England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand London WC2A 2LL
		October 6 2006

Mr Justice Lawrence Collins:

I Introduction

1. The first defendant ("Mr Zardari") is the husband of Ms Benazir Bhutto ("Ms Bhutto"), the former Prime Minister of Pakistan (between December 1988 and August 1990, and between October 1993 and November 1996).
2. Mr Zardari was at various times during Ms Bhutto's premiership a Member of the National Assembly of Pakistan, a Member of the Senate of Pakistan, and a Federal Minister.
3. These proceedings concern three properties near Godalming in Surrey known collectively as the Rockwood Estate, comprising 350 acres of farmland, a principal farm (Rockwood House) and two smaller farms (Winkford Farm and Parsonage Farm).
4. The Rockwood Estate was purchased by the second to fourth defendants, Romina Properties Ltd ("Romina"), Winkford Farm Ltd ("Winkford") and Parsonage Farm Ltd ("Parsonage"), or "the defendant companies" collectively, on or about October 2, 1995, during the second premiership of Ms Bhutto.
5. Romina, Winkford and Parsonage are Isle of Man special purpose vehicles incorporated in 1995, and were set up for the purchase of the Rockwood Estate. The shares in these companies are owned by trusts. After the purchase, the Rockwood Estate was registered at HM Land Registry in the names of the defendant companies. The defendant companies entered into members' voluntary liquidation in February 2002.
6. The Government of Pakistan ("Pakistan") claims that the defendant companies were vehicles or alter egos of Mr Zardari and/or Ms Bhutto used for the purchase of the Rockwood Estate; that these companies (and the series of trusts employed to hold their shares) were a device used by Mr Zardari and/or Ms Bhutto to conceal their identity as purchasers; and that the reason for the motive behind the use of these secret vehicles was that Mr Zardari and/or Ms Bhutto funded the purchase and refurbishment of the Rockwood Estate from secret commissions or bribes they obtained in connection with contracts entered into by Pakistan or its agencies.
7. After the claims had been formulated by Pakistan, and the defendant companies had been placed into liquidation, the Rockwood Estate was sold for £4,350,000, and the liquidator of the defendant companies holds the net proceeds of sale, some £3,130,000.
8. Pakistan claims that it is beneficially entitled to the proceeds of sale of the Rockwood Estate, and entitled to an order that such proceeds of sale be paid to it; that the defendants hold their interest in the Rockwood Estate and its proceeds on constructive trust for Pakistan; and that Mr Zardari is liable to account to Pakistan or compensate Pakistan in equity for the monies that passed through his hands and were used for the purchase or refurbishment of the Rockwood Estate.
9. I was told that Mr Zardari is now in New York on a temporary visa undergoing medical treatment for a heart condition. I was also told that Ms Bhutto (together with their children) is currently resident in Dubai, and that elections are due in Pakistan at the latest by 2007, and that she may return to power.
10. Since Mr Zardari and the defendant companies are outside the jurisdiction in countries to which the Judgments Regulation (and the 1968 and Lugano Conventions) do not apply, it was necessary for Pakistan to obtain permission to serve them abroad. This is my judgment on applications to set aside the permission granted by Cooke J.

II The particulars of claim

Bomer/Nassam/Benington

11. The allegations in the particulars of claim (and I emphasise that at this stage they are only allegations, and that I am not making any findings of fact in this judgment) are as follows. Mr Zardari and/or Ms Bhutto, acting in concert with their associate, Mr Jens Schlegelmilch, a Swiss lawyer who was the Bhutto family's lawyer in Europe ("Mr Schlegelmilch"), received secret commissions and bribes, and concealed them through bank accounts in Geneva held in the names of shell companies registered in various offshore locations (including the BVI and Panama), in particular Bomer Finance Inc ("Bomer"), Nassam Overseas Inc ("Nassam") and Benington Management Inc ("Benington"). The accounts were controlled by Mr Zardari and/or Ms Bhutto: para. 18.
12. Bomer was incorporated in 1991 in the BVI, and Mr Schlegelmilch was its sole director. It had an account at Citibank Private Bank in Geneva, and the account had two US dollar sub-accounts and a sterling sub-account. It also had an account at UBS Geneva: paras 22-24.
13. Bomer and its accounts were at all material times owned by Mr Zardari and/or Ms Bhutto (para 25):

(1) Mr Zardari now asserts that he is the beneficial owner of the Rockwood Estate, which was purchased and refurbished with the use of, inter alia, funds derived from bank accounts in the name of Bomer.

(2) A manuscript ledger maintained by Mr Schlegelmilch for payments received by the Bomer UBS Account notes that receipts were 50% for the account of "A.A.Z." (Mr Zardari) and 50% for the account of "B.B." (Mrs Bhutto).

(3) Citibank's account opening form (Form A) for the Bomer Citibank Account contains a declaration signed by Mr Schlegelmilch that Mr Zardari was the beneficial owner.

(4) An undated mandate agreement between Mr Zardari and Mr Schlegelmilch mandates the latter to be sole director-president of Bomer and to carry out his functions by observing Mr Zardari's instructions.

(5) Mr Schlegelmilch stated at an oral examination in October 1997 in Swiss criminal proceedings that Bomer was acquired by him on behalf of Mr Zardari, and that some of the monies received into its accounts were for the benefit of Mr Zardari.

(6) In 1997 an item of jewellery was acquired by Mrs Bhutto in London, and part of the price (£92,000) was paid by a payment from the Bomer UBS Account.

14. Nassam was incorporated in 1989 in Panama. Mr Schlegelmilch and his wife were directors. Nassam had an account at Barclays Bank (Suisse) in Geneva, with two US dollar sub-accounts and a Swiss franc account. Payments were made from the Nassam Barclays Account for the refurbishment of the Rockwood Estate, and it is to be inferred that Nassam and its accounts were controlled by Mr Zardari and/or Ms Bhutto: paras 26-29.
15. Benington was incorporated in the BVI in (it is thought) 1996, and was represented by Mr Schlegelmilch, who arranged for it to have an account at Banque Pasche, Geneva. The account opening form contains a declaration by Mr Schlegelmilch that the beneficial owner was Mr Zardari. The Rockwood estate was in part refurbished with monies derived from bank accounts in the name of Benington. When Citibank decided to close the Bomer Citibank Account (and an account in the name of another company, Capricorn, controlled by Mr Zardari and/or Mrs Bhutto) the credit balances were transferred to Benington's account with Banque Pasche: paras 30-32.

Bribery allegations

16. In the claim, Pakistan relies in particular on payments made to accounts in the names of Bomer, Nassam and Benington, which have no commercial business of their own, and were incorporated or acquired simply to receive bribes, secret commissions and the proceeds thereof: paras 18-19, 33.
17. In that context Pakistan relies, in addition to the general allegation of corruption, on transactions in which illegal bribes and commissions were paid by two Swiss inspection firms, SGS and Cotecna: para 34.
18. It is alleged that Nassam and Bomer received very substantial secret commissions in connection with contracts entered into between SGS and Cotecna (Swiss customs surveillance and inspection companies) and the Government of Pakistan in 1990 and 1994.

(1) By a letter to Mariston Securities Inc ("Mariston", a company incorporated in the BVI in 1989) Cotecna confirmed that, should it receive an inspection contract from the Government of Pakistan within 8 months, it would pay Mariston 6% of the amount billed. Mr Schlegelmilch held the shares in Mariston on behalf of Ms Bhutto's mother, and money received into its account was for the benefit of Mr Zardari and/or Ms Bhutto.

(2) By a letter to Nassam dated January 10, 1990 (during Ms Bhutto's first period of premiership), Cotecna confirmed that should it receive an inspection contract from the Government of Pakistan within 6 months from that date, it would pay to Nassam 3% of the amount billed to the Government of Pakistan, and on the same date Cotecna agreed to pay 1% to Mr Schlegelmilch personally.

(3) The Government of Pakistan entered into a contract for inspection services with Cotecna on April 18, 1990, and the services were provided in 1990 and 1991.

(4) In accordance with its agreement with Nassam, between February 14, 1991 and October 8, 1992 Cotecna paid at least $428,202 to Nassam (to its account with Barclays Bank in Geneva), $856,406 to Mariston and $142,734 to Mr Schlegelmilch.

(5) The contract with Cotecna was terminated in November 1991, following the dismissal of the first Bhutto government.

(6) By letters dated March 11, 1994 (during Ms Bhutto's second period of premiership) to Bomer and Mr Schlegelmilch, SGS confirmed that it would pay to Bomer, in consideration of Bomer's active support and assistance in connection with an import verification programme entered into by SGS with the Government of Pakistan, a consultancy fee of 6% of the total amounts paid to SGS under the contract, and similarly pay a fee of 1% to Mr Schlegelmilch.

(7) By letters dated June 29, 1994 to Mariston, Nassam and Mr Schlegelmilch, Cotecna confirmed that should it receive an inspection contract from the Government of Pakistan within 6 months from that date, Cotecna would pay to Mariston 6%, to Nassam 3%, and to Mr Schlegelmilch 1.25%, of the total amount invoiced by, and paid to, Cotecna under the contract.

(8) By letter dated June 29, 1994 to Nassam, Cotecna confirmed that should inspection contracts be entered into between Cotecna and SGS and the Government of Pakistan within 6 months from that date, Cotecna would pay to Nassam on SGS's behalf 3%, of the total amount invoiced by, and paid to, SGS under the contract.

(9) On September 29, 1994, SGS and Cotecna entered into contracts for inspection services with the Government of Pakistan.

Payments

19. Pursuant to those agreements secret commissions or bribes were paid: (i) between June 1995 and August 1997 Cotecna paid at least $3,835,231 to Bomer (to its account with UBS in Geneva), at least $3,807,338 to Nassam (to its account with Barclays Bank in Geneva) and at least $812,205 to Mr Schlegelmilch; and (ii) between May 1995 and September 1997 SGS paid at least $4,354,854 to Bomer (to its account with UBS in Geneva) and at least $725,809 to Mr Schlegelmilch: para 34.15-34.17.
20. Various substantial payments in 1995 to the Bomer Citibank Account are also pleaded, namely various payments totalling $7 million by unidentified clients of Citibank New York, and payments by order of Mr Al-Assir from Citibank New York: paras 36-37.
21. The payments received from Mr Al-Assir constituted secret commissions or bribes in connection with an oil transaction with Mr Al-Assir, and it is to be inferred that the Bomer Accounts were used to receive and launder funds from corrupt sources: para 38.
22. Payments of about $1.55 million were received into the Nassam Barclays Account between December 7, 1995 and August 19, 1996, which were used among other things to fund the refurbishment of the Rockwood Estate, from SGS and Cotecna: para 40.

The purchase and refurbishment of Rockwood Estate

23. The particulars of claim plead (paras 48-56):

(1) Mr Zardari went to view the Rockwood Estate in January or February 1995. He and Ms Bhutto sought an estate in England where they could establish a stud farm and/or polo centre.

(2) Mr Zardari and/or Ms Bhutto instructed Mr Schlegelmilch to facilitate the purchase and refurbishment of the Rockwood Estate. They also instructed Mr Richard Howard, then a partner in Messrs Lawrence Jones, to conduct the purchase.

(3) On February 25, 1995 Mr Zardari confirmed in writing to Mr Howard that Mr Schlegelmilch was fully authorised by Mr Zardari to give Mr Howard instructions on his behalf.

(4) Agreement in principle for the purchase was reached in April 1995, for £2.5 million subject to contract and survey.

