March 25, 2015 Court of First Instance -Judgments,Judgments
Claim No: CFI 020/2014
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai
IN THE COURT OF FIRST INSTANCE
BEFORE JUSTICE SIR DAVID STEEL
GFH CAPITAL LIMITED
DAVID LAWRENCE HAIGH
Hearing: 23 March 2015
Counsel: Andrew Bodnar instructed by Gibson, Dunn & Crutcher LLP for the Claimant.
Zafar Ali QC and Ryan Hawthorne instructed by Stephenson Harwood (Middle East) LLP for the Defendant.
Judgment: 24 March 2015
RULING OF JUSTICE SIR DAVID STEEL
Transcribed from the oral judgment delivered on 24 March 2015, revised and approved by the Judge.
1. This is an application by the Defendant, David Lawrence Haigh, to vary a freezing order that had been issued by the Deputy Chief Justice in June 2014 whereby the Defendant was restrained from disposing of his assets save in excess of US$ 5 million. The freezing order was accompanied by a search order in regard to the Defendant’s apartment in Dubai which was one of the identified assets within the body of the order.
2. The hearing took place in the absence of Mr Haigh who is presently in custody. It appears that despite attempts by his legal representatives to obtain his temporary release from custody to attend court, that has not proved possible.
3. The June freezing order contained the outcome of an agreement between the parties that the order should not prohibit the Defendant from spending up to US$ 2050 per month towards his ordinary living expenses if he was not in custody. It also permitted him to expend a reasonable sum on legal advice and representation.
4. It is important to note however that the Defendant was required to tell the Claimant’s legal representatives where the money was to come from in terms of his living expenses and/or his legal expenses before those monies were spent. It should be noted also in passing that the search order identified the persons which the Defendant was required to permit entry into his apartment for the purposes of the search.
5. An earlier application to vary that freezing order was made in September 2014. That application was directed at two matters; personal expenses whilst in custody and additional expenses with regard to wide ranging commitments of the Defendant both in Dubai and England.
6. The Defendant has been in custody since May 2014 and presumably it had been wrongly assumed in June that he would not need funds whilst in custody. Such did not prove to be the case. But the claim advanced to obtain such funds in September was in many respects pretty incredible. For example, it was alleged that he needed to obtain phone cards at the cost of US$ 750 per week and medication at a rate of US$ 1000 per week. I concluded there was, however, a need for money to obtain such things as additional food, clean water, toiletries and so on. Unassisted by any material deployed by the Defendant, I ordered that he be permitted to withdraw a sum of US$ 500 per week.
7. As regards the legal costs, the Claimant agreed in September to permit the Defendant to use a sum of GBP 200,000 of cash funds in the hands of his solicitors towards the legal costs despite the fact that the Claimant was asserting that it had a proprietary interest in that money. I also acceded to an application by the Defendant in September to sell his apartment against an undertaking to permit the search to be carried out, and also to sell his motor car. The reason that the search had not been carried out between June and September was apparently some dispute as to whether it was appropriate for a search order of this court to be effectively enforced outside the DIFC.
8. I rejected all the other claims for permission to expend funds or other assets. Again, it might be noted in passing that, rather bizarrely, the application for such expenditure extended to such items as payments to the Defendant’s partner, gym membership, his personal assistant’s salary and PR and Media costs. These and many other items are no longer pursued.
9. Somewhat strangely in December 2014 the Defendant made a further application to vary the freezing order. This sought an increase in living expenses whilst in custody from US$ 500 to US$ 2000. It also sought permission to spend a total of GBP 1.3 million on legal fees. The application was issued apparently as an urgent application, and the Defendant sought to have it heard 6 days after it was issued; in fact, on Christmas Eve. The matter came before His Excellency Justice Omar Al Muhairi, who concluded the application was not urgent. The Defendant then simply withdrew the application.
10. This application was issued on 12 February 2015. It seeks the following variations to the present freezing order. Firstly, an increase of living expenses whilst in custody to USD 2,528.65 per week. It makes no mention of the sale of the apartment but seeks presumably in the alternative to sell property known as Travorian Farm, Sancreed in Cornwall. It also sought an ability to expend funds on reasonable legal expenses both incurred and to be incurred but in the draft form of order as served with the application, no figure was included. Lastly, it sought an order permitting the Defendant to apply the sum of GBP 54,842.10 in respect of debts set out in Schedule C to that draft order a set of expenses or debts which I must return to in due course.
