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||Neutral Citation Number:  EWHC 3269 (Ch)
||Petition No: 10850 OF 2011
IN THE HIGH COURT OF JUSTICE
IN THE MATTER OF FI CALL LIMITED
AND IN THE MATTER OF THE COMPANIES ACT 2006
||Petition No: 10850 OF 2011
Royal Courts of Justice
Strand, London, WC2A 2LL
||11 November 2015
B e f o r e :
THE HONOURABLE MR JUSTICE HILDYARD
|| (1) APEX GLOBAL MANAGEMENT LIMITED
(2) FAISAL ALMHAIRAT
- and -
||(1) FI CALL LIMITED
(2) GLOBAL TORCH LIMITED
(3) HRH PRINCE ABDULAZIZ BIN MISHAL BIN ABDULAZIZ AL SAUD
(4) EMAD MAHMOUD AHMED ABU-AYSHIH
(5) HRH PRINCE MISHAL BIN ABDULAZIZ AL SAUD
Matthew Collings QC and Oliver Phillips (instructed by HCLS LLP in the Petition and
Set Aside Application only) for the Claimants
Justin Fenwick QC, Daniel Saoul and Michael Ryan (instructed by Mishcon de Reya) for the Defendants
Hearing dates: 26 – 30 January 2015 and 23 – 24 April 2015
HTML VERSION OF JUDGMENT
Crown Copyright ©
Mr Justice Hildyard :
- These much-publicised and complex consolidated proceedings, involving cross-petitions under the Companies Act and other claims between the parties, bundled together for the purposes of their management and trial by order of Vos J (as he then was) made on 30 July 2013 (sealed on 30 September 2013, "the Vos Order"), have been bedevilled by an extraordinary litany of procedural follies and failures, first on the part of one side and then the other. These have ultimately left the court with no option but to make a series of "unless" orders culminating in default judgments, so that in the end these proceedings have imploded, with all claims except the Counterclaim having been disposed of by such judgments in default.
- After all this, all that remains for resolution is:
(1) the petition and counterclaim ("the Counterclaim") brought by the Second Respondent, Global Torch Limited ("Global Torch") seeking (a) the winding-up of Fi Call Limited ("Fi Call Limited") on the just and equitable ground, and (b) an account of monies paid out of Fi Call Limited at the instance of Apex Global Management Limited (singly, "Apex") or Faisal Abdel Hafiz Almhairat (individually "Mr Almhairat" and, together with Apex, "the Apex Parties") and equitable compensation or damages, which the Apex Parties have been debarred from defending;
(2) an application ("the Set Aside application") by the Third Respondent, HRH Prince Abdulaziz Bin Mishal Bin Abdulaziz Al Saud ("Prince Abdulaziz") to set aside a judgment in default which was entered against him by Norris J on 14 October 2014 and which also debarred him from defending the cross-petition of Apex after he had failed to comply with a provision of the Vos J order requiring him personally to certify compliance with certain disclosure obligations by a Statement of Truth; and
(3) an application by Apex to resurrect its petition ("Apex's application" and "Apex's Petition" respectively) pursuant to section 994 of the Companies Act 2006 in respect of Fi Call Limited, notwithstanding an order providing for it to be struck out which I made on 18 December 2014 (sealed on 19 December 2014) after repeated failures on the part of the Apex Parties to comply with earlier orders.
- Furthermore, in the event, even that Counterclaim has had to be determined unopposed and without testing of evidence and adversarial argument, since by the same order of 18 December 2014 the Apex Parties were debarred from defending the Counterclaim also.
- To describe the position that has been reached as unsatisfactory is a considerable understatement. The burden on the court at every level in terms of the deployment of its resources has been prolonged and substantial: a plethora of interlocutory applications, which have travelled repeatedly to the Court of Appeal and once to the Supreme Court, attest to this. The costs to the parties have been enormous.
- Further, the result of the various procedural debacles, though it has led to a shorter trial, has been greatly to increase the burden of fairly adjudicating the remaining claims. Ferris J made a similar observation in his judgment in Re Full Cup International Trading Ltd  BCC 682, a case which also involved a petition which the respondents were debarred from defending. In an adversarial system, the absence of opposition, and of the elucidation brought by oral argument, makes for obvious difficulties.
- That is particularly so in a case such as this. At all stages of the proceedings it has been recognised that the allegations of forgery and fraud which each side maintained against the other could only properly be resolved after full disclosure, expert evidence and cross-examination at a full trial. When there is added to this the fact that the primary relief sought in the Counterclaim, the winding-up of Fi Call Limited, has never really or plausibly been resisted, the position moves beyond being remarkable.
- Nevertheless, Global Torch has pressed for adjudication; and the primary purpose of this judgment is to provide that, so far as is fair, possible and necessary to do so in the peculiar and unsatisfactory circumstances.
- Since there are other matters also inextricably connected, and with a view to finality, I deal with them also.
- Fi Call Limited, the company which has been the subject of cross-petitions pursuant to section 994 of the Companies Act 2006 and which Global Torch now seeks to have wound up, was incorporated in England on 23 October 2009 as a private company limited by shares.
- Fi Call Limited was conceived to be a corporate vehicle for the exploitation of telecommunications technology, and in particular a system designed to be installed in smartphones and to enable users to make free calls over the internet to other users with the same software. This system was known as Voice Over Internet Protocol Application (or "VoIP App").
- Fi Call Limited has a nominal capital of £300m divided into 180 million A shares of £1 each and 120 million B shares of £1 each. Apex was initially registered as the owner of the A shares and Global Torch was registered as the owner of the B shares. The Articles of Association of Fi Call Limited provided for A shares to have one vote, and for B shares to have 1.6 votes.
- Fi Call Limited's Articles of Association also provide for Prince Abdulaziz to be the Chairman (removable only on death or resignation). The quorum for board meetings was a Global Torch nominee and Mr Almhairat, or Prince Abdulaziz and Mr Almhairat with Prince Abdulaziz having a casting vote. However, the only de jure directors of Fi Call Limited since its incorporation have been Mr Almhairat and Mr Emad Mahmoud Ahmed Abu-Ayshih ("Mr Abu-Ayshih", the Fourth Respondent): Prince Abdulaziz was never formally appointed as a director and never de jure became one, even though he was designated to act, and did occasionally purport to act, as Chairman at board meetings.
- The shares in Fi Call Limited are no longer held only by Apex and Global Torch. They are held by additional investors, as follows:-
i) Apex holds not more than 165,800,680 A shares (55.27% of the shares and 44.57% of voting rights).
ii) Global Torch holds not more than 114,646,851 B shares (38.22% of the shares and 49.31% of voting rights).
iii) Mr Al Masoud holds at least 4,400,000 A shares and 2,933,333 B shares (2.44% of the shares and 1.99% of the voting rights). The Third to Fifth Respondents suggest that he bought a further 4.6 million A shares and 3,066,666 B shares between May and July 2010.
iv) Prince Saud holds 399,660 A shares and 266,440 B shares (0.22% of the shares and 0.18% of voting rights).
v) Prince Turki holds 399,660 A shares and 266,440 B shares (0.22% of the shares and 0.18% of voting rights).
vi) Mr Abdulrahman Al Shehri ("Mr Al Shehri") holds at least 9 million A shares and 1,886,966 B shares. Apex contends that Mr Al Shehri purchased a further 4,113,034 A shares on 29th March 2011, and the Third to Fifth Respondents contend that he purchased an additional 4,113,034 B shares on that date instead.
- Unusually, not all the registered shareholders have been joined as parties; by contrast, neither Prince Abdulaziz nor his father HRH Prince Mishal Bin Abdulaziz Al Saud ("Prince Mishal") is (or has ever been) a shareholder in Fi Call Limited and yet each is joined as a party. However, I understand that all shareholders have been notified of these proceedings.
- The shares as originally allotted and purportedly issued to Apex and Global Torch were not paid for in cash, but were treated as fully paid up as follows:
(1) the A shares allotted to Apex were treated as paid up by non-cash consideration in the form of goodwill and property rights in the VoIP App (see below);
(2) the B shares allotted to Global Torch were treated as paid up by non-cash consideration in the form of goodwill and contacts which it was said Prince Abdulaziz brought in through his reputation and his ability to attract further investment.
- The adequacy of that non-cash consideration appears to me uncertain; and although none of the parties has ever taken a point in this regard, it seems to me that any liquidator appointed if Fi Call Limited is wound up may wish to examine the true position.
- Apex is a body corporate incorporated in the Seychelles. Apex is wholly owned and controlled by Mr Almhairat.
- Global Torch is a body corporate incorporated in the British Virgin Islands. Its shares are held by Prince Abdulaziz (who owns 50% of its shares), Mr Abu-Ayshih and a Mr Yasin Sabha ("Mr Sabha", a Jordanian lawyer, who is not a party).
- The Fifth Respondent, Prince Mishal, was never a shareholder or a director in Global Torch or Fi Call Limited. Global Torch and Mr Abu-Ayshih contend that Prince Mishal has had no involvement in the affairs of Fi Call Limited and should never have been included in these proceedings.
- Mr Almhairat is a director of Apex as well as Fi Call Limited. Mr Abu-Ayshih is, likewise, a director of Global Torch and of Fi Call Limited. In this judgment Apex and Mr Almhairat will together be referred to as "the Apex Parties", and Global Torch and Mr Abu-Ayshih will together be referred to as "the Global Torch Parties".
- Before descending into the detail, it is convenient to provide a brief overall description of the context of the proceedings. I can take that from Arden LJ's judgment in the consolidated appeals relating to the interim orders culminating in the default judgment against Prince Abdulaziz ( EWCA Civ 1106):
"A brief description of the proceedings will suffice to give the context. Apex Global Management Limited ("Apex") and Global Torch Limited ("Global Torch") (Seychelles and British Virgin Islands companies respectively) set up an English company, Fi Call Limited ("Fi Call"), to develop and market internet telecommunications technology. Mr Almhairat, the second respondent, a Jordanian, is Apex's sole shareholder. Global Torch is owned by Prince Abdulaziz, Mr Abu-Ayshih and a Mr Sabha, who is not a party to these proceedings. The joint venturers have fallen out and have launched cross-petitions under the court's statutory jurisdiction to give relief against the unfairly prejudicial conduct of a company's affairs in sections 994 to 996 of the Companies Act 2006 ("CA 2006"). Both seek share purchase orders as well as pecuniary and declaratory relief. The respondents to Global Torch's petition are Apex and Mr Almairat ("the Apex parties"). The respondents to Apex's petition are Global Torch, Prince Abdulaziz, Mr Abu-Ayshih and HRH Prince Mishal bin Abdulaziz Al Saud ("Prince Mishal") ("the Global Torch parties"). Fi Call is joined as a nominal respondent in both cases.
3. Both joint venturers make allegations of serious misconduct of the affairs of Fi Call. For the purposes of this judgment, only the general flavour is needed. The Apex parties contend that the Global Torch parties have caused Fi Call to be involved in money laundering and of having run a campaign of threats and other unlawful conduct against them. The Global Torch parties have alleged that Mr Almhairat misappropriated monies belonging to Fi Call. The Global Torch parties challenge the authenticity of various emails and conversation tapes, which it says have been forged.
4. The Apex parties say that Global Torch is a corporate vehicle of Prince Abdulaziz. Prince Abdulaziz has also acted as Chairman of Fi Call but he is said not to be a lawfully appointed director of Fi Call. The Apex parties say that Prince Abdulaziz has acted as a de facto and/or shadow director of Fi Call. Mr Abu-Ayshih is an adviser to Prince Abdulaziz and is a director of and a shareholder in Global Torch, and a lawfully appointed director of Fi Call. Prince Mishal is the father of Prince Abdulaziz, and both Princes are members of the House of Saud."
- It is the Global Torch Parties' case that the venture agreed to be carried on through Fi Call Limited was entered into by them on the basis of a number of important assurances and representations given by Mr Almhairat on behalf of Apex, which the Global Torch Parties now know to be untrue, in particular as to:
(1) the state of the VoIP App technology, namely that it was fully functional and commercially viable; and
(2) the fact that Mr Almhairat and his existing company, Nida'a Amman, owned the technology and all associated intellectual property and would be transferring it to Fi Call Limited.
- With this in mind, the Global Torch Parties' hope and belief was that Fi Call Limited would become a serious player in the telecoms industry in the Middle East.
- A Shareholders Agreement, entered into between Global Torch, Apex and Mr Almhairat on 6 November 2009, included provisions for:
(1) Mr Almhairat, as part of the non-cash consideration for the allotment to Apex of shares in Fi Call Limited, to procure the transfer to Fi Call Limited of "various intellectual property rights" from a company called Amman Capital plc (which until a change of name on 16 October 2009 was called Fi Call plc), a company incorporated under the laws of England as a public company (clause 2(3));
(2) the business and affairs of Fi Call Limited to be managed by its Board of Directors (clause 5(1));
(3) the quorum for any Board meeting to be at least one director nominated by Global Torch and one by Mr Almhairat and the Chairman and Mr Almhairat (clause 5(3));
(4) any resolution of such Board to require, in order to be valid, the positive vote of at least one of the directors nominated by Global Torch;
(5) the Chairman at such meetings to have a casting vote;
(6) by clause 5(7), that "No resolution may be passed by the Board having the effect of removing the Chairman from office";
(7) by clause 11(1), that Apex may not transfer or dispose of any interest in its shares in Fi Call Limited except with the prior written consent of Global Torch;
(8) by clause 11(2), that:
"(a) any transfer of shares in the Company to a person who is not a party to the Shareholders' Agreement shall be conditional upon, inter alia, the transferred shares comprising of shares offered by Apex and Global Torch in proportion to the shares held by them respectively pari passu as if their shares constituted one class of share; and
(b) if a transfer of shares would otherwise result in Global Torch losing a simple majority of votes, i.e. a number of votes equal to or greater than 51% of the total votes of shareholders, Apex must vote in favour of a special resolution to adopt new articles of association effecting an increase in the number of votes for each of the B shares held by Global Torch sufficient to give Global Torch a simple majority of votes following completion of the transfer";
(9) by clause 11(3), that:
"The parties shall procure that before any person (other than a person who is already a Shareholder) is registered as a holder of any share in the Company, such person shall enter into a Deed of Adherence in the form set out at Schedule 5 covenanting with the parties to this Agreement from time to time to observe, perform and be bound by all the terms of this Agreement which are capable of applying to such person (other than the provisions of clause 3 hereof) and which have not been performed. The Company shall not register any such person as the holder of any share until such a deed has been executed. Upon being so registered, that person shall be deemed to be a party to this Agreement."
(10) by clause 20(10), that the Shareholders' Agreement "shall be governed by and construed in accordance with English law and the parties hereto irrevocably submit to the non-exclusive jurisdiction of the English courts in respect of any dispute or matter arising out of or connected with the Shareholders' Agreement".
- With Fi Call Limited set up on terms that afforded control rights to Global Torch, the Global Torch Parties proceeded in good faith to introduce investors to the business – their ability to attract investment being their agreed contribution to Fi Call Limited. This resulted in a string of valuable Share Purchase Agreements ("SPAs") pursuant to which a number of third parties paid substantial funds to Apex and Global Torch, funds which were primarily intended, as had been agreed between the parties, to be poured into Fi Call Limited as working capital.