(5) Mr Howard sought on behalf of Mr Zardari and/or Ms Bhutto the advice of a tax consultant, Mr Wilamowski, of the Jeffcote Donnison Group, and by a letter of instruction dated July 3, 1995 Mr Howard stated that their ultimate individual client was a national of, and resident in, Pakistan, and that it was of critical importance that the disclosure of the ultimate beneficial ownership of the Rockwood Estate, the livestock and the trading activities be limited as much as possible and instructed Mr Wilamowski to give his advice in the confines of the importance of non-disclosure.

(6) Mr Wilamowski advised that:

(a) Rockwood House should preferably be held by an Isle of Man trust, and purchased with a loan from an offshore entity: he noted that the ultimate client already had a Liechtenstein trust that could be used for that purpose.

(b) Winkford Farm should be held by a separate Isle of Man company, such company to be held by a separate Isle of Man trust.

(c) Parsonage Farm should be held by a separate Isle of Man company, held by the same Isle of Man trust as held the company that held Winkford Farm.

24. The result of the arrangements was that the defendant companies were ultimately controlled by an entity called Colletta Foundation, a Liechtenstein foundation controlled by Mr Zardari and/or Ms Bhutto, of which Mr Zardari was the first beneficiary and Ms Bhutto was second beneficiary: paras 58-61.
25. Completion of the purchase of the Rockwood Estate took place on October 2, 1995. The purchase price of £2,250,000 was apportioned as a payment of £1,725,000 by Romina for Rockwood House, £375,000 by Winkford for Winkford Farm and £150,000 by Parsonage for Parsonage Farm: para 67.
26. In fact the Rockwood Estate was sold commercially as a single unit and purchased commercially as a single unit, by way of a single composite transaction: para 68.
27. The three properties were purchased on behalf of Mr Zardari and/or Ms Bhutto by the use of secret commissions and/or bribes received into the Bomer Citbank Account or the proceeds thereof (paras 69-70 and Schedule 1):

(1) On about July 4, 1995 £110,000 was transferred from the Bomer Citibank Account to Lawrence Jones as "down payment for property"

(2) On about July 10, 1995 £60,000 was transferred from the Bomer Citibank Account to Lawrence Jones as "down payment for property"

(3) On about July 10, 1995 and July 11, 1995 Lawrence Jones paid £112,500 and £56,250 respectively to the vendor's solicitors

(4) On about September 28, 1995 £2,123,750 was transferred from the Bomer Citibank Account to Lawrence Jones pursuant to the instructions of Mr Schlegelmilch and described on the Bomer Citibank debit advice as "purchase Rockwood property as per fax R.V. Howard 14.09.05."

(5) On about October 2, 1995 Lawrence Jones paid the sums of £1,596,625, £346,875, and £138,750 to the vendor's solicitors, reference respectively "Callaghans re Romina Prop," "Callaghans re Winkford Farm" and "Callaghans re Parsonage Farm".

28. Each of the payments made from the Bomer Citibank Account derives from and represents the secret commissions and/or bribe payments referred to in para 37: para 71.
29. The secret commissions and/or bribe payments referred to in para 36 are traceable into the Rockwood Estate and the proceeds thereof: para 73.
30. Refurbishment was done on the Rockwood Estate between October 1995 and November 1997, and paid for by the use of secret commissions and/or bribes paid from accounts in the names of Nassam, Bomer and Benington to Mr Howard's client account and then (mainly) to Grantbridge Ltd, a building contractor (paras 76-78 and Schedule 2):

(1) £394,504.71 was paid from the Nassam Barclays Account between December 1995 and August 1996.

(2) £424,876.86 was paid from the Bomer UBS Account between January and June 1996.

(3) £1,505,864.50 was paid from the Bomer Citibank Account between March and July 1996.

(4) £516,369.10 was paid from the Benington Bank Pasche Account between November 1996 and September 1997.

31. The secret commissions and/or bribe payments referred to at paragraphs 37-45 are traceable into the Rockwell Estate and/or their furnishings and the proceeds thereof: para 80.
32. On July 16, 2004 the defendant companies completed the sale of the Rockwood Estate for £4,350,000. The proceeds of sale are held in the jurisdiction by the liquidators: para 81.
33. The secret commissions and/or bribes were held on constructive trust for Pakistan, and Mr Zardari is obliged to account: para 83.
34. The defendant companies received monies and/or property directly or indirectly derived from money received by Mr Zardari and/or Ms Bhutto as secret commissions and/or bribes. There was no reason for their involvement, and their use was a device for wrongfully diverting and concealing the secret commissions and/or bribes, and in the circumstances the money and/or property received by them were held on constructive trust. They received the money as alter egos of Mr Zardari and/or Ms Bhutto. Further or alternatively, they received the money and/or property with knowledge that it represented the proceeds of secret commissions and/or bribes, and accordingly hold the money and/or property on constructive trust: paras 85-87.

III Isle of Man proceedings

35. In 1998 Pakistan obtained freezing injunctions in the Isle of Man against Mr Zardari under the Drugs Trafficking Offences Order 1987. Mr Zardari's uncontested evidence is that the order was obtained on the basis of an allegation that Mr Zardari had acquired the Rockwood Estate using the proceeds of drug trafficking. The freezing injunction remained in place until 2002, and the proceedings were never brought to trial.
36. On February 8, 2002 the defendant companies were placed in members' voluntary liquidation and Mr Steven Taylor ("the Liquidator") was appointed liquidator of each of the defendant companies. The liquidations followed the assertion by Pakistan that the Rockwood Estate was beneficially owned by Mr Zardari and/or Ms Bhutto and had been acquired with the use of corrupt payments.
37. On November 4, 2003 the Liquidator entered into a conditional compromise with Pakistan under which it was agreed (subject to the approval of the shareholders or the sanction of the Isle of Man High Court) that the Liquidator would sell the Rockwood Estate, pay the creditors and account for the net proceeds to Pakistan.
38. In January 2006 the Isle of Man High Court heard an application by the liquidator for sanction of this compromise agreement. Pakistan and Mr Zardari were given notice of this application, and were parties. The application was supported by Pakistan and opposed by Mr Zardari. In a reserved judgment delivered on February 9, 2006 His Honour the Deemster Kerruish ("the Deemster") refused to sanction the compromise agreement.
39. The Deemster referred to Mr Zardari's denial for some considerable time that he was the beneficial owner of the defendant companies. In particular:

(1) whilst he accepted that other payments referred to in the draft particulars of claim (almost identical to the final version) "might be linked to alleged corrupt practices, there was no evidence" that the payments to Bomer pleaded in paragraph 36 of the particulars of claim (para 20, above) derived from corrupt activity: para 113.

(2) he could not conclude that "there is evidence upon which it is just and reasonable for the Liquidator to form a view that the monies used by Bomer Finance Inc and others to finance the purchase, and refurbishment of the Rockwood Estate were obtained as a result of the illegal acts of corruption whilst Mr Zardari held government office in Pakistan": para 119.

40. He said:

"[128] I find that, in determining the Government of Pakistan's case, and the evidence in support thereof, and in pursuing this application the Liquidator has been unduly partial to the Government of Pakistan's position.

…

[137] I appreciate that the claim by the Government of Pakistan is a proprietary claim, and presents a significant risk to the assets of the Companies..

…

[140] I am aware that if I do not exercise the requested power, and the Government of Pakistan issue proceedings, then absent new funding, the Liquidator will have insufficient funds to oppose, or challenge such proceedings, and further that at present, whilst there may be what could be viewed as negative evidence, or challenges, there is little, if any, positive evidence to challenge such proprietary claim. I agree with Mr. Morris [for Pakistan] that in these proceedings, it is not for this Court to adjudicate upon the [dispute between the] Government of Pakistan, and Mr. Zardari, but to confine itself to the relief sought in the Petition.

[141] Before sanctioning a compromise, the Court must be satisfied as to the facts on which it is based …

[142] … the Court must be satisfied that the required exercise of the power will be just, and beneficial before it accedes in whole, or part to the application. I bear in mind paragraphs [100] et seq, particularly paragraphs [119], [128], and [130]. I am mindful of the subject allegations of the intended action by the Government of Pakistan, and, if the same is successful, the potential significant consequences, particularly for the creditors. I am mindful of the proceedings between the Government of Pakistan, and Mr. Zardari, and particularly those extant in Pakistan. I bear in mind the lack of any real consideration by the Liquidator of the draft Particulars of Claim with the supporting documents, and of the Compromise Agreement before entering into the same. I have carefully considered the evidence. I am not satisfied that, in the circumstances of this case, it would be just, and beneficial to exercise the required power, and to sanction the Compromise Agreement or to authorise the Liquidator to enter into and implement the terms of the same. I decline to exercise the required power."

41. There was no appeal against the Deemster's judgment. Since the judgment Mr Zardari and Mr Shimmin (the registered shareholder of Winkford and Parsonage) have lodged motions seeking orders relating to the costs and fees of the Liquidator, an order that the balance of the sale proceeds are paid into court in the Isle of Man, that the liquidations be stayed, and that the Liquidator be removed. These are still pending.

IV Application by Pakistan for permission to serve abroad

42. The application was supported by a witness statement of March 3, 2006 by Pakistan's solicitor, Mr Maton. The witness statement set out the general nature of the claim and exhibited the particulars of claim. Mr Maton referred to discussions with the Liquidator of the defendant companies at a time when Mr Zardari and Ms Bhutto denied that they were the ultimate beneficial owners of the Rockwood Estate or the defendant companies, and to the compromise agreement with the Liquidator of November 4, 2003 when (subject to the approval of the shareholders or the sanction of the Isle of Man High Court) it was agreed that the Liquidator would sell the Rockwood Estate, pay the creditors and account for the net proceeds to Pakistan.
43. Mr Maton referred to the fact that the Liquidator's petition was heard in January 2006, when Mr Zardari in a pleading asserted for the first time that he was the beneficial owner of the Rockwood Estate, and through counsel also asserted that he was the beneficial owner of the defendant companies. Mr Maton said that the Deemster had refused to sanction the compromise agreement because the Liquidator had failed to discharge his duties and obligations in an independent, objective and impartial manner, and had been unduly partial to Pakistan's position in determining its claim and pursuing the application for sanction, and in particular had failed to properly evaluate the merits of Pakistan's claim under the time pressure imposed by Pakistan.
44. The application was made under (a) CPR 6.20(10) on the basis that the whole subject matter of the claim related to property within the jurisdiction and (b) CPR 6.20(14) on the basis that the claim was made against the defendants as constructive trustees.
45. The witness statement referred to a number of criminal proceedings in Pakistan against Mr Zardari in the context of forum conveniens and of full disclosure: (1) The "Assets case", which according to Mr Maton, concerns alleged corruption involving the receipt of $1.5 billion outside Pakistan and Rs 22 million within Pakistan, where the assets include the Rockwood Estate; (2) and (3) the SGS and Cotecna cases concerning the award of pre-shipment contracts in return for illegal bribes and commissions, where the factual issues will overlap with some of the issues in the present case; (4) the ARY Gold case, concerning the grant of a licence for the import of gold and silver, where issues of fact may overlap with allegations in the present case concerning the source of funds in Capricorn (but which is in any event not central to the present application). I should add that subsequently fresh criminal proceedings were commenced in the Court of Session Judge Islamabad based on Mr Zardari's failure to disclose (inter alia) the ownership of the Rockwood Estate in declarations of assets made to the Election Commission and in declarations made as a member of Parliament.
46. The witness statement pointed out that convictions in these cases could lead to confiscation orders, which would not be enforceable in England. Mr Zardari had failed to return to participate in the criminal proceedings, which had led or could lead to him being declared a "proclaimed offender" (or absconder) which could lead to confiscation.
47. The witness statement also referred to a criminal investigation in Switzerland of Mr Zardari for alleged money laundering in relation to funds passing through offshore companies, including the funds used to acquire the Rockwood Estate. Pakistan is said to be a noticed party to those criminal proceedings, and it is also said that Mr Zardari has not participated in those proceedings.
48. Permission to serve out was granted by Cooke J on March 6, 2006.