11.Those figures require some further elaboration. Firstly the figure of US$ 2,528.65 per week is I understand made up of two items. First, the sum of US$ 903.86 as itemised in a Schedule to the Witness Statement of the Claimant, Schedule 1. That in effect covers personal expenses (a topic to which I will have to return) in regard to items such as food, medicine, telephones and so on, the cost of which are being incurred he says during his custodial period. The figures it might be noted are different from and I think in all respects lower than any of the claims that were advanced in September or December. The other item included in the US$ 2500 figure is a quarter of the total of the weekly payments of US$ 500 which I had permitted in September, but which have been advanced to the Defendant by friends and relations. As I say, the figures for legal expenses were left blank. I shall return to the topic in due course but it is to be noted that the costs already incurred by February 2015 in the range of proceedings to which the Defendant was a party were already enormous, about GBP 1.4 million, and they were anticipated to be likely to double in the future as those claims were pursued.
12. The application in December, as I have already noted, invited the Court to release GBP 650,000 for legal expenses incurred and another GBP 650,000 for expenses to be incurred, totalling GBP 1.3 million. Somewhat startlingly, during the course of the hearing, when invited to identify what figure the Defendant was inviting the Court to insert in paragraphs 4 and 5 of the order, the answer that was given by leading Counsel for Mr Haigh was GBP 250,000 in each paragraph, totalling GBP 500,000, although it should be noted that part of the explanation for that reduction was that it was accepted that these funds should only be attributable to the costs involved in these proceedings and in the criminal proceedings in Dubai and not any of the costs in other proceedings that have been issued which I will identify in a moment.
13. Let me now turn to some of the background. The Defendant was arrested on 18 May 2014 in response to a criminal complaint by the Claimant. It is the Defendant’s position that he was induced to return to Dubai under false pretences, with the object on the part of the Claimant of achieving that arrest. He has indeed been in custody ever since and as I understand it bail has been set at some stage which I’m unaware of at about USD 5 million. This eventuality was in fact foreshadowed in the freezing order, which permits the Defendant to apply on paper for permission to fund such a bail condition, despite the restraint on his assets. However no such application has ever been made.
14. On 26 May 2014 the Claimant issued their Claim Form. The Particulars of Claim annexed to it set out the essence of their claim, which is that the Defendant issued or procured the issue of a range of false invoices of the Claimant company addressed to third parties, whereby a sum of USD 5 million was diverted to his own bank accounts in breach of his fiduciary duties. Further it is alleged that those monies were in part used to make loans, for instance to Leeds United Football Club, and to purchase property, for instance the property in Cornwall. A Defence was served in December 2014. However it has not been suggested at any hearing in regard to the freezing order either here or in London or in Guernsey, that the Claimant does not have a good arguable case on the merits. What the defence asserts is that although it is accepted that the invoices were false, someone else other than the Defendant forged his signature upon them. It is also accepted that the monies were received by the Defendant in his bank accounts, but it is contended that they were in fact intended for the Defendant in order to reimburse him for expenses incurred in the course of his employment by way of some form of reconciliation and/or in respect of his salary and bonus entitlement. The Defence also asserts there was a shortfall of GBP 4.8 million in respect of commissions due to the Defendant although no counterclaim is advanced on these grounds because it is asserted by the Defendant that he cannot fund the filing fee. It is not appropriate for me to dwell further on the merits of the Claimant’s claim.
15. As I say, it is accepted that there is a good arguable case. It is not suggested that there are any grounds to set aside the freezing order and no such application has or is being made. My reluctance to deal any further with the merits of the Claimant’s claim is enhanced by the fact that the Claimant had taken out an application for immediate judgment under Part 24 of the Rules of the DIFC Courts on the grounds that there is no real prospect of successfully defending the claim. This is due to be heard in two months’ time so it is appropriate that I should leave the topic there save to repeat that it strikes me that the Defendant is correct to concede that the Claimant has a good arguable case.
