Jersey Unreported Judgments

Injunction - application by the Interveners for the discharge or variation of a freezing injunction granted to the Plaintiffs.

[2019]JRC023

Royal Court

(Samedi)

12 February 2019

Before     :

T. J. Le Cocq, Esq., Deputy Bailiff, and Jurats Pitman and Ronge

 

Advocate W. A. F. Redgrave for the Plaintiffs.

Advocate M. P. Cushing for the Interveners.

judgment

the deputy bailiff:

1.        This is the application of Badriya Abdul Rasool Toorani ("Badriya"), Markh Abdul Rasool Toorani ("Markh"), Rabab Abdul Rasool Toorani ("Rabab"), Shadukh Abdul Rasool Toorani ("Shadukh") (hereinafter collectively referred to as "the Interveners") for the discharge or variation of a freezing injunction granted by this Court in favour of Sameera Abdul Rasool Toorani ("Sameera"), Khairayah Abdul Rasool Toorani ("Khairiyah"), Rouhangiz Abdul Rasool Toorani ("Rouhangiz"), Zainab Abdul Rasool Toorani ("Zainab"), Maryam Abdul Rasool Toorani ("Maryam") (hereinafter collectively referred to as "the Plaintiffs"). 

2.        On 30^th August, 2017, interim injunctions were granted by this Court on an ex parte application by the Plaintiffs against Red Rose Limited (named in the original proceedings as the Defendant) ("Red Rose") and Ocorian Limited (named in the original proceedings as the Party Cited).  The injunctions restrained Red Rose and Ocorian Limited from disposing of the shares in Red Rose to a third party or disposing of the Burwood Estate or the net proceeds of sale of the Burwood Estate if it had already been sold.  The Interveners are Red Rose's beneficial owners.   

3.        The injunctions granted by the Court were obtained in support of English proceedings which the Plaintiffs stated that they intended to commence.  Those proceedings were to seek to recognise and enforce against the English estate of Behrooz Toorani ("BT") certain judgments obtained against BT in Bahrain by the Plaintiffs and to set aside a transfer in 2006 of the Burwood Estate ("Burwood") to Red Rose under Section 423 of the Insolvency Act 1986 on the basis that that transfer was at an undervalue and was made for the purposes of putting assets beyond the reach of BT's creditors ("the English Proceedings"). 

Background

4.        Mr Abdul Rasool Toorani ("Abdul") died in around 1965.  He had two wives. 

5.        With his first wife, Abdul had five children, namely BT and the Interveners.  Badriya is the sole executor of BT's will dated 1^st April, 2007.  The estate is being administered in England.  The Interveners are beneficiaries under BT's will. 

6.        With his second wife, Abdul had seven children, a son (Mohammed Abdul Rasool Toorani) ("Mohammed") and six daughters, Suhaila Abdul Rasool Toorani (Suhaila) and the Plaintiffs. 

7.        BT and Mohammed were partners in A R Toorani and Company ("ART") in Bahrain and each of the Plaintiffs and Interveners were minority shareholders in ART.  

8.        Prior to BT's death in July 2017, an agreement has been reached for the sale of the shares of Red Rose for the price of £7.7 million.  The proposed sale was to a neighbouring landowner of Burwood and was at a price that the directors of Red Rose considered exceeded the value which would be obtained for that property on the open market.

9.        On 18^th October, 2017, Red Rose sought and obtained orders varying the terms of the injunctions.  That application was made with the knowledge and support of the Interveners.    

10.      The variation order granted by the Court permitted the proposed sale of the shares in Red Rose to proceed on the basis that the Interveners' Jersey advocates, then Messrs Bedell Cristin, provided a written undertaking to pay into Court the proceeds of sale of the shares in Red Rose less the Interveners costs of the sale to be held in Court pending further order.  Following the sale of the shares and the payment of the said proceeds into Court, both Red Rose and Ocorian Limited were released from the proceedings.  The sale of shares completed on 4^th December, 2017, and the proceeds were paid into Court. 

11.      The Interveners now apply by summons for an order that the sum of £7,677,459.58 together with accrued interest held in Court pursuant to the undertakings given by Bedell Cristin be paid to the Interveners; and in the alternative £1,121,926.37 from that sum be paid to the Interveners' English solicitors for the purpose of funding the Interveners' legal costs in the English proceedings. 

12.      The essence of the application made by the Interveners is that the injunction should not have been granted.  The Interveners argue that the manner in which the Plaintiffs have presented their application to the Court created the appearance that the Plaintiffs were being frustrated by BT with the assistance of the Interveners in the enforcement of judgments that they had obtained in Bahrain.  The Interveners allege, however, that the Court was not provided with the proper context in which to view the Plaintiffs' claims.  Those claims were part of a broader family dispute relating to essentially the same subject matter in which applications to recover assets from the Interveners had already been unsuccessful in Bahrain and in which the Plaintiffs had previously compromised and released claims.  Lastly, it was alleged that the Interveners had obtained their own multi-million pound judgments against BT, ART and Mohammed.  It is argued that had this Court been made aware of the matters referred to above, the injunctions would not have been granted and the Interveners would not have been obliged to pay the sum into Court. 

The Order of Justice    

13.      The allegations in the Order of Justice filed in these proceedings in August 2017, and subsequently amended in October 2017 may be summarised as follows:-

(i)        The Plaintiffs are BT's paternal half-sisters.  BT died on 8^th July, 2017, in England and his estate is accordingly being administered there;

(ii)       The Plaintiffs had collectively obtained judgments in 2005 and 2014 in Bahrain against BT in the sum that cumulatively, converted into sterling amounts to approximately £15,141,579.05 together with fees and interest ("the 2005 Judgment and the 2014 Judgment");

(iii)      BT had failed to pay the judgment debts prior to his death and accordingly the Plaintiffs were seeking payment of them from his estate;

(iv)      The Plaintiffs, in addition had a claim to inherit from BT's estate;

(v)       On or around 10^th October, 2006, BT had transferred his principal asset, a property in England, Burwood to Red Rose.  Burwood had a value of between £9 million and £13 million;

(vi)      Red Rose is incorporated in Jersey;

(vii)     The Plaintiffs' English solicitors are taking steps to have the judgment debts recognised in the English High Court and they will then be enforced against BT's estate;

(viii)    If BT's estate would be insufficient, then the Plaintiffs would be applying under Section 423 of the Insolvency Act 1986 against BT's estate and Red Rose to set aside the transfer of Burwood House;

(ix)      The Plaintiffs would be issuing court proceedings in England. 

(x)       The Plaintiffs understood that the sale of Burwood or the shares in Red Rose were imminent. 

14.      As indicated above, the Order of Justice contained interim injunctions which were granted on an ex parte basis. 

Allegations of material non-disclosure

15.      A number of affidavits have been filed in connection with the various applications before the Court and in this application. 

16.      The Order of Justice was supported by an affidavit of Edmund Charles Beale of 29^th August, 2017, ("Beale Affidavit 1") who is a partner in the firm of Trowers and Hamlins LLP who acts for the Plaintiffs.  Mr Beale also filed an affidavit on 17^th October, 2017, ("Beale Affidavit 2"), a third affidavit of 9^th July, 2017, ("Beale Affidavit 3") which was filed in response to the Interveners' application before this Court and a further affidavit of 6^th September, 2018, ("Beale Affidavit 4"), also filed for that purpose.  He filed a final affidavit on 20^th September, 2018 ("Beale Affidavit 5").   

17.      In addition, in the application for the injunction, the Court had before it an affidavit of Madeleine Paulette Le Mauviel dated 25^th August, 2017 ("the Le Mauviel Affidavit"). 

18.      The Interveners' Application was supported by the affidavit of Badriya of 7^th May 2018 ("Badriya's First Affidavit") and a further affidavit of 9^th August, 2018 ("Badriya's Second Affidavit").  In addition the Interveners filed an affidavit by Patrick David Gearon of 11^th May, 2018 ("Gearon's First Affidavit") in support of their application.  Mr Gearon is a partner in Charles Russell Speechlys LLP acting for the Interveners.  He also filed a second affidavit of 9^th August, 2018 ("Gearon's Second Affidavit").  There are other affidavits before the Court which, although the Court has considered them, are not referred to herein. 

