MUBARIK v. THE UNITED KINGDOM
Inadmissible
Giovanni Bonello;Lech Garlicki;Ledi Bianku;Nebojša Vučinić;Nicolas Bratza;Päivi Hirvelä
The applicant, Mr Iqbal Mubarik, is an Indian national who was born in 1958 and lives in London. He is represented before the Court by Hughes Fowler Carruthers, a law firm based in London. The applicant comes from a successful family of jewellers. In around 1980, the applicant moved from India to Kuwait, where he began a business working with his cousin and brother-in-law, Mr Wani. It is disputed whether the applicant and Mr Wani were equal partners in the business in Kuwait and in subsequent businesses established. In 1983, the applicant married and his wife, Mrs Mubarak, joined him in Kuwait. By 1986, the applicant wished to expand the business outside Kuwait. He incorporated the Kuwait business, which became Dianoor International Ltd, Hong Kong. The applicant and his family subsequently moved to Hong Kong. The applicant claims to have entered into a written joint venture agreement with Mr Wani in February 1987 specifying that they were in business as equal partners, each owning 50 per cent of the assets and being responsible for 50 per cent of the liabilities of the jewellery business. This claim was later contested by Mrs Mubarak. In September 1993, the applicant incorporated Dianoor Jewels Ltd, a UK company. The company acquired the lease of a shop in London and the applicant has subsequently built up a prestigious jewellery business trading from those premises. In March 1994, the applicant caused a Bermudan company to be formed, 21st Century Holdings Ltd. Initially the applicant and Mrs Mubarak were the two shareholders and directors. It was around this time, Mrs Mubarak alleges, that the marriage began to deteriorate. The applicant claims that he and Mr Wani entered a second joint venture agreement in April 1996. In the summer of 1996, the applicant decided to set up an offshore trust, following tax advice from his lawyers. In July 1997, a Jersey company, Dianoor Jewels International Ltd, was incorporated as a wholly owned subsidiary of 21st Century Holding Ltd. Dianoor Jewels International Ltd became the holding company for the other three companies in the Dianoor Group, including Dianoor International (Hong Kong) and Dianoor Jewels Ltd (UK). At the same time, most of the shares of 21st Century Holding Ltd were bought in by the company and loan accounts in the name of the applicant and Mrs Mubarak were set up. In August 1997, the applicant and his family moved to the United Kingdom. On 2 September 1997, the IMK Family Trust was created in Jersey. Its trustees were Craven Trust Co. Ltd (Jersey). The applicant and Mrs Mubarak transferred their remaining shares in 21st Century Holding Ltd to the Craven trustees, to be held under the terms of the trust. The settlors of the trust were therefore expressed to be the applicant and Mrs Mubarak, and the beneficiaries were the applicant and Mrs Mubarak and their children. On 20 March 1998 the applicant and Mrs Mubarak separated. The applicant subsequently removed Mrs Mubarak as a beneficiary of the IMK Family Trust and a second Jersey trust, the Dianoor Foundation for Art Trust. Mrs Mubarak applied to the High Court for a decree nisi and ancillary relief for herself and the four children of the family. The hearing commenced on 29 November 1999. On the third day of the hearing, the applicant and his legal team withdrew from the proceedings following the discovery that evidence upon which the applicant sought to rely in order to support his claim that he had entered into a second joint venture agreement with Mr Wani was false. The hearing continued in the applicant’s absence. Mr Justice Bodey had the benefit of evidence from experts instructed by the applicant and by Mrs Mubarak on the global trading conditions for the jewellery industry. Mrs Mubarak’s expert also gave oral evidence. In his judgment of 10 December 1999, Mr Justice Bodey considered the financial position of the applicant in light of the evidence he had heard regarding the jewellery industry. The judge also considered other assets held by the applicant, or alleged to be held by him. He concluded that the applicant had other undisclosed assets which were or may be of considerable value. As to the applicant’s claim that Mr Wani was entitled to 45 per cent of all his assets, the judge noted that all the relevant assets were in the applicant’s sole name and were not legally owned in any way by Mr Wani. He found that the burden must fall on the applicant and Mr Wani to establish the equitable or moral claim asserted by Mr Wani, on a balance of probabilities. The judge considered affidavits from some 25 witnesses as to the existence of a partnership between the applicant and Mr Wani and took into account expert evidence as to the cultural differences between business arrangements in