Lexi Holdings Plc v Shaid Luqman & Ors [2007] EWHC 1508 (Ch)

[2007] EWHC 1508 (Ch)Case No HC 06 C04067
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 02/07/2007
Before
THE HONOURABLE MR JUSTICE HENDERSON
Between
LEXI HOLDINGS PLC (In Administration)ClaimantSHAID LUQMAN and othersDefendants
Mr Philip Marshall QC and Ms Ruth Holtham (instructed by DLA Piper UK LLP) for ClaimantMr Anthony Elleray QC and Mr Giles Maynard-Connor (instructed by Birchall Blackburn) for First DefendantHearing Hearing dates: 4, 9, 10, 11, 15, 16, 21 and 22 May 2007
Approved JudgmentI direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic..............................THE HONOURABLE MR JUSTICE HENDERSONON THE COMMITTAL APPLICATION

Introduction

[1]This is an application by the claimant Lexi Holdings Plc (“the Company”) for the committal to prison of the first defendant, Mr Shaid Luqman, for a number of alleged breaches of court orders originally made by David Richards J on 13 November 2006 when he granted a worldwide freezing injunction and extensive ancillary relief against Mr Luqman and a number of other respondents. It is a committal application on a large scale, in the context of a massive alleged commercial fraud which the administrators of the Company, who were appointed on 5 October 2006, are still in the process of uncovering.[2]The grounds of the committal application, in their re-re-amended form, fill nine pages (including a schedule). In broad outline, and in the order in which they are now set out in the continuation sheet to the Company’s application notice to commit for contempt originally issued on 18 December 2006, the alleged breaches are as follows:(1) breaches of an order for the immediate delivery up by Mr Luqman of his passports, and an order restraining him from leaving the jurisdiction until he had fully complied with various orders for the disclosure of information (paragraphs 1 to 8);(2) breaches of orders for the disclosure of assets, consisting of failure to disclose his interest in eight specified assets comprising a property in Spain (“the Marbella Property”), various commercial properties in Manchester and Oldham, two hotels in Cumbria, and the shares or assets of two companies (paragraphs 8A to 8D);(3) breaches of tracing disclosure orders requiring the provision of information about the present whereabouts of certain specified funds and assets, consisting of the provision of false information and failure to give full particulars about certain payments (paragraphs 9 to 14, the particulars under paragraph 14 running to some three and a half pages);(4) breaches of orders for the delivery up of documents to the Company’s solicitors, and the production of a list of such documents (paragraphs 15 to 16); and(5) breach of the freezing order itself, by virtue of certain dealings with the Marbella Property between 20 November 2006 and 16 January 2007, and with a sum of €2,895,753 advanced to Mr Luqman on the security of the Marbella Property.[3]The committal application was originally listed to come on for hearing together with a number of other applications, the most important of which are:(a) an application by the Company for default judgment against Mr Luqman, on the basis that he is in admitted breach of two orders of Briggs J which debarred him from defending in the event of non-compliance;(b) a cross-application by Mr Luqman for relief from sanctions under CPR 3.9;(c) applications by the Company for summary judgment against Mr Luqman (if his application for relief under (b) above succeeds), and for default or alternatively summary judgment against the second to fifth defendants, who are all members of Mr Luqman’s family; and(d) an application for default judgment against the tenth defendant, Lexi Property Finance, following its failure to comply with an unless order or to acknowledge service, and a cross-application by that defendant for relief from sanctions.[4]On the first morning of the hearing (Friday, 4 May) I made clear my firm view that the committal application should be dealt with first, and by itself: first, because it involves the liberty of the subject; and by itself, because it is a procedure of a quasi-criminal nature, where the criminal standard of proof applies, and it is important to focus without distraction on the pleaded grounds for committal. It would in my view have been a recipe for chaos to attempt to hear any of the other applications, let alone all of them, at the same time, and would also have involved a grave risk of contamination of the evidence on the committal with evidence adduced on the other applications, and vice versa: compare the warning given by the Court of Appeal, in a comparable context, in Phillips and another v Symes and another [2003] EWCA Civ 1769, unreported, at paragraph 53.[5]In the event, there was no opposition to the committal application being heard by itself except, rather to my surprise, from leading Counsel for Mr Luqman, Mr Elleray QC. However, he did not press his opposition, and made it clear that his main concern was that the allegations of contempt against his client should be considered in the context of his intended defence to the action, and not in isolation. I agree with Mr Elleray that it is appropriate to have regard to the wider context, and to Mr Luqman’s intended defence if he obtains relief from the debarring orders, and I have attempted to do so in this judgment. There is no problem about this from an evidential point of view, because Mr Luqman’s seventh affidavit (sworn on 5 April 2007) gives full details of his intended defence and exhibits an updated draft Defence to the Re-re-amended Particulars of Claim. This affidavit, although filed in relation to all the applications involving Mr Luqman, is clearly part of the evidence on the committal application, and Mr Marshall QC for the Company did not suggest otherwise.[6]Excluding material which relates only to the other applications, the amount of documentation before the court is still voluminous and fills many lever arch files. The evidence includes the twelfth affidavit of Mr Paul Joseph Fleming, a partner in the Company’s solicitors DLA Piper UK LLP (“DLA”), made in reply to Mr Luqman’s seventh affidavit and various other witness statements, and sworn on 24 April 2007. The exhibits to this affidavit include a 560 page report by KPMG on their investigations into Mr Luqman’s director’s loan account with the Company and the movements of funds on a Lloyds TSB account held in the name of “Shaid Luqman trading as Pearl Holdings (Europe)” (“the Lloyds TSB account”). This analysis is said to reveal that Mr Luqman has falsely inflated his loan account, to such an extent that in truth the Company owes nothing to him and on the contrary he is heavily indebted to the Company, and also that he has made use of the Lloyds TSB account to misappropriate very substantial funds from the Company. However, these findings are not yet reflected in further amendments to the Particulars of Claim (although I understand that an application to make such amendments will come before the court shortly), and by the start of the hearing Mr Luqman and his team had not yet had sufficient time to deal with this massive and detailed exercise in forensic accountancy.[7]The parties disagreed on the extent, if any, to which reference could be made to the KPMG report in cross-examination of Mr Luqman. Counsel for Mr Luqman submitted that it would be unfair to allow any use to be made of it, while Counsel for the Company submitted that Mr Luqman should be cross-examined on selected examples culled from it, including some which had been the subject of an earlier (but much less full) version of the report. I ruled on this question early on Day 3 (Thursday, 10 May) and decided that no reference should be made to this report in cross-examination. My main reasons for so deciding were:(a) the fact that it did not yet support any pleaded case against Mr Luqman;(b) the size of the report, and the fact that Mr Luqman and his team had not yet had a proper opportunity to consider and respond to it;(c) the fact that it relates to only one of the main grounds of the committal application (alleged breach of the tracing disclosure orders); and(d) the fact that its relevance to even that ground is fairly indirect and tenuous (via a reference by Mr Luqman to his loan account in paragraph 41 of his draft Defence), whereas the matters to which it is directly relevant are the Company’s claims of fraud and misappropriation against Mr Luqman, which will in due course be the subject of an application for default or summary judgment against him.[8]In reaching this conclusion I was also influenced by the authorities on cross-examination in committal applications which had been shown to me on Day 1, including in particular Comet Products UK Ltd v Hawkex Plastics Ltd [1971] 2 QB 67 (CA): see the judgments of Lord Denning MR at 74E – 75F, Megaw LJ at 76G – 77B and Cross LJ at 77D – 78A. As Lord Denning said at 75C:
“Here we must have regard to the fact that this is in the nature of a criminal charge. It is not a claim to recover compensation from the defendant; it is a claim to enforce the injunction. The only permissible object of this application is to punish the defendant – to impose sanctions against him – for wilful disobedience to an order of the Court. ”
[9]Mr Marshall did not dispute that cross-examination of Mr Luqman should be limited to the particular circumstances of the alleged contempts, but even so he estimated that it would take between two and three days. This estimate proved to be accurate, as Mr Luqman’s cross-examination began in the late morning of Day 3 and concluded at 4.00 pm on Day 5. In recording this fact I intend no criticism at all of Mr Marshall, whose cross-examination was throughout firm, fair and focused. The time it took merely reflects the large amount of ground that had to be covered, even with the KPMG report excluded.[10]Directions had been given in advance of the hearing for the parties to give prior notice if they wished to cross-examine any deponents to affidavits. The only deponent in respect of whom such notice had been given before the hearing was Mr Luqman himself. However, it soon became clear on Day 1 that Mr Elleray did in fact wish to cross-examine two bank officials who had sworn affidavits on behalf of the Company relating to the question whether a particular account held at the Brook Street branch of United National Bank in London (“the UNB account”) was an account which belonged at the material times to the Company, or to a Gibraltar company called Lexi Holdings Ltd. The evidence of the bank officials was that the account had belonged to the Company from the date when it was opened in early September 2005, although the position was complicated by two factors: first, until July 2006 statements for the account were sent to “Lexi Holdings Ltd” (not “Lexi Holdings Plc”) at the registered address of the Company in London, and secondly UNB’s internal file for the account had been mislaid, which led to the re-creation of the account opening documentation in 2006 and a change in the name shown on the statements to Lexi Holdings Plc. It became clear that Mr Elleray wished to challenge this evidence, if it was relevant, and to seek to establish that the account did indeed belong originally to the Gibraltar company, and that the bank’s mistake lay not in the name shown on the statements between September 2005 and July 2006 (which was correct) but rather in the subsequent change of the name on the statements to the Company’s name when the Company applied to open a new account with UNB in 2006.[11]The question of relevance arose because the original freezing order of 13 November 2006 had required Mr Luqman to provide full particulars of certain payments out of the UNB account, and Mr Luqman had at first refused to do so (in his fourth affidavit sworn on 15 January 2007) on the ground that the account did not belong to the Company. It was later accepted on his behalf that this was not a valid reason for refusing to comply with the order, with the result that he was admittedly in contempt for his initial refusal to comply. Steps were then belatedly taken to comply, and the sufficiency or otherwise of the information provided is one of the matters that I will have to consider. However, submitted Mr Elleray, in view of the admitted inadequacy of Mr Luqman’s original excuse for failure to provide the information, it was no longer relevant for the court to consider which company the account belonged to, and it was therefore unnecessary for him to cross-examine the bank officials on their evidence.[12]I made it clear to Mr Elleray that I disagreed with this submission. One of the pleaded particulars of breach in the committal grounds is that Mr Luqman originally refused to provide the relevant information “on the false basis that the payments were not made from the [Company’s] account”: see paragraph 14(1). Accordingly, it is clearly alleged against Mr Luqman that his original reason for refusing to provide the information was a false one. Were that to be established, his original failure to comply with the order would be very much more serious than if the account did indeed belong to the Gibraltar company and he had merely misunderstood the intended scope of the order. In the light of my indication, Mr Elleray did not press the point but said that he would after all like to cross-examine the bank officials. Arrangements were therefore made for them to attend court on Day 2 (Wednesday 9 May, the Monday being a Bank Holiday and the Tuesday a further reading day). Meanwhile, Mr Elleray had also decided that he wished to cross-examine Mr Paul Fleming on the parts of his affidavit evidence which related to the alleged breaches of the passport orders, so arrangements were made for his attendance too.[13]In the event, the oral evidence of the two bank officials and Mr Fleming occupied the whole of Day 2, and (as I have said) the cross-examination of Mr Luqman began on Day 3 after I had ruled on the admissibility of the KPMG report.

The Factual and Procedural Background

[14]I will now set out the factual and procedural background, to the extent that is necessary to place the committal application in context. It needs to be remembered that the facts alleged by the Company against Mr Luqman are, at this stage, allegations and no more. They have not been the subject of any judicial determination. Much of what follows is based on the summary helpfully provided in the skeleton argument of Mr Marshall QC and his junior, Ruth Holtham, for the Company. (1). The Company[15]The Company was incorporated on 9 September 2000 under the name Pearl Securities Ltd. It then changed its name first to Pearl Holdings (Europe) Ltd and then, on 9 November 2004, to its present name when it became a Plc.[16]As at 5 October 2006, when the Company entered administration, its officers were Mr Luqman, his sisters the third and fourth defendants (“Monuza” and “Zaurian”), and a Mr Norman Hill.[17]The second defendant, Mr Luqman’s brother, Waheed Luqman, purportedly resigned as director and secretary of the Company on 11 June 2001, whereupon his sister Zaurian was appointed to both of those roles. Nevertheless, he remained employed by the Company and the Company contends that he was a de facto or shadow director, which Waheed now admits in his Amended Defence.[18]Zaurian was at all material times the sole registered shareholder of the Company. In his draft Defence Mr Luqman alleges that she held the shares as nominee or bare trustee for him.[19]The principal activity of the Company was the provision of bridging loan finance for the purpose of real estate acquisition. The loans were mostly to commercial property developers. Such loans were not regulated by the Financial Services Authority.[20]The Company obtained finance for its activities through a revolving credit facility arranged by Barclays Capital and provided by a syndicate of banks of which the agent was Barclays Bank Plc (“Barclays”). The credit facility was originally provided under a Facility Agreement dated 29 November 2001 and was amended and re-stated from time to time thereafter. By 27 July 2005 it took the form of a “fourth amendment and re-statement agreement” (“the Facility Agreement”) under which the available facility was £120 million. The facility was secured by fixed and floating charges over all of the Company’s assets.[21]Under the terms of the Facility Agreement all of the Company’s receipts (including receipts on the re-financing or redemption of bridging loans) were to be paid into an account of the Company, to which Barclays would have sole signing rights, known as “the Receipts Account”; the previous funding account of the Company was to be closed; there were to be no further advances made to the Company; and the Company was to begin making substantial repayments of the sums already advanced, and was not to dispose of any assets or take on further indebtedness save as specifically permitted.[22]It is the Company’s case that, contrary to the above provisions, the Company did carry on trading with substantial loans and sales being made to companies owned or controlled by Mr Luqman. Moreover, in breach of the provisions regarding the Receipts Account Mr Luqman and his co-directors paid large sums of company money into other accounts. The Company says that these sums were then misappropriated. It is alleged that over £75 million of the Company’s money was paid into the Lloyds TSB account of Mr Luqman, and that at least £24 million was then paid away from this account to Mr Luqman or parties connected with him. It is further alleged that the UNB account was set up by the Company without the knowledge of Barclays, and that over £18.8 million of the funds in this account were paid to Mr Luqman, his father Mohammed Luqman (the fifth defendant) and various other of the defendants.[23]It is further alleged by the Company that amounts in excess of £4.6 million were paid away from the Company’s Barclays current account to Mr Luqman and others, again without any justification.[24]In addition to this, the Company alleges that very substantial further misappropriations were made through Mr Luqman’s director’s loan account with the Company. This account purports to show that between 2002 and 2005 funds in excess of £62 million were introduced into the Company by Mr Luqman, and over £42 million was withdrawn from the Company on this basis. On the strength of the KPMG report, the Company now alleges that the account was, if not entirely, then almost entirely, fictitious, having been created in respect of transactions which either did not take place at all or alternatively involved the transfer to the Company of money which already belonged to it.[25]In his intended Defence, Mr Luqman denies all of these allegations. He says, in short, that the transactions of which the Company complains either did not involve Company money at all, or, if they did, the Company has in one way or another been fully repaid. (2). Mr Luqman[26]Mr Luqman was the managing director and guiding force behind the Company. His background does not inspire confidence. In 1993 he was convicted on four counts of attempting to obtain property by deception and one count of obtaining property by deception, and sentenced to twenty-one months’ imprisonment. It seems that some of the offences related to mortgage fraud. On 14 February 1997, he was again sentenced in Manchester Crown Court to two years’ imprisonment for attempting to obtain property by deception. In October 2004, the Company (then under the control of Mr Luqman) discontinued certain proceedings in the Chancery Division in Manchester relating to the resignation of Messrs Howarth Clark Whitehill as the Company’s auditors. In awarding costs on the indemnity basis against the Company, His Honour Judge Howarth (sitting as a Judge of the High Court) said that the proceedings were “as clear an abuse of the process of this court as it would be possible to find”, and that the case was as clear a case involving dishonesty, the creation of fraudulent documents and perjury as he had come across for a long time. On 4 October 2006, Mr Luqman was disqualified from acting as a director of a company for 15 years, being the maximum permitted period under the Company Directors Disqualification Act 1986, in proceedings which concerned an unrelated furnishings company, Modern Living (UK) Ltd. In making the order, Patten J held that Mr Luqman was “completely dishonest”.[27]Mr Luqman was the recipient of much of the money alleged to have been misappropriated from the Lloyds TSB account, the UNB account and the Company’s Barclays account. It is common ground that he owns or controls a number of the defendant offshore companies, which have received funds or property belonging to the Company. Those companies include Charyn International SA (“Charyn”), Serton International Corporation SA (“Serton”), Monaro Investment Promotion Ltd (“Monaro”), and Chartley Company SA (“Chartley”). (3). The Administration[28]Mr Richard Fleming and Mr Brian Green, two partners in KPMG LLP, were appointed as joint administrators of the Company on 5 October 2006. When they arrived at the offices of the Company at 1 St Ann Street, Manchester they found that the premises had been emptied of virtually all of the Company’s books and papers and virtually all of its computers. The administrators were concerned to locate the missing records as swiftly as possible, and conducted a number of interviews and examinations for that purpose. They formed the view in the course of their investigations that the removal of the records had occurred as a result of a deliberate strategy of concealment. During an interview on 20 October 2006, Mr Luqman initially claimed not to remember where the Company’s books and records had been stored, nor who had removed them from the Company’s premises. He then admitted that they had in fact been stored in the garage of the house occupied by his brother at 5 Broad Lane, Hale in Cheshire, and confirmed that they would be delivered to the administrators that day. In fact, however, the books and papers were never produced. After his interview Mr Luqman gave the administrators keys to a Mercedes car, which contained around eight boxes of documents. The contents of those boxes do not include most of the basic Company records that the administrators had expected to find, and which remain unaccounted for, including the Company’s loan books for the last three years, the Company’s bank statements, cheque books and stubs, the Company’s purchase ledger, monthly management accounts, details of Company expenses, and most of the Company’s loan book files. None of the computers used by the Company have been recovered, apart from a damaged hard drive, two computer towers and a number of back-up tapes. Furthermore, when Mr Luqman was interviewed pursuant to section 236 of the Insolvency Act 1986 on 13 December 2006, he admitted in response to questioning by Mr Marshall QC that most of the Company’s books and records were shredded or otherwise disposed of in August and September 2006.[29]In the light of this wholesale destruction of documents, the administrators have had to obtain such information as they can from banks and other third parties who had dealings with the Company. This process is still going on, with large amounts of money still to be accounted for. However, enough material has come to light for the administrators to conclude that the Company has been the victim of very substantial misappropriations of funds by Mr Luqman, and has also been caused by him to lend funds and enter into a number of property transactions with offshore entities owned or controlled by Mr Luqman in breach of sections 320 and 330 of the Companies Act 1985. The administrators contend that Mr Luqman was helped to carry out these depredations by his brother, Waheed, and his sisters, Monuza and Zaurian. (4). Procedural History[30]The present action was begun on 13 November 2006, and on the same day the Company applied without notice to David Richards J who granted the freezing order to which I have already referred more than once. I will henceforth refer to this order as “the November Order”. As well as the freezing injunction itself against Mr Luqman, the members of his family who are defendants, and various others, it also contained ancillary orders for the disclosure of assets and tracing information, orders for the delivery up of relevant documents, and orders restraining Mr Luqman from leaving the jurisdiction and requiring the delivery up of his passports. I will not set out the terms of the November Order at this stage, but will refer to the relevant parts of it in detail when I come to each of the grounds of committal.[31]On 17 November 2006 the Company sought a downward adjustment of some of the specified limits within the November Order, following receipt of further information indicating that those limits had been set too high. On the same date Lawrence Collins J permitted the Company to amend the Particulars of Claim to reflect the adjustment.[32]On 24 November 2006 David Richards J made a further order continuing the November Order (as varied) until 1 December 2006, in order to permit the Company to effect service on those defendants who had yet to be served, including Mr Luqman and the second to fifth defendants.[33]On 1 December 2006 Lightman J continued the November Order (as varied) against all the defendants, but with a return date of 14 December in respect of Waheed, Monuza and Zaurian and those defendants yet to be served, who included Mr Luqman and his father Mohammed. Lightman J also continued the freezing order until trial or further order against each of the corporate defendants, and made orders for the further disclosure of asset information by Waheed, Monuza and Zaurian.[34]On 13 December 2006, as I have already mentioned, the examination of Mr Luqman under section 236 of the Insolvency Act 1986 took place. At the conclusion of the examination, arrangements were made for the delivery up of his UK passport on Friday, 15 December 2006.[35]On 14 December 2006 Briggs J continued the freezing injunction until trial against all the remaining defendants apart from Mohammed Luqman, in respect of whom he made a freezing order returnable on 19 January 2007. The Judge made a number of further orders varying the terms of the November Order. He also made an “unless” order to ensure that the disclosure and tracing provisions of the November Order were complied with by Mr Luqman and by the corporate defendants who were subject to the freezing injunction.[36]Mr Luqman failed to deliver up his UK passport on 15 December, so on 18 December Briggs J issued a bench warrant for his arrest and the present committal application was issued.[37]On 21 December 2006 the bench warrant was withdrawn after Mr Luqman delivered up his UK passport and made arrangements for the delivery up of his Pakistani passport. Briggs J gave directions for the committal application, and varied the “unless” order for the provision of tracing information so as to set a new deadline. The combined effect of the “unless” orders made by Briggs J on 14 and 21 December was (in relation to Mr Luqman) to debar him from defending the action unless he complied in full with the asset disclosure provisions of the November Order by close of business on 11 January 2007, and with the tracing information provisions of the November Order by close of business on 15 January 2007. In the event, it is common ground that he failed fully to comply with either of the “unless” orders by the stipulated deadlines.[38]On 19 January 2007 Evans-Lombe J continued the freezing injunction against Mohammed Luqman until a further return date on 2 February 2007.[39]On 23 January 2007 Sir Donald Rattee, sitting as a judge of the High Court, permitted an amendment to the committal application to introduce the alleged breaches of the tracing disclosure provisions of the November Order, and adjourned the hearing of the application.[40]On 2 February 2007 Warren J continued the freezing injunction against Mohammed Luqman until trial.[41]On 21 February 2007 Kitchin J gave permission for the Particulars of Claim to be re-amended, and increased the level of the freezing injunction against Mr Luqman and others to £40,488,916, and against Mohammed Luqman to £7,350,000.[42]On 20 March 2007, by consent, Lindsay J gave permission for the Particulars of Claim to be re-re-amended and the committal application to be re-amended.[43]Finally, on 23 March 2007 David Richards J adjourned the committal application, and the other applications to which I have referred, to the present hearing and gave directions for the service of further evidence.

