Minwalla v. Minwalla, [2004] EWHC 2823 (Fam.)
Mhlanga
TRUSTEES LTD
Family Division
[2004] EWHC 2823 (Fam), [2005] 1 FLR 771
HEARING-DATES: 3 December 2004
3 December 2004
CATCHWORDS:
Financial relie - Divorce - Non-disclosure - Off-shore trusts - Piercing
the veil - Effectof concealing resources - International co-operation
HEADNOTE:
The husbad and wife had been involved in a relationship for over 15 years,
and marrie for almost 10 years. There were no children of the marriage, but
the wife ha two children, aged 10 and 5 at the time the relationship began,
who ha been provided for by the husband at all times. From an early stage
the husband had paid the wife's living expenses, and provided her with a
home, cquired in the name of a Panamanian company, DM Investments SA (DM),
which te husband had set up. The husband was an international businessman,
with anumber of property interests around the world, and the family enjoyed
a extremely high standard of living. Payment for the family's persona
expenses was met through DM, whose structure was eventually revised so tha
it became a wholly owned asset of a Jersey trust. After the marriage broke
dwn the husband informed the wife that he had 'divested himself of all his
asets' and resigned from various income-generating posts. The wife applied
fo and obtained a worldwide freezing injunction, which covered a hotel in
Karchi and apartments in London, New York and Karachi, as well as what the
wife claimedwere the husband's interests in DM, and another Panamanian
company, Midfied Management SA (MM), which had been involved in the
purchase of the currnt family home. The husband's affidavits and Form E did
not set out a clear satement of his assets, but asserted that his
liabilities exceeded what asets there were. Specifically the husband denied
any interest in either of he companies, DM or MM, or in the Jersey trust.
The wife undertook a vry costly investigative process in order to gather
information about he husband's resources to put before the court. There was
evidence that th husband had attempted not only to conceal his resources,
but also to takesteps to remove his assets from the jurisdiction. The
husband had als instituted separate proceedings against the wife in
Pakistan, and thretened to do so in a number of other forums, in relation
to the worldwide frezing order. The court found that the husband had a
fortune of, at a minimum US$25m, and in all probability considerably more.
The court also foundthat the husband had total control over both companies,
and over the Jersy trust.
Held - awarding the wife £ 4,185,000, to include a contingent sm of
£ 500,000 to cover actual and threatened litigation initiated by the usband
in various jurisdictions -
(1) The husband's stance in relation tothe court, and to the wife's claim,
had been wilfully contemptuous of his oligation to make full, frank and
clear disclosure in the proceedings. While he suppression of assets was not
behaviour that of itself enhanced an award,the non-disclosing spouse was
vulnerable to adverse inferences being drawn aginst him. In this case the
court readily concluded that the husband had availble to him ample
resources with which to satisfy an award at or aboutthe level sought by the
wife (see para [45]).
(2) Where it appeared tat an off-shore trust had been woven together to
create a shroud designedto bury the husband's resources from view, but the
husband himself piered that veil as and when it suited him, a court
exercising the ancillary reief jurisdiction would strain to see through the
smoke and would set the structure aside so as to treat the reources as
wholly his. This was what the parties, trustees and directors concrned
should expect where fairness to both spouses depended so crucially onan
accurate understanding of the realities of each party's economy (see par
[1]).
(3) The shelter provided by sophisticated off-shore arrangements was
ependent upon there being properly constituted corporate and trust
structues in place; and there being a level of competence and of formality
in the roduction of minutes of board meetings, powers of attorney etc, wit
supporting evidence for the proposition that proper consideration had ben
given by the trustees to the exercise of their discretionary powers (ee
para [51]).
(4) The Jersey trust was a sham, in that the husband had ever had the
slightest intention of respecting even the formalities o the trust and
corporate structures that had been set up at his direction. is purpose was
only to set up a screen to shield his resources from other claim or
unwelcome scrutiny and investigation. The trustees had been prepared t go
along almost totally passively with the way in which the husband anaged the
trust. The assets of the trust, namely the shares in both companie, vested
in the husband as their true and sole owner (see paras [57], [58], [60]).
(5) Letters of request addressed to the Jersey courts had been used during
the cse, which had proved an efficacious and comparatively inexpensive
methd of extracting necessary information concerning off-shore trusts where
he settlor or beneficiary was unwilling to provide relevant information. It
ws important for English courts and lawyers to bear well in mind that such
asistance as letters of request could provide must be sought in accordance
withthe formal requirements of the Hague Convention of 18 March 1970 on the
Takng of Evidence Abroad in Civil or Commercial Matters, which required, i
the case of Jersey, that they be sent to Her Majesty's Attorney General for
Jersey, not direct to residents of the island or to pulic authorities there
(see paras [97], [98]).
NOTES:
Statutory provision considered
Matrimonial Causes Act 1973, ss 25, 31(2)(d)
Hague Convetion of 18 March 1970 on the Taking of Evidence Abroad in Civil
or Commerial Matters
CASES-REF-TO:
A v A (Maintenance Pending Suit: Provision or Legal Fees) [2001] 1 WLR 605,
[2001] 1 FLR 377, FD
Al-Khatib v Msry [2001] EWHC 108 (Fam), [2002] 1 FLR 1053, FD
Baker v Baker [1995] 2 FL 829, CA
G v G (Maintenance Pending Suit: Costs) [2002] EWHC 306 (Fam), [203] 2 FLR
71, FD
Hitch v Stone (Inspector of Taxes) [2001] EWCA Civ 63, [200] STC 214, CA
J v V (Disclosure: Offshore Corporations) [2003] EWHC 3110 (Fam), [2004] 1
FR 1042, FD
Midland Bank plc v Wyatt [1995] 1 FLR 696, ChD
Snook v Lodon and West Riding Investments Ltd [1967] 2 QB 786, [1967] 2 WLR
110, [1967] 1 All ER 518, CA
Tilley v Tilley (1980) Fam Law 89, CA
Westbuy v Sampson [2001] EWCA Civ 407, [2002] 1 FLR 166, CA
COUNSEL:
Martin Poiner QC and Geoffrey Kingscote for the petitioner; The first
respondent wasneither present nor represented; Marcia Shekerdemian for the
second, third and fourth respondents participated only in relation to costs
issues affcting those parties, but did not attend the substance of the
hearing
JDGMENT-READ:
Cur adv vult
PANEL: Singer J
JUDGMENTBY-1: SINGER J:
JUDGMEN-1:
SINGER J:
[1] This judgment on a wife's ancillary relief claim touchesupon a number
of matters which are of importance in cases where the question is not merely
the quantum of the award, but where there are isses as to the scale of
resources. The first is the approach that the cour should adopt where it
finds (as I do here in relation to Darayus Cyrus Minwlla, familiarly known
as Happy Minwalla, the husband) that a party has st out to conceal
resources and obstruct proper investigation of their finanial affairs, a
subject only recently considered by Coleridge J in J v V(Disclosure:
Offshore Corporations) [2003] EWHC 3110 (Fam), [2004] 1 FLR 1042at [127]
and [130]. Secondly, the virtue of international co-operation in theinvestigative process where the finances under review are conducted behnd a
web of off-shore structures. Thirdly, the approach which those involved
should expect of the court where it appears that an off-shore trust with its
professional trustees and ssociated companies with their sometimes cipher
directors have been oven together to create a shroud that is designed to
bury the husband's rsources from view. Should the court respect the legal
structure of that scren? Or, if it becomes apparent that the husband
himself pierces theveil as and when it suits him, should the trustees and
directors be surprisd that a court exercising the ancillary relief
jurisdiction will strain to ee through the smoke and will set the structure
aside so as to treat te resources as wholly his? For that is what he and
they should expect where airness to both spouses depends so crucially on an
accurate understanding (ollowing what should be clear and accurate
disclosure) of the realities o each party's economy.
[2] The wife (W as I will call her) is 55. In 195, when she was but 35, she
was widowed. With her late husband she had two chldren, X and L, who are
now aged 29 and 24 respectively, but were then ony 10 and 5. In 1986 she
met and began a relationship with the husband (H). H is now aged 61, and
was then 42. At that juncture he was still married to his third wife, D. By
his first marriae the husband has one surviving son, F, who is 39. By his
second marriagehe has a son, T, who is 24. It would appear that at the time
of the commenement of the relationship between the husband and the wife,
his marriage tohis third wife was continuing (although manifestly it was in
difficulies). When the parties met, the husband had one son with her, J,
who is now 19. In 1990 they had a second son together, HO who is now 13.
[3] Nevertheless there was sufficient solidity in th relationship between H
and W for him, soon after they met, to buy ahouse in Friern Barnet for
occupation by W and her two children. That proprty, it is agreed, was
acquired in the name of a Panamanian company called D Investments SA
(hereafter DM) that had been set up by the husband in Februar 1985. There
is a suggestion by H that at the same time as DM was formed a trst was set
up in Jersey to hold the shares of the company. No documenttion at all in
relation to that suggested structure has been produced and i may well be
that none survives, if indeed there is any truth in the sugestion. It is
not disputed that in 1986 at the time that DM acquired the hose in Friern
Barnet, the company was acting under H's direction and control, nd that
that continued to be the position at the time when the trust tht came to
hold the shares was established (in July 1998: see below). Frm 1986 W and
her two children have been dependants of H. The house in Frien Barnet was
their family home in the UK. (It was not their only home for as I will
explain, H is an international businessman and the life that the prties led
was cosmopolitan.) In 1991 the parties moved their London resience from
Friern Barnet to a house in The Bishops Avenue in northwest London.By this
time, it would appear, the failing marriage between H and his thir wife had
come to an end. In September 1992 they went through a divorce procss in the
Dominican Republic.
[4] On 4 May 1994 these parties were marriedin Manhattan. That civil
ceremony was followed by a Zoroastrian ceremony in June 1994 in London. At
some point ater that ceremony it came to H's attention that the divorce
proceedings tht he and D had undergone in the Dominican Republic may not
have been vaid; and so she and he went through a further set of divorce
proceedings n New York, culminating in a decree on 10 March 1995. To tie
their knot securely, H and W were re-married at a civi ceremony in London
on 18 November 1995.
[5] I am satisfied (indeed it is sarcely disputed) that during the period
from the commencement of the paties' relationship until at least 2000 H had
diverse business intersts that enabled the family to enjoy a comfortable,
if not opulent, lifesyle. From 1967 he had been responsible for the
management of the Hotel Meropole in Karachi, erected by his late father in
about 1950. From 1971 Hhas been employed as the local manager for Cathay
Pacific in Pakistan and n Afghanistan. From 1988 to 2001 H was an
Ambassador at Large for Pakistan,with a seat in the Cabinet of the
Government of that country. H is the prprietor of a travel agency called
'Trade Wind Associates', which operats in the USA, Canada and the UK. He
has a number of property interests aroundthe world. The parties divided
their time between Karachi, London and New Yok (maintaining separate
establishments in each city). They have employed ermanent staff in all
three properties. W deposes, and I accept, that their huses were furnished
to a high standard and housed valuable antiques. As sh states, 'we have
never wanted for anything' [B138]. And I do not doubt tht while the
marriage subsisted, H was a generous provider. They travelledwidely (always
first class or business class) and stayed in the best hotels
[6] Payment for their personal expenses was met through DM. The allowance
tat H made to W was paid by a monthly cheque drawn on an account in the
nme of DM.
[7] In 1998 the structure under which DM was held was revised. n 1 July
1998 the Fountain Trust (FT) was formally created. At inception he original
settled property was £ 500 and the only named beneficiary is a chrity. The
trust was set up in Jersey. Once that was done, DM became a wholl owned
asset of the trust.
[8] In 2000 the London base was changed. Te house at The Bishops Avenue was
sold and (soon after) the parties movd into an apartment in Portland Place,
W1. Just as with The Bishops Avenue, etensive refurbishment was carried
out, at a cost of £ 200,000 or thereabouts.The conveyancing file has been
the subject of production procedures. Theoriginal negotiations for the
purchase of the apartment were carried out in 's name. However, it
transpired that the flat was already owned by a Panamanin special purpose
company called Midfield Management SA (MM). This affored the opportunity
for acquisition without payment of stamp duty. The purchase was completed,
therefore, by transer of the shares in MM. These shares were acquired by
FT. The funding for th purchase came as to £ 300,000 from moneys within DM
that H diverted to FT an a mortgage of £ 500,000 from Standard Chartered
Bank; though that mortgage was soon afterwards reduced by £ 200,000 which
as also derived from DM.
[9] In September 2003, for reasons that are not elevant to this judgment,
the marriage between the parties broke down. I record that there had been an
earlier period of strain when in (it seems likely) the pring of 1998 H
discovered that W had (as in her evidence to me she accepte) for some
months (and mainly in absentia and by correspondence) conducted n affair. W
suffered an acute sense of guilt and shame and offered to leave teir
marriage and abandon his support if that was what he required. She saysthat
he accepted her promise to cut off all contact with the man concerned nd
wished to mend their relationship. She says she believed that they wathered
this squall and that she was committed to the continuance of their mariage,
until the events (about the detail of which I have heard no evidenc) which
led to her decision in September 2003 to bring the marriage to an en. I
note that H was opposed to the divorce until the day before I pronounced
ecree nisi, and did not raise the allegation of adultery until his mot
recent affidavit which arrived with W's advisers on the eve of this hearing.
I have heard evidence from W about this issue to satisfy myself (as she has)
that there is in currnt circumstances no prospect of any relationship
rekindling betweenW and this other man such as might impact upon the
outcome of W's financialclaims.
[10] W has remained from the time of that separation living in theapartment
at Portland Place. H has not returned there and latterly has made hs own
base at the apartment in Karachi.
[11] The parties remained in dialgue both by email and by telephone. W
tells me (and I accept) that orallyH told her that he had 'divested himself
of all his assets'; that he had resigned from his position 'as consultant'
with DM and that payment of the household bills by that compan would cease;
and that he had resigned from his position at Cathay Pacific. O 11 December
2003 H sent an email to W in which he stated that he had given up his main
income stream fro Cathay Pacific and would wind up the few things they had
asked him to do in he next month or so. He wrote that he was handing over
his US business, Trae Winds and the Hotel Metropole to his sister, Mitzie.
On 27 December 2003 Hwrote again to W. He asserted that his arrangement
with DM had been that hisposition was merely that of a consultant, and that
he had now resigned. He caimed that he owed DM several hundred thousand
dollars. The bills for utilites at Portland Place, he said, would no longer
be discharged by the company. e said that two bank guarantees that had been
issued by Standard Charterd were secured against the Portland Place
apartment; that he did not have funs to meet the liabilities secured by
those guarantees, and implied that te Bank would impose a sale of the flat.
(I interpolate here that it was untru that the guarantees were secured
against the flat.) Both letters also conveyd the message that H was
contemplating suicide. By mid-January 2004 letters ariving at the London
flat illustrated that the arrangements H had made fr payment of the
household bills had indeed been terminated: the correspondnce showed that
all the direct debits against the DM bank account had been ancelled.
[12] All these gloomy hints, threats and prognostications jarred, rom W's
perception, with the financial history of their married life; and se
reckoned that they were the initiation of a programme of suppression of H'strue fortune, designed to minimise her financial claim against him. On 16
anuary 2004, therefore, W made application, without notice, to Munby J fora worldwide freezing injunction. The injunction that was granted froe H's
resources up to £ 4m, including in particular the Hotel Metropole i
Karachi, and the three apartments in New York, London and Karachi, a well
as what were said to be H's interests in DM and in MM. The order contaied a
conventional requirement for H to disclose all his assets by affidavi
within 7 days. H thereafter made two affidavits: on 23 January 2004 he
puported to set out his means and on 30 January 2004 he made an affidavitanswering the allegations that had been made against him by W in support of
her injunction appication. Neither affidavit condescended to a net
summation of his assets, though the list of liabilities set out in hs
statement of means on 23 January 2004 was extensive. It is plai that H was
describing his financial situation as parlous. (Later, in his Frm E, he
maintained that his liabilities exceeded his assets by some £ 40,000, a
figure revised in his final affidavit to a deficit approachig £ 4m.)
