-Eid. I am satisfied that Mr Abdelmawla did not forge Mr Al-Eid's purported letter of registration and that he did not supply false information, such as a salary of 3030 Syrian lire, to the Social Security Establishment. Mr Anderson made the point that if Mr Abdelmawla was engaged in a process of producing false information, it was very odd to invent Mr Al- Eid's resignation. The claimants' case would be best served by showing that Mr Al- Eid was still working as a driver at a monthly salary of 3030 Syrian lire.
- I regard the documentary evidence produced by Mr Abdelmawla, and his related evidence of what he read in certain records as in a different class from the first category of unattributed oral hearsay. It is evidence of some substance, which calls for an answer. Mr Al-Eid is prepared to give an answer in writing, but not to be crossexamined. Moreover, I am satisfied in other very important respects, to which I have referred, that Mr Al-Eid's evidence is deliberately untrue.
- I am satisfied overall by this evidence that there is no realistic possibility that Mr Al- Eid would have been in a position to purchase the Delaware companies for $75,000 or Globenet for £800,000 or to control the business of an airtime reseller in London. I accept Mr Abdelmawla's evidence that Mr Al-Eid was recorded in the vehicle registration ledger as the driver of a tourist bus owned by Al-Jawadean Tours. I accept that the Social Security Establishment's records contained the information shown in the documents obtained by Mr Abdelmawla in October and November 2004. 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 Al-Eid has produced in evidence what purports to be a reference dated 22 October 2004 from Lebanon and Gulf Bank SAL in Beirut. It states that Mr Al-Eid is a customer who "to the best of our knowledge… possess substantial financial means, and enjoys good morality". There is no further evidence as to his dealings with this bank, whether he has accounts with it, and if so the balances on them and when they were opened. It is unclear why Mr Al-Eid, who lives and works in Syria, should have dealings with a bank in Beirut or why he produces no reference from a Syrian Bank. I attach no weight to this document.
- The third category of evidence given by Mr Abdelmawla is his direct evidence of telephone conversations with Mr Al-Eid and another individual. Mr Abdelmawla's account is given in his first affidavit. On 12 August 2004 his mobile phone number was supplied to a woman believed to be a relative of Mr Al-Eid's wife. His account continues:
"34. Approximately half an hour later, I received a phone call on my mobile from a man who introduced himself as Shilash Eid and asked me directly what I wanted him for as he thought I needed him for a business. I clearly explained to him that I wanted to see him with the view of clarifying his position with regard to an ongoing legal case in Britain. Mr Eid then requested that he calls me within four hours and the telephone conversation ended.
35. Approximately four hours later, Mr Shilash Eid called me back on my mobile and said that he was accompanied by his lawyer and requested me to explain the whole matter to his lawyer.
36. When I asked Shilash's lawyer to introduce himself he refused however, I went on and explained that Shilash Eid was in big legal trouble as his name was associated with foreign companies registered in his name. The lawyer then stated "I believe this has to do with Hassan Makki". As at this stage whilst I was not aware that Mr Al-Eid and Mr Makki were in subsequent contact, I was not aware of the subject matter of this contact, other than Mr Al-Eid's implication in dealings with foreign companies I asked the lawyer to call me back within the hour to discuss the matter in detail.
37. An hour later I received a call from the lawyer on my mobile phone who advised me that he had sent a text message to Hassan Makki in London asking that he calls him and that he was waiting for his call.
39. Two/three hours later I received a phone call on my mobile from Shilash's lawyer who stated that Hassan Makki has offered to pay Shilash £200,000 (Sterling Pounds) in return for his silence. Having spent approximately 80 minutes on the phone in which I attempted to explain the legal implications surrounding Shilash, he proposed that unless we pay $50,000 to Shilash plus five boxes of cigars, Shilash will not be prepared to make a statement about his association with Hassan Makki. He further stated that the offer is open for three days otherwise they will strike a deal with Hassan Makki."
Later that day he again met the woman referred to above, who told him that Mr Al- Eid would not meet him but would call him if he gave her his number. He gave her a different mobile number known only to his family. His affidavit continues:
"41. Approximately half an hour later, I received a phone call from Shilash on my special mobile 092416184, and after I explained to him in detail all the legal implications that surround him and that meeting up with the English lawyers and making a statement will clear his name. He stated "do you think I am crazy to give up the new BMW, a villa in Damascus and the money offered to me by Hassan Makki in return of giving a statement". He stated that he does not fear anything, that he was Hassan Makki's partner and that no one can arrest him because the "Syrian law does not hand in Syrians"
43. After I returned to Damascus that evening I was surprised to receive a phone call on my special mobile 092416184 which was passed on to Shilash by the wife's relative from the following telephone number 00447775524747 as registered on my mobile. I produced herewith Exhibit "AAA1" page 8 photograph of this number I have taken from the call register on my mobile phone. The caller identified himself to me as Hassan Makki and when I asked him "how did you get my number", he answered "in my own way". He then asked me if I could locate Eid Shilash as he was looking for him, I replied: "I do not trace people", he then said that he wanted to meet me accompanied by his lawyer, I said that I will not be available as I am travelling to Lebanon. He then asked me to write down his number 00447775524747 in order that I keep it and said that he will be contacting me when he returns back to London."
