England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		25/02/2016

Mrs Justice Whipple:

INTRODUCTION

1. On 15 October 2015, Nextam Partners Limited (the "Claimant") applied to commit Mohamed Sarwar Mughal (the "Defendant") to prison for contempt of the Freezing and Proprietary Injunction (the "Injunction") which was made on an ex parte basis by Patterson J on 8 June 2015, and was then made final following notice and a further hearing by HHJ Seymour sitting as a deputy judge of the High Court on 19 June 2015. It was further extended by Knowles J on 14 September 2015.
2. The Injunction prohibited the Defendant (and his consultancy, Mughal Consulting Limited, the "Second Defendant", together the "Defendants") from dealing with the proceeds of the unauthorised transactions which gave rise to the action (which I shall explain further below), and from dealing with the Defendants' assets up to a value of £1.8 million. The Injunction also contained other positive obligations on the Defendants, namely:

i) provision of information/disclosure, requiring the Defendants, by serving an affidavit within 72 hours, to inform the Claimant "to the best of his/its ability" of

a) what had become of the proceeds of the unauthorised transactions and

b) their assets worth in excess of £5,000 (these are the "disclosure requirements"); and

ii) repatriation of transfers proceeds, requiring the Defendants to transfer such proceeds of the unauthorised transactions "as are in the [Defendants'] control" to an account in the Claimant's favour (these are the "repatriation requirements"). The repatriation requirements were consequent on the Claimant's proprietary claim to trace the funds which had been stolen from it by the Defendants. The Injunction was endorsed with a penal notice which made it quite clear that failure to comply with it could lead to contempt of court proceedings which could result in the Defendant's imprisonment.

3. The background to the committal application is set out in the witness statements filed for this application and in support of the Injunction itself. The Claimant provides investment management services to other companies in the Nextam group, which group provides financial services (including fund management) to third parties, and is regulated by the Financial Conduct Authority. The Defendant is the sole director of the Second Defendant through which the Defendant offers his services on a consultancy basis. The Defendant provided services as an accountant and compliance officer to the Claimant from 2001. The Defendant was a trusted associate of the Claimant and had access to the Claimant's bank accounts. In 2007, the Defendant became an authorised signatory to those accounts (although two signatures were still required for payments in excess of £5,000). On 15 December 2014, the Defendant was appointed a director of the Claimant.
4. Between January 2012 and May 2014, the Defendants caused a series of unauthorised transfers to be made from the Claimant's bank account. The amount of money transferred without authorisation is in the region of £1.8 million. The unauthorised transfers comprised three types of transfers:

i) payment made to H Group in Costa Rica;

ii) payment made to Vacas group in Belize; and

iii) payments made to Evans Randall LLP in the United Kingdom.

The Defendant had forged the signature of one of the other directors of the Claimant to effect these transfers. The proceeds of the unauthorised transfers are referred to as the "transfers proceeds".

CHRONOLOGY OF EVENTS

5. The Claimant discovered the fraud in around May 2015, when the Claimant's auditors alerted the Claimant to problems. The Claimant issued its application for the Injunction, which was heard ex parte on 8 June 2015. On the same date, the Claimant issued a Claim Form against the Defendants. Particulars of Claim followed on 25 June 2015. The Particulars asserted breach of fiduciary duty and unlawful means conspiracy. The Particulars sought return of the money, equitable compensation or damages to compensate the loss.
6. The Defendant filed his first affidavit on 26 June 2015. He gave no information about the transfers proceeds which he said were not in his control or possession. He disclosed assets comprising: 6 Audley Road (saying "I hold the legal title on trust for both myself and my wife") subject to mortgage; a Toyota Prius said to be worth £10,000; shares in the Second Defendant and Evans Randall LLP; and cash in his Lloyds account of £20,000.
7. The Defendant filed his second affidavit on 1 July 2015. He disclosed certain bank statements and repeated his position on the transfers proceeds.
8. There were further developments away from the litigation.

i) First, the Claimant put in hand investigations into the Defendant's assets, not satisfied that the Defendant's two affidavits to date revealed the full picture. The Claimant discovered that the Defendant owned other properties and registered restrictions against them (namely, 23 Cedar Lodge, 30 Parkfields Avenue and 28 Review Road, as well as 6 Audley Road which had been disclosed already). I shall refer to these collectively as the "properties".