India compared to the United Kingdom. He found that: “I am satisfied that nothing said by the [applicant], Mr Wani or their witnesses is sufficiently cogent (certainly without having seen them and heard them cross-examined) to outweigh the matters set out ... below, the strong thrust of which is firmly against the existence of any kind of partnership or sharing agreement”. Mr Justice Bodey made an order that the applicant should pay to Mrs Mubarak a lump sum of GBP 4,875,000. He was further ordered to make periodical payments of GBP 12,900 to Mrs Mubarak until payment of the lump sum, as well as periodical payments in respect of the children. The judge also ordered that if the applicant failed to pay the lump sum or provide security for it within three hours of being served with the judgment, then he should deliver up to Mrs Mubarak’s solicitors the whole stock of jewellery and artefacts listed in a schedule delivered to the court (owned either by Dianoor Jewels Limited or Dianoor International Limited) to be sold to meet the award made under the judgment. The applicant sought to appeal the order. On 3 April 2000 the Court of Appeal dismissed his application for permission to appeal. Thorpe LJ referred to the husband’s and Mr Wani’s evidence about the alleged joint venture agreement as being “nothing more nor less than a fraud”, and he considered significant the husband’s “determined” and “dishonest” litigation strategy. On 23 October 2000, having heard evidence from several parties, including the financial director of one of the Dianoor companies, Mr Justice Bodey in the High Court accepted that as a matter of law, the court could not “pierce the corporate veil” (i.e. it could not ignore the company/trust structure through which the jewellery stock was owned). He therefore discharged the paragraph of his order of 10 December 1999 in which he ordered the delivery up and sale of the jewellery stock. He found nonetheless that the applicant did have undisclosed assets from which he could make the lump sum payment. He further considered that it was plain that the applicant controlled the IMK Family Trust, which was revealed both by the documents setting up the trust and the ease with which he had arranged for Mrs Mubarak’s name to be removed from the trust beneficiaries. While the court was not able to pierce the corporate veil in order to seize the company assets directly, the applicant could nonetheless in practice use his ultimate ownership of the business structure to raise the sums required by accessing the underlying resources. By March 2005, Mrs Mubarak had obtained a total of GBP 266,000 of the lump sum through charging orders on two flats owned by the applicant. The applicant made the periodical payments in full until April 2003, at which point he began making reduced payments of around GBP 8,000. In August 2003, he reduced the payments further, to around GBP 5,800. He stopped the payments altogether in May 2005. On 7 March 2005, Mrs Mubarak made an application to enforce the unpaid balance of the lump sum. She sought: (a) to set aside the transfer of assets into the IMK Family Trust in 1997; (b) to set aside the document of exclusion in 1998 whereby the applicant excluded her as a beneficiary of the trust; (c) to vary the trust as a post-nuptial settlement such that the trustees would hold for her absolutely that value of the trust assets as equated to the outstanding sums arising from the 1999 orders; and (d) to be released from an undertaking given by her not to litigate against the trust except within the jurisdiction of England and Wales. In addition to the primary relief sought, Mrs Mubarak also sought an order barring the applicant from opposing her applications by taking part in proceedings, pursuant to a jurisdiction founded on a Court of Appeal decision from 1952 in the case of Hadkinson v. Hadkinson [1952] P 285 (“a Hadkinson order”). On 9 May 2006, Mr Justice Bodey delivered judgment in relation to Mrs Mubarak’s application for a Hadkinson order. He accepted that a Hadkinson order was competent where a party to proceedings was in contempt and concluded that non-payment in breach of a matrimonial order to pay money was in itself a contempt of court, whether or not such non-payment could be described as “culpable” (i.e. whether or not the non-paying party had the means to pay). The question therefore arose as to how the court ought to act on the contempt established. Mr Justice Bodey considered it “blindingly obvious” that the applicant could have paid a great deal more towards the outstanding balance of the lump sum than he had paid. However, in the event, he refused to make an order barring the applicant from the proceedings altogether. Instead, he made an order requiring the applicant to fulfil certain conditions before he would be able to participate in the substantive hearing. He noted (at paragraph 