19.      The Interveners assert that the Plaintiffs, in obtaining their interim injunction, did so on the basis of material non-disclosures which may be characterised as follows:-

(i)        The Court was not informed by the Plaintiffs, that the Interveners had themselves the benefit of substantial judgments in Bahrain concerning substantially the same subject matter and against the same parties (including BT) as those obtained by the Plaintiffs ("the Interveners' Judgments");

(ii)       The Plaintiffs mischaracterised the intentions of BT when he transferred Burwood to Red Rose in 2006 ("BT's Intentions");

(iii)      The Plaintiffs did not inform the Court that they had entered into a settlement agreement in 2002 pursuant to which they had agreed not to make any claims for amounts due from ART which was the entity whose profits formed the subject matter of the Plaintiffs' underlying judgments in Bahrain ("the Settlement Agreement");

(iv)      The Plaintiffs did not inform the Court that the 2014 judgment was not capable of recognition and enforcement in England as an execution file had not been opened in Bahrain, steps to exhaust all means of execution inside Bahrain had not been taken, and also steps to enforce against judgment debtors residing in Bahrain had not been taken.  All of these were requirements of Bahraini law ("Bahrain Law Issues");

(v)       The Plaintiffs failed to inform the Court that unsuccessful claims have already been made in proceedings in Bahrain against one of the Interveners seeking to reverse real estate transactions entered into with BT and that at the time of the application for an injunction there was an ongoing appeal in Bahrain in relation to that issue ("Claim against Interveners in Bahrain");

(vi)      The Plaintiffs failed to inform the Court that they required litigation funding and after the event legal costs insurance to enable them to pursue the English proceedings.  The Court was informed during the ex parte application for the injunction that English proceedings would be issued "shortly".  They had not in fact been served until five months later ("Litigation Funding"). 

(vii)     The Plaintiffs failed to return to Court to inform the Court of evidence provided to them by the Interveners of payments made by the Interveners to or on behalf of BT in consideration of the transfer of Burwood to Red Rose ("Further Evidence");

(viii)    The Plaintiffs failed to inform the Court of evidence provided to them by the Interveners of tax advice given to BT relating to the transfer of Burwood which pre-dated the commencement of the Bahrain proceedings by the Plaintiffs ("Tax Planning").    

The Interveners' Judgments

20.      The first allegation of material non-disclosure is to be found in Gearon Affidavit 1 which indicates that the Interveners, who, as we have said, are the beneficial owners of Red Rose have themselves substantial money judgments against ART, BT and Mohammed.  We have been shown a translation of the Bahraini court documentation which illustrates the claims made and that they were successful.  That documentation also shows that one of the Plaintiffs is named in those proceedings as an intervening party and accordingly the existence of those judgments must, it is alleged, have been known to the Plaintiffs.  The date of the judgment is 30^th January, 2014, and accordingly this should have been explained, it is argued, to the court when the application for an injunction was made. 

21.      The Interveners assert that, in failing to explain the existence of these judgments, the court considering the application for an interim injunction was left with an insufficient understanding of the family dynamics and indeed that the Interveners would have had competing claims against BT's estate. 

22.      The Plaintiffs, whilst accepting that they were aware of the judgment in favour of the Interveners, point out that those claims were bought in 2007 by the Interveners against BT for the Interveners' share in the profits of ART.  There is no suggestion that the Interveners' claims are being enforced nor do they form part of the Interveners' defence in the English proceedings.  In any event, so the Plaintiffs argue, the existence of similar judgments by the Interveners does not have any effect on the strength or otherwise of the Plaintiffs' claims nor on the merits of their application for an interim injunction.  If and to the extent the Interveners are creditors of BT then they will also be able to prove as creditors of his estate.  Such will not have any effect on the Plaintiffs' claim either in the UK or in Jersey that the assets should form part of BT's estate. 

23.      It is clear that this is a complex matter in which there are disputes between members of the same family and it would have been possible to provide the Court, when considering the injunction, with substantially more information relating to the detail of the family disputes.  That is not to say, however, that the information would have been required to enable the Court to have a sufficient understanding of the basis for the application before it for interim relief.  The obligation on a plaintiff is of course to provide full and frank disclosure.  That does not mean, however, that full disclosure requires every detail of every issue or transaction to be included in documentation before the Court and drawn out from documentation specifically into the affidavit or affidavits filed in support.  The Court must look to whether any failure in disclosure is material and by that we mean of a nature that may have caused the Court to view the order requested differently so as to refuse it or to modify it so as to grant it in different terms. 

24.      In our judgement, the failure to make express reference to the judgments obtained by the Interveners, in the context of the claim set out in the Order of Justice which, in essence, is to preserve the position until the Plaintiffs' application to have the assets transferred into the estate of BT had been determined, was not material to the question as to whether or not an injunction would be granted or granted in a different form. 

BT's Intentions

25.      In Beale Affidavit 1, filed in support of the of the interim injunction, at paragraph 48 it states:-

"On 24^th August 2017, I learned further information regarding the imminent disposal of the property, including that the reason for the transfer of the property to Red Rose in 2006 was because Mr Toorani wanted to put it beyond the reach of his creditors including his paternal brother Mohammed Torrani."

26.      Mr Beale was challenged on this in correspondence and in the Beale Affidavit 3 he states, at paragraph 137:-

"The reference to Mohammed Toorani was wrong because Mohammed Toorani is not a party to the Bahrain judgments.  This was an inadvertent reference, when I simply intended to refer to the dispute between the two sides of the Toorani family."

27.      In paragraph 138, he goes on to observe:-

"In any event, however, this was not a ground relied upon for the injunction, and does not form part of the facts relied upon in the letter before claim in respect to the second English claim, or the amended particulars of claim." 

28.      It is in fact submitted by the Interveners that Mr Beale's evidence is still incorrect in that Mohammed was a party to the Bahrain judgments but he was, like BT, a defendant. 

29.      It is argued by the Interveners that the Court must have been misled by thinking that Mohammed was a creditor of BT and that his position as creditor was behind BT's alleged intention to transfer Burwood.  This is characterised by the Interveners as a serious mistake and that there was no evidence of any intention on the part of BT to avoid creditors. 

30.      The Plaintiffs accept that this was a mistake on Mr Beale's behalf but argue that it is irrelevant. 

31.      In paragraph 59 of the Beale Affidavit 1 in comment upon the intended English proceedings, Mr Beale states:-

"In that case, the Plaintiffs intend to have the 2006 transfer set aside pursuant to section 423 of the IA 1986.  By that date, Mrs Sameera Toorani's legal proceedings against Mr Toorani had been underway since 2002 and she had obtained a number of court judgments against him, including the 2005 judgment and the March 2006 judgment.  He would therefore have been aware of his liability to Mrs Sameera Toorani and was likely aware that Mrs Sameera Toorani's sisters would potentially bring similar claims, as they indeed did. ..."

32.      The Plaintiffs argue that the Court was accordingly not misled in any material way and indeed there was additional evidence relating to the possible intention to take assets beyond the reach of creditors. 

33.      It is further submitted by the Plaintiffs that this mistake on the part of Mr Beale did not come to his attention until after the matter was inter partes. 

34.      There is reference to the intention on the part of BT to avoid Mohammed making a claim at paragraphs 36 and 42 of the Le Mauviel Affidavit.  Miss Le Mauviel lived with BT and speaks amongst other things, of the period leading up to his death.  There is reference to a conversation taking place in front of BT prior to his death in which reference is made that the transfer to Red Rose in 2006 was to avoid his paternal brother Mohammed from making a claim to it.  This may have been the origin of the error in Beale Affidavit 1. 

35.      It appears to the Court that whilst this was clearly a mistake, it was minor in nature and did not mislead the Court in granting the interim injunction in any way.  It was clear that the claim was being made to set aside the transfer on the ground that it was made to avoid creditors and the fact that the identity of one of those potential creditors may have been misstated is not a material non-disclosure from the Court's perspective.     