- Unfortunately, the Global Torch Parties' vision proved to be a chimera. As they came to learn, the technology which the Apex Parties purported to invest into Fi Call Limited was nowhere near as advanced as they had asserted, with serious question marks also existing over their rights to and ownership of that technology, which, it materialised, was in fact being developed by third parties at a substantial cost to Fi Call Limited and without the Global Torch Parties' informed consent.
- Moreover, the Global Torch Parties contend, as time wore on and the true state of the technology became apparent, Mr Almhairat sabotaged potentially lucrative deals with major telecoms service providers in the Middle East, began to exclude the Global Torch Parties from access to important Company documents and improperly removed Mr Abu-Ayshih as a director of the board of Fi Call Limited's sister company in the Seychelles ("Fi Call Seychelles"). Mr Almhairat also removed Mr Abu-Ayshih as a co-signatory of Fi Call Seychelles' bank account, leaving Mr Almhairat in sole control of an account which held several million US dollars, and in respect of which Mr Almhairat has failed despite several requests, to provide up to date bank statements.
- Further, the Apex Parties failed to account for very substantial sums paid to Apex and intended for onward transmission to Global Torch pursuant to one of the SPAs mentioned above, and also caused Fi Call Limited to make significant payments, including to entities associated with Mr Almhairat or his family, in circumstances which were not explained to the Global Torch Parties and still have not been explained.
- As the Global Torch Parties became alive to these concerns, and sought to call Mr Almhairat to account, he refused to attend Company Board meetings and instead, shortly before this litigation commenced, made very serious allegations against Mr Abu-Ayshih, Prince Abdulaziz and Prince Mishal, of alleged money laundering for Hezbollah, gem and gold smuggling and the making of death threats towards Mr Almhairat and his family. Although the Apex Parties always insisted that these allegations are supported by recordings of face-to-face conversations and telephone calls and/or by emails, no recording has ever been provided to the Global Torch Parties and in three years of litigation no evidence was ever produced in any reliable form to support these allegations. Indeed, it has been a matter of increasing concern to the Global Torch Parties that two key sources of electronic evidence – Fi Call Limited servers and a Hotmail account, both maintained by Mr Almhairat – have been allowed to be decommissioned or lapse, with the result that important evidence, including evidence for the purpose of testing the Apex Parties' assertions regarding a number of disputed emails, is no longer available to the court. It is the Global Torch Parties' case that these assertions (which have little or no connection with Fi Call Limited in any event) were entirely false, having been brought to embarrass the Princes so as to pressurise them into a settlement favourable to Apex.
Nature of claims and relief sought
- As indicated in the overall summary above, Global Torch's petition and claims, brought together under what has been described compendiously and for convenience as its Counterclaim, alleged:
(1) that the Apex Parties have been and/or are conducting the affairs of Fi Call Limited in a manner that is unfairly prejudicial to the interests of its members generally and Global Torch in particular;
(2) that the Apex Parties have misappropriated and must account for funds due or belonging to Fi Call Limited;
(3) that such conduct has been such as to cause Global Torch to lose any and all trust and confidence in the Apex Parties; and
(4) that further or alternatively the circumstances of the Apex Parties' misconduct are such that it is just and equitable that Fi Call Limited be wound up.
- For clarity, until an amendment put forward in the course of the one-sided trial, there was no express or separately pleaded claim in the Counterclaim in respect of the monies (known as "the Al Masoud monies") which were the subject of the default judgment against Prince Abdulaziz. Put shortly, the Al Masoud monies represented monies payable by a Mr Al Masoud to Apex under an agreement referred to in this judgment as the First Al Masoud SPA. However, there was a claim that Mr Almhairat, as the sole executive director of Fi Call Limited, had in breach of duty failed to procure Fi Call Limited to keep proper accounting records: and in the course of the trial this was sought to be elevated into a contention that, had proper accounts been kept, it would have been evident that no claim lay against Prince Abdulaziz since he had already discharged the obligation asserted by a payment to Fi Call Limited with the knowledge of Apex and its agreement to the discharge thereby of Prince Abdulaziz's obligations to Apex in respect of the Al Masoud monies. I elaborate later on this aspect of the dispute, which travelled to the Supreme Court and which has in some senses become the focus of the proceedings.
- The relief which Global Torch initially sought pursuant to sections 994 to 996 of the Companies Act 2006 was an order that the Apex Parties be required to purchase Global Torch's shares in Fi Call Limited at a fair and proper valuation, making allowance for the misappropriations and defalcations further pleaded. At the trial, however, Mr Fenwick QC on behalf of Global Torch disclaimed such relief: no buy-out was pursued; nevertheless, he continued to maintain claims for account and payment, as well as the primary relief of a winding-up.
- In these circumstances, the relief now sought by the Global Torch parties can be summarised as follows:
(1) Fi Call Limited be wound up;
(2) the Global Torch Parties have permission to apply for the appointment of a liquidator being appointed for that purpose and also to investigate and take steps in respect of the misappropriations from Fi Call Limited of Apex and Mr Almhairat; and that
(3) the Apex Parties do account to Global Torch and to Mr Abu-Ayshih for the very substantial sums which they have misappropriated from them.
- I shall return to more detailed aspects of the proceedings later. Before doing so, I turn to summarise the legal parameters of the dispute.
Sections 994 to 996: remedies for unfairly prejudicial conduct
- The statutory remedy for unfairly prejudicial conduct was first introduced by section 75 of the Companies Act 1980 and is now contained in the Companies Act 2006, Part 30 (the "Act"). The governing provision, which remains substantially unchanged since its first introduction in 1980, is Section 994(1) of the Act, which provides:
"A member of a company may apply to the court by petition for an order…on the ground:"
(a) that the company's affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself), or
(b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial".
- If either of these grounds is established, section 996(1) of the Act provides that the court has extremely broad powers: it may
"make such order as it thinks fit for giving relief in respect of the matters complained of".
- There is a tendency to regard section 994 as extending to any form of conduct or act which relates to or affects the company concerned. However, and although the court has adopted a flexible and in some ways expansive approach to proceedings pursuant to the section, section 994 does expressly require the petitioner to establish three things:
(1) first, that the matters of which he complains are either actual or proposed acts or omissions of the company or consist of the conduct of the company's affairs;
(2) secondly, that those matters have caused prejudice to his interests as a member of the company; and
(3) thirdly, that the prejudice is unfair.
- As to (1) above, the conduct of a member of his own affairs, even in relation to the company, is irrelevant, even if it affects the company (see, for example, per Peter Gibson LJ in Legal Costs Negotiators Ltd  BCC 547 at 551). Likewise conduct which adversely affects his interests in some capacity other than as shareholder or director of the company is not within the ambit of the section. As David Richards J put it in Re Coroin Ltd  EWHC 2343 (Ch),  2 BCLC 583 at :
"The purpose of the jurisdiction is to provide remedies in respect of the way in which the affairs of the company are conducted…The section is not directed to the activities of shareholders amongst themselves, unless those activities translate into acts or omissions of the company or the conduct of its affairs. Relations between shareholders inter se are adequately governed by the law of contract and tort, including where appropriate the ability to enforce personal rights conferred by a company's articles of association."
- That said, David Richards J made clear (at ) that:
"The court will not adopt a technical or legalistic approach to what constitutes the affairs of the company but will look at the business realities."
- Thus, for example, the affairs of a company could include the affairs of a wholly-owned subsidiary with common directors; they could similarly extend to any matter capable of coming before the board or the company in general meeting for its consideration, and which could be the subject of a board or shareholder decision.
- As to (2) in paragraph  above, the relevant prejudice need not necessarily be financial in character, nor need it affect the value of his shareholding; but it must affect him adversely in his capacity as a shareholder, or offend the rules (in the constitutional documents or a shareholders' agreement or some other collateral agreement between shareholders) which he and other shareholders agreed should regulate the conduct of the business and affairs of the company: and see O'Neill v Phillips  1 WLR 1092. Again to quote David Richards J in Re Coroin (this time, at ):
"Prejudice will certainly encompass damage to the financial position of a member. The prejudice may be damage to the value of his shares but may also extend to other financial damage which in the circumstances of the case is bound up with his position as a member. So, for example, removal from participation in the management of a company and the resulting loss of income or profits from the company in the form of remuneration will constitute prejudice in those cases where the members have rights recognised in equity if not at law, to participate in that way. Similarly, damage to the financial position of a member in relation to a debt due to him from the company can in the appropriate circumstances amount to prejudice. The prejudice must be to the petitioner in his capacity as a member but this is not to be strictly confined to damage to the value of his shareholding. Moreover, prejudice need not be financial in character. A disregard of the rights of a member as such, without any financial consequences, may amount to prejudice falling within the section."
- Inherent also is the requirement for the petitioner to establish a causal link between the conduct complained of and the prejudice suffered.
- On the third element (see paragraph 35(3) above), that of unfairness, the court has the authoritative guidance given by the House of Lords in O'Neill v Phillips. For present purposes this sufficiently emerges from the following extract from Lord Hoffmann's speech in that case, where he discusses section 459 (the old section 994), which is of such importance that (like David Richards J) I think it appropriate to quote at some length:
"In s 459 Parliament has chosen fairness as the criterion by which the court must decide whether it has jurisdiction to grant relief. It is clear from the legislative history (which I discussed in Re Saul D Harrison & Sons plc  1 BCLC 14 at 17-20) that it chose this concept to free the court from technical considerations of legal right and to confer a wide power to do what appeared just and equitable. But this does not mean that the court can do whatever the individual judge happens to think fair. The concept of fairness must be applied judicially and the content which it is given by the courts must be based upon rational principles. As Warner J said in Re J E Cade & Son Ltd  BCLC 213 at 227: "The court … has a very wide discretion, but it does not sit under a palm tree." Although fairness is a notion which can be applied to all kinds of activities, its content will depend upon the context in which it is being used. Conduct which is perfectly fair between competing businessmen may not be fair between members of a family. In some sports it may require, at best, observance of the rules, in others ("it's not cricket") it may be unfair in some circumstances to take advantage of them. All is said to be fair in love and war. So the context and background are very important. In the case of s 459, the background has the following two features. First, a company is an association of persons for an economic purpose, usually entered into with legal advice and some degree of formality. The terms of the association are contained in the articles of association and sometimes in collateral agreements between the shareholders. Thus the manner in which the affairs of the company may be conducted is closely regulated by rules to which the shareholders have agreed. Secondly, company law has developed seamlessly from the law of partnership, which was treated by equity, like the Roman societas, as a contract of good faith. One of the traditional roles of equity, as a separate jurisdiction, was to restrain the exercise of strict legal rights in certain relationships in which it is considered that this would be contrary to good faith. These principles have, with appropriate modification, been carried over into company law. The first of these two features leads to the conclusion that a member of a company will not ordinarily be entitled to complain of unfairness unless there has been some breach of the terms on which he agreed that the affairs of the company should be conducted. But the second leads to the conclusion that there will be cases in which equitable considerations make it unfair for those conducting the affairs of the company to rely upon their strict legal powers. Thus unfairness may consist in a breach of the rules or in using the rules in a manner which equity would regard as contrary to good faith. This approach to the concept of unfairness in s 459 runs parallel to that which your Lordships' House, in Ebrahimi v Westbourne Galleries Ltd  2 All ER 492,  AC 360, adopted in giving content to the concept of "just and equitable" as a ground for winding-up. After referring to cases on the equitable jurisdiction to require partners to exercise their powers in good faith, Lord Wilberforce said ( 2 All ER 492 at 500,  AC 360 at 379): "The words ['just and equitable'] are a recognition of the fact that a limited company is more than a mere legal entity, with a personality in law of its own: that there is room in company law for recognition of the fact that behind it, or amongst it, there are individuals, with rights, expectations and obligations inter se which are not necessarily submerged in the company structure. That structure is defined by the Companies Act 1948 and by the articles of association by which shareholders agree to be bound. In most companies and in most contexts, this definition is sufficient and exhaustive, equally so whether the company is large or small. The 'just and equitable' provision does not, as the respondents [the company] suggest, entitle one party to disregard the obligation he assumes by entering a company, nor the court to dispense him from it. It does, as equity always does, enable the court to subject the exercise of legal rights to equitable considerations; considerations, that is, of a personal character arising between one individual and another, which may make it unjust, or inequitable, to insist on legal rights, or to exercise them in a particular way." I would apply the same reasoning to the concept of unfairness in s 459. The Law Commission, in its report on Shareholder Remedies (Law Com No 246) (1997) [Cm 3769], BAILII:  EWLC 246, para 4.11, p 43 expresses some concern that defining the content of the unfairness concept in the way I have suggested might unduly limit its scope and that "conduct which would appear to be deserving of a remedy may be left unremedied". In my view, a balance has to be struck between the breadth of the discretion given to the court and the principle of legal certainty. Petitions under s 459 are often lengthy and expensive. It is highly desirable that lawyers should be able to advise their clients whether or not a petition is likely to succeed. Lord Wilberforce, after the passage which I have quoted, said that it would be impossible "and wholly undesirable" to define the circumstances in which the application of equitable principles might make it unjust, or inequitable (or unfair) for a party to insist on legal rights or to exercise them in a particular way. This of course is right. But that does not mean that there are no principles by which those circumstances may be identified. The way in which such equitable principles operate is tolerable well settled and in my view it would be wrong to abandon them in favour of some wholly indefinite notion of fairness."
- As that passage makes clear, and as also is apparent from cases such as Re Saul D Harrison & Sons plc  1 BCLC 14, the concept of unfairness is open-textured; but it is to be applied judicially and must comprise some breach of either the terms on which it was agreed the affairs of the company should be conducted or of equitable constraints which apply to the exercise of legal powers by reason of the nature of the relationship between the parties. As to the latter, the context in which such equitable considerations most regularly arise is that of what is usually referred to (since the seminal speech of Lord Wilberforce in Ebrahami v Westbourne Galleries Ltd  AC 360) as a "quasi-partnership". That useful, but perhaps over-used, phrase is intended to recognise and convey the fact that the relationship between shareholders may be subject to equitable considerations of a personal character which "make it unjust or inequitable to insist on legal rights, or to exercise them in a particular way".
- It is common ground in this case that Fi Call Limited was intended to be the vehicle for a joint venture between the Apex Parties and Global Torch, and also (to quote Global Torch's skeleton argument for trial) that the joint venture was based on a relationship of trust and confidence, with Global Torch, Apex and Mr Almhairat owing each other fiduciary duties and duties of good faith. However, that skeleton argument goes on to note "that Global Torch does not accept the Apex Parties' characterisation of the joint venture as a 'quasi-partnership' insofar as this is intended to imply additional legal rights and obligations, although it is not clear, on the pleadings, if it is." Further, it was never made clear whether, and if so on what basis, any equitable obligations also bound shareholders who acquired their shares later from the original joint venturers.