ii) Secondly, the Claimant (by its director Mr Gentili and its solicitor Mr Weekes of Squire Patton Boggs (UK) LLP, "SPB") met with the Defendant or his solicitor on two dates in May and June. The first meeting was on 22 May 2015, between the Defendant, Mr Gentili and Mr Weekes. At the Defendant's request, the meeting was agreed to be on a without prejudice basis. That agreement was respected by Mr Gentili in his first affidavit dated 8 June 2015. However, the Defendant himself referred to that meeting in some detail in his witness statement dated 2 November 2015, and to answer this, Mr Weekes has given details of that meeting in his second affidavit of 4 November 2015. I conclude that any privilege attached to that meeting has been waived by the Defendant, and it can now be referred to by the parties openly. There was a second meeting (open) between the Defendant, Mr Gentili and Mr Weekes on 10 June 2015, at which the Defendant said that the money was shortly to be returned to him, and that he would be in a position to repay. There are two points which must be made about these meetings. First, no repayment has been made and the money remained and remains outstanding. Secondly, I am quite satisfied that the Claimant at no time promised or represented that it would refrain from taking legal proceedings; its witnesses were not cross examined on their version of events at those meetings, which I therefore accept as the truth.

9. On 10 June 2015 the Defendant went to Pakistan, on his account to tend his sick father. He returned on 24 June 2015.
10. On 10 July 2015, SPB (Mr Timms) had a discussion with OGR (Mr Pearl). Mr Pearl said that the Defendant had told him the money was held in an escrow account and there were sufficient funds to repay the sums owed; Mr Pearl suggested 14 days. OGR came off the record as acting for the Defendant later that day. No repayment was ever made.
11. On 3 August 2015, Lloyds Bank wrote to SPB (Lloyds being a named Defendant to this action), indicating that the Defendant was a beneficiary in the H Group account in Costa Rica.
12. The Defendant filed a third affidavit on 21 August 2015. He was now represented by different solicitors, Peters & Peters. This affidavit was, he said, to "provide further information in response to the Order and to correct certain matters". He confirmed his position in relation to the unauthorised transfers, but he denied that he had any control of or access to the accounts into which the transfers proceeds had been paid. He gave details of other bank accounts owned by him and the Second Defendant which he said exceeded a value of £5,000, and listed other assets including pensions and properties (namely, 6 Audley Road and two properties which SPB had already identified independently, being 23 Cedar and 30 Parkfields).
13. Dissatisfied with the Defendant's compliance with the Injunction, the Claimant applied to commit the Defendant by application dated 15 October 2015. The Defendant applied to adjourn that application for lack of legal representation (see his first witness statement dated 29 October 2015). The adjournment application was dismissed by William Davis J on 29 October 2015 (order dated 3 November 2015). The committal hearing remained listed for 4 November 2015.
14. Meanwhile, the Claimant had applied for charging orders on the Defendant's properties. Interim charging orders were made on 17 September 2015. The Defendant had filed an affidavit dated 19 October 2015 resisting those charging orders being made final. He did so on the basis that he had no beneficial interest in the properties. He attached Bare Trust Letters ("BTLs") and Confirmatory Trust Deeds ("CTDs") in relation to each property purporting to show that the beneficial interest in the properties was held by other members of the Defendant's family. The CTDs consisted of 4 similar documents purporting to be drafted by "Lovells" (the name on the foot of each) on various dates between 6 January 1995 and 6 February 2006. The Claimant's application for final charging orders came before Master Yoxall on 23 October 2015. The Defendant was questioned about the CTDs. The Master described his explanation as "eyewash". Master Yoxall made the charging orders final.
15. On 27 October 2015, SPB received a telephone call from Lloyds who advised that their previous letter dated 3 August 2015 (see [11] above) was incorrect, and Lloyds was unable to say whether the Defendant was the beneficiary of the H Group account in Costa Rica. It was able to say, only, that the Defendant had made payments into that account.
16. The Defendant then provided his second witness statement dated 2 November 2015. He was at this time unrepresented and acting in person. In that witness statement, the Defendant set out his version of the "scam" which, he said, had led him to make unauthorised transfers, and then lose the transfers proceeds. His version of events was this: in 2007 he had invested in shares and warrants in a company called Medacure Therapy Ltd ("MTL"). In 2010, he had been contacted by Mr Gordon York of York Venture Capital ("YVC") who said it was acting for Alpha Global Energy Inc ("AGE") in its takeover of MTL, and YVC wished to buy out the Defendant's MTL shares (and any further shares purchased by conversion of the warrants). Mr York put the Defendant in touch with Mr Pearson of SB Registry ("SBR") to assist with the conversion of the warrants into shares. The Defendant, on Mr Pearson's request, paid £100,000 to the H Group account in Costa Rica, to convert his warrants into shares. But the payment for the shares never came. In 2012, Mr Pearson told the Defendant that he would have to pay more to recoup his investment in AGE, at which point the Defendant says this [13]:

"… I did not have the amount of funds requested and momentarily I made an error of judgment which has become the biggest mistake in my life. I used the Claimant's funds hoping that the transaction will complete imminently and I will refund Claimant's money immediately … I now realise that I was scammed by both Mr York and Mr Pearson. Not only have I lost the Claimant's money but I have lost all of my money and investments".

17. It is a matter of record that the unauthorised transfers occurred not just on one occasion, but over a period of over 2 years, to May 2014.
18. The application for committal came before me on 4 November 2015. I adjourned it, given the Defendant's lack of representation at that hearing, and noting paragraph 15.6 of the Practice Direction to CPR 81 which requires an alleged contemnor to be informed of the possibility of public funding for representation; I considered it very important that the Defendant should have legal representation if at all possible, given the possibility of imprisonment if he was found in breach of the Injunction. The hearing was re-listed for 7 and 8 December 2015.
19. As to the underlying claim: the Defendants initially sought and obtained an extension of time to lodge their defence, but in the event no defence was entered and judgment in default was entered on 14 November 2015 by Knowles J, who declared that the Defendants were jointly and severally liable to account to the Claimant for the "traceable proceeds" of the unauthorised transfers and held any such proceeds as remained in their control on trust for the Claimant. Knowles J also continued the Injunction in wider terms than its previous incarnations, because by this time further details of the Defendant's assets were available and were specified in the order, and the amount owed (including costs) had increased, so that the value reflected in the order was £1.9 million.
20. I gave directions for further disclosure by the Defendant before adjourning the matter on 4 November 2015. The Defendant served a further affirmation dated 11 November 2015, which purported to give further details of his assets and attached certain exhibits (I will call this his fourth affidavit, although I recognise it was not in that form).
21. The Claimant applied to amend its grounds of contempt by application dated 11 November 2015.
22. The Defendant served a further affidavit on 2 December 2015 (the fifth affidavit).
23. The matter came before me again on 7 and 8 December 2015. The Defendant was by that time represented by Counsel (Mr David Giles) and solicitors (Ullah Law Associates). The Claimant's evidence was not challenged. The Defendant was called to give evidence and was cross examined by the Claimant's counsel (Mr Max Mallin). There was insufficient time for submissions, after lengthy oral evidence. I adjourned to 10 February 2016, with directions for further submissions and evidence to be filed in the meanwhile. I granted the Claimant's application to amend its grounds of contempt. I directed the Defendant to make further disclosure, based on his admission in the course of giving evidence that he had assets beyond those already disclosed. I made clear to the Defendant, before adjourning, that he now had a final chance to come clean and reveal the information and make the disclosure he was required to make under the Injunction.
24. The Defendant submitted a further affidavit on 11 December 2015 (his sixth affidavit).
25. Each party filed closing submissions in advance of the hearing. Each party made oral submissions at the hearing. I am grateful to both counsel for their submissions.

AMENDMENT

26. At the hearing on 7 and 8 December 2015, I granted the Claimant's application for permission to amend its grounds for contempt. Some amendments simply added grounds of breach which appeared from recent evidence filed by the Defendant; the Defendant did not object to these. Others sought to add allegations of false statements in affidavits filed by the Defendant, and specifically sought to challenge as false the Defendant's statement that he did not own the beneficial interest in the properties, in light of the BTLs and CTDs.
27. The Defendant suggested that permission was required to add the allegations of false statements. Having been referred to the CPR 81.18 which provides that permission is required to commit for a "false statement of truth or disclosure statement", and to the judgment of Green J in International Sports Tours Ltd T/A Inspire Sports v Shorey and Others [2015] EWHC 2040 (QB), I am satisfied that permission is not required to bring these allegations before the Court. The alleged false allegations were made in affidavits, not in witness statements attested by a statement of truth, nor in disclosure statements, and are outside the terms of CPR 81.18. Any residual uncertainty about the position has been clarified by International Sports Tours.
28. The Defendant further resisted the amendments on the basis that the Claimant was going too far in seeking, in effect, a declaration as to the beneficial interest in the various properties, in circumstances where the Defendant's family members were not present in court or represented, and could not therefore assert their own claims to a beneficial interest in those properties. However, it was clear to me that the existence of family beneficial interests would remain open for the Master, in the context of any application for an order for sale of the properties, and the task for this Court was to establish whether the Defendant's assertion that he had none of the beneficial interest in those properties – because of the BTLs and CTDs - amounted to a contempt. On this basis, Mr Giles was content to proceed, and so I permitted the amendments to the grounds of contempt.
29. I therefore address the amended grounds for contempt in this judgment.