The Settlement Agreement

36.       It is alleged that the Plaintiffs failed to disclose to the Court that in 2002 they had signed an agreement with ART that they would not make a claim in relation to the amounts due pursuant to their minority shareholding for any sum before 2002.  It is pointed out that the purchase of Burwood by BT started in 1984 which was some 18 years before the agreement in 2002 was signed.  It is asserted in Gearon Affidavit 1 that:-

"The existence of this agreement will materially affect the claims raised by the half-sisters in the English Court as the half-sisters/Plaintiffs clearly accept that as of 2002 they would not seek to undo or query any transaction involving the company or the company's partners before that time."

37.      It is accordingly argued by the Interveners that this failure meant that the Court was not alerted to a potential defence within the English proceedings. 

38.      In response, the Plaintiffs submit that the Settlement Agreement makes no difference to the 2005 Judgment and 2014 Judgment.  We have seen a letter dated 18^th January, 2002, signed by Maryam, Zainab, Rouhangiz, Khairiyah on ART headed paper which insofar as material reads as follows:-

"By signing here below we the partners of AR Toorani hereby confirm that in 1996 there was a family dispute regarding the business and we agreed on the following in the presence of Mohammed AR Toorani:-

"Each partner will receive BD200,000 as full and final settlement of their share for the period 1978 to 2001.  We also agreed that we have no right in the company's profit nor are we responsible for any loss for that period.""

39.      There is a paragraph after the signatures reflecting that Suhaila and Sameera had already received a similar sum. 

40.      It is argued by the Plaintiffs that given that this so called agreement did not affect the Plaintiffs judgments in Bahrain in 2005 and 2014, they did not think that it could affect their application in Jersey in support of the English proceedings. 

41.      On the face of it, it is not clear from the letter of 15^th January, 2002, that it has any reach beyond the signatories' share of the profits in ART for the period set out in the letter.  It certainly does not reach expressly into the assets of BT. 

42.      In our judgement had that letter been brought to the attention of the Court it would not have altered or had any impact on the Court's decision to grant the interim injunction and was not a material non-disclosure. 

Bahrain Law Issues

43.      Exhibited to Gearon Affidavit 1 is a legal opinion dated 26^th March, 2018, provided by Mr Awad Fouda who is described in Gearon Affidavit 1 as independent Bahrain counsel. 

44.      In his letter of advice Mr Fouda indicates that to enforce a judgment obtained in Bahrain requires the successful parties to open an execution file which the Plaintiffs have not done with regard to the 2014 judgment. 

45.      Similarly in his opinion, he indicates that the law of Bahrain requires Bahraini court judgments to be registered with the court of execution and that there is a requirement that the successful parties must exhaust their means of execution inside Bahrain before seeking to enforce a judgment outside of that country. 

46.      It is asserted by the Interveners that:-

"It is therefore clear that, as a matter of Bahrain law, the 2014 judgment is not, as matters stand, enforceable either in Bahrain, in England or indeed anywhere else because the Plaintiffs have not taken the steps which they are required to take to open an execution file in Bahrain and to exhaust their rights to enforce the judgment against Mohammed Toorani and against the company in Bahrain, before seeking to enforce the judgment outside the jurisdiction of the Bahrain courts." (Gearon Affidavit 1 paragraph 71). 

47.      It appears that there is disagreement between the experts in Bahraini law on these points.  In an opinion dated 9^th July, 2018, given by different experts, the following was contained at paragraph 11:-

"As to enforcement of a Bahrain judgment abroad, Bahrain law does not regulate or impose any restrictions on attempts to enforce judgment outside of Bahrain.  Such lack of regulation or restriction is axiomatic as Bahrain law would not usually regulate or impose restrictions on extraterritorial matters.  A party who seeks to enforce a Bahrain judgment abroad would therefore not be required to register the judgment with the execution court in Bahrain, issue proceedings in the execution court in Bahrain or exhaust all enforcement options in Bahrain."   

48.      The Plaintiffs observe that there is nothing in Bahrain belonging to the estate of BT against which the Bahraini judgments could be enforced. 

49.      There is some reference in the documents filed on behalf of the Interveners that criticism was raised of the Plaintiffs disclosure to the extent that it had not revealed that the 2014 judgment in Bahrain was subject to appeal.  This point was not developed in argument before us and we do not therefore deal with it other than to refer to the fact that in Beale Affidavit 1 (at paragraphs 73 and 74 and 95.2) reference is made to the appeals and their existence is drawn expressly to the attention of the court considering the grant of the interim injunction. 

50.      It might also be noted that under the heading "Full and Frank Disclosure" of Beale Affidavit 1 at paragraph 95.3 the following statement is made:-

"There may also be reasons why Bahrain law and the judgment debt are not due and payable or under English public policy why they should not be recognised.  I am not aware of any such reasons and none have been raised by Charles Russell in correspondence (though this correspondence is at an early stage)." 

51.      Had the points raised by the Interveners' expert been deployed before the court considering the interim injunction in Beale Affidavit 1 it would inevitably have also received the submission of the Plaintiffs' expert which is to opposite effect.  Patently, it is not for a court considering competing claims of foreign law in a case such as this to seek to determine which opinion is correct for the purposes of interim relief. 

52.      In the circumstances of this case we do not think that reference beyond that contained in Beale Affidavit 1 to the enforceability of the 2014 judgment was required.  We do not consider this in all the circumstances to be a material non-disclosure. 

Claim against Interveners in Bahrain

53.      Gearon Affidavit 1 states that on 31^st January, 2018, a judgment issued by the Bahraini courts dismissed Suhaila's claim that the property transactions made by BT and/or ART should be reversed.  This, it is submitted would have a significant impact in relation to the strength of the Plaintiffs' claim under the Insolvency Act in the English proceedings. 

54.      Gearon Affidavit 1, at paragraph 122, quotes from the 2014 Judgment which says as follows:-

"With regard to the First Defendant brought into the case [Badriya] the reason for it having been involved in the claim is its purchase of real estate properties from the First Defendant [BT], given that this was done pursuant to a proper contract that has not been contested, and given that the court has doubts regarding the conclusion of the expert that the purchase of the real estate properties by the defendant was done using the funds of the Third Defendant [ART] ....... It was necessary for the expert to prove that the First Defendant had brought the real estate properties using the funds of the company, the report as well as the documents of the case are void of any such proof.  Thus the court disregards it...."    

55.      The decision of the appeal court in Bahrain upheld that decision.  Gearon Affidavit 1 goes on to make the point that the decision makes it clear that under Bahrain law a property transaction could only be set aside or reversed if a claimant could demonstrate that the property in question had been acquired by a defendant using funds from ART.  A similar case is made in the English proceedings and that the Plaintiffs are in the same difficulty that appears from the judgments of the Bahrain court.  Accordingly, so it is asserted, this matter should have been brought to the attention of the Royal Court in considering the grant of the interim injunction. 

56.      Further, it is asserted that the fact that the Plaintiff did not disclose to the Royal Court that a claim had been pursued unsuccessfully in Bahrain against one of the Interveners prevented the Court from understanding a matter that was material to the merits of the English proceedings and that the English Court might be reluctant to exercise any discretion under the Insolvency Act to overturn a property transaction to satisfy a Bahrain judgment in circumstances where the Bahrain court itself would not do so. 

57.      In response the Plaintiffs observe that the claim in Bahrain was made by Suhaila and not by any of the Plaintiffs.  Accordingly no res judicata arises.  Furthermore, the English court in considering the application will not be applying Bahraini law.  More importantly, however, the case in Bahrain did not refer to the same property.  In Beale Affidavit 3, at paragraph 144 et seq, the matter is stated as follows:-

"144. Further, and in any event, Suhaila Toorani's attempt to join Badriya Toorani did not rely upon or involve the transfer of Burwood House.  This is made clear in 31^st January 2018 judgment.  At its page 3... it refers to these matters, stating:-

"... The First Respondent [BT] purchased real estate of the property of the Third Respondent Company [ART] and sold them to the Sixth Respondent [Yousef Dawood Nono Ibrahim], without depositing the sale proceeds in the account of the Third Respondent Company.  He also sold some of his properties to his mother, who in turn sold them to the Seventh Respondent [Badriya]."

145. The same matters are repeated in the seven final lines on page 6 of the judgment. 

146. It is evident from this that these references are not to Burwood House.  As explained in section A of my first affidavit, this was property which Mr Toorani purchased personally in the 1980s, before transferring it to Red Rose shortly before the 2005 judgment was confirmed by the Bahrain court of appeal.  It was not a property which he purchased from the company [ART] and sold to Yousef Dawood Nono Ibrahim.  It also was not a property which he sold to his mother who then sold it Badriya Toorani." 

