Abela & Ors v Baadarani [2015] EWHC 2393 (Ch)

[2015] EWHC 2393 (Ch)Case No HC-2009-000004
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 24 th July 2015
Before
Mr Justice Norris
Between
(1) Albert John Martin AbelaClaimants(2) Albert J.M. Abela SRLClaimant(3) Albert J.M Abela Catering and Interactive Services LimitedClaimantAhmad BaadaraniDefendant
Mr Tim Penny (instructed by PCB Litigation LLP) for ClaimantsThe Defendant Mr Baadarani in Person for in personHearing Hearing dates: 23 rd and 24 th July 2015
Approved Judgment
[1]In 2002, Mr Abela and his companies entered into a share purchase agreement with Mr Baadarani. In April 2009, Mr Abela and his companies commenced proceedings in relation to a dispute arising out of that transaction.[2]Mr Baadarani is based in the Lebanon. There was a dispute over service of the proceedings. That dispute reached the Supreme Court, who in June 2013 decided that service was effective. Huge costs were run up in relation to that interlocutory dispute. They are said to come to about £450,000.[3]On 9th June 2013 the court made an interim costs order, ordering Mr Baadarani to pay Abela and his companies £150,000. That sum was not paid.[4]Abela and his companies decided to enforce the interim costs order. They asked for Mr Baadarani to be examined as to his means. On 18th March 2014, Mr Justice Henderson made an order for his examination before a Master.[5]Paragraph 1.2 of his order said that Mr Baadarani, at the time and place of his examination, should produce at court:
"... all documents in his control that relate to his means of paying the judgment debts. The documents produced must include those shown in the attached schedule."
[6]The attached schedule contained 59 categories of documents. The first of the categories related to any and all documents and records of Mr Baadarani's savings, current or other accounts, anywhere in the world, with any type of financial institution, during the preceding 12 years; in particular, his accounts with the Beirut Riyad Bank and the Banque L'Industrie et du Travail (“BIT”) and HSBC Bank.[7]That Order also contained a provision requiring the general production of documents in paragraph 6, which simply said:
"You must produce all documents that confirm the information required. If you do not have them in your possession, you must get them if you can.

(a) bank statements…"

[8]The Order contained a specific provision for alternative service by email, Mr Baadarani's preferred form of receipt of documents. I should say at the outset that I am satisfied that all orders and all schedules attached to orders have been correctly served on Mr Baadarani. He has, to his credit, not taken any points on service.[9]The oral examination contemplated by Mr Justice Henderson's Order took place before the Master, Master Bowles, on 19th June 2014. Mr Baadarani brought along some documents, but not very many. The documents he did bring were limited as to their dates. There were large gaps in the documents provided, both by reference to the specific schedule attached to Mr Justice Henderson's Order and pursuant to the general provision in paragraph 6 of the Order.[10]Accordingly, the examination was adjourned to enable further documents to be provided. CPR 71.7 provides for such an adjournment and says that:
"... the court will give directions as to the manner in which notice of the new hearing [was to be given]."
[11]Master Bowles decided that he would order the provision of additional documents. His Order, dated 19th June 2014, said that by a date not later than three months after he was served with a list of such documents, Mr Baadarani had to disclose to Abela and his companies all documents which were set out an intended list. Since the list did not then exist, Master Bowles's order contained a provision enabling Mr Baadarani to apply for revision of the list if he objected to any of the items requested.[12]A schedule was prepared and that schedule was served on 25th June 2014. There was no challenge by Mr Baadarani to any of the items on the schedule, notwithstanding that some of the items were very generally described and required him to produce a large range of documents going back over a 12-year period. But unless he objected to the schedule, Mr Baadarani was bound to comply with the court order.[13]The time for providing the scheduled documents expired on 27th September 2014. On 29th September 2014, Mr Baadarani provided some further documents. This was immediately before a further directions hearing in the action on 3rd October 2014. But these additional documents failed to supply the deficiencies in the documents produced at the examination itself. There continued to be a failure to disclose certain documents at all. There was a failure to disclose statements for two BIT accounts; there was a failure to make disclosure of a subsequently discovered HSBC account.[14]Because of these deficiencies, Abela applied under CPR 71.8 (1) for an order referring the matter to a High Court judge, with a view to having a committal order made against Mr Baadarani. CPR 71.8 says that:
"(1) If a person against whom an order has been made under rule 71.2 ... (c) ... fails to comply with the order, the court will refer the matter to a High Court judge..." the court will refer the matter to a High Court judge..."