BURDEN AND STANDARD OF PROOF

30. In this judgment I shall make findings of fact, with a view to determining whether the Defendant has breached the Injunction, and if so, in what ways. I shall address my mind to the issue, important from a sentencing perspective, whether the breaches are historic in nature or are continuing.
31. I remind myself that I must be sure, to the criminal standard of proof, of any contempt before making a finding to that effect. Further, I remind myself that the burden is on the Claimant to satisfy me on the evidence to that standard. The Defendant is under no obligation to disprove the allegations.
32. The principles of law were not disputed by the parties. They are conveniently set out in the recent judgment of Rose J in JSC Mezhdunarodniy Promyshlenniy Bank and Another v Sergei Viktorovich Pugachev [2016] EWHC 192 (Ch). In that case she considered the standard and burden of proof, as well as the approach to allegations of false statements in an affidavit. In that case, the Bank was the Claimant in the application for committal for contempt:

"The law

41. ….The burden of proof falls on the Bank and the criminal standard of proof applies so that a finding of contempt can be made only if I am satisfied beyond reasonable doubt that the breach of the order alleged has occurred. This has been confirmed recently in a decision of the Court of Appeal that is particularly relevant to Allegations E1 to E4 concerning alleged false statements made in the course of evidence given under oath. In JSC BTA Bank v Ereshchenko [2013] EWCA Civ 829 the Court of Appeal was considering allegations that Mr Ereshchenko had lied in written evidence he provided to the court. The Court of Appeal upheld the decision of Vos J (as he then was) in dismissing the application for committal. Vos J set out the principles to be applied in paragraph 132 of his judgment. So far as relevant to the present application these were as follows:

i) the burden of proving the contempt that it alleges lies on the Bank. Insofar as Mr Pugachev raises a positive defence he carries an evidential burden which he must discharge before the burden is returned to the Bank.

ii) the criminal standard of proof applies, so that the Bank's case must be proved beyond reasonable doubt – or so that the court is sure. In case the meaning of this formulation were unclear, Phipson on Evidence (17th edition, 2009 at paragraph 6.51) cites the Privy Council in Walters v. R [1969] 2 AC 26 as indicating that "[a] reasonable doubt is that quality or kind of doubt which when you are dealing with matters of importance in your own affairs you allow to influence you one way or another".

iii) The court needs to exercise care when it is asked to draw inferences in order to prove contempt. The law in this respect is summarised in a passage in the judgment of Teare J in JSC BTA Bank v. Ablyazov [2012] EWHC 237 (Comm). Circumstantial evidence can be relied on to establish guilt. It is however important to examine the evidence with care to see whether it reveals any other circumstances which are or may be of sufficient reliability and strength to weaken or destroy the Bank's case. If, after considering the evidence, the court concludes that there is more than one reasonable inference to be drawn and at least one of them is inconsistent with a finding of contempt, the claimants fail. Where a contempt application is brought on the basis of almost entirely secondary evidence, the court should be particularly careful to ensure that any conclusion that a respondent is guilty is based upon cogent and reliable evidence from which a single inference of guilt, and only that inference, can be drawn.