58.      In our judgement, the dissimilarities between the transaction that formed the subject matter of the case in Bahrain and the issues relating to Burwood make the decision of the Bahraini courts of 2018 of marginal if any significance in considering whether or not an injunction should be granted in support of a claim made in connection between different properties by different parties where English law would be applied. 

59.      It may have been appropriate to make reference to it within Beale Affidavit 1 but in our judgment any failure to do so does not amount to a material non-disclosure. 

Litigation Funding

60.      The Plaintiffs did not in applying for the interim injunctions disclose to the Court that they were in the process of seeking litigation funding and indeed after the event (ATE) insurance to make their claims in the English proceedings.  It is also clear that there was significant delay between when the court granted the interim relief in August of 2017 and the eventual issue of the proceedings on 30^th November, 2017, and their service on 31^st January, 2018. 

61.      The Plaintiffs point to the fact that at the hearing of the ex parte application before the Deputy Bailiff on 30^th August, 2017, when discussing the fortification of the undertaking in damages the Plaintiffs' advocate noted that they would "struggle to provide further funds". 

62.      This, it is suggested by the Plaintiffs, meant that the need for litigation funding and ATE insurance was in effect raised before the court in considering the grant of the injunction. 

63.      In our view, that interpretation of the submissions of the Plaintiffs' legal adviser before the Deputy Bailiff is not justified. 

64.      The Court was not alerted to the fact that there was any impediment which might cause a delay to the commencement of the English proceedings and, in the view of the court, that is something that should have been brought to the court's attention. 

65.      Had such been done, it is likely that the court would have explored this in some detail and considered imposing a deadline on the commencement of proceedings in England and Wales as was, indeed, done when the matter was returned before the court on 18^th October, 2017, before Sir Michael Birt, Commissioner where an order was made requiring the substantive proceedings to be issued by 30^th November, 2017.  Criticism was made of the Plaintiffs' attitude to service of the English Proceedings when, in dealing with Badriya's application for security for costs there was correspondence from the Plaintiffs' legal advisers in January 2018 in which it is said "Our clients are not required to serve their claims.  They are entitled to allow the claim forms to expire.  In that case there would be no proceedings in which your clients could seek their costs.... However, our clients do of course intend to serve their claims.  One of the reasons they have not yet served is because, entirely without prejudice to the points made above, our clients are in the process of obtaining after the event legal costs insurance to cover their possible liability to pay your clients' costs of the claims...". 

66.      The Plaintiffs point out there is no Jersey authority in support of the proposition that an applicant for injunction must disclose their litigation funding arrangements and the extent of an applicant's duty to disclose, under Jersey and English law, is limited to its financial position with regard to its ability to honour any cost undertaking and damages in respect of which, of course, the court was informed at the ex parte hearing in chambers by the Plaintiffs' legal adviser. 

67.      It is further argued by the Plaintiffs that the question of the Plaintiffs need for ATE insurance did not arise until the Interveners threatened to bring a security for costs application which would have been prevented by ATE insurance.   

68.      We accept, for the purposes of this judgment, that there is no express requirement to notify a court considering the grant of an interim injunction about the arrangements made by Plaintiffs for their litigation funding.  However, clearly if there is a funding question which may impinge upon the timing of a step, in this case the issue of English proceedings, which the injunction is sought to underpin, then that would be a material consideration that should be brought to the attention of the court. 

69.      We think, therefore, that an intention on the part of a plaintiff to delay the issuing of the English proceedings until litigation funding is secured is something that should have been told to the court and a failure to do so is a material non-disclosure.  

70.      However, as we have said above, in our judgement this would not have prevented the court from granting the relief sought other than the Court may well have put a time limit in for the commencement and progress of the English proceedings. 

71.      In our judgement, this failure on the part of the Plaintiffs is not sufficiently serious to merit the immediate discharge of the injunction but even were it to be so, we would on balance have re-imposed it as amended by the subsequent amendment of Commissioner Birt.  

Further evidence and tax planning

72.      It is convenient to deal with the allegation that the Plaintiffs failed to return to Court to inform the Court of evidence provided to them by the Interveners about payments made by the Interveners to or on behalf BT in consideration for Burwood, and relating to tax advice given to BT about the transfer of the Burwood which pre-dated the commencement of the Bahrain proceedings because both of these matters relate to information that came to the attention of the Plaintiffs after the Interveners were involved in the proceedings and accordingly the proceedings were no longer ex parte. 

73.      Gearon Affidavit 1 asserts that Beale Affidavit 1 fails to refer the Court to correspondence with Mr Gearon's firm but was material to the potential success or otherwise of the Plaintiffs' English claims and should have been disclosed to the Court at the time of the variation.  On 12^th October, 2017, Charles Russell Speechly wrote a letter to Trowers and Hamlins which contained an annex providing information which related to the provision by the Interveners of financial support to BT between 2006 and his death in 2017 which amounted to over £7.1 million.  That letter also attached tax advice provided by KPMG dated from the 1990s that recommended that BT set up an offshore structure for inheritance tax reasons.  These, it is suggested were relevant matters for the Plaintiffs to have disclosed to the Court that should have been disclosed pursuant to the Plaintiffs' duties of full and frank disclosure.  They undermined, so it is argued, the assertions in Beale Affidavit 1 of a good arguable case by reason of the fact that they would have pointed to consideration being paid by the Interveners for Burwood and indeed that BT was motivated by considerations other than avoiding creditors for the transfer. 

74.      The way that the Interveners put the matter before the Court is that the duty of the Plaintiffs of full and frank disclosure of the evidence provided to them by the Interveners extends beyond that time when the ex parte orders have been made and after the matter has become, in effect, inter partes. 

75.      It is correct that no reference is made to these matters in Beale Affidavit 1 but they are dealt with in Beale Affidavit 3. 

76.      In this he characterises the points made by the Plaintiffs as an assertion that although Burwood was transferred by BT to Red Rose by way of a deed of gift and registered such in the Land Registry, it was not in fact a gift but part of a contractual agreement whereby the Interveners received a beneficial ownership of that property in exchange for supporting BT financially.  This matter was touched on by Janet Gabrielson of Ocorian Limited in her affidavit of 28^th September 2017 ("the Gabrielson Affidavit") in support of the application by Red Rose to vary the injunctions contained in the Order of Justice. 

77.      Other than pointing out that in his judgment it is improbable that the English court would accept a claim made by the Interveners as characterised above given the way that the transaction was set up, he makes the observation that it is a matter for determination by the court within the English proceedings. 

78.      In Beale Affidavit 4, with regard to the payment by the Interveners of rent to Red Rose, it is pointed out that Red Rose was owned by the Interveners beneficially and, in effect, it is asserted that there is a circulatory of payment although this appears to have been denied by Charles Russell Speechlys in correspondence on the basis that the monies received by Red Rose were used to defray other costs incurred by BT.

79.      With regard to the motivation of the transfer of Burwood House to Red Rose being based in fact on a recommendation by KPMG for tax planning purposes, Beale Affidavit 3 points to the fact that this has been raised as an issue for the first time in paragraph 9 of the Gabrielson Affidavit.     

80.      Beale Affidavit 3 sets out a number of reasons why in his view this information would not affect the assessment of a good arguable case.  In brief, they are as follows:-

(i)        The KPMG recommendation was made in 1992 but it was only some 14 years later after the 2005 Judgment had been obtained that it was acted upon;

(ii)       At around the same time, so the Plaintiffs will say, BT wound up the business of ART and ceased travelling to Bahrain in order to evade enforcement of the 2005 Judgment;

(iii)      Even if saving tax was one purpose of the transaction, if another substantial purpose was evading creditors then that would also impugn the transfer;

(iv)      In fact the transfer resulted in additional tax liabilities;

(v)       Even if the intention was to save tax and given the assertion by the Interveners that the transfer whilst characterised as a gift was in fact part of an agreement between themselves and BT, this would be an attempt to evade liabilities to HMRC potentially;

(vi)      The transfer of Burwood was arranged on behalf of BT by a close personal adviser who appears, according to the allegations made in Beale Affidavit 3 to have sought to avoid letters from Mr Beale's law firm;

(vii)     The explanation by the Interveners is not consistent with the Le Mauviel Affidavit. 