16. Some of the points that are of some note are as follows. First, the Defence is almost devoid of any particularisation. Second, although much reliance is placed on evidence of a handwriting expert as to the nature of the signature on the invoices that evidence does not go anywhere near establishing that the Defendant was not responsible for obtaining or procuring the forgeries. Thirdly, it is difficult to identify the motive for the Claimant to embark upon false documentation in order to repay genuine expenses, let alone pay salary. Fourthly it also remains obscure as to why the Defendant was selected by some unknown person as the person to be apparently responsible for forging the invoices, and in the process, to have his email account used to promote the fraud. Fifthly it is also perhaps difficult to understand how the defendant who is a senior executive within the relatively small company making up the Claimant remained wholly unaware of any of these activities.
17. What then about the contention that the Claimant advances that it has a proprietary interest in the monies in the Defendant’s bank accounts or monies transferred from his bank accounts, all of which it is common ground were paid into his accounts as a result of the false invoices? Once again it is only appropriate for me to form a broad view on this topic. I say this because, again, it is common ground that the Claimant has a good arguable case on the topic. The position as regards the funds that remain in the bank accounts is clear enough, and as regards the money advanced to Leeds United and then repaid the position it seems to me is little different. Notably, Mr Ali QC for the Defendant opened this application by saying that it was for the Claimant to make good its assertion of the validity of the proprietary claim, and that he would leave matters there and deal with them if necessary in reply. In the result, in the wake of Mr Bodnar’s submissions on the topic, no challenge was made to them.
18. Of course the mere fact that the Claimant has a good arguable case of having a proprietary interest in the funds does not constitute a bar to an application by the Defendant to use those funds appropriately for such items as personal expenses and legal costs. As I understood it, it was common ground between the parties that the principles elaborated in the judgment of Mr Justice Morgan in David Nugent v Sarah Nugent  3 WLR p 59 are those which are appropriate to apply in the present circumstances given that the judge discussed all the relevant cases in respect to the use of funds where there is a freezing order covering proprietary assets.
19. The judge summarised the principles as follows, albeit in the context of the particular parties:
“(1) the court should recognise that the result of the claim may be that it is determined that [David Nugent] has a present proprietary right to the land or that the court will confer on him a proprietary right to the land;
(2) although [David Nugent] recognised in his pleadings that it would not be unconscionable for the [Mrs Nugent] to use the land to meet her own needs and pay her debts, he is entitled to argue that because it is unconscionable for her to refuse to perform the promises allegedly made by her and her late husband, it is similarly unconscionable for her to use the land to raise funds to be spent defending his claim; spending money in that way is not meeting a relevant need or paying a relevant debt;
(3) conversely, the court should recognise that the result of the claim may be that [David Nugent] has no present proprietary right, and is not given any proprietary right, to the land, which at all times has belonged to [Mrs Nugent], who is entitled to use the land to raise funds to defend the claim;
(4) the decision whether to allow the land to be used to raise funds to pay the defendant’s legal expenses requires a careful and anxious judgment which will involve an assessment of the injustice to [David Nugent] of allowing [Mrs Nugent] to do so (if [David Nugent] in due course establishes his claim) and of the injustice to [Mrs Nugent] of preventing her from doing so (if [David Nugent] in due course fails to establish his claim);
(5) the burden is on [Mrs Nugent] to show that she does not have access to any other available assets on which she could draw to pay her legal expenses;
(6) in considering whether [Mrs Nugent] has other available assets on which to draw, it is relevant to consider whether [Mrs Nugent] could effectively call on family or friends with the means to support her in paying her legal expenses.”
20. That authority was drawn to my attention by Mr Ali QC and I feel I can with confidence apply it in the present case in considering the position of his client, Mr Haigh.
21. It follows that the next topic to which I must turn is a consideration of what is described as the balance of injustice. The fundamental point taken by the Defendant is that absent release of funds he will be deprived of legal representation. Before considering this submission I ought to add a word or two on matters of credibility.
22. First, the Defendant is in the unhappy position of being in clear breach of the freezing order. In August 2014, he transferred two properties in Cornwall, which he accepts were assets of his, to his sister. His excuse for that is he claims he had not been told by his legal representatives that there was a freezing order. I express some doubt about that excuse.