V Applications to set aside

49. On April 28, 1996 an application was made on behalf of Mr Zardari for an order declaring that the court had no jurisdiction, or that it should not exercise its jurisdiction (and setting aside service or staying proceedings) on the grounds that (1) the claim did not fall within CPR 6.20(10) or CPR 6.20(14); (2) there was no serious issue to be tried; (3) England was not the proper place to bring the claim; and (4)there had been material non-disclosure. An identical application was made on behalf of the Liquidator on May 12, 2006.
50. The witness statement of Mr Lloyds in support of Mr Zardari's application to set aside the order for permission to serve out relied in particular on the fact that the material placed before the Deemster was almost identical to that put before this court, and that the Deemster had said said that there was no evidence that the money used to purchase the Rockwood Estate had derived from corrupt activity.
51. Mr Lloyds says that Mr Zardari was imprisoned in Pakistan awaiting the conclusion of criminal proceedings between November 4, 1996 and November 22, 2004, when he was granted bail by the Supreme Court of Pakistan, when the Chief Justice expressed concern that the case against him was "mala fide", as he was only involved in that case after he had been granted bail in other cases. The evidence for Mr Zardari is that he left Pakistan in December 2004, returned in April 2005, and left the following month. While in Dubai in June 2005 he had a heart attack, and his heart condition prevents him from travelling to Pakistan or Switzerland.
52. Mr Lloyds stated that Mr Zardari had filed evidence in the Isle of Man court to show that the proceedings were politically motivated and that they overlapped with the criminal proceedings in Pakistan, and he exhibited (inter alia) affidavits sworn in October and December 2004 by Mr Abu Bakar on behalf of Mr Zardari ...and exhibits) in the Pakistani criminal proceedings. He exhibited an affidavit of Mr Irfan Qadir, Prosecutor General, National Accountability Bureau, to show that Mr Qadir confirmed Mr Abu Bakar's evidence that Mr Zardari's lawyers were vigorously defending the criminal proceedings.
53. Mr Lloyds made the following points (inter alia): (1) the References in 1998 and 2002 in the proceedings against Mr Zardari and Ms Bhutto in the Accountability Court (a special tribunal established to deal with cases of alleged corruption) have as part of their subject matter the allegations that the Rockwood Estate was acquired by them with the proceeds of corruption; (2) a freezing order/order for confiscation of Mr Zardari's assets was made on April 27, 1998, which remains in force; (3) Mr Zardari and Ms Bhutto (through her attorney) have answered questions about this matter in the course of the criminal proceedings; (4) the Supreme Court of Pakistan quashed one corruption conviction on the grounds of improper government interference with the proceedings of the Accountability Court; (5) the Lahore High Court quashed another conviction on the grounds of insufficient evidence; (6) there are proceedings before the Special Judge (Central) in Karachi, which has accepted that Mr Zardari's medical condition prevents him from travelling; (7) the Accountability Court has declined to excuse his personal attendance and has declared him a "proclaimed offender" and issued a warrant for his arrest; (8) Mr Zardari is challenging the decisions of the Accountability Court before the High Court in Lahore; (9) it was not true, as asserted by Mr Maton, that Mr Zardari had not participated in the Swiss proceedings.
54. Mr Lloyds complains of the non-disclosure by Mr Maton of these matters:

(1) Mr Maton gave the impression that the payments made by SGS and Cotecna were used to fund the purchase of the Rockwood Estate, but failed to draw attention to the fact that this was not Pakistan's case in the Isle of Man or that it was established in the Isle of Man proceedings that these payments "had nothing to do with the purchase of the Rockwood Estate" (judgment, paras 72 and 115);

(2) the principal reason (or one of the principal reasons) why the Deemster refused to sanction the compromise agreement was that there was no evidence that the monies used to purchase the Rockwood estate were the proceeds of corruption (paras 113, 119 and 142) (and it was not sufficient disclosure simply to exhibit the judgment);

(3) contrary to Mr Maton's witness statement, Mr Zardari had participated in the Swiss proceedings, and had succeeded in having the initial sentencing order of the investigating magistrate quashed and obtained a costs order in his favour.

55. In reply Mr Maton said that the Citibank Geneva account of Bomer was used to pay for the Rockwood Estate; substantial payments were made into the Bomer Citibank Account; Mr Zardari was the beneficial owner and controller of Bomer; Mr Lloyds did not say whether or not it was Mr Zardari's case that he was the owner of Bomer; Mr Zardari claimed ownership of the Rockwood Estate; Mr Zardari must be in a position to explain the source of the $10 million paid into the Bomer Citibank Account between March and September 1995, part of which appeared to have funded the purchase of the Rockwood Estate; if he was not the beneficial owner of Bomer; he must be in a position to explain how he was the owner of the Rockwood Estate; he had not given an explanation because there was no innocent explanation; his previous denials that he was the beneficial owner were consistent with his desire to conceal the source of the money used to purchase the Rockwood Estate; the money spent on refurbishment came from the Nassam Barclays Account, the Bomer UBS Account, the Bomer Citibank Account, and the Benington Banque Pasche Account; SGS and Cotecna agreed to pay percentages to Mariston, Nassam, Bomer and Mr Schlegelmilch, and payments were made to the Nassam Barclays Account and the Bomer UBS Account; the Benington Banque Pasche Account received $1,636,007 from the Bomer Citibank Account; accordingly, sums paid by SGS and Cotecna can be traced into the costs of refurbishment. It is Pakistan's case that the payments from SGS and Cotecna funded the refurbishment, but not the purchase, of the Rockwood Estate.
56. In answer to the allegations of non-disclosure, Mr Maton says that it is not Pakistan's case that the SGS and Cotecna payments funded the purchase (as opposed to the refurbishment) of the Rockwood Estate, but its case is that the fact that the refurbishment was funded from the proceeds of corruption is a further ground for inferring that the purchase was funded from corrupt funds. As regards the Swiss proceedings, Mr Zardari has not participated in the sense of attending to answer questions from the investigating magistrate.
57. Mr Popat, the solicitor for the Liquidator, made a witness statement on May 12, 2006, in support of the defendant companies' application. No substantive points are made in relation to the grounds of the application, except perhaps that the Isle of Man is the appropriate forum. In a second witness statement this point was developed: the Liquidator seeks to secure an orderly and efficient winding up of the defendant companies by having all matters resolved in the Isle of Man court in the course of the winding up and in proceedings and in a jurisdiction in which Pakistan has at all stages been intimately involved.

VI Reasonable prospect of success/serious issue to be tried

Mr Zardari's arguments

58. Pakistan's case was presented to Cooke J by Mr Maton's first witness statement on the basis of assertions that the Rockwood Estate was purchased with the proceeds of secret commissions and bribes received by Mr Zardari and/or Ms Bhutto whilst they were in office in Pakistan: paras 9.2, 25 and 27.
59. The question whether there is any evidence that the Rockwood Estate was purchased using the proceeds of corruption was investigated in detail in the Isle of Man proceedings. Pakistan's particulars of claim (in a form which, in relation to this allegation, did not differ materially from the particulars of claim in the present case), and all of the evidence available to Pakistan to support its allegation, were placed before the Isle of Man High Court. The Deemster concluded that there was no evidence that the payments made to purchase the Rockwood Estate (set out in paragraph 36 of the particulars of claim before him and paragraph 37 of the particulars of claim in the present proceedings) were derived from corrupt activity.
60. Paragraph 37 of the particulars of claim asserts that the purchase of the Rockwood Estate was funded using (a) three transfers into the Bomer Citibank Account from unidentified persons, and (b) two transfers into that account by order of a Mr Al-Assir. There is no evidence at all about the transfers from the unidentified persons. The little evidence there is about Mr Al-Assir suggests that he was involved in transactions with Mr Zardari relating to countries other than Pakistan.
61. Pakistan accepts that it has no direct evidence of a link between the alleged corruption and the monies used to purchase the Rockwood Estate. Pakistan appears to contend that: (1) the lack of direct evidence can be overcome by pointing to the fact that Mr Zardari has yet to provide an explanation for the source of the purchase monies; and/or (2) that the lack of evidence that the purchase monies represented the proceeds of corruption can be overcome by pointing to evidence that the monies used to refurbish the property may have derived from corruption.
62. A serious charge of fraud must be specifically alleged and have a proper evidential basis, and must not be advanced on a speculative basis. The only corrupt transactions pleaded relate to SGS and Cotecna, but Pakistan does not allege that commissions from those two companies were used to purchase the Rockwood Estate. No other corrupt transactions are pleaded and the suggestion that there must have been others from which the purchase of the Rockwood Estate was funded is speculative. It is insufficient to say that Mr Zardari has not identified an innocent source and therefore the court may infer that the source is corruption. That would be inappropriate in any fraud case, but is particularly inappropriate in the present case where Mr Zardari and witnesses have been tortured and Pakistan has interfered improperly with the court process in Pakistan. In such circumstances, as the Deemster recognised at paragraph 134 of his judgment, Mr Zardari may have good reason to keep his powder dry. The Deemster rightly considered that it was not appropriate in a case such as the present for Pakistan to invite the court to draw the sort of inference it seeks in paragraph 38.4 of the Particulars of Claim: para 113 of his judgment.
63. The case was not put by Pakistan when seeking permission to serve out on the basis that the refurbishment monies were the proceeds of corruption and it could be inferred that the purchase monies were too. It was put squarely on the basis that the monies used to purchase the property were the proceeds of corruption.
64. It follows that there is no serious issue to be tried on the central plank of Pakistan's case, namely its assertion that the monies used to purchase the Rockwood Estate were the proceeds of corruption.

The defendant companies' arguments

65. In the course of the Liquidator's application to the Isle of Man High Court in relation to the proposed settlement agreement with Pakistan substantial gaps in Pakistan's ability to trace into the funds utilised in the purchase and refurbishment of the Rockwood Estate were disclosed. Pakistan's pleaded case in these proceedings makes no attempt to close these gaps. Pakistan appears to have conceded that it has no direct evidence supporting its claim that the funds in issue were the proceeds of bribery or secret commissions.