Furthermore, he denied any beneficial interest in DM or in MM or in T. H
claimed that he no longer had a mandate over the DM bank account, nd so
could not obtain bank statements. As is now known (and as I am vry
satisfied and will so find), that was all untrue. He asserted that he wasneither a shareholder, nor director, nor in possession of any beneficial
iterest in either company; that he was not a trustee, nor a beneficiary o
FT; that he had been the protector of that Trust, but 'only for a short
tim'. (That too was untrue.)
[13] H also asserted that his marriage to Whad not been valid, on account
of the allegedly ineffectual divorce proceedins that had taken place
between him and D in the Dominican Republic. He revealed that he had on 25
November 2003 instituted proceedins in New York to annul the parties'
marriage.
[14] Those were the rival contntions of the parties when the case came
before me on 2 February 2004. At tha hearing I continued the freezing
injunction. I made directions for a haring to take place on 14 June 2004
that should address the questions of th validity of the marriage and of
forum conveniens; and of disclosure, including any application that might be
made for inspection appointmentsor for letters of request and for the
hearing of W's application for maintenace pending suit. So there was set in
train the investigative process that it as been necessary for W to
undertake at length and at great cost (her coss estimate to date is of the
order of £ 400,000 of which she has so fr been able to pay only £ 28,000 on
account) in order to garner sufficientinformation to enable her and the
court to perceive but a shadowy thogh not (I am sure) the full picture, of
the resources that should realisticaly and properly be regarded as
available to H.
[15] Thus it has bee necessary for W to address two questionnaires to H.
Neither has he answerd satisfactorily. She has had to seek the issue of
three sets of leters of request addressed to CI Law Trustees Ltd (CI), the
professional trutee company in Jersey which supplies the trustees of FT and
the directors of DM and of MM; and further letters of requestdirected to
Standard Chartered Bank in Jersey. In order to obtain intelligile
information about what had been happening in Jersey, it was necessay for
there to be a 2-day hearing in Jersey, at which W was represented y Mr
Kingscote, her junior counsel in this case. She has had to apply for
insection appointments against Standard Chartered Bank and EFG Bank in
London; ad against the conveyancing solicitors who acted for H on the
purchas of The White House. A great deal of the historical information that
feature in this judgment is the product of that endeavour. It is conclusive
of thereality to which I aspire in my appreciation of H's dealings with the
asses of this so-called trust and its supposedly creature companies that in
the curse of the evidence that was given in Jersey they were vividly
described b the Jersey-based trust operative and director of both DM and MM
as H's 'prsonal fiefdom'. That same evidence is utterly damning of H's
integrity i these proceedings, and convincingly destructive of the
deceptive presenation he has attempted to foist on W and on the court.
[16] As the process as developed, the volume of information concerning H's
affairs has increased,and with it more details of the steps that he was
taking ahead of, at thetime of, and from the breakdown of the marriage all
of which were designed, a I find, to reduce or to eliminate successful
enforcement of any award infavour of W on her ancillary relief claim. It is
no exaggeration to descrie H's stance in relation to the court and to W's
claim as wilfully contempuous of his obligation to make full, frank and
clear disclosure in these proeedings so that the overall objective of
fairness to both parties can be facilitated.
[17] It is now apparent, therefore, that, as erly as March 2003 H had begun
the process of re-arrangement of his banking fcilities. The main bankers to
DM were Standard Chartered Bank. Thecustomer relationship manager there (as
he is termed) was Mr Robert Mitchel. He left Standard Chartered Bank and
went to join EFG Bank, which is a Swis bank with offices in London and in
Guernsey. Records produced by the EFG Bak pursuant to letters of request
directed to them in Guernsey show that as ealy as 11 April 2003 [CC380] H
was making arrangements to open a new accoun with that bank in Guernsey. No
doubt Mr Mitchell was keen on behalf f his new employers to attract
business; but, equally, I have no dout, H perceived that DM was an entity
too closely for comfort associated withhim and that its resources might be
vulnerable to attack either in these proeedings (which, by then, he may
well have contemplated) or in other ways. A ittle later, in January 2004, H
is recorded as saying to Mr Rayment a Standard Chartered Bank that 'too
many people know about DM Investments' [S25].
[18] Certainly it is the case that, as soon as the marriage broke dow in
September 2003, H swung into action. On 22 September 2003 he instructed
tandard Chartered Bank, the main bankers of DM, not to send any further
mail o Portland Place (the address that had until then been their mailing
reference) [O289]. The same day he instructed StandardChartered to send
US$500,000 from the DM account in Jersey to EFG Private ank [S237]. He also
instructed Standard Chartered to close one of the dolla accounts that it
maintained in the name of DM and send the whole of the oney to the EFG
Bank. On 25 November 2003 H began proceedings in New York,by which he
sought a decree of nullity in respect of the parties' marriage. H relied
upon the probable invalidity of the divorce proceedings that had takn place
in the Dominican Republic between himself and D as rendering nullthe
initial two ceremonies between himself and W; and thereby characterised is
relationship with W as bigamous. He cynically chose to ignore th fact that
there had been subsequent divorce proceedings between himsel and D and a
further ceremony of marriage between himself and W which was,on any view,
valid if their earlier marriage ceremonies were ineffective.
19] At the same time H developed further his relationship with EFG and the
nw financial structure he was forging with them. Thus, on 3 October 2003 a
newservice company called Jealott Investments Ltd was incorporated at the
diretion of H in Panama. Mr Pointer QC submits, and I accept, that the
purpose ofthis company was to replace the historic investment function for
which in part, DM had been used. On 18 December 2003 H caused to be
incorporate a further service company called Aviation International
Consulting Ltd, nother Panamanian company. Mr Pointer again submits, and I
accept, that the purpose of this company was to perform te second of the
two functions that had until then been carried out by DM, nmely to receive
the commission payments earned by H through his contracts wth Cathay
Pacific and Rolls-Royce, to which I refer below. At H's dirction both
companies opened bank accounts with EFG Bank. By 24 Deember 2003 H was
giving instructions to EFG that he wished to wind-up its banking
arrangemnts with DM (now that he had the two new companies and their
accounts wit EFG in place). An internal memo from Mr Mitchell of that date
records that 'the clent does want this account to be closed a.s.a.p. I know
it could be a nuisace ... I understand the client's desire to wind the
companies affairs up vey urgently' [CC171]. That cryptic note by Mr
Mitchell reflects the burgeonig desire of H to distance himself from that
company and its resourcs. On 12 January 2004 H purported to resign from the
board of KarachiProperties Investment Co Ltd: the company that owns the
valuable MetropoleHotel in Karachi. By mid-January 2004 H had applied to
Standard Chartered to borrow a frther sum of £ 300,000 against the security
of the apartment in Portland Plac. He had, as I find, no need for those
funds. His object was to reduce te equity in the London property, where W
was living and against which her caim for a property transfer order was
directed. That request was not processd, because W had registered her
rights of occupation. Between June 200 and January 2004 H also cashed in a
series of four Norwich Union policie for, in aggregate, about £ 216,000.
The money from those policies has been xpended by H and is no longer
available to this court.
[20] I have recordedhow on 16 January 2004 Munby J granted a freezing
injunction, which was coninued by me with slight adjustments on 2 February
2004. H paid scant regard o those injunctions.
[21] It is plain from the EFG Bank documentation [CC133 that by early March
2004 H was talking in terms of selling the New York fat. Indeed, by the
time of the hearing before me in June 2004 W had been ableto obtain
particulars from the agents instructed by H in New York, demonstratng that
he had been actively marketing that flat.
[22] It also has only rcently become apparent from the EFG Bank
documentation that in January 2004H had given instructions for the
encashment of two investment bonds, one withNorwich Union and one with
Prudential that were worth together about S$750,000. The EFG and the
Standard Chartered documents show that H was aamant that the bonds should
be cashed, even though there was a not insignifcant financial penalty for
early surrender. H's directions were that the moey should be placed into an
account in his sole name. This was in direct breach of the orders that had
been madeon 16 January and 2 February 2004. Standard Chartered Bank, who
had been gven notice of the order of 16 January 2004, regarded that order
as inhibiing the transaction that H was proposing. It appears that on 16
January 2004H gave instructions to Standard Chartered to send all the
investments held i two accounts in the name of DM to the EFG Private Bank
in Guernsey. Mr Poiner submits, and I accept that it is probable, that
those instructions were isued by H in reaction to the injunction that had
been granted by Munby J on te same day. Because the bank was given notice
of the order that had beenmade, they did not implement the instructions.
This led, ultimately, to a trt email from Robert Mitchell to a
representative of Standard Chartered Bak on 30 January. It recorded that
the bank's principal (obviously a referene to H) had been expecting the
transfer and was most concerned that it had not taken place. It asserted
that at the time that instrutions had been given to Standard Chartered,
that bank had not had notice of he injunction; and that Standard Chartered
had failed to act upon the instrucions promptly; it sought confirmation
that at the time the instructions were given the assets were 'free to
transfer' and demanded to know when Standard Chartered had received notice
of the inunction.
[23] On 22 January 2004 W received a letter that purported to cme from the
directors of MM in Jersey. The letter stated that the directorsof DM had
given notice to MM terminating the licence in favour of DM to ocupy the
apartment at Portland Place with effect from 31 March 2004; that,
ccordingly, W was obliged to vacate the apartment and were she not to do o
by that date she would be in illegal occupation, and steps would be taken o
evict her. When W, through her solicitors, protested about this letter, H
caimed, through his solicitors [E32] that he had had nothing to do with it.
Wen, in August 2004 Nicholas Morgan the nominee director of DM came to give
evdence in response to the letters of request issued in this court, he ws
asked about that correspondence by Mr Kingscote. It is plain from that
vidence that H was 'pushing' for possession proceedings to be instituted
aganst W. The letter of 22 January was undoubtedly the product of a
dialogue beween H, the nominee directors of DM and their London solicitors.
Not only wasthe denial in the letter of 26 January untrue, on 11 March 2004
the idential threat was repeated in another letter from the nominee
director of MM.
[4] The next manoeuvre by H was to attempt to argue that the funds still
held t Standard Chartered Bank in Jersey were not caught by the injunctions
of 6 January and 2 February 2004, on the ground that he had no beneficial
intrest in FT or the two companies DM and MM. His vehicle for this argument
ws, again, Nicholas Morgan of CI, the corporate trustee of FT. What
happend was that on 5 February 2004 Standard Chartered Bank in Jersey wrote
o Mr Morgan at CI, drawing attention to the fact that they had receivd
notice of the freezing injunction. By return of fax on the same day the
comliance officer at CI replied that Mr Minwalla was not a beneficiary of
FT. That letter was reinforced y a letter from Mr Morgan on 17 February
2004. By that letter he asseted that the original injunction of 16 January
2004 had been discharged on2 February 2004. He neglected to explain that
the order of 2 February 204 made a fresh freezing injunction in like terms.
The letter went on to say:
'... DM Investments SA and Midfield Management SA are bot companies that
are owned by the Trustees of the Fountain Trust and no by Mr Minwalla
personally. We further reiterate that Mr Minwalla has not een appointed as
a beneficiary of the Trust. In such circumstances if you coninue to treat
the accounts of the above companies as frozen until furthe notice, the
Trustees of the Fountain Trust and the above companies themselves must
reserve their position and shall look to yur bank to recover any loss or
damage suffered by the same as a result ofyour actions. In the
circumstances we should be grateful to receive your ugent confirmation that
you will reconsider your position and cease to freze the relevant accounts
relating to the above companies.'
[25] The lettr also pressed the bank to effect the transfer of securities
to the EFG Bank ie to carry through the transaction to which I have
referred above. A further letter in the same vein was written on 2 March
2004 reiterating the same threat. Fortunately, Standard Chartered reacted in
a commendably responsible way to that letter from Mr Morgan. They stated:
'If, as you are suggesting, Mr Minwalla has no interest in these companies
or in Fountain Trust, it seems bizarre that they are expressly mentioned in
the 2 February order ...'
[26] It is apparent that the bank had taken the trouble to read in full the
order of 2 February, and it had observed that, notwithstanding the
blandishments and the blusters of Mr Morgan, the freezing injunction had
been continued.
[27] It is unsurprising that Standard Chartered were bemused by the
proposition that H had and has no interest in FT or in DM or in MM. On 16
December 2002 CI had written a letter to Standard Chartered in Jersey that
was headed the Fountain Trust, and continued [T131]:
'We have introduced the above Trust to you for the purpose of opening a bank
account and can confirm the following:
- We are satisfied as to the integrity and standing of Darayus Happy
Minwalla, who is the Settlor and Principal Beneficiary of the above-named
Discretionary Trust.
- We shall notify the Bank immediately of any changes to the Principal
Beneficiary or Authorised Signatory.
- The structure of the above-named Discretionary Trust follows our standard
form of Trust Deed.'
[28] CI's reference on that letter commences NSTCM, the distinctive initials
borne by Mr Morgan.
[29] I struggle to see how Mr Morgan could have written such contradictory
letters. I remind myself that I have not heard Mr Morgan give evidence in
this case; though I do have the advantage that I have been able to read (and
have indeed with mounting disquiet and astonishment read) the 126-page
transcript of the evidence that he gave to the Royal Court in Jersey on 25
and 26 August 2004, and more recently on 19 November. I am satisfied that
the letters from Mr Morgan in February and in March 2004 were utterly
inappropriate given what emerges from his evidence as to his own state of
mind concerning H's dealings by that time. I have no doubt that the letters
were written by him under pressure from H, who was determined to shift his
assets, so far as possible, out of DM to the new vehicles that he had
constituted across the water in Guernsey. But (unless there is some very
cogent explanation for his conduct) that does not warrant Mr Morgan writing
letters that were quite at variance with the December 2002 letter that he
had written and with the reality in respect of the trust and the two
companies, as he himself knew it to be and as his evidence in August 2004
exemplified.
[30] On 27 May 2004, shortly before the hearing that had by then been fixed
for 14 June 2004, a deed of appointment was executed relating to FT
[BBi112]. This deed purported to add H's four sons as beneficiaries of the
trust. There is no doubt that this step was taken at the instigation of H.
In his evidence in Jersey, Mr Morgan accepted that this action was taken 'in
the context of the matrimonial proceedings' [AA107]. I find that this was
another attempt by H to impede the ancillary relief claim by W. In a letter
to W's solicitors dated and received by fax today H asserts: 'I am passing
on [an injunction I made on 1 December to preserve funds in accounts in
Jersey] to the beneficiaries of FT, who will no doubt be appealing and
filing for amendment of the same'. Similar injunctions have been in place
since before the date of that deed and no application to set aside or vary
has been made on their behalf, or seeking to be heard in relation to what
has from the outset been W's case: that the paraphernalia of the trust and
of the company structures are a sham, and that their assets have never in
any real sense belonged to anyone other than H.