[15]It continues by saying that:
"That judge may ... make a committal order against the person."
[16]Chief Master Marsh made such an order. He was accordingly satisfied that Mr Baadarani had failed to comply with Master Bowles's original order; but I should make explicit that I must consider all of the complaints afresh. Master Marsh was only concerned to be satisfied on the balance of probabilities that a breach of the Order had occurred. I must apply a rather different standard when considering whether to make a committal order under the discretion which is conferred on me.[17]I am satisfied that Chief Master Marsh's Order was correctly served on Mr Baadarani. The permission so granted led to an application notice on the part of Abela, dated 21st January 2015, seeking an order for the committal of Mr Baadarani to prison, pursuant to CPR 71.8, by reason of the contempts of court set out in the Grounds of Committal that were annexed to the application. I am satisfied that that application notice and the evidence in support of it were correctly served on Mr Baadarani.[18]Once that committal application had been launched on 12th February 2015, Mrs Justice Proudman gave directions for the filing of evidence. Mr Baadarani could not be compelled to file evidence, but the Order provided that if he was to serve any, then it had to be served by 4 pm on 27th March 2015.[19]In fact, no additional evidence was served by Mr Baadarani. What he did serve was a tranche of further documents on 27th March 2015. But those documents, says Abela, did not fulfil all of the outstanding requirements. So, the committal application has proceeded to a hearing before me.[20]At the hearing, I had the evidence of Mr Mascarenhas in three affidavits on behalf of Abela. Those affidavits contained statements of fact, they contained statements of opinion and they contained some submissions about drawing inferences. The facts are not in dispute. I put to Mr Baadarani whether he challenged any of the facts which Mr Mascarenhas deposed to as to what had occurred, in answer to the court orders, but creditably, Mr Baadarani did not seek to challenge any of that. I explained to Mr Baadarani that, so far as Mr Mascarenhas's opinions and submissions were concerned, they were not evidence and I could exclude them from my mind. On that basis, Mr Baadarani was content that I should admit Mr Mascarenhas's evidence without him being cross-examined.[21]Mr Baadarani had not filed any evidence. As I have said, he was not obliged to do so, but I afforded him the opportunity, without in any sense compelling him, to give evidence if he wished.[22]He took the opportunity and was sworn. I explained to him that the consequence of giving oral evidence was that he would be cross-examined and he readily assented to being cross-examined.[23]CPR 71.8 (4) says that:
"If a committal order is made, the judge will direct that -- (a) the order shall be suspended provided that the person: (ii) complies with all the terms of that order and the original order..."