The Committal Application

[44]Having set the scene I will now deal with the contempt allegations in turn. For convenience, I propose to do so in the same order that Mr Marshall followed in his cross-examination of Mr Luqman, that is to say:(a) alleged breaches of the asset disclosure orders;(b) alleged breaches of the freezing order itself in relation to the Marbella Property;(c) alleged breaches of the tracing information orders;(d) alleged breaches of the orders relating to documents; and(e) alleged breaches of the passport orders.

I. Alleged breaches of the asset disclosure orders

[45]By paragraph 11 of the November Order, Mr Luqman was obliged to inform the Company’s solicitors immediately and to the best of his ability of all his assets worldwide whether in his own name or not and whether solely or jointly owned, giving the value, location and details of all bank accounts, irrespective of the amount of the balance thereon, and all other assets, with a value in excess of £5,000, to enable the Company to identify such assets. The details to be provided expressly included details “of any interest of whatsoever nature under any trust”, and details of all bank or other accounts in which Mr Luqman was interested whether legally, beneficially or otherwise, including the name, branch location and account number. By virtue of paragraph 6 of the November Order, the word “assets” includes “any asset which [Mr Luqman] has the power, directly or indirectly, to dispose of or deal with as if it were his own”, and he is to be treated as having such power if a third party holds or controls the asset in accordance with his direct or indirect instructions.[46]By paragraph 12 of the November Order, Mr Luqman was obliged to swear and serve on the Company’s solicitors an affidavit confirming the above information within ten working days of being served with the Order.[47]The November Order was served on Mr Luqman on 4 December 2006. However, Mr Luqman failed to comply with either paragraph 11 or paragraph 12, and as I have already said unless orders were made by Briggs J on 14 and 21 December 2006 the effect of which was to debar him from defending unless he complied with the orders by 11 January 2007.[48]In purported compliance with the above orders, Mr Luqman swore a short affidavit (his second) on 8 January 2007. This affidavit is barely two pages long and has no exhibits. It discloses Mr Luqman’s ownership of two residential properties in England, and of some (but not all) of the corporate defendants. Bare details are given of certain properties in England owned by three of those defendants (Chartley, Monaro and Serton). Details are also given of three bank accounts (with Coutts & Co in London, Halifax Plc in Manchester and UBL at Kharian City, Pakistan), the credit balances on the first two being said to total approximately £20,000 and the third account being said to be closed with a nil balance. In paragraph 4 of his affidavit Mr Luqman said:
“I do not have any interest of any nature in any other property, bank account or funds or any interest in any trust fund for my own benefit nor does any third party hold any trust funds for my benefit.”
He went on in paragraph 5 to confirm that the contents of the affidavit were true.[49]It is now admitted by Mr Luqman that the asset disclosure made in his second affidavit was deficient, in that it failed to provide details of a number of further bank accounts. In paragraph 22 of his seventh affidavit, details are given of a current account with United National Bank in London (with a credit balance of £730.72), a current account with La Caixa in Marbella (with a credit balance of €3827) and a reserve account with Coutts & Co (with a nil balance). He also discloses his director’s loan account with the Company, alleging that “about £21-£22 million” was owed to him at the commencement of the administration. He says that these omissions were an innocent mistake, which was not noticed either by himself or by his then legal team, and offers his apologies. In his tenth affidavit, sworn on 30 April 2007, Mr Luqman discloses the existence of five further accounts, two with the UBL Kharian City branch (both said to have been closed in late October or early November 2006 with minimal balances), two with Bank Alfalah Ltd in Gujarat, Pakistan (both with nil balances) and the fifth with HSBC Bank AS, at a branch in North Cyprus (in respect of which Mr Luqman claims not to know what the credit balance is, but says that he has telephoned the bank to ask for copy statements). Again, he says that these omissions were an innocent mistake for which he apologises.[50]I need not spend more time on the undisclosed bank accounts, beyond noting the admitted breaches of the original asset disclosure order which I have listed above, because they do not form part of the committal application. The assets in respect of which the committal application is made are set out in paragraph 8D of the grounds, and are as follows:(1) the Marbella Property;(2) and(3) 43, 45 and 47 Piccadilly, Manchester and 2-8 (even) Lever Street, Manchester;(4) Anchor Mill, Oldham;(5) the Moota Hotel, Moota, Cockermouth, Cumbria;(6) the Westlands Hotel, Braithwaite Road, Workington, Cumbria;(7) the entirety of the issued shares of Beauchamp Ventures Ltd, which is the registered owner of land and buildings on the south west side of Old Lane, Beeston, and Sunglow Model Factory, Beeston, Leeds; and(8) the beneficial ownership and/or assets of the eleventh defendant, Imaan Incorporated (“Imaan”).

Imaan

[51]Imaan is a company which was incorporated in the British Virgin Islands on 25 November 2003. There is no dispute that the entire issued share capital of 50,000 shares has at all material times been registered in the name of Mr Luqman. Imaan is the registered owner of at least nine valuable properties, mostly in London and Cheshire, including Waheed’s home at 5 Broad Lane, Hale, Cheshire, and a former home of Mr Luqman’s at 6 Stanhope Road, Bowden, Altrincham, Cheshire (also known as “Chatsworth House”). Imaan is the eleventh defendant, and the nine properties which I have mentioned are listed in paragraphs 7.42 to 7.50 of the November Order and are subject to the freezing injunction. Imaan is currently defending the action, having succeeded on procedural grounds in setting aside a default judgment entered against it, and has served a Defence.[52]The reason given by Mr Luqman for his failure to disclose his shareholding in Imaan is that he has always held the shares on trust for a Mr Chaudhry Salamat Ali (“Mr Ali”), a textile businessman who lives in Lahore. In paragraph 15 of his draft Defence, Mr Luqman says that although he has been a director and shareholder of Imaan, “it has always been and is beneficially owned and controlled by [Mr Ali]”, and he holds the registered shares “as bare trustee for Mr Ali”.[53]No declaration of trust or document of any description has been adduced by Mr Luqman to establish or evidence the existence of the alleged trust. However, Mr Luqman has exhibited to his seventh affidavit an undated witness statement by Mr Ali, which appears to have been signed by him, and a notarised copy of which was provided to me at the hearing (having been obtained by Imaan’s solicitors). In this witness statement, which is expressed to be made in support of Imaan’s application for relief from sanctions and in opposition to the Company’s application for default judgment, Mr Ali purports to explain the position in the following terms:
“3. I am the beneficial owner of [Imaan] including all its issued share capital comprising 5,000 [sic] shares which are registered in the name of Shaid Luqman. I will explain how the company came to be incorporated and the role of Mr Luqman. 4. I am a wealthy businessman engaged in the textile industry in Pakistan. For many years I have visited the UK both on business and holiday. Several years ago I met Shaid Luqman through his father, Mohammed Luqman,the fifth defendant, whom I knew socially. I was interested in investing in property in the UK and Shaid agreed to help me. 5. For various reasons I was advised that it would be sensible to use an offshore company as a property investment vehicle however it would be easier to raise finance from UK banks if the company had a director based in the UK who should also hold the shares in the company. So in 2003 Shaid arranged for Imaan to be set up with himself as the director and registered shareholder. 6. I provided the investment from my personal funds and I have invested a total of between £2 million and £3 million. With these and funds borrowed from banks such as Anglo Irish Bank and others the company has acquired several properties. As Shaid is based in the UK I have relied on him to run the company for me. 7. There are no formal documents to record my ownership of the company and I trust Shaid to protect my interest. This is commonly how business is done in Pakistan. 8. I confirm that none of Shaid or any member of his family or group of companies has any beneficial interest in Imaan.”
[54]Mr Ali has not himself sworn an affidavit in the committal proceedings, nor has he given oral evidence on behalf of Mr Luqman or made himself available to be cross-examined on his witness statement, although the Company wrote on 26 April 2007 to say that it wished to cross-examine him. Mr Ali is entitled to adopt this stance, if only because, as a resident of Pakistan, he is not a compellable witness in the UK; but in the absence of any direct evidence from him and cross-examination upon it, I consider that the weight I can attach to his witness statement is minimal, particularly given the total absence of any documentary evidence to support his account.[55]In stark contrast to the absence of any such evidence, there is a wealth of documentation which on the contrary very strongly suggests that Mr Luqman has at all material times been the beneficial as well as the legal owner of the shares in Imaan. Most strikingly of all, on 2 October 2004 Mr Luqman signed a statement on Imaan’s headed notepaper, in connection with a charge over the shares in Imaan to be given to Anglo Irish Bank Corporation Plc (“AIB”), in which he referred to himself as “sole director and 100% beneficial owner of Imaan”. This document was produced in order to comply with the requirements of AIB set out in a facility letter dated 7 September 2004, in which AIB had agreed to lend Imaan up to £10,815,000 to assist with the purchase or re-finance of four properties, including Waheed’s residence at 5 Broad Lane. The loan was to be secured by, among other things, a legal charge over the issued share capital of Imaan and joint and several guarantees by Mr Luqman and Zaurian. By virtue of clause 9.2(g) it was a condition precedent to the making of the loan that AIB should receive confirmation of the beneficial ownership of Imaan, and in clause 11.1(f) Imaan warranted to AIB upon acceptance of the offer that all information delivered by Imaan to AIB before drawdown was true and correct in all respects. By clause 11.1(h) Imaan further warranted that it was controlled by Mr Luqman and Zaurian, “control” being defined for the purposes of the facility letter in terms of the power to appoint and/or remove the majority of the members of the governing body of the person controlled, or the power to control that person’s affairs and policies.[56]Mr Luqman and Zaurian duly gave personal guarantees in respect of the facility for a loan of up to £10,815,000. Rather puzzlingly, Mr Luqman also signed a letter to AIB dated 29 September 2004 warranting on behalf of Imaan that Zaurian was the sole shareholder, and confirming that Imaan’s agents in the BVI (Crescent Corporate Services Ltd) had been authorised to confirm this to AIB’s solicitors. There seems on any view to have been some confusion here, because it is Mr Luqman’s case, as he confirmed in cross-examination, that he has at all times been the sole shareholder of Imaan. However, this unequivocal representation to AIB, even if it was untrue, may help to explain why it was that AIB sought personal guarantees from Zaurian as well as Mr Luqman himself.[57]In cross-examination Mr Luqman sought to explain away the letter of 7 October 2004 referring to him as the sole beneficial owner of Imaan by saying that the form of words had been dictated by AIB in an email to his solicitor, Mr Mick Hewitt. There is indeed an email of 7 October from AIB’s solicitors to Mr Hewitt asking him to arrange for Mr Luqman to forward a letter on Imaan’s headed notepaper in the terms of the letter which Mr Luqman signed. However, this does not begin to explain why Mr Luqman was prepared to sign it, or why he was prepared to give a personal guarantee as security for the loan, if in truth he held the shares on trust for Mr Ali, of whom there is not a single mention anywhere in the documentation. Mr Luqman was driven to say that his own solicitor, Mr Hewitt, had knowingly allowed him to sign a false letter, and that he decided to give the guarantee as a matter of personal choice on his part, which reflected the fact that he was dealing with the day to day running of Imaan on Mr Ali’s behalf. I have no hesitation in rejecting these explanations, which seem to me wholly incredible. In my judgment Mr Luqman said he was the sole beneficial owner of Imaan because that was indeed the true position, and that is also the reason why he gave a personal guarantee. This must be the information which he gave to Mr Hewitt, who could not possibly have allowed him to send the letter of 7 October 2004 on any other basis. I note that it was not suggested by Mr Luqman in cross-examination that the letter was sent without Mr Hewitt’s knowledge.[58]Additional support for my conclusion is provided by several further matters, the most significant of which I shall now mention.(1) In March 2005 agreements were entered into increasing the amount of the facility first to a maximum of £12,035,000 and then to a maximum of £13,485,000, in order to enable the purchase or refinance of three further properties, including Mr Luqman’s one-time residence at Chatsworth House. Personal guarantees were again given by Mr Luqman and Zaurian, and again Mr Luqman had no sensible explanation of why he was prepared to do this if he was not himself the beneficial owner of the shares.(2) On 12 October 2004 Mr Luqman signed on behalf of Imaan an Inland Revenue form applying as a non-resident company to receive UK rental income gross. In this form Mr Luqman named himself as the only person owning more than 10% of the shares in Imaan, and gave Chatsworth House as his address. Significantly, he left blank the box at question 14 which asked if the company was controlled by a trust, and (if so) asked for details. Mr Luqman was unable to provide any satisfactory explanation of this in cross-examination.(3) In January 2006 Mr Luqman became dissatisfied with AIB, and on 12 January he sent a fax (signed on his behalf by Waheed) making a formal tender of £6 million to redeem the mortgages on two of the properties, namely Flat 2, 17 Upper Grosvenor Street and 29 Rutland Gardens. This tender was supported with a letter from UNB confirming that the total balance of clear funds in Mr Luqman’s accounts with UNB on 12 January was a sum in excess of £6.95 million. On 13 January Mr Luqman sent a further letter to AIB (again signed on his behalf by Waheed) saying he had asked for a settlement figure “based on repayment from my own funds”. Mr Luqman was unable to offer any credible explanation in cross examination why he was tendering his own money to redeem the properties, if the beneficial owner was in fact Mr Ali. In answer to one question he said:
“I am a 100% shareholder of the Company and I run the Company as I saw fit, and if I wanted to purchase or sell a property then that is what happened.”
In my view that is an accurate description of how Mr Luqman operated, and reflects the fact that he was the sole beneficial owner of Imaan. (4) In or about May 2006 some insurance documents with Norwich Union relating to 5 Broad Lane described the policy holder as “Mr Shaid Luqman trading as Imaan Incorporated”. Mr Luqman disclaimed responsibility for this description which he said was not his own wording. I have little doubt, however, that it was based on information which he had provided, and in my view it again accurately reflected the true position. (5) Finally, and to my mind most revealingly of all, on 6 July 2005 Mr Luqman signed on behalf of Imaan a private customer services agreement with AIB dated 17 June 2005 whereby AIB undertook to provide execution only services in relation to investment in financial derivatives and other money market products, together with any other designated investments which AIB might agree to deal in for Imaan’s account. This agreement appears to be incompatible with Mr Luqman’s oral evidence that the sole purpose of his arrangement with Mr Ali was to enable Mr Ali to invest in property in the UK. Mr Luqman was cross-examined on the apparent inconsistency, and it is instructive to see how he responded. He began by saying that the agreement was a requirement of AIB’s under the loan facility, and was “their way of risk assessment internally”. Then he tried to maintain it was not a condition precedent to the loan facility, but a condition subsequent, in order to explain the fact that it post-dated the original facility in September 2004 and the increases in the facility in March 2005. When asked where the relevant provision is to be found in the facility, he said there was no such provision but “it is an additional bolt-on which the bank required”. He then said he thought it arose after the second facility, and “I think they restructured the financing internally through derivatives”. He sought to maintain that it was a requirement of an AIB manager, and then changed tack again to say that it was “basically additional advice from [AIB] that … Imaan can get a second facility and we would like you to enter into this additional service agreement”. Finally, he described it as “a general agreement from [AIB] … sent to probably 99% of their customers who have facilities from them in terms of additional services that they can provide”. I have cited these responses because they provide an extreme illustration of the evasive, shifty and self-contradictory way in which Mr Luqman gave much of his evidence. I have no doubt that he was making up these answers as he went along, and that his motive in doing so was to distract attention if he could from the obvious inference from the document, namely that Imaan at his behest entered into a separate investment agreement with AIB in mid 2005, which was unconnected with the previous loan facility, and unconnected with Mr Ali. On the strength of this and several other similar passages in his oral evidence, I find Mr Luqman to be a wholly unsatisfactory, unreliable and dishonest witness whose evidence can only safely be credited where it consists of admissions or where there is contemporary documentary material to corroborate it.[59]I have so far examined only Imaan’s dealings with AIB. However, a similar picture presents itself in relation to other transactions. For example, Imaan also raised loan finance from Bank of Scotland for the purchase of 29 Rutland Court in March 2004. The Bank’s account opening form made it clear that in the case of a limited company written confirmation was required giving details of directors, shareholders and beneficial owners. On 10 March 2004 Imaan’s solicitors, Weightman Vizards, wrote to Bank of Scotland giving details of the directors and shareholders. They described Mr Luqman as the sole director and shareholder, saying:
“Mr Shaid Luqman is the sole director and shareholder of Imaan Incorporated and holds 50,000 shares in the company.”
There is no mention of Mr Ali. As in the case of AIB, personal guarantees were given by Mr Luqman, not only in relation to the loan for 29 Rutland Court, but also in relation to two further loans from Bank of Scotland for the purchase of other properties. As before, Mr Luqman was in my judgment unable to provide any credible explanation for having given these guarantees if he was not himself the beneficial owner of Imaan, particularly as he admitted having received advice from Mr Hewitt before giving the first of them. All he could say was that the guarantees were given as part of the general day to day running of the business, that it was his liability because Mr Ali had entrusted him with the running of the company, and that it was a commercial decision that he took. Here again Mr Luqman was in my judgment making up his evidence as he went along.[60]In similar vein, Mr Luqman was also unable to explain why he and two companies admittedly owned and controlled by him, Chartley and Charyn, gave guarantees to support a major re-financing loan by CitiGroup Private Bank in May 2006, beyond saying that some of the properties involved were not owned by Imaan and that the terms of the re-financing were favourable to all of them. In fact, of course, the use of Imaan properties to secure lending to other entities owned and controlled by Mr Luqman provides strong support for the inference that the Imaan properties too were beneficially owned by Mr Luqman through the medium of Imaan. Otherwise the mingling of properties which he owned beneficially with others which he held on trust for Mr Ali would be inexplicable. A similar line of cross-examination in relation to the offer of Imaan properties as security for lending by UNB to Lexi Property Finance, a partnership between Mr Luqman and a Mr Davis, yielded answers which I found equally unconvincing, and in respect of which I draw the same inference.[61]With regard to Mr Ali himself, I see no reason to doubt that he does exist, but it is notable how recently his name has been put forward by Mr Luqman as explaining why he does not own the shares in Imaan beneficially. Mr Ali is not clearly named in the section 236 examinations of either Waheed or Mr Luqman which took place in December 2006, although it is possible that transcription errors are to blame for this (the names apparently given were “Mr Choudhry Salamat” by Waheed and “Chahabi Salam” by Mr Luqman). Further, although Mr Ali asserts in his witness statement that he invested some £2 million to £3 million with which Imaan has acquired properties, Mr Luqman himself said in his oral evidence that the amount was only about £1 million. However, KPMG have analysed the funding of the properties acquired in the name of Imaan, and have found no evidence of any contribution of money by Mr Ali. Their analysis reveals that all of the Imaan purchases were funded either by the Company, or by third party lenders (such as AIB and Bank of Scotland), or to a very limited extent (about £200,000) by Mr Luqman himself. Mr Luqman has not challenged the accuracy of this analysis, but he says that it needs to be understood in the context of fuller financial information which is not yet available and which will show how money provided by Mr Ali was in fact used for this purpose. I do not believe this explanation, which on the evidence before me appears to have no solid foundation at all. A flavour of Mr Luqman’s case on this point can be gauged from the following question and answer on Day 3 (transcript page 89):
“Q. Where and when and in what amount did Mr Ali contribute funds for investments in Imaan, Mr Luqman? A. I cannot possibly tell you until I get a full disclosure of all the relevant bank documentation. We have tried to get Lloyds TSB Bank statements for months. I have even been to the bank with my lawyer and we still have not got bank statements. I cannot possibly answer your question without full disclosure of the information.”
I comment that if Mr Luqman’s case on this important point is still so hopelessly vague six months after the November Order, he can hardly expect it to be taken seriously by the court.[62]It is now time for me to state my conclusion in relation to Imaan. Taking account of all the matters which I have mentioned, and the transcript of Mr Luqman’s oral evidence, which I have read and re-read with care, I am satisfied beyond reasonable doubt that Mr Luqman is indeed the beneficial owner of the shares in Imaan. All the documentary evidence points clearly in that direction, and Mr Luqman himself signed the letter of 7 October 2004 in which he so described himself. There is nothing to support the story about Mr Ali’s involvement apart from the word of Mr Luqman himself, whom I find to be an unreliable, dishonest and evasive witness, and the untested hearsay evidence of Mr Ali. Without a shred of documentary evidence to support it, I can only regard this evidence, in the form in which it is now before me, as shadowy in the extreme. It is not enough to raise a reasonable doubt in my mind. I also find it impossible to understand why, if Mr Luqman’s account of the matter is correct, he did not mention his shareholding in Imaan in his second affidavit and explain the involvement of Mr Ali as fully as he was able. It is not as though the importance of Imaan can have escaped his mind. It owns an extensive portfolio of properties, including his brother’s home, and since Mr Luqman held at least the legal title to the shares the only straightforward thing for him to have done would have been to make the fullest possible disclosure at the earliest possible stage. Instead, he did absolutely nothing.