[31] In June 2004 the case came before me to deal with the various matters
stood over from February. In order to dispose of H's unattractive plea of
bigamy in response to her petition, W proposed to amend her petition to
plead in the alternative the third (civil) ceremony that she had undergone
with H at the Westminster Register Office, which post-dated the second
divorce between H and his third wife. It was impossible for Mr Moor QC, then
representing H, to resist that method of clearing the logjam that H had
created, and so I gave directions that led to pronouncement by me of decree
nisi the following day, 15 June 2004. I amended the order for maintenance
pending suit from the £ 24,000 pa that had been fixed on 2 February 2004 to
the more realistic level of £ 40,000 pa (given that W was now having to meet
all the running costs of the apartment in Portland Place). I also made an
order for maintenance pending suit for costs, in accordance with the now
established practice in cases such as this: see A v A (Maintenance Pending
Suit: Provision for Legal Fees) [2001] 1 WLR 605, [2001] 1 FLR 377 and G v G
(Maintenance Pending Suit: Costs) [2002] EWHC 306 (Fam), [2003] 2 FLR 71. I
made orders joining as parties to these proceedings CI as trustees of FT, DM
and MM. I made directions for the issue of letters of request directed to
Nicholas Morgan and Conrad Whitehead, the nominee directors of the two
companies and the managers of FT; and for an inspection appointment directed
to Standard Chartered Bank.
[32] I am satisfied that H realised that the inevitable consequence of the
issue of the letters of request would be the revelation of documentation
demonstrating, as W was asserting, that H was indeed the true beneficial
owner of FT and of the two companies. It is apparent to me that following
that hearing on 15 June 2004 H embarked upon a programme of withdrawal from
the proceedings in the UK and from the UK itself. Following that hearing
(apart from one matter to which I refer below) he ceased to instruct counsel
who had been acting for him in the case, Philip Moor QC and Justin Warshaw.
He did not attend the FDR on 22 July 2004, where he was represented by his
solicitor alone. He dispensed with the services of those solicitors in
September 2004. He paid not a penny in respect of the order of maintenance
pending suit for costs. In respect of the general maintenance, he paid
£ 3,250 in June 2004: he has paid nothing since. It would also appear that
at about the same time he decided that he would no longer actively
participate in an arbitration with Rotary Watches Ltd in which (via one of
his commercial enterprises) he was involved.
[33] Before he in effect distanced himself from this investigation in the
way that has since become apparent, H gave instructions to Mr Warshaw to
settle a notice of appeal against the order for maintenance pending suit
that had been made on 15 June. That was lodged on 29 June 2004 and led, in
due course, to an oral hearing for permission to appeal (with appeal to
follow if granted) on 3 November 2004. Mr Pointer submits, and I accept,
that H had no real intention of participating in that appeal (or even of
paying under the order were the appeal to be dismissed): but that instead
his sole purpose was to cause W to incur considerable extra legal costs in
dealing with that appeal.
[34] It is plain, however, that H has kept abreast and to some extent ahead
of the steps that W has been taking to try and discover the truth about his
financial affairs. I have little doubt but that he has learned of her
attempted pursuit of the funds held by DM at Standard Chartered Bank and,
latterly, at EFG Private Bank in Guernsey. The order for letters of request
made on 15 June led to the production by Mr Morgan of a bundle of documents
pertaining to DM and MM; and the inspection appointment against Standard
Chartered Bank revealed (a fact until then unknown to W) the transmission of
funds to EFG Bank. That new information led, after the FDR on 22 July 2004,
to a broadening of the freezing injunction and to other investigatory
directions. Documents very recently produced by EFG Bank show that in
September 2004 H was taking steps to shift funds originating from DM, but by
then transferred to Jealott Investments Ltd, from EFG Bank in Guernsey to a
new company and a new bank, namely BMM Holdings (which is probably a Dubai
limited liability company) at ABN Amro in Dubai.
[35] As has been described, W has been compelled to undertake a tortuous and
costly process to try to ascertain as much as she has of the truth of H's
financial affairs. By far and away the major and certainly the primary
responsibility for this rests with H, whose duty it was to set out his
financial circumstances in a full, frank and clear manner; and I conclude
from what I have seen that his stance stems from his sense of affront at
what he perceives to be the temerity of W in bringing these divorce
proceedings and financial claims against him. I find that he continues to be
driven by ill will towards W, and is determined to cause her to incur
significant legal costs not only in pursuing her claim against him, but in
dealing with proceedings that he has set in train against her and (as seems
likely) with others which he threatens to foment in a number of
jurisdictions and at the suit (in name) of a variety of entities he controls
or influences.
[36] First, at the hearing on 14 and 15 June 2004, my attention was drawn to
a proposed redevelopment of the Hotel Metropole in Karachi which, it was
being suggested by Mr Pointer for W, was being undertaken at H's direction.
I was shown a substantial glossy brochure that had been prepared by a firm
of developers, incorporating a series of financial projections. The response
from Mr Moor (then appearing for H, and no doubt relaying his instructions)
was a simulacrum of what appeared soon after in H's textual answers to an
outstanding questionnaire, namely:
'Karachi Properties [the owner of the hotel] commissioned the report based
on a potential investor from Singapore in 1997 or 1998. The plan was
scrapped as it was impracticable. There are no other proposals for the
development of this site, save as is already stated, demolition and
commissioning into a parking lot/marriage hall.'
[37] Nevertheless, on 4 August 2004 a firm of advocates in Karachi were
writing to W, through her solicitors, suggesting that the injunctions that
had been granted on 16 January 2004 and which have continued throughout this
case had precluded the redevelopment of the Metropole Hotel which, the
letter stated, was 'in the process of transformation from an hotel to a
shopping mall and commercial centre'. It was alleged that the freezing
injunction had inhibited the progress of that development, and that the
company had suffered a loss of £ 19m. That letter has been followed with the
issue of proceedings by Karachi Properties on 11 October 2004 in the High
Court of Sindh. I have been shown the copy of the claim in those
proceedings. The claim, astonishingly, relies upon the contents of the
self-same brochure which was produced to me on 14/15 June 2004, and which H
alleged related to a dead-letter project long since abandoned. The company
alleges that that very project (in the statement of claim it is termed the
company's 'mega project') had been embarked upon, but had now become
frustrated because of the freezing injunction made in these divorce
proceedings. The analysis is that because of the freezing injunction
Standard Chartered Bank have called in a guarantee of US$223,000, secured
(it is said) on certain saving certificates that belong to H. Even assuming
(though there is no concrete evidence to demonstrate it) that the guarantee
issued by Standard Chartered Bank to support a borrowing of Karachi
Properties may have been called in, I reject the assertion that the freezing
injunction granted by this court has in some way impeded the development.
The scale of the resources truly available to H personally or through his
various service companies is such that he could readily have replaced the
guarantee or the security in the sum of US$223,000 (or even the larger
figure of US$300,000 that is referred to in the bank's own documentation).
Secondly, were it demonstrably the case that the freezing injunction made in
this court were in some way inhibiting the progress of the redevelopment of
the hotel, application could (and no doubt would) have been made to this
court to vary the injunction. But what is significant for present purposes
is that the newly launched litigation in Karachi against W is, first,
entirely at variance with the presentation that was being made by H in these
proceedings in June and July 2004 as to the use to which the Hotel Metropole
was going to be put; and, secondly, is, as I find, undoubtedly instigated by
H in order to subject W to yet further pressure and expense. She has had to
fund representation in Karachi at the so far modest cost of £ 500 and has
been given the (I venture to think optimistic) augury that the case may be
ground to a satisfactory conclusion for the expenditure of only a further
like sum. The litigation in Sindh is brought in the name of the company. I
am satisfied, however, that the proceedings would not have started without
not merely the imprimatur of H, but also his impetus and his animus.
[38] Secondly, as I have already recorded, H ignored that part of the
freezing injunction that prohibited him from disposing of his New York
apartment. He seeks to place responsibility for the marketing and attempted
sale of this property on the Habib Bank in New York which, he says, has
security over it for money that it has lent to one of H's businesses, Trade
Wind Associates Inc. As recently as 7 September 2004 H has been writing
threatening yet further litigation against W. He wrote as follows:
'I do intend to make your client fully responsible for my having lost this
property to the Bank and will be claiming separately from her the market
value of the property and all losses that I have incurred in the USA as a
result of the freezing injunction.'
[39] I recall that on 15 June 2004 there was before the court an application
by H to vary the freezing injunction of 2 February 2004 so as to permit the
sale by H of the New York flat. I was not satisfied from the exiguous
evidence that H had chosen to place before me that the sale of that flat was
necessary, nor that the bank was genuinely pressing for its realisation. I
did not dismiss the application, but instead adjourned it, giving H the
facility to restore the matter before the court, should there indeed be
evidence of the nature that his counsel on his behalf was suggesting H would
be able to produce. He has chosen not to restore it. I conclude that this
threatened further litigation against W is another illustration of his
determination to pressurise W, both financially and psychologically.
[40] It does not stop there. In his latest affidavit H, at paras 3 (headed
'Harassment' - ie of him by her) and 8, threatens to unleash a barrage of
litigation against W once these proceedings have been concluded. The tone of
his threats can be read if there is any need to remove doubt about the
extent of his animosity towards W and the lengths to which it may indeed
carry him. The institution already of the Karachi litigation supports the
conclusion that from H such threats are real. This aspect of the case will
find reflection in my award.
[41] H has not participated in this trial. I am fully satisfied that that
results from tactical decision on his part rather than any inhibiting
incapacity. On 8 November 2004 I considered an application that H had made
in writing for this trial to be adjourned. He protested that his health was
not good and that the trial should be adjourned until he might be better.
There was no medical evidence in support of that ground for his application.
He said, secondly, that he had insufficient funds to pay his lawyers, and
that he had a pending application for Legal Aid which he hoped would be
successful, and that the trial should be adjourned until the application had
been determined. I refused to accede to the application to adjourn.
[42] On the day of the trial H sent by fax to the court a letter dated 22
November 2004. The letter stated that on Saturday 20 November 2004 'a cyst
in [his] skull was ruptured' and that he was undergoing essential surgery on
23 November 2004. W cast doubt on the truth of this assertion. She produced
a copy of an invitation to a reception, a significant social event that H
was hosting at his apartment in Karachi on the evening of Sunday 21 November
2004, the eve of the first day fixed for this hearing. She reported to me
that that reception had taken place, and had been attended by H who was in
apparent good health. Although W's account had come from someone else, who
was present at the party, and is thus only indirect evidence of what
occurred, I regard it as more likely accurate than the assertion of ill
health coming from H, which, I was satisfied, was merely his latest attempt
to derail these proceedings.
[43] On day 2 of the trial, a medical report was faxed to W's solicitors'
offices and brought to court. This stated that a sebaceous cyst had been
operated upon. It was not materially more informative as to H's health and
his ability (even if he had been willing) to attend this trial.
[44] On resuming this hearing on 29 November I was handed faxes sent by H
complaining he had had inadequate notice, by post alone, of the relevant
hearing dates. I reject his assertions and accept the assurance of W's
solicitors that before each relevant letter was posted it was faxed to H's
fax machine at the Karachi flat to and from which communication has been
satisfactorily conducted hitherto. H's blusters that the progress of these
proceedings before me these last 2 weeks violates his rights to a fair trial
are just empty wind.
[45] As is already apparent from this judgment thus far, I am far from
persuaded that H has made proper disclosure of his financial resources in
this case. He has set out at every juncture to obstruct W's investigation of
his financial affairs. He has, I find, concealed resources, and has been
taking steps throughout the pendency of these proceedings to put them beyond
the reach of this court and of any enforcement process that W may be minded
to pursue against him, whether in this country or elsewhere. In J v V
(Disclosure: Offshore Corporations) [2003] EWHC 3110 (Fam), [2004] 1 FLR
1042, to which I referred at the start of this judgment, Coleridge J
condemned the all-too frequent practice of attempting to conceal resources
behind the screen of off-shore structures and identified the costs
consequences that would flow from such litigation conduct. I agree entirely
with each of those observations. The suppression of assets is not of course
behaviour that of itself enhances an award. But the non-disclosing spouse
does make himself vulnerable to adverse inferences being drawn against him,
in accordance with the well-established line of authorities recording that
principle, of which Baker v Baker [1995] 2 FLR 829 was a useful example. In
this case, given the relative modesty of the claim that is advanced by W in
the context of the standard of living enjoyed by the parties during the
marriage, I readily conclude that H has available to him ample resources
with which to satisfy an award at or about that level.
[46] Nevertheless, it is of course appropriate that I should examine (so far
as I can despite his lies and obfuscations) what are the actual resources of
H in order that the probable scale of his fortune may be understood, against
which I can then measure the claim by W and the award that I have in mind to
make.
The Fountain Trust
[47] I reject completely the multiple assertions by H that he has no
beneficial interest in this trust. There are in the complex and voluminous
documentation amassed in the preparation of this case a number of examples
of documents (letters, but notably also periodic wealth statements prepared
by H) which proclaim that FT is his, and incorporate values for it and the
companies in the presentation of his wealth and income. Such assertions are
supported rather than belied by the way in which he has operated the assets
(including the companies) of this supposed trust with utter disregard for
any but his own wishes, decision-making and - in short - total control.
[48] But there is more to it than that, were that not enough. Among the
documents produced by Nicholas Morgan pursuant to the letters of request
that were issued in June 2004 are two letters of wishes, both signed by H.
These bear identical dates of 22 September 1998. However, they incorporate
different directions. One provides that during H's lifetime he is to be
considered the principal beneficiary of the trust. It provides that in the
event of H's death W is to be consulted as to investment matters and as to
the distribution of the trust fund; and that in the event of his death
one-third of the fund was to belong to W absolutely; that W should be
permitted to occupy any property in which she may be resident at the date of
H's death; and that the other two thirds of the fund were to pass to H's
four sons. The other letter omits any reference to H as the principal
beneficiary. It provides that in the event of H's death the whole of the
funds within the trust are to go to H's sons. There is no third document
indicating that one or other of the two contemporaneous letters of wishes
should take priority, or the circumstances in which one rather than the
other should (subject always to their discretion, theoretically at least)
guide or influence the trustees.
[49] The circumstances in which there came to be two divergent
contemporaneous letters of wishes were the subject of inquiry in the second
round of letters of request that were issued in July 2004. A set of answers
in writing was supplied shortly ahead of the hearing that took place in
Jersey on 25 August 2004. The answers comprised (just as if in answer to a
questionnaire) a text and accompanying documentation. Behind the
documentation was enclosed what was plainly an earlier draft of the textual
answers. The draft document [V119] itself showed that it had been
transmitted by fax from H's fax number in Karachi. Unsurprisingly W's
solicitors asked the solicitors for the trustees to confirm that H was the
author of the draft document. The trustees' solicitors refused to answer and
demanded the return of the draft, suggesting it was privileged. W's
solicitors did not concede the claim of privilege. As is now plain the
document was indeed a communication between H and Mr Morgan, and Mr Pointer
contends that no question of litigation privilege can properly be
maintained. The point was never pursued. However, the explanation given in
the draft text and reproduced in the final text was that the letter of
wishes under which W was a beneficiary was merely an initial draft that had
been prepared by the trustees and despatched to H for his consideration. The
other letter of wishes was said to have been prepared by H in response to
the trustees' draft and was sent by him to the trustees: he having decided,
it was said, to exclude W on account of her affair. I reject that
explanation. There is no material to support the proposition that any draft
letter of wishes was ever sent by Mr Morgan to H. There is no evidence of
any dialogue between H and Mr Morgan concerning the change in H's plan or
his reasons for the exclusion of himself (as principal beneficiary) and W
from the 'second' letter. There is no document produced from Mr Morgan's
file to demonstrate how or why it was that one letter or the other was to be
regarded as having priority. Furthermore, in correspondence passing between
W's solicitors in London and the trustees' solicitors in London, it was
suggested on behalf of the trustees that while it was true that the draft
set of answers had come from H in Karachi, that had been in response to an
earlier draft set of answers that had been despatched from Jersey to Karachi
for consideration by H. The problem with that explanation is that while this
correspondence was being exchanged, Mr Morgan was being examined by Mr
Kingscote before the Royal Court in Jersey. The transcript of that
examination records Mr Morgan as acknowledging that the set of draft answers
had originated from H and not from his firm.
