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England and Wales High Court (Family Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Family Division) Decisions >> Mubarak v Mubarak  EWHC 466 (Fam) (23 October 2000)
Cite as:  EWHC 466 (Fam),  1 FLR 673,  Fam Law 177
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IN THE FAMILY DIVISION
B e f o r e :
|- v -|
|- and -|
|MOHAMMED HUSSAIN WANI||Intervener|
|DIANOOR INTERNATIONAL LTD.||Third Respondent.|
|- and -|
|DIANOOR JEWELS LTD. (in administration)||Fourth Respondent|
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MR. C. HOWARD Q.C. and MR. R. HARRISON (instructed by Messrs. Bates Wells & Braithwaite) appeared on behalf of the Respondent.
THE INTERVENER did not appear and was not represented.
MR. I. HUNTER Q.C. and MR. V. FLYNN (instructed by Messrs. Taylor Joynson Garrett) appeared on behalf of the Third Respondent.
MS. S. PREVEZER Q.C. (instructed by Clifford Chance) appeared on behalf of the Fourth Respondent.
Crown Copyright ©
A. SUMMARY OF BACKGROUND
"... he had been depressing the banking picture as the court views the [bank] statements. The [financial] settlement is due to be agreed in a month's time after which business and banking will return to 'normal'.
"... The fact that in ancillary relief proceedings no- one has made a distinction between the husband, on the one hand, and the assets belonging to the various companies ... on the other, does not, of course, enable the court when considering the interests of DJL's creditors to disregard the corporate structure through which the businesses have been conducted. It is not suggested that DJL is a sham. It is plainly operated as a separate trading entity. Its creditors can only look to DJL and ultimately, through a liquidation, to DJL's assets for satisfaction of their claim. The fact that there are other companies in the group and that the husband regards them all as one and their assets as his to deal with, and the fact that the husband, the controlling shareholder, is a man of great wealth, is irrelevant so far as the claims of DJL's creditors are concerned ... "
B. CAN THE WIFE ENFORCE HER ORDER AGAINST THE COMPANY ASSETS?
The company law approach
"... No shareholder has any right to any item of property owned by the company for he has no legal or equitable interest therein. He is entitled to a share in the profits while the company continues to carry on business and a share in the distribution of the surplus assets when the company is wound up." (Macaura v. Northern Assurance Co. Ltd.  A.C. 619, 626 per Lord Buckmaster).
"... The approach of the judge in the present case was simply to look at the economic unit, to disregard the distinction between the legal entities that were involved and then to say: since the company cannot pay, the shareholders who are the people financially interested should be made to pay instead. That of course is radically at odds with the whole concept of corporate personality and limited liability and the decision of the House of Lords in Salomon ..."
"... It is not possible to formulate any single principle as the basis for these decisions, nor are all the decisions as to when the separate legal entity of the company must be respected or when it may be disregarded entirely consistent with one another."
The family law approach
"... a question arises whether, having regard to the shareholdings in the two relevant companies ... it is proper for the court to pierce the corporate veil with the effect that though the company is the legal owner of the realty the court would disregard the corporate ownership and make an order which, in effect, is an order against the husband, an individual shareholder. Of course it is quite clear, and there is abundant authority, that where the shareholding is such that the minority interests can for practical purposes be disregarded, the court does and will pierce the corporate veil and make an order which has the same effect as an order that would be made if the property was vested in the majority shareholder."
"... it is not open to the court to supplement the express powers specified in s.23(1) (c) and s.24(1) [of the Matrimonial Causes Act 1973] in such a way as to exercise an inherent power, the effect of which will be to force a third party, to wit the company, to sell property vested in the company by way of sale to the petitioner. The difficulty, I feel, is that Parliament has in s.24(1) (a) specifically limited the property that shall be the subject of a property adjustment order and has limited it to property which is property to which the first-mentioned party is entitled in possession or reversion."
At p.292 Dillon L.J. said:
"... If the company was a one-man company and the ... of the husband, I would have no difficulty in holding that there was power to order a transfer of the property, but that is not this case. The evidence shows that the husband only has a 71% interest in this company. The remaining 29% is held by individuals who, on the evidence available to this court, are not nominees but business associates of the husband. ... I find it quite impossible, therefore, to disregard the corporate entity of [the company] ... "
"... That wording can relate to the shares in the company ... which are owned in their own right by Mr. or Mrs. Crittenden, but it cannot relate to the assets of [the company] ... "
"... it would, it seems to me on the face of it, be an irony if the court was precluded from ordering a sale of the land which was very much central to the litigation, simply because a party has only a 100% interest in the shares in the company which owns the land, rather than the actual title to the land himself."
"... I find it difficult to see how the application for ancillary relief in Green ... could have been said to relate to land when the husband merely owned shares in two companies which owned land. I can well understand Connell J's desire to find a solution so that the petitioner and her child could be provided with a home, but I do not think that the court had power in that case to order a sale of the land."
Rationalisation of approach
"... For the purposes of these proceedings the husband accepts that the assets of the trust will be treated as being his, subject to ... "
[It was there suggested that the husband had only shared ownership with the intervener, his adopted brother, a suggestion which I rejected at the substantive hearing: the intervener was also incidentally caught out in the lie surrounding the forged document referred to at the outset of this Judgment, and he too abandoned the hearing, in his case never to return].