The Trust Properties

[63]I move on now to consider items (2) to (7) in the list of assets in paragraph 8D of the committal grounds (see paragraph 50 above). These assets all share the common feature that they were subject to a written declaration of trust in favour of Mr Luqman. For this reason it is convenient to refer to them collectively as “the Trust Properties”. I should add that items (2) and (3) (43, 45 and 47 Piccadilly and 2-8 (even) Lever Street, Manchester) comprise a single site on the corner of those two streets in Manchester, which I will call “the Manchester property”.[64]The Trust Properties comprising items (2) to (6) on the list (that is to say the Manchester property, Anchor Mill, the Moota Hotel and the Westlands Hotel) all originally belonged to third parties but were charged to the Company. On various dates in April and June 2004 the Company acting through receivers appointed under the Law of Property Act 1925 sold these Trust Properties to three companies which are still their registered owners. The Manchester property was sold to a company called KNJ Ltd (“KNJ”); Anchor Mill was sold to Tona (2003) Ltd (“Tona”); and the two hotels were sold to Viewfresh (2004) Ltd (“Viewfresh”). Each purchase was funded with loans of 100% of the purchase price from the Company, which took a charge on the property as security. The sole or joint director, and (directly or indirectly) the sole or 90% shareholder of each of the three purchasing companies, was a Mr Amiram White (“Mr White”).[65]On various dates in June 2004 each of the three purchasing companies, acting by Mr White as director, executed a written declaration of trust of the Trust Property which it owned in favour of Mr Luqman. I take as an example the declaration of trust executed on 14 June 2004 by Tona in respect of Anchor Mill. Mr Luqman was also a party to the deed, being defined as “the Beneficiary”. After reciting the transfer of Anchor Mill to Tona, and the acceptance by Tona of the legal estate in the property as trustee for Mr Luqman, clause 2 of the deed provided as follows:
“2.1 The Trustee declares that it acquired and holds the Property as trustee of a trust of land … on behalf of the Beneficiary … 2.2 The Trustee and the Beneficiary hereby agree and acknowledge that the Beneficiary has the right to require the Trustee to transfer the legal title in the Property to the Beneficiary or to the Beneficiary’s nominee. 2.3 This declaration of trust shall be governed and construed in accordance with the laws of England. ”
Clause 3 went on to provide that during a specified period of ten years the Trustee should have certain additional powers, and in clause 4 Mr Luqman agreed to indemnify the Trustee in respect of all present and future liabilities etc relating to the Property during such period as he continued to have an interest in it, but limited in extent to the value for the time being of his interest. Although clause 3 envisaged that a time might come when Mr Luqman ceased to have an interest in the Property, the declaration of trust itself in clause 2 is unqualified in extent or duration, and clause 2.2 in particular makes it clear that Tona held the legal estate as Mr Luqman’s nominee.[66]In respect of the remaining Trust Property, namely the shares in Beauchamp Ventures Ltd (“Beauchamp”), the arrangement was slightly different. Beauchamp is a company incorporated in the British Virgin Islands, Mr White again being the sole director and shareholder. In July 2004, the Company sold two parcels of land at Beeston, Leeds, to Beauchamp, the purchase again being wholly funded by the Company and secured by a charge over the land. No declaration of trust was executed by Beauchamp, but on 20 December 2005, in connection with the grant of the ABN facility to which I refer below, Mr White signed a letter addressed “to whom it may concern” in which he confirmed that he held all the shares in Beauchamp “on trust absolutely” for Mr Luqman, and that he would deal with the shares as directed by Mr Luqman.[67]By two deeds of legal charge dated 21 December 2005 Viewfresh, Tona and KNJ charged the Trust Properties vested in them to ABN Amro Bank NV (“ABN”), and Mr Luqman (defined in the deeds as “the Ultimate Beneficial Owner”) joined in the deeds for the purpose of charging his beneficial interest in the properties. These charges were part of a major financing exercise in which ABN provided a large facility of nearly £100 million to a new company, Monaro, promoted by Mr Luqman to assist in the purchase of shares and loan notes in the Priory Group. The facility was secured on a number of properties owned by corporate vehicles of Mr Luqman’s as well as the Trust Properties.[68]In May 2006 the ABN transactions were reversed, and ABN released all of the charges that had been granted to it. The Company was then re-granted first charges on each of the Trust Properties, thereby restoring it to its original position as first chargee funder of the Trust Properties.[69]In his seventh affidavit Mr Luqman seeks to explain his failure to disclose his beneficial interest under the declarations of trust. In paragraph 40 he says this:
“From about April 2004 Mr White and other companies with which he was connected … were being investigated by the DTI. I do not know much of the detail but I believe that the investigation had something to do with concerns over representations made to third parties. Mr White was concerned about that investigation and its potential effect on his ability, via Tona, Viewfresh and KNJ to obtain the requisite further finance and, where necessary, planning permission to develop the trust properties. Consequently, and given that it was in the [Company’s] best interests if the trust properties could be developed and sold at a higher price in that realisations would be maximised and the debt due to the [Company] would hopefully be paid in full, I agreed with Mr White that declarations of trust in relation to the beneficial interest in the trust properties would be executed so that the beneficial interest would be held by me on a temporary basis until such time as the requisite finance was obtained and, where necessary, planning permission was obtained, alternatively until it was clear that such finance would not be available. Given my reputation and contacts in the property development market it was felt by both of us that if I was involved with the trust properties the prospects of the proposed development would be improved dramatically. It was [for] this reason and this reason only that the declarations of trust … were executed. Again my arrangement with Mr White was agreed to be temporary from the outset. I was never going to be the beneficial owner of the trust properties on a permanent basis … ”
[70]With regard to the position after the reversal of the ABN transactions, Mr Luqman says in paragraph 47 of his seventh affidavit:
“From that point as far as both myself and Mr White was concerned I no longer held any interest in the trust properties. I accept that no further declarations of trust or other documentation was executed but I did not believe that any was necessary given the nature and extent of my agreement with Mr White. Therefore, … from May 2006 at the very latest I have had no interests at all in the trust properties and it was for this reason that I made no mention of the same in my second affidavit.”
He then goes on to say that the position in relation to the Beauchamp shares is essentially similar.[71]There are a number of obvious problems with this explanation. First and foremost, the wording of the declarations of trust is not subject to any temporal limitation. The effect of the declarations and Mr White’s signed letter in relation to the Beauchamp shares is that the Trust Properties are held by the legal owners as bare nominees for Mr Luqman, who holds the entire beneficial interest. It is of course entirely consistent with this that Mr Luqman should have offered the Trust Properties as security for the ABN facility to his own company Monaro. Secondly, Mr Luqman provides no explanation of how the beneficial interest in the Trust Properties reverted to Mr White after the failure of the ABN transactions. He merely says that he no longer held any interest in the Trust Properties; but that assertion flies in the face of the wording of the trust documentation. There is no suggestion that he made any written disposition of his equitable interest in the Trust Properties, or even that he entered into any contract for value with Mr White to do so. The assertion amounts to no more than saying that his interest somehow just came to an end.[72]In cross-examination Mr Luqman was unable to deal with these, and other problems, and I found his evidence as unreliable and unconvincing as I did in relation to Imaan. When taken to the wording of the declarations of trust early on Day 4, he accepted that he had read and understood it, and was satisfied that it expressed the intention of both himself and Mr White (see page 6 of the transcript). He likewise accepted that Mr White’s letter relating to the Beauchamp shares expressed the true intention of Mr White at that time (ibid page 17). When asked how he relinquished his interest in the Trust Properties after the reversal of the ABN transactions, he was driven to allege an oral agreement between them that he would no longer have any interest in the properties. There is no mention of any such agreement in his seventh affidavit. Unsurprisingly, Mr Luqman was unable to remember the time or place when the agreement was made, or to explain his failure to mention it in his affidavit. I am satisfied that this supposed agreement is an invention. It is also contradicted by Mr Luqman’s own previous statements. For example, in his interview with the administrators on 20 October 2006 he said that in 2004 Mr White got into financial difficulties and “washed his hands” of the Trust Properties. There was no suggestion of a merely temporary arrangement with Mr White. More recently, in his last section 236 examination on 5 March 2007, Mr Luqman finally accepted, after a series of prevaricating answers, that he was indeed the beneficial owner of Tona and Viewfresh (see bundle C12 at pp388-394).[73]Mr Luqman was equally unable to provide any concrete details of the “requisite finance” or planning permission that he was supposedly to obtain on behalf of Mr White during his period of temporary ownership. Nor did he explain how charging the Trust Properties to ABN in support of the facility for Monaro was going to benefit Mr White, or was in accordance with the supposed agreement between them. Instead, he now sought to say that the time when Mr White washed his hands of the properties was not in 2004, but after the reversal of the ABN financing in May 2006. As so often, I am satisfied that Mr Luqman was making up his evidence as he went along, heedless of the fact that it contradicted earlier versions which he had given to the administrators and in his section 236 examinations.[74]I also agree with Mr Marshall QC that the idea of Mr White concealing his involvement with the Trust Properties by procuring the execution of declarations of trust in favour of Mr Luqman is in any event absurd. Mr White remained the director and a registered shareholder of the relevant companies, and it would have been easy for lenders or planning authorities to have discovered this. ABN were obviously aware of Mr White’s involvement, because (as Mr Luqman confirmed in cross-examination) it was ABN who required a second trustee of the declarations of trust to be appointed on 21 December 2005, and it was evidently also ABN who required Mr White to sign the letter relating to the Beauchamp shares on the same day. No doubt appreciating the problems that this caused for his story that Mr White had to stay in the background, Mr Luqman went on to say that the ABN financing had been arranged without reference to Mr White, and he was only involved because of the third party charges to be provided by the companies which owned the Trust Properties. However, this explanation in my judgment only reinforces the implausibility of Mr Luqman’s original story, because it is impossible to see how such third party charges in support of lending to Monaro were supposed to benefit Mr White. To summarise, I am abundantly satisfied, and find beyond reasonable doubt, that the declarations of trust, and Mr White’s letter regarding the Beauchamp shares, mean what they say; that the Trust Properties have at all times since the execution of those documents been in the sole beneficial ownership of Mr Luqman; that no agreement was made between Mr Luqman and Mr White for the termination of the trust arrangements in May 2006, or at any other time; and that Mr Luqman’s beneficial interests in the Trust Properties are therefore assets of his which he ought to have disclosed if they exceed £5,000 in value.[75]In his closing submissions Mr Elleray QC submitted that the court could not be satisfied beyond reasonable doubt that there was still any positive value in the Trust Properties, given the indebtedness to the Company which is secured on them. In support of this submission he relied on Mr Luqman’s oral evidence that Mr White had washed his hands of the Trust Properties in 2006 because of the negative equity in them. I am unable to accept this submission for a number of reasons. First, Mr Marshall submitted, and Mr Elleray did not disagree, that if a person charged with civil contempt wishes to rely on a minimum value exception to a court order requiring disclosure of assets, there is an evidential burden upon him to lead evidence which, if believed, could reasonably be taken to support his case that the exception applies: compare Great Future International Ltd and others v Sealand Housing Corporation andothers [2004] EWHC 124 (Ch), TLR 1 March 2004, at paragraphs 15 to 24 per Lewison J. Secondly, Mr Luqman has in my judgment clearly failed to satisfy the evidential burden on this issue. All that is relied upon for this purpose is one or two answers in cross-examination by Mr Luqman, whose evidence I find to be unreliable, and whose account of his dealings with Mr White I have rejected. Thirdly, and in any event, it is Mr Luqman’s own evidence, in paragraph 44 of his seventh affidavit, that by December 2005 planning permission had been obtained to develop Anchor Mill into 96 apartments, and an indication had also been given that planning permission would be granted to develop the Manchester property into a seven storey office block with retail units on the ground floor. In cross-examination Mr Luqman confirmed that planning permission for the Manchester property was subsequently obtained by the Company. So in relation to Anchor Mill and the Manchester property, at the very least, any suggestion that there is no positive equity in the properties seems wholly incredible.