- There is some debate in the text books, by reference to these parameters, whether, where a respondent causes an irrevocable breakdown in the relationship of trust and confidence, that is capable of being considered to be conduct of the company's affairs in the case of a quasi-partnership where the parties have agreed to cooperate in the conduct of those affairs: see, for example, 'Minority Shareholders, Law, Practice, and Procedure' 5th ed at 6.42). Vos J, in his judgment at an earlier stage in these proceedings to which I have previously referred, was persuaded (see paragraph 125) that
"A section 994 petition is appropriate where, for whatever reasons, the trust and confidence of the parties to a quasi-partnership has broken down."
- I wonder, with great respect, whether this may go rather too far: in my opinion, the breakdown must be in consequence of some breach of either legal right or equitable constraint affecting the conduct of the affairs of the company. For example, insulting behaviour may not suffice: it may be inappropriate, but I am not convinced that any fiduciary duty which might be implied extends to control every aspect of one person's interaction with another. As it seems to me, and as in the context of a petition to wind up on the just and equitable ground on the basis of lack of confidence in the company's management (see Loch v John Blackwood Ltd  AC 783):
"this lack of confidence must be grounded on conduct of the directors, not in regard to their private life or affairs, but in regard to the company's business"
- That said, however, I would be prepared to accept that if in a quasi-partnership context, one quasi-partner so denigrates the activities of another quasi-partner as regards the latter's conduct of the company's affairs as to make their constructive continuation in quasi-partnership unrealistic, that may well suffice.
- As to what relief the court may grant if satisfied that a section 994 petition is well founded, the breadth of the remedies available to the court has already been noted; though, of course, the remedies are discretionary and the court's discretion must be exercised judicially and with a view to remedying as fairly as possible the unfairly prejudicial conduct that has been portrayed.
- The jurisdiction extends to requiring reimbursement to the company of sums due to or held on trust for it, or for some other form of equitable compensation to the company, even though a derivative action would ordinarily be the appropriate process for such relief: see Gamlestaden Fastigheter AB v Baltic Partners Ltd  1 BCLC 468 (Privy Council) (though cf Re Chime Corporation Limited (2004) 7 HKCFAR 546).
- In my judgment, it would extend also to adjusting the proportion of distributions upon a winding-up of the company (as in Re Phoneer  2 BCLC 241), even though in my opinion, the court should not ordinarily make a winding-up order pursuant to section 996, given the specific provisions for such a remedy and the careful protections relevant to the exercise of such jurisdiction: see Full Cup International Trading Ltd  BCC 682 (which went to appeal but which was not doubted on this point); see also, as to the more general proposition that the court should normally discourage a process which is less specific and affords less protection than a specially prescribed one, Re Trix Ltd  1 WLR 1421.
Alternative claim for just and equitable winding-up
- That leads on to Global Torch's (originally) alternative (but now primary) claim for a winding-up on the just and equitable ground pursuant to Section 122(1)(g) of the Insolvency Act 1986, which provides as follows:
"A company may be wound up by the court if…the court is of the opinion that it is just and equitable that the company should be wound up."
- The remedy, because it brings an end to the company as a going concern, is one of last resort, and section 125(2) of the Act stipulates as follows:
"If the petition is presented by members of the company as contributories on the ground that it is just and equitable that the company should be wound up, the court, if it is of opinion—
(a) that the petitioners are entitled to relief either by winding up the company or by some other means, and
(b) that in the absence of any other remedy it would be just and equitable that the company should be wound up,
shall make a winding-up order; but this does not apply if the court is also of the opinion both that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy. "
- As an aspect of this, the court will consider, not only alternative remedies, but also whether the petitioner has some improper or collateral purpose in seeking liquidation, or is behaving unreasonably: see In re a Company (No 002567 of 1982)  1 WLR 927 at 936.
- Subject to that, the two statutory remedies relied upon by Global Torch (section 994 and section 122) run in parallel; but (contrary to Global Torch's initial submissions) they are not coterminous. As Stanley Burnton LJ explained in Hawkes v Cuddy  2 BCLC 427:
" It is to be noted that Lord Hoffmann did not say that the facts giving rise to the jurisdiction to wind up under the 'just and equitable' jurisdiction were the same as those giving rise to the exercise of the jurisdiction under s 994: he used the word 'parallel'. To the contrary, he expressly approved the statement of Mummery J in Ex p. Estate Acquisition and Development Ltd that the grant of one remedy will not necessarily require proof of conduct which would justify a different remedy. In many, if not most, cases the conduct of the respondent may give rise both to the jurisdiction under s 994 and to that under s 122(1)(g); but there may be cases which satisfy the requirements of one jurisdiction but not the other. In addition, it should be borne in mind that a winding-up may be ordered on the 'just and equitable' ground where no unfair conduct is alleged, as in the cases in which the so-called substratum has gone, as in Re German Date Coffee Co (1882) 20 Ch. D 189 and Re Baku Consolidated Oilfields Ltd  1 All ER 24.
 In Re Guidezone Ltd  2 BCLC 321 at - Jonathan Parker J stated:
180. I accordingly conclude that if the conduct by the majority relied on by Surendra in the instant case is not unfair for the purposes of s 459, it cannot found a case for a winding-up order on the "just and equitable" ground.
 Lewison J in the present case at  and Warren J at  of his judgment in Re Southern Counties Fresh Foods Ltd,  EWHC 2810 (Ch) expressed doubt as to the correctness of the conclusion of Jonathan Parker J. For the reasons I have endeavoured to give above, in my judgment, those doubts were justified: the judgment of Jonathan Parker J on this point should no longer be followed. This is not to say, however, that his decision on the facts of that case was incorrect. On the facts as found by him, it is difficult to see that either the 'just and equitable' ground or the requirements of s.994 (then s.459) were satisfied.
 It seems to me that the judge's acceptance, at  of his judgment, of [Counsel for Mr Cuddy's] submission that a breakdown of trust and confidence, resulting in deadlock and the inability of the company to conduct its business in the manner initially contemplated, justified an order under s.994 was based on his decision to follow the judgment of Jonathan Parker J in Re Guidezone Ltd. Deadlock and the inability of a company to conduct its business as initially contemplated when the parties trusted and had confidence in each other may be inherent in the breakdown of that trust and confidence, but in my judgment do not without more satisfy the requirements of ss. 994 and 996. Of course, in many cases one party will be able to point to unfairness in the other party's reaction to the deadlock. As Lord Hoffmann said in O'Neill v Phillips  1 WLR 1092 at 1101,  2 BCLC 1 at 11:
'For example, there may be some event which puts an end to the basis upon which the parties entered into association with each other, making it unfair that one shareholder should insist upon the continuance of the association. The analogy of contractual frustration suggests itself. The unfairness may arise not from what the parties have positively agreed but from a majority using its legal powers to maintain the association in circumstances to which the minority can reasonably say it did not agree: non haec in foedera veni. It is well recognised that in such a case there would be power to wind up the company on the just and equitable ground (see Virdi v Abbey Leisure Ltd  BCLC 342) and it seems to me that, in the absence of a winding-up, it could equally be said to come within s 459. But this form of unfairness is also based upon established principles and it does not arise in this case.' "
- A petitioner for a winding-up order must also show that he has a "sufficient interest" in the form of some tangible and substantial benefit to accrue to him by virtue of his membership if the order is made: Re Rica Gold Washing Co Ltd (1879) 11 Ch D 36, 42-3. However, that may encompass more than a monetary surplus, and may include, for example the achievement of some substantial advantage or the minimisation of some disadvantage: see per Oliver J (as he then was) in Re Chesterfield Catering Co Ltd  Ch 373. In this case, the prospect of recovery from the claims for an account and payment suffice.
- The leading case as to what will constitute "just and equitable grounds" is still Ebrahami v Westbourne Galleries Ltd. Lord Wilberforce was careful to reject any exhaustive definition or categorisation of the circumstances that would fulfil the criteria. The court will necessarily wish to have regard to all of the circumstances of the case. However, examples of cases where the courts have considered it appropriate to make such an order include:
(1) the exclusion of a petitioner from the management of the company where it was understood or agreed that he would not be so excluded (Re Ebrahimi v Westbourne Galleries Ltd, supra);
(2) deadlock in the management of the company, where the directors and/or shareholders refuse to cooperate with one another (Re Yenidje Tobacco Co Ltd  2 Ch 426); and
(3) where the company's objects or trading purposes can no longer be achieved (Re Perfectair Holdings Ltd  BCLC 423).
- As I shall elaborate later, it is a feature of this case that both (a) the breakdown in trust and confidence between the Apex parties and Global Torch is admitted and (b) it is common ground that Fi Call Limited has been unable to trade and its goodwill has been destroyed. Further, (c) the VoIP App may not belong to it, and in any event Fi Call Limited cannot exploit or develop it. The truth is that beyond bringing a certain finality and the opportunity for objective investigation by the liquidator, a winding-up of Fi Call Limited is little more than legal confirmation of the reality that Fi Call Limited has no viable business nor any remaining purpose.
- That begs the question why so much money and effort has been expended by the parties in litigating over their respective interests. That in turn brings me to an important issue as to the proper scope of this judgment.
- In addition to the relief actually sought, Mr Fenwick has also sought to use the process to achieve more far-reaching and amorphous personal vindication for his clients. He has urged me to determine the various serious allegations made against them by the Apex Parties as above briefly described. In response to my queries as to the extent to which it was appropriate for me to deal with matters which were neither the gist of the Counterclaim nor necessary to determine it, Mr Fenwick emphasised the concern of his clients (in this context including Mr Abu-Ayshih but also, I think, the Princes) to obtain, if possible, a judicial determination that would extend to dispelling the very serious allegations of egregious misconduct which Apex and Mr Almhairat had put forward in their own claims.
- Where the adjudication of those allegations is of material relevance to the claim or the relief sought, it is right that I should seek to address them as best I can, even on the one-sided evidence now available. I am fortified in that by the fact that one of the considerations which influenced the Court of Appeal in this very case in upholding Morgan J's decision that, contrary to the contention of the Global Torch parties, the matter should be heard in public and not private was that a trial should provide vindication: or as it was put by Maurice Kay LJ in Global Torch Ltd v Apex Global Management Ltd  EWCA Civ 819,  1 WLR 2993 at  on page 3007:
"There are allegations and counter-allegations of serious misconduct. A person on the receiving end of such allegations will always be at significant risk of reputational damage. However, if the allegations are false, he will obtain his vindication through the judicial process, if not as a result of interlocutory application, then after a trial."
- Further, the fact that Apex and Mr Almhairat have by their conduct forfeited their own right to a full trial should not, within reason, deprive the Global Torch Parties and the Princes of the opportunity of vindication, at least where the allegations against them go, even if only indirectly, to whether they are entitled to the relief they have pleaded and seek.
- However, and as will appear, I have not felt it right to go as far as Mr Fenwick wished. I consider it axiomatic that the court should only determine disputed factual issues which need to be adjudicated in order to determine whether the cause of action asserted and the relief sought is established and appropriate. It is not the business of the court to adjudicate on matters that would not materially affect its ultimate decision on the case as put forward. What I apprehend is required of me is to determine whether Global Torch is entitled to the remedies it seeks by reference to such of the facts in the Counterclaim as it is able to prove (or which the Defendants have admitted).
- In this regard it is essential, I think, to distinguish between allegations in Apex's petition from Global Torch's claims: Global Torch is entitled to the adjudication of matters material to its own claims, but not to matters only material to Apex's claims. Neither a petition on the just and equitable ground nor proceedings pursuant to section 994 is otherwise an appropriate vehicle for the vindication of personal or business reputation, except insofar as that is incidental to the adjudication as to whether the relief sought is justified.
Three preliminary procedural points
- Before turning to describe in more detail the allegations which I do need to adjudicate upon, there are three further preliminary matters which I need to address.
- The first is a question as to the proper role of the Apex Parties, given the orders that they are debarred from defending the Counterclaim. There is, in the event, little between the parties in this regard.
- At the outset of the trial, I took the opportunity to clarify with Mr Collings QC, who was present because of his clients' remaining interests on (a) the Set Aside Application and (b) Apex's Petition (if still surviving), what, if any, part he considered he was entitled to play in the Counterclaim, given that the Apex Parties were (after repeated default) debarred from defending it. The resulting exchange went as follows:
"MR COLLINGS: Yes, my Lord, and of course here I don't trespass in any way on the counterclaim because I am not allowed to do so. But what this hearing --
MR JUSTICE HILDYARD: Can we just get that out of the way first?
MR COLLINGS: Absolutely.
MR JUSTICE HILDYARD: You have made your position clear in your skeleton argument, and the reason for your lighter dress is that you do not wish to make any submissions in that regard, your perception being that the order precludes you from doing so.
MR COLLINGS: Yes, my Lord.
MR JUSTICE HILDYARD: I say nothing about that. That is a matter for you to advise your clients on. You will know, as a matter of obviousness, I hope, that there was a question raised, at least in the case of Thevarajah v Riordan as to whether and, if so, what limited participation was permissible by -- I only mention that so that I should not have kept unduly my own thoughts to myself. That has been taken into account, and the position is as regards the counterclaim that you will wish to say nothing.
MR COLLINGS: My Lord, that is right. In fact that authority was referred to in the Court of Appeal in this very case as part of some submissions made by my learned friend Mr Fenwick, which I think he resiled from in the light of that authority. It is recorded by Lady Justice Arden. But in the circumstances of this case, it does not seem at all appropriate in the light of the debarring order for to us take any part in it and we don't propose to do so."
- Mr Collings subsequently reaffirmed this position. In the light of it, I have not had to consider the extent to which, if at all, the debarring orders left it open to the Apex Parties to make submissions. However, the question remained as to what, if any, regard I should have to matters in their pleadings.
- After I reserved judgment at the end of the first part of the hearing (which was subsequently reconvened in April 2015, as I later explain), the Court of Appeal (on 4 February 2015) handed down its judgment in Theverajah v Riordan and Others  EWCA Civ 41. At the trial of that action, after an order debarring the defendants from defending, the Deputy Judge had considered himself bound entirely to ignore any pleadings on the part of the Defendants as well as any evidence filed on their behalf. He had felt unable to have regard even to admissions confining the dispute. The Court of Appeal disagreed with this approach. In his judgment (with which the other members of the Court of Appeal agreed) Tomlinson LJ said this (at ):
"33 ….The Deputy Judge did not have to ignore how the pleaded claims had been clearly understood in the Defence or in the correspondence. Curiously, at paragraph 16 of his judgment the Deputy Judge recorded that the Defence and Counterclaim had ceased to exist and had been omitted from the bundles before him, notwithstanding that earlier in the same paragraph he had referred to two passages contained in that pleading on which Mr Bailey had relied. Mr Davenport reminded us that the "Glossary" at Section E of Civil Procedure says that the meaning of the expression "Strike Out" is "the court ordering written material to be deleted so that it may no longer be relied upon". The status of the glossary is explained in CPR 2.2(1), which states that it "is a guide to the meaning of certain legal expressions used in the Rules, is not to be taken as giving those expressions any meaning in the Rules which they do not have in the law generally." At paragraph 16 (a) of his judgment the Deputy Judge also referred to the Defence and Counterclaim as having been "erased" and said that "any statement dependent for its vitality on the continued existence of the now erased Defence and Counterclaim cannot be invoked to supply, cure or support any claim not, or inadequately, advanced in the Particulars of Claim." I do not entirely understand the ambit of this approach but I do not agree with the notion that the Defence had for all purposes ceased to exist. What had happened is that the Respondents had been debarred from defending. To that extent the Defence could not be relied upon by the Respondents, but it would be absurd if the document could not be relied upon by the Claimant as indicating the ambit of the dispute. Were that not the case, matters which were never in issue because of admissions in the pleadings would suddenly become contentious, with the extraordinary and perverse effect that the burden on the claimant at trial would be increased. The obverse would equally be true - a defendant may by virtue of being debarred from defending avoid the consequences of his admissions, thereby casting upon the claimant a burden which may, in reliance upon the admission, have become more difficult or even impossible to discharge. I agree with Mr Smith's happy observation that "a defence will have left a lasting legacy on the statements of case as a whole. By virtue of what is said in a defence, the content of any reply, or the decision not to rely upon one, will have been affected. Further, if the defence indicates to a claimant that the parties are in agreement as to what they disagree about, it will impact upon any consideration of whether to amend the particulars of claim to clarify anything that might be said to have been unclear." It might also for example have been necessary to look at the Claimant's Reply and Defence to Counterclaim which would most likely be difficult to follow without resort to the pleading to which it was responsive.