That has been the focus of the hearing before me.[24]I should briefly note that in the meanwhile, the main action has been continuing, now service has been established, and Abela has obtained a default judgment in the main action for something over $20 million. I emphasise that that is not the judgment with which I am concerned. I am concerned with an examination to enable enforcement of a costs judgment in the sum of £150,000. Of course, enforcement of court orders is important, whether the orders relate to large sums or to small sums, but the consequences of breach in relation to facilitating recovery of a small sum may be more moderate than breaches in relation to a larger sum.[25]Nonetheless, an application for committal is a very serious thing. I explicitly record that the burden lies on the Abela camp to make good its allegations of contempt against Mr Baadarani. Mr Baadarani does not have to prove anything. His task is to raise questions sufficiently substantial to prevent the burden of proof being discharged. The standard of proof that Abela must meet is that they must satisfy me beyond reasonable doubt.[26]With those matters in mind, I turn to the grounds of committal and immediately record that some of them have sensibly been abandoned, or, if not formally abandoned, have not been pressed. In particular, grounds 1, 2, 8 and 9 (b) have all not been pursued. I shall therefore only address those which remain, and not all of those.[27]They fall conveniently, as Mr Penny divided them up, into three broad categories. The first relates to bank accounts.[28]Ground 3 of the grounds for committal made complaint of a failure to disclose bank account statements for some BIT accounts. It is accepted that now, all of the relevant account statements have been disclosed for the accounts 4491 and 4293.[29]It is said that the disclosure was late. I am sure that the disclosure was late. I am satisfied that Mr Baadarani knew what he was obliged to do and I am satisfied that he knew that he had not done it. His general attitude as explained to me was in these terms:[30]First, Mr Baadarani understood that the court order was serious, but he says he did not understand how serious, by which he means he did not understand that he could be sent to prison if he broke it, notwithstanding the clear penal notice that was on the relevant orders.[31]Secondly, he acknowledges that he has not, as he put it, “respected the timeframe”. He accepts that he should have done more. He explains his inattention to the fact that he was focusing on his business, but he acknowledges that he had made lots of mistakes.[32]I am sure that the relevant intentional element in the contempt is, on the evidence, established. I am sure that Mr Baadarani is in contempt of court in relation to the BIT bank statements by not abiding by the court's timetable.[33]Those findings and holdings will apply to each of the occasions on which Mr Baadarani is found to be late in complying with the court order. I have, on each occasion, analysed the period and nature of the lateness and satisfied myself as to the relevant intentionality, but it would be tedious in what is already a long judgment to repeat those findings and holdings on each occasion.[34]Ground 4 of the grounds for committal related to the failure to produce Bank Riyad and Bank of Beirut account statements. It is accepted that these have now been produced, but Mr Baadarani was late in producing the relevant material. I hold that Mr Baadarani is in contempt of court in relation to the late production of the Bank Riyad and Bank of Beirut bank statements.[35]Ground 5 of the grounds for committal related to the failure to disclose the HSBC bank statements. It is now accepted by Abela that the relevant HSBC bank statements were finally produced in complete form on 27th March 2015. It is accepted by Mr Baadarani that the documents were produced late. I find and hold that Mr Baadarani was in contempt of court in being late in complying with the court order.[36]Ground 6 related to some bank statements which Mr Baadarani had produced in connection with his account at Audi Bank. On examination, these statements contain credits under the rubric, "checks purchased". It was the evidence of Mr Baadarani, given in response to enquiries made of him in correspondence, that the term "checks purchased" related to cheques which he had drawn on other accounts and which were credited to the Audi Bank account.[37]But for this evidence, I would have regarded "checks purchased" simply as being a record of cheques deposited, whether drawn on Mr Baadarani's accounts or on the account of a third party.[38]When cross-examined, Mr Baadarani acknowledged that he had said that "checks purchased" meant cheques drawn by him, but he added:
"Now, I am not sure. I will get the cheques from the bank to show where it came from. If you give me the list I will find it."