81.      The Plaintiffs argue that at the time of the application for the injunction they were not aware of any possible side arrangement between BT and the Interveners, nor were they aware of the tax advice that BT may have received. 

82.      Moreover it is pointed out that to the extent that these are challenges to the English proceedings, they are a matter for the English court to resolve. 

83.      One of the issues to consider is the extent to which the duty of full and frank disclosure carries with it an obligation to continue to make disclosure once the matter is inter partes and the information that might be disclosed is within the knowledge of the other parties. 

84.      In fact the allegation that the transfer of Burwood was not in fact a gift but was rather part of an agreement between BT and the Interveners is contained in paragraph 14 et seq of Badriya's First Affidavit which was filed in support of the current application.  It is pointed out, however, by the Plaintiffs that this is the Interveners' own information and could have been raised before the Court during the application to vary the injunction had the Interveners sought to intervene at that point.  It is accepted that such explanations relating to payments made by the Interveners or tax advice might be relevant but not that there is an obligation upon the Plaintiffs in the circumstances to have referred them back to the court. 

85.      The Interveners point to the case of Wilkins and Others -v- Headrick and Others 2000/186A in which the court considered amongst other things the effect of the failure to proceed with interrogatories which had been granted on an ex parte basis.  The court at paragraphs 18 to 20 said:-

"18. Mr Le Quesne argues, firstly, that the Plaintiffs agreed not to require the Defendants to provide the information therefore that part of the interim injunction was not enforced.  Secondly, they did not require them to file answers.  There is much in what Mr Le Quesne says: if it was necessary to obtain vitally quickly and urgently this important information, why was it not pursued?  Thirdly, he refers to - and I have already mentioned them - the proceedings in Scotland in the second Order of Justice.  It seems to us that the Plaintiffs had a duty to disclose either to the Deputy Bailiff, Mr Hamon, or, most importantly, to the Court, what was happening in other jurisdictions in order that the Court could decide whether it was necessary for its original injunctions to remain in place.  

19. It seems to us there are two parts to the injunctions: one freezing the assets and the other imposing what I have called judicial interrogatories. 

20. There is a heavy duty on every counsel and plaintiff seeking to obtain such draconian orders and Mr Le Quesne has stated that the Plaintiffs abused the provisions which this Court applies, in order to obtain the Order.  We cannot agree that, at the time the Order was obtained, there was not full and frank disclosure nor that in some other way they abused what they required.  However, thereafter, we are satisfied that they did not prosecute or that they abandoned the Orders so obtained and to that extent and because the authorities show that full and frank disclosure continues even after an injunction of this sort has been obtained, requiring any substantial and relevant change to be made known to the issuing Judge, we are going to discharge the injunctions." [Our emphasis]

86.      The Interveners accordingly argue that it is clear that under Jersey law there is a continuing obligation of full and frank disclosure even after an injunction has been obtained and that the information relating to the Interveners' payments and the KPMG tax advice clearly should have been referred to the issuing judge. 

87.      The Plaintiffs for their part distinguish Wilkins on the basis that the instant position is very different.  Wilkins was concerned with interrogatories in addition to freezing orders, and there is no suggestion that the Plaintiffs in this case had abandoned any of the relief that they had obtained on an ex parte basis. 

88.      The Plaintiffs rely on Commercial Injunctions (6^th Edition) by Stephen Gee QC ("Gee") where at paragraph 9-026, the learned author states:-

"The duty of the applicant for ex parte relief to act with the utmost good faith towards the court does not cease with the granting of the application.  The court is exercising a jurisdiction which is obviously very hazardous and liable to cause serious prejudice to the defendant or third parties.  The granting of ex parte relief is an exception to the general rule that no order is to be made to the prejudice of a party unless he has had the opportunity of being heard in his defence.  Furthermore, with Anton Piller orders, there will almost invariably be a period between the granting of the order and the time when the claimant is ready to execute it at the premises concerned.  With Mareva relief there may similarly be a not insubstantial period between the making of the order and the time the defendant is notified of it.  During this time the claimant is giving notice of the order to banks and other non-parties, and possibly obtaining information from them under the order in respect of the defendant's assets. 

Thus, when the court grants ex parte relief of this nature, it is in effect entrusting the applicant with its order, at least for the period immediately following the application, on the basis that the applicant will be using the order to forward the interests of justice.  It is not for the applicant to act as judge in his own cause and decide what effect, if any, new developments are to have on the ex parte relief.  Thus the general principle on the ex parte application is that an applicant may not select the material to be placed before the court.  This applies with equal force in relation to new developments in the case, at least while the defendant is under a continuing disability in relation to protecting his own interests.

This in Commercial Bank of the Near East Plc -v- A [1989] 2 Lloyd's Rep 319, Saville J considered the position in relation to Mareva relief when, following the application, the plaintiffs had obtained leave to register cautions over property belonging to the defendants in Greece.  Although the case was not one in which the court had been misled or incomplete information had been given on the initial ex parte application, Saville J held that "while the proceedings remain on an ex parte basis", the applicant has a duty to the court to bring to its attention any subsequent material changes in the situation, i.e. any new or altered facts or matters which, had they existed at the time of the application, should have been disclosed to the court.

...

It may be that certain material has been placed before the court which the claimant discovers to be misleading, but there is other material in the affidavit evidence from which he feels he can still draw a sufficiently adverse conclusion to enable him to maintain the order.  In those circumstances, the correct approach is to tell the court and the defendant why the material in question has been discovered to be misleading, and to disclaim any further reliance on it, leaving the court to consider the merits of continuing the injunction on the basis of the material remaining.  A variant of this situation is where fresh information obtained by the claimant is given to his legal advisers in circumstances which would attract a claim for privilege, or (perhaps less frequently) where a third party claims the fresh information is confidential and prohibits its disclosure or use in the litigation, so the claimant may not wish to state what it is unless the court orders him to do so.  It is impossible to lay down any specific rules which the practitioner should observe in those circumstances, as the proper course of action will depend on the facts in each case.  However, one possible approach would be for the claimant to swear an affidavit, identifying the material in question and stating that since the ex parte hearing he has obtained further information, under circumstances attracting a claim for privilege or confidentiality, which shows the material to be false or misleading and consequently he disclaims all further reliance upon it.  The claimant then applies to the court to reconsider the order. 

In Commercial Bank of the Near East Plc -v- A (above), Saville J said that the duty continued while the proceedings remained on an ex parte basis.  The circumstances in question there, however, were also known to the defendants, so that once the defendants had been fully apprised of what had occurred on the ex parte application, they would themselves have been in a position to apply to the court to discharge or vary the order in the light of the change of circumstances.  A situation could also arise where new information becomes available only to the applicant, or there is a new development known only to the applicant, after the defendant has been fully apprised of what had occurred ex parte and:

The defendant does not know or have full information of the new development or fresh information; and

The new development or fresh information means either that the information given to the court on the ex parte application was misleading, or that the basis on which the relief has been granted ex parte could no longer be supported or has been substantially impugned."   

89.      We were also referred to the recent case of JSC BTA Bank -v- Mukhtar Ablyazov, Ilyas Khrapunov [2018] EWHC 259 (Comm), in which, under the heading "The Continuing Duty of Disclosure"  the court said this at paragraphs 9 et seq said:- 

"9. As a litigant making an ex parte application, the Bank was under a duty not only to avoid misleading the Court, but to make the fullest possible disclosure of all material facts which were within its knowledge or of which it would have been known had it made proper inquiries.  With regard to the Russian assets, it is said both that the Bank did not make proper disclosure and misled the Court when the application was before Males J, and that this failure was not corrected either while the proceedings remained on an ex parte basis or thereafter.  The expression that proceedings were "on an ex parte basis" derived from the judgment of Saville J in Commercial Bank of the Near East pic -v- A [1989] 2 Lloyd's Rep 319.  He said that, "While the proceedings remain on an ex parte basis, in the absence of agreement by the party enjoined or unless the court otherwise directs, it is the duty of a party who obtains ex parte mareva [sc. freezing] relief to bring to the attention of the court any subsequent material changes in the situation, i.e. any new or altered facts or matters which, had they existed at the time of the application, should have been disclosed to the court.  It must always be remembered that the granting of ex parte relief provides (albeit so that justice can be done) an exception to the most basic rule of natural justice - that both parties should be heard.  Thus, the need for full disclosure by the party seeking relief and thus to my mind the need to continue to make full disclosure while the proceedings remain on an ex parte basis."  The principle enunciated by Saville J has been endorsed in subsequent first-instance authority, and it was not disputed before me that it correctly describes the duty of a litigant who is granted relief on an ex parte application.  I accept it. 