…

43. As regards the mental element, Mr Smith drew my attention to the relevant passage in McGrath Commercial Fraud in Civil Practice (2nd edn). That emphasises that contempt of court is, in general, a strict liability offence. Provided that the alleged contemnor intended to carry out the conduct which was prohibited, it is no answer to say that there was no direct intention to disobey the order. The court is not interested in examining the motive or intent behind the actions of an individual breaching the terms of an injunction. However Mr Smith accepted that the Court of Appeal in Ereshchenko approved of the approach taken by Vos J where the alleged contempt was the giving of false evidence. At paragraphs 18 and 19 of his judgment, Lloyd LJ (with whom Elias and Beatson LJJ agreed) said:

"18 ... It was therefore necessary for the Bank to prove beyond reasonable doubt that each of Mr Ereshchenko's statements relied on was untrue at the time it was made, and that Mr Ereshchenko did not have an honest belief in its truth at that time. The judge attached importance to the need to focus on Mr Ereshchenko's state of mind at each relevant date, and it seems to me that this was clearly right and necessary. Mr Ereshchenko has been able to give more information at a later stage of the process than he did previously, but it does not follow from this that he could have done so at the earlier stage and that he was therefore concealing information earlier of which he was aware, and was thus dishonest in asserting that he had said all he could at that time.

19 In essence the Bank alleges, and must prove to the criminal standard, that at the time of the December witness statement, and on each later relevant occasion, Mr Ereshchenko knew more than he was admitting to, and knew that he did, and was therefore consciously and deliberately holding back information which he had and which he knew he was required by the Disclosure Order to reveal."

44. I also bear in mind Vos J's note of caution at paragraph 159 of his judgment in Ereshchenko that "[f]inely balanced judgments about a witness's state of knowledge at particular times against the backdrop of years of complex documentation have no sensible place in such an application".

FINDINGS OF FACT

33. There are two overarching issues of fact for me to determine, relating to (1) beneficial ownership and (2) transfers proceeds.

(1) Beneficial Ownership

34. The Defendant's case is that he holds the legal title only, and not the beneficial interest, in the properties. That being so, he argues that he is not in breach of the Injunction in failing to disclose details, because the properties are not "his" assets. He relies on the BTLs and CTDs to demonstrate that the beneficial ownership lies elsewhere; Mr Giles correctly submits that if I conclude that the BTLs or the CTDs might have the effect of disposing of the beneficial interest in the properties, then that is sufficient for present purposes, and I cannot find the Defendant guilty of any contempt in failing to disclose them. (I note that he did disclose them on 21 August 2015, but the argument runs that disclosure was not required on that date or on any earlier date. I further note that by 21 August 2015, the Claimant knew of the Defendant's legal interest in them and had registered its interest in relation to each of them well before then, so the Defendant was not volunteering information about assets which were otherwise unknown to the Claimant.)
35. There are a number of problems on the evidence in relation to the BTLs and CTDs:

a) In the Defendant's first affidavit he said that he held the legal title of Audley Road on trust for himself and his wife. This was not altered in his second affidavit. It was only in his third affidavit that he suggested, for the first time, that his wife and father in fact held the beneficial interest in Audley Road, and that he had no beneficial interest in it at all. As to this change of evidence:

i) I reject Mr Giles's suggestion that the first affidavit was not an assertion of beneficial interest: it plainly was – the Defendant was plainly saying that the beneficial interest was split between him and his wife (although he understandably chose to express it in his own way, not using precise legal language).

ii) If in truth the beneficial interest had been held by his wife and father since 1995 as he now asserts, in reliance on the relevant BTL and CTD, it is incredible that the Defendant submitted the first affidavit in the terms in which it is drafted, and then failed to correct the position in the second affidavit.

b) The Defendant's evidence before me as to this inconsistency was unconvincing. He suggested that his first affidavit was written "off the cuff" and without checking the trust documents, and that he was not thinking properly at the time he swore this affidavit. But:

i) this is not believable. The Defendant's evidence was that the trust documents were kept in a drawer at home. If they existed at this date, he would surely have checked them in advance of swearing the first affidavit;

ii) further, there is evidence that the Defendant was at this time (June 2015) thinking very clearly, and taking steps to put his property beyond the reach of creditors. Examples of this are:

(1) his instruction to IEC Solicitors, who wrote to Tay Mortgages on 15 June 2015 (on the Defendant's instructions) asking to add the Defendant's wife, father and daughter to the register for 30 Parkfields Avenue; and

(2) his redirection of rent payments for 23 Cedar Lodge and 28 Review Road into his wife's bank account from 1 July 2015, to avoid the freezing effect of the Injunction.

c) The Defendant disclosed the existence of the properties other than Audley Road in his third affidavit. But he did not identify the BTLs or the CTDs in terms at that stage (instead, he asserted that the properties were beneficially owned by others pursuant to "trust deeds"). He did not attach the BTLs or the CTDs, or even describe the "trust deeds" with any specificity. If the BTLs and CTDs existed at the time and were genuine, he would surely have exhibited them.