88 of his judgment): “I am satisfied that the husband can and should be placed on certain terms. This is exceptional and unusual, but it is an exceptional and unusual case. To echo the words of Lord Denning in Hadkinson, it merits ‘a strong thing’.” As to the terms of the order, the judge stipulated as follows: “(a) By 12th June 2006 (or by such other date as the parties may agree or the court may direct) the husband do by recorded delivery letter inform the trustees of the Jersey Trust in terms expressed to be irrevocable: (i) that he accepts that he is bound by the court’s orders, awards and findings of 10th December 1999 and cannot go behind them (including in particular the finding that Mr. Wani has no interest in the Trust assets); (ii) that he wishes the trustees to assist him in meeting his obligations under the orders of this court and wishes them not to take any steps having the effect of making it more difficult for him to do so; and (iii) that he accepts that (subject to appeal) he is bound by whatever orders the court may make on the wife’s pending applications in December 2006, and that (again) he wishes the trustees to give full effect to those orders; and 1. (b) For each £1 he pays to his own lawyers for preparation, representation or advice in respect of the December 2006 hearing from now on, he do pay £1 into a joint account in the names of the parties’ respective solicitors. (This is what I called during the hearing ‘pound for pound’). The money so lodged is to be held to the order of the court, but is to be paid out to the wife’s solicitors at the conclusion of the December 2006 hearing unless, when dealing with costs at the end of that hearing, the court should positively rule otherwise in its overall discretion. (c) The husband’s solicitors are, by 14th June 2006, to confirm to the wife’s solicitors whether the husband has complied with paragraph (a) of these terms (enclosing a copy of the husband’s letter concerned) and are to keep the wife’s solicitors regularly appraised of each payment made to them by the husband from now on, unless any such payment is not in any way connected with the December 2006 hearing.” The order stipulated that in the event of a dispute as to whether the applicant had complied with the terms of the order, the parties were at liberty to apply to the court for a determination on the matter. In making the order, the judge was mindful of the requirements of Article 6. In particular, he commented: “90. These terms are not intended to punish or penalise the husband, which would be a wrong objective ... Rather they have what I regard as the legitimate aims of trying to create a fair hearing for both parties and/or facilitating the enforcement of the court’s orders ... 91. The terms are also, in my judgment, proportionate. The link exists which [counsel for the applicant] submits is required between contempt and sanction. ‘Term (a)’ requires the husband to do no more than to attempt to comply with the orders of the court. ‘Term (b)’ seeks to moderate his ability to continue to employ a Rolls-Royce legal team whilst simultaneously failing to pay the wife any of the monies owed to her and leaving her reliant on credit in trying to achieve enforcement. 92. Only ‘term (b)’ requires the husband to find any money. It does not stop him litigating nor being legally represented. It merely creates an opportunity for the court to ensure that this wife, who is owed substantial sums, is not unduly disadvantaged in funding the litigation by reason of the husband’s wilful non-compliance with the court’s orders ... 93. If the husband complies with the above terms then he may fully participate at the hearing in December 2006. Otherwise he will be debarred from so doing.” The applicant sought leave to appeal against the order. Leave was refused on 19 July 2006. On 20 July 2006, the applicant wrote to the trustees of the IMK Family Trust purporting to comply with the conditions of the order of 9 May 2006. In his letter, he emphasised that he was “deeply unhappy at being compelled by the court to write in this manner” and that his “sole purpose in doing so is to enable me to resist strenuously the current application which my wife has made”. He confirmed that he was bound by previous findings of the court as to Mr Wani’s interest “... despite the fact that neither Mr Wani nor I agree with the findings the learned judge made and that I contend that he made an order for me to pay a sum that I cannot afford to pay”. He confirmed that he would be bound by an order made in December 2006 and continued: “I wish to give effect to any such order provided that this can be achieved without prejudicing the viability of Dianoor’s companies to trade, or prejudicing their obligations to their employees or their liabilities to their creditors.” The letter concluded by stating that the applicant would like