23. Second, he is in clear breach of his undertaking to comply with the search order which he gave in September. His refusal now is on the grounds that he objects to the use of two members of the Claimant’s legal team in conducting that search. Yet, they were actually named in the original order. No attempt has been made to vary that order. The earlier objection to the search order was the inappropriateness of its enforcement outside the DIFC, and that was abandoned in September. No point was taken in September about the identity of those who were going to conduct a search. In any event, as soon as this point was raised, the Claimant agreed that those persons should not participate. In the result, the Defendant has given no valid explanation for abandoning his successful application to sell his house or his car which on any view are assets available to him to pay his legal expenses and/or personal expenses.
24. Third, the Defendant has posted a startling range of different figures for his funding application. The comparison in respect of September, December and February is set out in the Claimant’s skeleton at paragraph 32 which I have no intention of repeating. Nonetheless, it is very instructive. It leaves little confidence on the part of the Court in any of the evidence advanced by the Defendant about his expenses.
25. Fourthly, as will appear in a moment, the Defendant has issued proceedings both here, in Dubai and in London where he has paid the appropriate court fees. No notice was given to the Claimant about those payments let alone of the source of the funds, and yet strikingly poverty is pleaded in paying the court fees for the counterclaim in the main action. It is difficult to reconcile those matters.
26. Fifthly, the Defendant adopts a scattered approach in making allegations against the Claimant and the claim. For the sake of example, out of the blue in the Defence there is a plea of want of jurisdiction, some 6 months after the original inter parties hearing. This was then quickly abandoned during the present hearing. There was also in the papers leading to this application an assertion of want of clean hands on the part of the Claimant. This point has not seen the light of day before, no application has ever been made to discharge the freezing order, let alone to stay the proceedings.
27. Sixthly, and perhaps not least, no adequate explanation has ever been forthcoming as to his failure to disclose his multiple bank accounts in his initial statement of assets.
28. In the result, I approach his complaint that injustice would be occasioned by any refusal to release funds for legal costs and personal expenses with considerable caution. As I have already indicated, he has tempered his demand to a request for monies for legal expenses incurred in respect of these proceedings and of the criminal proceedings, but it has to be noted that he has also as I have mentioned instigated a number of other proceedings.
29. First, on 9 October 2014, a claim was issued in this Court against the Claimant and Mr Hisham Al Rayes, who is a senior executive of the company, for the sum of US$ 150,000 said to be owed in respect of unpaid performance bonus for the year 2012. The claim form records that the Court fee of US$ 7,500 was paid. The Claimant has put in a defence to this claim which was filed in December. Since that time, no progress has been made in the claim by the Claimant, but what perhaps is notable also about the proceedings is that the admitted costs of pursuing it are likely to exceed any conceivable recovery.
30. Second, a claim in the Queen’s Bench Division in London was issued on 3 October, that’s a week earlier, against the Claimant, its parent company and a number of individuals. The claim sought damages in deceit arising from the alleged representations made to the Defendant which he says induced him to come to Dubai. The claim form records that the Defendant expects to recover up to US$ 150,000 in damages. Once again, the court fee, this time of GBP 1,115 was paid. The claim form was clearly marked not for service outside the jurisdiction. There are no Particulars of Claim yet in existence. Furthermore, once again, it would appear that the costs of pursuing that litigation would exceed any potential recovery.
31. Thirdly, a claim was issued in the Commercial Court in London on 23 January 2015 in the name of Sport Capital Limited, a company registered in the British Virgin Islands, against the Claimant. Sport Capital is a company that is in effect the Defendant. The claim seeks damages in the total sum of GBP 33,156,994.77 for an alleged breach of a share purchase agreement. Once again, the Claim Form records that a Court fee of GBP 2,400 was paid, and again, it is marked not for service out of the jurisdiction. Furthermore, likewise, there are no Particulars of Claim.
32. Fourthly, on 12 January 2015, that is shortly before the claim issued in the Commercial Court, the Defendant instigated a private prosecution against Mr Patel, who is a witness in this case, and Mr Al Rayes alleging a conspiracy to defraud on essentially the same grounds as the civil claim in the Queen’s Bench Division; that is to say, the alleged misrepresentation which induced him to come to Dubai. The court in London is invited to proceed on the basis and this is of some note that the claim being advanced in these proceedings is fabricated. Against that background, the Defendant has applied for warrants of arrest of Mr Patel and Mr Al Rayes, an application being due to be heard before a district Judge on 9 April.