34. It follows that I do not consider that the Deputy Judge was precluded from having regard to the Defence and Counterclaim if that document helped him to understand the ambit of the dispute between the parties."
- Plainly, therefore, it is right for me to consider the ambit of the dispute as it appears from the pleadings, including those served on behalf of the debarred Defendants. It was submitted to me by Counsel for Global Torch that it also followed that I should determine all matters defined in the pleadings, including (for example) allegations made by the Apex Parties, such as the alleged misappropriation of the Al Masoud monies (as to which see below). However, I do not think that does follow. As I read the Court of Appeal's decision, the debarred party's pleadings may and usually should be taken into account for the purposes of defining and confining the ambit of the real dispute; and, for example, admissions may be taken as rendering proof of the admitted matters unnecessary. However, that is not to say that the proceeding party is entitled to seek adjudication of the debarred party's case: only to adjudication of its own case, and only then insofar as the court considers requisite in order to determine whether to grant relief and in what terms.
- The second preliminary procedural issue that I should address arises in relation to the Set Aside Application. This raises a question of some intricacy.
- As previously indicated, Prince Abdulaziz seeks, by the Set Aside Application, to set aside the default judgment against him made by Norris J and affirmed on appeal, which also expressly debarred him from defending Apex's Petition and other claims. Given especially that (as later explained more fully) the Apex Petition has also been struck out, his principal purpose is to recover the monies the subject of that default judgment, amounting to some $5.984m plus interest.
- Prince Abdulaziz seeks to contend that those monies, representing Apex's share of the monies paid by Mr Al Masoud on the terms of the First Al Masoud SPA (as defined below), had already been paid earlier to Fi Call Limited, pursuant to an agreement with Mr Almhairat and in discharge of any obligation owed to Apex, and that the default judgment entered represented, to the knowledge of the Apex Parties, double recovery.
- Two alternative bases for setting aside the Default Judgment are suggested on behalf of Prince Abdulaziz: either that he should be entitled ex debito jusititiae on the footing that there was never a basis for the claim on which the judgment was founded or that the judgment should be set aside on grounds of fraud. As to the latter, the Prince's Application Notice puts that alternative ground as being:
"…that Mr Almhairat knew that the monies to which [the judgment] relates had in fact been paid at the time either that the claim was issued and/or that he knew this either at the time that Default Judgment was entered…or subsequently but has nevertheless continued to seek to maintain the claim."
- Most formidable of the difficulties confronting the Set Aside Application is that the Supreme Court, in December 2014, dismissed the Prince's appeal against the Default Judgments notwithstanding having before it the Prince's argument that he had a strong, he suggested unanswerable, case that he had indeed already paid the monies and that there was no bona fide claim underpinning the judgment. Put very broadly (and the judgments are of course more nuanced) the rationale was that the default judgment should be maintained unless possibly the Prince had been able to establish that his case was so strong that he was clearly entitled to reverse summary judgment (which they held he was not).
- However, the issue remains of continuing relevance now for two main reasons. The first such reason is that notwithstanding its decision, and pursuant to a postscript to its judgments, the Supreme Court directed that the amounts due under the default judgment, which as a condition of being given permission to appeal to the Supreme Court Prince Abdulaziz had been required to pay to his solicitors (amounting with interest to US$8,699,988.49) to be held to the order of the court, should continue to be held by such solicitors
"until such time as a High Court Judge directs them to be paid out, whereupon they should be paid out in accordance with the Judge's direction."
- It follows that this too is a matter that requires determination. The second reason why this is of continuing importance flows on from that. Although the effect of the decision of the Supreme Court may be that the Set Aside Application cannot succeed on the first ground, and may have insurmountable difficulties in relation to the second, their Lordships left open the possibility that, in the extraordinary circumstances of this case, it was just possible that Prince Abdulaziz might in effect be entitled to recover (or perhaps more accurately, recoup) the sums in question if his entitlement in that regard were established not by an assault on the default judgment but because his right had to be and was determined in the course of the remaining proceedings. Lord Neuberger put this more elegantly as follows:
"It seems unlikely that, if the contention that the Prince had already paid the $6m is maintained at trial, it will be ruled on by the trial judge unless it is necessary to do so in order to resolve a live issue between the remaining parties, i.e. an issue which will affect the terms of any court order. And, if the contention had to be resolved in order to determine such an issue between the remaining parties, and the trial judge concluded that the $6m had in fact been paid by the Prince, it is conceivable that the Prince would be able to recover the $6m or its equivalent. That is, I must emphasise, mere speculation on my part but it illustrates that the Prince may not be without some hope, albeit of a highly speculative nature, of getting the $6m returned, if he had in fact paid it. To that extent, he is actually better off than if this was the more normal case involving the enforcement of a sanction."
- As mentioned earlier, the dispute as to the entitlement to this considerable sum, whether in the context of the Set Aside Application or as a (in a sense) serendipitous consequence of the determination of other matters in issue, has become a primary focus in these proceedings. Prince Abdulaziz has sought to amend to introduce a clearer basis for recovery or recoupment; and the issue as to both the Set Aside Application and any decision in the Apex Petition has been the subject of extended argument, both sides being of course entitled to full participation at least in relation to the Set Aside Application. I shall return to the issue later; for the present suffice it to say that the dispute is of some difficulty, and has been the principal reason for my directing a further hearing of the Apex Petition over the course of 23 and 24 April 2015.
- The third procedural issue I should address at this stage relates to an unfortunate uncertainty as to the effect of my order of 18 December 2014. Again put shortly, Apex contends that it cannot sensibly or properly have been the intention of that order that Apex's Petition and its other claims against the Princes (as distinct from the Petition and claims against Global Torch and Mr Abu-Ayshih) should be struck out, since (a) the application for the order was made only by Global Torch and Mr Abu-Ayshih and not the Princes, and in any event (b) the Apex Parties had not been in breach of any obligation towards the Princes.
- Apex further and accordingly contended that its Petition and claims against the Princes therefore remain extant and (by reason of the debarring order made) undefended. It seeks directions for trial. Mr Collings also suggested that in that event the court might wish to defer giving judgment on the Counterclaim until after adjudication of Apex's Petition (seeking a buy-out order notwithstanding any winding-up ordered) and other claims so as (a) to be more fully informed and (b) to reduce the risk of inconsistency.
- Alternatively, Apex submitted that if its Petition against the Princes had somehow been struck out, "this must have been an accident"; and that this should be corrected, since a strike out would be "wrong in principle". Without prejudice to its primary contention that its claim was unaffected and remained extant, Apex advanced an application to address the situation in one of the following ways:
(1) for correction of the order in question (and if necessary a consequential further order of mine made on 9 January 2015) pursuant to CPR Part 40.12 and PD 40B paragraph 4.5;
(2) for a variation of the order(s) pursuant to CPR Part 3.1(7);
(3) for relief from sanction pursuant to CPR Part 3.9 on the basis that Apex's claim against the Princes has been struck out inadvertently and wrongly.
- Mr Fenwick submitted that, on the contrary, the orders of 18 December 2014 and 9 January 2015 correctly struck out all the Apex claims, and he sought to dismiss their applications to resurrect them as "absurd". He elaborated these submissions as follows:
(1) He described the suggestion that this order only bites "as against the Second and Fourth Respondents" (which suggestion is made in the body of the draft order provided by the Apex Parties) as nonsense. There is no such limitation in the Orders made - drafts of which were served on the Apex Parties in advance of the relevant hearings - nor could there be: the Apex Parties' misconduct which resulted in those Orders related to their Petition generally. They sought their adjournment as against all Respondents, and not only as against the Global Torch Parties; resulting in a series of Orders requiring them to substantiate their unlikely assertions, which they refused to comply with.
(2) Indeed if it were not so, the Petition would have come on for trial on 3 November 2014 so far as the Third and Fifth Respondents were concerned and would inevitably have been dismissed at that time since (on the Apex Parties' evidence) they would not have participated, would not have called evidence and would not have instructed lawyers to make submissions on their behalf.
(3) Having secured an adjournment as against all Respondents on conditions which they subsequently refused to fulfil, ultimately resulting in the dismissal of the Apex Petition and the striking out of the Amended Points of Claim in their entirety, there is no scope for arguing that these orders were specific to the Global Torch Parties. The orders sought and made were not so confined and nor would there have been any reason for them to be.
(4) The idea that the Apex Parties should be partially immune from the consequences of their consistent disregard for court orders and contempt generally for the court's process is nothing short of ludicrous and their application should be dismissed as totally without merit and abusive.
- I regret that my orders should have given rise to such a dispute. However, without endorsing his dismissive language, I agree with Mr Fenwick that it must have been obvious to the Apex Parties that, if they did not comply with the conditions on which they secured a conditional adjournment, their claims would be struck out against all the Respondents. They cannot reasonably have thought that their claims were to proceed against the Princes at their own leisure and despite their own failures. All the claims were always to be tried together: they fell as they had stood.
- I therefore proceed on the basis that the only substantive claims to be adjudicated at this trial are those in the Counterclaim. I turn at last to consider those claims.
Detail of claims in the Counterclaim
- What then are the material averments that Global Torch relies upon to justify the winding-up order and other relief it seeks (as adumbrated below)?
- It is the Global Torch Parties' case that
(1) Prior to the setting up of Fi Call Limited, the VoIP App was neither operational nor commercially viable, and Mr Almhairat's representations in that regard and as to the ownership of IP rights in the VoIP App were false.
(2) At Mr Almhairat's instigation, the true ownership of the relevant IP rights was concealed through a complex web of corporate structures, assignments and name changes, and to the knowledge of Mr Almhairat and Apex the IP rights were never effectively transferred to Fi Call Limited.
(3) On what Mr Almhairat knew to be the false premises that (a) Fi Call Limited owned the VoIP App and the IP rights to it and (b) Mr Almhairat had negotiated an agreement for the purchase by Fi Call Limited of a software development house apparently incorporated in California, USA but based in India called Octro Inc. ("Octro"), the Global Torch Parties were induced by Mr Almhairat to agree to Fi Call Limited paying some $595,792 to Octro (as it did); yet in truth Octro was never to be acquired by Fi Call Limited, and has since itself claimed to be the independent owner of IP rights in respect of the VoIP App, and that it is owed fees of some $500,000 by Fi Call Limited.
(4) Mr Almhairat and Apex, on the basis of those false premises, induced the Global Torch Parties to introduce valuable contacts who invested in Fi Call Limited under SPAs, but then either failed to account for the monies so invested, or misused the monies invested under the SPAs on payments otherwise than in the best interests of Fi Call Limited, including payments to Octro and others (and also companies associated with Mr Almhairat and members of his family) which resulted in no value or no commensurate value in return to Fi Call Limited.
(5) Mr Almhairat and Apex persuaded some 198,564 subscribers to sign up to Fi Call Limited's services, but failed to account properly or at all for the subscription fees.
(6) Mr Almhairat acted in breach of fiduciary duty, and of his obligations under the Shareholders' Agreement by denying the Global Torch Parties any or any sufficient access to Fi Call Limited's business and other records and by (a) preventing Mr Abu-Ayshih from having access to Fi Call Limited's servers and email accounts and (b) failing to keep and make available to the Global Torch Parties proper books and records in respect of the business of Fi Call Limited.
- The Global Torch Parties also contend that Mr Almhairat concocted false and scandalous allegations, and forged emails and other documents in purported support of such allegations, against Mr Abu-Ayshih and the Princes with the intention of (1) exposing them to severe public embarrassment and distress and (2) coercing them and Global Torch into buying Apex's shares in Fi Call Limited at an artificial and inflated value.
The evidence and witnesses
- Mr Fenwick urged me that rather than simply giving default judgment I should hear the oral evidence, including expert witnesses, with a view to assisting me in the adjudication of the matters alleged, even though substantively unopposed. With some reservations (principally, that it increased the one-sided nature of the entire exercise) I agreed to do so. Thus, unlike the position in the Full Cup case, I had the benefit of full evidence from one side on the matters in issue, though not the benefit of cross-examination and contrary evidence and submission.
- On the factual issues evidence was provided from the following individuals (all adduced under the Civil Evidence Act, except in the case of Mr Abu-Ayshih who was called):
(1) Mr Abu-Ayshih, whose evidence concerned the relationship between the parties in general, from the outset to its conclusion;
(2) Mr Sabha, a shareholder in Global Torch. Mr Sabha is a Jordanian lawyer known to Mr Abu-Ayshih since 2004 who was retained by Fi Call Limited's Amman office to advise it on matters of Jordanian law. His evidence concerned the initial period including the representations made by Mr Almhairat, as well as later events including the setting up of Fi Call Seychelles, Mr Almhairat's alleged misconduct in relation to Fi Call Limited (including his failure to attend Board meetings) and other alleged illegitimate conduct on his part, including alleged attempts to bribe Mr Sabha and threats to involve Fi Call Limited in the gambling and sex industries;
(3) Mr Hiasat, who has known Mr Almhairat since 2008. He is a business advisor who provided advisory services to Fi Call Limited until in or around May 2011. His evidence pertained mostly to the negotiations between Fi Call Limited and other telecoms service providers, namely DU and STC, as well as the drafting of a number of SPAs including the agreement in 2011 relating to Mr Al Shehri;
(4) Mr Al-Shihabi, an IT consultant who was first contracted by Mr Almhairat in 2007 and who subsequently provided services to Fi Call Limited's predecessor companies until Mr Almhairat terminated Mr Al-Shihabi's involvement in late 2009. His evidence covered those earlier ventures of Mr Almhairat's, Mr Almhairat's dealings with Octro and the initial introductions between the parties, including Mr Almhairat's representations. Mr Al-Shihabi also attested to Mr Almhairat's dealings with an outgoing investor in another joint venture with Mr Almhairat ("Fi Call No.1, to be discussed below), Mr Mohammad Hijaz, as well as the apparent misuse of his (Mr Al-Shihabi's) personal email account after he parted ways with Mr Almhairat;
(5) Mr Fadiga, a solicitor qualified in England, but originally from West Africa. Mr Fadiga was asked to investigate the legitimacy of certain allegations made by the Apex Parties, namely that Interpol Guinea had raised arrest warrants against Mr Abu-Ayshih and Mr Sabha in respect of alleged money laundering and drug trafficking, the validity and authenticity of which the Global Torch Parties deny;
(6) Mr Austin, a forensic and business investigator retained by the Global Torch Parties to investigate some of the allegations made by the Apex Parties concerning the Nairobi Transactions (as to which, see below) and also alleged Interpol Notices concerning Mr Abu-Ayshih and Mr Sabha;
(7) Mr Al-Farouqi, the President of a telecommunications company known as Teletec which had antecedent business dealings with Mr Almhairat. Mr Al-Farouqi's evidence concerned Mr Almhairat's previous misconduct, which is relied upon both because it is said to be relevant to the relationship of trust and confidence between the parties to the joint venture, and because it is said to be similar fact evidence;
(8) Mr Al Hammad, a former business associate of Mr Almhairat's whom Mr Almhairat accuses of having stolen a memory stick containing recordings of important conversations between the parties, allegations which Mr Al Hammad firmly denies;
(9) Mr Al Shehri, a shareholder in Fi Call Limited whose evidence concerns primarily the terms of a disputed SPA ("the Al Shehri 2011 SPA") between him, Apex and Global Torch which was concluded in 2011, and who confirmed that Global Torch's version of the agreement is the one which he intended to and did enter into;
(10) Mr Al Dossary, a Saudi Arabian commercial pilot who is implicated by the Apex Parties in the Nairobi Transactions, and who has given two statements, as well as documentary evidence, disputing what is said against him; and
(11) Mr Karim, the Managing Director of a company known as HITECH, which provides IT and telecommunications services and solutions, and who like Mr Al-Farouqi has prior experience of business dealings with Mr Almhairat.