the trustees to assist him in meeting his obligations to pay his wife the sums awarded, again provided that the money could be raised without prejudicing the viability of Dianoor’s companies to trade, or prejudicing their obligations to their employees or their liabilities to their creditors. On 31 July 2006, Mrs Mubarak applied to the court for a determination of whether the applicant had satisfied the conditions imposed. On 25 August 2006, Mr Justice Bodey found that the applicant had failed to comply adequately with the terms set out in paragraph (a) of the order. He made a further order, in the following terms: “Unless the [applicant] shall send by recorded delivery by 6p.m. on 31st August 2006 to the Trustees of the IMK Family Trust a letter in the terms of the letter attached to this order, pursuant to ... the order of 9th May 2006 he shall be debarred from participating in the substantive hearing of [Mrs Mubarak’s] applications listed for hearing on 4th December.” The attached letter reproduced almost exactly the terms of paragraphs (a) (i) to (iii) of the order of 9 May 2006. The applicant subsequently sent a letter in the ordered terms and the proceedings before the High Court took place with his participation. On 12 January 2007, Mr Justice Holman gave judgment. He refused the first two applications, namely to set aside the transfer of assets into the IMK Family Trust in 1997 and to set aside the document of exclusion in 1998 whereby Mrs Mubarak was excluded as a beneficiary of the trust. However, he granted the third application and varied the terms of the IMK Family Trust so as to require the trustee to pay Mrs Mubarak an amount equalling the balance owing under the lump sum, any arrears of periodic payments and the balance of costs still due. The applicant’s application for leave to appeal was dismissed by the Court of Appeal on 17 July 2007. Wall LJ noted that in refusing leave on the papers, Thorpe LJ had commented that: “... the application falls to be considered in the context of over 7 years of litigation, rightly described by Holman J as ‘Titanic’. The husband is and has been for years in contempt. He cynically incurs and discharges massive litigation bills with, as I infer, the intention of depriving the wife of her entitlement to independent affluence. This court should not encourage or collude in his apparent strategy.” Wall LJ later reiterated (at paragraph 31): “At this point it is, I think, necessary, and therefore needs to be stated again, that this is not a case of cannot pay; it is case of will not pay, and one of the worst of its kind.” He later added (at paragraph 34): “I remind myself that the reason for the application has been [the applicant’s] grossly contumacious refusal to pay. Had he paid, none of this would be necessary.” Mrs Mubarak then applied to the Royal Court of Jersey, where the trust was based, seeking enforcement of the order of Mr Justice Holman. On 15 August 2008, the court handed down its judgment. It noted that by that stage, some GBP 7.6 million was owed to Mrs Mubarak but concluded that it was unable to enforce the judgment of the English High Court in light of the relevant legislation in force in Jersey. However, it considered an alternative argument advanced by Mrs Mubarak that the trust could be varied by consent of all the beneficiaries, namely the applicant and the children of the marriage. The court noted that the two adult children consented to the variation in favour of Mrs Mubarak. As regards the minor and unborn children, the court approved the alteration of the trust as being to their benefit. In respect of the applicant, the court considered his letter to the trustees following the order of Mr Justice Bodey of 25 August 2006 and concluded that the letter demonstrated that the applicant had consented to the variation of the trust. It emphasised that the applicant had had a choice whether to refuse to write the letter, and thus be prevented from participating in the hearing before Mr Justice Holman, or to write the letter and thereby be able to participate in the hearing. The court noted (at paragraph 86): “It was a matter entirely for [the applicant]. He chose the latter course. He wrote the letter. He therefore obtained the advantage of appearing before Holman J and he did this by leading and junior counsel who argued strongly against the wife’s application. It is of interest that the hearing before Holman J apparently took 9 days.” The court concluded (at paragraphs 87 to 89): “The terms of the August 2006 letter are clear. The husband confirms that he is bound by the Holman order and wishes the Trustee to give effect to it, i.e. he wishes effect to be given to the alteration to the Trust made by Holman J. Is he now to be allowed to renege on that letter? We do not think so. The husband chose to write the letter and to participate in the hearing before