33. The Defendant is represented by leading counsel. There is a very substantial Witness Statement from the Defendant which forms part of the papers. There is no indication of any funding difficulties or lack of assets, preventing the private prosecution from proceeding. The basis of the complaint is the suggestion that the claim here has been fabricated. This is pretty startling. No such allegation is made in the Defence to the effect that the claim is bogus and dishonest. To the contrary, the Defendant accepts in these proceedings that the Claimant has a good arguable case. It seems to me wholly inappropriate that there should be this collateral attack on its own admission.
34. Whilst on the subject of legal representation, it might be perhaps noted because it is relevant to the ability of the Defendant to obtain adequate legal representation that despite the fact that he puts himself forward as destitute, he has managed to retain the services of a large number of law firms including KBH Kaanuun, Baker McKenzie Habib Al Mulla and, most importantly, Stephenson Harwood. He has been able to retain counsel in this jurisdiction to represent him in the criminal proceedings, he has retained no less than 3 silks; Mr Robert Lawson, Mr Alan Jones and Mr Zafar Ali, together with their appropriate juniors, he has retained PriceWaterhouse Coopers, he has retained Samuels LP, a firm of accountants, who have apparently made a report but it has not been disclosed, he has retained two handwriting experts, he has retained a translation provider and he has retained a company which deals with data management who have been able to load a very substantial stick with a large number of documents.
35. I have already indicated that the position with regard to legal expenses by 12 February 2015 was quite remarkable, bearing in mind that the figures which I am about to identify are after and exclude the expenditure of the GBP 200,000 which had been released in September.
36. First, Messrs Stephenson Harwood are owed over GBP 1 million in fees on top of that local counsel are owed GBP 100,000, experts are owed GBP 20,000 and litigation support amounting to GBP 28,000. It follows that it is apparent that the Defendant has encountered no difficulty in persuading a whole range of legal talent and other professionals to act for him no doubt in the expectation or at least the hope that he will be able to recover his costs in due course and indeed make good his claims. As a matter of first impression, the release of a further GBP 250,000 in regard to the costs that have already been incurred will have minimal impact. It only represents about 15 or 18% of the sums that are outstanding. Presumably the lawyers concerned have made it plain that they will continue to act. There is certainly no evidence they will not. The future also looks on one sense gloomy; the estimates are as follows: the main claim will cost GBP 850,000, the criminal claim will cost GBP 300,000. Once again, GBP 250,000 becomes almost insignificant, the more so as the other proceedings which I have identified, four of them in total, will consume a further GBP 500,000.
37. In the result I am unable to accept that the refusal to allow the Defendant use of the Claimant’s funds would cause the Defendant to be without proper and adequate legal representation, and even if it does, it is primarily due to the extravagant range of proceedings that have been advanced by the Defendant.
38. I am also unable to accept that the Defendant has no realisable assets to contribute to his legal costs. He is not destitute. First, there is his apartment. The figures are not entirely clear but it would seem that the equity in the apartment upon payment of the mortgage amounts to GBP 200,000, and yet the Defendant having asked the court permission to sell it has not done so and is clearly not intending to.
39. Secondly, monies were found to pay the court fees in three of the actions totalling about GBP 10,000. No explanation of where that money came from and no reason to think there is no further funds from that source. Even if they have been advanced by the lawyers, as is one possibility, the fact that the lawyers are prepared to proceed on what might be regarded as a contingency basis is a further indication that the Defendant is not likely to be deprived of proper legal representation, bearing in mind also that he is clearly in receipt of funds from family and friends and there is no suggestion in the evidence that they are not, if I may say so, good for further money.
40. So against that background, I turn to the application that is now advanced. I have already perhaps said more than once that the major item is in respect of legal costs, GBP 250,000 for the past and GBP 250,000 for the future. As I have stated, I am unpersuaded that absent such funding the Defendant will be left without satisfactory legal representation. The reality is that despite no apparent ability to meet the costs concerned, the Defendant has engaged in wide ranging litigation both here and in other jurisdictions, despite the expenditure of GBP 200,000 provided by the Claimant. He has been able to persuade those people to supply legal services worth a further 1.2 million. In the process, he has assembled a vast army of impressive legal representation.