10. The question therefore arises how long these proceedings are to be regarded as being on an ex parte basis so that the applicant's duty of disclosure continued.  This requires me to say something about the procedural history.  The claim form was issued on 17 July 2015, and the Bank attempted to serve it on Mr Khrapunov in Switzerland on 11 September 2015.  Service was not effective, apparently because the proceedings were not translated into French, as required by Swiss procedural law.  In the event, Mr Khrapunov received a copy of the claim form and the WFO on 26 October 2015, although he appears to have had notice that the WFO had been made earlier than that.  Certainly by a letter dated 30 October 2013 Mr Khrapunov acknowledged that he was aware of the WFO.  On 6 November 2015, at a hearing which Mr Khrapunov did not attend and at which he was not represented.  Popplewell J made an order under 81.1 of the Civil Procedure Rules dispensing with formal service of the WFO and providing for alternative service of the claim form and the particulars of claim.  The claim form and the particulars of claim were served on 17 November 2015.  On 27 November 2015 Mr Khrapunov issued a challenge to the Court's jurisdiction, applying to set aside the claim form and particulars of claim and service of them and to discharge various orders, including the WFO.  On 20 January 2016 the Bank issued an application to continue the WFO.  The applications were heard by Teare J on 26, 27 and 28 January 2016.  Teare J reserved judgment, ordering that the WFO continue pending him delivering it.  On 11 February 2016 he held that the Court has jurisdiction in respect of the Bank's claim in so far (but only in so far) as it is concerned acts done before 16 February 2012, when Mr Ablyazov had fled England and the jurisdiction of the Court.  (The decision about jurisdiction has been the subject of appeals to the Court of Appeal and the Supreme Court, and the judgment of the Supreme Court is awaited).  Having heard further argument on 24 February 2016 and 23 March 2016, Teare J made an order on 23 March 2016 in which he continued the WFO (with some modifications, which are immaterial for present purposes).  He also ordered that Mr Khrapunov be cross-examined about his asset disclosure.

...

13. As Saville J explained, the duty of full and frank disclosure placed on ex parte applicants is designed to minimise the potential unfairness that a litigant has no opportunity to be heard when an application for an order against him is determined.  The WFO made by Males J like any properly drawn ex parte order provided that Mr Khrapunov might apply to the court for its variation or discharge, and he does not complain that he was not properly informed of the material on the basis of which the WFO was made.  To my mind, there is no cogent reason that in those circumstances an ex parte applicant should remain under the duty of full of a frank disclosure: the respondent is then in a position to apply to the court and put before it any information that he considers relevant." 

90.      It seems to us that the obligation of full and frank disclosure continues to apply to a plaintiff who has obtained interim relief unless and until the matter becomes inter partes. 

91.      Thereafter, the matter being inter partes, in our judgment where information is in the possession of the defendants in general (or the Interveners in this case), particularly in the circumstances where they have the information and the Plaintiffs initially do not, then they, that is the defendants/Interveners, can bring matters to the attention of the court as they wish.  In fact the information relating to the alleged agreement between the Interveners and BT was contained in the Gabrielson Affidavit in any event as was reference to the KPMG tax advice. 

92.      To the extent that Wilkins, above, suggests that the obligation of full and frank disclosure remains on a plaintiff even after the matter has become inter partes such that a Plaintiff has a continuing obligation to bring to the attention of the court information brought to his attention by a defendant it does not, in our view, represent the correct position. 

General Principles

93.      It is common ground that the approach of this Court to full and frank disclosure is to be found in the case of Goldtron Limited -v- Most Investment Limited [2002] JLR 424 in when at paragraphs 15 and 16 the Court said:-

"15. In our judgment, a short and accurate summary of the duty lying upon the party applying for ex parte relief is to be found in the decision of Bingham, J in Siporex Trade S.A. -v- Comdel Commodities Ltd (4), ([1986] 2 Lloyd's Rep. at 437): 

"The scope of the duty of disclosure of a party applying ex parte for injunctive relief is, in broad terms, agreed between the parties.  Such an application must show the utmost good faith and disclose his case fully and fairly.  He must, for the protection and information of the defendant, summarise his case and the evidence in support of it by an affidavit or affidavits sworn before or immediately after the application.  He must identify the crucial points for and against the application, and not rely on general statements and the mere exhibiting of numerous documents.  He must investigate the nature of the cause of action asserted and the facts relied on before applying and identify any likely defences.  He must disclose all facts which reasonably could or would be taken into account by the Judge in deciding whether to grant the application.  It is no excuse for an applicant to say that he was not aware of the importance of matters he has omitted to state.  If the duty of full and fair disclosure is not observed, the Court may discharge the injunction even if after full enquiry the view is taken that the order made was just and convenient and would probably have been made even if there had been full disclosure."

16. We must emphasis the passage concerning the exhibiting of numerous documents.  It is not sufficient for a plaintiff to be able to say that, buried somewhere amongst the voluminous exhibits, the point at issue was available to the judge.  The duty is much more stringent.  All defences actually raised by the defendant or which can reasonably be expected to be raised in due course must be identified and fairly summarised in the affidavit.  If the affidavit itself is voluminous, counsel may need to refer the judge to the relevant points.  The overriding duty of the applying party and his advocate is to ensure that all actual or possible defences (and other material matters) are brought to the specific attention of the judge so that he may consider them before making his order."     

94.      In Gee at paragraph 9-008 the learned author states with regard to the duty of full and frank disclosure:-

"It is often a difficult exercise to settle a suitable affidavit which achieves the right balance between full and fair disclosure and a far too detailed description of the facts, with perhaps too much generosity towards the defendant.  The duty of disclosure does not require the applicant to describe his case or the factual background in minute detail, nor does it require him to search for possible but unlikely defences."  

95.      Even if there has been a failure in full and frank disclosure it is not always the case that the court would raise an interim injunction or, if it does, it may consider re-imposing it.  In Goldtron at paragraphs 22 and 23 the Court said this:- 

"22. But even where the court has discharged an injunction on the grounds of non-disclosure, it has a discretion to re-impose the injunction.  The circumstances in which it would be right to do so were considered by the English Court of Appeal in the case of Brink's Mat Ltd -v- Elcombe (1).  Two particularly useful passages are as follows.  Balcombe, L.J. said this ([1988] 1 W.L.R. at 1358): 

"The rule that an ex parte injunction will be discharged if it was obtained without full disclosure has a two-fold purpose.  It will deprive the wrongdoer of an advantage improperly obtained: see Rex -v- Kensington Income Tax Commissioners, Ex parte Princess Edmond de Polignac, [1917] 1 K.B. 486, 509.  But it also serves as a deterrent to ensure that persons who make ex parte applications realise that they have this duty of disclosure and of the consequences (which may include a liability in costs) if they fail in that duty.  Nevertheless, this judge made rule cannot be allowed itself to become an instrument of injustice.  It is for this reason that there must be a discretion in the court to continue the injunction, or to grant a fresh injunction in its place, notwithstanding that there may have been non-disclosure when the original ex parte injunction was obtained ... Whilst, having regard to the purpose of the rule, the discretion is one to be exercised sparingly, I would not wish to define or limit the circumstances in which it may be exercised."

Ralph Gibson, L.J. said this (ibid., at 1357):

"(6) Whether the fact not disclosed is of sufficient materially to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issues which were to be decided by the judge on the application.  The answer to the question whether non-disclosure was innocent, in the sense that the fact was not known to the applicant or that its relevance was not perceived, is an important consideration but not decisive by reason of the duty on the applicant to make all proper inquiries and to give careful consideration to the case being presented.   

