Kuwait Oil Tanker Company SAK & Anor v Al Bader & Ors [2008] EWHC 2432 (Comm)

[2008] EWHC 2432 (Comm)Case No 2004 FOLIO 1072
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 17/10/2008
Before
MR.JUSTICE TEARE
Between
(1) KUWAIT OIL TANKER COMPANY S.A.K.Claimants(2) SITKA SHIPPING INCORPORATED(1)ABDUL FATTAH SULAIMAN KHALED AL BADERDefendants(2) HASSAN AL HASSAN QABAZARD(3) TIMOTHY ST JOHN STAFFORD(4) PONTIRANA INVESTMENTS(5) MAHNAZE INCORPORATED(6) MARWAN SULAIMAN KHALED AL-MUTAWA
Richard Slade (instructed by Waterson Hicks) for Claimants for The First and Sixth Defendants against whom relief was sought were not representedHearing Hearing dates: 13-14 October 2008
JudgmentMr. Justice Teare:Introduction
[1]On 15 December 1998 the Claimants obtained a judgment in their favour in an action (“the first action”) in which they alleged and proved that Mr. Al Bader, and others, had defrauded them. Damages in the sum of US$137,323,405 were awarded against Mr. Al Bader by Moore-Bick J. An appeal was unsuccessful; see (2000) 2 AER Comm. Reports 271 (per Nourse, Potter and Clarke LJJ). Since then the Claimants have endeavoured to enforce their judgment on such assets of Mr. Al Bader as they have been able to locate. Thus in November 2002 they obtained a charging order on a flat known as 80 Viceroy Court, London which was registered in the name of Pontirana Investments, a company registered in the British Virgin Islands. Master Miller held that Mr. Al Bader had provided the purchase money to Pontirana which gave rise to a resulting trust in his favour and therefore an equitable interest in the property. However, a considerable sum, in excess of US$123m., is said to be still unpaid.[2]On 13 December 2004, a matter of days before the expiry of 6 years from the date of the judgment in the first action the Claimants commenced another action (“the second action”). In that second action they seek judgment upon the earlier judgment for the outstanding judgment debt and certain other declarations. Mr. Al Bader sought to have that action summarily struck out as an abuse of the process of Court. He failed, though one element of the claim (interest from more than 6 years from the date of judgment) was struck out; see [2005] EWHC 1592 QB (per Toulson J.).[3]Mr. Al Bader’s solicitors, Olswang, said on 31 December 2007 that Mr.Al Bader had suffered a major stoke in late 2006 and remained very ill and unable to instruct them personally. On 17 January 2008 Olswang came off the record. Nobody has communicated with the Claimants’ solicitors since then giving any further details of Mr. Al Bader’s state of health.[4]There were, originally, four other Defendants to the second action. Judgment in default has been obtained against them. On 11 April 2008 permission was obtained to add Dr. Al-Mutawa as the 6th. Defendant in order that he would be bound by the declarations sought by the Claimants. He is the nephew of Mr.Al Bader. Permission was granted to serve him at his mailing address in Kuwait.[5]The trial in the second action took place on 13 and 14 October 2008. Mr. Al-Bader did not attend the trial and was not represented. Although Dr. Al Mutawa was not served at his mailing address as contemplated by the order giving permission to serve out of the jurisdiction, he was served with the proceedings in Kuwait in person and in accordance with the law of Kuwait on 13 May 2008. There can be no doubt that these proceedings were properly served and brought to his attention. However, he did not attend the trial and was not represented.[6]I am satisfied that both Mr. Al Bader and Dr. Al-Mutawa have been given proper notice of this trial and that it is appropriate to proceed to hear and determine the claim notwithstanding their absence. Neither Mr. Al Bader nor Dr. Al-Mutawa gave an address for service within the jurisdiction. However, notice of this hearing, and of the evidence to be relied upon by the Claimants, was given to Mr. Al Bader by means of letters dated 17 July 2008, 24 July 2008, 5 September 2008, 17 September 2008 and 25 September 2008 addressed to his last known address in this jurisdiction and to a Mr. Labeed Abdal in Kuwait to whom Olswang, Mr.Al-Bader’s former solicitors, had said correspondence should be sent. Dr. Al-Mutawa did not acknowledge service. But notice of this hearing, and of the evidence to be relied upon by the Claimants, was given to Dr. Al Mutawa by means of letters dated 17 July 2008, 24 July 2008, 5 September 2008, 17 September 2008 and 25 September 2008 addressed to his mailing address in Kuwait. There has been no response to any of these communications from Mr. Al Bader or from Dr. Al-Mutawa or from any person on their behalf.[7]Counsel for the Claimants has referred me not only to matters which support the Claimants’ case but also to such matters as might possibly support the interests of Mr. Al Bader and Dr. Al-Mutawa.