41. Despite the expectation of a further spend of a similar sum, there is nothing in the evidence to indicate any unwillingness on the part of these people to continue assisting the Defendant absent a part payment of their fees. Indeed, if that was their concern it is difficult to see why a contribution of 15-20% would make any difference to them, all the more so in the run up to the immediate judgment application in two months’ time.
42. Of course, it is incumbent on the Court to comply with the overriding objective that so far as practical the parties are on an equal footing and that matters are conducted in a manner proportionate to the financial position of the parties. But as I’ve said, I do not detect any suggestion or concern that the Defendant is at some disadvantage in this regard. The army of people that he has retained and the sums that he has expended are adequate representation of that. Of course, I haven’t forgotten that his ability to give instructions may well be inhibited by being in custody and equally I have no doubt that being in custody is an extremely unpleasant experience, but this Court has no control over those matters.
43. The Claimant has properly made provision in the freezing order for the use of the frozen assets to support a bail application. As I have already observed, there appears to be not the slightest difficulty in providing instructions to those acting in the criminal proceedings in London in giving a very detailed signed statement from the Defendant. I reject the suggestion that the failure to bring the counterclaim in this jurisdiction in these proceedings is attributable to lack of funds when has spent significant sums on precisely that kind of expenditure in other cases. In the result, I reject the application in paragraphs 4 and 5 of the application notice.
44. I also reject the application to sell the Cornish property which is referred to in paragraph 3. This is expressly within the embrace of the Freezing Order issued by the London Commercial Court. The Claimant has established, and this is common ground a good arguable case that it has a proprietary interest that property. No satisfactory or coherent explanation has been given as to the failure to proceed with the sale of the apartment for which permission was sought and given in September. If there are mortgage payments outstanding, they can be paid out of proceeds; this will release a very substantial sum.
45. As regards to the debts totalling GBP 54,800 odd in paragraph 6, I refuse the employment of frozen funds for their payment. Some of them relate to the apartment, and that it seems to me needs to be sold and I will say no more about it. Some are debts incurred in Cornwall to the local authorities. These were all outstanding before the Defendant was ever arrested. At the time of his arrest, he had very substantial funds in his current account which would have enabled him to meet those debts if he had chosen to do so rather than transfer the funds elsewhere. The credit card debts were also outstanding at that time, and it does not appear that City Bank have taken any steps to recover the debt, even after 10 months. The concern that dishonouring the supporting cheque of the account might lead to imprisonment is in the circumstances of no materiality. As regards to the claim in respect of living expenses paid by his friends and family, that is not a legitimate charge on the frozen assets, see Cantor Index Limited v Lister  C.P. Rep 25.
46. This leaves the claim in respect of expenses whilst in custody, put forward at about US$ 900. Sadly, there remain a few problems even with this.
47. First, the food ordered through the prison catering service is put forward at AED 100 per day, but this charge is simply not supported by the Defendant’s statement at paragraph 21.
48. Second, the Defendant makes much of being a lifelong vegetarian but the food referred to in the invoices which are said to be the result of his purchases include chicken and beef noodles.
49. Three, toiletries are still put forward as a pretty handsome sum, namely of GBP 100 per week. It is difficult to see what toiletries are involved in the expenditure of such a sum, and it is not supported by anything in the Defendant’s statement.
50. That said, I confess that the present figure of US$ 500 per week was not more than an educated guess in September 2014 against the background of thoroughly unsatisfactory material put before the Court by the Defendant. I sought to revisit the figure and again I find myself in a difficult position to ensure that I do justice on the point. But against the background of the material which I have set out in this judgment, and which I have read in the papers before me, I increase the figure to US$ 750 per week.
51. It follows that save for that very minor adjustment necessitated by the very confused material presented by the Defendant in September, and still fairly confused now, the Defendant’s application is dismissed.
52. As presently advised, I see no good grounds for not awarding the costs against the Defendant. If there are any points to be made about my provisional view on costs, they must be drawn to the Court’s attention by letter to the Registrar within seven days.
Date of Issue: 25 March 2015
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