36. The documents themselves are equally unconvincing. The BTLs are just single page letters, by the Defendant to family members, each in similar form, each containing a declaration in a couple of lines that he holds the property on bare trust for that family member. The letters are dated by hand (from December 1994 to January 2006), they are not witnessed and they bear no formality. The CTDs are all in the same form as each other, with the name "Lovells" on the front page of each, with the address shown on each as Atlantic House. Each one names the Defendant as Trustee and family members as beneficiaries. Each contains a confirmation that the Trustee holds the property on bare trust for the beneficiaries. But there are a number of problems:

a) Lovells did not exist in that name in 1995 when the Audley Road CTD is dated (the firm was at that stage Lovell White Durrant, or something similar; it is now Hogan Lovells). Likewise, in 2000 when the CTD relating to 28 Review Road is dated, Lovells was not the name of the firm.

b) When these difficulties were put to the Defendant at the hearing before Master Yoxall, the Defendant said that he had prepared the CTDs himself, and had taken off the words "White Durrant" "because I did not want to use the full name because they were not given to me by the firm". He made no reference at all to backdating two of the documents.

c) Since that hearing, SPB (by Nicola Phillips, in an affidavit dated 30 November 2015) has investigated the origin of these documents. She has established that Lovells (as was) only moved to Atlantic House in 2002, and the reference on the CTDs belongs to an individual who started working at Lovells in 2007. So these documents cannot have come into existence as early as 1995 (Audley Road) or 2000 (Review Road).

d) When he came to give evidence to me, the Defendant advanced a version of events which was very different from what he had told Master Yoxall. He said that he had produced all the CTDs in around 2006, but he had backdated the Audley Road CTD to 1995 and the 28 Review Road CTD to 2000. He told me that he had backdated the first to the date of his marriage or thereabouts, and the second to the date of purchase of the property or thereabouts, because he had always had the intention of giving his benefit in those properties to his family. He could give no explanation at all for why he had failed to give this explanation to Master Yoxall. In the circumstances, I did not find this explanation to be credible.

37. I am sure that the Defendant has lied about the BTLs and CTDs.
38. I am sure that the Defendant drew up these documents after his third affidavit was sworn on 21 August 2015, and before he submitted his 19 October 2015 affidavit in the charging order proceedings. His intention was to defeat the charging orders by asserting that he did not have any beneficial interest in the properties. He used the "Lovells" name in order to give the impression that these were formal documents, drawn up by solicitors. But he was caught out in front of Master Yoxall by the fact that Lovells was not the name of the firm in 1995 and 2000, the dates of two of the CTDs. So he invented the story that he had simply removed the words "White Durrant". Master Yoxall did not believe that story. Nor do I. He was further caught out when he came to give evidence to me by the fact that the documents could not have come into existence in 1995 (Audley Road) and 2000 (Review Road), given the address and reference, so he was forced to fabricate a different version, to the effect that these two documents had been backdated. I do not believe that story either. The Defendant has a track record of creating false documents (noting Mr Gentili's forged signature on the unauthorised transfers) and I conclude that this is another example of the Defendant doing just that.
39. I reject Mr Giles' submission that the CTDs operate as valid declarations of trust in compliance with s 53(1)(b) of the Law of Property Act 1925, because they are in writing. I conclude that there was no genuine intention at any stage to create a trust of this property. The documents cannot be relied on to demonstrate any intention at all on the Defendant's part, other than an intention to deceive. These are shams: documents intended to give an appearance only, which is not the truth, in order to mislead.
40. I therefore conclude that the Defendant does have a beneficial interest in the properties and should have disclosed that interest in each of them. He has deliberately provided false information to the Court and lied on affidavit in pretending that he has no beneficial interest in the properties. He still maintains that false story.