Pakistan's arguments

66. The defendants have not put in evidence on the merits. There are plainly serious issues here which it is reasonable for the court to try. There is a strong case that the refurbishment of the Rockwood Estate can be traced to corrupt payments. Pakistan is entitled to ask the court to conclude in its favour from all the circumstances, including Mr Zardari's failure to explain the source of the monies that were used to purchase the Rockwood Estate; the clear evidence concerning the source of the monies used to refurbish the Estate; the similar course of conduct in relation to the purchase (including the use of the same off-shore corporate vehicles and the same advisers); the careful cloak of secrecy surrounding the purchase; and from his previous (unexplained) denials of ownership. The obvious inference to be drawn is that the Rockwood Estate was purchased with the proceeds of corruption. Bomer (and the other offshore vehicles) was used from mid-1995 onwards to receive secret commissions from SGS and Cotecna in connection with contracts between those entities and Pakistan.
67. Bomer had no commercial business of its own. It was no more than a vehicle for Mr Zardari and/or Ms Bhutto. The evidence also shows that they were behind a number of other off-shore shell companies used to receive bribes (while concealing their interests).
68. Pakistan relies on the matters pleaded in the particulars of claim and some additional documents adduced in evidence on this application to support its case that the claim has a reasonable prospect of success. In particular, it relies on these matters: (1) the payments made to the Bomer UBS Account, statements relating to which show that it was 50% owned by Mr Zardari and 50% by Ms Bhutto; (2) the mandate given to Mr Schlegelmilch in relation to the affairs of Bomer (which Mr Zardari has said is a forgery); (3) in an oral examination conducted on October 22, 1997 in Swiss proceedings, Mr Schlegelmilch stated that Bomer had been used to receive payments to Mr Zardari after he had acted as intermediary in an oil affair in Saudi Arabia with Mr Al-Assir; these payments (of $1,325,000) were made to the Bomer UBS Account in August 1994. It is to be inferred (in the absence of any other explanation) that the payments totalling $3 million made from Mr Al-Assir to the Bomer Citibank Account in August and September 1995 are similarly tainted. Mr Schlegelmilch went on to say that "Bomer has also been used to collect funds originating from other contracts with Mr Al Asir, regarding other countries, on the account with Citibank."
69. It is to be inferred from the pattern of payments into and out of the Bomer Citibank Account that it was used to launder corrupt monies. Large, round sums were received into the accounts, for no known business purpose, and in some cases without the transferor being identified. One reason that Citibank decided to close the Bomer Citibank Account in October 1996 was that there had been far too many external transfers.
70. It is inherently improbable that Mr Zardari would have wished Bomer, which was used to receive and launder funds from corrupt sources (the payments from SGS and Cotecna) to receive funds deriving from legitimate sources. If there had been an innocent source of monies they would have taken the obvious step of using or incorporating another company to receive them – by this date they were used to setting up corporate vehicles.
71. Mr Zardari treated all the monies in the various Swiss bank accounts held by his various offshore vehicles as being effectively part of the same fund. This is shown by the way the payments were made for the purchase and refurbishment of the Rockwood Estate (and by the way in which the monies in the various Swiss accounts were treated as part of the same fund: para 38.5 of the particulars of claim).
72. Mr Zardari has until recently repeatedly denied ownership of Bomer, the defendant companies and the Rockwood Estate. Mr Zardari actively sought to be joined to proceedings in England in July 2003, in which a charging order had been obtained against the Estate, in order to establish that he was not the owner of it or the defendant companies. Mr Zardari did not disclose his ownership of the Rockwood Estate or the companies in his tax returns in Pakistan or asset declaration filed as part of nomination papers for election to the senate (in which he declared he did not own any property outside Pakistan). There has been no realistic explanation of his consistent denials of ownership. If the purchase had been innocent he would have claimed ownership and not denied it.
73. No explanation has ever been given by Mr Zardari of the source of these payments into the Swiss bank account of Bomer, one of his offshore vehicles, at a time when his wife was prime minister of Pakistan. They are inconsistent with his declared income and assets. Many millions were received in short periods by Bomer and his declared income does not come anywhere near these sums. His case may be that the payments had some innocent or legitimate source, but Mr Zardari has not revealed that source.
74. It was only late in the Isle of Man proceedings that Mr Zardari formally asserted for the first time that he was the beneficial owner of the Rockwood Estate and the defendant companies (paras 27 and 105 of the Deemster's judgment).
75. Even since Mr Zardari's assertion of beneficial ownership of the Rockwood Estate in the Isle of Man proceedings, he has presented (or allowed to be presented on his behalf) this change of stance as purely tactical. As reported in the Daily Times of Pakistan of August 19, 2004, Mr Zardari's lawyer stated that "Mr Zardari is sick of NAB's false claims that Surrey house belongs to him, therefore he decided to counter the propaganda with a new move." This is extraordinary: the suggestion is that he is not actually interested in the property but is now asserting ownership only because Pakistan has said that he has acquired the property corruptly.
76. If the purchase of the Rockwood Estate had been funded by legitimate monies, there would have been no need or desire on the part of Mr Zardari to go to such lengths to conceal his ownership: on which question his position is still far from clear. Secrecy is a badge of fraud: Millett J in Agip (Africa) Ltd v Jackson [1990] 1 Ch 265 at 294; AL Smith LJ in Grant v Gold Exploration and Development Syndicate Ltd [1900] 1 QB 233 at 242.

VIII Jurisdiction

A CPR 6.20(10)

Pakistan's arguments

77. The whole subject matter of a claim relates to property located within the jurisdiction: CPR 6.20(10). The claim need not be to real property, and the claim need only "relate" to the relevant property, and not necessarily be a claim to a proprietary or possessory interest in the property: Re Banco Nacional de Cuba [2001] 1 WLR 2039 at [33]. The whole subject matter of the claim relates to the Rockwood Estate (and now the proceeds of sale which represent the Estate). The Rockwood Estate is located in Surrey, within the jurisdiction. The proceeds of sale are also property within the jurisdiction as they are held by the Liquidator at London branches of the Royal Bank of Scotland.

Mr Zardari's arguments

78. In considering the application of CPR 6.20(10) it is necessary to examine how the case is put, and what in substance it involves: Sahar v Tsitsekkos [2004] EWHC 2659 (Ch) at [41]-[42]. In substance the subject matter of this claim is, or at least includes, corruption and money laundering. There is no suggestion that any corrupt acts, or any money laundering, took place within the jurisdiction. Accordingly it cannot be said that the "whole subject matter of the claim" relates to property within the jurisdiction. The purpose of requiring the whole subject matter to relate to property within the jurisdiction is to prevent a claimant from using the fact that a claim relates partly to property within the jurisdiction to pursue other aspects of a claim which have no sufficient connection with the jurisdiction. The words "whole subject matter" must be given due weight and any doubt as to the manner in which they limit the scope of the jurisdictional gateway resolved against the exercise of extra-territorial jurisdiction.
79. Alternatively, even if a narrower view is taken of the subject matter of the claim, the "property" to which it primarily relates, i.e. the proceeds of sale of the Rockwood Estate, is not the kind of property to which the rule is intended to apply. It is intended to apply to e.g. real property or shares in English companies or other types of property which have a substantial connection with the jurisdiction, and not to easily movable property such as money which can be brought into or taken out of the jurisdiction at will. If the rule applied to such easily movable property a claimant could establish jurisdiction over a foreigner by, for example, paying a disputed fund into an English bank account. That cannot have been the intention. Insofar as Pakistan claims to be entitled to other, unspecified, assets of the defendant companies, the location of such unspecified assets is unclear. There is no evidence that the companies have any assets within the jurisdiction.

Defendant companies' arguments

80. The additional point put on behalf of the defendant companies was that Pakistan had sought, in addition to a declaration in relation to the proceeds of the Rockwood Estate, a declaration that it was entitled to such other assets held by any of the defendant companies as were found to have derived directly or indirectly from the proceeds of corruption. That was not limited in any way to property located in England. At the hearing Pakistan did not press this aspect of the claim, and the point is no longer live.

B CPR 6.20(14)

Pakistan's arguments

81. CPR 6.20(14) applies where a claim is made for a remedy against the defendants as constructive trustees where their alleged liability arises out of acts committed within the jurisdiction. The Rockwood Estate, and the proceeds of sale, have at all material times been held by Mr Zardari and the defendant companies as constructive trustees for Pakistan. The principal acts giving rise to the constructive trusteeship were the receipt of the monies used to purchase the Rockwood Estate by or on behalf of the defendant companies, the purchase of the Rockwood Estate and the onward sale of the Rockwood Estate. Those acts were committed within the jurisdiction.
82. The claim against Mr Zardari is limited to the monies that passed through his hands and through Mr Howard's solicitor's client account (which was in England) and were used towards the purchase and refurbishment of the Rockwood Estate.
83. It is not necessary that all the acts giving rise to liability occurred within the jurisdiction: NABB Brothers Limited v Lloyds Bank International (Guernsey) Limited [2005] EWHC 405 (Ch) at [79] to [86].

Mr Zardari's arguments

84. The claim against Mr Zardari is not a claim against him as constructive trustee in the sense of CPR 6.20(14): cf ISC Technologies Limited v Guerin [1992] 2 Lloyd's Rep 430 at 433, and Nycal (UK) Ltd v Lacey [1994] CLC 12, 16, applying Metall und Rohstoff AG v Donaldson Lufkin and Jenrette Inc [1990] 1 QB 391, 473. On Pakistan's case Mr Zardari is not within any of the recognised categories of constructive trusteeship, but is one of two principal fraudsters. Bribery and corruption are torts: Mahesan v Malaysia Government Officers Co-operative Housing Society [1979] AC 374, 381. Pakistan in substance alleges tortious conduct against Mr Zardari outside the jurisdiction and does not seek (and could not seek) to bring its claim within CPR 6.20(8).
85. The extended notion of constructive trust suggested in NABB Brothers Limited v Lloyds Bank International (Guernsey) Limited [2005] EWHC 405 (Ch) at [72] is obiter and incorrect. It is accepted that Attorney-General for Hong Kong v Reid [1994] 1 AC 324 establishes that the recipient of a bribe holds it on constructive trust. But when the constructive trust head of jurisdiction was introduced by Ord 11, r 1(1)(t), a claim relating to the acceptance of bribes was not within a proprietary claim: Lister & Co v Stubbs (1890) 45 Ch D 1.
86. If, however, a wider approach to the concept of constructive trusteeship is taken, it follows that the real question in relation to CPR 6.20(14) in the present case is whether Mr Zardari's alleged liability arises out of acts committed within the jurisdiction. The short answer to this question is that on Pakistan's case Mr Zardari is not liable because he bought a property in England, but because he engaged in corruption outside the jurisdiction.

Defendant companies' arguments

87. The defendant companies are not express trustees in any sense and do not fall within the first category of constructive trustee identified by Millet LJ in Paragon Finance Plc v Thakerar & Co [1999] 1 All ER 400, 408-409. The defendant companies, if constructive trustees at all, are such on the basis of their "knowing receipt" of the assets in question: NABB Brothers Limited v Lloyds Bank International (Guernsey) Limited [2005] EWHC 405 (Ch) at [70] and [71].
88. In Paragon Finance plc v D B Thakerar & Co [1999] 1 All ER 400, at 409, Millett LJ classified constructive trusts in two groups: (1) where the person described as a constructive trustee was actually a trustee, as in the Pallant v Morgan [1953] Ch 43 line of cases, where the defendant holds on trust for himself and another party; (2) where the defendant is implicated in a fraud and is not a trustee, but is held liable to account as if he were a trustee: in this class are the "knowing assistance" and "knowing receipt" cases.
89. To make a recipient liable as constructive trustee on the basis of knowing receipt, the recipient's state of knowledge (acquired at the date of receipt or later) must be such as to make it unconscionable for the recipient to retain the benefit of the receipt: Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437, at 455 (CA). The innocent recipient of property does not become a constructive trustee until receipt of knowledge of the claim in equity of the true owner: Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, at 707; Agip (Africa) Ltd v Jackson [1990] Ch 265, 290, revd on other grounds [1991] Ch 547.
90. For the purposes of CPR 6.20(14) Pakistan must show that a substantial part of the acts viewed as a whole, on the part of the original fiduciary and the defendant, which give rise to the alleged liability, took place within the jurisdiction: ISC Technologies v Guerin [1992] Lloyds Rep. 430, 433; Polly Peck International Plc v Nadir, March 17, 1993, CA, transcript, pp 7-8.
91. Pakistan relies primarily upon various acts of Mr Zardari and others which occurred in either Pakistan or Switzerland. It is only by virtue of these acts that the funds allegedly held in the various accounts and used to purchase and refurbish the Rockwood Estate can be said to have been impressed with any form of trust. In addition to establishing these facts, an essential requirement for a claim based on a constructive trust is knowledge on the part of the defendant. However, the only facts pleaded by Pakistan relating to the knowledge of the defendant companies is that at paragraphs 66 and 87.3 of the particulars of claim in which the knowledge of Mr Zardari and Ms Bhutto is attributed to the defendant companies. This attribution cannot constitute an act which was committed in England.
92. Insofar as Pakistan seeks to rely not on a constructive trust in the true sense but simply on its claim in equity to the funds in question, such a claim does not fall within CPR 6.20(14). There is no scope for treating the expression "constructive trust" (where, as in CPR 6.20(14), it is used as a term of art) as including any claim which does not involve knowledge on the part of the alleged trustee: Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, at 707. The fact that the expression is used colloquially to include a bare claim in equity cannot alter this and NABB Brothers Limited v Lloyds Bank International [2005] EWHC 405 (Ch) at [72] is wrong on this point.
93. Even if such a claim does fall within CPR 6.20(14), the only consequence will be that Pakistan need not establish knowledge on the part of the defendant companies. The position will remain, however, that Pakistan will have failed to show that a substantial part of the acts giving rise to its claim against the defendant companies took place in England.