- Further, Global Torch also served a Civil Evidence Act Notice regarding:
(1) their (materially different) version of the Al Shehri 2011 SPA, on which the Apex Parties purport to rely: the genesis of the document and its terms being covered in the statements of Mr Abu-Ayshih, Mr Hiasat and Mr Al Shehri; and
(2) a letter from a Mr Al Majali, an employee of Royal Jordanian Airlines, which concerns the Nairobi Transactions.
- Prince Abdulaziz and Prince Mishal were stated to be unable to give evidence due to a Royal Protocol prohibiting their personal participation in litigation, as has been confirmed in a letter provided by the Director General of Prince Mishal's private office as well as in witness statements served by Global Torch's legal advisers (in particular, Ms Santos and Mr Marshall) and by an expert in Saudi Arabian law, Mr Al Gahtani.
- Global Torch called expert witnesses as follows:
(1) Mr Sam Narula, to give expert accountancy evidence. His findings are summarised below in relation to Mr Almhairat's alleged misappropriations from Fi Call Limited;
(2) Mr Keith Cottenden, a computer forensic investigator, to give expert IT evidence, especially as to the alleged fabrication of emails purporting to relate to the Nairobi Transactions (see paragraph 160(b) below);
(3) Mr Peter Buckie, to give expert gemmology evidence, in particular as to what gemstones are indigenous to the Democratic Republic of Congo, and what quantity of gold is mined annually there, all in the context of allegations of gem smuggling made by the Apex Parties against the Global Torch Parties referred to under the rubric "the Nairobi Transactions".
(4) Mr David Browne, to give expert handwriting evidence, as to the authenticity (or not) of the signatures on the version of the Al Shehri 2011 SPA adduced by the Apex parties.
The VoIP App and the Business of Fi Call Limited
- As to paragraph 86(1) above, there is remaining uncertainty, which the evidence adduced does not dispel, as to who devised the VoIP App, and as to the ownership of the intellectual property rights ("IP rights") relating to it.
- It was Apex's pleaded case that the VoIP App was developed by a Jordanian body corporate owned by Mr Almhairat's sons, called Nida'a Amman for Telecommunication Services ("Nida'a Amman"), that Nida'a Amman and Mr Almhairat assigned the IP rights in the VoIP App to a company incorporated in England on 21 August 2009 under number 06997519 called FI Call Plc and that thereafter Fi Call Plc (which changed its name to Amman Capital Plc on 16 October 2009) transferred such rights to Fi Call Limited "for £1".
- That appears at first blush to be supported by a deed dated 24 September 2009 ("the Deed") to which the parties named are Nida'a Amman and Fi Call PLC, recording (or purporting to record) the assignment to Fi Call Plc of all Nida'a Amman's right, title and interest in the VoIP software, and related Trade Mark(s).
- However, Global Torch pointed out that the Deed itself recorded the fact that the VoIP App had been developed by an Israeli body corporate called Naris Limited in 2006; and that there was documentary evidence suggesting that Naris Limited delivered all software and source codes for the VoIP App to "Fi Call Plc" on 16 November 2006. Since the company now called Amman Capital Plc (which Global Torch referred to as "Fi Call No. 2") was not incorporated until 21 August 2009, the delivery must have been to another company, which Global Torch referred to as Fi Call No. 1, and which must have been incorporated earlier than that.
- The uncertainty is deepened by the fact that it also appears that there was indeed a company incorporated in England under the name Fi Call Plc under number 06619328; but although incorporated earlier than the company now called Amman Capital Plc, that company (which changed its name to Worldwide Telecom Services Plc on 18 August 2009) was not incorporated until 13 June 2008. That company was then dissolved on 6 April 2010.
- It appears, therefore, that it is quite possible that the IP rights relating to the VoIP App were retained in Fi Call No. 1 (which became Worldwide Telecom Services Plc) and were never in fact assigned to Fi Call No. 2 (which became Amman Capital Plc), and nor accordingly from Fi Call No. 2 to Fi Call Limited. That seems to be supported by the admission by Apex that Fi Call No. 1 had been the previous vehicle for investment in the VoIP App and that Mr Mohammad Hijazi had invested $7.2m in Fi Call No.1 in return for a 40% investment. Mr Mohammad Hijazi was also appointed a director of Fi Call No. 1.
- The Global Torch Parties rely also on the fact that there is no way in which Mr Almhairat could have effected or intended to effect a transfer of the intellectual property held by Fi Call No. 1 to Fi Call Limited in November 2009 because he had previously resigned as a director of Fi Call No. 1 on 20 July 2009.
- Thus, there is doubt as to whether and if so by what process (a) the VoIP App and related intellectual property was ever validly transferred to Fi Call Limited and in consequence whether (b) Mr Almhairat ever paid up in full the shares allotted to him in Fi Call Limited. The Global Torch Parties' Counterclaim relies on (a) as a further example of what they maintain was dishonesty and deception on the part of Mr Almhairat. But, as previously indicated, they make no point as to (b).
- In my judgment, what is plainly established on the evidence before me is that Mr Almhairat must have been aware that there was, at the very least, doubt as to whether Fi Call Limited had any legal right to the assets which were its raison d'être and the development and exploitation of which through Fi Call Limited was the purpose of the Global Torch Parties' investment and participation.
The arrangements between Mr Almhairat and Octro in respect of the VoIP App
- Just as much uncertainty also attends the question of what the VoIP App actually comprised, and what Fi Call Limited did in terms of its development and exploitation; but what appears to be clear is that Mr Almhairat did not disclose the true nature of the arrangements he made in this regard with Octro.
- As to this, the case advanced by the Global Torch Parties was that Mr Almhairat deceived the Global Torch Parties as to the nature of the arrangements between Fi Call Limited and Octro, and induced the Global Torch Parties to make payments supposedly for the acquisition of Octro, but in fact to discharge fees due for Octro's work in developing the VoIP App technology and supplying its own technology under an agreement that Mr Almhairat never disclosed to the Global Torch Parties.
- The Global Torch Parties presented the position as having been as follows:
(1) Roughly a month after the execution of the Shareholders' Agreement Mr Almhairat informed Mr Abu-Ayshih that he had negotiated the purchase of Octro by Fi Call Limited.
(2) On this basis Mr Abu-Ayshih was persuaded by Mr Almhairat to approve substantial payments to Octro, which Mr Almhairat represented and Mr Abu-Ayshih believed represented part-payments of the consideration price for the acquisition of that company.
(3) In fact, according to the evidence of Mr Abu-Ayshih and Mr Hiasat, the payments made to Octro were not payments of an agreed acquisition price but payments in respect of (i) licence fees to use technology developed by Octro and/or (ii) fees payable to Octro to develop such technology.
(4) Although Mr Hiasat's evidence is that Mr Almhairat had told him that he had agreed with Mr Saurabh Aggarwal, the owner of Octro, to purchase Octro under an option agreement for US$5m and that fees paid by Fi Call Limited to Octro would be set off against the agreed price under the option, it seems clear that no acquisition was ever made.
(5) In the meantime, Octro had the use and benefit of the product (the VoIP App) and charged Fi Call Limited fees for its development. Mr Narula's evidence was that Fi Call Limited paid Octro some US$595,792; and according to Mr Abu-Ayshih Octro maintains that there is a debt still outstanding to it from Fi Call Limited of about US$500,000.
- The Global Torch Parties depicted this as evidencing a "white-labelling" agreement whereby technology was shared between the two companies but branded under different names. This was done without the knowledge, still less the consent, of the Global Torch Parties, in circumstances where the very purpose of the joint venture was to develop and commercialise the VoIP App technology itself and (exclusively) for its own benefit. The Global Torch Parties claim that the result was to lose or damage IP rights which Fi Call Limited might have had in the VoIP App technology.
- The Global Torch Parties relied on the following evidence:
(1) Mr Abu-Ayshih's evidence that Mr Almhairat had represented to him that he had negotiated the purchase of Octro by Fi Call Limited;
(2) Mr Hiasat's evidence that Mr Almhairat had informed him that he had negotiated an agreement to purchase Octro under an option agreement for $5m;
(3) the Initial Operational Projections for Fi Call Limited: in October 2009, Mr Hiasat produced a forecast for the Fi Call Limited business and Mr Almhairat forwarded this to Mr Abu-Ayshih. This forecast, prepared on Mr Almhairat's instructions, included a provision for "Buying Development House in INDIA";
(4) Mr Al-Shihabi's evidence that in August 2009 a Mr Mohammad Al Khrisha of Octro entered a "white-labelling" agreement whereby they would develop the VoIP App technology together and build each other's client bases. In fact, the Octro system, called "Octro Talk" ended up being customised for use by Fi Call Limited. This was of course entirely contrary to what had been envisaged and agreed by the Global Torch Parties at the outset of the joint venture that the parties would work together to develop the VoIP App technology for the benefit of Fi Call Limited;
(5) a Mutual Confidentiality Agreement between Octro and Fi Call Plc dated 4 August 2009 and signed by Mr Saurabh Aggarwal of Octro and Mr Almhairat;
(6) a draft licence agreement between Fi Call Limited and Octro providing for Octro to carry out services for Fi Call Limited in return for a fee calculated by reference to the number of users of the service;
(7) correspondence from Mr Aggarwal of Octro to Mr Abu-Ayshih confirming that Octro had been providing services to Fi Call Limited pursuant to a licence agreement:
a) email of 18 August 2011 in which Mr Aggarwal stated: "Octro has been providing FiCall services since August 2009 under the agreed upon terms. Faisal (cc'ed), a director of FiCall, should have all the details regarding our contract, and execution terms";
b) email of 25 September 2011 in which Mr Aggarwal stated "FiCall has failed to pay the yearly license fee and other fees for professional services rendered … We will be shutting down the license server permanently on October 20th 2011";
(8) an email from Mr Aggarwal to Mr Almhairat of 24 October 2011 explaining the work carried out on the VoIP App: "Repackaging the product, adding new technologies to create a Viber like product";
(9) an email from Mr Aggarwal in which he summarises the effect of Mr Almhairat's dealings in relation to Octro:
"Since we did get the advance money, and since we were protected anyways (since we didn't have to share source code, IP, and were allowed to put in a backdoor license scheme in the clients where by we can shut down the clients in case of any eventuality, and all of this was in the draft agreement) we decided to start work for FiCall"
"There were talks between Faisal and me, about FiCall taking over OCtro Inc and thus acquiring its IP and source code several times in between our arrangement.
I was made to believe that FiCall would acquire Octro Inc (With a price range of ~$10 million by the end of 2011) and until that happens, FiCall would continue paying our services. Thus we had offered an extremely competitive licensing rate to FiCall".
It should be noted that this email goes on to say: "As far as I could tell, you were well aware of these arrangements. Since you had introduced me as the CTO for FiCall at meetings with Du, STC and since you were fully aware that I was not an employee at FiCall. I had always believed that HRH and you always knew about the arrangement to acquire Octro".
This email makes clear that the white-labelling exercise which Mr Almhairat brought about had resulted in whatever IP rights which Fi Call Limited might have had being undermined.
(10) an email from Mr Nikolov of Nexcom to Mr Almhairat of 14 July 2011 stating that "You are still wasting money on useless expenses such as … questionable software development work in India";
(11) Mr Abu-Ayshih's evidence that neither he nor any of the Global Torch Parties had any direct contact with Octro and were unaware of the arrangements put in place by Mr Almhairat;
(12) The expert evidence of Mr Sam Narula (an accountant) that Fi Call Limited paid the total sum of $595,792.86 to Octro for apparently nothing in value in return.
- My own reading of the evidence is a little different. As it seems to me, the truth of the matter is likely to be that Mr Almhairat engaged Octro because Fi Call Limited did not in fact work in technology; and that Fi Call Limited was dependent on Octro's technology, and in particular "OctroTalk". That seems to me to be clear from the "License and Services Agreement". That explains why Octro required a covenant (by clause 4) from Fi Call Limited recognising Octro's IP rights, and Octro retained the right to shut down a client's access. In other words, the agreement with Octro did not so much undermine Fi Call Limited's rights as enable it to function; it disguised the fact that Fi Call Limited's own product was not functional.
- Be that as it may, the conclusion that the Global Torch Parties were misled, and were induced both to invest in Fi Call Limited and then to fund its activities on a false basis, seems to me to be established.
- I accept also that Mr Almhairat's conduct in this regard comprised a breach of his fiduciary duty to Fi Call Limited and a breach of the Shareholders' Agreement (including of Clause 9(9), which required the engagement of software developers to be on terms acceptable to Global Torch, as well as of the warranties given as to Fi Call Limited's ownership of the relevant technology).
The SPAs and the misuse of monies raised
- It is common ground that between February 2010 and March 2011, and on the basis (as I accept the Global Torch Parties believed it to be) that Fi Call Limited had good title to the VoIP App, and that the VoIP App was fully functional and commercially viable, at least six (and on the Global Torch Parties' case seven) agreements for the sale and purchase of shares in Fi Call Limited were entered into with third parties, the proceeds of which exceeded $35m and (on the Global Torch Parties' case) came to approximately $45m.
- As indicated in paragraph  above, one of these SPAs, the "First Al Masoud SPA" dated 7 February 2010, has given rise to the dispute as to the Al Masoud monies. That dispute, which is also the subject of the Set Aside Application, relates to what became of the consideration of US$10m payable to Prince Abdulaziz and Apex, which it is common ground was received by Prince Abdulaziz, but which he claimed he had accounted to Apex for the amounts due to Apex.