[39]In fairness to Mr Baadarani, his understanding appears to have derived from a letter written to him by BIT, not Audi Bank, relating to similar entries on BIT accounts. There, BIT had said: ""Checks purchased" means the cheques deposited by yourself on your account with us." So there was room for misunderstanding as to what "checks purchased" really meant.[40]I am not sure that there are other non-disclosed accounts of Mr Baadarani on which those “checks purchased” were drawn. The Abela case is that when one analyses the entries marked "checks purchased", if one assumes that those represent cheques drawn by Mr Baadarani on his own account, an analysis of all of his disclosed accounts shows many instances in which there is no corresponding debit on a known Baadarani account.[41]The inference which I am invited to draw is that, therefore, there must be other Baadarani accounts on which these relevant "checks purchased" were drawn. But those other accounts have not been disclosed.[42]Because of the doubt about what "checks purchased" might mean, I am not sure that this is right. However, I do think that there is a real possibility that there may be undisclosed bank accounts. That is for two reasons. First, the material disclosed in relation to the BIT accounts, according to a schedule produced by BIT, includes money received from Mr Baadarani for an account called Land Mark. There are 13 such entries, some of them very large. All of the large entries can be matched to other Baadarani accounts, save for one. That is a credit of $1.905 million deposited on 23rd July 2005 in connection with the Land Mark transaction. If this was money received from Mr Baadarani to the account of Land Mark, and all the other monies so received were drawn on Mr Baadarani's disclosed bank accounts, this one entry suggests that there may well be another Baadarani account, which has not been disclosed.[43]Secondly, in the HSBC disclosure, there are sundry entries as credits on the account number 56113, which confirm, or appear to confirm, transfers from accounts in the name of Mr Baadarani to this HSBC account, most of them of sizeable amounts. Once again, it is not possible to match up in the disclosed Baadarani accounts these credits to the HSBC account. This also suggests that there is a real possibility of the existence of other Baadarani accounts, which are not disclosed. Of course, the reason for the nondisclosure, if it be such, may be entirely innocent, but I record that there is a real possibility that Mr Baadarani is in breach of his disclosure obligations.[44]Ground 7 related to a complaint about a failure to disclose bank accounts with the National Bank of Kuwait (“NBK”). In this connection, Mr Baadarani's disclosure is undoubtedly late. I am satisfied that he is in contempt of court in relation to the late disclosure.[45]Abela says that the disclosure is also partial. I am not sure that Mr Baadarani is in contempt of court in relation to that accusation. He explained to me in his evidence that the reason that his NBK, statements end in March 2009 is that from 2007 until 2009, he was working in Kuwait and operated this account. But thereafter, the account was dormant and so what NBK has done is to produce statements, not down to June 2014, but down to the last activity on the account. This strikes me as a credible explanation and certainly one in respect of which Mr Baadarani should be given the benefit of the doubt. Accordingly, I do not find him in contempt of court as regards that allegation.[46]Indeed, I very much doubt that it is worth anybody pursuing the point any further. If Mr Baadarani is to get any further information out of NBK, it appears that he must satisfy a debt that he owes in Kuwait. That money would probably be better spent meeting his obligations to Abela in this country.[47]Ground 10 relates to some promissory notes that were underwritten by a Lebanese bank. These notes were produced late. They evidently relate, as Mr Baadarani himself admits, to some larger transaction, for they constitute, a re-statement of a pre-existing liability. Mr Baadarani says that this liability related to his share of a larger borrowing undertaken in connection with business that he was doing with Sheikh Al Wazzan. I am sure that there are further documents relating to the bank of Lebanon promissory notes. Mr Baadarani was required to produce all loan documentation and all promissory notes relating to the loan with the Lebanon & Gulf Bank, and there must be some documents that relate to the original advance. Mr Baadarani himself acknowledged in cross-examination that he could ask the bank for the relevant loan documentation and how much he had originally borrowed. His failure to do so in compliance with the court order, in my judgment, amounts to a contempt of court.[48]That concludes what I have to say in relation to the bank statements.[49]The second category of complaint related to Mr Baadarani's former ownership of a flat in Hanover Gate. Mr Baadarani had originally owned a 999 year lease of this property, but in May 2008 he transferred it to a Panamanian company called Hanover Place Corporation, apparently for the benefit of his daughters.[50]Mr Baadarani was obliged to produce all documentation relating to the transfer of 12 Hanover Gate from himself to Hanover Place Corporation. In fact, he has produced only one or two documents. His explanation is that this affair was handled by his English agent, Mr Fakih, who used his company, Leesdel Limited, and its in-house lawyer, Mr Hyam Lehrer, to undertake the relevant transactions.