Judgment upon the judgment in the first action

[8]The Claimants are in principle entitled to seek a judgment against Mr. Al Bader upon the judgment in the first action, however surprising that may seem. The juridical basis of the second action has long been explained as being an implied contract to honour the judgment in the first action. The authorities which support such cause of action, both ancient and modern, are Adams v Ready (1861) 6 H & N 261, Grant v Easton (1883) 13 QBD 302, ED and F Man (Sugar) v Haryanto (unreported) 17 July 1996 and Bennett v Bank of Scotland [2004] EWCA Civ 988.[9]The only possible defence to such a claim is that the second action is an abuse of the process of the Court. That depends upon the reasons for it. When Mr. Al Bader sought an order striking out the second action summarily Toulson J. declined to strike out the action as an abuse, leaving the decision to the trial judge. He said he was “unhappy about the idea that the claimants should have another period of six years to seek to enforce their judgment without any continuing form of control by the court. However, the claimants have asserted that they may be prejudiced if they are not able to obtain a judgment in the second action, because without such a judgment it may be more difficult for them to enforce their rights in other jurisdictions.” (see [2005] EWHC 1592 at para.12.)[10]Mr. Mark Aspinall, the solicitor acting for the Claimants, gave evidence before me. His written statement did not address the reasons for the Claimants’ action but in his oral evidence he did so. He stated that it had been and remained the intention of the Claimants to recover the full amount of the judgment debt. He said that in late 2002 a substantial recovery had been made in Switzerland. Enquiries were made as to whether future recoveries in Switzerland might be prejudiced by the elapse of time from the date of the judgment. He was advised that there would be no prejudice so long as the judgment was still recognised in England. Similar enquiries were made of other jurisdictions, particularly outside Europe. No advice was received that the lapse of time would preclude enforcement but advice was received that administrative problems might be caused by delay in enforcement. It was therefore decided out of an abundance of caution to seek a judgment based upon the first judgment before 6 years had elapsed. Pursuant to section 24 of the Limitation Act 1980 the limitation for such a claim was 6 years. The Claimants wished to avoid any administrative problems which might be caused by delay but more particularly they wished to avoid any risk that a judgment older than 6 years might not be enforceable.[11]There was no reason not to accept the evidence of Mr.Aspinall. In the light of his evidence as to the reasons why the second action was issued there was no reason for concluding that the second action was an abuse of the process of the Court. Counsel for the Claimants expressly disclaimed any intention to avoid the judicial control over the execution of a judgment more than 6 years old in RSC Order 46(2) (which has survived the CPR). He said that the Claimants were not seeking to improve their position in that regard. Consistent with that position he accepted that it would be appropriate to make the type of order suggested by Toulson J., namely, that enforcement of the judgment in the second action be stayed until the Claimants obtain permission from the Court to enforce it. Thus, if and when the Claimants wish to enforce the judgment either in England or abroad the Court would have an opportunity to review the matter and ensure that the Claimants were seeking to enforce the judgment upon an asset recently discovered rather than upon an asset of which they had known for some time but had delayed seizing for no good reason.[12]I therefore consider that the second action is not an abuse of the process of this Court, that the Claimants are entitled to judgment against Mr. Al Bader upon the judgment in the first action and that there should be a stay of execution which the Claimants may apply to have lifted.[13]So far as the amount in which judgment should be entered I accept the evidence of Mr. Aspinall that the amount outstanding in respect of principal and interest (up to 6 years from the date of the first judgment pursuant to section 24(2) of the Limitation Act 1980, Lowsely v Forbes [1999] 1 AC 329 and the decision of Toulson J. on the strike-out application in this action) is US$123,559,033.37. The judgment in the first action also awarded the Claimants their costs of the first action which were later assessed (by default of objection) in the sum of £2,688,715. There is, it seems to me, no reason in principle why the judgment to which the Claimants are entitled in the second action should not include the costs which were awarded to the Claimants in the first action. Toulson J. doubted whether such an order could be properly be made when the costs order could still be enforced. However, more than 6 years has now elapsed since the date of the assessment by default and so the reason for his doubt has fallen away.