The Marbella Property

[76]The remaining asset which Mr Luqman is alleged not to have disclosed is his interest in the Marbella Property. It will be convenient to consider this question in conjunction with the alleged breaches of the freezing injunction itself committed by him in relation to the Marbella Property, which I shall consider in the next section of this judgment.

II. Alleged breaches of the Freezing Injunction: the Marbella Property

[77]Paragraph 5.2 of the November Order provided that Mr Luqman should not “in any way dispose of, deal with or diminish the value of any of his assets whether they are in or outside England and Wales” up to the value of £31,736,125. This monetary limit was varied by the order of Lawrence Collins J of 17 November 2006 to £28,740,665. By paragraph 7 of the November Order various specific assets were listed as being affected by the freezing injunction, including (see paragraph 7.3) “531 Los Grandados, 11 Puerto Banos, Marbella, Spain”, i.e. the Marbella Property.[78]The freezing injunction was then continued until trial by a combination of the orders made by David Richards J on 24 November 2006, Lightman J on 1 December 2006 and Briggs J on 14 December 2006.[79]Since the freezing injunction was a negative injunction, it could be enforced by committal without being served. It would be sufficient if the court were satisfied that, pending service of the order, Mr Luqman had had notice thereof “by being notified of the terms of the order, whether by telephone, telegram or otherwise”: see RSC order 45 rules 5(1) and 7(6) in Schedule 1 to the CPR.[80]The November Order was served on Mr Luqman on 4 December 2006, pursuant to an order for substituted service made by Lightman J on 1 December. The permitted method of service which was adopted was by leaving the documents at Waheed’s address at 5 Broad Lane, Hale. There is no dispute that the terms of the November Order came to Mr Luqman’s attention on this day at the latest, because he admitted during his most recent section 236 examination on 5 March 2007 that the freezing order came to his attention on 4 December: see page 151 of the transcript in volume C12 at p 457.[81]The alleged breaches of paragraph 5 of the November Order are set out in paragraph 18 of the committal grounds in the following terms:
“(1) on 20 November 2006 [Mr Luqman] signed a written agreement appointing Kristina Szekely Real Estate as sole agent to sell the Marbella Property at a price of €3,500,000; (2) on or around 18 December 2006 [Mr Luqman] granted a legal charge over the Marbella Property in consideration for a loan of €2,895,753 in favour of Muhammad Latif; and thereafter (3) [Mr Luqman] permitted the registration of the said charge over the register of the Marbella Property on 16 January 2007; and (4) [Mr Luqman] has dealt with or dissipated the sums advanced under the aforesaid loan.”
[82]It is common ground that Mr Luqman was registered as the sole owner of the Marbella Property in the local Property Register (Registro de la Propriedad) on 23 July 2003, and that he remains the registered owner today. There is a dispute which I do not need to resolve whether the purchase price of the Marbella Property was money misappropriated from the Company. It is enough to record that the Company will so contend when the Particulars of Claim are next amended, but that Mr Luqman maintains that he was the sole legal and beneficial owner of the property: see paragraph 25 of his seventh affidavit. Mr Luqman accepted in cross-examination that the purchase price was in excess of £1.5 million.[83]The contemporary documents also reveal that:(a) On 14 November 2006 Mr Luqman signed a power of attorney in Marbella appointing a Spanish lawyer, Mr Lucas, and his brother Waheed as his attorneys, with power (among other things) to borrow or take loans, and to mortgage any unfurnished properties to any individual as security for such loans. It should be noted, however, that the power did not authorise the attorneys to sell Spanish property already owned by Mr Luqman.(b) On the same day a Mr Muhammad Latif (“Mr Latif”) signed a power of attorney in Pakistan authorising Mr Lucas to grant loans to Mr Luqman on the security of unfurnished property. This power of attorney appears on its face to have been signed in the presence of an advocate called Malik Mohammed Nawas Awan (“Mr Awan”) in Kharian.(c) On 20 November 2006 Mr Luqman apparently signed a form authorising a Spanish estate agent, Kristina Szekely, to market the Marbella Property for a period of six months as sole agent for an asking price of €3.5 million and agreeing to pay commission of 5% in the event of a sale.(d) On 24 November 2006 Mr Latif re-executed his power of attorney before Mr Awan to add his passport number.(e) On 25 November 2006 Mr Luqman received a loan of £1,925,000, equivalent to €2,895,753, from Mr Latif.(f) On 8 December 2006 Mr Latif re-executed his power of attorney at the Spanish Embassy in Islamabad.(g) On 18 December 2006 Mr Lucas, acting as attorney for both Mr Luqman and Mr Latif, executed before a notary a deed granting Mr Latif a mortgage over the Marbella Property in respect of the above loan. The deed provided that the loan was to be repayable on 18 March 2007, and was to bear interest in the meantime from 25 November 2006 at the rate of 1.95% per month.(h) An endorsement on the mortgage deed dated 22 December 2006 recorded that the notary had been provided with a document proving Mr Luqman’s Spanish (non-resident) national identity number.(i) On 16 January 2007 the mortgage was formally registered in Marbella.[84]Mr Luqman’s explanation of these transactions in his seventh affidavit is as follows. He says that discussions between him and Mr Latif about the Marbella Property first took place during September 2006. At that time, Mr Luqman was coming under pressure from a creditor of his resident in Pakistan, a Mr Mohammed Hanif, from whom he had borrowed about £2.4 million between 2002 and 2006. He says that Mr Hanif was aware that the Company had stopped trading in July 2006, and was demanding repayment of this debt. On a number of occasions, he had attended unannounced at the home of Mr Luqman’s elderly great uncle, Mohammed Mushtaq, and harassed him, his wife and their daughter about the debt. In the circumstances, says Mr Luqman, he needed to raise substantial funds quickly and approached Mr Latif, initially by telephoning him in Pakistan, and then when he too was in Pakistan in September 2006, to enquire whether he would be interested in purchasing the Marbella Property. Mr Luqman approached Mr Latif because Mr Latif invests in property, and trades as Hamra Financial Associates.[85]Mr Luqman then goes on to say:
“After some deliberation over a period of approximately two weeks Mr Latif telephoned me in the UK and confirmed his willingness to purchase the Marbella Property. We agreed the price of about £2 million, which when converted into euros was €2,895,753. Further, and at my request, Mr Latif confirmed that he would arrange for the money to be paid to Mr Hanif so I could get him off my back. We also agreed, following advice given to Mr Latif by his lawyers, that to speed things up and to save tax for both of us, instead of a straight conveyance Mr Latif would take a charge over the Marbella Property. He could then enforce that charge and deal with the Marbella Property whenever he chose to do so. Importantly, despite the envisaged mechanics it was always agreed between us that I would no longer have [any] interest in the Marbella Property. That agreement was reached orally. In order to effect the necessary formalities Mr Latif and I agreed to retain the services of a Spanish lawyer to whom we would each provide a power of attorney. This would ensure that the transaction progressed as quickly as possible. Mariano Lucas from Marbella was subsequently instructed. I have known him since 2003 and he acted for me when I purchased the Marbella Property.”
[86]Mr Luqman then goes on to describe how Mr Lucas prepared powers of attorney to be executed by himself and Mr Latif, and how he travelled to Marbella on 11 November 2006 and stayed there until 14 November. He confirms that he executed the power of attorney before a notary on 14 November, and says he was told by Mr Latif by telephone on that day that he too had executed his power of attorney. He says that, as far as he was concerned, when he executed the power of attorney on 14 November he had already disposed of his interests in the Marbella Property to Mr Latif in view of their previous agreement. He says that the money was subsequently paid by Mr Latif to Mr Hanif, and relies on a letter from Mr Latif’s lawyers to which I will refer below.[87]Mr Luqman emphasises that all of the transactions up to and during his visit to Marbella took place before he knew of the November Order. He says that he first became aware of the November Order “during the first week of December 2006”. He also says that he was not trying to dissipate his assets, because he had a genuine need for substantial funds to repay Mr Hanif. He says that he was not personally involved in either the execution or the registration of the charge over the Marbella Property, both transactions having been executed by Mr Lucas under the power of attorney. He denies having signed the sale instruction to Kristina Szekely dated 20 November 2006, because he was in Pakistan on that date. He accepts, however, that while he was in Marbella, and with Mr Latif’s consent, he did approach Kristina Szekely on Mr Latif’s behalf, although he did not tell her that he was acting on Mr Latif’s behalf. He expected that she would deal with Mr Lucas, and if necessary Mr Lucas would tell her about Mr Latif’s involvement and ownership of the Marbella Property. He says he approached her firm for the purpose of selling the Marbella Property for Mr Latif, and to get an idea of what price he could get for it. He suggested an initial asking price of €3.5 million, but the agent (whose name he cannot recall) told him that about €3 million was a more realistic figure. He says that as far as he can recall his last dealing with Kristina Szekely was during his stay in Marbella between 11 and 14 November.[88]Mr Luqman confirms that he never revoked his instructions to Kristina Szekely after service upon him of the November Order. His reason for failing to take this step is that as far as he was concerned he no longer had any interest in the Marbella Property. Likewise, he confirms that the power of attorney in favour of Mr Lucas was never revoked, and he relies on the same explanation. He offers his apologies to the court if he is found to be in breach of the November Order. With regard to any possible equity of redemption in the Marbella Property, he contends that it was and is worthless and that he is therefore not in breach of the asset disclosure provisions in the November Order.[89]As I have mentioned, Mr Luqman supports his case in relation to the Marbella Property by exhibiting a letter from Mr Awan. The letter is dated 29 March 2007 and addressed to Mr Luqman’s solicitors. It is headed “Re our client: Mr Mohammed Latif”, in the matter of his “purchase” of the Marbella Property. Mr Awan then sets out the chronology of events relating to Mr Latif’s “purchase” of the Marbella Property, as follows:
“1. Mr Latif held discussions in person with the seller Mr Shaid Luqman. When the latter was in Pakistan in September 2006. These discussions continued thereafter and the terms of the purchase were agreed between the two parties in October 2006. My involvement in representing Mr Latif commenced from this time and the events that follow are within my knowledge. 2. A price of €2,895,753 was agreed and it was agreed that both seller and buyer would execute powers of attorney relating to the property simultaneously in favour of [Mr Lucas] … It was further agreed that on Mr Luqman executing his power of attorney he would relinquish all his rights and interest in the property and these would vest in Mr Latif. 3. Following the above Mr Latif instructed his bankers on 16 November 2006 to make payment in the Pakistan rupee equivalent sum of €2,895,753 directly to a third party for the benefit of Mr Luqman as Mr Luqman said he had to pay a third party creditor relating to previous personal borrowing. 4. [Details are given of the subsequent re-executions of Mr Latif’s power of attorney]. We are in no doubt that Mr Luqman’s interest in the property terminated on 14 November 2006 as agreed by both parties. ”
[90]Mr Luqman also exhibits a further letter from Mr Awan dated 4 April 2007 in which he confirms on behalf of Mr Latif that Mr Latif operates part of his business through a partnership known as Hamra Financial Associates, and says it is within his own knowledge that Hamra Financial Associates has an office at City Tower, Abbott Road, Lahore. He adds that Mr Latif only holds meetings and receives visitors at these premises on a strictly pre-arranged basis, and that for security reasons unannounced visitors would not be told of Hamra’s operations from the premises.[91]An important preliminary point that I need to determine in relation to the Marbella Property is whether it is open to the Company to allege that Mr Luqman had knowledge of the November Order before it was served on him by substituted service on 4 December 2006. In agreement with Mr Elleray QC, I consider that it is not. No such allegation is to be found anywhere in the grounds of the committal application. Furthermore, the only section of the grounds which deals with service of the November Order is the first one (alleging breach of the passport order), and here it is alleged in paragraphs 4 and 5 that the November Order was duly served on Mr Luqman on 4 December, and that this alternative method of service “was effective in bringing the Order to [his] attention”. In my judgment fairness to Mr Luqman, in the context of a committal application, requires that he should have been given clear notice in the grounds (which have been amended no fewer than three times) of any contention that the order was in fact brought to his attention before that date. In particular, the grounds nowhere allege that prior knowledge on his part should be inferred from the fact that Waheed was in receipt of a copy of the order and was seeking legal representation for himself from 17 November onwards. Cogent evidence to this effect was adduced by Mr Paul Fleming in his twelfth affidavit sworn on 24 April 2007 (see paragraph 24.1), and there is obvious force in the suggestion that once Waheed knew about the order he must have informed his brother at the earliest opportunity. If this were an ordinary point to be determined to the civil standard of proof, I would have had little hesitation in allowing it to be taken and in drawing the suggested inference. But in the context of a committal application it is in my judgment of cardinal importance that the applicant should be held firmly to the pleaded grounds, and that damaging allegations of this nature should not be allowed in by the back door. Moreover, in the absence of fair notice to Mr Luqman in the grounds of committal I would in any event not feel justified in concluding to the criminal standard, i.e. beyond reasonable doubt, that he had such knowledge merely on the basis of an inference from his brother’s knowledge and conduct. The significance of this point is in my judgment twofold. First, it means that the appointment of Kristina Szekely as agent to sell the Marbella Property, apparently on 20 November 2006, cannot be relied on as a breach of the freezing order, even if I were to find that the instructions were indeed given by Mr Luqman on that day and not a week earlier when he was in Marbella. I therefore express no view on when the instructions were in fact given. Secondly, it means that I must focus on events which took place after 4 December 2006, and bear in mind that by that date both Mr Luqman and Mr Latif had executed powers of attorney in favour of Mr Lucas, with a view to the mortgage of the Marbella Property as security for a loan by Mr Latif to Mr Luqman, and (importantly) that the principal of the loan had already been paid by Mr Latif on 25 November. I should add that although in cross-examination Mr Marshall sought to challenge the very existence of Mr Latif and Hamra Financial Associates, I see no reason to doubt that they do exist, especially in view of the letters from Mr Awan to which I have already referred.[92]That is not to say, however, that I find all aspects of Mr Luqman’s story about the Marbella Property credible. Far from it. I have the gravest doubts about the existence of Mr Hanif, and I found Mr Luqman’s oral evidence about his supposed indebtedness to Mr Hanif frankly incredible. I am also very sceptical of Mr Luqman’s evidence that his original agreement with Mr Latif was for the sale of the Marbella Property, and that this was later changed in October to an agreement to mortgage the property for unexplained tax reasons. However, I do not propose to review the evidence on these points at length, or to make detailed findings of fact about them, because there is no evidence before me which suggests that Mr Luqman dealt in any way with the proceeds of the loan after 4 December 2006. All the indications are that Mr Luqman had received and dealt with the money by 25 November at the latest. I have little doubt that he has diverted it to what he hopes will be a safe haven, and that the point of the exercise was to extract virtually all of the equity from the Marbella Property and place it beyond the reach of his creditors. Such conduct, I need hardly say, is thoroughly discreditable. However, if it took place (as I believe to be the case) before 4 December 2006, it cannot constitute a breach by him of the November Order. I therefore find that the first and fourth of the alleged breaches in paragraph 18 of the grounds are not made out.[93]It remains to consider the second and third of the breaches alleged in paragraph 18, and the question whether Mr Luqman breached the disclosure provisions of the November Order by failing to disclose the Marbella Property as an asset. I am left in no doubt that these breaches are established, although their practical significance is not great because Mr Luqman had unfortunately already succeeded in his objective of extracting and disposing of nearly all of the value in the property before the order was served on him.[94]With regard to the grant and registration of the mortgage on 18 December 2006 and 16 January 2007 respectively, Mr Luqman was in my judgment clearly in breach of paragraph 5 of the November Order by reason of his failure to revoke the power of attorney, thereby permitting the transaction to go ahead. The mortgage was on any view a dealing with the Marbella Property, carried out by Mr Luqman through the agency of Mr Lucas. Whether Mr Latif could, or would, have taken steps to compel the grant of the mortgage if Mr Lucas’ authority had been revoked by Mr Luqman is not a question that I need to consider, if only because the authority never was revoked. I am certainly not prepared to assume in Mr Luqman’s favour that Mr Latif would have taken steps to enforce their agreement, or (if he had) that Spanish law would have operated in the same way as English law. Furthermore, even if Mr Latif would have taken steps to enforce the agreement, that would not detract in any way from the fact that the grant of the mortgage was in any event a breach of the freezing order. It was a dealing by Mr Luqman, through an agent, with property of which he was the registered owner. Any loss incurred by Mr Luqman as a result of complying with the order would be recoverable under the Company’s cross-undertaking in damages should it turn out that the freezing order was wrongly made. The possibility of such loss cannot in itself be a good reason for failing to comply with the express terms of the order.[95]With regard to the question of non-disclosure of assets, the Marbella Property is clearly an asset the legal title to which is vested in Mr Luqman and of which he claims to be the beneficial owner subject only to the mortgage in favour of Mr Latif. It should therefore have been disclosed, unless its value was less than £5,000. In my judgment Mr Luqman has failed to satisfy the evidential burden of adducing credible evidence that the value of his equity of redemption in the Marbella Property is less than £5,000. On the contrary, the asking price of the property when it was placed with agents last November was €3.5 million, and even if Mr Luqman is right in saying he was told that around €3 million was a more realistic valuation that figure still exceeds by a substantial margin (over €100,000) the amount of the mortgage advance (€2,895,753). Interest on the advance did not begin to run until 25 November 2006, which was of course after the date of the freezing order.