[50] Mr Pointer submits that the only sensible reason to have two
inconsistent signed contemporaneous letters of wishes is to enable the
dishonest selection of one or other letter to meet the circumstances in
which the letter may have to be produced or otherwise relied upon. Thus, in
the context of divorce proceedings, H, if obliged to produce a letter, would
produce the one that excluded W. For other purposes, he would produce the
alternative. In the absence of any overarching letter of stage 1 wishes
containing further instructions as to which of the stage 2 letters is
effective in what circumstances it is difficult to conceive what other
explanation there can be. Mr Morgan accepted that for a trustee to hold on
file or in its safe two such letters is, in what seems to be his very
extensive experience, unique. I would hope so.
[51] The nature and structure of sophisticated off-shore arrangements such
as have been deployed by H is well understood in this Division. No doubt the
professional advisers and trustees of wealthy individuals wish honestly to
strive to construct a network of interwoven trusts and companies able
successfully to withstand the scrutiny of the internal revenue services of
the parts of the world relevant to the interested parties. That shelter is
dependent upon there being properly constituted corporate and trust
structures in place; and there being a level of competence and of formality
in the production of minutes of board meetings, powers of attorney and so
on. There must also be supporting evidence (if and when questions arise
which must be answered) for the proposition that proper consideration has
been given by the trustees to the exercise of their discretionary powers.
Two divergent letters of wishes do not fit anywhere into such a structure. I
do not see how any professional trustee can properly have in his possession
two such contemporaneous documents without there being the clearest
instructions in writing as to which prevails.
[52] I would have no hesitation in concluding that H should in his lifetime
be regarded as the owner of FT. If bounty from the trust reaches other
individuals it does so as H's gift or to meet his requirements, rather than
as the result of any exercise of trustees' discretion independently
exercised. The resources within FT have been and (insofar as they still
remain there) remain available to him, at any rate in the sense in which
resources are appraised under the Matrimonial Causes Act 1973, s 25(2)(a).
[53] However, Mr Pointer invites me to go further than that. He submits that
I should find that FT is a sham. It is, in reality, no more than a piece of
paper utilised by H as a fiscal and/or financial screen. In this connection
I have been referred to a number of authorities on this topic. Some of the
earlier cases, including in particular some observations of Diplock LJ in
Snook v London and West Riding Investments Ltd [1967] 2 QB 786 suggest that
in order for the court to conclude that a document or transaction is a sham,
it is necessary that all the parties to it must have a common intention that
the 'documents are not intended to create the legal rights and obligations
which they give the appearance of creating'. However, in Midland Bank plc v
Wyatt [1995] 1 FLR 696 at 699 DEM Young QC sitting as a deputy judge of the
High Court held, as to that principle:
'... I do not understand Diplock LJ's observations regarding the requirement
that all the parties to a sham must have a common interest to be a necessary
requirement in respect of all sham transactions. I consider a sham
transaction will still remain a sham transaction even if one of the parties
to it merely went along with the shammer not either knowing or caring about
what he or she was signing. Such a person would still be a party to the sham
and could not rely on any principle of estoppel such as was the case in
Snook, the defendant there not being a party to the transaction at all.'
[54] Support for that analysis can be gleaned from the judgment of Arden LJ
In Hitch v Stone (Inspector of Taxes) [2001] EWCA Civ 63, [2001] STC 214 in
which she said at 234 'in my judgment, the law does not require that in
every situation every party to the actual document should be a party to the
sham'. I have also read a lucid and scholarly paper on the topic of sham
trusts written in 2004 by Stuart Pryke, a member of the specialist Bar, in
which he refers to and analyses what appear to be the most relevant
authorities.1 In that paper he concludes:
'In order for a trust to be found to be a sham, both of the parties to the
establishment of the trust (that is to say the settlor and the trustees in
the usual case) must intend not to act on the terms of the trust deed.
Alternatively in the case where one party intends not to act on the terms of
the trust deed, the other party must at least be prepared to go along with
the intentions of the shammer neither knowing or caring about what they are
signing or the transactions they are carrying out.'
[55] That seems to me to by a fair analysis of the current state of the law,
and I adopt it.
[56] What are the factors here that support the proposition that the trust
is a front, and that H, at least, had no intention of treating it as such?
First, the assets of the trust comprise only the shares in DM and the shares
in MM. As to the former, it is clear that H has treated the bank accounts of
DM as if they were his own. He has caused to be paid into them the funds to
which he was entitled under his various consultancy agreements with Cathay
Pacific. He has withdrawn money from those accounts as if it were his own.
No formal trading accounts for DM have been drawn up, at least since the
execution of the trust deed in 1998. Transfers have been made from DM to MM,
without any accounting ever being undertaken between the two companies.
Transfers have been made from DM to Jealott Investments Ltd, as if the money
were H's own funds to move around as he chose, which is precisely as he has
always regarded them, a practice from which the trustees/directors have been
unwilling or unable to restrain him. The documents to which I have referred
above show that H was planning to wind up DM (because too many people knew
about it). Plainly, there would have been no accounting between him and DM,
or Jealott and DM, or MM and DM, were DM to have been wound up. MM was a
vehicle acquired simply to own his matrimonial home. Expenditure on it was
met from the DM account. Again, no trading accounts have ever been drawn up.
H's presentation in this case has been that he had a consultancy agreement
with DM. No such document has ever been produced. Mr Morgan was never aware
that there was one. It is true that at certain stages Mr Morgan took the
trouble to draw up powers of attorney in favour of H, in order to permit him
to utilise the company's bank accounts. But that was an empty and in any
event inconsistent and ineffective formality: window-dressing, it might
fairly be called, or going through some of the motions. The last such power
of attorney expired in June 2003. That did not prevent H continuing to use
the bank accounts as if they were his own: he remained a signatory on those
accounts, and the mandate did not change until after the freezing injunction
was made in January 2004. In his testimony in Jersey Mr Morgan conceded in
answer to questions from Mr Kingscote that DM was in truth H's alter ego;
that H had total investment control over that company and, in Mr Morgan's
own words, H treated DM as his own 'personal fiefdom' [AA51]. Not only had
Mr Morgan never seen any consultancy agreement between H and DM, he had not
until this summer seen any of DM's bank accounts, and could not be sure at
which banks accounts were operative. He was until shortly before he gave
evidence in July wholly ignorant about a series of three agreements between
Cathay and DM concluded as long ago as May 2001 under which DM would receive
up to a total of US$4,750,000 in one-off fees contingent upon securing
certain deals, plus an annual fee income until April 2006 of US$850,000.
[57] I have, therefore, no hesitation in coming to the conclusion that H
never had the slightest intention of respecting even the formalities of the
trust and corporate structures that had been set up at his direction. His
purpose was only to set up a screen to shield his resources from other
claims or unwelcome scrutiny and investigation. In most cases where
off-shore structures are put in place the primary objective is fiscal, and
for all I know such considerations here played their part. But in this case,
where H has already been through three divorces, it may well be that he was
keen to shield his resources from matrimonial claims as well. Undoubtedly,
H's intention always was that the resources were his and would continue to
be his.
[58] I conclude also that the trustees were privy to the sham, at least in
the sense that they went along with the intentions of H. In this regard I
have observed that the trustees were willing to go along with all of H's
actions and did not, from what has been shown to me, attempt at any stage to
rein him in. There is support for this interpretation from the evidence
given by Mr Morgan in Jersey. In the course of that testimony he said that
'I believe he [H] is the protector of the trust - and, as such, he is
effectively the client' [AA106]. Mr Morgan also observed that he had
regarded H as 'de facto principal beneficiary' [AA114]. When dealing with
the letters of wishes Mr Morgan was at pains to emphasise that letters of
wishes are precatory only and he said that 'where you have a settlor
situation, a letter of wishes is for guidance only and the settlor can
verbally or in writing give different wishes at any stage' [AA115]. He went
on to say that a letter of wishes 'could be changed yesterday; it could be
changed tomorrow' [AA113]. That was troubling evidence. It, of course,
provokes the question whether or not what H says in the second letter of
wishes had in fact been backdated; and I have given due consideration to
that possibility. However, I have rejected the evidence that the 'second'
letter of wishes was a refinement of the first draft. And I adhere to the
conclusion voiced above that these letters were both deliberately produced
at the same time: a time when, according to W's evidence about his reaction
to discovery of her affair and her offer to depart the marriage if that was
what he required, he seemed anxious that on the contrary the marriage should
be saved, which she thought was what they set about achieving. That analysis
serves too to confirm me in the view that this was not and was never
intended by H to be a properly managed and independent trust; but was
instead simply an extension of H himself. I conclude, on the material to
which I have referred, that the CI were certainly prepared to go along
almost totally passively with the way in which H made plain he intended to
manage and was managing this trust.
[59] I should record here that in the latter stages of CI's relationship
with H, some suggestion was being made that H and they should part company.
The reason for this appears to have been that the regulatory requirements
for the management of off-shore companies and trusts in Jersey have become
more restrictive; and that Mr Morgan was keen, therefore, to see that proper
trading accounts for DM at least were drawn up. He was (for the reasons I
have indicated) entirely dependent upon H for the information necessary to
have such accounts prepared; and H was not prepared to supply that
information to him. Thus it was that Mr Morgan was contemplating an exit
strategy for his firm; but in the event that never occurred. This late
development in the relationship between H and CI cannot, in my judgment,
operate to undermine the conclusion that I have reached on the other
material, namely that this trust is a sham. Indeed, it serves to reinforce
it.
[60] The result of my findings as to the status of the trust will be that
the assets of the trust, namely the shares in DM and in MM, vest in H, as
their true and sole owner. It is necessary, therefore, that I should
consider what assets remain within those companies and potentially available
for the purposes of assessing this ancillary relief claim, and to meet it.
DM Investments SA
[61] Assessing the true value of the assets within this company is a
Sisyphean labour. H has never revealed the assets of the company. His
presentation has been that he owes the company several hundred thousand
pounds, but that it is otherwise nothing to do with him. Nicholas Morgan was
required under the letters of request to furnish a schedule of assets, but,
notwithstanding that he is on paper a director of the company, he has failed
to do so: saying that only H has the necessary information. Whenever W has
seemed to be approaching what appear to be funds available to meet her
claim, they have in the main been removed elsewhere.
(i) The combination of the inspection appointment against Standard Chartered
Bank in London and the letters of request to Standard Chartered's Jersey
offshoot has revealed a series of accounts at that bank which hold in
aggregate about £ 1.15m. However, that sum is vulnerable to reduction on
account of three guarantees that Standard Chartered had issued at the
request of H, two in connection with the Rotary Watches arbitration
amounting to £ 337,500 and a third in support of an account in Karachi for
the benefit of the Hotel Metropole in the sum of US$300,000. The aggregate
of £ 500,000 may, therefore, be called in and reduce that cash of £ 1.15m to
about £ 650,000.
(ii) There are the proceeds of the two investment bonds that in February
2004 H was attempting to surrender and to transmit to the EFG Bank in
Guernsey. The bonds were surrendered, but, because of the freezing
injunction the current net proceeds of about US$800,000 are (subject to a
little doubt in the light of some evidence given by Mr Morgan in Jersey on
the 19 November 2004) held by Mr Morgan's firm in Jersey. At the present
depressed value of the dollar that approximates to only about £ 420,000.
(iii) There should also be the sum of US$500,000 that at the time of the
breakdown of this marriage H sent from Jersey to EFG Bank in Guernsey.
However, it is likely that that is part of the money that has now been sent
on by H from Guernsey to Dubai. Properly, that money belongs to DM: but it
is doubtful whether it will find its way back to that company.
(iv) The company technically enjoys the benefit of certain contracts that H
has negotiated with Cathay Pacific. Under those contracts DM was due to
receive US$4.7m as commissions under a series of transactions that were due
to take place between May 2001 and June 2003. I am satisfied that those
commissions have been paid, but to what extent they are now represented in
the resources I have been describing above, it is difficult to say. In
addition, there is a rolling contract under which Cathay is due to pay to DM
US$850,000 pa. I have little doubt but that in the context of this divorce H
has redirected those payments from Cathay, almost certainly to his new
service vehicle, Aviation International Consulting Ltd.
Midfield Management SA and the Portland Place flat
[62] In this case it has been H's presentation that the Portland Place
apartment is not his. In correspondence his solicitors wrote on his
instructions that he 'knows nothing about the actions of MM ... it is an
entirely independent legal entity in which he has no interest whatsoever'.
On 8 September 2004 H wrote to Sheridans (his erstwhile commercial
solicitors in London) stating that 'the property ... is not my matrimonial
home, it is not my property and I am not the beneficiary of the trust that
owns the property. You are, therefore, trying to take a charge over a
property in which I have no personal interest'. In answers to questionnaire
H even went so far [F204] as to state that, as well as not having anything
to do with the decision-making, he does not know who the directors of MM
are. I have already rejected the assertions by H that FT, DM and MM are
properly to be regarded as independent legal entities. The conclusion that I
have already expressed is supported by H's own presentations both to his
bankers and to Mr Morgan. Thus, in a letter dated 27 February 2002 [L96], H
wrote to Mr Morgan, saying as follows:
'I am enclosing herewith an updated net worth statement of myself as the
sole beneficiary of the Trust and as promised also give you a bird's eye
view of the last year's activities and income source. Midfield Management
was purchased with the sole aim of owning flat no 2, 55 Portland Place and
this was completed on 17 October 2001. I have full possession of the
property and am in occupation of the same.'
[63] The value of this apartment is agreed on the face of the parties' Forms
E at £ 1.1m. More recently, W has gained sight of a valuation of the
property at £ 1,050,000, obtained for lender security purposes last
December, no doubt in connection with H's unsuccessful attempt to raise a
further £ 300,000 to reduce the available equity. I shall take the property
to be worth the lower figure as does Mr Pointer's final schedule, because in
it he makes no allowance for the notional costs of sale, usually taken as 3%
including VAT, which near enough removes the differential. It remains
subject to the balance under the original mortgage with Standard Chartered
Bank, standing at £ 300,000. Secondly, it has become subject during the
course of these proceedings to a charging order in favour of Sheridans. As
is already recorded, they instituted proceedings against H for fees owing to
them in the sum of £ 162,053. H did not defend the claim. Judgment was
entered on 2 July 2004 in the sum of £ 177,953 (a figure that included
interest and fixed costs). On 9 August 2004 Sheridans obtained a charging
order nisi alleging (entirely in parallel with what W has been saying in
this case) that H is the true beneficial owner of the property. Accordingly,
if I make an order for transfer of the shares in MM and/or the property
itself to W, she will take the property subject to both those charges. For I
have, pending delivery of this judgment, made the charging order absolute
once those acting for FT, DM and MM had (having considered an earlier draft
of this judgment upon the status of the trust) abandoned the stance that H
was not the true owner of the apartment.
[64] After recording the principal identifiable assets of H, the task
becomes significantly more demanding. W has pointed to a series of assets
that she says are the property of H: but he has not co-operated in the
investigative process, and, as I have already found, has obstructed the
inquiry at every turn.