(7) Finally, it 'is not for every omission that the injunction will be automatically discharged.  A locus poenitentiae may sometimes be afforded:' per Lord Denning, M.R. in Bank Mellat -v- Nikpor, [1985] FSR 87,90.  The court has a discretion, notwithstanding proof of material non-disclosure which justifies or requires the immediate discharge of the ex parte order, nevertheless to continue that order, or to make a new order on terms." 

23. In our judgment, this reflects the position at Jersey law.  In cases of comparatively minor non-disclosure, the court may well continue to re-impose the order.  But in cases of serious non-disclosure, even if innocent, as described by Ralph Gibson, L.J., the normal order will be to discharge the order and not re-impose it.  As Balcombe, L.J, said, the power to re-impose should be used sparingly.  The reason for this is to ensure compliance with the duty to make full and frank disclosure.  If it became the case that injunctions were routinely re-imposed, with the only penalty being one of costs, not only would plaintiffs and their advisers begin to take this duty less seriously; but defendants would eventually give up applying to set aside injunctions obtained as a result of non-disclosure if their only "reward" were simply to recoup the costs of the application, with the injunction remaining in place.  This would in turn further reduce the pressure on plaintiffs to make full disclosure."     

96.      In Gee, at paragraph 21-057, the learned author says:-

"Where there is an interim order made after a hearing on the merits inter partes, the court will not entertain an application to set aside that order or part of it or which is inconsistent with that order, unless there has been a material change of circumstances or the judge in the original application has been misled in a material respect, or if there has been a manifest mistake.  This prevents re-litigation of the same application, and applies when it was open to the applicant to take the same points on the original hearing even though he did not do so.  The principle has the consequence that if a point was open to the applicant on an earlier interlocutory application and was not pursued, then it was not open to the applicant to take the point in a later application when there has been no material change of circumstances and no new facts...It applies when the defendant consents to continuation of a freezing injunction without a hearing. 

The principle applies to an application under CPR R31(7) which enables a court "... to vary or revoke an order", and limits the availability of relief from sanctions under CPR R3.9.  It applies when a freezing injunction has continued inter partes, or an undertaking is given in equivalent terms, which is expressed to be until trial or further order, and no specific reservation is made before the court by the applicant." 

97.      Although we refer to the extract for the sake of completeness, we note in the Gabrielson Affidavit at paragraph 5 that the defendant reserved its position to apply to discharge the injunctions.  In any event it does not to us appear that the principle referred to in Gee will be applicable in the instant case given that there has been no previous hearing in connection with the Interveners.

Release of money for legal costs

98.      As an alternative to the application to lift the undertaking, the Interveners apply for a variation of the undertaking to permit a substantial sum, specifically £1,121,926.37 to be removed from the retained sum and paid to the Interveners English solicitors for the purpose of funding legal costs. 

99.      In the case of Armco Inc., and Others -v- Donoghue and Others [1998] JLR Notes 12A.  The Court of Appeal set out a number of principles which are to be applied in deciding whether to allow payment of the defendant's legal costs out of injuncted funds.  The principles are set out in the following extract from the notes of the case:-

"The following principles are to be applied when deciding whether to allow payment of the defendant's legal costs out of enjoined funds, in circumstances in which the plaintiff asserts a proprietary claim to the funds (the list is not exhaustive): 

1.        Only in an exceptional case, in which the merits can be gone into for the purpose of satisfying a court that the proprietary claim is well founded at an interlocutory stage, should a defendant not be free to draw on the enjoined funds to finance his defence. 

2.        In non-exceptional cases in which a proprietary claim is made, a careful judgment has to be made as to whether the injustice of permitting the use of the funds by the defendant is outweighed by the possible injustice to the defendant if he is denied the opportunity of advancing what may turn out to be a successful defence. 

3.        A defendant should not be allowed to draw on a fund which may belong to a plaintiff for the purpose of paying the defendant's legal costs until he has satisfied the burden of showing that he has no funds of his own available for that purpose. 

4.        The court will look to the reality of what would occur if no order were made.  If the costs would in practice be paid by a third party, then the court will take this into account. 

5.        The court will not normally concern itself with the quantum of the individual items of costs, although it may well fix a limit to the overall amount to be allowed for this purpose pending further application to the court: it will not act as a form of provisional taxing body for the purposes of scrutinizing the defendant's legal fees. 

6.        The court may impose safeguards, e.g. an undertaking by the defendant that he will make good, out of the funds to which the plaintiff has no proprietary claim, any sums spent on costs which are subsequently found to have come out of property to which the plaintiff has a good proprietary claim."    

100.   In a short judgment delivered in the case of A and Another-v- C and Another (No. 2) [1981] QV 961 Robert Goff J considered an application on the part of the defendants to release monies frozen by a Mareva injunction in order to pay their legal costs.  In considering what information the court needed in order to consider such an application, the learned judge, at page 963 paragraph B says this:-

"In the present case, I have had to consider the position where the defendant has, or may have, other assets from which the relevant payment may be made.  I have still to apply the basic principle, i.e., that I can only permit a qualification to the injunction if the defendant satisfies the court that the money is required for a purpose which does not conflict with the policy underlying the Mareva jurisdiction.  I do not consider that in normal circumstances a defendant can discharge that burden of proof simply by saying, "I owe somebody some money".  I put to the defendants' counsel, in the course of argument, the example of an English-based defendant with two bank accounts, one containing a very substantial sum which was not subject to the Mareva injunction, and the other containing a smaller sum which was.  I asked counsel whether it would be sufficient for the defendant simply to say, "I owe somebody some money, please qualify the injunction to permit payment from the smaller account, without giving any consideration to the possibility of payment from the larger account."  Counsel was constrained to accept that that would not be sufficient, because it would not satisfy the court that the payment out of the smaller account would not conflict with the principle underlying the Mareva jurisdiction.  The whole purpose of selecting the smaller account might be to prevent the money in that account from being available to satisfy a judgment in the pending proceedings.  In my judgment, a defendant has to go further than that; precisely what he has to prove will depend, no doubt, upon the circumstances of the particular case.  At all events, in the present case, if the defendants making the application have other assets, freely available - and I do not know, on the evidence, whether they have or not - it would be open to counsel for the plaintiffs to submit, on the evidence, that it would be wrong for the court to vary the Mareva injunction.  All I can say at present is that, on the evidence before the court the defendants have not discharged the burden of proof which rests upon them."       

101.   Gee at paragraph 21-053 in connection with a claim for the release of funds to pay legal costs where there is a proprietary claims says this:-

"What if there is a proprietary claim by the claimant?  The purpose of an injunction granted in aid of a proprietary claim is to stop the defendant expending for his own benefit what may be the claimant's property.  No one has the right to use someone else's money to pay for their defence and so before there can be any question of allowing a defendant to use funds to use the claimant has a very strong proprietary claim he must show an arguable case for denying that they belong to that claimant.

"If he cannot show that there is an arguable claim in his part of the funds, he has no right to use the money ...  No man has a right to use somebody elses's money, for the purpose of defending himself against legal proceedings."

Where there are assets which may belong to the claimant, the court will not allow those funds to be used for legal costs until the defendant has shown by "proper evidence" that he has no other assets which can be used for this purpose.  If there are such funds, then the defendant must use these first before any question arises of his having access to funds which are the subject of a proprietary claim.  But once it is shown there are no other assets except those subject to a proprietary claim, the court must make a difficult decision in the exercise of its discretion as to what is to be done by considering where the balance of justice lies in permitting or refusing the payment." 

102.   And, lastly, in Vulnerable Transactions in Corporate Insolvency (2003) Harmer and Bennett Ed in considering an application under Section 423 of the Insolvency Act 1986 the learned authors say:-

"Another example is National Westminster Bank plc -v- Jones.  Mr and Mrs Jones carried on a family farming business funded by loans from National Westminster Bank plc on the security of mortgages and agricultural charges given in favour of the bank.  On 27 April 1999 the bank demanded full payment of £335,418.85 due in satisfaction of this debt.  Mr and Mrs Jones feared that they would lose their home and farming business.  After having received professional advice, Mr and Mrs Jones formed a company (Neuadd Goch Farms Ltd) and on 27 April 1999 signed two agreements:  (1) a tenancy agreement leasing the family farm to the company; and (2) a sale agreement transferring to the company all of the farming assets.  The bank appointed administrative receivers who came to court seeking a declaration that these two agreements were transactions defrauding creditors pursuant to Insolvency Act section 423.  Neuberger J had some sympathy for the position of Mr and Mrs Jones but held that he '...should set the agreements aside pursuant to [Insolvency Act] s 423(2)'.       