III. Alleged breaches of the Tracing Disclosure Orders

[96]By paragraph 13 of the November Order Mr Luqman was required to disclose to the best of his ability, within seven days of service of the order upon him, the present whereabouts of the funds and assets identified in Schedule D to the order, and details of any assets acquired with such funds or assets.[97]The details to be supplied were set out in paragraph 15 of the November Order, the relevant assets and funds being defined as “the Funds”:
“15.1 what became of the Funds after their transfer including the date of any relevant transaction, the parties to it, whether it was evidenced in writing, whether any consideration was provided (and, if so, what consideration), and the purpose of the transaction; and if the monies representing those payments or any part of them have been transferred to any bank account, (1) the name of the bank or other institution with whom the account is maintained, (2) the name and address of the branch at which the account is maintained, (3) the sort or identifying code of the branch, (4) the name(s) in which the account is maintained and (5) the number of the account; 15.2 the identity and current address of the ultimate recipients of the Funds and any part of them and, if such recipient is a company, trust, foundation or similar entity, the names of its current officers and directors and their respective addresses; and 15.3 the nature of the assets which have been acquired with the Funds, stating their location and the identity and address of the person or persons who claim to own them.”
[98]By virtue of paragraph 17 of the November Order the information required under paragraph 13 was to be given in an affidavit sworn by Mr Luqman exhibiting all documents in his possession, custody or power evidencing the matters set out in paragraph 13, such affidavit to be served within 14 days of service of the November Order.[99]Schedule D to the November Order identified the Funds in a table.

(c) Mohammed Luqman £4,050,000 (d) Ian McGarry £625,250

[100]The orders for disclosure in paragraph 13 of the November Order and for service of an affidavit in paragraph 17 should have been complied with on 11 December and 18 December 2006 respectively. It is common ground that Mr Luqman failed to do anything to comply with those orders within the required timescale. On 20 December 2006 he made a witness statement admitting that he was in breach and seeking further time for compliance. After hearing argument on 21 December Briggs J made an order that unless Mr Luqman complied with the tracing disclosure provisions of the November Order by 15 January 2007 he would be debarred from defending.[101]On 15 January 2007 Mr Luqman served his fourth affidavit in purported compliance with the relevant provisions of the November Order. The affidavit contains only three paragraphs, and has a single exhibit. Paragraph 2 takes the point that the UNB account referred to in Schedule D was not an account owned by the Company, but an account in the name of Lexi Holdings Ltd, which is a Gibraltar registered company. Mr Luqman deposed that none of the dealings made through that account related in any way to the Company, and he stated his belief that the claim made against him by the Company was fundamentally flawed. In paragraph 3 he referred to an analysis which he had prepared of the transactions referred to in Schedule D, and exhibited the analysis together with a copy of a legal charge dated 14 February 2006. He said that this legal charge was the only document concerning the transactions which was not already contained in exhibit “RDF1” to the affidavit sworn by Mr Richard Fleming on 13 November 2006.[102]The analysis exhibited by Mr Luqman to his fourth affidavit is confusingly headed “Schedule C Payments”. It is enough to note at this stage that in paragraphs 2 to 7 of the analysis details are given of various payments originating from the UNB account and passing either directly or through various intermediate stages to either a specified account in the name of Mr Luqman at UBL, Kharian branch, or a specified account in the name of Mohammed Luqman at Askari Commercial Bank, Gujarat, and in each case then being “used to repay Mohammed Cheema as agent for Lexi Holdings Limited Investors”. In one of the paragraphs the word “investors” is omitted after “Lexi Holdings Limited”, but I am satisfied that this is a typographical error.[103]In paragraph 55 of his seventh affidavit Mr Luqman now accepts that his comments about the UNB account in paragraph 2 of his fourth affidavit “provided no justification for not producing the particulars ordered to be disclosed”. He also goes on to acknowledge that he has not produced all those particulars, given his limited resources and other claims on his time. He therefore accepts that he is in further breach of the November Order, and that he is presently debarred from defending the claim. He then makes a further effort in the seventh affidavit to provide the requisite particulars, although noting “that I remain unable to provide everything as I have been unable to obtain the relevant information from third parties.”[104]The alleged breaches of the tracing disclosure provisions in the November Order are set out in paragraphs 9 to 14 of the committal grounds. Paragraphs 9 to 13 refer to the relevant provisions of the November Order and the procedural history up to the order of Briggs J on 21 December 2006. The alleged particulars of breach are then set out in paragraph 14.[105]Paragraph 14(1) alleges that in his fourth affidavit Mr Luqman refused to provide the requisite information in relation to nine payments identified in a schedule to the grounds “on the false basis that the payments were not made from the [Company’s] account”.[106]Paragraph 14(2) alleges that by his fourth affidavit Mr Luqman “falsely asserted that the [Company’s] traceable funds had been used to repay Mohammed Cheema as agent for Lexi Holdings Ltd”.[107]Paragraph 14(3) alleges that by his fourth affidavit Mr Luqman “failed and/or refused to provide full information, namely the information set out in paragraphs 15.1 to 15.3 of the [November] Order, in relation to the following payments”. Details of the alleged deficiencies are then set out under four main sub-headings, each of which refers to one of the four payments listed in paragraph 99 above.[108]In dealing with these alleged breaches it will be convenient to take first two issues of a general nature, the resolution of which will have a very material bearing on the extent and gravity of Mr Luqman’s admitted failure to comply in full, even today, with the relevant provisions of the November Order. The first of those issues is whether the UNB account referred to in Schedule D to the November Order was indeed an account of the Company. The second of those issues is whether the sums referred to by Mr Luqman in the analysis exhibited to his fourth affidavit were indeed used to repay Mr Cheema as an agent for investors in Lexi Holdings Ltd. (1). The Ownership of the UNB Account[109]I have already given a brief introduction to this issue in the first section of this judgment: see paragraphs 10 to 12 above. The two bank officials who gave evidence were Mr Vikas Monawer, the head of internal audit and compliance of UNB, and Mr Mir Mohammed Akhlaq, the chief manager of the Brook Street branch of UNB. Each of them was cross-examined by Mr Elleray QC. I found them both to be generally truthful witnesses. Although Mr Elleray submitted that their evidence was in some respects unsatisfactory, he did not directly impugn their credibility in cross-examination. I see no good reason to doubt that they are independent witnesses, with no personal axe to grind, who gave their evidence to the best of their ability. Although that evidence was in some ways embarrassing to UNB, in that it involved the loss of a customer file and a mistake in the customer’s name on bank statements, they did not try to cover this up.[110]The UNB account is a sterling current account, number 0001-012267-001. It was opened on or shortly before 2 September 2005, that being the date of the first entry on the statements when a sum of £500,000 was credited. The name of the account holder as shown on all the monthly statements up to and including 31 July 2006 is “Lexi Holdings Ltd”, and beneath that “Property Development/Purchase”. However, the address shown on the statements is 43 Grosvenor Street, Mayfair, London, which is the registered office of the Company, Lexi Holdings Plc.[111]In late August 2005 Mr Luqman had also opened a personal account with the Brook Street branch of UNB. Exhibited to Mr Akhlaq’s affidavit is the “Know Your Customer” (“KYC”) information form which he filled in and signed on 24 August, presumably on the basis of information supplied to him by Mr Luqman. The form records that:
“Mr Shaid Luqman is the managing director of Lexi Holdings, a bridge financing company and also have [sic] a property portfolio. He is doing property investment in Pakistan and intend[s] to open account for his personal daily banking requirements and remittance to Pakistan. He intends to use this account as his personal main account.”
The form also recorded that Mr Luqman was the managing director of Lexi Holdings, and that his net worth was £125 million. There can be no doubt that the references to “Lexi Holdings” on this form are references to the Company.[112]In addition, Mr Luqman filled in an account opening application form for his personal account in which he gave his occupation as “Director, Lexi Holdings Plc, 43 Grosvenor Street, Mayfair, London W1”. Incidentally, he also said that his annual gross income was £800,000.[113]The documents exhibited to the affidavits of Mr Monawer and Mr Akhlaq reveal that by 2 September 2005 Mr Malcolm Davis, the chief financial officer of the Company, had approached UNB with a view to negotiating a facility of up to £14 million, possibly to be made available “via a new legal entity”. In advance of meeting Mr Davis, UNB obtained an Experian “silver report” on the Company dated 5 September. The report was favourable, and on 8 September two UNB officials (Mr H Bawkher and Mr I Chaudry) met Mr Luqman and Mr Davis. On 13 September Mr Bawkher submitted a memorandum to the Line and Board Credit Committees of UNB, which described the meeting. Under the heading “Background” Mr Bawkher said:
“LH [i.e. the Company] is a family owned finance company that provides bridge loans to commercial and residential property developers, and has been in business since 08/01. Also, directly or indirectly the owners have a huge buy-to-let property portfolio. Mr Shaid Luqman is reportedly amongst the top 100 Asian businessmen with a personal net worth stated at around £125 million. He has recently opened company and personal accounts with UNB, at Brook Street, and balance of both accounts total £1.5 million. Mir Akhlaq the Main Branch Chief Manager has introduced this name and earlier £2.5 million had been deposited with the Bank.”
The memorandum went on to report on the Company’s finances, and explained that Mr Luqman wished to have the new facility for “a new family partnership”. Reference was also made to a suggestion from Mr Luqman that UNB might consider participating in “a new/fifth offshore SPV” that he was planning to set up. The memorandum concluded with a request for approval in principle for a £7 million facility for up to one year “via a new partnership/entity”.[114]On 22 September Mr Bawkher wrote to Mr Luqman offering a new facility in substantially the same terms as he had recommended.[115]I have referred to this contemporary documentation at some length, because it shows clearly that UNB was forming new customer relationships with Mr Luqman and “his company”, and was also considering the grant of a substantial facility to a new partnership or entity to be formed by Mr Luqman. There is no reference anywhere to a Gibraltar company called Lexi Holdings Ltd. In these circumstances the overwhelmingly probable inference from the documents alone is that the company of Mr Luqman’s which had opened the UNB account was Lexi Holdings Plc, the UK-incorporated and resident main company of the group. This inference gains further strength from the fact that the statements for the UNB account were sent to the Company’s registered office in London.[116]Lexi Holdings Ltd was incorporated in Gibraltar on 1 March 2004, evidently by company formation agents. The entire issued share capital of 2000 £1 shares was registered in the name of Zaurian. Mr Luqman was the sole director, as he confirmed in his section 236 examination on 13 December 2006. He also confirmed that the registered office of Lexi Holdings Ltd was in Gibraltar, although he could not remember where (page 71 of the transcript). His evidence about the activities of Lexi Holdings Ltd in his examination was vague in the extreme. He said that it bought and sold property, but could not give a single specific instance. He said that it never prepared any accounts, because “it didn’t need to” (page 73). He also said that investing in property in England was “all it did” (page 74). I comment that it seems to me unlikely in the extreme that UNB would have agreed to open an account for a Gibraltar company which was unable to produce any accounts, and was therefore in breach not only of its own articles of association (see article 30) but also of the relevant provisions of the Gibraltar Companies Ordinance.[117]I now turn to the evidence of Mr Monawer and Mr Akhlaq. It was their common understanding that the account numbered 012267 was always the account of Lexi Holdings Plc. Neither of them had previously heard of any Gibraltar company called Lexi Holdings Ltd. The account was referred to internally as the “Lexi Holdings” account, but that description was always understood to refer to Lexi Holdings Plc. By way of confirmation that this was the position, Mr Monawer exhibits a number of photocopies of cheques and paying-in slips which refer to Lexi Holdings Plc and were paid into the account. Some of these cheques were for very substantial amounts: for example, in December 2005 three cheques totalling nearly £3 million and expressed to be payable to Lexi Holdings Plc were credited to the account. Furthermore, the paying-in slips include ones filled in by Beverly Holden and Norman Hill who were respectively an employee and a director of the Company, and Mr Luqman himself signed at least one remittance mandate on the account which identified the account holder as Lexi Holdings Plc, while other remittance forms identified the account holder as simply “Lexi Holdings”. There is no reference in any of this documentation to a company called Lexi Holdings Ltd.[118]Mr Monawer says that the reference to “Lexi Holdings Ltd” on the bank statements was simply an error on UNB’s part, and was corrected from August 2006 onwards when “Plc” was substituted for “Ltd” on the statements. The correction was made in the context of a reconstruction of UNB’s file for the Company, which had been reported as mislaid when Mr Monawer requested sight of it in or around May/June 2006. He says that when searches failed to locate the missing file, he requested Mr Akhlaq in late July or early August to reconstruct the file, because it was not acceptable to run the account in the absence of a physical file. This account is confirmed by Mr Akhlaq, who says that he then requested and obtained from Mr Luqman duplicate information reproducing that which had originally been provided when the account was opened in September 2005. He says that he telephoned Mr Luqman, and asked him to complete the “Know Your Customer” process again, which included filling in an account opening application form, signing the bank’s terms and conditions, providing a further board resolution, and providing further identification information for all of the people on the mandate. He exhibits the information provided by Mr Luqman to his affidavit. It includes a board resolution dated 25 July 2006 and signed by Mr Luqman which states:
“This is to confirm the Board’s earlier resolution to open a current account with United National Bank, 2 Brook Street, London W1S 1BQ.”
In my view the brief wording of this confirmation only makes sense in the context of the reconstruction described by Mr Monawer and Mr Akhlaq. If the Company had indeed been opening an account with UNB for the first time in July 2006, one would expect to find full minutes of the relevant board meeting and not just a two line confirmation of an “earlier resolution”.[119]It is Mr Luqman’s case that the UNB account was indeed originally opened in the name of Lexi Holdings Ltd, and when the Company applied to open an account as well in July/August 2006 it provided the material exhibited by Mr Akhlaq, but UNB mistakenly failed to open a separate account and merely changed the description of the account holder on the existing account from Lexi Holdings Ltd to Lexi Holdings Plc. I have no hesitation in rejecting this suggestion. Both Mr Monawer and Mr Akhlaq confirmed that such a procedure would have been highly irregular, and contrary to UNB’s standard procedure. As Mr Monawer says:
“It is standard practice that if a customer requires UNB to change a name on an account then the old account would have to be closed and a new account (with a separate number) opened. The old account number would not be continued nor would it be used again. ”
Furthermore, it is hard to credit that the failure to open a new account would not have been noticed by the Company if it had indeed applied for one. The only sensible explanation of what happened is the one provided by the bank officials, namely that there was never more than one account, which belonged throughout to the Company. The mistake in the account holder’s name, until it was corrected in August 2006, was careless, but neither surprising nor sinister in a context where UNB had no knowledge of a separate company called Lexi Holdings Ltd and the account was generally referred to as that of “Lexi Holdings”. The loss of the original file was also careless, and it is unfortunate that UNB should have compounded its original error with this additional one. However, accidents of this nature can and do happen from time to time, and if a file is lost the obvious remedy is to seek to reconstitute it in the manner described by Mr Monawer and Mr Akhlaq. I am certainly not prepared to find that their evidence on this point is untrue, and still less as Mr Luqman at one stage wildly alleged in cross-examination that he is the victim of a conspiracy and a cover up by UNB. On the contrary, I am afraid that in my judgment this is yet another case where it is Mr Luqman who has been untruthful.[120]To conclude, for the reasons I have given I am satisfied beyond reasonable doubt that the UNB account belonged from its inception to the Company. Not only is that the natural inference to draw from the contemporary documents, but it also accords with the evidence of the two bank officials. It follows that the explanation given by Mr Luqman in paragraph 2 of his fourth affidavit was a false one which he must have known to be untrue. It also follows that the breach alleged in paragraph 14(1) of the grounds is in my judgment made out to the requisite standard of proof. (2). Mr Cheema[121]In paragraph 41 of his draft Defence Mr Luqman says that:
“Mohammed Cheema is a Lahore investment broker, who had lent [Mr Luqman] about £12-13 million between 2002 and 2005, which had enabled [Mr Luqman] in particular to add to his loans to the Company. [Mr Luqman] believes Mr Cheema made his loans on behalf of investors for whom he was acting.”
Particulars are then given of Mr Luqman’s last address for Mr Cheema in Naidrabad, Lahore.[122]There is very little that Mr Luqman is able to add to this in his seventh affidavit. In paragraph 66, he refers to a sum of £1.5 million transferred into his UBL, Kharian branch, account number 19049-9 on 2 December 2005, and says that he used the money “to repay loans made to me by Mr Mohammed Cheema on behalf of investors for whom he was acting”. He goes on to say that despite numerous requests UBL have still not supplied statements relating to the above account and information about transfers from it. In the absence of such information, he claims to be unable to give the requisite particulars. He continues:
“That said, to the best of my recollection, the loan repayments made from the UBL account were made in more than one tranche and I believe were made either by bankers draft or by electronic transfer, not by cheque. As previously stated, I also confirm that I have no documentation in relation to the loans that were made to me by Mr Cheema as there were none between us. I believe that there would have been documents about the loans or the monies which made up the same as between Mr Cheema and the other investors, but I cannot be sure. Further … I have been unable to contact Mr Cheema who is no longer residing at his last known address … My uncle, Mohammed Akhtar, has travelled to Lahore at my request to find Mr Cheema but was unable to do so. I have also attempted to find Mr Cheema by speaking to an acquaintance in Lahore. Specifically, I have spoken to an individual I only know as “Asif”
. I appreciate that this is unsatisfactory but I am unable to provide any further details.”[123]The surprising picture that emerges, therefore, if Mr Luqman is to be believed, is that Mr Cheema lent him about £12-13 million between 2002 and 2005, acting as a broker on behalf of unnamed investors, but Mr Luqman has no documentary evidence of the loans, and is now unable to trace Mr Cheema.[124]At his section 236 examination in December 2006, Mr Luqman said that he had no personal knowledge of who the investors were, and he never had any direct dealings with them. He said that the amount raised by Mr Cheema from the investors was “probably about £10-15 million”, on a transaction-by-transaction basis. He said that the investors executed an agreement with Mr Cheema, and that there was also an agreement between Mr Cheema and Lexi Holdings Ltd, although that company did not have a copy of the agreement.[125]In cross-examination before me, Mr Luqman changed his tack somewhat. He still denied that he had entered into any written loan agreements himself, and said there may well have been agreements between Mr Cheema and his investors. However, he no longer said that there was an agreement between Mr Cheema and Lexi Holdings Ltd, but rather that the funds were invested with him and it was then up to him how he invested them. Such investments were “not necessarily” made through Lexi Holdings Ltd. When confronted with the answers he had given at his examination in December, Mr Luqman was left floundering. He was unable to explain the relationship between Mr Cheema, Lexi Holdings Ltd and himself, and had recourse to vague assertions about cultural differences. When it was put to him that not a single document has been produced showing any dealings between any of those three parties, or between any of them and any of the investors, he answered:
“No, because no documents exist. There is not any need for any documents to exist. As I explained earlier, it is basically about the cultural thing …”
A little later Mr Luqman was asked about the terms of the loans from Mr Cheema, and said that generally there was a return of 10%, by which he meant that interest at that rate would be payable upon maturity of the particular transaction in which the investment was made. He said that different investments were made at different times, and the investment might be for as little as one year or as long as five. Despite the obvious complexities that these different agreements with different investors would involve, Mr Luqman still stoutly maintained that no written records of them existed in any shape or form. He said it was unnecessary for him to keep records, because the figures could always be worked out when it came to repayment.[126]I find this evidence simply incredible, and I agree with Mr Marshall that Mr Luqman was again making it up as he went along. I am also unable to take seriously his evidence that Mr Cheema cannot now be traced. It beggars belief that an investment broker in Lahore, who had lent Mr Luqman around £12 million and was acting on behalf of a number of individual investors, should have disappeared without trace. I am unimpressed by Mr Luqman’s claim in cross-examination that the only thing preventing him from tracking down Mr Cheema is the passport order, and that if he could go to Pakistan there is a 90% chance he would find him. It is equally in the interest of Mohammed Luqman that Mr Cheema should be located, if he does indeed exist; yet he has evidently had no more success than his son in finding Mr Cheema, even though he lives in Pakistan and is not subject to a passport order.[127]It is also worthy of note in this context that on Day 7, 21 May 2007, Mr Luqman was finally able to produce statements of his Pakistani rupee account with the Kharian city branch of UBL, from its opening on 17 August 2005 to its closure on 8 May 2007. It is notable that although the statements give details of a number of transfers and payment orders to named individuals, the name of Mr Cheema is conspicuous by its absence.[128]There is one piece of evidence relating to Mr Cheema which I have yet to mention. Mr Luqman exhibits to his seventh affidavit a letter dated 4 April 2007 from Gondal Law Company in Rawalpindi, Pakistan. The letter is addressed to Mr Luqman’s solictors, and purports to be written on behalf of a client named Mr Riaz Ahmed. One of the matters which the letter purports to confirm is that:
“Mr Riaz … is aware that Mr Shaid [Luqman] dealt with Mr Mohammed Cheema who is known to Mr Riaz but there were no common investments between Mr Riaz and Mr Cheema.”
The weight that I can attach to this triple hearsay evidence is in my view minimal. In the absence of any documentary evidence substantiating his existence and the terms of his alleged agreement with Mr Luqman, and in the absence of any witness who is prepared to give oral evidence or to be cross-examined on these matters, I am left in no reasonable doubt that the alleged repayments to “Mohammed Cheema as agent for Lexi Holdings Ltd investors”, upon which Mr Luqman relies in his schedule in exhibit “SL2”, are fictitious. In saying this I do not rule out the possibility that Mr Cheema may turn out to exist, and that he may have had dealings of some sort with Mr Luqman, or with entities controlled by Mr Luqman, in the past. I am, however, satisfied to the criminal standard of proof that the explanation given by Mr Luqman in this document is a false one. It follows that I am also satisfied that the breach alleged in paragraph 14(2) of the grounds is made out.