Hotel Metropole
[65] Historically this was an important building in Karachi. The original
hotel was opened by the late Shah of Iran in 1950. It occupies a large site
comprising a whole block in the heart of Karachi. The site is owned by
Karachi Properties Investment Co Ltd. Until the doubtful letter of
resignation at the time these divorce proceedings began, H was the chief
executive of this company. Of the 4,900 issued shares at least 2,000 are
registered in H's name. W says that she believes that H owns 58% of the
company [B5]. I have no particular reason to doubt her evidence. H claims
that whatever shares may be registered in his name, they are held in trust
for his children. He has produced a form of Pakistani trust deed that he
says was drawn up in 1994, and under which he holds the shares in that
company on trust for three of his sons, F, J and H. However, the validity of
that trust is open to doubt. W has conducted investigations in Pakistan. It
transpires that under Pakistani law it is probably necessary for a trust
such as this to be formally registered. Inquiries have shown that this trust
is not registered. In any case all the documentary material that has been
unearthed by W relating to this hotel indicates that H does indeed have a
beneficial interest in it of at least 50%. In all the bankers' material,
including the statements of net worth to which I refer below, the hotel is
treated by H as his. In September 2003 H is recorded as having told Standard
Chartered Bank that he was going to sell the hotel for US$10m, of which
US$5m would go to him. When H began to divert his banking arrangements to
EFG Bank he informed them that he owned the hotel [DD208]. There are two
documents in the bundle which give an indication of what may be the value of
the site. The first is the development report that I have mentioned above,
which puts a value on the site of (the Pakistani rupee equivalent of)
£ 7.5m. The second is a valuation that H produced in the course of his
answers to questionnaire, which gave a value of about £ 7.3m. Of course, the
claim that has been brought against W in the High Court in Karachi indicates
that the value of the property with its redevelopment potential is very
significantly greater, for otherwise a claim for as much as £ 33m could not
have been formulated. I conclude that H is beneficially entitled to not less
than 50% of the value of the hotel and that the figure of £ 7.5m is the
absolute minimum for its worth.
EFG Bank
(i) Funds have been diverted from Standard Chartered to EFG Bank. The
benefits of the contracts with Cathay Pacific have been diverted from DM to
Jealott Investments and have, I conclude, found their way into the EFG Bank.
What remains there has not been ascertained.
(ii) Some of the accounts at EFG Bank are in the name of Jealott Investments
and Aviation International Consultants. These accounts are run by and for
the benefit of H in the same way that the accounts of DM were.
Aviation Services Ltd
[66] This company is (it is agreed) the general sales agent for Cathay
Pacific. H has claimed in these proceedings that he has no interest in the
company. In answer to the direct question what is his association with the
company, he answered merely that he is neither a shareholder nor a director.
However, W holds 619,150 shares in the company. In her oral evidence to me
she explained that she had not realised that shares had been placed in her
name; and that it must have been done by H. She tells me that Aviation
Services Ltd generates substantial income for H. She tells me that the paper
shareholdings disguise the true beneficial ownership of the company. (The
majority of the other shares are registered in the name of H's son F.) I am
satisfied on the evidence I have seen that on the balance of probabilities H
is the true underlying beneficial owner of this company, and that it
generates significant income for him from its agency with Cathay Pacific.
Trade Wind Associates Inc
[67] This is the travel agency business that operates in North America, of
which H owns 50%. Until recently this generated an income for H of
US$250,000 pa. H has claimed, during the course of these proceedings, that
the company has fallen on hard times, is losing money and that its bankers
are therefore seeking to recover his flat in New York, which is security for
the business's borrowings. No up-to-date financial material in respect of
Trade Wind Associates has been forthcoming, nor its sister company Trade
Wind Associates Canada Inc.
[68] There is a series of other companies that have been identified in the
course of the case with which H has some connexion and in most cases, I am
satisfied either a partial or the whole beneficial interest, but about which
the information is sparse.
[69] Trade Wind Associates (UK) Ltd is said by H to be dormant, but there is
no proper material to demonstrate that. Trade Wind Gulf Aviation Ltd is said
by H to be closed but that too has not been corroborated. There are sister
companies in Pakistan and in Dubai, but H has provided no information about
them at all. Rotary Watches (USA) Inc I accept can be regarded as having no
value, together with its associated company Import Export Inc, in the light
of the unsuccessful arbitration. Alongside Karachi Properties Investment Co
Ltd stands Hotel Metropole Ltd, which is said to be the company that manages
the hotel from that site. H acknowledges that he has a 35% interest (at
least) in this company, but there is no material upon which those shares can
be valued. There is a series of companies that bear H's familiar name of
Happy. These are Happy Associates Ltd, Happy Development Corporation Ltd and
Happy Trading Corporation Ltd. Again, there is no information that allows me
to ascribe any proper value to these companies. There are two companies that
are apparently concerned with freight: Freight Systems Pakistan LLC and
Strategic Freight Systems Ltd (which is said to be a subsidiary of Freight
Systems LLC). Again, the material concerning these companies is completely
inadequate. There is a property owning company in Pakistan called Properties
Services Ltd, in which H has either one-third or a 25% share. Again, it is
not possible to assess the value of that interest. There is a relatively new
company that has been created by H called Al-Abda Pakistan Ltd. I have no
more material about that company. I have recorded above that H has caused
the formation of Jealott Investments Ltd and Aviation International
Consultancy Ltd as his personal service companies. Given that he has not
even revealed the existence of these companies to the court, he has,
unsurprisingly, not provided any information as to what assets they contain.
The bank documents show that he is the 100% beneficial owner of those two
companies. It is also apparent that H has set up a further company called
BMM Investments Ltd as an additional service company into which he has
transferred money.
[70] I need to address two other factors that may bear upon H's financial
circumstances.
Rotary Watches arbitration
[71] H set up a company called Rotary Watches Inc. He has asserted a 75%
interest in the company. This company obtained the franchise for
distribution of Rotary watches in the USA. The agreement was terminated by
the UK parent, Rotary Watches Ltd, in about 1998. The US company made a
claim against the UK company for alleged wrongful termination of the
distribution agreement. The UK company counterclaimed. A commercial silk was
appointed arbitrator. The proceedings took a very long time. Each side
incurred substantial legal costs. H's company was required to provide
security for costs in the sum of £ 609,000. Of that sum either £ 272,500 or
£ 350,000 (the position is unclear) was evidently covered by an insurance
policy. The balance of £ 337,500 was secured by two guarantees given by
Standard Chartered Bank. Those London guarantees were themselves secured on
cash held by DM in Jersey. It would appear that H agreed to indemnify
Sheridans, the London solicitors acting on behalf of Rotary Watches (US) Inc
in relation to the costs of the arbitration [E326/J231].
[72] In June 2004, after H had decided to withdraw from all litigation in
the UK, he was sued by Sheridans for the balance then owing to them in fees,
namely £ 162,053. The claim was issued on 15 June 2004. Judgment was entered
on 2 July 2004. It is suggested that there is a further balance due of
£ 228,611 [E451] but it has also been confirmed that recovery thereof will
not be sought against the Portland Place property.
Jersey police
[73] A letter from Jersey police dated 19 May 2004 [E272] records that the
police are interested in a series of transactions on the bank account of DM,
namely the receipt of sums from Cathay Pacific amounting to US$4.85m in 2002
and 2003, and a number of smaller payments out. H has recently suggested
that this interest by the Jersey police was provoked by W securing a
freezing injunction [E463]. In fact the Standard Chartered documents show
that the initial report was made by CI Law Trustees Ltd. Documentary
evidence has been produced to me which demonstrates that the money that was
paid to H by Cathay Pacific was being paid pursuant to a legitimate
commercial contract. His function under the contract was to negotiate the
sale of a number of aircraft to Pakistan International Airways. The
material, so far as it goes, that I have read does not suggest that there
was anything tainted about those transactions.
[74] Arriving at a precise arithmetical conclusion as to what may be the
overall fortune of H is, therefore, a task that has been frustrated by H's
dishonest presentation of his financial affairs. Should I then derive
guidance from the presentations that H has made to his own bankers? The
letter of 22 February 2002 to Mr Morgan to which I have made reference above
included with it a statement of net worth. Oddly, when the letter itself was
produced by Mr Morgan in July 2004, the net worth statement was not
included, and W's solicitors had to press for it. The document purported to
summarise H's financial affairs as at 31 December 2001, and gave his total
net worth at US$19,580,000. A later net worth statement was elicited from
Standard Chartered Bank, dated 31 December 2002. That put H's net fortune at
US$24m. The most recent presentations in papers from EFG Bank suggest that
he may be worth US$28m. When I consider the financial presentations as at
December 2001 and December 2002, I have to bear in mind that since those
dates H has suffered the adverse outcome of the arbitration proceedings
concerning Rotary Watches, so that the value ascribed to Rotary Watches USA
Inc is to be regarded as lost, along with such legal costs and securities as
H has himself been obliged to put up. On the other hand, I remind myself
that the litigation was being conducted not in H's personal name, but in the
name of the United States Corporation, so that any liability for damages
rests with that business and not with H. Moreover, insofar as he has made
himself responsible for loans to the company or in respect of arbitration
costs, it would be wrong to ignore the fact that he may have recourse as to
25% against the other beneficial shareholder in Rotary.
[75] But as against that, the significant contracts with Cathay Pacific and
Rolls-Royce have been generating funds for H since the date of the earliest
of the statements of net worth referred to above. There are other
indications in the documents produced by EFG Bank that H's fortune may be
considerably more. There is a manuscript note which suggests that US$25m is
being transmitted from Canada to the Bank of Punjab. There are references in
both the EFG papers and in the documents produced by Mr Morgan that indicate
that there may be bank accounts in Switzerland either at UBS or at Lloyds
TSB or both. In the documents produced by Standard Chartered Bank is
evidence that H transferred US$750,000 to a company called Leetonia
Properties [O99, O117]. In his evidence in Jersey, Mr Morgan suggested that
a company bearing that name had been set up by him just before the purchase
of the apartment in Portland Place with the intention that it would be used
to hold that property; but that, in the event, the shares in MM were
acquired instead, so that the company was no longer used. That appears to be
gainsaid by the Standard Chartered documents. It is also suggested in the
EFG documents that H is the owner of the site of the Hyatt Regency Hotel in
Karachi; and there are queries from W as to whether or not H owns a property
in Texas and, maybe, another property in London.
[76] In the absence of supporting evidence I apply the same principle of
disbelief to other areas of H's assertions during these proceedings, and,
when it has suited him, outside them. I, therefore, conclude that I should
make no allowance for the possibility that H might be garaging funds for
others in DM. It is all too easy a suggestion to make. It is true that CI
became concerned at the regulatory implications of H's assertions to them on
this topic and, therefore, sought corroboration and greater detail (without
great success). H has produced nothing tangible to support the assertion
that some of the funds from time to time sheltered in DM were moneys he had
allowed friends, business associates or relatives to park there to
accommodate their own personal needs for fiscal, financial or familial
invisibility. Yet today H has sent a fax to W's solicitors, commenting in
relation to an injunction I authorised on 1 December (designed to preserve
the funds in Jersey intact): 'I am passing [the injunction] on to the third
parties whose funds have been blocked in the account of DM, so they may send
their affidavits directly to the court and to you for the release of their
funds, as these assets are neither part of any assets of mine or part of the
matrimonial proceedings'. The funds in question have been blocked for
months, and, therefore, one wonders why it is at this juncture only, when
(as the letter makes clear) H erroneously believes 'the hearings ... are
over' that such claims are to be pursued.
[77] Nor do I, without firm evidence, credit H's claim that his business
associate and relative Mr Bamboat of Dubai has on the strength of a series
of IOUs promising repayment by the end of the year lent him £ 73,500 which
he has disbursed direct to firms of lawyers. There is no evidence to
demonstrate the source of the money Mr Bamboat laid out in these
transactions.
[78] In the end, I am driven to conclude that H's fortune must be measured
as having a minimum worth of US$25m; and in all probability considerably
more.
[79] So far as W is concerned, she has net debts of about £ 45,000. She has
in the course of the hearing ascertained that there are £ 3,500 of service
charge arrears unpaid on Portland Place. (She may have an interest jointly
with H in two small funds in the USA which I will transfer to her upon the
basis that any value she achieves will be offset against H's total
liabilities under my order, but is likely that they will not long be
available to her or have any material value when she comes to investigate
them.)
Income
[80] H's presentation in this case has been that his total income is a
consultancy fee of US$48,000 pa from Cathay Pacific. He has asserted that he
retired from his former position at Cathay Pacific in 2002 and that his
contract with Cathay Pacific is limited to that consultancy agreement. The
documents obtained by W have demonstrated the falsity of that presentation.
H has a continuing right under the contract of 1 May 2001 with Cathay
Pacific to US$850,000 pa (albeit diverted by him into one of his service
companies). The documents from EFG Bank show that he has a rolling contract
with Rolls-Royce for the maintenance of aero engines under which the fee to
which he is entitled is US$500,000 pa. Through Aviation Services Ltd H has
the benefit of the sales agency contracts for Pakistan, Afghanistan and the
Central Asian republics. H undoubtedly was able to draw an income from Trade
Wind Associates Inc at the rate of US$250,000 pa; and I am sure that that
income can and will be restored once this case is over. On that footing, H's
income should be taking at a minimum of US$1,650,000 pa. My sense is that he
should be regarded as having an income of the order of £ 1m pa, on which,
because of his diversion of that income to his off-shore entities, he pays
at most negligible tax. His presentation to his banks of his living expenses
puts them no higher than about US$300,000 pa. So the surplus that he
generates each year is substantial. On one view, the figures that I have
taken for H's income are modest. The documentation produced by his bankers
shows that H has been presenting his income to them as ranging from £ 1.4m
to US$4.1m pa in the last 4 years.
[81] For her part, W has an interest in a modest business in Karachi called
AM Flowers. This is involved in the importation of flowers from Dubai and
from Thailand for sale in Karachi. The business has struggled due to the
absence of W in London during the course of these proceedings and also, she
says (and I accept), because of pressure that H, in Karachi, has brought to
bear upon W's business partner. She tells me that it could generate a small
income for her, were she able to go to Karachi and apply herself to it. I am
satisfied that, having regard to the history of this relationship, W should
not, at her age, be subject to any obligation to generate any income of
substance. It was H's desire, if not requirement, during the marriage that
she should not work, but be dependent wholly upon him. Now his assertions
that it is a veritable and inexhaustible goldmine for her lack credibility
as much as do many of his other uncorroborated utterances.
[82] Inevitably, the focus of this judgment has been upon the financial
circumstances of the parties, and H in particular, but it is important that
I should not overlook the other criteria that are set out in the Matrimonial
Causes Act 1973, s 25.
Needs and obligations
[83] W needs accommodation for herself. She resides at present in the
Portland Place apartment and, although she can foresee a time when she may
wish to move to another property, she would wish to remain there for the
foreseeable future. The remaining lease is not long, and she would like to
have the funds to buy an extension to take the lease beyond 2035. I have
taken the property to be worth £ 1,050,000 net of notional sale costs, but
the charges upon it (the mortgage of £ 300,000 and the charging order in
favour of Sheridans) reduce its net value to about £ 570,000. To purchase a
lease extension would cost, probably, £ 460,000 when I make an allowance for
associated costs. The resultant value of the property would hopefully be no
less than £ 1.55m to justify the purchase. That will be a matter for her. In
order to place W in that position it would be necessary to direct the
transfer to her of that apartment, and to require H to pay a lump sum to
discharge the indebtedness secured on it as well as to fund the acquisition
of the lease extension. In aggregate the sum required amounts to £ 940,000.