IX Forum conveniens

Pakistan's arguments

94. England is the forum in which the case can be suitably tried for the interests of all the parties and for the ends of justice. The defendants have not set out even the outline of a defence to the claims. If they wish to persuade the court that England is not appropriate they should (at least) state in broad terms what the issues are likely to be. This then would enable the court to assess the relevant factors.
95. The real connections in this case are overwhelmingly with England. The Rockwood Estate is in England. The proceedings are concerned with the purchase and refurbishment of that property, which were funded (Pakistan says) with the proceeds of corruption.
96. The Rockwood Estate has now been sold and the claim (against the defendant companies) is therefore to the proceeds of sale of the property in the hands of the Liquidator rather than to the property itself. If the claim remained one to real property within the jurisdiction, it could not realistically be contended that the appropriate forum was anywhere other than the jurisdiction in which the property was located. The fact that the property is now represented by a fund has not changed the essential nature or circumstances of the claim. The fact that the proceeds of sale themselves also remain within the jurisdiction is another strong indication that England is the appropriate forum.
97. Those engaged in the purchase and refurbishment of the Rockwood Estate and able to give evidence in respect of it were based in England. The purchase was effected on Mr Zardari's behalf by Mr Howard, an English solicitor based in London. Mr Zardari will not be able to claim legal professional privilege concerning Mr Howard because of the iniquity exception. The monies were received and then paid over in England, via Mr Howard's solicitor's client account. Advice as to the ownership structure was sought from Mr Wilamowski, who was also based in London. The persons engaged in the refurbishment of the Rockwood Estate, including a surveyor (TW Gillo), a firm of architects (MacKenzie Architects) a building contractor (Grantbridge Limited) and interior designers (Christopher Cook Designs Ltd) were based in England. The relevant documents (to the extent they still exist) are likely to be in English and in England (save perhaps for some Swiss banking documents).
98. It would not be onerous to require the parties to attend trial in England. The parties have all engaged solicitors in England before the issue of these proceedings. The Liquidator is based in England and is represented by Ingram Winter Green, English solicitors. Mr Zardari has engaged English leading counsel in the Isle of Man proceedings and has been variously represented by Mr Howard of Lawrence Jones, Raymond Saul & Co (London), and Cadwalader Wickersham & Taft (London).
99. As far as witnesses are concerned England is far more convenient: apart from Mr Zardari (who lives in New York or Dubai) the witnesses are likely to be here (most importantly, Mr Howard and Mr Wilamowski) or in Switzerland or the Isle of Man. The same is true of any documents they may have in their possession.
100. Mr Zardari chose to purchase an estate in England. There is nothing unfair or inappropriate in a dispute about the ownership of the Estate being heard here.
101. To the extent that there are potential witnesses or documents in the Isle of Man or Continental Europe, it will be considerably more straightforward for them to attend trial in England than in Pakistan.
102. As to Mr Zardari's residence, he is now apparently living either in New York or Dubai – neither of which is an appropriate jurisdiction.
103. The defendant companies' solicitor, Mr Popat, says that a number of issues in relation to the assets of the defendant companies and the ownership of the defendant companies remain to be decided in the Isle of Man. The issue in this case is the ownership of the Rockwood Estate, an English property acquired by the defendant companies. If it is decided in favour of Pakistan, the assets will be its property and not that of the companies. Any questions of ownership of the defendant companies are irrelevant.
104. Mr Popat suggests in his second witness statement that the decision should be affected by the fact that the defendant companies are being wound up in the Isle of Man, and the Liquidator is concerned with an orderly liquidation. This claim is not affected by, and has nothing to do with, the liquidation. The question of ownership of the Rockwood Estate is a free-standing issue which has nothing to do with the winding up of the companies, and it is an issue that clearly needs to be determined by legal proceedings rather than within the winding up of the companies.
105. The only connection with the Isle of Man is that it happens to be the offshore jurisdiction chosen by Mr Zardari for the location of the companies and trusts by the use of which he sought to conceal his ownership of the Rockwood Estate.
106. Apart from the Liquidator's suggestion of the Isle of Man, there is no positive suggestion that any other forum would be more appropriate than England in the evidence put forward by the defendants in support of their applications.
107. The breaches of duty on the part of Mr Zardari and Ms Bhutto upon which Pakistan relies were owed to Pakistan. It had been suggested by Mr Zardari's leading counsel in the Isle of Man proceedings that Pakistan was the appropriate forum. Although some of the breaches of duty may have occurred in Pakistan (such as the decision to award contracts to SGS and Cotecna), others will have occurred in Switzerland (where the proceeds were paid) and England (where the monies were used to acquire the Rockwood Estate). Unless Mr Zardari's case is that he did receive the proceeds of corruption in Pakistan, then there is no particularly strong connection with Pakistan: what can be seen is that payments were received in Switzerland from SGS and Cotecna, or into the Bomer Citibank Account via Citibank New York and Banco Arabe Espanol, Madrid.
108. As regards the criminal proceedings that have been brought in Pakistan, the Pakistani courts have declared that Mr Zardari is an absconder from justice, and the criminal proceedings against him cannot proceed in his absence. He has demonstrated that he is not prepared to participate effectively in those proceedings and there is no reason to think he would genuinely participate in any civil proceedings brought there either.
109. Mr Zardari has challenged the declarations that he is a proclaimed offender, which challenges were made on March 25, 2006 (i.e. after permission to serve out in these proceedings was granted). However, when the matter came for hearing on May 2, 2006, Mr Zardari asked that it be adjourned as his senior counsel was engaged in another case. The court noted that Mr Zardari "has engaged three learned counsel… but none of them has entered appearance to argue the case. In addition, no cause what to talk [sic] of 'sufficient cause' for their absence has been shown". The court nonetheless granted an adjournment in order to provide a further opportunity of hearing to Mr Zardari lest he complain that he was not given an opportunity to be heard.

Mr Zardari's arguments

110. The proceedings commenced against Mr Zardari and Ms Bhutto in 1998 in the Accountability Court include the claim that the Rockwood Estate was purchased using the proceeds of corruption. The Accountability Court granted a freezing order/order for confiscation of assets against Mr Zardari on April 27, 1998 which remains in force, and both Mr Zardari and Ms Bhutto have been questioned about the purchase of the Rockwood Estate during the course of the protracted proceedings in Pakistan.
111. In his judgment in the Isle of Man proceedings the Deemster said at paragraph 135 that he could appreciate the force of a submission that the appropriate forum was Pakistan where proceedings had been in existence since 1998.
112. In the present case the proceedings in Pakistan have been dealing since 1998 with the very issue Pakistan now seeks to litigate in England. Mr Zardari has been incarcerated for a lengthy period awaiting their outcome prior to being granted bail. Pakistan has had the benefit of a freezing order/order for confiscation of Mr Zardari's assets in those proceedings. Mr Zardari and Ms Bhutto have been questioned about the purchase of the Rockwood Estate in those proceedings. The central issue is corruption and this will be governed by the law of Pakistan. The witnesses are likely to be in Pakistan. The documentary evidence has already been collected in Pakistan. Mr Zardari has incurred, and is continuing to incur, substantial legal costs in relation to the proceedings in Pakistan. On the face of it everything points towards the courts in Pakistan being the appropriate forum.
113. Pakistan's answer to this point appears to be that the proceedings in Pakistan are not an available forum as Mr Zardari has been declared a "proclaimed offender" and the trial cannot proceed in his absence. However, the legal proceedings relating to the lawfulness of the decision of the Accountability Court to declare Mr Zardari a proclaimed offender have yet to be resolved by the courts in Pakistan. Pakistan's evidence in response does not address the fact that another court in Pakistan has accepted that Mr Zardari has a medical reason which excuses his personal attendance for the time being. The inconsistency between different courts in the judicial arm of the State of Pakistan is striking, and unexplained. Given the proven political interference in the Court's process in previous proceedings involving Mr Zardari, this is a matter of real concern which Pakistan has chosen not to explain.
114. Mr Zardari's position before Pakistani courts is that he will return to Pakistan to participate personally in the proceedings as soon as his health permits and his medical advisers tell him that he is fit to do so. That position has been accepted by the court in Karachi. Whether it should be accepted by the Accountability Court is the subject of ongoing proceedings in the High Court in Lahore.