Other breaches

[129]In view of the adverse findings which I have made on the questions of the ownership of the UNB account and the alleged repayments to Mr Cheema, I do not propose to spend long on the detailed complaints set out in paragraph 14(3) of the grounds. For the most part, the complaints are of failure to identify the specific amounts paid over to Mr Cheema, and failure to give full particulars of the destination of the sums referred to in paragraphs 2 to 7 of Mr Luqman’s Schedule C document after they left the relevant bank accounts in Pakistan of himself and his father. In the light of my conclusions about Mr Cheema, these breaches are in my judgment clearly made out; and they are serious ones, because I am satisfied that the Cheema explanation is untrue. Furthermore, while denying the breaches alleged in paragraphs 14(1) and (2) of the grounds, Mr Luqman admits a number of specific breaches in relation to paragraph 14(3): see paragraphs 9.15 to 9.17 of the closing submissions prepared on his behalf by Mr Elleray QC and Mr Maynard-Connor.[130]The main points that Mr Luqman makes by way of mitigation for his admitted failures to comply with this part of the November Order are that he has encountered severe difficulties in obtaining the necessary bank statements, and that he has also been hampered by limited resources and the pressures of the litigation. For the most part, I am unimpressed by these pleas. It is now over six months since the November Order was made, and Mr Luqman has had ample time to obtain and analyse the necessary information. He has had the assistance of solicitors, and of leading and junior counsel. There is no evidence that he is suffering any financial difficulty in funding his defence.[131]The only point I am prepared to accept in his favour is that he has, on occasion, found it difficult to extract information to which he is entitled from banks. For example, in paragraph 3 of her affidavit sworn on 23 April 2007 Miss Fenton of Mr Luqman’s solicitors deposes to problems encountered by her and Mr Luqman in obtaining copy bank statements from Lloyds TSB. However, that particular bank account is not directly relevant to any of the breaches of the November Order with which I am now concerned. More germane, perhaps, is Mr Luqman’s repeated complaint that his efforts to obtain copy bank statements and other relevant information from UBL in Pakistan have been hampered by a perceived problem over confidentiality. Mr Luqman alleged several times in his oral evidence that a letter from the Company’s solicitors was to blame for this problem, and hinted darkly at a conspiracy against him. I was at first inclined to dismiss this as a complete invention, particularly as Mr Paul Fleming, a partner in the Company’s solicitors, has stated on affidavit that there has been no obstruction from his firm, and a letter has also been obtained from UBL confirming that they will provide information for a customer regarding his bank account on request, and that there has been no obstruction to the provision of such information in respect of Mr Luqman. However, the documents produced by Mr Luqman on Day 7 included a letter dated 13 March 2007 from DLA Piper to Mr Monawer of UNB in which UNB is thanked for confirming that certain authorities are in a form acceptable to both UNB and UBL, and copies are requested of the statements etc detailed in the authorities. The letter concludes:
“We would like to thank you for your co-operation in this matter and request that this remains confidential.”
[132]It was not, and could not be, suggested that this letter was in any way improper, or that it would have provided UBL (which is connected with UNB) with a valid reason for refusing to provide Mr Luqman with details of his accounts with UBL. It is, however, just possible that the request for confidentiality was misunderstood by the local officials of UBL in Pakistan, and that this may have given rise to some delay in providing Mr Luqman with the information he has requested. I emphasise, however, that even if the letter may provide some explanation for delay since mid March 2007, it cannot provide any excuse for Mr Luqman’s failure to make every effort to obtain the necessary information at a very much earlier date. The “unless” orders of Briggs J gave him a final chance to comply with the tracing requirements of the November Order by 15 January 2007. Mr Luqman should then have made an energetic and concerted attempt to obtain the necessary information before that date. I am satisfied, however, that he made no serious effort to comply with his obligations, and I can only describe his fourth affidavit as a woefully inadequate response.[133]Finally, I should briefly mention a point which surfaced for the first time in Mr Elleray’s closing submissions for Mr Luqman. The point related, as I understood it, to the assertion made by Mr Luqman in his fourth affidavit that the payments referred to in Schedule D to the November Order were not payments made from an account owned by the Company. The reason given by Mr Luqman for this assertion was that the bank account in question was the UNB account, which he said belonged to Lexi Holdings Ltd. I have of course already dealt with and rejected that contention. However, submits Mr Elleray, Mr Luqman’s assertion was in fact correct, because the payments were not made from any account belonging to the Company, and in particular most of them originated with payments made by The Funding Corporation (“TFC”). I confess that I have found this point difficult to understand. Mr Luqman is obliged to provide particulars of the payments listed in Schedule D to the November Order, whatever the precise origin of those payments may be. It is not suggested that there is any difficulty in identifying the payments in question, even if it is not strictly accurate to describe them as originating from an account of the Company’s. In any event, I am not satisfied that it is in any way wrong or misleading to refer to the payments originating from TFC as payments from an account of the Company’s, because the effect of the arrangements between the Company and TFC (to which Mr Marshall QC took me briefly in reply) was that TFC purchased debts owing to the Company for 90% of their face value. In my judgment it is plain that the purchase price was money belonging to the Company, and even if it was not paid to the Company it was held by TFC on the Company’s account to be disposed of as the Company directed. In my judgment, therefore, there is nothing in this point.

IV. Alleged breaches of orders relating to documents

[134]The November Order contained provisions designed to ensure that all potentially relevant documents would be disclosed and preserved until trial. By paragraph 18 Mr Luqman, in common with the other respondents, was ordered not to part with possession of, give up control over, destroy, damage or alter any documents relating to the facts and matters set out in the first affidavit of Mr Richard Fleming sworn on 13 November 2006 (“the Documents”). Mr Richard Fleming is one of the administrators, and his affidavit of 13 November 2006 was the main affidavit in support of the application for the freezing order. By paragraph 19 of the November Order, Mr Luqman was required, within four working days after service upon him of the order, to deliver the originals of any of the Documents in his possession, custody or power, or to provide legible copies of the same, either to the Company’s solicitors or to a solicitor instructed to act for him in the matter. Under paragraph 20 of the November Order, Mr Luqman was required within 21 days after service of the order upon him to deliver to the Company a list of such of the Documents (or copies thereof) which had been delivered to his solicitor pursuant to paragraph 19.[135]Accordingly, on the basis that Mr Luqman was served with the November Order on 4 December 2006, he was required to deliver up any relevant documents within his possession, custody or power by no later than Friday, 8 December, and he had to provide a list of documents which had been delivered to his solicitor by no later than 27 December 2006.[136]These evidence preservation provisions of the November Order were important, in view of the very small amount of documentation found by the administrators when they were appointed, and the deliberate destruction of documents which was admitted by Mr Luqman at his section 236 examination on 13 December 2006. However, Mr Luqman’s initial reaction to these parts of the November Order was to ignore them entirely. Furthermore, when he was reminded of his obligations in his section 236 examination he claimed that he had no relevant documents at all, and that he had provided all documentation within his control to the administrators after his first interview on 20 October 2006. In fact, however, on that occasion he had failed to provide the administrators with several categories of the most basic documentation relating to the Company, as Mr Richard Fleming explains in paragraphs 22 to 23 of his first affidavit: see paragraph 29 above.[137]In the light of Mr Luqman’s failures to deliver up documentation, on 14 December 2006 Briggs J made an “unless” order requiring full compliance with paragraphs 18 to 20 of the November Order by 11 January 2007, failing which Mr Luqman would be debarred from defending. This order too was ignored, and no effort whatever was made to comply with it.[138]On 2 February 2007 the Company’s solicitors wrote to Mr Luqman’s solicitors requiring compliance with paragraphs 18 to 20 of the November Order by close of business on 6 February 2007, and gave warning that failure to comply might lead to additional grounds being added to the existing committal proceedings. Details were then given of several categories of documentation which the administrators had reason to believe were in Mr Luqman’s possession or power. In a reply to this letter dated 9 February 2007, Mr Luqman’s solicitors said “Our client cannot prepare a list of documents that he does not have”, and “Our client has no such documents”. The author of that letter was Mrs Theresa Fenton, the solicitor who has conduct of the matter on Mr Luqman’s behalf. In a subsequent affidavit sworn by her on 27 April 2007 she says:
“Contrary to what I say in my letter of 9 February 2007 I accept that at that time there were documents that could have been contained in a list. At the time I had just started the process of collating information and documents and there were some documents that could and should have been disclosed to the [Company]. I accept that my response was wholly inadequate.”
She goes on to say that since being instructed in December 2006 she has been endeavouring to obtain documents to assist Mr Luqman with his defence from a variety of sources, and offers her sincere apologies to the Court for her omission to advise him that he should prepare a list of documents and disclose them in order to comply with the November Order and subsequent orders.[139]In the event, it was only when Mr Luqman served his seventh affidavit on 5 April 2007 that he eventually purported to provide a list of documents pursuant to paragraph 20 of the November Order. The list provided in exhibit “SL12” was barely two pages long. The only explanation that Mr Luqman was able to give for his delay in producing the list was that he and his solicitors had been struggling to deal with the litigation and the ongoing section 236 examination: see paragraph 114 of his seventh affidavit. He said he was sorry for the late production of the list.[140]It quickly became apparent that this list was completely inadequate, despite the long delay in its production, and on 25 April 2007 Mr Luqman swore his ninth affidavit exhibiting a revised disclosure list and two files of documents.[141]Meanwhile, on 20 March 2007 the Company had been granted permission to re-amend the grounds for the committal application. After referring to paragraphs 18 to 20 of the November Order, paragraph 16 alleges that:
“In breach of the aforesaid paragraphs [Mr Luqman] has taken no steps to deliver the Documents up to the [Company’s] solicitors, or to a solicitor instructed by him, or to produce a list of the Documents to the [Company’s] solicitor.”
Since the date of that amendment, Mr Luqman has provided the lists to which I have referred in his seventh and ninth affidavits. However, the administrators take the view that the list provided is still seriously inadequate, and having heard Mr Luqman give evidence I have no hesitation in agreeing with them.[142]In the first place, Mr Luqman admitted in cross-examination that there were categories of documents within his control that he had made no effort at all to disclose. He told the Court that his accountants, Mokhtassi Williams, hold documentation regarding his financial affairs, and that his solicitor, Linder Myers, holds a file (“a stack of papers”) regarding his arrangements with the Riggs Bank. In each case his response to the question why he had not produced these documents was “I did not need to”. However, I agree with Mr Marshall QC that the documentation is likely to relate, at the very least, to his asset position, and almost certainly to his financial dealings with the Company. I have no doubt that these documents ought to have been reviewed and disclosed.[143]Secondly, Mr Luqman admitted that he is resident in the UK for tax purposes and that his accountants have dealt with his tax returns. On his own evidence he operated a number of businesses in a personal capacity, for which tax records would have to have been maintained for a period of at least five years in order to comply with the provisions of sections 8 and 12B of the Taxes Management Act 1970. These businesses include Alliance Associates and Meridian Asset Consultants, which are trading names of Mr Luqman’s, and at least two partnerships of which he was a member, namely Maidment Partnership and Lexi Property Finance. In addition, there is evidence suggesting that Mr Luqman owns a personal property portfolio valued at £250 million. In cross examination he denied ownership of such a portfolio and said that the properties in question belonged to a consortium including members of the Saudi royal family, on whose behalf he managed a property business. Even if there were any truth in this explanation, which I very much doubt, it seems incredible that Mr Luqman should have managed the business on a purely gratuitous basis, and on any view full disclosure of the arrangement between him and the consortium members, including all relevant documentation, should have been made. Needless to say, not a single document has been produced. Equally, the Company has yet to receive any financial documentation relating to the other businesses carried on in Mr Luqman’s name, or in relation to the Gibraltar company, Lexi Holdings Ltd.[144]Even more astonishing, in my judgment, is the fact that by the date of his ninth affidavit, 25 April 2007, which was already more than five months after the November Order, Mr Luqman had not managed to produce a single bank statement for any of his offshore bank accounts. At the start of the hearing before me the only bank statements in evidence were ones obtained by the administrators themselves. As I have already mentioned, on Day 7 Mr Luqman was belatedly able to produce a statement of his rupee account with UBL in Kharian City, Pakistan. However, even that material is not yet formally in evidence, and compared to what remains outstanding it must represent no more than the tip of a very considerable iceberg.[145]Apart from the almost total absence of financial records, Mr Luqman has disclosed virtually no correspondence or emails or other documentation relating to his financial affairs or the operations of the Company before it went into administration. No computer records of any description have been disclosed. Nor are there any diary or other records of his day to day movements.[146]The explanations put forward by Mr Luqman for his failure to supply documents in the categories which I have mentioned are in my judgment feeble and unconvincing. Time and again his response to some potentially damaging allegation, or his explanation for some particularly implausible transaction, was that he holds no relevant documentation. For example:(a) he claims to have no documentary evidence of the identities of the purported investors who advanced money through Mr Cheema, or of the amount and dates of their loans;(b) he claims to have no documentary record or evidence of the loan of approximately £2.4 million allegedly made to him by Mr Hanif;(c) he says that he has no documents relating to his alleged dealings on behalf of the Saudi royal family;(d) there is again a total lack of documentation for the one property deal which he accepts was entered into by Lexi Holdings Ltd; and(e) there is no documentary evidence of the alleged reversal of his beneficial ownership of the Trust Properties. The total absence of documentation is in itself a very strong indicator that the transactions mentioned above are fictitious, and in relation to several of them I have so held. However, if Mr Luqman’s account is to be believed, the absence of documentation is in my view incredible, and he must be in breach of his disclosure obligations.[147]I turn to consider some of the other explanations put forward by Mr Luqman for the absence of documentation.[148]In paragraph 12.20 of his seventh affidavit he claims that “In common with many people I do not keep hard copies of bank statements”, on the basis that accounts within the UK should be relatively easy to access electronically. However, he admitted in cross-examination that he does not have on-line banking facilities for his accounts in Pakistan, and he also admitted that he does not have on-line banking for Meridian or for his accounts at Lloyds TSB. Nevertheless, he claims not to have kept bank statements for those accounts.[149]Mr Luqman referred a number of times in his oral evidence to cultural differences in order to explain the absence of documentary evidence for very substantial business deals in Pakistan and Saudi Arabia. However, this contention was put forward at such a high level of generality, and is also so convenient from Mr Luqman’s personal point of view, that I can attach only minimal weight to it. I am simply not prepared to accept, without a much fuller and more convincing explanation, that business deals involving many millions of pounds are routinely left undocumented in those parts of the world for supposedly cultural reasons. In any event, Mr Luqman appeared to contradict his own evidence on this point when he accepted that there probably were written loan agreements between Mr Cheema and the investors, although there were (conveniently) none between Mr Cheema and himself.[150]Mr Luqman’s explanation for having no diary was that he keeps his appointments “in his head”. He says he is “not one of those individuals” who sits in a meeting and writes long notes. He claims not to have had a laptop or any other computer, as he is “not very technical in that sense”. Again, this evidence is all suspiciously convenient from Mr Luqman’s point of view, and again I do not accept it. For example, to take the case of computers, documents disclosed by Mr Luqman himself show that he had a personal email address at the Company which he used to hire a car for his visit to Malaga in November 2006, and his own reason for not keeping hard copies of UK bank statements was that they could readily be accessed on-line.[151]I have already referred more than once to the difficulties allegedly encountered by Mr Luqman in obtaining copies of bank statements, both in this country and abroad. I have accepted that there may be some truth in some of what he says about this. However, I am wholly unable to accept that if he had made energetic and whole-hearted attempts to obtain the necessary statements since last November the result would still have been as paltry as it has been. It is noteworthy, in this context, that the administrators had no difficulty in obtaining statements from UBL in Pakistan in respect of the one account for which Mr Luqman granted them an authority after the most recent section 236 hearing: see paragraph 19.2 of Mr Paul Fleming’s twelfth affidavit.[152]To conclude, I am left in no reasonable doubt that Mr Luqman is still in serious breach of his obligations under paragraphs 19 and 20 of the November Order, and that the steps which he has so far taken in purported compliance with those provisions are grossly inadequate. This is, of course, quite separate from his admitted total failure to comply with paragraphs 19 and 20 within the time initially stipulated, or before the later deadline imposed by Briggs J. in his “unless” order of 14 December 2006. I accept Miss Fenton’s apology for her share of the responsibility for failure to serve a list in due time, but in my judgment that cannot excuse Mr Luqman for his sustained personal failure to make any serious effort to comply with this part of the November Order. In short, I am satisfied to the requisite criminal standard of proof that Mr Luqman is guilty of both historical and continuing failures to comply with these provisions, and that this ground of committal too is accordingly made out.