In both of the above cases the remedy awarded by the court brought about precise restitution of the benefits conferred.  The claimant in each case obtained restitution in specie.  Rather than awarding the value of the asset transferred, the court reversed the transfer of that very asset.  As has been said, it is clear that this is some species of proprietary award.  However, it is important to realise that not all proprietary claims are given to reverse unjust enrichment.  Broadly speaking, there are two categories of case.  In the first, the claim to recover the property is based on the claimant's existing proprietary rights in that property.  In the second, the claim to recover the property is based on proprietary rights raised to reverse unjust enrichment. ..."

103.   We take from these cases the following principles:-

(i)        A claim under Section 423 of the Insolvency Act 1986 is proprietary in nature;

(ii)       Where a proprietary claim is concerned, the principles set out in Armco above apply;

(iii)      It is for the applicants, in this case the Interveners, to establish that they have no other assets from which they can fund the litigation before generally they should have recourse to the retained funds. 

The evidence

104.   The application for the release of funds is supported by Badriya's First Affidavit and Badriya's Second Affidavit. 

105.   In Badriya's First Affidavit she confirms that the Interveners have not been able to obtain third party funding although it does not go into detail and that the proceeds of sale from Burwood represent the only unencumbered monies of any significance which the Interveners could call upon to defend the claims made against them. 

106.   She repeats the assertion that the transfer of Burwood was not a gift but that the Interveners funded the ongoing expenses for maintenance and upkeep of the estate and BT's personal living expenses and medical costs in effect in return for the transfer of Burwood to Red Rose.

107.   She maintains that the expenditure over the years has totalled "many millions of pounds".  She refers to Gearon Affidavit 1 which refers to "hundreds of pages of evidence" to support the assertion that the Interveners financially supported BT. 

108.   Badriya confirms that she and the other Interveners have been required to take out loans and exhibits her bank statements and other documents dealing with aspects of her financial affairs.  The only documentation exhibited which did not relate to Badriya appears to be a certificate of insured mortgage relating to Rabab in favour of a bank and a letter from another bank to Rabab confirming an overdraft facility. 

109.   In Badriya's Second Affidavit she confirms that she is a full-time surgeon working in Bahrain and also conducts a private clinic.  Her sister Rabab owns retail stores in Bahrain and is also involved in the real estate business.  Others of the Interveners work with Rabab and are supported financially by their partners. 

110.   Badriya states that none of them have substantial liquid assets and that most of their liquid resources have been spent on legal proceedings in Bahrain and in meeting the running costs of Burwood.  She asserts that all of the properties owned by the Interveners are encumbered by loans which have, to an extent at least, been incurred in maintaining Burwood. 

111.   She refers further to a report of property values relied upon by the Plaintiffs which she seeks to dispute and also to undermine on the basis that the deeds which allegedly form part of the report and relate to real estate owned by Rabab were unlawfully obtained under Bahraini law because only those with an interest in properties can obtain copies of deeds from the Bahrain Survey and Land Registration Bureau. 

112.   Badriya confirms that she does not believe that all of the properties listed in the report are in fact owned by Rabib and says:-

"I (and my family) do not wish, or believe that it is fair, that we are asked to provide corrections to a report obtained illegally within Bahrain and in connection with which an arrest warrant has been granted."

113.   She confirms that the properties owned by Rabab jointly or otherwise have significant debts secured against them but "there has not been sufficient time since the service of Mr Beale's third affidavit to collate the documentation in relation to such mortgages." 

114.   We note in Beale Affidavit 4 that any suggestion of illegality is expressly disputed and that the copy deeds were not attached to the impugned report but rather exhibited separately.  Mr Beale disputes that there was any validity to any criminal complaint which he says, in effect, has been improperly made. 

115.   We do not need to resolve this dispute over evidence.  The assertions in the report have been made in connection with assets owned by the Interveners and the Interveners have not, because they maintain that information was obtained unlawfully, condescended to answer it or comment upon it.  This, in terms of the exercise that the court is asked to undertake, is unhelpful. 

116.   Beale Affidavit 3 deals with the Interveners' assets and makes reference to the property valuation on which the Interveners have declined to comment.  The report makes reference to some 10 properties including several four storey buildings, investment buildings and residential buildings and compound villas and the valuation report values those property assets at BD9,129,394 which is the equivalent of approximately £18 million. 

117.   In addition, evidence is put before us that Rabab owns a property in central London together with her husband and her son and some evidence is provided that property might have a value of in excess of £1 million.  The Land Registry does not show any mortgage outstanding.  The Beale Affidavit 3 concludes that Rabab, accordingly, has real estate assets valued at approximately £20 million. 

118.   The information provided by Badriya is disputed.  By way of example, in a letter dated 9^th April, 2018 from Standard Chartered Bank to Badriya, there appears to be an outstanding overdraft of BD108,837 but a fixed deposit of BD300,000 which would, so Mr Beale states, be a net asset position of approximately £400,000. 

119.   In our judgement, the criticism of the Interveners' evidence is justified. 

120.   This is in essence a proprietary claim in the sense that it is claimed that the assets transferred to Red Rose belong to BT's estate and should be set aside under section 423 of the Insolvency Act 1986. 

121.   Having been placed on notice that the Plaintiffs are asserting a proprietary claim it was in our view incumbent upon the Interveners to place sufficient evidence before the Court in support of their application so that the Court could be satisfied that they did not have a ready recourse to alternate assets.  That is certainly the assertion made in Badriya's affidavits but the documentary support is, it must be said, thin.  The Court is not clear that the documentation exhibited relating to Badriya's own affairs represents the totality of her banking arrangements and we are not provided with any detail relating to the real property or personal property owned by the Interveners other than to some extent Badriya.  There is prima facie evidence that Rabab owns very substantial amounts of real property in Bahrain and, indeed, in London and we cannot be satisfied that the Interveners do not have recourse to significant assets sufficient to fund their litigation costs.   

122.   Furthermore, in our judgement, any alleged illegality in obtaining information from the public registry in Bahrain does not absolve the Interveners from meeting the financial case that they need to do in order to obtain money from the retained funds.

123.   We note that the legal costs incurred and in prospect are substantial and that we are informed that the most recent account rendered by the Interveners' legal advisers have not been met.  That does not say it could not be met and we simply do not have enough information to be satisfied that we should make the orders sought by the Interveners.  It may be that with further information the Interveners can make another application to the Court but at this point the evidentiary picture is insufficient.

Conclusion

124.   In our judgement, as we have indicated, a number of the matters raised by the Interveners do not amount to a material lack of disclosure on the part of the Plaintiffs.  The delay in financing leading to a delay in the commencement of the English proceedings should however have been disclosed.  As we have said, it is likely to be the case that the judge considering the interim injunctions would have fixed a deadline for the commencement of proceedings.  However we do not consider on balance that the want of disclosure should lead us to raise the injunction.   

125.   In our judgement, therefore, we are not persuaded either that there has been a sufficient want of disclosure to justify raising the injunctions granted by the Court nor releasing the monies from the undertaking which replaced them.  Nor do we believe that we have sufficient information to make the orders requested by the Interveners for money to fund the English proceedings

Authorities

Wilkins and Others -v- Headrick and Others 2000/186A. 

Commercial Injunctions (6th Edition) by Stephen Gee QC. 

JSC BTA Bank -v- Mukhtar Ablyazov, Ilyas Khrapunov [2018] EWHC 259 (Comm). 

Goldtron Limited -v- Most Investment Limited [2002] JLR 424. 

Armco Inc., and Others -v- Donoghue and Others [1998] JLR Notes 12A. 

A and Another-v- C and Another (No. 2) [1981] QV 961. 

Vulnerable Transactions in Corporate Insolvency (2003) Harmer and Bennett Ed