Defendant companies' arguments

115. This case has significant and relevant connections with three jurisdictions: Isle of Man, Pakistan and Switzerland. The connections with England relied on by Pakistan are minimal. It cannot be said that England is the natural forum for the resolution of these issues; it simply is not the forum with the most real and substantial connections with the claim.
116. The connections relied on by Pakistan primarily concern the events surrounding the purchase of the Rockwood Estate in England. Pakistan also relies on the appointment of a liquidator resident there and the holding of the proceeds of sale by the Liquidator in England. These factors are of limited significance on the question of forum conveniens. None of these factors points to England as the most appropriate forum.
117. There is nothing in the nature of the dispute that points to England or in relation to which England offers any advantage as a forum. As all parties either are within or have submitted to the jurisdiction of the Manx courts, and there will be no difficulty over the enforcement of any judgment issued by that court affecting the assets in issue.
118. The essential legal issues underlying Pakistan's claim will be determined according to the law of Pakistan (being the law governing the relationship between Mr Zardari and Pakistan). Only after a right or entitlement is established under that law will any issue as to the recognition of a constructive trust arise. On this, England offers no particular advantage as the Isle of Man court will impose a constructive trust in virtually identical circumstances as would an English court.
119. England similarly offers no advantage in relation to witnesses. The key witnesses in relation to Pakistan's fundamental bribery claim will be Mr Zardari and those with whom he is alleged to have dealt, none of whom is in England. Pakistan's attempt to emphasis the importance of Mr Howard (the conveyancing solicitor) and the tax adviser consulted by him, is transparent. The importance of this element is in any case reduced by the fact that there are persons in the Isle of Man who may well have similar input in relation to the events surrounding the acquisition of the Rockwood Estate.
120. In the result, Pakistan cannot show that litigating this matter in England will advance the interests of all the parties and the interests of justice. Further, Pakistan cannot identify any legitimate juridical advantage which will accrue to Pakistan by litigating this matter in England (or, conversely, any real prejudice that will be caused by litigating elsewhere).
121. There are, by comparison, substantial connections with the Isle of Man: (1) The Isle of Man is the place of incorporation and residence of the defendant companies. (2)The Isle of Man is the situs of the trust which may affect the shares of the third and fourth defendants and of the trust on which the second defendant may hold the assets in its name. (3) The Isle of Man is the seat of the winding up of the defendant companies. (4) The Isle of Man is the jurisdiction in which there are active proceedings on foot, all in the course of the winding up of the defendant companies, and which must, inevitably, address the disposition of the funds in issue, including Pakistan's claim to them. (5) All parties are either within the jurisdiction of the Manx courts or have already submitted to its jurisdiction.
122. Pakistan has sought to diminish the significance of the residence of the defendant companies in the Isle of Man by reference to Lord Goff's comment in Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 at 481 that "a defendant's place of residence may be no more than a tax haven to which no great importance should be attached". It is most likely that he meant that a corporate residence in a tax haven may not necessarily have any great substance and that the relevant parties may be those standing behind such a company. If so, this in no way points to England. But the defendant companies are not merely resident in the Isle of Man they are incorporated there. Isle of Man law will govern and the Isle of Man courts will be the natural forum for the determination of all corporate issues.
123. The Isle of Man offers distinct advantages. Pakistan's claim cannot properly be segregated from all other matters arising in the winding up of the defendant companies in the simplistic manner Pakistan seeks to achieve by these proceedings. There are a variety of issues which need to be dealt with, or at the very least, need to be considered and a coordinated approach to their proper resolution adopted. These will include: (a) the progress of the winding up of the defendant companies; (b) the payment of the various parties' costs incurred in the winding up; (c) the nature of the first defendant's interest in the assets held by the defendant companies or in the shares of the defendant companies; (d) the status of the Rockwood House Trust; (e) the status of Winkford and Parsonage Farm Trust; and (f) the position of other possible claimants, in particular Mr Muzzafar Owais.
124. These issues can be dealt only in the Isle of Man; certainly it is only in the Isle of Man that fully effective orders (under both section 240(1) of the Companies Act 1931 and section 61 of the Trustee Act 1961) offering protection to the Liquidator and others, can be obtained.
125. There is a real risk of conflicting orders if all matters in the winding up of the defendant companies are not properly coordinated by the Manx court. This risk has already materialised. In correspondence between the advocates and solicitors for Pakistan and the Liquidator it was asserted, on behalf of Pakistan, that Pakistan does not consider itself bound or affected by the Order of the Deemster made on May 3, 2006, in which the Liquidator was directed to bring this application to challenge jurisdiction.
126. The need for coordination with the Manx proceedings is emphasised in Limit (No 3) Ltd v PDV Insurance Co [2005] EWCA Civ 383, [2005] 2 All ER (Comm) 347, requiring that the effect on "related proceedings" also be considered. The Manx court is already seised of this entire matter and has been for some years and has gained considerable familiarity with it. The view of the Manx court on these questions has been clearly indicated by the direction given to the Liquidator to bring this application to challenge jurisdiction.
127. The court in England will respect the integrity of foreign winding up proceedings and will not, without compelling reason, take any steps to interfere in that process, and the fact that the winding up of the defendant companies and the various proceedings having been brought in the Isle of Man have all been brought about in large part by Pakistan is highly relevant to the exercise of the court's discretion: Banque Indosuez v Ferromet Resources [1993] BCLC 112.
128. The connections with the Isle of Man have a particular significance because they have been brought about directly as a result of the actions of Pakistan or its agents. It was Pakistan's agent who secured the reinstatement of the defendant companies and the entry of the defendant companies into voluntary winding up. It was Pakistan which proposed the compromise agreement and, with it, that the Liquidator make an application to the Manx court for its sanction under s. 240 of the Isle of Man Companies Act 1931 (which led to the Deemster's judgment). Pakistan took a full part in the sanction proceedings.

X Non-disclosure

Mr Zardari's arguments

129. The evidence presented by Pakistan on the without notice application resulting in the order for service out asserted that: (1) the "key allegation" was that the Rockwood Estate was purchased by Mr Zardari and Ms Bhutto with the proceeds of corruption, yet failed to draw attention to the finding of the Isle of Man High Court that there was no evidence to support that allegation. Although the judgment of the Deemster was exhibited it is a lengthy and complex judgment and it is not sufficient merely to exhibit such a document and expect the court to read it carefully and at length. Much less is it acceptable to misrepresent the reasoning in the judgment by summarising it in an incorrect manner; (2) Mr Zardari had not participated in the Swiss proceedings to date, and this assertion was designed to paint a picture of evasion of court proceedings on the part of Mr Zardari. In fact, Mr Zardari has at all times been represented in the Swiss proceedings and has successfully appealed against the Order originally made and obtained an order for costs in his favour and (3) Mr Zardari had failed to return to Pakistan to participate in the criminal proceedings against him, without explaining that the court in Karachi had accepted that his medical condition prevents him from personally attending the hearings at present, or that the inconsistent decision of the Accountability Court is the subject of challenge in proceedings by Mr Zardari before the High Court in Lahore, in which that court has directed that no further Order prejudicing the rights of Mr Zardari should be passed by the Accountability Court.
130. The second and third of these complaints may have resulted in Cooke J being left with the impression that Mr Zardari was concerned to avoid facing the music. However that would have been unfair. Mr Zardari has in the past taken action in the courts of Pakistan in an attempt to speed up the progress of the case against him. He has participated fully and successfully in the Isle of Man proceedings. He has participated in the Swiss proceedings and is participating in the ongoing proceedings in Pakistan.

Defendant companies' arguments

131. The weakness in Pakistan's case (which had, less than a month earlier, been so graphically pointed out in the Isle of Man hearing) should have been brought expressly to the court's attention. Even though the judgment of the Deemster was exhibited to that statement, this is not sufficient.
132. Pakistan also failed to disclose the history of Pakistan's dealings in the Isle of Man prior to bringing these proceedings. It was Pakistan who brought this matter into the Isle of Man and has pursued its rights fully in that jurisdiction.

Pakistan's arguments

133. The question before the Isle of Man court was whether it ought to exercise its power to sanction the compromise agreement. It was not a trial or even summary determination of the issues now before the court. The Deemster refused sanction as in his view the Liquidator had failed to discharge his duties properly. The Deemster's reference to a lack of evidence can only be to a lack of direct evidence, as there is plainly ample evidence of corruption. If the Deemster intended otherwise, then he was wrong.
134. The Deemster's judgment does not establish or pretend to establish that there is not a serious issue to be tried. That was not the issue before him. Rather, the Deemster came to the view, in the light of the Liquidator's conduct and evidence, that the court ought not to sanction the compromise agreement. His acceptance that Pakistan's claim represents a significant risk to the assets suggests that in his view there was a serious issue to be tried, but that the Liquidator was wrong to compromise the claim in the manner which he did.
135. There is nothing in the point that Pakistan failed to disclose that Mr Zardari had not participated in the Swiss proceedings. In fact, Mr Zardari refused to answer the questions posed of him prior to the initial sentencing order in the Swiss proceedings. He then lodged an opposition to the sentencing order, which has the automatic consequence that the conviction is set aside and the matter sent to a higher court. Mr Zardari has not attended the hearings before the Investigating Magistrate since then, having asked to be excused on medical grounds. The Magistrate has refused to excuse Mr Zardari from hearings on September 19, 2005, November 24 and 25, 2005 and May 24, 2006, but Mr Zardari has failed to attend in person.

XI Conclusions

A General principles

136. On the merits of the claim the claimant's application must show that the claim has "a reasonable prospect of success" (CPR 6.21(1)(b)), and it has been confirmed by the Court of Appeal that this threshold is the same as if the claimant were resisting an application by the defendant for summary judgment, i.e. "the claimant has no real prospect of succeeding on the claim" (CPR 24.2): Carvill America Inc v Camperdown U.K. Ltd [2005] EWCA 645, [2005] 2 Lloyd's Rep 457; and see De Molestina v Ponton [2002] 1 Lloyd's Rep 271, 279-281. It is probable that there is no practical difference between this test and the test for the purposes of RSC Ord. 11, r 1(1) of "a serious issue to be tried" in Seaconsar Far East Ltd v Bank Markazi Iran [1994] 1 AC 438.
137. The standard to be applied in considering whether the jurisdiction of the court has been sufficiently established on the facts is that of good arguable case: Seaconsar Far East Ltd v Bank Markazi Iran [1994] 1 AC 438, 454.
138. CPR 6.21(2A) provides that the Court will not give permission to serve out unless satisfied that England and Wales is the proper place in which to bring the claim. In cases of service outside the jurisdiction (by contrast with applications for a stay of English proceedings) the burden is on the claimant to show that England is clearly the appropriate forum for the trial of the action, namely the forum where the case may most suitably be tried for the interests of all parties and the ends of justice: Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460, 481. But where a case may most suitably be tried will depend on the likely issues, and the defendant should identify the issues and state how they arise or may arise in the proceedings: Limit (No. 3) Ltd v PDV Insurance Co [2005] EWCA Civ 383, [2005] 2 All ER (Comm) 347 at [72], per Clarke LJ.
139. The relevant forum conveniens factors, authoritatively established in Amin Rasheed Shiping Corp v Kuwait Insurance Co [1984] AC 50 and Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460, have been applied in many decisions, both in stay cases and in cases of service out of the jurisdiction: for a recent example see Limit (No. 3) Ltd v PDV Insurance Co, ante, at [67]. The existence of parallel proceedings in another jurisdiction between the same parties is a relevant, and frequently an important, or even decisive, factor in the determination of the appropriate forum.
140. Since the application is made without notice, full and fair disclosure of relevant matters must be made. The primary question is whether in all the circumstances the effect of the evidence in support is such as to mislead the court in any material respect concerning its jurisdiction and the discretion under the rule: BP Exploration v Hunt [1976] 1 WLR 788, applied in, e.g. Konamaneni v Rolls Royce (India) Ltd [2002] 1 WLR 1269, at 1301-2. Depending on the circumstances, it may not be a sufficient disclosure to include relevant material in an exhibit without drawing attention to its significance in the witness statement: see Civil Procedure, 2006, vol 1, para. 6.21.6(e).

B Reasonable prospect of success/serious issue to be tried

141. I emphasise again that I am making no findings of fact, and that I am concerned only with the question whether Pakistan has reached the necessary threshold. Although all defendants seek to have the order set aside on the ground that there is no serious issue to be tried, none of the witness statements in support sets out a factual case on what might be expected to be the areas of controversy, although the evidence for Mr Zardari does rely extensively on the references in the Deemster's judgments to a lack of evidence of corrupt payments on which the Liquidator could act. I accept the point made for Mr Zardari that if a claimant makes allegations tantamount to fraud without any proper basis then it is not for the defendant to answer them in detail, if the defendant can make good the argument that there is insufficient material on which the allegation could be properly made.
142. I accept Pakistan's case that it has a real prospect of success on the merits. Mr Zardari sought to conceal his interest in the Rockwood Estate. In the words of Mr Howard "It is of critical importance that the disclosure of the ultimate beneficial ownership of the properties … is limited as much as possible." On September 17, 2003 Mr Zardari's solicitors, Raymond Saul & Co wrote to the Liquidator's solicitor to say that he did not claim to be the beneficial owner of the Rockwood Estate. But in the proceedings before the Deemster Mr Antony White QC was granted permission to amend the Answer to acknowledge that he was the beneficial owner of the Estate (and of the defendant companies), which he had previously denied: the Deemster's judgment, paras 27 and 105.
143. Mr Zardari has not answered Pakistan's case that he did not disclose his ownership of the Rockwood Estate or the defendant companies in his 1995 and 1996 tax returns in Pakistan, or in his asset declaration filed in February 1997 as part of his nomination papers for election to the Senate.
144. The purchase price was paid by Bomer. The relevant transfers from the Bomer Citibank Account to Mr Howard's client account were: (1) £110,000 on July 4, 1995; (2) £60,000 on July 10, 1995; and (3) £2,123,750 on September 28, 1995.
145. Almost £2 million was paid from the Bomer UBS and Citibank Accounts for the refurbishment: (1) £424,876 in four payments between January 1996 and June 1996 from the Bomer UBS Account to Mr Howard's client account; (2) £1,505,864 in ten payments from the Bomer Citibank Account between March 1996 and July 1996, mainly to Mr Howard's client account, but also including payments of £125,000 to Christopher Cook Designs Ltd and of £207,314 to Grantbridge. In addition (1) payments of £394,504 were made from the Nassam Barclays Account between December 1995 and August 1996 to Mr Howard's client account; and (2) payments of £516,369 were made from the Benington Banque Pasche Account between November 1996 and September 1997 to Mr Howard's client account.
146. There is evidence that Mr Zardari was the beneficial owner and controller of Bomer. First, Citibank's account opening form for the Bomer Citibank Account contained a "Verification of the Beneficial Owner's identity" signed by Mr Schlegelmilch and dated February 27, 1995, stating "that the beneficial owner of the assets deposited with the bank" is Mr Zardari. Second, Mr Schlegelmilch stated at an oral examination in April 1999 in the Swiss proceedings: "…SGS knew that Mr. ZARDARI was the beneficial owner of BOMER. I insist on the fact that he was the sole beneficial owner of the company." Third, an undated mandate agreement entered into between Mr Zardari and Mr Schlegelmilch recorded that Bomer had been incorporated at the request of "the principal" (as Mr Zardari was defined in the agreement) and that its share capital was owned by him, and provided that Mr Schlegelmilch was to "hold all the shares in a purely fiduciary manner, i.e. in his own name, but on the principal's behalf exclusively, and at the latter's own risks".
147. Mr Lloyds exhibited to his witness statement a deposition made in Pakistan in 1999 by Mr Zardari in which he "denied for want of knowledge" questions relating to the shareholders and directors of Bomer and denied that he had any knowledge of the Bomer UBS Account. He also claimed that the undated mandate agreement in which he, as the sole shareholder, appointed Mr Schlegelmilch as sole director-president of Bomer was "evidently, false, forged and fabricated."
148. Between March 7, 1995 and September 1, 1995, $10 million was paid into the Bomer Citibank Account, as follows:

Date	Amount	Transferor
March 7, 1995	$3,000,000	Citibank New York: "one of their clients via Banco Arabe Espanol, Madrid"
May 4, 1995	$1,000,000	Citibank New York: "one of their clients via Banco Arabe Espanol, Geneve"
June 15, 1995	$3,000,000	Citibank New York: "one of their clients via Banco Arabe Espanol, Madrid"
August 22, 1995	$1,200,000	Citibank New York: "Abdul Rahman Al-Assir via Citibank NA, Zuerich"
September 1,1995	$1,800,000	Citibank New York: "Abdul Rahman Al-Assir via Citibank NA, Zuerich"

149. Pakistan has exhibited the agreements entered into (a) between SGS/Cotecna and Nassam/Mariston in 1990, (b) between SGS and Bomer/Mr Schlegelmilch in March 1994, and (c) between Cotecna and Nassam/Mariston and Mr Schlegelmilch in June 1994, under which commissions would be payable to Mariston, Nassam, Bomer, and Mr Schlegelmilch.
150. The monies that were agreed to be paid to Mariston under the 1994 agreements were in fact paid to Bomer. Pursuant to those agreements (i) between June 1995 and August 1997 Cotecna paid at least $3,835,231 to the Bomer UBS Account, at least $3,807,338 to the Nassam Barclays Account and at least $812,205 to Mr Schlegelmilch; and (ii) between May 1995 and September 1997 SGS paid at least $4,354,854 to the Bomer UBS Account and at least $725,809 to Mr Schlegelmilch.
151. Accordingly there is direct evidence that the Cotecna/SGS payments were used to source the cost of refurbishment, but there is no direct evidence that the source of the Bomer monies used to fund the purchase was the proceeds of corrupt payments.
152. No explanation has been given by Mr Zardari of the source of the payments into the Bomer Accounts.
153. Bomer (and the other offshore vehicles) was used from mid-1995 onwards to receive secret commissions from SGS and Cotecna in connection with contracts between those entities and Pakistan. Bomer had no commercial business of its own, and it was a vehicle for Mr Zardari and/or Ms Bhutto. There is material that they were behind a number of other off-shore shell companies used to receive bribes (while concealing their interests).
154. From what Mr Schlegelmilch said about the payments from Mr Al-Assir to the Bomer UBS and Citibank Accounts in 1994 and 1995 (totalling $4,325,000), it is arguable that these payments were tainted, although I recognise that it may turn out (as is argued for Mr Zardari) that these payments are not connected with corruption, or with corruption relating to Pakistan. In an oral examination conducted on October 22, 1997 in the Swiss proceedings, Mr Schlegelmilch stated that the Bomer UBS Account had been used to receive payments to Mr Zardari after he had acted as intermediary in "an oil affair in Saudi Arabia" with Mr Al-Assir, and that the Bomer Citibank Account was used to collect funds originating from other contracts with Mr Al-Assir, "regarding other countries." I accept that it is inherently improbable that Mr Zardari would have wished Bomer, which was used to receive funds from SGS and Cotecna, to receive funds deriving from legitimate sources. All the monies in the various Swiss bank accounts seem to have been treated as being effectively part of the same fund.
155. There is, in my judgment, a reasonable prospect of Pakistan establishing that (a) Mr Zardari and/or Ms Bhutto instructed Mr Schlegelmilch and Mr Howard to facilitate the purchase and refurbishment of the Rockwood Estate; (b) that advice was sought from Mr Wilamowski, with the object (among others) of concealing the beneficial ownership of the Rockwood Estate; (c) that the result of the arrangements was that the defendant companies were ultimately controlled by an entity called Colletta Foundation, a Liechtenstein foundation controlled by Mr Zardari and/or Ms Bhutto, of which Mr Zardari was the first beneficiary and Ms Bhutto was second beneficiary; (d) that the funds used to refurbish the Rockwood Estate were the proceeds of payments by SGS and Cotecna; (e) that those payments were the fruits of corruption; (f) that the funds used to purchase the Rockwood Estate were also the fruits of corruption; and (g) that the defendant companies (through Mr Zardari) were aware of all relevant matters.
156. This conclusion is not affected by the Deemster's judgment. As the Deemster made clear in his judgment, he was not asked to determine any "question". The only matter with which he was concerned was whether it was just and beneficial to exercise the power to sanction the compromise agreement, and he was not adjudicating on the underlying claim by Pakistan, and contemplated that these proceedings would continue: paras 98-100, 139-140. In effect what he had to decide was whether the Liquidator could enter into a compromise agreement, the effect of which would be to deprive Mr Zardari of any interest in the Rockwood Estate, and (subject to the claims of ordinary creditors) give unconditional effect to Pakistan's claim. He said in paragraphs 113 and 119 that there was not evidence upon which it was just and reasonable for the Liquidator to form a view that the monies used by Bomer and others to finance the purchase and refurbishment of the Rockwood Estate were obtained as a result of illegal acts of corruption. In my judgment it is clear from the context that the question he was addressing was whether the Liquidator could form a final and definitive view, the effect of which would be to deprive Mr Zardari of any interest in the property. This he declined to do, and found that the Liquidator had not given proper consideration to the claim: para 142.

C Jurisdiction: CPR 6.20(10) and CPR 6.20(14)

157. By CPR 6.20(10) the court may assume jurisdiction if the whole subject-matter of the claim relates to property situated in England. In Re Banco Nacional de Cuba [2001] 1 WLR 2039, at 2055, Lightman J held that the rule is not confined to claims relating to the ownership or possession of property, but extends to any claim for relief, whether for damages or otherwise, so long as it is related to property located within the jurisdiction; but since the jurisdiction was discretionary the court would consider whether the character and closeness of the relationship was such that the jurisdiction against foreigners abroad should properly be exercised. In Sahar v Tsitsekkos [2004] EWHC 2659 (Ch) at [41]-[42] Mann J held that in considering the application of the rule it was necessary to examine how the case was put, and what in substance it involved.
158. Pakistan no longer pursues the claim in these proceedings "to such other assets" of the defendant companies as are found to have derived from corrupt payments. If the claim is limited to the proceeds of the Rockwood Estate I have no doubt that the whole subject matter of the claims against Mr Zardari and the defendant companies relate to property in England. Both the Rockwood Estate and the proceeds of sale are in England.
159. The subject matter of the claim is the property. It is true that the basis of the claim rests on alleged corruption, but that does not affect the existence of jurisdiction under CPR 6.20(10). The intention of that head of jurisdiction is to confer a discretionary jurisdiction on the English court to hear disputes relating to property in England. Nor is there any basis for the suggestion on behalf of Mr Zardari that the rule was not intended to relate to disputes over funds of money representing property in England. It is argued that if the rule applied to easily movable property a claimant could establish jurisdiction over a foreigner by, for example, paying a disputed fund into an English bank account. But in such a case the discretion of the court would prevent an exorbitant jurisdiction being exercised.
160. By CPR 6.20(14) the court may assume jurisdiction if the claim is made against the defendant as constructive trustee where the defendant's alleged liability arises out of acts committed within England.
161. Two questions arise on the application of this rule: the scope of the concept of constructive trust, and the question of whose acts, and what acts, engage the application of the rule.
162. In ISC Technologies Limited v Guerin [1992] 2 Lloyd's Rep 430, 433 (a case on the predecessor of the rule in RSC Ord 11, r 1(1)(t)) Hoffmann J said in this context that this liability was based upon constructive trusteeship which could be imposed in two categories of case: (1) knowing receipt of monies paid in breach of trust and (2) knowing participation in a fraudulent breach of trust. In Nycal (UK) Ltd vLacey [1994] CLC 12, 16, Knox J considered (also in relation to the previous rule) that the field occupied by constructive trusts had been set out in by Slade LJ in Metall und Rohstoff AG v Donaldson Lufkin and Jenrette Inc [1990] 1 QB 391, 473:

"No satisfactory definition of a constructive trust has yet been enunciated, and perhaps none ever will be; for the concept is still uncertain and the boundaries obscure…

..

Nevertheless, as appears from p.194 of Snell, there are, among others, at least three well-established categories of constructive trust. A person receiving property which is already subject to a trust becomes a constructive trustee thereof either (1) if he receives the trust property with actual or constructive notice that it is trust property and that the transfer to him is in breach of trust (which we will call a "receipt of property constructive trust") or (2) if, after receiving it, otherwise than as a purchaser for value without notice of the trust, he acquires notice of the trust and thereafter deals with it in a manner inconsistent with the trust (which we will call a "wrongful dealing constructive trust"), and (3) a person who does not actually himself receive the trust property, may also be treated as a constructive trustee if, …he assists with knowledge a fraudulent design on the part of the trustees."