The costs of the appeal

[14]At the opening of the trial the Claimants sought a declaration that Mr. Al Bader is obliged to pay the costs of the unsuccessful appeal from the judgment of Moore-Bick J. However, the Claimants have already have been awarded those costs by the Court of Appeal but they have taken no steps to have them assessed. The declaration which was sought would not improve the Claimants’ position. It would therefore serve no purpose. What would improve their position would be an application to have their costs of the appeal assessed. Their delay in doing so might well result in a loss of interest; see CPR Part 47.8(3). Accepting that the declaration they sought lacked a real purpose, the Claimants did not pursue their claim for the declaration as to the costs of the appeal.[15]The declarations sought, which were amended during the course of the trial, are as follows: “1. It is declared that at all times since 23 April 1993 any possession by the Sixth Defendant [Dr. Al-Mutawa] of shares in the Fourth Defendant [Pontirana] has been as agent on behalf of the First Defendant [Mr. Al Bader].[2]It is declared that the Fourth Defendant [Pontirana] was acquired by the First Defendant [Mr. Al Bader] on 23 April 1993 for the purpose of ensuring that the First Defendant’s assets would not be available to meet the First Defendant’s existing liabilities for fraud.”[16]The Claimants’ purpose in seeking these declarations is precautionary. The only asset known to have been owned by Pontirana was 80 Viceroy Court which has now been sold. However, in the event that further assets are found the Claimants wish to prevent Dr. Al-Mutawa from denying that he holds the bearer shares as agent for Mr. Al Bader. He is not bound by the findings of Master Miller in the charging order application but would be bound by the first declaration if it were made in this action. The Claimants seek the second declaration in order to assist them in piercing the corporate veil of Pontirana in the event that they locate further assets in the name of Pontirana and wish to say that they are in truth assets of Mr. Al Bader.[17]The liquidator of Pontirana is unaware of any further assets in the name of Pontirana and there is no evidence before me that further assets in the name of Pontirana are likely to be found. Mr. Aspinall was understandably reticent to state in evidence where he was looking and where he hoped to find assets. But it is plain that he and the Claimants are looking for such assets. Having regard to the size of the fraud perpetrated by Mr. Al Bader it is not possible for me to exclude the possibility that the Claimants might find further assets in the name of Pontirana. I therefore do not consider that the making of the declarations can be said to be of academic or hypothetical interest only. There is a real possibility, that is, a more than fanciful possibility that other assets in the name of Pontirana will be found and that the declarations will therefore be of benefit to the Claimants. I therefore consider that the Court should grant the declarations sought, assuming that the facts underlying them can be proved.[18]The Claimants rely heavily upon documents obtained by the liquidator of Pontirana. He has himself considered those documents and concedes that Pontirana is controlled by Mr. Al Bader and that the Claimants are entitled to pursue Pontirana for recovery of the judgment in the first action “as it has been a vehicle for fraud and the covert holding of assets on behalf of one or more of the First, Second and Third Defendants”.[19]Moore-Bick J. found that Mr. Al Bader left Kuwait for London on 5 January 1993 just before an investigation into his activities came to a head and that he feared that he would not be able to give a satisfactory answer to the case against him (see pp.89-90 of the judgment of Moore-Bick J). On 22 March 1993 Pontirana was incorporated (see the Memorandum of Association) and on 23 March 1993 two bearer shares in that company were issued (see the bearer shares). On 23 April 1993 a Management Agreement in relation to the company was signed. Mr. Al Bader was party to it as “the Owner”. It was signed on his behalf by a Swiss lawyer, Mr. Costabella, acting for a partner Mr. de Preux, in the firm of Tavernier, Gillioz, De Preux, Dorsaz. The agreement recited that the Owner had acquired the company on April 23 1993 and had requested Citco, a Swiss company, to act as a director of the company. The Owner warranted that “he is acting for his own account and that he is solely entitled beneficially to the shares of the Company.”