- There is a further dispute in relation to a second transaction entered into between Apex, Global Torch and Mr Al Masoud in around July 2010, pursuant to the exercise by Mr Al Masoud of an option conferred by the First Al Masoud SPA for the acquisition for US$10m of further shares in Fi Call Limited (the "Al Masoud Share Option"). The Global Torch Parties contend that those monies were received by Prince Abdulaziz and paid on by him to the account of Fi Call Seychelles on or about 7 July 2010. The Global Torch Parties' case is that thereafter those monies were misappropriated by Mr Almhairat.
- As indicated previously, another dispute has arisen in relation to the Al Shehri 2011 SPA concerning which of two versions of that SPA is authentic, and in consequence as to whether the consideration of some US$16.7m was properly accounted for by the immediate recipient, Apex. The version relied on by the Global Torch Parties provides for the sale by Apex of A shares and by Global Torch of B shares on a pro rata basis, so that the proceeds of sale were to be divided 60/40 between Apex/Global Torch as was the usual arrangement in the other SPAs. The version relied on by Apex provided for the sale and purchase only of 10 million of Apex's A shares, with the entire consideration payable to Apex accordingly. It has never been disputed that Apex has not accounted to Global Torch for any of the sums it received pursuant to the Al Shehri 2011 SPA, and Mr Almhairat admitted that he had procured the entirety to be transferred to himself personally and he had spent the lot.
- The Global Torch Parties seek findings of fact to support their monetary claims in respect of the acquisitions the subject of each of these SPAs, and they rely on these matters also as further factors weighing in favour of the just and equitable winding-up order they seek. I turn to discuss each of the three claims indentified.
The First Al Masoud SPA
- There is a preliminary issue concerning the claim in relation to the Al Masoud monies, which is whether the matter properly falls for determination in the context of the Counterclaim as between the parties other than Prince Abdulaziz (who, as matters presently stand, is debarred from advancing any claim in that context). Put another way: only the Prince has a claim to the monies, raising the gateway question whether or not any finding in this regard is appropriate or necessary in determining the entitlement to and nature of any relief to be granted to the other parties. It would not be right to permit the other Global Torch Parties to seek a remedy simply as proxies for the Prince.
- I consider also that I should adopt a reasonably strict approach, notwithstanding the hope expressed by Lord Clarke of Stone-cum-Ebony JSC in paragraph 78 of his judgment in the matter that it might be possible in resolving the issues between the parties at trial to take into consideration whether the Prince did account for the US$6m, as he says he did. Lord Clarke envisaged at that time a properly contested trial: that is not what has transpired, and it seems to me that only if the proper disposition of the Counterclaim as between the other parties requires it should I seek to determine the issue in the absence of Mr Almhairat.
- Mr Fenwick submitted that such a determination was warranted and indeed that Global Torch was entitled to require adjudication of the issue. I think I can summarise his submissions as follows:
(1) Having agreed to hear the Counterclaim in the absence of Mr Almhairat on its merits (rather than simply on a default basis) the court had taken upon itself the task, from which it should not shirk, of making findings in relation to what Mr Fenwick described as the "core elements of our claim" and the "serious allegations" made against Global Torch by Apex in its own Petition, including Apex's allegation that Prince Abdulaziz had failed to account to Apex for the Al Masoud monies.
(2) Global Torch is entitled in such circumstances to an adjudication by the court of not only all the reasons advanced by Global Torch in support of its prayer for a just and equitable winding-up, but also all the allegations made by Apex in support of its own Petition and its case that it was not its conduct but the conduct of the Global Torch Parties which caused the breakdown which all parties accept has occurred.
(3) To quote from Mr Fenwick's oral submissions, Global Torch itself should also be entitled to seek recovery of the Al Masoud monies
"on its own behalf or on behalf of its shareholder, on the basis that it is not a totally separate wrong divorced from the company. It is part and parcel of the management of this company and its direction, and the way it was being funded and the way in which its funds were being accounted for and allocated, and it is all to do with the affairs of the company, and it is therefore within the wide powers of section 994 to make a declaration…"
(4) If and insofar as it had not pleaded it as a separate claim, Global Torch should be permitted a suggested amendment to plead expressly that
"…HRH Prince Abdulaziz paid the sum of $7,999,943 to the accounts of the Company, of which $5,984,000 represented the amount due to Apex under the Al Masoud SPA, of which payment Apex was aware. Global Torch thus accounted to Apex for the sums due to Apex under the Al Masoud SPA. At the instigation of the Apex Parties, by an order dated 14 October 2013 judgment in default was entered against Prince Abdulaziz in favour of Apex in the sum of $5,984,000 plus interest at 8% per annum in respect of the Apex share of the proceeds of the Al Masoud SPA. Accordingly, Apex has unjustly obtained the double recovery of its share of the proceeds of the Al Masoud SPA"
and to include a claim that Apex and/or Mr Almhairat should account to Global Torch for such monies.
(5) Recovery by Global Torch should thus be enabled (again quoting from Mr Fenwick's oral submissions)
"either by making a declaration under section 994 that the money has been paid and that following from that it should be released; or by finding to the extent that the Court doesn't do that, that the unfairly prejudicial conduct of Apex, in the running of the Company and in failing to account for the monies, has given them the windfall of a double payment for which they should account with interest and that they should do that in the context of the section 994 relief for unfairly prejudicial conduct."
- In the exercise of my discretion I permitted Mr Collings to make submissions as to these points, and on the requested amendment. That permission seemed to me fair, realistic and requisite, given especially the interplay with the Set Aside Application in which his clients are of course still involved, and taking into account the observations of the Court of Appeal in Thevarajah v Riordan and others  EWCA Civ 41. I can summarise his submissions as follows:
(1) The Counterclaim as it stands (that is, before the proposed amendment) did not mention the Al Masoud monies, still less assert any cause of action or remedy in respect of them: that was a correct reflection of the fact that Global Torch was the only claimant by counterclaim and it had not paid any such monies, nor had it any right itself in respect of them.
(2) It was irrelevant that in its Petition Apex had pleaded not only that Prince Abdulaziz had failed to account for Apex's share of the Al Masoud monies, and held such share or its traceable proceeds on trust for Apex, but also that (a) such failure was unfairly prejudicial to the interests of Fi Call Limited's members and contrary to good faith, and (b) that there should
"be added to the notional value of Apex's shares the sum of US$5,984,000 to which Apex was entitled pursuant to the Al Masoud SPA but which was instead paid to Prince Abdulaziz."
It was irrelevant because Apex's Petition had been dismissed at Global Torch's own behest, and the claim fell away accordingly; and in any event, even if it had been in issue on Apex's Petition, "that would not make it an issue in the Counterclaim, still less an issue on which Global Torch was entitled to seek relief".
(3) Indeed, so Mr Collings submitted, the court is simply not entitled to adjudicate on factual matters pleaded in Apex's own dismissed Petition/claim but not in Global Torch's Counterclaim: the court is functus officio in that respect and it "is simply not open to Global Torch, having obtained that dismissal, to come back to the Court and ask that particular aspects of the Apex Parties' former case against it be made the subject of specific findings of fact".
(4) As to the proposed amendment, Global Torch has no legal standing to pursue the proposed claim as to the state of account or indebtedness between Apex and Prince Abdulaziz: any such claim arises between and may only be pursued by Apex or Prince Abdulaziz. Further, no such claim could be pursued by way of an unfair prejudice petition: it does not relate to the conduct of the affairs of Fi Call Limited; it relates to the relationship between the shareholders inter se: see paragraphs  and  above.
(5) It is true that Apex advanced such a claim in its Amended Points of Claim, but that is explained by the fact that, pragmatically but very unusually, Vos J gave directions for the Points of Claim to encompass both the claim in Apex's original unfair prejudice Petition and its counterclaim in the Global Torch petition, notwithstanding that the two claims are (as Mann J described them in his judgment at an earlier stage ( EWHC 3752 (Ch)) "conceptually and procedurally different claims" both maintainable by Apex (the one by Petition, the other at common law and equity).
(6) Further, even if it has jurisdiction to make a monetary award in respect of such a claim made by way of petition, the court should only rarely, if ever, exercise it: see Re Chime Corporation  HKFCA 8.
(7) In any event, the claim could not succeed without the amendment; and the amendment should not be permitted at such a late stage, especially given that Apex had not sought to participate at all on the basis that no claim to the Al Masoud monies was in issue.
- In adjudicating between these contentions on the preliminary question as to whether it is necessary to determine any factual or legal issues relating to the Al Masoud monies, it is I think important to keep firmly in mind (especially since Mr Collings' submissions appeared to overlook them) three overriding points. The first is the fact that neither Global Torch nor Prince Abdulaziz ever had need or entitlement to make any claim in respect of the Al Masoud monies: so far as they were concerned, they had been paid in full by Mr Al Masoud and had no complaint as regards Apex. The question is not whether Global Torch can maintain a claim to the monies (it has never had or sought to assert any): it is whether its defence that Apex had already in substance received all that it was entitled to under the First Al Masoud SPA is made good.
- Secondly, the monies paid by Prince Abdulaziz to his solicitors (US$6m plus interest) as a condition of permission to appeal to the Supreme Court against the decision by the Court of Appeal to uphold the default judgment obtained against him by Apex are held "until such time as a High Court judge directs them to be paid out, whereupon they shall be paid put in accordance with the judge's directions". Such release is not determined according to whether or not the default judgment is set aside, although of course that will be a very important, and in some circumstances paramount, consideration.
- Thirdly, the debate between the parties as to the extent to which it is proper for the court to consider pleadings which relate to a now defunct action (Apex's Petition and Global Torch's defence to it) has tended to obscure the fact that there has always been a larger measure of common ground between the parties than their arguments might have suggested. Thus:
(1) It has always been accepted that Prince Abdulaziz received the aggregate consideration payable by Mr Al Masoud under the First Al Masoud SPA in respect of the shares sold to him by Apex and Global Torch, and that such payment discharged Mr Al Masoud's obligations under that SPA.
(2) It has always been accepted that by the terms of the First Al Masoud SPA the consideration monies were expressly agreed to be paid into Fi Call Limited's account, and that such monies were to be received by Fi Call Limited as agent for Apex and Global Torch in their due proportions ($5,984,000 for Apex and $4,016,000 for Global Torch) (though Global Torch also pleaded that the parties had agreed "that at least part of the proceeds of sale of the shares were to be used as working capital for Fi Call Limited").
- In the latter regard, the First Al Masoud SPA, to which not only Mr Al Masoud, Global Torch and Apex, but also Fi Call Limited and Mr Almhairat were parties, provides in the relevant clause (clause 5) as follows:
"Upon completion of the matters referred to in clauses 5.2 to 5.5 above the Purchaser [Mr Al Masoud] shall:
5.6.1 deliver to the A Vendors [Apex] a banker's draft for the amount of the purchase consideration for the A shares; and
5.6.2 deliver to the B Vendors [Global Torch] a banker's draft for the amount of the purchase consideration for the B shares.
5.6.3 The Vendors, the Purchaser, Faisal [Mr Almhairat] and the Company [Fi Call Limited] agree and consent to the purchase consideration for the A and the B Shares purchased to be paid into the Company's Bank Account: [of which details are then set out]…"
- Thus, although the issue has been depicted by Apex and Mr Collings as arising between, and exclusively concerned with the rights inter se of, Apex and Prince Abdulaziz, in fact, both Global Torch and Fi Call Limited had rights in respect of such monies, at least to the extent of a right to require payment thereof to Fi Call Limited in accordance with clause 5.6 of the First Al Masoud SPA. Further, although the First Al Masoud SPA called for payment in the first instance by banker's draft to the Vendors and thereafter for remittance to a nominated bank account of Fi Call Limited, so that (as noted by Lord Neuberger in his judgment in the Supreme Court at para. 35) "the payments were not made on the dates or into the accounts into which they ought to have been made if they were paid pursuant to the arrangements relied on by the Prince", it nevertheless seems to me that Global Torch's case that Prince Abdulaziz paid over the entirety of Apex's share of the Al Masoud monies into bank accounts for Fi Call Limited is broadly consistent with what had been agreed between all concerned.
- Moreover, although Mr Collings on behalf of Apex submitted, in effect, that the issue as to whether Prince Abdulaziz did pay over such monies to Fi Call Limited is res inter alios acta, all the parties to the First Al Masoud SPA had an interest in its performance and in any event in any winding-up of Fi Call Limited, questions will be likely to arise as to whether the monies received by Fi Call Limited were so received as agent for Apex or on loan or other terms.
- It seems to me to be clear, on either footing, that the monies paid to his solicitors by Prince Abdulaziz and presently held to the order of this court should not be paid out to either Apex or Mr Almhairat, or indeed returned to Prince Abdulaziz, before determining whether or not the Al Masoud monies were paid to Fi Call Limited in accordance with the First Al Masoud SPA. Apex was contractually obliged to pay to Fi Call Limited the consideration for the sale of some of its shares to Mr Al Masoud; and the question is whether that obligation was discharged. In my view, those monies fall either to be paid to Fi Call Limited (if, as Apex has maintained, Prince Abdulaziz did not account to Fi Call Limited for Apex's share of the Al Masoud monies) or to Prince Abdulaziz (if, as Global Torch has maintained, the Prince did so account in satisfaction of Apex's obligation to pay in such monies to Fi Call Limited pursuant to the First Al Masoud SPA). (Fi Call Limited may also have a claim to any part of the Al Masoud monies payable to Global Torch which were not in the event remitted to Fi Call Limited in accordance with the First Al Masoud SPA.)
- I return to the question as to whether (as Mr Fenwick submitted) it is necessary and appropriate, notwithstanding the absence of Mr Almhairat and Apex, the fact of the outstanding default judgment against Prince Abdulaziz in respect of Apex's share of the Al Masoud monies, and the pendency of the Set Aside Application, for me to determine those questions now.
- As it seems to me, the answer must depend on whether Global Torch can demonstrate, in its own right and not as proxy for Prince Abdulaziz, that the determination of those questions is required in order to determine what relief (if any) it should be granted in respect of its Counterclaim.
- I must in that context first determine whether or not to permit the amendments Global Torch belatedly sought (see paragraph  above). My conclusion is that I should refuse such permission. In my judgment, no claim to Apex's share of the Al Masoud monies is maintainable by Global Torch in its own right, whether by way of common law claim or by way of petition. Global Torch itself never had any right or interest in or to such monies: it has no standing on the issue at common law or in equity; it cannot claim on behalf of or as proxy for the Prince; and such a monetary claim is not one capable of being shoe-horned into section 994 because it does not itself involve any act or omission on the part of Fi Call Limited or the conduct of its affairs. The proposed amendment is both misconceived and too late. I consider that I should be slow to permit a late amendment in circumstances such as these. I do not need to determine whether a claim for monetary compensation is maintainable in the context of a petition (the point in Chime Corporation) and I must resist the temptation to say any more in that regard.