163. In NABB Brothers Limited v Lloyds Bank International (Guernsey) Limited [2005] EWHC 405 (Ch), [2005] ILPr 506, at [72] I expressed the view, obiter, that the concept of constructive trust included other cases in which proprietary relief was available in equity, and where the terminology of constructive trust had been used: see Boscawen v Bhaja [1996] 1 WLR 328, 334-5 and Sir Peter Millett, Restitution and Constructive Trusts, in Restitution, Past, Present and Future: Essays in Honour of Gareth Jones (ed Cornish et al, 1998), 199, at 200.
164. In Attorney General for Hong Kong v Reid [1994] 1 AC 324, 336, the Privy Council held (not following Lister & Co v Stubbs (1890) 45 Ch D 1) that a bribe and the property from time to time representing the bribe are held on a constructive trust for the person injured. See also Daraydan Holdings Ltd v Solland International Ltd [2004] EWHC 622 (Ch), [2005] Ch 119.
165. If the payments were bribes, and if (as is alleged) Mr Zardari is the controlling mind of the defendant companies, then the defendant companies would be constructive trustees on the basis of their knowing receipt of the proceeds of the bribes.
166. The next question would be whether the relevant defendant's liability arose out of acts committed within the jurisdiction. In NABB Brothers Limited v Lloyds Bank International (Guernsey) Limited [2005] EWHC 405 (Ch), [2005] ILPr 506, at [79] et seq I discussed the nature of the required territorial link for the purposes of CPR 6.20(14) (and also CPR 6.20(15), which deals with restitution) and set out the decisions on the former rule in RSC Ord 11, r 1(1)(t), which allowed service out of the jurisdiction where the defendant's alleged liability arose "out of acts committed, whether by him or otherwise, within the jurisdiction": there was a difference of opinion as to whether all the acts necessary to impose liability as a constructive trustee must have been committed within the jurisdiction: in ISC Technologies Limited v Radcliffe, unreported, Millett J, December 7, 1990, it was held that the former rule only applied if all the acts necessary to impose liability were committed in England, and that accordingly it applied to knowing participation by acts in a fraudulent breach of trust committed in England, but not to knowing receipt abroad of the proceeds of such a fraud. In ISC Technologies Limited v Guerin [1992] 2 Lloyd's Rep. 430 at 433 Hoffmann J considered that Millett J's construction was too narrow, and that the rule was "primarily designed" to catch "the foreign entity which has not participated in the fraud but has been used as a receptacle for the proceeds by the natural persons who controlled it". It was not required that every act necessary to create liability should have been committed within the jurisdiction.
167. In Polly Peck International plc v Nadir, The Independent, September 2, 1992 Knox J said that his own preference was for the construction which did not require all the acts constituting the constructive trust to have been committed within the jurisdiction. So to construe the paragraph would empty it of very nearly all its practical utility when one had regard to the prevalence of foreign corporations whose officers are very likely to be resident abroad and therefore only likely to require the necessary knowledge to establish the claimed constructive trust by events occurring abroad. The decision was reversed on other grounds: The Times, March 22, 1993. In the Court of Appeal Hoffmann LJ said that he remained of the view tentatively expressed in the Guerin case that it was sufficient if a substantial part of the acts, viewed as a whole, on the part of the original fiduciary and the defendant which gave rise to the alleged liability took place within the jurisdiction. It would be anomalous if jurisdiction over an offshore entity used by a fraudulent fiduciary to receive the proceeds of fraud committed within the jurisdiction depended upon whether or not the entity maintained an English bank account into which the proceeds were paid. A broader construction would reflect a more consistent purpose.
168. There is no doubt that, if I am right that the case of the proceeds of a bribe held on constructive trust under Attorney General for Hong Kong v Reid are within the concept of "constructive trust" for the purposes of CPR 6.20(14), then both Mr Zardari and the defendant companies are within that rule, subject to the question of territorial connection. There can be no doubt that the liability of the defendant companies arises out of acts committed within the jurisdiction, namely their acquisition of the Rockwood Estate in England with allegedly corrupt funds.
169. Whether Mr Zardari's liability arises out of acts committed within the jurisdiction is more difficult. The relevant relief sought against him is for a declaration that the Rockwood Estate is held on constructive trust, and a declaration that he is liable to account to and/or compensate Pakistan in equity for the money which passed through his hands or through the Swiss bank accounts and were used for the purchase or refurbishment of the Rockwood Estate. CPR 6.20(14) omits the omits "whether by him or otherwise." In NABB Brothers Limited v Lloyds Bank International (Guernsey) Limited [2005] EWHC 405 (Ch), [2005] ILPr 506, at [87] I expressed the view, obiter, that the omission did not make any difference, and that the relevant acts did not need to be those of the relevant defendant. On that basis there is a good arguable case that Mr Zardari would be within the rule because his liability in respect of the Rockwood Estate itself arises out of acts committed in England by the defendant companies on his instructions.
170. It is not, however, necessary to decide definitively whether Mr Zardari is within CPR 6.20(14) because he clearly comes within CPR 6.20(10). In any event, even if Mr Zardari were not within CPR 6.20(10) and 6.20(14), he would plainly be within CPR 6.20(3) as a necessary or proper party, and I would have given permission under that head, and dispensed with additional service.

D Forum conveniens

171. The onus is on Pakistan to show that England is clearly the appropriate forum. In one sense England is the natural forum to determine the ownership of property in England. But this is not a dispute about title to real property depending on English land law. In such a case it is almost impossible to imagine circumstances in which England would not be the appropriate forum, since under the private international law of most countries the court will not adjudicate on title to foreign land. But this is a claim to equitable ownership of the proceeds of sale of English land stemming ultimately from alleged acts of corruption abroad, and the search is for the forum in which the case can be suitably tried for the interests of all the parties and for the ends of justice.
172. The claim is to a fund in England held by the Liquidator of the defendant companies. The Liquidator has not indicated what the defendant companies' defence will be. The witness statements of Mr Popat on his behalf do not amount to more than (a) the defendant companies remain in liquidation and there are active proceedings in the Isle of Man in connection with the winding up; (b) the beneficial ownership of the fund and of the companies remains to be determined; (c) the Liquidator seeks to secure an orderly and efficient winding up of the companies by having all matters resolved in a single court.
173. In argument it was suggested on behalf of the Liquidator that the Isle of Man is an appropriate forum because the Isle of Man is the place of incorporation and residence of the defendant companies; the Isle of Man is the situs of the trusts which may affect the shares of the third and fourth defendants and of the trust on which the second defendant may hold the assets in its name; the Isle of Man is the seat of the winding up of the defendant companies; the Isle of Man is the jurisdiction in which there are active proceedings on foot, all in the course of the winding up of the defendant companies, and which must address the disposition of the funds in issue, including Pakistan's claim to them; all parties are either within the jurisdiction of the Manx courts or have already submitted to its jurisdiction.
174. But the companies are not being compulsorily wound up and there are at present no civil proceedings pending in the Isle of Man (or elsewhere other than England) relating to the ownership of the Rockwood Estate or the sale proceeds. This claim is not affected by, and has nothing to do with, the liquidation. The place of incorporation or residence of the defendant has little significance if the matter has no other connection with that jurisdiction: Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 at 481.
175. Nor did Mr Lloyds on behalf of Mr Zardari indicate what his defence will be. On the issue of forum conveniens his witness statement does not directly address the question, but in the course of it he says that (a) the subject matter of the references to the Accountability Court includes allegations that the Rockwood Estate was acquired by Mr Zardari and Ms Bhutto using the proceeds of corruption; (b) those proceedings are still being pursued; (c) Mr Zardari is not attending hearings in those proceedings because of his health, which the Karachi court (but not the Accountability Court) has accepted; (d) he will return to Pakistan to participate personally as soon as his health permits.
176. The Deemster said (para 135) that he could appreciate the force of the argument on behalf of Mr Zardari that the appropriate forum was Pakistan, where criminal proceedings had been in existence since 1998, but merely noted the arguments made in favour of that argument, namely that the alleged corrupt practices took place while Mr Zardari held office in Pakistan; the relevant law was Pakistani law; and witnesses and documentation were available there. These points were repeated before me, when it was emphasised that the central issue is corruption, which would be governed by the law of Pakistan; that the witnesses are likely to be in Pakistan, the documentary evidence has already been collected in Pakistan, and Mr Zardari has incurred, and is continuing to incur, substantial legal costs in relation to the proceedings in Pakistan.
177. I do not accept the argument for Mr Zardari that Pakistan is the appropriate forum. I give very little weight to the pending criminal proceedings in Pakistan, and the fact that the charges relate (inter alia) to the acquisition of the Rockwood Estate. The only matters which are likely to be centrally related to Pakistan are (a) Pakistani law as the law governing the fiduciary or other duties of Mr Zardari; and (b) the contracts with Pakistan allegedly facilitated by Mr Zardari in return for payment. It may also transpire that negotiations relating to payments took place in Pakistan or that documents relating to them may be there, but equally those discussions may have taken place outside Pakistan, and the documents may be outside Pakistan, especially if foreign contractors were involved. Mr Zardari claims to be anxious to return to Pakistan when his health permits, but he has been declared a proclaimed offender (or absconder) by the Accountability Court, the order of which still stands.
178. I accept Pakistan's argument that the indications are that Mr Zardari has demonstrated that he is not prepared to participate effectively in those proceedings and that there is no reason to think he would genuinely participate in any civil proceedings brought there either.
179. I should add that there was no evidence or argument about the availability or effectiveness of the Pakistani forum, and in particular whether the Pakistani court would have jurisdiction over the defendant companies. On the assumption (as is likely) that the Pakistani court would have jurisdiction, then the Foreign Judgments (Reciprocal Enforcement) Act 1933 would apply to the enforcement and recognition in England of a judgment of the Pakistani court. Provided that the defendants appeared in those proceedings, a money judgment would be enforceable against their property in England. But if there were a declaratory judgment relating to Pakistan's entitlement to the proceeds of the Rockwood Estate, that would not be enforceable as such. If the Liquidator were not prepared to act on it, a fresh action would be necessary, in which the Pakistani judgment would (subject to the usual exceptions) be entitled to recognition.
180. The payments were made in England through Switzerland via entities incorporated in offshore jurisdictions. Mr Schlegelmilch is in Switzerland. Mr Howard (to the extent that privilege does not apply or is waived) and Mr Wilamowski are in England. So are those engaged in the refurbishment, although their evidence would be peripheral.
181. Looking at the matter in the round I consider that England is the clearly appropriate forum for the determination of a dispute relating to the ownership of land (and the proceeds of sale) in England, when the issues are likely to involve events, persons and documents in several countries, including, as an important place for those events, England.

E Non-disclosure

182. I do not consider that there is anything in the points made on behalf of Mr Zardari about Mr Zardari's non-appearance in the Swiss proceedings, or about Pakistan's evidence that Mr Zardari had failed to return to Pakistan to contest the criminal proceedings. Nor is there anything in the defendant companies' points about the alleged deficiency in the account of the history of the Isle of Man proceedings.
183. The only point which requires fuller consideration is the point that Mr Maton, on behalf of Pakistan, had asserted that the "key allegation" was that the Rockwood Estate was purchased by Mr Zardari and Ms Bhutto with the proceeds of corruption, yet failed to draw attention to the finding of the Deemster that there was no evidence to support that allegation.
184. What Mr Maton said (para 51 of his witness statement) was:

"I should also point out the Deemster held that in evaluating the Claimant's claim and entering into the conditional compromise agreement the Liquidator failed to discharge his duties and obligations in an independent, objective and impartial manner, and had been unduly partial to the Claimant's position in determining its claim and pursuing the sanction application: see for example paragraphs 127 and 128 of his judgment … In particular the Deemster held that the Liquidator had failed to properly evaluate the merits of the Claimant's claim under significant time pressure imposed by the Claimant (through my firm as the Claimant's advisers). Hence the Deemster refused to sanction the conditional compromise agreement."

185. I consider that this was a reasonably accurate summary of the actual decision. It might have been better if Mr Maton had] referred to the Deemster's statements about the lack of evidence, but to characterise the omission as material non-disclosure would be the exercise which Kerr J warned against in BP Exploration Co (Libya) Ltd v Hunt [1976] 3 All ER 879, 894 (the first part of this passage is not in the report at [1976] 1 WLR 788):

"… the court should not consider the supporting affidavit as though it were marking an examination paper, deciding one way or the other merely on the basis of the extent to which the affidavit could have been improved. The primary question should be whether in all the circumstances the effect of the affidavit is to mislead the court in any material respect concerning its jurisdiction and the discretion under the rule."

186. I do not consider that the omission of the observation by the Deemster on the lack of evidence could have had any influence on the grant of permission by Cooke J and did not mislead him.
187. I will therefore dismiss the applications.