Is this an unreasonable aspiration? When I survey the probable true scale of
H's resources, and the standard of living that was enjoyed by the parties
during the marriage, for W to have about £ 1.5m for her housing requirement
in London does not seem to me to be excessive, though I shall consider it in
conjunction with the balance of her claim below. I appreciate that a time
may well arrive when W could decide to move somewhere less extensive than
this 2,500 square foot flat, at which point she will release free capital
(in all likelihood) and may reduce some elements of her expenditure (for
instance in relation to service charges). These considerations do not
persuade me that it would be unfair for her to have such a degree of
flexibility and self-determination after a relationship and marriage such as
these parties have had.
[84] In the course of this case, W has had to sell her Mercedes car and some
of her jewellery and borrow money from her children and others (some
£ 45,000) in order to maintain herself. She needs, therefore, funds for a
replacement car. She seeks the price of a Mercedes C320, which is about
£ 30,000. She needs to pay off the service charge arrears.
[85] H has stated that his intention is to reside in Karachi. He retains a
large apartment there, where he is supported by seven staff. He has a
continuing obligation to maintain his minor son, HO, who lives in the USA
with his mother, D. Having regard to the conclusions to which I have come as
to the scale of the husband's resources, I am confident that he is able
financially to provide for HO at an appropriate level.
[86] I have recorded above that the standard of living enjoyed by the
parties during the marriage was extremely high. H is now 61, and W is 55.
The marriage lasted for about 9 years. However, I do not overlook the fact
that the parties were in a settled relationship from 1986 and that, from
inception, W and her children became financially completely dependent upon
H. I observe that H's continuing marriage to D was an obstacle in the way of
these parties becoming married very much earlier than they were.
[87] As to health: H is a diabetic. This is a condition that was diagnosed
many years ago and is managed satisfactorily. H has concern about the
condition of his heart, but there is no current medical evidence to indicate
that this is a matter of any serious concern. I discount the recent
presentation by H on the eve of the trial as signifying any genuine or
genuinely serious health problem.
[88] As to contributions: it is acknowledged that the sole financial
contribution has been from H. On the other hand there does not seem to be
any dispute but that W played her part as wife and as supporter to H in his
business activities throughout their relationship. This is not a case in
which there is any basis for differentiation between the spouses in the area
of their respective contributions.
[89] The aspiration of W in the case is for owned accommodation (to include
the capacity to acquire an extended lease if she so chooses) and for an
investment fund that will on accepted Duxbury principles generate an income
for her at the level of the budget she has advanced. Her budgeted figure was
£ 90,000 pa. That budget was tested in the course of W's oral testimony, and
I am satisfied that (as it then stood) it is not excessive. Since she gave
her evidence it has emerged that it was understated to the tune of £ 11,750
pa while she remains at Portland Place, the current scale of the ground rent
and service charges. For however long that particular element in her budget
remains payable, however, I doubt whether annual expenditure at the level of
£ 101,750 net would in fact permit her to maintain in London (where she
anticipates continuing to make her home whether at Portland Place or
elsewhere, and where her two children are established) the same standard of
living that she enjoyed during the marriage. The total sought is to be
measured against H's own annual budget for himself (not that which he
produced for forensic purposes in the sum of £ 46,000 but rather his living
expenses figure given to his bankers) in the sum of US$300,000.
[90] W's corrected budget of £ 101,750 translates (as the Capitalise
computer programme shows) into a Duxbury fund requirement of £ 2,100,000. I
remind myself that H, upon the available evidence, has a number of
high-earning years ahead of him, whereas any income W may generate will (in
my judgment) be very modest by comparison. He, therefore, has the prospect
of increasing his capital base: her income-producing fund will, if she
applies the Duxbury rationale and methodology, diminish to projected
extinction over the 32-year balance of her life-span upon which the
computation is based.
[91] If I aggregate the Duxbury fund requirement with the housing aspiration
and the price of a new car and debt repayment for W, the total provision
sought by her under those heads comes to £ 3.685m.
[92] W, however, in the particular circumstances of this case, has another
identifiable prospective need which, in my judgment, is not so remote that I
should disregard it. I view it as more likely than not, such is his
animosity towards W and his determination that she should not receive more
than whatever he would choose for her to receive, that H will carry out his
threat of pattern-bombing W with litigation brought by him and his
creatures. The cost of meeting those assaults should not deplete the other
aspects of her award or invade what, in my view, is her fair entitlement.
She will, moreover, most likely sustain some significant irrecoverable costs
in seeking to enforce the order so as to obtain its fruits. Her difficulties
will flow entirely from the stance and actions adopted by H in response to
her legitimate claim. She should be shielded from what I understand Thorpe
LJ, when rejecting his application for permission to appeal my June
maintenance pending suit order, described as H's policy of poisoning the
water and burning the crops as he retreats to havens fresh. That policy of
waste should ricochet to his account, if W is ever so fortunate as to obtain
full performance of the obligations which this order will impose on H.
[93] I propose, in short and without separate analysis of its legal
justification, to follow the course adopted by Munby J in Al-Khatib v Masry
[2001] EWHC 108 (Fam), [2002] 1 FLR 1053. I allocate £ 500,000 to those
purposes, inevitably an estimate, to be designated in this court's order as
a separate and additional instalment of the lump sum, payable only once the
whole of the balance of the lump sum (and costs) orders I will make have
been met, and at that stage subject to variation if H then wishes to
demonstrate that £ 500,000 has proved to be excessive by way of provision
for these purposes until that point, and/or to bind himself that there will
be no future occasion for her to meet such expenditure. The jurisdiction for
such a variation application is founded in s 31(2)(d) of the Matrimonial
Causes Act 1973, and that it may have the effect of reducing or
extinguishing (as well as rescheduling) the ordered instalment is at present
decided by authority such as Tilley v Tilley (1980) Fam Law 89 through to
Westbury v Sampson [2001] EWCA Civ 407, [2002] 1 FLR 166. But any such
application might well, as a practical prerequisite, involve H first meeting
the orders (including the costs orders) which I shall make. That will,
however, be a matter for the judge hearing the application.
[94] Therefore, the total value of the provision which H should make to W is
£ 4,185,000 (subject to costs). The form of the order will be fixed
immediately after this judgment has been handed down.
Fairness
[95] It is not easy to undertake any evaluation by reference to equality of
division, for the totality of the whole is unknown. If I am right that H's
resources are a minimum of US$25m, or between £ 13m and £ 14m at least, W's
claim is for between about 32.2% and 29.9%. I remind myself that although
the committed relationship between the parties was a long one, it was a
fourth marriage for H, and he has been developing his expertise and building
up his fortune in the aviation, hotel and travel services businesses over
many years, including before he met W. I do not see, however, that it would
be fair to do other than provide fully but still reasonably for what I have
assessed to be the reasonable needs of W for her immediate and longer term
accommodation and for her revenue requirements. As to £ 500,000, the award
contingently meets a need which H is entirely responsible for creating. I am
confident that he has ample resources with which to satisfy the overall
award.
[96] Before turning to the structure of the order that I propose to make and
the extant matters upon which it is still necessary to hear argument and to
rule, it is appropriate that I should make a number of observations on
procedural matters that have arisen in the course of this case.
[97] First, the use of letters of request. During this case there has been a
series of three letters of request addressed to CI in Jersey. In each case
the requests have attracted maximum co-operation from the Jersey courts.
They have been dealt with with the utmost courtesy, speed and efficiency. I
am given to understand that Deputy Judicial Greffier Matthews, who has had
the management in Jersey of this case, has gone out of his way to
accommodate the timetable laid down by this court for the progress of the
case, and has fitted in hearings so as to enable the information to be
produced speedily. I am informed that there is statutory provision in Jersey
that, if there be an oral hearing on the letters of request, English counsel
have a right of audience, so that they may investigate the matters arising
on the letters of request with the respondent to the hearing; and, secondly,
that no order as to costs is made by the court. (Although that is not to say
that in an appropriate case the witness should not recover the expense,
including professional time, incurred in meeting the request: in this case
and understandably CI did not pursue the totality of their potential claim
under this head.) This is, therefore, an efficacious and comparatively
inexpensive method of extracting necessary information concerning off-shore
trusts where the settlor or beneficiary is unwilling to provide relevant
information.
[98] It has, however, been courteously drawn to my attention in a letter
from Mr Jowitt, the Senior Legal Adviser to the Law Officers' Department in
Jersey, that it is important for English courts and lawyers to bear well in
mind that such assistance as letters of request can provide must be sought
in accordance with the formal requirements of the Hague Convention of 18
March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters,
which in the case of Jersey requires that they be sent to Her Majesty's
Attorney General for Jersey, and not direct to residents of the island or to
public authorities there.
[99] I repose confidence in the courts of Jersey and of Guernsey that they
will do their best, of course always in accordance with their domestic law
and procedures, to ensure the speedy and efficient implementation of the
orders that I will make to reflect the findings and the award contained in
this judgment, so that W receives what is due to her without significant
expense and delay.
[100] Next, I have referred above to the existence of the inquiry being
undertaken in Jersey by the state's police. The result of the order that I
am proposing to make will be that beneficial ownership of DM will pass to W.
She will thereupon become entitled as the owner of the company to take
whatever steps may be appropriate and necessary to take control of the
moneys held within the DM accounts, which are at the moment frozen because
of the police investigation there. It would, therefore, seem appropriate for
the terms of my order (insofar as they relate to FT and the two companies)
to be brought to the attention of the state police, in the hope that they
will give urgent consideration to the release of the money in Jersey.
[101] Thirdly, it is evident that funds have been diverted by H from Jersey
to EFG Bank in Guernsey. I am concerned to have read, amongst the
documentation produced by that bank in response to the letters of request,
an internal memorandum which records the bank as saying, at the time when
they were given notice of the worldwide freezing injunction, that not only
that it did not bite upon them because there was no equivalent injunction
then made in Guernsey; but also because they held no funds in Guernsey. That
latter observation is gainsaid by their own documentary material which shows
that there were significant funds on deposit with the bank at that time that
were held to the order of H in his own name. I express the hope that EFG
Private Bank will henceforth be fully co-operative with W in tracing the
funds that were placed with them in the name of DM, but which have since, it
would appear, been wrongfully diverted from that company to other companies
acting under the direction and control of H.
[102] Fourthly, I have recited above that H has chosen to institute separate
proceedings against W in Pakistan, through the vehicle of Karachi Properties
Investment Co Ltd, a corporation acting under his direction, in order to
inhibit W in the prosecution of her ancillary relief claim. As part of his
claim in the High Court in Karachi, H seeks an injunction restraining W from
'disposing of any asset which [W] owns or may acquire by virtue of the
matrimonial proceedings'. I express the confident hope that if and when any
proceedings involving H or W come before the courts in Karachi, they will
recognise that the essential dispute between them arises from this divorce,
and that this court has been the one charged with an appraisal of the
totality of their financial affairs. I accordingly hope that it would be
regarded as unjust to allow this (or other) satellite litigation in Karachi
(or elsewhere) to run on or to be used an oppressive tool against W. These
comments apply with equal force to the litigation with which H has
threatened he and/or others will unleash. My order will contain provisions
which seek to deflect back onto him the ultimate liability for any awards
which may be made against W in this way.
[103] I have given consideration to the structure of the order that I should
make in this case. The total value of the award in favour of W that I will
be making is £ 4,185,000. £ 570,000 of that is represented by the equity in
the Portland Place apartment. Thus cash provision of £ 3,615,000 is
required. Provided that funds are still held by Standard Chartered Bank and
that the US$800,000 remains with CI (as I am assured by CI's counsel Miss
Shekerdemian is the case), W should be in a position to recover about
£ 1,104,000 in Jersey (at current exchange rates). When, where and at what
cost she may recover the balance owing to her is more difficult to predict.
[104] I have considered whether or not I should adjourn the lump sum part of
the claim (having made provision for transfers of the shares in the two
companies and of the Portland Place apartment to W), so that I can ascertain
what recovery is made over the course of the next few months, and then
formally quantify the lump sum award when that recovery is known. The
alternative is for me to fix the lump sum now, but stay execution of that
part of it which seems to equate to the probable recovery from the money
held in Jersey. The latter course seems to me to be preferable. Accordingly,
there will be an order (and consequential directions to CI as trustee and to
the relevant individual nominee directors of the companies) for transfer by
H to W of the shares in DM and the shares in MM. There will be an order that
the property at Portland Place be transferred into W's sole name as and when
she may require such transfer to be effected, subject to the mortgage in
favour of Standard Chartered Bank and the charging order absolute obtained
by Sheridans. There will be a lump sum order for £ 4,185,000. But I will
stay execution of £ 1.1m of that lump sum until further order, my intention
being that W should give credit against the total lump sum order for such
sums as she recovers from any source (including, if Portland Place is
transferred to her, £ 570,000 to be taken for computation purposes as the
value to be ascribed to the net equity in that apartment).
[105] The contents of Portland Place will be transferred to W in their
entirety. Pending payment of the full lump sum the maintenance obligation
upon H will be £ 100,000 pa. When and if the lump sum payment and costs are
paid in full a clean break will operate between the parties.
[106] I have already granted some injunctive relief designed to enable W to
protect her position in relation to assets I have determined are
beneficially H's, and anticipate I may be asked to consider more. I will
hear submissions on the form of the order and as to costs between H and W. I
will give leave for this judgment to be published, and see no reason why
anonymity should be preserved in the circumstances of this case.
DISPOSITION:
Order accordingly.
SOLICITORS:
Mishcon de Reya for the petitioner; Isadore Goldman for the second, third
and fourth respondents
Mhlanga
IN THE MATTER OF THE FOUNTAIN TRUST
C.I. LAW TRUSTEES LIMITED and FOLIO TRUST COMPANY LIMITED v. MINWALLA and
FOUR OTHERS
ROYAL COURT (Bailhache, Bailiff and Jurats Le Breton and Clapham) : July
20th, 2005
Trusts‹variation‹enforcement of foreign financial provision‹comity may
require Jersey court to vary Jersey trust to make financial provision
ordered in foreign matrimonial proceedings if fair‹court generally reluctant
to enforce foreign judgment varying Jersey trust or declaring it sham‹party
to matrimonial proceedings not to be permitted to hide behind trust to
prevent assessment of assets so as to inhibit fair division
The trustees of a Jersey trust applied for directions as to how to respond
to a judgment of the English High Court which declared the trust to be a
sham and ordered the trustees to transfer the trust assets to the first
respondent.
In matrimonial proceedings in England, the first respondent (the wife) was
awarded Ł4,185,000 by the English High Court. Her husband (the second
respondent) had established a post-nuptial settlement in Jersey, of which
she was not a beneficiary, which was administered by the representors (the
trustees) . Applying principles of English trusts law, the judge found the
trust to be a sham, intended by the husband to conceal his assets. The
English court declared that the husband was in fact the beneficial owner of
the trust assets and that they were held on bare trust for him. It ordered
that the trust should be set aside and the assets transferred to the wife.
The husband was found to have been uncooperative and obstructive and to have
failed to make full and frank disclosure of his assets. He had chosen not to
attend the proceedings after an interim order was made.
The trustees participated in the matrimonial proceedings to a very limited
extent and did not make submissions. They were, however, aware of the relief
sought by the wife and nevertheless submitted to the jurisdiction of the
English High Court, asserting that they would abide by any order or
declaration made. They brought the present proceedings, seeking directions
as to how they should respond to the English judgment.