[20]On 5 May 2003 Mr. Al Bader transferred the sum of £600,000 to his solicitors in England, S.J.Berwin. On 28 May 2003 Pontirana were registered as the owner of 80 Viceroy Court. The address of the company was given as “care of S.J.Berwin.” By letter dated 24 July 1993 S.J.Berwin informed the Home Office that they had been instructed by Mr. Al Bader who wished to apply for entry clearance to the UK as a person of independent means. They said that “he has recently purchased a flat for £700,000 in St.John’s Wood, London and has spent a further £200,000 in decorating and furnishing it as his London residence.” There is no reason to doubt that the flat was 80 Viceroy Court. Mr. Al Bader agreed in cross-examination in the first action that the letter referred to 80 Viceroy Court (see p.35 of Moore-Bick J.’s judgment).[21]On 21 July 1994 a freezing order was granted by Cresswell J. which covered 80 Viceroy Court. On 18 August 1994 S.J.Berwin wrote to the Harrow District Registry objecting to a caution being placed on the Land Register with regard to 80 Viceroy Court. They said “We are instructed by Pontirana ……… that [Mr. Al Bader has] no legal or equitable interest in the company.” On 24 September 1994 Mr. Al Bader swore an affidavit of assets in which he said that he “did not have any interest in Pontirana.”[22]In January 1999 Mischon de Raya, solicitors for Pontirana, sought information from Dr. Al-Mutawa. He told them by letter dated 1 February 1999 that he held the bearer shares but referred the solicitors to Mr.Al Bader for information concerning the incorporation of Pontirana and the role of Citco. He said that it was essential to have property in the name of an offshore company “to avoid estate duty taxes”. He was pressed for more information but again referred the solicitors to Mr. Al Bader.[23]In 2000 the Claimants commenced an action seeking to trace funds stolen from them into 80 Viceroy Court. That action was stayed in May 2001 by Colman J. when the Claimants sought a charging order over the property by way of execution of the first judgment. A charging order nisi was made by Steel J. in June 2001 and made absolute by Master Miller in November 2002. However, before the 2000 tracing action was stayed Pontirana had to serve a defence verified by a statement of truth. Citco refused to verify the proposed defence of Pontirana. They said that “the assertions that S.J.Berwin & Co. acted on behalf of Pontirana and that Mr. Al Bader acted as nominee on behalf of Dr.Al-Mutawa are not supported by any documentation or correspondence in our files.” They said they had decided to resign as a director of Pontirana.[24]The statement of truth was in the event signed by Dr. Al Mutawa. There is no dispute that he had in his possession the bearer shares. The British Embassy in Kuwait certified that he had them on 9 December 2000.[25]There are two further documents which should be mentioned. The first is dated 1 August 1993 but did not emerge until 2001. It is in English, signed by Dr. Al-Mutawa and addressed to Mr. Al Bader. It states “I inform you – in my capacity as owner of (Pontirana Investment Ltd.), owner of flat No.8 Viceroy Court, Prince Albert Road, London NW8, that I have no objection using the said flat as residence for you and your dignified family……….Please do not hesitate to use this letter as a declaration made by me with all contents contained therein. I am also well prepared to sign any legal documents for confirmation of the contents of said letter.” The second document purports to be an Underlease dated 15 June 1997 between Dr. Al-Mutawa for Pontirana as Landlord and Jawaher Al-Saleh (the wife of Mr. Al Bader) as Tenant extending a lease of 80 Viceroy Court from 5 years to 15 years.[26]In his defence to the second action, which he verified, Mr. Al Bader denied that Pontirana was a vehicle for any fraud by him and that Pontirana held any assets of Mr. Al Bader whether covertly or otherwise. However, he did not give evidence at the trial and took no part in the trial. Dr. Al-Mutawa did not file a defence, has submitted no evidence and took no part in the trial.