[51]I am sure that there must be a conveyancing file of some sort relating to this transaction. This is not in the physical possession of Mr Baadarani because he left everything to Mr Fakih and the solicitor whom Mr Fakih used; but the documents are, in my judgment, in the control of Mr Baadarani, since they are held by his agent and by the solicitor instructed by his agent.[52]Whilst I cannot be sure that Mr Baadarani's failure to obtain the documents thus far constitutes a contempt of court, now that the matter has been explained to him, any continued failure would prima facie demonstrate the relevant degree of intentionality to establish a contempt. For the time being, however, I am not sure that Mr Baadarani is in contempt of court, even though I am sure that there must be more documentation than he has produced.[53]Ground 9 of the grounds for committal related to a guarantee. Mr Baadarani said in the course of his examination that he had provided a guarantee in support of a mortgage over Hanover Gate, granted to Hanover Place Corporation by NBK, in the sum of £945,000.[54]The list sent pursuant to Master Bowles's Order required him to produce the asset statement provided to the NBK, evidencing his ability to meet the guarantee, and it also required him to produce all documents evidencing payments made from that loan.[55]So far as the provision of an asset statement is concerned, Mr Baadarani's evidence was that he did not provide any asset statement. He said that Mr Fakih had never asked him for such a statement and that he merely signed a statement that he was good for the money.[56]He says that he has asked Mr Fakih for exactly what he has been asked to produce by Abela, and he has produced everything with which he has been provided. He confirmed that NBK had never asked him for any paper and he speculated that that was because Mr Fakih would have told NBK what he was good for and that they trusted that personal reference.[57]I am not sure that Mr Baadarani is in contempt of court, although I do think there must have been probably something to support the guarantee.[58]So far as the complaint about the distribution of the mortgage monies, it is now accepted that Mr Baadarani has provided a completion statement and that, in substance, he has discharged his obligations, though he was undoubtedly late in so doing (and to that extent in contempt of court).[59]Committal ground 9 (f) related to some accounts at Barclays Bank in connection with the ownership of the Hanover Gate property and the dealings therewith by Mr Fakih. Both in relation to the mortgage and in relation to service charges etc, it appears that accounts at Barclays Bank were used. Mr Baadarani produced one such Barclays account, but it appears that there are other connected Barclays' accounts. He produced everything late and it is clear that some of the Barclays' statements are missing. Mr Baadarani acknowledged in cross-examination that he would seek to get all the statements but he insisted upon dealing with Barclays Bank, because he had hitherto only dealt with them through Mr Fakih.[60]I am sure that there are other statements beyond those that have been disclosed. I am not sure that Mr Baadarani's failure to disclose them completely is a matter of intention on his part, rather than a matter of pure oversight.[61]The third category of complaint made related to Mr Baadarani's business dealings with Sheikh Al Wazzan.[62]This first particular complaint deals with Mr Baadarani’s interest in a company. Ground 11 of the grounds for committal complained that Mr Baadarani had not complied with item 13 on Master Bowles's schedule in producing all documents evidencing purported shareholdings in Al Ashrifiya, a company said to be in the ownership of Sheikh Al Wazzan, as to 85%, and Mr Baadarani's brother, Mohamed Baadarani, as to 15%. Mr Baadarani has produced no documents at all as regards this. His explanation in evidence was that this was a transaction in which he had been originally involved with the intention that he should have a 35% shareholding and Sheikh Al Wazzan should have a 65% shareholding. But then, his brother Mohamed came into the picture and Mohamed and Sheikh Al Wazzan divided up the shareholding with 15% to Mohamed and 85% to Sheikh Al Wazzan. The result was that, whatever the original intention might have been, Mr Baadarani never got any shares and was never required to put any money in.[63]In these circumstances, he has no documents available and he says cannot get any documents, other than perhaps the share register of Al Ashrifiya, which will demonstrate the relevant holdings. He says that there are no documents because all dealings between him and the Sheikh were verbal or oral. He says that he is from the old school, and that while relying on word of mouth is, what he called, "Stone Age thinking", it is the way that his generation worked.[64]I am not sure that Mr Baadarani is in breach of the order to disclose item 13 of the Bowles list, but I consider it probable that Mr Baadarani has within his control, that is to say he can acquire, the shareholder register.[65]The second ground of complaint relating to “business dealings” relates to a document which has been produced by Sheikh Al Wazzan and addressed to Mr Baadarani, confirming that the two of them had been co-operating and acted jointly in several business transactions, for which the Sheikh acted as financier and under which Mr Baadarani was entitled to a share of the proceeds. But, the letter says:
"We have completely and finally settled all our rights and obligations ensuing from all operations related to the BIT out of the aforesaid business transactions."