He added in his second affidavit (para 4.5) that: "On Thursday 12th August 2004, I received a telephone call from a man who introduced himself as Mr Al-Eid's uncle, and who claimed to be a lawyer. I explained the issues surrounding Mr Al-Eid's purported ownership of the companies in the UK, and he said that Mr Al-Eid was a very poor man, and that this was likely to be the tricks of Abou Ali/Hassan Makki."
- In his affirmation, Mr Al-Eid accepts that he had conversations with Mr Abdelmawla in early August 2004 but gives a different account of them:
"46. Earlier this year sometime in early August a person called me who gave the name Boshr Abdul-Mawla. He said that he was a lawyer calling from the city of Homos and that a foreign company had engaged him to negotiate with me. He said that the company employing him would pay me fourteen thousand American dollars if I would give a statement saying that the companies I own in the United States, Weybridge Management LLC, Hillside Trading Group LLC and Community Technology LLC were not mine but were owned by Hassan Makki. He further offered me a car and subsequently tickets to Spain, France or Egypt with accommodation for me and my family. I refused to give a false statement. I have reported this matter to the Syrian Police. "CA1" pages 2-27.
47. Not long afterwards the same man called again but this time the pretended to be a Syrian lawyer. I recognised his voice. He said that the British court had assigned him to check the American companies and that Hassan Makki was evading taxes in England. When I again set out the true position in relation to the companies he threatened to pursue me and Hassan Makki through Interpol.
60. It is not true that I called Mr Albacha. He called me. As I have stated he tried to bribe me. The conversation that he recounts in his affidavit which supposedly took place with me is not true. I understand that the Lebanese police would also like to speak with Mr Albacha about his activities in this matter."
As to the offer of a car and tickets, Mr Abdelmawla stated in his second affirmation that he was:
"Having located Mr Al-Eid in Dara'a, I was instructed to approach Mr Al-Eid to ask him if he owns companies in the UK and, if not, if he would be willing to make a formal statement. I was further instructed that, if Mr Al-Eid was not willing to meet with the Claimants' lawyers in Damascus, they were willing to meet him at a location of his choice outside Syria and to pay for his air ticket, accommodation and reasonable disbursements."
- Mr Abdelmawla's evidence is that on the same day he had telephone conversations with Mr Al-Eid, a man introduced as his lawyer and Mr Makki. Mr Al-Eid accepts that he had conversations with Mr Abdelmawla. Mr Makki does not dispute that he had a telephone conversation with Mr Abdelmawla. There is no evidence from Mr Al- Eid's lawyer, but Mr Al-Eid does not deny that he instructed his lawyer to speak to Mr Abdelmawla or that his lawyer did speak to Mr Abdelmawla.
- I can dismiss without difficulty Mr Al-Eid's allegation that Mr Abdelmawla tried to bribe him. Mr Abdelmawla denied it and Mr Al-Eid was not prepared to give oral evidence to support it. I accept Mr Abdelmawla's evidence of his conversations with Mr Al-Eid and his lawyer. I find it entirely credible that, once he realised that his evidence was in demand, Mr Al-Eid would attempt to do a deal with Mr Makki or Mr Abdelmawla. In the light of my other findings concerning Mr Makki, I also find it entirely credible that he would have offered and paid substantial sums to Mr Al-Eid for his evidence. In turning down Mr Abdelmawla's request for a statement, I see no reason why Mr Al-Eid's statement of benefits provided to him by Mr Makki should be untrue; there was no reason to think that it was a further ploy in a negotiation. There is only the untested written evidence of Mr Makki and Mr Al-Eid to counter Mr Abdelmawla's account of the conversations. I am satisfied that not only did Mr Al- Eid and his lawyer make the statements of which Mr Abdelmawla has given evidence, but also that Mr Makki has bought Mr Al-Eid's evidence.
- In conclusion, therefore, I find that the defences of Mr Makki and Daltel USA are false in the respects alleged by the claimants and that Mr Makki knew that they were false when he signed the statements of truth verifying them. I am satisfied that he knew and intended that by raising false defences he would interfere with the administration of justice in this action. For the reasons given earlier in this judgment I am also satisfied that Mr Makki has deliberately flouted the search and freezing orders in many of the respects alleged by the claimants.
- It was agreed that I would hear submissions on the appropriate orders to be made on the committal applications after I had given this judgment.