[27]My findings are as follows. It is plain from the Management Agreement concerning Pontirana that the company was owned by Mr. Al Bader. He was described as the owner and as the beneficial owner of the bearer shares. Those shares and hence the company were acquired by Mr.Al Bader shortly after he fled Kuwait. Whilst there can be legitimate reasons for acquiring bearer shares in a company incorporated in the the British Virgin Islands Mr. Al-Bader has not seen fit to come to this court and give evidence that he had a legitimate reason. In the absence of any such evidence it is a reasonable inference from the fraud he committed, the timing of his acquisition of the bearer shares and the ability of an owner of such shares to hide the true ownership of the company that he acquired the company with a view to concealing assets from the Claimants whom he had defrauded.[28]It is also clear that the purchase price of 80 Viceroy Court was provided to S.J.Berwin by Mr. Al Bader and that S.J.Berwin purchased that property in the name of Pontirana on the instructions of Mr. Al Bader. S.J.Berwin must have written the letter dated 24 July to the Home Office on the instructions of Mr. Al Bader. That letter was true; it is consistent with the evidence in the Management Agreement. The subsequent letter from S.J.Berwin dated 18 August 1994 sits unhappily with the Management Agreement and did not state the true position.[29]At the trial of the first action in 1998 the Claimants pointed to the inconsistency between the letter dated 24 July 1993 from S.J.Berwin and his affidavit of assets for the purpose of damaging Mr. Al Bader’s credit. Counsel in the first action did not have all of the documents which are now available and suggested that the letter dated 24 July 1993 was a lie. In the course of his evidence in the first action Mr. Al Bader said that he had negotiated the purchase of the flat on behalf of his nephew, Dr. Al-Mutawa, who was the legal owner of Pontirana. He also said that the letter dated 24 July 1993 was a mistake. Moore-Bick J., in the course of his judgment, said that “Mr. Al Bader was quite willing to allow his solicitors to write to the Home office in terms which clearly indicated he was the beneficial owner of a valuable property when he knew that was not the case” (see p.36 of the judgment). On appeal the Court of Appeal said that one or other account must have been untrue (see p.287 of the judgment of Nourse LJ).[30]In this second action the Claimants’ case is that the letter dated 24 July 1993 stated the truth and that Mr.Al Bader’s affidavit was untrue. I do not consider that the Claimants are precluded from alleging this in the second action on the grounds that Moore-Bick J. made a finding that the letter was false. The relationship between Mr. Al Bader and Pontirana was not central to the first action and Moore-Bick J. did not make detailed findings about that relationship. He was concerned with an issue affecting the credibility of Mr. Al Bader. In that context he did no more, in my judgment, than point out that since Mr. Al Bader had said on oath that he had no interest in Pontirana he must have allowed his solicitors to make a statement in the letter dated 24 July 1993 which he knew was not true. For the purposes of impugning the credit of Mr. Al Bader it was not necessary to decide which account was true. This was expressly recognised by the Court of Appeal who said that one or other account must have been untrue.[31]Since at least since 9 December 2000 the bearer shares have been in the possession of Dr.Al-Mutawa. However, having regard to the fact that the bearer shares were originally acquired by Mr. Al Bader for the purpose of concealing assets from the Claimants whom he had defrauded it is more likely than not Dr.Al-Mutawa holds them on behalf of Mr. Al Bader. Citco, the original director of Pontirana, refused to sign a statement verifying a plea that Mr.Al Bader acted as nominee for Dr.Al-Mutawa. Whilst Mr.Al Bader gave evidence before Moore-Bick J. that he had negotiated the purchase of the flat on behalf of his nephew, Dr.Al-Mutawa, who, he said, was the legal owner of Pontirana and Dr. Al-Mutawa gave evidence before Master Miller that Mr. Al Bader gave the purchase money to Dr. Al Mutawa in payment of a pre-existing debt neither defendant gave any such evidence before me. In so far as those suggestions are before me I reject them.