"... We are instructed that the husband acknowledges his beneficial entitlement to 55% of all the business assets described above [I rejected this 55% argument]- ... " [Emphasis added]
Turning now to the oral evidence at this hearing,
"... It may be that something else can be resurrected, ... a proposal to which Mr. Crittenden will agree, while at the same time satisfactorily protecting the creditors of the company whose interests in a company's parlous position cannot be overlooked."
In similar vein Blackburne J. in his Judgment above said:
"... There is, I venture to suggest, nothing in this [protecting the interests of creditors] which is inconsistent with the law and practice of the Family Division in ancillary relief matters. In Nicholas ... it is clear that the minority interests in a company, unless for some reason it is possible to disregard them, must be safeguarded before the assets of the company can be applied in satisfaction of a lump sum payment obligation owed by the controlling shareholder to his spouse. The position of creditors seems to me to be a fortiori ... "
Conclusion on lifting the veil
C. THE JUDGMENT SUMMONS
"... may commit to prison for a term not exceeding six weeks, ... any person who makes default in payment of any debt or instalment of any debt due from him in pursuance of any order or judgment ... "
Such jurisdiction may only be exercised where it is:
"... proved to the satisfaction of the court that the person making default either has or has had since the date of the order or judgment the means to pay the sum in respect of which he has made default ...
"Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law.
3 Everyone charged with a criminal offence has the following minimum rights:
(a) to be informed promptly, in a language which he understands and in detail, of the nature and cause of the accusation against him;
(b) to have adequate time and facilities for the preparation of his defence; ...
(d) to examine or have examined witnesses against him ... "
Preliminary points taken on behalf of the husband
The substance of the Judgment Summons
"... the fact is that the standard of proof is the criminal standard and, as Johnson J [who tried the original ancillary relief hearing] had specifically made his findings on the balance of probability, it was not sufficient for Judge Owen [who tried the Judgment Summons] to say that the finding of Johnson J was binding and that the husband had the ability to meet [the order]. The judge should have reminded himself, having regard to the findings of Johnson J, that the case needed to be decided beyond all reasonable doubt. There probably was material before him on which he could have been so satisfied, but he did not consider that aspect and this matter, on its own, would be sufficient, in my judgment, to justify allowing the appeal."
(a) Asked whether he presently has any income to pay the substantial rent and periodical payments which he is in fact paying the wife, the husband replied 'not really' - or words to that effect. He explained he was able to make these payments by way of borrowings. He referred to one or two relatives as being the lenders, but the amounts which he mentioned of their loans bore no relation to the sum of £14,000 odd per month which he is having to find for the wife, the children and their rental payments.
(b) He admitted when asked that he is effectively employing a chauffeur/assistant, someone whom he took on about two months ago. This was at a time when the English company was in administration and when he was and is deeply in debt to the wife under the order in these proceedings. I do not know how he is paying for this convenience or why.
(c) He admitted forgery of the 1996 supposed Joint Venture Agreement, which forgery had previously only been a matter of inference. It meant that he had arranged for an Indian lawyer and two other witnesses to give false evidence, and it now appears from his evidence that (just as the wife was alleging at the original hearing) the 1996 purported Agreement was in fact prepared much later than its stated date, even after the husband had filed his "Form E".
(d) The husband has at no stage explained why he stayed away from the main hearing which must I think, unless and until explained, be regarded as having been tactical (i.e. to avoid full investigation of his means).
(e) He was casual about the value of an Australian property development company in which he has an interest, saying that 'off the top of his head' he could not say whether it presently has any assets. Previously he valued his interest in or contribution to it at around $500,000.
(f) He gave evidence which was unacceptable about his inability to get money (viz. the potential net proceeds of sale of a flat in Bombay) out of India. In fact, and on his own case to explain so-called 'Parties 1 to 11', he has huge experience and acumen in handling other people's money through his Swiss bank account, by way of assisting them as regards exchange control regulations.
(g) He fenced with Mr. Pointer as to whether he it was who arranged for the Indian lawyer (above) to swear false evidence, which he eventually accepted; and as regards whether the trustees of the Jersey trust do actually exercise any real independent discretion (he suggesting that they do so, when their removal of the wife as beneficiary at his behest shows that they do not).
(h) When asked whether he has been paying so-called 'Creditors A to D' pursuant to a repayment schedule relied on by him at the outset of the original hearing, the husband said he was unsure. This was a quite unsatisfactory answer because the sums due, if being paid, are substantial and one could hardly be in a state of uncertainty about them.
(i) He says in his recent affirmation that in his original presentation he omitted to mention a BVI company, saying it is dormant; but he produces no documents whatsoever to support this.
(j) He further says in that recent affirmation that, when he gave Barclays Bank information about his financial circumstances in 1998, he omitted to mention his creditors (said by him to have been, firstly, of £10 million and, secondly, of one half of all his net assets). Accepting for the sake of argument the husband's case as to this i.e. his presenting a rosy picture to the bank (which is anyway contrary to my findings at the main hearing) it would clearly demonstrate his willingness and ability to make inaccurate and self-serving statements convincingly.
Ability to have paid out of disclosed assets?
(There is a subsidiary issue as to whether the order of 20th January 2000 actually stayed the lump sum, or whether it only stayed enforcement of it by way of execution on the company's assets. But I find as a matter of construction of the order, and on balance, that the lump sum itself was stayed).
Conclusion on Judgment Summons
"... He time and again made clear that the proceeds of sale of the May sale would go to the wife at the end of June ... "
[NOTE: See also Discussions after Judgment and subsidiary Judgments given today]