(2) Transfers Proceeds

41. The Defendant's case is that he does not have any interest in the H Group account, he does not know where the money that he paid into that account has gone, and he is not able to pay it back or disclose any further information about it. In consequence he is not in breach of the disclosure or repatriation requirements of the Injunction, so far as the transfers proceeds are concerned.
42. The Claimant accepts that there is no direct evidence that the Defendant has control over the H Group account (noting that the Lloyds letter of 3 August 2015 has initially provided just such a direct link; but Lloyds has now accepted that it made a mistake in that letter), but argues that I can and should infer that the Defendant had control from the circumstantial and other evidence against the Defendant, looked at in the round. The particular features I am invited to take note of include the following:

a) The Defendant's propensity to dishonesty. This is demonstrated by his theft of the Claimant's money in the first place, by a dishonest course of conduct over many years. He stole from another of his clients (Evans Randall LLP) over the same period, demonstrating an ingrained propensity to dishonesty, and a lack of trustworthiness.

b) The fact that his dishonesty is further demonstrated by the way he put forward the BTLs and CTDs as truthful documents, when they are not. The Defendant simply cannot be trusted: he will say anything to this Court to avoid being found in breach of the Injunction.

c) Further, the Defendant has produced insufficient evidence to document his account. There are no contracts or emails to support his story. That is incredible: he was parting with millions of pounds, over a lengthy period (on his story) and must have had some documentation, contracts, emails, promises to pay, etc, if he is to be taken as telling the truth about being a victim of the scam. This is a further demonstration that his story is simply untrue.

d) Yet further, the Defendant is a professional, educated man. His initial investment was £100,000. He would not have parted with £3 million (some of which was stolen from the Claimant, some from Evans Randall LLP) to recover that initial outlay. It makes no sense, and is not the truth.

e) All in all, I should disregard the explanation given to me by the Defendant in his second witness statement of 2 November 2015. The Defendant is totally unreliable and this evidence is worthless. The truth is that he has taken the Claimant's money for his own benefit. He is a perpetrator of the "H Group scam", not the victim of that scam.

f) The Defendant offered to repay the Claimant during the meetings in May and June of 2015, saying that he had the money and telling his solicitors the same. The reason he was prepared to say that – truthfully – was that he thought he was covered by the privilege of a without prejudice meeting, and that the Court would never hear of it. This is the occasion when the Defendant was closest to telling the truth.

g) His solicitors then indicated that the money was held in an escrow account. This is plainly what his solicitors had been instructed, and tallies with what the Defendant was saying at the May and June 2015 meetings with the Claimant. The Defendant's subsequent explanation, that he meant something different by escrow and that his solicitors misunderstood, is not capable of belief.

43. The Claimant's headline submission is that I should reject the Claimant's explanation that he was the subject of a scam. If I do, I am then left without any explanation at all, and I should, in the absence of any credible case put forward by the Defendant, use my common sense to infer that he still has the money or at least that he knows where it is.
44. Mr Giles urges caution. He submits that, even if I conclude that there are problems with the Defendant's evidence, I cannot be sure that his story is false. And even if I was sure that his story was false, it does not follow, and I cannot be sure, that the Defendant knows where the money is or has it under his control.
45. I have grave reservations about the Defendant's evidence. He is not a man who tells the truth, and I have found in terms that he has lied in his evidence to this Court about the beneficial ownership of the properties. But just because a person has lied about one part of his case does not necessarily mean he or she is lying about all of their case. Having listened to and seen all the evidence in this application, I am not sure that the Defendant is not telling the truth about being scammed. Having my doubts is not the same thing, and is an insufficient basis on which to find the Defendant in contempt. Further, even if I was satisfied that he was not telling the truth, I am still not sure that he knows where the money is, or is in a position to return it. There is no evidence before me, of any direct nature, to suggest that he has or at any stage has had control of the H Group account. The circumstantial evidence is just too vague to satisfy me to the required standard that he has failed to comply with the disclosure requirements so far as they relate to the transfers proceeds, or with the repatriation requirements.
46. I am therefore unable to accede to Mr Mallin's invitation in this case to infer that the Defendant knows where the money is. I do not find, on the evidence, that I can be sure of what happened, or of the Defendant's state of knowledge at any time about the transfers proceeds.

BREACH

47. The Defendant is plainly in breach of the obligation to file an affidavit within 72 hours of the ex parte and final Injunctions in April 2015. He is guilty of a failure to disclose full details of his properties (in which I have concluded he does hold a beneficial interest); and has maintained that failure to date, because even now he asserts that he does not have the beneficial interest: from that point of view, his disclosure failure is continuing at least to the date of this judgment. He has provided false information about the properties, and likewise, that failure continues to the date of this judgment.
48. He is not guilty of a failure to provide information relating to the transfers proceeds or the control or ownership of the H Group account, nor is he guilty of a failure to repatriate the transfers proceeds.
49. As to the various grounds:

a) Grounds 1, 2, 6, and 7 are made out to the extent that the Defendant failed to file an affidavit within the required time. But they are not made out on the substance, because they concern disclosure and repatriation of transfers proceeds.