The wife submitted that it should be recognized and enforced in Jersey as a
matter of comity. The husband, on the other hand, submitted that (a) it
would be contrary to public policy to enforce the order, as the English
court did not have jurisdiction to declare a Jersey trust to be a sham; and
(b) alternatively, the order was unenforceable because it was a declaratory
order.
Held, ruling as follows:
(1) The English judgment would be recognized and enforced so as to vary the
trust, which was a post-nuptial settlement, to give financial relief to the
wife, because it would be fair to do so as a matter of comity. As the trust
was governed by Jersey law and administered by trustees established in
Jersey, the English court had, however, erred by applying English law in
finding that it was a sham. The question of whether or not it was a sham
should instead have been determined according to Jersey law‹which required
that both the settlor and the trustees should have had a common intention
that the deed was not to create the legal rights and obligations which it
gave the impression of creating, as well as a common intention to deceive
third parties. Furthermore, the assumption by a foreign court of the power
to vary the terms of a Jersey trust or to declare it to be a sham would
generally be regarded as exorbitant and a Jersey court would be reluctant to
enforce such a judgment. It was also important, however, that parties to
matrimonial proceedings should not be permitted, by obstruction and
manipulation, to prevent a proper assessment of their financial positions
and thereby to inhibit a fair division of family assets. In the particular
circumstances of this case, it would not, therefore, be contrary to public
policy to enforce the judgment, as it sought to do justice in matrimonial
proceedings in which the husband had been obstructive and had failed to
disclose his assets (para. 5; paras. 1618; para. 27; para. 31) .
(2) Moreover, it would not be unfair to enforce the English judgment against
the trustees since, despite being aware of the nature of the relief sought
by the wife, they had submitted to the jurisdiction of the English court
when it was clear that an order or declaration affecting the status of the
trust might be made. Indeed, to the extent that the trustees submitted to
the jurisdiction and failed to protect the beneficiariesą position, they
could be liable for breach of trust. If they had not submitted to the
English courtąs jurisdiction, however, it might not have been fair to
enforce the judgment against them (paras. 2021; para. 29) .
(3) Although the English judgment was a declaratory judgment, it could be
recognized and enforced as a matter of comity because the husband had had
every opportunity to participate fully in the English proceedings and to
raise any defences he thought fit. It was irrelevant that he had in fact
chosen not to attend those proceedings after an interim order had been made
(para. 24) .
Cases cited:
(1) Compass Trustees Ltd. v. McBarnett, 2002 JLR 321, dicta of Le Cras,
Commr. considered.
(2) Esteem Settlement, In re, 2003 JLR 188, applied.
(3) Hitch v. Stone, [2001] STC 214; [2001] BTC 78; [2001] EWCA Civ. 63,
dictum of Arden, L.J. not followed.
(4) Lane v. Lane (née Coverdale) , 198586 JLR 48, followed.
(5) MacKinnon v. Regent Trust Co. Ltd., 2004 JLR 477; on appeal, 2005 JLR
198, referred to.
(6) Midland Bank plc. v. Wyatt, [1997] 1 BCLC 242; [1995] 1 FLR 696, dicta
of David Young, Q.C. not followed.
(7) Rabaiotti 1989 Settlement, In re, 2000 JLR 173, applied.
(8) Shalson v. Russo, [2003] EWHC 1637, referred to.
(9) Snook v. London & W. Riding Invs. Ltd., [1967] 2 Q.B. 786; [1967] 1 All
E.R. 518; (1967) , 111 Sol. Jo. 71, referred to.
(10) Trollope v. Jackson, 1990 JLR 192, referred to.
Texts cited:
de Ferričre, 1 Dictionnaire de Droit et de Pratique, at 600 (1771 ed.) .
Dicey & Morris, 1 The Conflict of Laws, 13th ed., para. 14003, at 468;
para. 14R141, at 525 (2000) .
D.F. Le Quesne for the representors;
D.M. Cadin for the first respondent;
W. Grace for the second respondent;
F.B. Robertson for the third respondent;
J.P. Speck for the fourth respondent;
S. Sharpe, Crown Advocate, for the Attorney General.
1 BAILHACHE, BAILIFF:
Introduction
This matter comes before the court following a representation by C.I. Law
Trustees Ltd. and Folio Trust Co. Ltd. (łthe trustees˛) , as trustees of the
Fountain Trust, seeking directions as to how to respond to a judgment in the
Family Division of the High Court of Justice in England setting aside the
trust as a sham and ordering the trustees to transfer the trust assets to
the petitioner in the matrimonial proceedings, Meher Darayus Minwalla (łthe
wife˛) .
2 Case management hearings were conducted before the Bailiff on May 26th and
June 20th, 2005. A number of orders were made. Darayus Cyrus Minwalla, the
first respondent in the matrimonial proceedings before the High Court (łthe
husband˛) , and Jamsheed and Framji Minwalla (referred to individually as
łJamsheed˛ and łFramji˛ and collectively as łthe beneficiaries˛) were
granted leave to intervene, the husband on condition that Ł20,000 was paid
into court as security for the costs of the wife. On May 26th, the Bailiff
released Advocate Hanson, as guardian ad litem for Hormazd Minwalla, from
further appearance, on the ground that his interests would effectively be
represented by counsel for the benefi
ROYAL CT. IN RE FOUNTAIN TRUST 2005 JLR 362
ciaries. The Bailiff determined that the essential issue for consideration
was whether, as a matter of comity, the Royal Court should enforce the
judgment of the High Court delivered by Singer, J. on December 3rd, 2004
(łthe judgment˛) . The Bailiff ordered the trustees to remain neutral and
not to participate in the argument between the wife and the other parties to
the proceedings.
3 When the hearing opened, on July 4th, Standard Chartered (Jersey) Ltd. and
the Attorney General, on behalf of the Government of Pakistan, were granted
leave to intervene, but agreed, on terms that their respective positions
would not be prejudiced, not to participate in the argument. An application
by Messrs. Cowasjee Minocher Cowasjee, Mehmood Haji and Sheikh Sultan
Al-Qasimi for leave to intervene on the ground that they were creditors of a
company or companies forming part of the underlying assets of the Fountain
Trust was refused.
4 In the opening paragraph of the judgment, Singer, J. described the wifeąs
claim for relief as raising important issues. The judge stated:
łThe first [issue] is the approach that the court should adopt where it
finds (as I do here in relation to Darayus Cyrus Minwalla, familiarly known
as Happy Minwalla, the husband) that a party has set out to conceal
resources and obstruct proper investigation of their financial affairs, a
subject only recently considered by Coleridge, J. in J v. V [2003] EWHC 3110
(Fam) [2004] 1 FLR 1042 at [127] and [130]. Second, the virtue of
international cooperation in the investigative process where the finances
under review are conducted behind a web of offshore structures. Third, the
approach which those involved should expect of the court where it appears
companies with their sometimes cipher directors have been woven together to
create a shroud that is designed to bury the husbandąs resources from view.
Should the court respect the legal structure of that screen? Or, if it
becomes apparent that the husband himself pierces the veil as and when it
suits him, should the trustees and directors be surprised that a court
exercising the ancillary relief jurisdiction will strain to see through the
smoke and will set the structure aside so as to treat the resources as
wholly his? For that is what he and they should expect where fairness to
both spouses depends so crucially on an accurate understanding (following
what should be clear and accurate disclosure) of the realities of each
partyąs economy.˛
5 We agree entirely with the view that parties to matrimonial proceedings
should not be permitted, by obstruction and manipulation, to prevent a
proper assessment of their respective financial positions and thereby to
inhibit a fair division of family assets. This application raises equally
important issues, however, in this jurisdiction as to how the cou
ROYAL CT. IN RE FOUNTAIN TRUST 2005 JLR 363
should respond to the assertion by courts outside Jersey of power to
determine issues relating to trusts governed by Jersey law.
The English judgment
6 The judgment was given in matrimonial proceedings which were, initially at
any rate, hotly contested and difficult. The judgment was, as one would
expect, comprehensive and thorough, and included a number of findings which
were trenchantly expressed. The judge found that‹
(i) the trusteesą conduct left a great deal to be desired;
(ii) the Fountain Trust was a sham and łthe trustees were privy to the sham,
at least in the sense that they went along with the intentions of [the
husband]˛;
(iii) the husband had been uncooperative and obstructive, and contemptuous
of his obligation to make full and frank disclosure;
(iv) in respect of general maintenance for the wife, the husband had paid
Ł3,250 in June 2004 but had otherwise ignored the orders of the English
court as to maintenance pending suit;
(v) the husband was a very wealthy man with assets of at least US$25m.,
whereas the wife had net debts of about Ł45,000 (ignoring substantial
outstanding legal fees) ;
(vi) the husband was motivated by ill will towards the wife and determined
to cause her to incur significant legal costs in pursuing her legitimate
claim against him; and
(vii) the husbandąs evidence was untrustworthy and undeserving of belief.
The judgment awarded Ł4,185,000 to the wife, none of which has been paid.
7 In order to arrive at the figure awarded to the wife, the English court
had been assisted, as it found, by evidence taken in Jersey from Mr.
Nicholas Morgan, an English solicitor and the principal behind the trustees,
pursuant to letters of request. That evidence revealed that the assets of
the Fountain Trust were the issued shares of DM Investments SA (łDM˛) and
Midfield Management SA (łMidfield˛) . Both these companies are registered in
Panama. DM appears to have cash of approximately US$800,000. Midfield owns
Flat 2, 55 Portland Place, London with a net equity of about Ł570,000 after
deduction of debts due to Standard Chartered and Sheridans, a firm of
English solicitors.
8 The material part of the order of the English court was in the following
terms:
ROYAL CT. IN RE FOUNTAIN TRUST 2005 JLR 364
ł(2) The settlement known as the Fountain Trust be set aside as being a sham
trust, to the effect that (and it is declared as follows) :
(a) The [husband] is the beneficial owner of all the issued share capital in
DM Investments SA; and
(b) The [husband] is the beneficial owner of all the issued share capital in
Midfield Management SA;
and that the shares in those companies are held by the [trustees] on bare
trust for the [husband].
(3) The [husband] do forthwith transfer or cause to be transferred to the
[wife]‹
(a) all the issued share capital in DM Investments SA; and
(b) all the issued share capital in Midfield Management SA.
(4) Subject to any contrary requirement of Jersey law, C.I. Law Trustees
Ltd. (the fourth respondents) ‹
(a) do take all such steps as may be necessary to effect the transfers of
the shares provided for by para. 3 above;
(b) do deliver up to the [wife] all and any bearer shares for those two
companies;
(c) do deliver up to the [wife] all and any share certificates for those two
companies and execute such stock transfer instrument as may be necessary;
(d) if and to the extent they are requested to do so by the [wife], do
facilitate the execution of new bank mandates, the appointment of new
directors and, if necessary, the appointment of a new management company in
Panama for those two companies;
(e) do take all such other steps as may be appropriate to place the
companies under the control of the [wife], as their sole beneficial
shareholder; and
(f) if so requested by the [wife], do transfer the property at 2/55,
Portland Place, W.1 into the sole name of the [wife] (as provided for by
para. 5 below) ; [who, for the avoidance of doubt, shall be liable for any
stamp duty and for the conveyancing costs (limited to Ł500 plus VAT and
disbursements) ].
(5) The property known as 2/55 Portland Place, W.1 be transferred into the
sole name of the [wife] subject only to‹
ROYAL CT. IN RE FOUNTAIN TRUST 2005 JLR 365
(a) the mortgage thereon in favour of Standard Chartered (Jersey) Ltd.; and
(b) the charge effected by the charging order in favour of Sheridans.
(6) Such interest as the [husband] may have (whether owned directly or
through the Fountain Trust, or through [DM] or the [Midfield]) in the
chattels at 2/55, Portland Place be transferred by him to the [wife].˛
The application of the wife
9 Counsel for the wife submitted that the judgment should be recognized and
enforced on two alternative bases:
(i) pursuant to the provisions of the Judgments (Reciprocal Enforcement)
(Jersey) Law 1960 (łthe 1960 Law˛) ; or
(ii) as a matter of comity.
10 We think that, for a number of reasons, the first basis is a shaky
foundation for the application, but one consideration seems to us to be
fatal. Even if the judgment were capable of registration under the 1960 Law
(and we find that it is not) it would not be capable of execution as a money
judgment, because what the wife seeks are orders addressed to the trustees
of the Fountain Trust. We turn to the question of comity, which is generally
acknowledged to be an łelastic concept.˛
11 In Lane v. Lane (née Coverdale) (4) , the court considered an application
for the recognition and enforcement of a judgment of the English court in
relation to a property in Jersey. The court held that where there was a
declaration of a competent English court, not appealed, the doctrine of
comity required that effect be given to the order of the English court,
provided that it was clear the defendant had had every opportunity to raise
all relevant defences at the hearing. The court examined the doctrine of
comity and found it to be based upon the concept of équité, which was
similar to but wider than the English concept of equity. The court adopted a
definition in 1 Dictionnaire de Droit et de Pratique by de Ferričre, at 600
(1771 ed.) , in the following terms (198586 JLR at 5859) :
łÉQUITé, est un juste tempérament de la Loi, que en adoucit la rigueur, en
considération de quelques circonstances particulieres du fait.
Ainsi cette équité est un juste retour au droit naturel, en retranchant les
fausses & rigoureuses conséquences quąon veut tirer de la disposition de
quelque Loi, par une trop rigoureuse explication
ROYAL CT. IN RE FOUNTAIN TRUST 2005 JLR 366
des termes dans lesquels elle est conçue, ou par de vaines subtilités qui
sont évidemment contraires ŕ la Justice, & ŕ ląintention du Législateur.
Cette équité, qui doit ętre la régle de la Justice, doit ętre préférée ŕ la
disposition de la Loi męme, lorsque la question qui se présente ŕ juger
nąest pas expressément décidée par la Loi, ou que le sens & les paroles de
la Loi peuvent, ŕ cause de leur ambiguité, recevoir quelque interprétation.˛
Crill, Deputy Bailiff (as he then was) , quoting from Trollope v. Jackson
(10) , concluded (ibid., at 60) : łIn our view, the word equity in Jersey
corresponds mainly to the French équité‹in other words, a question of
fairness.˛
12 Lane v. Lane was followed in Compass Trustees Ltd. v. McBarnett (1) ,
where the trustee of a Jersey settlement (the Eiger Trust) applied for
directions following an order of the English court. The sole asset of the
Eiger Trust was the matrimonial home in England of the settlor and his wife.
After a decree nisi, the High Court held that the trust was a post-nuptial
settlement which was capable of variation under the Matrimonial Causes Act
1973, and that it was in the interests of justice to vary the settlement to
allow a capital distribution to be made to the wife by way of financial
provision. The trustee advised the High Court that it would not give effect
to any order until authorized by the Royal Court. The wife applied to the
Royal Court, which overruled the objections of the other beneficiaries and,
in accordance with the doctrine of comity, gave effect to the order of the
English court. Le Cras, Commr. stated (2002 JLR 321, at paras. 89) :
ł8 Finally, the learned judge comes to the following conclusion:
ŚIf the settlement is not varied, the wife will have none of the matrimonial
assets. It is true that I could create a petition of the trust with the wife
as a life tenant but this would give the wife no capital interest and, upon
ceasing to be the settlorąs wife, she would no longer be a beneficiary under
the existing trust. I toyed with the idea of dealing with it in this way.
However, in the light of the circumstances of this case, the disadvantage
caused to the remaining beneficiaries by varying the trust does not outweigh
the injustice caused to the wife by leaving her without a capital interest.