- Taking the Counterclaim as it stands, I do not accept Mr Collings' submission that there is no mention of the Al Masoud monies: Global Torch set out its factual case in relation to that in its Defence, and in paragraph 158 of its Counterclaim (though rather formulaically) it repeated its Defence. However, the problem for Global Torch is the difficulty of discerning the relevance of the facts to any relief it seeks: the facts are never identified as supporting any particular claim or prayer for relief. Thus, in the particularisation of its contention that the affairs of Fi Call Limited have been conducted unfairly and prejudicially to its interests as a member, no mention at all is made of the First Al Masoud SPA or the Al Masoud monies (in contrast to its express reliance on, for example, the Al Shehri 2011 SPA). As previously explained, that may well be because the issue was regarded as in reality arising between Apex and Prince Abdulaziz.
- Mr Fenwick submitted that a determination of the truth or falsity of the allegation that Apex's share of the Al Masoud monies was an "integral part" of the winding-up claim. He sought to justify this submission on the basis that Global Torch had relied on the making of false allegations as a principal factor in the breakdown of trust and confidence which was the justification for a winding-up. The difficulty is, as indicated above, that this is not expressly pleaded.
- Mr Fenwick also submitted that the issue needed to be determined in the context of Global Torch's plea that Mr Almhairat, as Apex's only acting director, had failed to keep statutory records. If such records had been kept, he submitted, the fact and basis of the payment into Fi Call Limited would have been clear, and supported Global Torch's case. Mr Fenwick relied on that as supporting both a just and equitable winding-up and the plea of unfairly prejudicial conduct of Fi Call Limited's business and affairs. Again, however, he could not point to any express reliance on the Al Masoud issue: he had to rely on inference, or on mere unstated but obvious particularisation of the main plea. It is well established that the court is reluctant to go beyond properly set out allegations: and see Re Tecnion Investments Ltd  BCLC 434 at 441. It seems to me of special importance for the court to be rigorous in unusual circumstances such as these, where it must seek to do justice between the parties with the benefit of argument from only one side.
- In short, there is only a slender basis for a conclusion that it is necessary to determine these issues, given that Global Torch did not feel it necessary to plead them with any usually requisite particularity. Slender then: but is it sufficient?
- I must admit to having wrestled with this question: and the more anxiously because of my concern to proceed only out of necessity, and not out of convenience or any more amorphous attraction of dealing substantively with a matter that, if left to the default judgment obtained, may result in Apex and Mr Almhairat achieving a windfall or double recovery. I have also had to bear in mind that when the matter went before the Supreme Court at an earlier stage, the majority of the Justices did not consider the case clear enough for summary disposition; and, although the evidence has moved on, in substance that remains what I am invited to do.
- In the end, I have concluded that I should not determine the issue at this stage. Instead, and even at the risk of further delay and expense, I intend to direct a further hearing of the issue after the winding-up which I intend to order, and after the liquidator has had an opportunity to gather any further records and documentation (not all of which, Global Torch has complained, has yet been made available).
- At that further hearing I would provisionally propose, subject to any submissions to the contrary when this judgment is handed down, that Global Torch, Fi Call Limited (through its liquidator) and also the Apex Parties should be entitled to appear. I would additionally provisionally propose that the Set Aside Application be heard at the same time, either concurrently or consecutively.
- For the avoidance of doubt, I propose to make such directions pursuant to section 996 of the Companies Act 2006 and pursuant to my inherent jurisdiction.
- As to section 996, in my view, Global Torch's allegation that Fi Call Limited's books and records have been inadequate is well established and fully exemplified by the lack of any proper record as to the fact and basis of the admitted payment by Prince Abdulaziz. In my view, the dispute over the Al Masoud monies could not have arisen had the monies remitted to Fi Call Limited been properly accounted for in the books and records of Fi Call Limited: the dispute to that extent arose out of accounting deficiencies for which the Apex Parties are primarily responsible and answerable. I readily accept that the default for which they are primarily responsible constitutes unfairly prejudicial conduct within the scope and meaning of section 994. Section 996 provides me with broad powers in those circumstances, well broad enough to give directions to the liquidator I propose to appoint, with a view to a proper examination and determination of the issue as to the Al Masoud monies.
- Further, in my judgment, the dispute as a whole does provide a further basis for the contention of Global Torch that through the fault of the Apex Parties trust and confidence between the members has broken down; and also for the allegation that the way the Apex Parties have conducted the business of Fi Call Limited, and especially its accounting function, was unfairly prejudicial to the interests of Global Torch and other members of Fi Call Limited.
- As to my inherent jurisdiction, it seems to me that a further hearing is required for the fair determination of the matter. Of course I bear in mind that the Apex Parties have been debarred from defending the Counterclaim; but the reality is that the Al Masoud issue was only referentially pleaded in the Counterclaim, and the claim against Global Torch was only ever an alternative claim in Apex's Petition. Apex pursued its primary claim against Prince Abdulaziz; and the position remains that it succeeded even if by virtue of a default judgment. For me to determine the substantive issues, which are of some detail and complexity, as the Supreme Court has accepted, in the absence of the primary protagonists and on the basis of the one-sided presentation which has been the consequence of the highly unsatisfactory course of these proceedings, seems to me to be unrealistic and unfair. The record is incomplete; the contrary explanation offered in outline by the Apex Parties in opposing the Set Aside Application has not been and cannot at this stage be fully explored; any conclusion would appear to represent a finding on contested facts, but that is not the reality. In any event, as it seems to me, to swing from a default judgment in the Apex Parties' favour to what in effect would be an adjudication of their substantive claim in their absence and without affording them a proper opportunity to argue their case seems to me inherently unfair and disproportionate.
- In the meantime, the monies held by Mishcon de Reya will continue to remain held on the same terms as previously. In light of my involvement thus far, and the nature of the proceeding which I have in effect directed, I would propose to retain the matter, subject to the exigencies of listing.
- I turn to deal in turn, but (given that the matters already referred to seem to me plainly to justify a winding-up) much more shortly, with the other allegations on which Global Torch relies and seeks adjudication.
Al Masoud Share Option and the consideration monies
- Although formally denied by the Apex Parties, it is clear from contemporaneous correspondence and the evidence of Mr Abu-Ayshih that (1) a second transaction was entered into between Apex, Global Torch and Mr Al Masoud in or around July 2010, pursuant to an option conferred upon Mr Al Masoud under the First Al Masoud SPA and (2) the US$10m payable as consideration by Mr Al Masoud for this further tranche of shares was paid by him to Prince Abdulaziz and then remitted by the Prince with the knowledge and approval of the Vendors to a bank account at RBS Coutts Bank Limited in Geneva ("Coutts Geneva") to the order of a body incorporated in the Seychelles also called Fi Call Limited ("Fi Call Seychelles").
- That route of payment resonates with Global Torch's case in relation to the Al Masoud monies; but the episode is relevant in its own right partly because the effect of Mr Almhairat's denial is to raise an issue as to how the shares in Fi Call Limited are held (which will eventually have to be established by the liquidator) but also (and of more immediate impact) because of what happened to the monies remitted to Coutts Geneva and Mr Almhairat's activities in relation to Fi Call Seychelles.
- Fi Call Seychelles was (I am told) intended to be a "sister company" to Fi Call Limited (owned as to 40% by Global Torch and 60% by Apex) which was set up "essentially to act as a bank account for Fi Call Limited". Its directors were (initially at least) Mr Almhairat and Mr Abu-Ayshih and they were also co-signatories in relation to the Coutts Geneva bank account.
- Mr Almhairat's activities in relation to Fi Call Seychelles have been the subject of separate proceedings in the Supreme Court of the Seychelles. The Seychellois Court, by its judgment of 10 December 2014, found (amongst other matters) as follows:
(1) Mr Almhairat had contrived unlawfully to remove Mr Abu-Ayshih as a director at a meeting of shareholders for which Mr Abu-Ayshih was given no notice, leaving himself as the only director and "thus allowing him to have a free hand to pursue his fraudulent scheme";
(2) Mr Almhairat's "intention was fraudulent and a manifestation of bad faith on his part, in order to solely access the funds of [Fi Call Seychelles]";
(3) Thus enabled, Mr Almhairat then caused Mr Abu-Ayshih to be removed as a signatory to the Coutts Geneva account and thereafter he withdrew $2.8m from that account (which it is Global Torch's case was held on trust for Fi Call Limited) for his personal use.
- It was contended before me by Mr Fenwick on behalf of Global Torch that the judgment of the Seychellois Court was entitled to recognition in this country as a final judgment on the merits by a court of competent jurisdiction (see Carl Zeiss Stiftung v Rayner Keeler  AC 853 (HL) and The Sennar (No. 2)  1 WLR 490 (HL), and that Global Torch was entitled in these proceedings to rely on the findings in it as conclusive.
- However, the status of the judgment (which I note is subject to appeal) may ultimately not matter: for (a) the fact of Mr Abu-Ayshih's removal as a director and signatory is not disputed (though it was suggested by Mr Almhairat that this was because he suspected Mr Abu-Ayshih of seeking to use the account for money-laundering), (b) I accept that he was not given notice of the meeting at which he was (purportedly) removed, and (c) Mr Almhairat has since admitted that he did take the $2.8m from the Coutts Geneva bank account, leaving no money in that account.
- In their Defence to Counterclaim the Apex Parties denied that these matters concerning Fi Call Seychelles constituted or concerned the conduct of the affairs of Fi Call Limited within the meaning of section 994. This is debatable. It seems to me arguable that in the absence of admissible evidence to controvert Global Torch's case that Fi Call Seychelles was intended to operate in effect as an offshore bank account for Fi Call Limited, the arrangements as regards the Coutts Geneva account were part of the business of Fi Call Limited, and the Apex Parties in procuring the removal of Mr Abu-Ayshih as a director and as a signatory may have constituted conduct of that business: and see Hawkes v Cuddy  2 BCLC 427.
- However, I do not think it necessary to decide the point; the matters complained of are chiefly relied on as supporting the plea for a winding-up; and, in my judgment, the covert and unlawful removal of Mr Abu-Ayshih as director and signatory, the seizure of control of Fi Call Seychelles and the appropriation of the monies in the company's account all amount to further support the need for a winding-up order.
The Al Shehri 2011 SPA
- Global Torch also placed reliance on what it presented as being a failure on the part of Mr Almhairat to account to Global Torch for a sum of US$6,704,000 due under the Al Shehri 2011 SPA. The genesis of this third SPA with Mr Al Shehri was Mr Almhairat's increasingly pressing need to raise funds to discharge his personal liability to Mr Hijazi.
- The parties relied upon different versions of this agreement and each side contended that the version advanced by the other is a forgery. The Apex Parties asserted that, by contrast with all other SPAs agreed in relation to Fi Call Limited's shares, the Al Shehri 2011 SPA was an agreement between Mr Al Shehri and Apex alone, for the sale and purchase of some 10 million of Apex's A Shares in Fi Call Limited. Accordingly, the entire consideration monies were payable to Apex and it was entitled to retain them and/or to dispose of them as it wished. The Apex Parties relied on a version of the Al Shehri SPA that so provided.
- The Global Torch Parties contend that in fact the agreement was on similar terms to all previous SPAs, with Apex selling A shares and Global Torch selling B shares on a pro rata basis, such that the proceeds of sale were to be divided 60/40 as to Apex / Global Torch, in the usual way. Global Torch relied for its part on a version of the Al Shehri 2011 SPA that so provided.
- It was not disputed that:
(1) An SPA was concluded with Mr Al Shehri in March 2011.
(2) The consideration payable by Mr Al Shehri pursuant to this SPA (the Al Shehri 2011 SPA), a total of approximately $16.7m, was paid by him to Apex. None of that sum has been paid onto Global Torch or Fi Call Limited.
(3) Apex has dissipated all of these monies. This was concluded by Mr Justice Newey when determining the Global Torch Parties' security for costs application and admitted and averred by Mr Almhairat in the course of the application to adjourn the trial.
- Global Torch invites me to determine that:
(1) the true version of the Al Shehri 2011 SPA concluded on 29 March 2011 is that relied upon by the Global Torch Parties;
(2) Apex and Mr Almhairat were and remain obliged to account to Global Torch for the sum of $6,704,000 due to Global Torch under the 29 March 2011 SPA;
(3) in failing so to account to Global Torch, in feigning attempts to do so, and in dissipating monies paid pursuant to the Al Shehri 2011 SPA, the Apex Parties have misappropriated monies due to Global Torch and are liable to make restitution to Global Torch in respect of the sum of US$6.7m plus interest;
(4) the unjustified and unlawful misappropriation of the monies due to Global Torch under the true Al Shehri SPA is another factor weighing in favour of a just and equitable winding-up order being made.
- As to (1), and the dispute as to which is the true version of the Al Shehri 2011 SPA, I have concluded that the available evidence demonstrates on a balance of probabilities that the version contended for by Global Torch is indeed the true version. Global Torch identified and I have relied in that regard on evidence as follows:
(1) Mr Al Shehri's evidence confirming that:
a) Mr Al Shehri did not sign the false version of the SPA and had not seen it before it was shown to him in this litigation;
b) the true version of the SPA is that which the Global Torch Parties contend for;
(2) a signed declaration by Mr Al Shehri dated 26 November 2011 confirming that the SPA provided for purchase of shares from both Apex and Global Torch, which again is consistent only with the version contended for by Global Torch;
(3) the evidence of Mr Abu-Ayshih confirming the true terms of the SPA and the circumstances of its signing;
(4) the evidence of Mr Hiasat confirming that:
a) he drafted the terms of the SPA on his laptop in accordance with Mr Almhairat's instructions, which provided for the terms contended for by the Global Torch Parties;
b) the purchase price of $16,760,000 was calculated by reference to the fact that payment would be made some three weeks after the signature date and upon the prevailing GBP/USD exchange rate;
c) Mr Almhairat signed the true version of the SPA in his presence;
(5) the failure of the Apex Parties to adduce an original of their version of the Al Shehri 2011 SPA – only a poor-quality fax copy of the agreement has ever been provided;
(6) the failure of the Apex Parties to inspect the original version of the Global Torch Parties' version of the Al Shehri 2011 SPA:
a) the original has been lodged with the Saudi Arabian Police;
b) whilst the Global Torch Parties do not have access to the document, Mr Almhairat, or his representatives, are entitled to copies of it, as well as to inspect it should they wish to do so. The position was confirmed beyond doubt in a formal legal opinion from Dhabaan & Partners, a reputable Saudi law firm affiliated with Eversheds. This was provided to the Apex Parties in February 2014;
c) No written response has ever been received and to the Global Torch Parties' knowledge the Apex Parties have never made any attempt to obtain a copy of or to inspect what the Global Torch Parties have throughout maintained is the true version of the Al Shehri 2011 SPA.
- As to the consideration payable and what became of it, I am satisfied on the balance of probabilities that
(1) On 19 April 2011, Mr Al Shehri transferred the consideration of $16,760,000 under the SPA to Apex. On 20 April 2011 informed Mr Abu-Ayshih that this had taken place.