[66]In fact, the BIT bank statements show that Mr Baadarani received, in March 2014, some $6.239 million from a source. Mr Baadarani says that this source is Sheikh Al Wazzan. The bank entry indicates that it is "closing account as per contract". Mr Baadarani is unable to explain what the reference to a “contract” is.[67]I am not sure that Mr Baadarani has failed to produce all documents relating to his business dealings with Sheikh Al Wazzan, though I think it probable that there must be more documents than he has produced.[68]The final ground of complaint relating to “business dealings” to which I wish to refer is the ground of committal that relates to non-payment of commissions, namely Ground 13. This relates to item 17 on Master Bowles's list, where Mr Baadarani was required to produce all documents from 2009 to the present relating to and explaining all commissions received by him from any source. On its face, this is an extraordinarily onerous requirement, but in fairness to the person who prepared the list, it arose out of an indication that Mr Baadarani had given in the course of his examination, that it was something that he could do. When it was embodied in the schedule attached to Master Bowles's Order, it was not something to which Mr Baadarani objected. Accordingly, it is for him to comply with the order.[69]Mr Baadarani says that in all his commission dealings, he operates only by word of mouth and that there will not be any contracts. What he suggested is that, if he was able to examine the bank accounts and was asked about the source of monies, he might well be able to remember where the commission payments came from. That would be a form of interrogation, properly to be conducted at the adjourned examination. I am not sure that there are other documents relating to commissions, though I consider it probable that there must be.[70]I have not reviewed more minor grounds set out in the grounds of committal because the review so far conducted is sufficient to dispose of this present application. I have made some findings that Mr Baadarani is in contempt of court. I have given other indications that whilst I am not sure, I consider it probable that there is other material that can be produced. I have given other indications that in other cases, there is a real possibility, if not a probability, that material is available.[71]In these circumstances, what should be done? I was referred to the decision of the Court of Appeal in Broomleigh Housing v Okonkwo [2010] EWCA Civ 1113. That case underlined the seriousness of making a committal order; see paragraph 21, where the Court of Appeal says:
"Rule 71.8 gives the court power to make a committal order, that requires the exercise of discretion, which in turn requires consideration of the circumstances of the contempt. Committing a person to prison for contempt of court is a serious step, too serious, in my view, to be undertaken simply as a matter of routine without enquiring into the nature of the contempt and the circumstances in which it has been committed and giving reasons, at any rate briefly, for the decision."
[72]There follows in paragraph 22 some guidance, suggesting that four options are available. The first relates to where a contempt of court is satisfactorily proved, namely,(a) that the debtor's breach is intentional and(b) in the circumstances, it is appropriate to make a suspended committal order (the judge having weighted all of the evidence which suggests that that is the appropriate course). There the application is disposed of.[73]The second option is to adjourn further consideration of the application for a suspended committal order. There the application is simply adjourned with no other order being made, but committal remaining a possibility.[74]The third option is to adjourn the application for the suspended committal order but to give directions supported by a penal notice requiring the judgment debtor to depose to specified matters and to file the affidavit or affirmation by a specified date; There the committal application will be reconsidered in the light not only of the original breaches but also of compliance with the new conditions. Fourthly, the judge can, there and then, decide not to make a committal order but to proceed in a different way, for example, simply by making a further order for the production of the missing information.[75]Within that range of options, I propose to take the third. It seems to me inappropriate to make a suspended committal order for the established contempts, which relate to late production of material in the main, rather than a complete failure to provide material. Equally, it seems to me inappropriate simply to dismiss the committal application when there is a real prospect, and in some cases a probability, that further material could have been and should have been produced.[76]It seems to me that both to underline the seriousness of the position to Mr Baadarani and to enable him to explain to third parties just how serious it is, the threat of a prison sentence, albeit one that is suspended, should remain hanging over him until there is full and complete compliance with Master Bowles's Order.[77]I will accordingly adjourn the further consideration of this committal application to a date to be fixed and, in the meanwhile, will direct that Mr Baadarani must depose to specified matters and provide identified documents by a specified date.[78]The precise terms of that Order will now be determined.