[32]I am unable to give any credence to the letter signed by Dr. Al-Mutawa and dated 1 August 1993. Its terms simply do not suggest it is authentic. Nor can I regard the apparent underlease dated 15 June 1997 as authentic. Dr. Al-Mutawa did not come to this court to give evidence that either document was genuine.[33]Whilst Article 16 of the Articles of Association of Pontirana provides that the bearer of a bearer share certificate shall for all purposes be deemed to be the owner of the shares that does not prevent the bearer having an arrangement with another that he holds them on behalf of that other. Nor does it prevent anyone alleging that there is such an arrangement.[34]I am therefore satisfied that any possession of the bearer shares by Dr. Al-Mutawa was as agent on behalf of Mr. Al Bader.[35]The terms of the redrafted second declaration are modelled on the language used by Clarke J. in The Tjaskemolen [1997] 2 Lloyds Rep.465 at p.469 to describe the circumstances in which it is proper to lift the corporate veil and followed by Cooke J. in Kensington International Ltd. v Republic of Congo [2005] EWHC 2684 at paras.185-190. For the reasons I have given I am satisfied that Pontirana was acquired by Mr. Al Bader on 23 April 1993 for the purpose of ensuring that his assets would not be available to meet his then existing (though not yet established) liability to the Claimants for fraud.

Election

[36]There is one further matter with which I must deal. In his Points of Defence Mr.Al Bader said that by failing to seek a tracing order in the first action in respect of assets held by Pontirana the Claimants had elected not to claim any tracing relief. Counsel for the Claimants treated this as being a submission that it was an abuse of the process to seek such relief in circumstances where a tracing order could have been sought in the first action. I shall also deal with it on that basis. It may well be the case that such an order could have been sought in the first action in addition to the remedy of damages. However, that is not enough to make the claim for tracing relief in the second action an abuse. It must be shown that the tracing remedy “properly belonged” to the first action and was “so clearly part of the subject-matter” of the first action that it would be an abuse of the process of the court to allow the remedy to be sought in the second action; see Johnson v Gore Wood [2002] 2 AC 1 at p.23. Lord Bingham explained the relevant principle at p.31:
“It is however wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.”
[37]The essential subject matter of the first action was establishing the defendants’ liability for fraud. The question of tracing stolen money into the hands of others did not properly belong to that action although it could have been raised with regard to Pontirana. It more properly belonged to proceedings to enforce the judgment in the first action. Whilst there is an important public interest in there being finality in litigation the private interests of the Claimants must also be considered. The natural order of events for the Claimants to follow is to obtain judgment and then enforce the judgment. One method of enforcement is tracing relief. I am firmly of the opinion that it is not an abuse of the process of the court to raise and pursue the question of tracing assets in the hands of Pontirana in the second action.[38]The plea based on election may however have been based upon the principle that when a person elects between two courses of action he is bound by that election and cannot later pursue a course he had earlier elected not to pursue. If this is what was intended it does not assist Mr. Al Bader. That is because the doctrine of election only applies when a person has to choose between two inconsistent courses of action. Although the prayer in the first action sought damages and tracing relief they were not inconsistent remedies or courses of action. The Claimants were entitled to seek and obtain a judgment in damages and later to seek and obtain tracing relief in order to enforce the judgment in damages.[39]For these reasons there shall be judgment for the Claimants against Mr. Al Bader and Dr. Al Mutawa and I shall make the orders requested by the Claimants.

Cited in 2 later judgments