(2) In the events that followed, Mr Almhairat feigned to attempt to transfer the Global Torch Share of the proceeds:
a) on 20 April 2011 Mr Almhairat instructed Mr Abu-Ayshih to prepare text message instructions to be sent to RBS Coutts (Apex's bankers) to transfer the monies. Mr Abu-Ayshih did so;
b) however Mr Wynn informed Mr Abu-Ayshih by telephone that the transfer could not be effected by text;
c) at Mr Almhairat's request, written instructions to Coutts were drawn up for transfer of $4,250,000 to Mr Abu-Ayshih and $2,500,000 to Prince Abudulaziz, making up the total payment of $6,750,000. Mr Almhairat emailed them to himself and in turn forwarded them to Mr Wynn at Coutts;
d) however, by email of Mr Almhairat sent to Coutts on 24 April 2011, he countermanded his instructions to transfer funds to the Global Torch Parties and instead gave instructions to Coutts to transfer all the sums in the Apex account to his personal account;
e) it is Mr Hiasat's evidence that Mr Almhairat deliberately failed to execute instructions to Coutts properly so that they would not be accepted by the bank;
f) no transfer to the Global Torch Parties was forthcoming from Coutts.
(3) Subsequently on 26 April 2011 Mr Almhairat fled Dubai for London.
(4) No transfer of any of the consideration under the true version of the Al Shehri 2011 SPA has been received by the Global Torch Parties.
- On that basis, in my judgment Apex and Mr Almhairat are obliged to account to Global Torch for the sum of $6,704,000 due to Global Torch under the 29 March 2011 SPA, together with interest (the suggested rate being 8%).
- In addition, I accept Global Torch's further submission that the unjustified and unlawful misappropriation of the monies due to Global Torch under the true Al Shehri 2011 SPA is another factor weighing in favour of a just and equitable winding-up order being made. For the avoidance of doubt: Global Torch, correctly, did not suggest that any of this constituted unfairly prejudicial conduct within the scope of section 994.
- In their Petition, now dismissed, the Apex Parties had advanced a variety of serious (and, in some cases, lurid) allegations against the Global Torch Parties, including of threats, bribery and money-laundering for terrorist organisations.
- These can briefly be summarised as follows:
(1) allegations which were referred to under the rubric "the Beirut Transactions", to the effect that in March 2010 Prince Abdulaziz coerced Mr Almhairat into assisting Mr Abu-Ayshih with the issuing by Fi Call Limited of a banker's draft in the sum of US$5m in favour of an individual based in Beirut and said by the Apex Parties to be associated with the terrorist organisation Hezbollah;
(2) allegations which were referred to in the pleadings, and earlier in this judgment, as "the Nairobi Transactions", and which were purportedly based on a series of alleged emails and transcripts of alleged conversations in which the transaction was allegedly revealed, to the effect that in late 2010 Mr Abu-Ayshih and Prince Abdulaziz procured Fi Call Limited to charter a flight from Nairobi to Amman for the purposes of covertly exporting an enormous quantity of gold nuggets and gemstones, all said to have been mined in the Democratic Republic of Congo.
- The Apex Parties had sought to rely on these matters as demonstrating:
(1) breaches by Mr Abu-Ayshih and Prince Abdulaziz of their statutory duties as directors of Fi Call Limited in that they had caused Fi Call Limited to carry on business in an unlawful and disreputable manner, jeopardised its contracts with other customers, and put its business at serious, possibly fatal, risk;
(2) breaches by Global Torch of an implied term in Fi Call Limited's Articles of Association and the Shareholders' Agreement between the members not knowingly to permit Fi Call Limited to carry on business in an unlawful manner;
(3) conduct inevitably destructive of the relationship of trust and confidence between the parties and seriously prejudicial to the economic value of Apex's shareholding in Fi Call Limited.
- The Global Torch Parties categorically and specifically denied these allegations, pointed out that in relation at least to the allegation that the Global Torch Parties had been involved in money laundering, Mr Almhairat, if he had any real concerns, should not have participated and assisted with the Beirut Transactions, and contested the authenticity of most of the evidence (including emails) on which the Apex Parties relied.
- Before me, Counsel for the Global Torch Parties denounced these allegations as "scurrilous" and "false and scandalous"; he pressed hard for their adjudication to clear his individual clients' names and to vindicate their and Global Torch's denials of any such unlawful activity.
- Against that, in the somewhat "Alice in Wonderland" world in which the proceedings have come to be fought out, the Apex Parties have urged against the adjudication of their own allegations. This is on the principal basis that insofar as such allegations were an issue between it and Global Torch as part of the Apex Parties' Petition and claims, it would be neither necessary nor appropriate for the court to adjudicate on them in circumstances where those pleadings have been struck out and dismissed as against Global Torch.
- In this regard, Mr Collings submitted that it would only be appropriate for the court to deal with them insofar as they are an issue in Global Torch's Counterclaim and only then insofar as they constitute allegations against Global Torch itself as distinct from the other Global Torch Parties. He described the court as "functus officio" as far as the Apex Parties' Petition is concerned, and urged me that it was simply not open to Global Torch, having obtained the dismissal of that Petition, to seek specific findings of fact on particular aspects of the Apex Parties' former case as selected by it.
- As to the extent to which the Global Parties themselves put these matters in issue in their Counterclaim (rather than simply in their Defence), the Global Torch Parties can point to two paragraphs. One, which has already been mentioned in a different context above, is paragraph 160, comprising the somewhat formulaic iteration that "Global Torch repeats their Amended Points of Defence above". The other is the plea in paragraph 256, which states as follows (without any further particularisation):
"The breakdown in trust and confidence has been exacerbated by false and malicious allegations of criminal conduct that the Apex Parties have made about Global Torch and its shareholders."
- Once again the question is whether it is necessary, appropriate and fair for the relevant allegations to be adjudicated in order to determine what, if any, relief should be granted. In all the circumstances, I have concluded that it is not.
- In short, this is primarily because I am quite satisfied that to succeed in its petition and to justify the relief it seeks, it is not necessary for Global Torch to establish its defence to these allegations. The onus was on the Apex Parties; the allegations were theirs to prove; and they have not been in a position, and indeed have forsaken any attempt, to make good their allegations. I appreciate that the Global Torch Parties may well consider that they should be entitled to full vindication as well as victory; but for the reasons previously stated, I consider that the test should be necessity.
- I stress, however, that I do not accept that allegation or any of the others. The difficulties of making good such extreme and extraordinary allegations would always have been considerable; and although in retrospect it might have been better not to have permitted any evidence on the matter at all, I think it is appropriate for me to record also that the evidence of the experts who gave oral evidence before me provided impressive, even if untested and not irrefragable, support for the Global Torch's case that
(1) the emails said to provide the evidence of the Beirut Transactions, the electronic copies of which were never disclosed by the Apex Parties, were fabricated, and the alleged transcripts of conversations revised and manipulated;
(2) similarly, the emails said to evidence the Nairobi Transactions were rather crude forgeries, and furthermore, (a) with the exception of malachite, none of the gemstones said to have been sourced in and exported from the Democratic Republic of Congo are indigenous to that country and (b) the quantity of gold nuggets alleged to have been exported from that country exceeded by some way the total amount of gold produced there in any one year.
- In the circumstances, the fact that I have not thought it necessary or appropriate to adjudicate them should not be interpreted as signifying that I have been persuaded that they have any substance; and as I have recorded, they have in effect been withdrawn.
Other Accounting and Banking Issues relating to Mr Almhairat
- As previously noted, it is abundantly clear from the evidence of Mr Narula and the dearth of material that the accounting records of Fi Call Limited (for which Mr Almhairat, both as its only executive director and pursuant to the Shareholders' Agreement, was primarily if not exclusively responsible) were woefully deficient.
- More broadly, it is plain that Mr Almhairat conducted the affairs of Fi Call Limited in an entirely irregular manner, with little or no attempt to account properly for its activities or to abide by ordinary standards of consultation and regular meetings. Thus, for example:
(1) In all the records which Mr Narula was able to scrutinise there are no invoices to customers or any equivalent subscription documents and there is no evidence of any income to Fi Call Limited. This state of affairs is unexplained but inconsistent with Mr Almhairat's representations that Fi Call Limited would inherit a ready-made subscriber base and his assertions during the currency of the parties' relationship, and indeed in the Apex Parties' pleadings, that Fi Call Limited had in the region of 200,000 subscribers.
(2) The Apex Parties' disclosure contains documents suggesting that a Paypal account had been created for Fi Call Limited; but again there is no evidence of any payments to Fi Call Limited through this or of the ultimate destination of any such payments. The Global Torch Parties' attempts to explore these matters and to understand what if any funds were paid by these alleged subscribers to Fi Call Limited (or indeed to the Apex Parties) have so far been unsuccessful.
(3) It appears that 99.9% of the £1m lent to Fi Call Limited by Prince Abdulaziz was withdrawn and used by Mr Almhairat. The available records and evidence provides no clear explanation of how these sums were used. From some of the documents available it seems that these funds may have been used to discharge invoices or tax liabilities relating to Mr Almhairat's previous ventures, and/or that the expenses which they have purportedly been used to settle have been significantly overstated. The document trail is very difficult to penetrate and the limited number of expenses claims provided by the Apex Parties do not cohere with one another. All this has understandably (and indeed, in my view, justifiably) given rise to mistrust and the suspicion that they were not used for Fi Call Limited's proper purposes.
(4) Some $3.32m was spent by Fi Call Limited on what appear to be "media" related matters, including $3.3m to an entity known as "Mediasat" and $123,000 paid to "Interactive Google". It is not clear what these substantial payments relate to.
(5) More than $1m was paid to a company called International Marketing Communications ("IMC"), a corporate group which seems to have included a Dubai company of which Mr Almhairat is a director. The Apex Parties admit that Fi Call Limited agreed to pay IMC $2.7m for "marketing services" but there is no clarity as to what these comprised.
(6) Approximately $1m was paid to Mr Almhairat's company, Nida'a Amman, for reasons which are not evident.
(7) Approximately $300,000 was paid to Mr Almhairat's preferred travel agency, Bawadi Tours, against invoices totalling substantially less. Again, there is no explanation provided for these payments.
(8) Substantial sums were drawn from Fi Call Limited's accounts as petty cash (for unknown purposes). The payment vouchers available do not appear to reconcile with the funds withdrawn.
Preventing the Global Torch Parties from accessing Company Information
- The deficiencies in Fi Call Limited's accounting records, its failure to lodge statutory accounts (leading to unanswered emails from the Companies Registry and ultimately notice that Fi Call Limited would be struck off), and the suspicion thereby raised, have been compounded by the fact that Mr Almhairat subsequently absconded from Fi Call Limited's offices in Amman, taking all Company documentation with him. He eventually formally closed the office and dismissed Fi Call Limited's employees in or around November 2011, with Mr Elayyan attempting to remove the contents of Fi Call Limited's offices without the Global Torch Parties' knowledge or consent.
- At or around this time the Apex Parties also admit that they allowed Fi Call Limited's servers to be decommissioned. It appears that they allowed this to happen after they had sent their letter before action to the Global Torch Parties on 9 September 2011, at a time when they must have been aware of their obligations to preserve documents, including electronic information. The excuse that they have advanced for this – lack of funds – is difficult to reconcile with their having sole control of the Fi Call Seychelles bank account which contained (or should have contained) more than $2m of Fi Call Limited's money, which Mr Almhairat appropriated (on his own admission).
- I accept that the lack of such records and the unexplained transactions instanced above constitute very good reason for an understandable loss of trust and confidence on the part of the Global Torch Parties.
- In my judgment, also, the serious deficiencies and apparent irregularities amount to conduct of the business of Fi Call Limited in a manner which has been and continues to be unfairly prejudicial to the interest of the Global Torch Parties as members within the meaning and scope of section 994.
- The Global Torch Parties recognise that detailed examination of these issues is beyond the scope of this trial and submit that consideration of them should be left to the liquidator appointed to wind up Fi Call Limited.
- The Global Torch Parties also contend that Mr Almhairat has failed to repay more than $100,000 lent to him by Fi Call Limited and some $46,000 lent to him by Mr Abu-Ayshih. The former is part of the Counterclaim; in default of admissible contrary evidence I propose to order Mr Almhairat to repay $100,000 plus interest. The latter is asserted in Mr Abu-Ayshih's seventh witness statement; but it is not part of the Counterclaim (in which the only claimant is Global Torch), and I can make no order in respect of that matter.
Other allegations and complaints
- It is the Global Torch Parties' case that Mr Almhairat was culpable of a range of other activities and threats which undermined the relationship between the parties and were contrary to Fi Call Limited's interests.
- As will already be apparent from my description of the witness evidence, these include:
(1) allegations of bribery (and in particular that, according to Mr Sabha's evidence, Mr Almhairat attempted to bribe him to induce his cooperation in the unlawful misappropriation of funds from Fi Call Limited's accounts);
(2) an allegation that Mr Almhairat sought to involve Fi Call Limited in the gambling and sex industries and procure a sale of shares in Fi Call Limited to Israeli companies and to publicise such activities, thereby seeking to publicly embarrass the Princes and procure a payment from them;
(3) an allegation that, in December 2012, Mr Almhairat contrived the notion, and fabricated documents to support it, that Mr Abu-Ayshih and Mr Sabha were the subject of Interpol Red Notices originating from Guinea (West Africa) in connection with money laundering and drug trafficking:
(4) an allegation that Mr Almhairat without consultation or justification enrolled Fi Call Limited in the PROOF scheme operated by Companies House, refused to share the relevant access codes and blocked the Global Torch Parties from making appropriate filing.
- I do not think it necessary to make findings in respect of any of these matters, beyond noting that the fact that they are in issue further demonstrates the complete breakdown between the parties, which makes a winding-up order in respect of Fi Call Limited, which has not traded since 2011, not only justified but a practical necessity.
- In conclusion and summary:
(1) Global Torch has fully demonstrated the need for, and I shall order, the winding-up of Fi Call Limited on the just and equitable ground;
(2) Fi Call Limited's share register should be rectified to reflect the exercise by Mr Al Masoud of his option to buy further shares in Fi Call Limited;
(3) the Apex Parties must make restitution in the sum of (alternatively pay damages in the sum of) $6.7m plus interest, being the amount due and owing to Global Torch by Apex pursuant to the Al Shehri 2011 SPA;
(4) in addition the Apex Parties must repay to Fi Call Limited $100,000 (or such greater sum as may on an account be demonstrated to be due) lent to him and not repaid, plus interest.
- Having concluded that I have jurisdiction to do so pursuant to section 996 of the Companies Act 2006 and pursuant to my inherent jurisdiction (see paragraphs  to  above), I intend to direct a further hearing of the issue relating to the Al Masoud monies after the liquidator has had an opportunity to gather any further records and documentation (not all of which, Global Torch has complained, has yet been made available). At that further hearing I would provisionally propose, subject to any submissions to the contrary when this judgment is handed down, that Global Torch, Fi Call Limited (through its liquidator) and also the Apex Parties should be entitled to appear.
- I would additionally provisionally propose that the Set Aside Application be heard at the same time, either concurrently or consecutively, and that I should retain these matters, subject to the exigencies of listing.
- These and any further consequential matters can be addressed after this judgment has been handed down.
Note 1 Re BSB Holdings Ltd (No.2)  1 BCLC 155. [Back]
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