V. Alleged breaches of the Passport Order

[153]Under paragraph 22(1) of the November Order, Mr Luqman was ordered not to leave the jurisdiction of the court until seven days after the date upon which he had complied with all of his obligations to disclose his assets and tracing information by affidavit, or until further order in the meantime.[154]Paragraph 22(2) of the November Order provided as follows:
“[Mr Luqman] must immediately deliver up all his passports and any Personal Identity Cards and travel documents which enable him to travel outside the United Kingdom to the person who serves this Order upon him. Such passports and Personal Identity Cards and travel documents shall be returned to [him] by the Applicant’s solicitors within seven days after [he has filed the last of the affidavits required under paragraph 22(1)].”
[155]Since the November Order was served on Mr Luqman by substituted service, it was not possible for Mr Luqman to comply with the order in paragraph 22(2) by delivery of his passports to the person who served the order upon him. However, it is not suggested on Mr Luqman’s behalf that this made the order ineffective, and it is I think common ground that it should be interpreted in the circumstances as requiring immediate delivery up of his passports to a duly authorised representative of the Company.[156]At his section 236 examination on 13 December 2006, Mr Luqman revealed for the first time that he had a Pakistani as well as a UK passport. It is worth quoting the passage from the examination in which this information was revealed:
“Q: …What I want to ask you please, in terms of passports, how many have you got? A: I’ve got a British passport. Q: Have you got any other passports? A: No, I haven’t. Q: You have a Pakistani passport? A: I have, but it’s in Pakistan. Q: Right. Who has it in Pakistan? A: My father. Q: Your father has got it. Is he coming back over here? A: He is due back first week of January. Q: Right. Can you please arrange for your father to deliver that passport to DLA please? A: Yes I will.”
Q: Have you got any other passports? Q: You have a Pakistani passport? Q: Right. Who has it in Pakistan? Q: Your father has got it. Is he coming back over here? A: Yes I will.”

Q: Your father has got it. Is he coming back over here?

[157]It will be noted that Mr Luqman’s admission that he had a Pakistani passport followed a denial that he had any passports apart from his British one, and came in answer to a direct question referring to a Pakistani passport. At his previous interview with the administrators on 20 October 2006 Mr Luqman had falsely stated that his only passport was his British one, a blatant lie for which he was unable to offer any intelligible explanation in cross examination before me. His explanation for his initial denial on 13 December was to my mind equally unconvincing, namely that he “did not remember” that he had a Pakistani passport until he was asked a direct question about it.[158]This evasiveness about his passports was matched by equally evasive evidence about his address in this country. On 20 October 2006 Mr Luqman told the administrators that his personal address was in Pakistan, and that he spent a half to one-third of his time in that jurisdiction. In fact, as he accepted in cross examination, he had spent only eight weeks in Pakistan during the last year. Moreover, he failed to provide the administrators with details of his home address in this country at 41A South Downs Road, Bowdon, Altrincham, Cheshire. This is a property which he owns and where he lives with his family. The only excuse he could offer in cross examination for his failure to disclose it was that he used his brother’s address at 5 Broad Lane, Hale, Cheshire for business purposes, and that his wife was often slow to pick up post at his home address when he was away. I do not accept this explanation. It seems far more probable to me that Mr Luqman was deliberately trying to make it difficult to trace him, and hoping that he could get away without disclosing either his UK home address or the existence of his Pakistani passport. Be that as it may, there is no doubt that Mr Luqman travelled to Pakistan on 19 November 2006, and that he returned to the UK on 1 December. There is, however, no evidence to suggest that Mr Luqman has left the jurisdiction at any time since his return on 1 December.[159]In paragraph 7 of the committal grounds it is alleged that in breach of paragraph 22(1) of the November Order, after service of it upon him, Mr Luqman has left the jurisdiction without delivering any of the affidavits he was required to serve under paragraphs 11, 12, 13 and 17 of the November Order. It was argued for the Company that Mr Luqman’s departure for Pakistan on 19 November 2006 was a breach of paragraph 22(1), on the basis that it could be inferred that he came to learn of the November Order on 17 November. However, as I have already explained in relation to the Marbella Property I do not consider that this contention is fairly open to the Company, because there is no allegation anywhere in the committal grounds that Mr Luqman came to know of the freezing order before it was served on him on 4 December. The contention also faces the insuperable difficulty that paragraph 7 of the grounds only alleges that he left the jurisdiction “after service of the Order upon him”, which must mean after 4 December. As I have said, there is no evidence to suggest that Mr Luqman has left the jurisdiction since that date, so this allegation of breach of the passport order must fail.[160]I now turn to the order for delivery up of his passports. It is common ground that Mr Luqman was in breach of this order, his UK passport not being handed over until 19 December and his Pakistani passport not being handed over until 24 December. The question that I have to decide is how serious these breaches were, and in particular whether Mr Luqman was intending to abscond if he could and only handed them over in response to the bench warrant for his arrest issued by Briggs J. on Monday 18 December.[161]It is common ground that no steps of any description were taken by Mr Luqman to hand over his passports between 4 December 2006, which on any view is the latest date on which he became aware of the November Order, and his section 236 examination on 13 December. The only excuse he was able to offer for this inactivity is that he needed to take legal advice before complying with any part of the November Order, and he was trying to obtain representation. However, there is no evidence to support his assertion that he was actively seeking legal representation between these dates, and the explanation is in my judgment a bogus one. The order to deliver up his passports immediately was clear and simple: it required no legal advice for its elucidation. Mr Luqman could and should have complied with it immediately, at any rate in relation to his UK passport, and I can only conclude that he deliberately decided not to. It is also revealing, as I have already shown, that during his examination on 13 December Mr Luqman initially tried to conceal the existence of his Pakistani passport.[162]Mr Luqman was reminded on 13 December of his obligations under the Passport order, and the transcript shows that he agreed to deliver up his UK passport “at the first opportunity”. When asked why he had not brought it with him, he said that it was at what he described as his parents’ address at 5 Broad Lane and agreed to deliver it up at DLA’s Manchester offices by 9 a.m. on Friday 15 December. This was reemphasised at the end of the examination, when Mr Marshall said:
“…in a minute, Mr Fleming, my instructing solicitor, will ask you exactly how you are getting back up to Manchester and we’ll make arrangements for someone from his offices in Manchester to attend there, for your arrival, for you then to deliver up that passport.”
[163]Mr Luqman’s reply to this was “That’s fine”. With regard to his Pakistani passport, he said that his father had it in Pakistan and was due to return to this country during the first week of January. He agreed to arrange for his father to deliver it to DLA.[164]In his third affidavit, sworn on 18 December 2006, Mr Paul Fleming says that at the end of the interview he and one of the solicitors in his team, Mr Crispin Jones, spoke to Mr Luqman to make the necessary arrangements. Mr Luqman told them that he was staying in London in order to take legal advice the following day, and would be returning to Manchester that evening with an estimated time of arrival at 5 Broad Lane of around 11 p.m. It was therefore agreed that he would deliver up his UK passport to DLA’s Manchester office by 9 a.m. on the Friday. He was also given the contact telephone number of Mathew Newman in the Manchester office, whom he should contact to deliver the passport. On being asked for his own contact number Mr Luqman said that he did not currently have a mobile phone and was in the process of obtaining a new one, but was undergoing a credit check estimated to take two weeks. He was asked whether messages could be left through his brother Waheed, but replied that they would have to talk to Waheed for that purpose. Mr Luqman has subsequently denied telling Mr Fleming that he was staying in London in order to take legal advice on the Thursday, and this was put to Mr Fleming in cross examination. It is convenient to say at this point that I found Mr Fleming to be a truthful and reliable witness, and I have no hesitation in accepting his version of the conversation. It turned out to be another of Mr Luqman’s lies. He did not seek legal advice on the Thursday, but instead drove back to Manchester.[165]Furthermore, although Mr Luqman had effectively gained himself an extra day by this deception, he then failed to deliver up his UK passport by 9 a.m. on the Friday. Nor did he make any contact with DLA on the Friday, although he had been given Mr Newman’s contact number. On the Friday evening DLA’s service agents, Messrs. Begbies, twice attended at 5 Broad Lane, but failed to find Mr Luqman there and were told that he was “out of the country” by the man who answered the intercom at the gate of the property. (In his third affidavit Mr Fleming says that it was a lady who answered the intercom, but he corrected this point at the start of his oral evidence). Mr Fleming had also discovered from a representative of his firm’s Manchester office that Mr Luqman gave evidence in separate proceedings in Liverpool on 15 December, from which he concluded that Mr Luqman must have travelled back from London. However, as Mr Fleming pointed out in his third affidavit, Mr Luqman had made no effort to deliver up his passport either before or after the hearing in Liverpool, and had also made no effort to contact DLA’s offices in either London or Manchester. In the light of this evidence, it is not surprising that the administrators concluded that Mr Luqman had decided to abscond, and on the morning of Monday 18 December they applied successfully to Briggs J. for a bench warrant for his arrest. It was in support of this application that Mr Fleming swore his third affidavit.[166]Mr Luqman has provided a number of inconsistent explanations for his failure to deliver up his passport as agreed on 15 December.[167]In his witness statement dated 20 December 2006, he says that he fully intended to deliver the passport to DLA on 15 December, but on the evening of 14 December he was telephoned by DC Ellis of the Metropolitan Police and asked to attend court in Liverpool in respect of a criminal trial involving serious fraud. He says:
“I was due to give evidence that day and went to Liverpool in the morning and did not return until late afternoon. I completely overlooked the fact that I had promised that I would deliver the passport on 15 December. I am aware that Daniel Izza did speak to Paul Fleming of DLA on either 15 or 18 December to say that I had been in court in Liverpool all day but that I would deliver the passport on Monday.”
[168]He goes on to say that on Monday 18 December he had arranged an appointment with Mr Izza, who is a solicitor with Laytons in Manchester. He says he explained to Mr Izza that he had to hand his passport over, and he anticipated that Mr Izza would make the necessary arrangements direct with DLA. However, when he got home on the Monday evening, having had a long meeting with Mr Izza, he became aware that DLA had issued an application for his committal. He then spoke with Mr Izza that evening, and Mr Izza said that he would arrange for the passport to be delivered to DLA the next morning. However, on Tuesday 19 December Mr Izza told him that he was unable to act for him because Laytons had a conflict of interest.[169]By contrast, in his third affidavit sworn on 15 January 2007 Mr Luqman does not claim to have overlooked his agreement to deliver up the passport on 15 December, but says that he telephoned Mr Izza on that day with a view to arranging an appointment that day. He says that he told Mr Izza the details of the November Order, and explained on the telephone that he wanted him to make arrangements to hand over his passport. Mr Izza was unable to see him on the Friday, but arranged an appointment for the Monday. On Monday 18 December Mr Luqman says that he spent 4 or 5 hours with Mr Izza at his office in Manchester, but neither of them was aware at the time of the bench warrant. Mr Luqman says that he only became aware of it when he returned home after the meeting and found that a file of papers had been left for him at Broad Lane. With regard to the hearing in Liverpool, he says that he left home at 8.05 a.m. on the Friday and did not return home until after 5 p.m.[170]It is a common feature of both the above versions that Mr Luqman says that he told Mr Izza about the terms of the freezing order, and asked him to make arrangements for the handing over of his passport. Mr Luqman repeated this in cross-examination before me, and said that he had explained to Mr Izza about the passport on the Friday. It was for that reason, he says, that he took no steps to contact DLA himself either on the Friday or over the weekend, the intention being that he and Mr Izza would meet on Monday morning in order to resolve the passport question. However, a very different impression is given by Mr Izza’s own attendance note which Mr Luqman exhibits to his fifth affidavit dated 20 February 2007. In this attendance note, which is dated 12 January 2007 and was evidently produced in response to a request from Mr Luqman’s solicitor, Mr Izza says this:
“By way of background, I tried to call at least three people in the London office without success. I spoke with Matt Newman in the Manchester office and agreed that the UK passport would be delivered to the Manchester office the following business day. I informed him I had been instructed that day and had noticed upon reviewing the papers that there had been an obligation to deliver the passport on the previous Friday. I was not aware of any application for contempt. Mr Newman was content for this to take place.”
[171]It will be noted from this attendance note that Mr Izza was only formally instructed on the Monday, and it was only upon reviewing the papers that he had “noticed” the obligation to deliver the passport on the Friday. The document that Mr Izza had noticed must be the letter dated 14 December from DLA which was delivered by hand at 5 Broad Lane on the morning of 15 December. Among other things, this letter recorded Mr Luqman’s agreement to deliver up the passport at DLA’s Manchester office by 9.00 am on the Friday. There is no indication in the attendance note that Mr Luqman had told Mr Izza about the passport provisions of the November Order or that they had discussed the subject on the Friday.[172]It is fair to note, however, that Mr Izza’s attendance note is not a contemporary one and was produced more than three weeks later. Furthermore, his email of 12 January 2007 to Mr Luqman’s solicitor also records that he did first speak with Mr Luqman on Friday, 15 December at around 3.30 pm, Mr Luqman having asked his secretary earlier that day if he could make an appointment for the afternoon. Mr Izza was unable to do that, but records that he spoke at around 3.30 pm with Mr Luqman “for around 30 minutes about the background to the case”. They then arranged an appointment at 10.30 on Monday, 18 December. In the circumstances, I am not prepared to find beyond reasonable doubt that Mr Izza was told nothing about the passport provisions of the November Order until the Monday. I think it is at least possible that Mr Luqman did tell him about those provisions on the Friday, and did ask him in a general way to deal with that aspect of the matter on his behalf. It is, however, clear, and I have no hesitation in finding, that Mr Luqman did not tell Mr Izza on the Friday about the 9.00 am deadline which he had already missed, and that Mr Izza only discovered this for himself when going through the papers on the Monday.[173]I am also not satisfied to the requisite standard of proof that Mr Luqman intended to abscond at this stage, and I accept that he probably did not learn about the bench warrant and the application for his committal until after his interview with Mr Izza on the Monday. Indeed, Mr Izza spoke on the telephone with Mr Paul Fleming at around 5.40 pm on the Monday, and Mr Fleming expressly accepted in cross-examination that Mr Izza did not then know there was a committal application. Since Mr Luqman had been with Mr Izza for some four or five hours earlier that day, it is barely conceivable that he would have discovered about the bench warrant and the committal application (which was of course made without notice) before his meeting with Mr Izza, or (if he had known about it) that he would not have told Mr Izza and sought his advice on how to deal with it. It follows that I am not satisfied that Mr Luqman agreed to hand over his UK passport only when he became aware of the bench warrant and committal application, even though the passport was not in fact handed over until Tuesday, 19 December when Mr Luqman delivered it in person to DLA’s Manchester office after Laytons had informed him they were unable to represent him. Nevertheless, Mr Luqman is in my judgment to be severely criticised:(a) for his initial failure to take any steps to hand over the passport between 4 and 13 December;(b) for the lie which he told to Mr Fleming on 13 December which gained him an extension of time until 9.00 am on the Friday;(c) for his failure, without any adequate excuse, to meet the Friday deadline; and,(d) for his total failure to take any steps to contact DLA either on the Friday or over the weekend. In the light of an order which required the passport to be delivered up immediately, this behaviour was in my judgment inexcusable. Compliance with court orders is a serious matter, not an optional requirement to be observed at Mr Luqman’s personal convenience.[174]I must finally deal with the delivery up of Mr Luqman’s Pakistani passport. As I have already noted, Mr Luqman undertook at the conclusion of his section 236 examination on 13 December to arrange for his father to deliver the passport to DLA upon his return from Pakistan in the first week of January. There must then have been further discussions between Mr Luqman and DLA, because in DLA’s letter of 14 December to Mr Luqman he is said to have told the Court that his father would be returning to the United Kingdom within the next seven days. Mr Luqman was therefore asked to confirm his father’s date of arrival by contacting Mr Newman, so that a mutually convenient location could be arranged for delivery up of the passport. In the event, according to Mr Luqman’s third affidavit, his father had originally intended to travel to the UK on 26 December, but then decided to travel on the 23rd instead and arranged a flight from Islamabad on that day as he was unable to get a flight from Lahore. Mr Luqman says he decided with his father that he should bring the passport with him in person, rather than hand it to agents of DLA in Pakistan. He exhibits a copy of his father’s flight ticket, which evidences that his father did indeed fly from Islamabad to Manchester on 23 December.[175]What then happened is explained in the affidavit of Norman Hill, an associate of Mr Luqman, sworn on 15 January 2007. He says that on the afternoon of Saturday, 23 December he received a telephone call from Mr Luqman, seeking his assistance to deliver up his Pakistani passport “which he told me had been returned to the UK by his father from Pakistan that day”. Mr Luqman asked Mr Hill to contact Mike Wright who was the Company’s service agent and whom Mr Hill had met and spoken to previously. Mr Hill deposes that he telephoned Mr Wright three to four times between 2.30 and 3.30 pm on 23 December on his mobile number, but his mobile was switched off and he was unable to leave a message. He then decided to send a text message to Mr Wright, which he knew he would pick up once his mobile was switched back on. The message was sent at 3.59 pm, and read as follows:
“Hi Mike. My name is Norman Hill PA to Shaid Luqman. I understand you need to collect his passport. Could you please contact me to make arrangements.”
He sent the text message twice, but after half an hour had still received no response from Mr Wright. Mr Hill then telephoned DLA’s UK switchboard at about 4.30 pm, but he was unable to speak to either Mr Fleming or his secretary. He left a message with the receptionist, which she told him would be recorded and immediately emailed to Mr Fleming. The message said that Mr Hill was instructed by Mr Luqman with regard to the delivery up of his passport, and asked Mr Fleming to contact him as a matter of urgency on his mobile number, details of which he gave. However, he received no call back from Mr Fleming. Eventually, Mr Hill received a text message from Mr Wright at 12.24 pm on 24 December, and arrangements were made for Mr Wright to collect the passport from 5 Broad Lane that afternoon, which he duly did.[176]No application was made to cross-examine Mr Hill on his evidence, and I therefore accept it as truthful. If it is indeed the case, as Mr Luqman told Mr Hill, that his father brought his Pakistani passport back with him from Pakistan, I am satisfied that no criticism can be made of the arrangements which were then made on Mr Luqman’s behalf for its handing over. However, the Company invites me to find that Mr Luqman’s story about the passport being in Pakistan is a fabrication, and that he had it with him in this country all along.[177]The matters which are relied upon in support of this submission are briefly as follows:(a) Mr Luqman’s initial denial on 20 October 2006 that he had any passport other than his British passport, and his initial denial to the same effect on 13 December;(b) his admission in cross-examination that he made frequent use of his Pakistani passport to travel to Pakistan;(c) his further evidence in cross-examination that he normally used his British and Pakistani passports together, the British one to enter the UK and the Pakistani one to enter Pakistan. The advantage of this procedure was that it enabled him to avoid having to apply for a visa, which was sometimes very expensive. Under some pressure, Mr Luqman accepted that his previous five-year visa had expired, and his current UK passport did not have one; and(d) it was only when Mr Luqman realised the implications of his evidence that he normally used the two passports together that he finally claimed to have forgotten his Pakistani passport during his most recent visit to Pakistan, and to have left it “in a different coat” or “in one of my other suits”.[178]The above evidence makes out a powerful case, and if I were deciding the point on the balance of probabilities I would probably be persuaded that Mr Luqman did indeed have his Pakistani passport with him in this country throughout. However, I am not satisfied beyond reasonable doubt that his story is untrue. Although he undoubtedly wished to conceal the existence of his Pakistani passport until 13 December, he has since then consistently stuck to the story that it was in Pakistan and his father was going to bring it back for him. I am very suspicious about this, particularly in the absence of any corroborating evidence from Mr Luqman’s father. However, I cannot rule out the story as inherently incredible, and I am left with a nagging doubt that it just might be true. Leaving a passport in the wrong pocket is probably something that most people do at one time or another. So, by a narrow margin, I am not satisfied to the requisite standard of proof that Mr Luqman is on this occasion telling yet another lie.