b) He admitted grounds 3, 4, 5, 8 and 9 in part (failure to provide information about his assets). I have now concluded that the breach was wider than admitted, in that the disclosure should have included information about his properties (I have rejected his case on beneficial ownership). I accept that he is not in breach so far as the H Group account is concerned (see my findings on transfers proceeds). Breaches of these grounds are made out in large part but not entirely. These breaches continue to the date of this judgment (see paragraph 47 above), but in light of my finding against the Defendant on beneficial ownership, for sentencing purposes I conclude that they have the character of historic breaches, given that he has now given disclosure of details relating to his properties, and that I have by this judgment determined the issue of beneficial interest against him. To put it another way: there is no continuing failure which is capable of remedy by the Defendant.

c) By Ground 10, the Claimant alleges a breach in the diversion of rental proceeds on Flat 23 Cedar and 28 Review Road via his wife's bank account in August 2015; I am satisfied that this breach has been established on the evidence, because the rent was redirected (an admitted fact), and that amounts to a "dealing with" an asset owned by the Defendant, contrary to the Injunction. I reject the Defendant's case that the Injunction entitled him to receive rents and deal with them without breach. The Injunction is quite clear and this activity was prohibited. This is a continuing breach.

d) By Ground 11, the Claimant alleges a breach by failure to disclose debts due to the Defendant, which were admitted in evidence on 4 November 2015. This breach is made out, but little was made of it at the hearing and I attach little importance to it. It is historic in nature.

e) Grounds 12, 13, and 14a-e, concern false statements by the Defendant as to the transfers proceeds. These have not been established.

f) Grounds 14f - 16b concern false statements by the Defendant as to his beneficial interest in the properties. These breaches are established. The false statements relating to beneficial interest in the properties were dishonest, and designed to interfere with the course of justice by putting the properties beyond the reach of the Claimant. The Defendant was clear in his assertion that the BTLs and CTDs were documents which came into existence many years ago: that was a falsehood, and I reject the Defendant's case to the contrary. For reasons given above at paragraph 49(b), for sentencing purposes I characterise these as historic breaches.

50. There is no evidence that the Defendant is in continuing breach of his obligation to disclose details of his assets (leaving transfers proceeds aside for the moment, and acknowledging that his breach in relation to beneficial interest has been terminated only by my finding that his case in this respect is false). Although he has produced information about his assets in a piecemeal fashion, and only when pressed by the Claimant and by the Court, there is no evidence before me to suggest that the Defendant has other assets to hand which have not yet been disclosed. There is no material continuing breach of disclosure. Plainly, however, if it comes to light that the Defendant does have other assets, which he has failed to disclose, he will be at risk of a further application being made to commit him for contempt of Court, and will, if contempt is made out on that occasion, face the consequences of not having made full disclosure during the lengthy course of this application.
51. I am not sure that the Defendant is not telling the truth about the transfers proceeds. If he does know more than he has so far disclosed about the transfers proceeds, I urge him to come clean, even at this late hour. There are at least two good reasons for that. First, if he was now to come clean, he might be able to avoid enforcement by the Claimant against his assets held in the UK, and in particular against his properties. One part of the Defendant's evidence that I do accept, is his concern for his large family and his desire to provide financial security for them. Enforcement against his properties (which is already underway) will inevitably have an adverse impact on his family, and the financial security he can offer them. Secondly, if it subsequently came to light, after these proceedings were concluded, that the Defendant had failed to tell the Court and the Claimant all he knew about the transfers proceeds, I doubt that the Court would be prepared to show much leniency in sentence, given the time and effort already taken in this application to establish the extent of the Defendant's knowledge of where the transfers proceeds are. The Defendant would be looking at a lengthy term of imprisonment, for his significant dishonesty in the face of Court proceedings to establish the whereabouts of the transfers proceeds.

CONCLUSION

52. The Defendant is in breach of the Injunction in the ways outlined above.
53. I will sentence the Defendant at the next hearing. If either party wishes to submit submissions on sentence to me in advance of that hearing, they are at liberty to do so. I will of course hear the Defendant's mitigation before passing sentence. All consequential matters arising out of this judgment (and the hearing that preceded it) are reserved to the sentencing hearing.