Holman J. The whole purpose of the Hadkinson order made by Bodey J was to require the husband to agree to be bound by the outcome of the hearing before Holman J if he wished to participate. In exchange for this assurance, the husband was permitted to participate in the hearing and to seek to persuade Holman J not to accede to the wife’s application. In this respect he was successful on two of the three heads of application ... He therefore obtained a tangible advantage by agreeing to write the August 2006 letter. We strongly deprecate the idea that, having obtained this advantage, he should now be permitted to disown the August 2006 letter as, for example, he has sought to do in a recent undated letter to the Trustee indicating that he opposes the wife’s application to this Court. He has made his choice and he is bound by it. We therefore have no hesitation in finding that he should be treated as consenting to the alteration to the Trust contained in the Holman order notwithstanding his later attempt to renege. We would emphasise that our decision to treat the husband as having consented on the basis of the August 2006 letter is wholly exceptional in the light of the particular circumstances of this case. Firstly, the husband was in flagrant and longstanding contempt of the English order; but secondly and most importantly, he exercised his free will in choosing to write the letter ...” The applicant’s appeal against the Royal Court’s judgment was unsuccessful. It used to be the case in the United Kingdom that a person in contempt would not be heard, although there were certain defined exceptions. However, this rule was clarified in the case of Hadkinson v. Hadkinson [1952] P. 285, in which Lord Denning indicated that: “... It is a strong thing for a court to refuse to hear a party to a cause and it is only be justified by grave considerations of public policy. It is a step which a court will only take when the contempt itself impedes the course of justice and there is no other effective means of securing [his] compliance ... I am of the opinion that the fact that a party to a cause has disobeyed an order of the court is not, of itself, a bar to his being heard but if his disobedience is such that, so long as it continues, it impedes the course of justice in the cause by making it more difficult for the court to ascertain the truth or to enforce the orders which it may make, then the court may in its discretion refuse to hear him until the impediment is removed or good reason is shown why it should not be removed.” This approach was accepted and approved by House of Lords in X Limited v. Morgan-Grampian (Publishers) Limited [1991] 1 AC 1, in which Lord Oliver of Aylmerton stated: “... It is suggested that to decline to hear an Appellant who is in contempt infringes the maxim ‘audi alteram partem’ which lies at the route of every civilised system of law ... For my part I think this is too facile an analysis. The maxim ‘audi alteram partem’ means not that a party has an absolute right in all circumstances to be heard in his own defence, but that he must be given a proper opportunity to be heard. So long as that opportunity is given upon terms with which the proposing appellant can reasonably comply, there is not and there should not be any impediment in principle to the imposition by the court of proper conditions which require to be complied with before the appeal is heard ...” Subsequently, in Arab Monetary Fund v. Hashim (Unreported) 21st March 1997, Lord Bingham C.J. (as he then was) formulated the relevant question as follows: “... whether, in the circumstances of an individual case, the interests of justice are best served by hearing a party in contempt or by refusing to do so, always bearing in mind the paramount importance which the court must attach to the prompt and unquestioning observance of court orders.” This was approved by Lord Nicholls in the House of Lords in Polanski v. Conde Nast Publications Limited [2005] UKHL 10. As regards the implications of limitations on access to court and compliance with Article 6 of the Convention, Potter LJ indicated in Motorola Credit Corporation v. Uzan (No.2) [2004] 1 W.L.R. 113 that: “... It is clear that the right of access to the court which is implied in Article 6 is not an absolute right but one that is open to restriction provided that the restriction has a legitimate aim in the public interest and that the means employed to realise that aim are proportionate ... The test of proportionality is to be applied on a case by case basis ... As it seems to us, this is reflected in the approach of the House of Lords in X Limited v. Morgan-Grampian (Publishers) Limited ... the width of discretion there recognised being apt to allow issues of proportionality to be properly considered and applied by the court in coming to its decision whether or not to hear a contemnor.”