Conclusions

[179]In the light of my conclusions on each of the five main heads of the committal application, Mr Luqman is clearly guilty of several serious breaches of the November Order. I have found all of the alleged breaches to be established beyond reasonable doubt, with the exception of:(a) the allegation that he left the jurisdiction after service of the November Order upon him; and(b) the alleged breaches of the freezing injunction in relation to the Marbella Property which took place before 4 December 2006.[180]Furthermore, I have found Mr Luqman to be an unreliable and dishonest witness, and in relation to most of the matters which he has put forward as explanations to justify or mitigate his conduct I have rejected the explanations as untruthful. In particular, I have disbelieved his evidence in relation to:(a) the beneficial ownership of Imaan;(b) the beneficial ownership of the Trust Properties;(c) his alleged indebtedness to Mr Hanif;(d) the ownership of the UNB account between September 2005 and July 2006; and(e) his alleged relationship with Mr Cheema, and his alleged repayment to Mr Cheema of loans made to him by Mr Cheema on behalf of investors.[181]Quite apart from this comprehensive catalogue of deception, I am also satisfied beyond reasonable doubt, for the reasons I have given, that Mr Luqman has persistently and culpably failed to comply in good time and to the best of his ability with the asset disclosure, tracing information and document disclosure provisions of the November Order. Freezing orders and the ancillary relief associated with them are vital weapons in the armoury of the court when a case of alleged fraud is uncovered, and investigations by responsible office-holders such as the administrators in the present case are in progress. The importance of such orders is, if anything, even more pronounced when, as in the present case, the books and records of the Company have to a large extent been deliberately destroyed by or at the instigation of the person against whom the orders are made. Any person who sets out to defy or disobey court orders in such circumstances must expect to be severely punished. If a person against whom such an order is made considers that it is wrong, his remedy is to apply promptly and with appropriate evidence for the order to be varied or discharged, or alternatively to appeal against it. Disregarding the order is not an option, and still less wilful disobedience to it.[182]The maximum sentence that the court can impose for contempt of court in civil proceedings is two years’ imprisonment: see section 14(1) of the Contempt of Court Act 1981. The effect of the early release provisions in section 258 of the Criminal Justice Act 2003 is that a person committed to prison for contempt is to be released unconditionally after serving one half of the term for which he is committed: see Arlidge, Eady & Smith on Contempt, para 14-13. Thus the effect of imposing the maximum sentence is that the contemnor will in practice spend no more than one year in prison. However, it would in my judgment be wrong to have regard to the early release provisions of the 2003 Act in fixing the appropriate term of a sentence for contempt, and the maximum term of two years should be reserved for the most serious cases.[183]The penalty that the court sees fit to impose for an established contempt will usually have both a penal and a coercive purpose: a penal purpose, because the contemnor is being punished for his breach of court orders, and a coercive purpose, because there will usually be rational grounds for hoping that the sanction imposed will act as a spur to secure belated compliance with the order that has been breached. A sentence of imprisonment for civil contempt is of course different from a sentence in criminal proceedings, in that it is open to the contemnor to apply to the court at any time to purge his contempt by showing that he has indeed belatedly complied with the order, or that his continued imprisonment would no longer serve any useful coercive purpose. Furthermore, in cases where the court does not see fit to impose an immediate custodial sentence, a suspended sentence will often have a valuable coercive role to play.[184]If I ask myself where on the spectrum of seriousness the present case lies, I can only answer that in my judgment it is a very serious case indeed. Mr Luqman has in my view done his level best to hinder the administrators in their task, and such information as he has disclosed has been prised from him step by reluctant step. Even today, more than six months after the November Order, the information and disclosure which he has provided remains woefully incomplete and inadequate. In these circumstances, I am satisfied that only an immediate custodial sentence will bring home to Mr Luqman the gravity of the breaches which I have found to be established, and the importance of the principle that court orders must be obeyed.[185]I said at the end of the hearing that I would give a provisional indication in my judgment of any penalties that I was minded to impose, and allow an opportunity for a plea in mitigation before I reached a definite decision. On that basis, the sentences that I am provisionally minded to impose on Mr Luqman are as follows:(a) Breaches of the passport order (paragraph 8 of the grounds): 3 months.(b) Breaches of the asset disclosure orders (paragraph 8D of the grounds): (i) the Marbella Property: 3 months. (ii) the Trust Properties: 6 months. (iii) Imaan: 6 months.(c) Breaches of the tracing orders (paragraph 14 of the grounds): (i) Paragraph 14(1) (the UNB account): 12 months. (ii) Paragraph 14(2) (Mr Cheema): 18 months. (iii) Paragraph 14(3)(a) (Mr Cheema): 18 months. (iv) Paragraph 14(3)(b) (Mr Cheema): 18 months. (v) Paragraph 14(3)(c): 2 weeks. (vi) Paragraph 14(3)(d): 2 weeks.(d) Breaches of the evidence preservation orders (paragraph 16 of the grounds): 18 months.(e) Breaches of the freezing injunction (sub-paragraphs 18(2) and (3) of the grounds): 12 months.[186]Since all of the breaches arise out of the same proceedings and the same course of conduct, I propose to order that the sentences will all run concurrently. Subject to mitigation, therefore, I will sentence Mr Luqman to an immediate term of imprisonment of 18 months.[187]I add the following brief comments by way of further explanation of the sentences I am minded to impose.[188](a) Breaches of the passport order This sentence is comparatively light, because both passports were eventually handed over, and I am not satisfied that Mr Luqman was only prompted to do so by the bench warrant for his arrest, or that he intended to abscond abroad after his return from Pakistan on 1 December 2006. Nevertheless, his conduct and delay in handing over the passports was deplorable in several respects: see paragraph 173 above. The sentence is intended to punish Mr Luqman for that conduct and delay.(b) Breaches of the asset disclosure orders These breaches all relate to assets known to the administrators, and most of them are referred to in the November Order itself. The sentences relating to Imaan and the Trust Properties are intended to punish Mr Luqman for his failure to disclose them as assets, and his dishonest and untruthful attempts to establish that he was not their beneficial owner. The sentence relating to the Marbella Property deals only with the non-disclosure aspect of Mr Luqman’s conduct, and is relatively lighter because Mr Luqman had already taken steps to divest himself of nearly all the equity in the property before the November Order was served upon him.(c) Breaches of the tracing orders The sentence relating to the UNB account is intended to punish Mr Luqman for his absurd, opportunistic and dishonest attempt to take advantage of a small error in the name shown on the bank statements and pretend that the UNB account was opened for and owned by the Gibraltar company, Lexi Holdings Ltd. The sentences relating to the false explanations given by Mr Luqman about Mr Cheema (that is to say, the three terms of 18 months) are intended to have both a punitive and a coercive content. I regard these false explanations as particularly serious, because they are designed to prevent the tracing of the relevant funds to their true ultimate destination. The sentences for the breaches alleged in sub-paragraphs 14(3)(c) and (d) of the grounds are, by contrast, light and intended to reflect the comparatively minor breaches admitted by Mr Luqman. Neither of these matters featured much in the evidence or submissions before me, and in the context of the present application I regard them as relatively insignificant.(d) Breaches of the evidence preservation orders This sentence again has both a punitive and a coercive element, and is a matter that I regard as particularly serious. Prompt and full disclosure of all documents in Mr Luqman’s possession, custody or power was essential, especially in view of the wholesale destruction of most of the Company’s books and records before the administrators were appointed. The imperative need for such disclosure was reinforced by the unless order of Briggs J. The paltry disclosure offered in purported compliance with that unless order was on any view completely unacceptable, and the drip-feed of additional material since January 2007 has in my judgment still done little to remedy the deficiency.(e) Breaches of the freezing order The mortgage of the Marbella Property was in my view a blatant breach of the freezing order. Mr Luqman should have taken immediate steps to revoke the power of attorney and take the property off the market, once the November Order was served on him. Instead he did absolutely nothing, and allowed the transaction to proceed to completion without hindrance. This sentence is intended to punish Mr Luqman for that culpable inactivity. It would be more severe still if he had not unfortunately succeeded in his main object of raising a loan on the promised security of the property and dissipating the proceeds before the November Order was served on him.[193]I conclude with a few words about Mr Luqman’s past record of crime and dishonesty, the main features of which I have noted in paragraph 26 above. That record is deplorable, and speaks for itself. I have, however, been careful to put it out of my mind when considering the present application. The committal proceedings are concerned with alleged breaches of the November Order, and nothing else. Mr Luqman must be punished for the breaches of the November Order which I have found to be established, but not for his past record. In adopting this approach I follow and respectfully agree with what Lewison J said in the Great Future case at paragraph 31:
“In a criminal case, with limited exceptions, the tribunal of fact is unaware of the defendant’s previous convictions, if any. Even where previous convictions are placed before a jury, they are relevant only to the question of the credibility of the defendant and not to his propensity to commit offences generally, or the offence of which he stands charged. By analogy, I consider that it would not be proper to rely on allegations of previous breaches of court orders by the defendant in considering whether the alleged contempts are made out in these applications.”
[194]Counsel for the Company submitted to me that the position is less restrictive than Lewison J supposed, in the light of the provisions relating to similar fact evidence and the admission of evidence of the defendant’s bad character contained in sections 101 to 105 of the Criminal Justice Act 2003. I accept that it is arguable, in the light of those provisions, that evidence of the bad character of an alleged contemnor should be admissible in order to establish that he has a propensity to be untruthful. However, I prefer to leave the point undecided because it is unnecessary to my decision. Mr Luqman’s propensity to be untruthful was amply demonstrated to me during his three days in the witness box, and needed no support from his past record to be established to my complete satisfaction.

Addendum

[195]This judgment was circulated in draft to the parties’ legal representatives on the morning of Friday, 22 June, and arrangements were made for it to be handed down on Monday, 2 July 2007. Later on 22 June, the Court was sent a further affidavit sworn by Mr Luqman on 7 June 2007 (his 12th), and informed in a covering letter from his solicitors that it would be relied upon “for the purposes of mitigation”. Mr Luqman exhibited to this affidavit the UBL bank statements which had been produced on Day 7, and provided a commentary on the entries shown on the statements. He also said that he had now managed to trace Mr Cheema to his new address, with the assistance of unspecified “Government Agents” in Pakistan, and exhibited what purports to be a notarised witness statement from Mr Cheema signed and dated on 3 June 2007. This witness statement, if taken at face value, corroborates the main features of the account of his dealings with Mr Cheema that Mr Luqman gave in cross-examination, and also confirms that Mr Cheema attended personally at the offices of UBL in Kharian City both to collect payment orders to repay third party investors and to supply personal bank details of investors when payment was to be made by cash transfer. In addition, Mr Luqman exhibited a copy of what purports to be a notarised letter from UBL dated 31 May 2007 and signed by an officer and manager in Kharian City, confirming the attendance at the bank of Mr Cheema for the above purposes and enclosing the material supplied to the bank to verify Mr Cheema’s identity. This material was not in fact exhibited to the affidavit, but in a subsequent affidavit sworn by Mr Luqman on 28 June (his 13th) he explained the reason for that omission (he only received the enclosures to the UBL letter on 13 June via his father, who had collected them from the bank and forwarded them to him by courier) and exhibited what appears to be a copy of Mr Cheema’s National Identity Card together with an English translation. Mr Luqman added that copies of these documents had been sent to the Company’s solicitors on 13 June.[196]If this additional evidence is admissible, and if it is taken at face value, the question obviously arises whether I was right to disbelieve Mr Luqman’s account of his dealings with Mr Cheema and to make the findings which are set out in paragraphs 125 to 128 of this judgment. There is no doubt that the Court has jurisdiction to admit late evidence before the order has been drawn up, and although cases when this is appropriate will be comparatively rare, the Court should in my view be willing to do so in a committal application if it considers that justice to the defendant requires it: compare Irtelli v Squatriti [1993] QB 83 (CA) at 88, 92 and 93. It soon became clear when Mr Elleray QC addressed me after the handing down of this judgment on 2 July that he wished to rely on the new evidence not only for purposes of mitigation, but also in order to invite me to reconsider my findings of fact in relation to Mr Cheema and my conclusion that the committal grounds relating to Mr Cheema had been made out to the requisite standard of proof. Following some discussion, it was agreed that the appropriate way forward would be for Mr Luqman to issue a formal application to adduce new evidence in respect of the alleged breaches involving Mr Cheema, and to invite the Court to reconsider its judgment in relation to those findings. I therefore gave directions for the issue of such an application and the service of evidence to a tight timetable, with a view to a further hearing taking place before me after 18 July, and if possible before the end of term.[197]In these circumstances, my findings of fact in this judgment relating to Mr Cheema, and my conclusions that the breaches alleged in paragraph 14(2), 14(3)(a) and 14(3)(b) of the committal grounds have been made out, must be regarded as provisional only, and subject to reconsideration at the further hearing to which I have referred. However, I saw no reason (and was not asked) to defer sentence on the other grounds which I have found to be established, and I therefore proceeded to hear mitigation from Mr Elleray in relation to those grounds. Having done so, I was not persuaded to depart from the sentences which I had indicated I was provisionally minded to impose, and I therefore sentenced Mr Luqman to an immediate term of imprisonment of 18 months for his breach of the evidence preservation orders, and to shorter concurrent terms for the other breaches as set out in sub-paragraphs 185(a), (b), (c)(i), (v) and (vi) and (e) above.

Cited in 4 later judgments