It is therefore necessary for the settlement to be varied to do justice to
the wifeąs case. Of course, only the Royal Court in Jersey will vary it, and
the Jersey advocate has led me to believe that they will.ą
9 In reading this, the court takes the view that where the learned judge
says that Śonly the Royal Court in Jersey will vary it,ą he meant
ROYAL CT. IN RE FOUNTAIN TRUST 2005 JLR 367
Świllą in the sense of Ścapable ofą or Śis able to,ą rather than in the
sense of Śmust.ą On this interpretation, no possible offence can be taken.˛
13 Counsel for the wife accordingly invites us to give effect to the
judgment of Singer, J. on the basis of comity. A number of objections to
this invitation were raised by counsel for the husband and for the
beneficiaries and we will deal with those below. There is, however, a more
fundamental objection with which it is convenient to deal at this stage.
Sham trust
14 Singer, J. held that the Fountain Trust was a sham trust. He referred to
observations of Diplock, L.J. in Snook v. London & W. Riding Invs. Ltd. (9)
which suggested that in order for the court to conclude that a document or
transaction was a sham it was necessary that all the parties to it should
have a common intention that ([1967] 1 All E.R. at 528) the łdocuments are
not to create the legal rights and obligations which they give the
appearance of creating.˛ He also referred to further observations of the
trial judge, David Young, Q.C., in Midland Bank plc. v. Wyatt (6) in the
following terms ([1995] 1 FLR at 699) :
łI do not understand Diplock, L.J.ąs observations regarding the requirement
that all the parties to the sham must have a common interest to be a
necessary requirement in respect of all sham transactions. I consider a sham
transaction will still remain a sham transaction even if one of the parties
about what he or she was signing. Such a person would still be a party to
the sham and could not rely on any principle of estoppel such as was the
all.˛
15 The learned judge suggested that support for this analysis could be
gleaned from the judgment of Arden, L.J. in Hitch v. Stone (3) , where she
stated ([2001] STC at 234) : łIn my judgment, the law does not require that
in every situation every party to the act or document should be a party to
the sham.˛
16 It appears, however, that Singer, J. was not referred to Shalson v. Russo
(8) , in which the judgment of Birt, Deputy Bailiff in In re Esteem
Settlement (2) was cited and regarded (as a matter of English law) as
correct in principle and in line with the guidance given by the English
Court of Appeal in Snook and Hitch v. Stone. In In re Esteem Settlement this
court held that, in order for a trust deed to be a sham, both the settlor
and the trustee must subjectively have a common intention that the trust
deed is not to create the legal rights and obligations which it gives the
appearance of creating: it is not sufficient that the settlor alone has such
an intention. In re Esteem Settlement has been followed in MacKinnon v.
ROYAL CT. IN RE FOUNTAIN TRUST 2005 JLR 368
Regent Trust Co. Ltd. (5) , a decision which was upheld by the Jersey Court
of Appeal.
17 More fundamentally, however, the judge applied English law in determining
whether the Fountain Trust was a sham. The Fountain Trust is a trust the
proper law of which is Jersey law and which is administered by trustees
established in Jersey. The relevant part of cl. 1 of the trust deed
provides:
łThis trust instrument is established under the Laws of the Island of Jersey
and the rights of all parties and the construction and effect of each and
every provision hereof shall be subject to the exclusive jurisdiction of and
construed and regulated only according to the Laws of the Island of Jersey
which shall be the forum for the administration hereof.˛
In our judgment, the question of whether or not the Fountain Trust is a sham
trust is one to be determined in accordance with Jersey law.
18 We think that there are important distinctions to be drawn between a
finding that a Jersey trust is a post-nuptial settlement, and therefore
liable to be varied, and a finding that a Jersey trust is a sham. The right
to seek a variation is one which derives from the matrimonial regime of the
jurisdiction which dissolves the marriage. There is a general statutory
power, for example, under the English Matrimonial Causes Act 1973 to vary
ante- or post-nuptial settlements. There is, so far as we are aware, no such
statutory power to declare a foreign trust to be a sham. Furthermore, a
decision to seek a variation of a trust in order to give effect to an order
under a matrimonial jurisdiction is qualitatively different from a decision
to declare a trust to be a sham. Under the law of Jersey, a sham trust
requires that the settlor and trustee have not only a subjective intention
that the deed is not to create the legal rights and obligations which it
purports to create, but also a common intention to mislead. It is a serious
matter to find that a professional trustee in Jersey has been party to a
sham. It is a finding, moreover, which might well have adverse consequences
under the statutory regime which regulates the activities of professional
trustees in Jersey and which, incidentally, is absent in England and Wales.
It is a finding which requires, so far as Jersey is concerned, a careful
analysis under the rules applicable in this jurisdiction. As a matter of
generality, we would regard an assumption of jurisdiction by a foreign court
to declare a Jersey trust a sham to be exorbitant and we would be reluctant
to enforce any judgment based upon such an assumption.
The trusteesą position
19 We turn now to the specific circumstances of this case. The court
directed the trustees to remain neutral and to play no part in the argument
ROYAL CT. IN RE FOUNTAIN TRUST 2005 JLR 369
between the wife and the other parties. We have accordingly heard no
submissions from counsel for the trustees on the merits of the application
by the wife. Mr. Le Quesne did, however, properly and appropriately remind
us that we should not, in seeking to do justice between the other parties,
fail to do justice to the trustees. We expressly decline, at this stage, to
make any findings of culpability on the part of the trustees so far as their
duties under the trust deed are concerned. That will be a matter to be
determined following argument in relation to their fees, expenses and costs
in due course.
20 Having said that, the trustees did submit to the jurisdiction of the
English court and participated in the proceedings. Counsel for the trustees
drew attention to the limited extent of that participation, as shown by the
frontispiece to the judgment, which records the trustees as having
participated łonly in relation to costs issues affecting [them] but did not
attend the substance of the hearing.˛ Nonetheless, the outline submissions
of counsel for the trustees, dated November 22nd, 2004, recorded that on
November 18th the trusteesą solicitors had received notice that the wife was
seeking relief which included‹
ł(1) a declaration that Mr. Minwalla is the beneficial owner of the Fountain
Trust and its assets;
(2) a declaration that Mr. Minwalla is the beneficial owner of the shares in
[DM] and in Midfield;
(3) [sic] a declaration that Mr. Minwalla is the beneficial owner of Flat 2;
(4) an order that Mr. Minwalla transfers his interest in Flat 2 to Mrs.
Minwalla; and
(5) an order that the trustees should call in and cash all assets in [DM]
and transfer them to Mrs. Minwalla.˛
21 While the word łsham˛ was not expressly mentioned, the trustees should
have been alerted to the fact that wide-ranging orders were being sought
which carried serious implications for the Fountain Trust. Indeed, it should
have been obvious that a sham was being alleged. Notwithstanding this
knowledge, the trustees asserted through their counsel that they łwill abide
by any order/declaration made by the court,˛ subject only to reservations
which are not relevant here. The trustees submitted to the jurisdiction of
the English court in circumstances where it was clear that an order or
declaration affecting the status of the trust might be made. In our
judgment, no unfairness arises from holding, as a matter of comity, that in
the particular circumstances of this case the judgment should be enforced
against the trustees. It would be a very different situation if the trustees
had not submitted to the jurisdiction.
ROYAL CT. IN RE FOUNTAIN TRUST 2005 JLR 370
The husbandąs contentions
22 Counsel for the husband contended that the judgment should not be
enforced in Jersey for four reasons:
(i) the order was a declaratory order and was therefore unenforceable;
(ii) there had been a breach of natural justice;
(iii) enforcement of the order was contrary to public policy; and
(iv) only one of the trustees of the trust, C.I. Law Trustees Ltd., was a
party to the English proceedings.
We take each of these contentions in turn.
23 Counsel referred us to Dicey & Morris, 1 The Conflict of Laws, 13th ed.,
para. 14003, at 468 (2000) , where the authors state as a general principle
that a declaratory judgment is not recognized and enforced. The relevant
passage ends:
łNot every type of judgment is capable of enforcement in this way. A
judgment dismissing a claim or counterclaim is obviously not capable of
enforcement, unless it orders the unsuccessful party to pay costs, as it
frequently does; nor is a declaratory judgment, e.g. one declaring the
status of a person or the title to a thing; nor is a decree of divorce.˛
That passage is however followed by the sentence: łThere may, however, be
orders ancillary to a decree of divorce which, because they order the
payment of money, are capable of enforcement.˛
24 In Lane v. Lane (née Coverdale) (4) , this court held that a declaratory
judgment would be enforced provided that it was clear that the defendant had
had every opportunity to raise all relevant defences at the hearing. We are
quite satisfied that the husband did have the opportunity to participate
fully in the proceedings before the English court and to raise any defences
which he thought fit. He chose to absent himself from the proceedings after
an interim order had been made but that was his choice and he must accept
the consequences of that decision.
25 So far as the alleged breach of natural justice is concerned, we repeat
that the husband had every opportunity to participate in the proceedings
before the English court at every stage but chose not to do so. We find no
substance in this objection.
26 Counsel drew attention to another passage from Dicey & Morris where it is
stated (op. cit., para. 14R141, at 525) that ła foreign judgment is
impeachable on the ground that its enforcement or, as the case may be,
recognition, would be contrary to public policy.˛ He also
ROYAL CT. IN RE FOUNTAIN TRUST 2005 JLR 371
referred to passages from the judgment of Birt, Deputy Bailiff in In re
Rabaiotti 1989 Settlement (7) , where the judge stated (2000 JLR at 194) :
łThe court regards it as unlikely that an English court would so exceed the
normal bounds of comity as to purport to vary a settlement governed by
Jersey . . . law, administered in Jersey by Jersey trustees, and which had
no connection with England save that some of the beneficiaries resided
there.˛
27 We agree with counsel that as a general rule, as set out in para. 18
above, it would be an exorbitant exercise of jurisdiction for a foreign
court to purport either to vary the terms of a Jersey settlement or to
declare such a settlement to be a sham. In the particular circumstances of
this case, we do not consider that it is contrary to public policy to
recognize and enforce a judgment which seeks to do justice in matrimonial
proceedings where the husband has flouted his legal and moral obligations
towards his wife.
28 As to the submission that only one of the trustees was a party to the
English proceedings, we find no substance in it. Both the trustees are
companies controlled by one individual, or one firm practising in Jersey.
Both are an alter ego either of Mr. Morgan or of his firm.
The beneficiariesą contentions
29 The thrust of the contentions of counsel for Jamsheed and Framji Minwalla
was that the judgment breaches the rules of natural justice so far as they
were concerned. The beneficiaries were not convened to the hearing in
England and had no opportunity to make submissions as to whether the
entirety of the trust fund should be paid to the wife. We think that the
short answer to that complaint is that the beneficiaries have been granted
leave to intervene in these proceedings and to make such submissions as they
think fit in relation to the recognition and enforcement of the judgment. It
is true that they were not given the opportunity to make submissions on the
issue of whether or not the Fountain Trust is a sham trust. We think that
there are two answers to that. First, the trustees were party to the
proceedings and had the opportunity, even if they chose not to take it, to
make submissions on the sham trust issue. To the extent that, having
submitted to the jurisdiction, they failed to protect the position of the
beneficiaries, it is possible that they may be liable for breach of trust.
Secondly, this court is not concerned with the question of whether or not
the Fountain Trust is a sham trust. We are concerned to decide whether it is
fair, as a matter of comity, to recognize and enforce the judgment. We have
considered the position of the beneficiaries in the round and asked
ourselves whether there has been a breach of substantial justice. A number
of circumstances appear to us to be relevant in answering that question.
ROYAL CT. IN RE FOUNTAIN TRUST 2005 JLR 372
(i) The affidavit of Jamsheed deposes to a conversation which apparently
took place with his father, the husband, around Jamsheedąs 18th birthday in
April 2003. It is said that he was told that his father had set up a Jersey
trust to look after him and his brothers. Jamsheed asserts that he only
became aware of the proceedings in England when this representation was made
to the Royal Court. He does not explain how or when he was informed of this
application, nor why whoever did inform him failed to tell him of the
English proceedings.
(ii) Jamsheed exhibits to his affidavit a copy of a letter from Mr. Peter
Barnes of C.I. Law Trust Group Ltd., dated December 16th, 2004, in the
following terms:
łI enclose herewith a copy of a letter of wishes signed by Mr. Minwalla and
dated 21/3/2003.
This was found in our safe and there was no reference to this letter of
wishes in any of the Fountain Trust files.
You will note that the existing Mrs. Minwalla was not contemplated as being
a beneficiary. This letter of wishes was apparently discovered by Nicholas
Morgan after the hearings for the letter of request and, as far as I am
aware, has not been disclosed to Mishcon de Reya.˛
This is a most curious development. Mr. Morgan was roundly criticized in the
judgment as a result of his admission that he was holding two letters of
wishes, both bearing the identical date of September 22nd, 1998, but in
mutually contradictory terms. All this emerged from the evidence of Mr.
Morgan taken before the Deputy Judicial Greffier in response to a letter of
request. Singer, J. stated in his judgment:
łThere is no third document indicating that one or other of the two
in which one rather than the other should (subject always to their
The judgment was delivered on December 3rd, 2004. It is noteworthy that,
despite being questioned some months before about the letters of wishes,
less than two weeks after the handing down of the judgment Mr. Morgan
łapparently˛ discovered the third document in his firmąs safe.
(iii) It is also noteworthy that the date of this third document is March
21st, 2003, not too far distant from Jamsheedąs 18th birthday, but more than
a year before the trustees, at the husbandąs request, executed a deed adding
Jamsheed and his two brothers to the class of beneficiaries. It seems
curious that his father should have told Jamsheed about a trust established
in Jersey for his benefit in April 2003, executed a letter of
ROYAL CT. IN RE FOUNTAIN TRUST 2005 JLR 373
wishes pursuant to that statement, yet failed for more than a year,
notwithstanding his apparent poor health, to take the necessary steps to
enable the trustees to treat Jamsheed as a beneficiary.
(iv) According to the evidence of Mr. Morgan before the Deputy Judicial
Greffier, the appointment of the beneficiaries to the class of beneficiaries
was łtactically because of the matrimonial situation.˛
(v) The freezing injunction granted by Munby, J. on January 15th, 2004
prohibited the husband from dealing, directly or indirectly, with inter alia
any interest in DM or Midfield. While it might be arguable whether that
injunction prohibited the husband from being party to the deed by which
Jamsheed and his brothers were added to the class of beneficiaries on May
27th, 2004, their inclusion at that stage of the matrimonial proceedings
between the husband and the wife does give rise to the inference that it was
a tactical move by the husband to frustrate the claims of the wife.
30 Taking all those circumstances into consideration, we do not think it
would be a breach of substantial justice to enforce the judgment to the
prejudice of any interest of the beneficiaries in the trust fund. Indeed, we
consider that it would be an affront to justice to prefer the claims of the
beneficiaries to that of the wife.
Conclusion
31 In the exercise of our discretion, therefore, we consider that, in the
unusual and particular circumstances of this case, notwithstanding the
reservations which we have expressed earlier in this judgment, it would be
fair, in the interests of comity, to recognize and enforce the judgment of
Singer, J. at least in part. We recognize the objections of Standard
Chartered to any order which might authorize the transfer of Flat 2, 55
Portland Place out of the name of Midfield and into the name of the wife. In
our judgment, it would be sufficient, in order to give effect to the
substance of the judgment of the English court, to order the trustees to
transfer the shares in DM and Midfield to the wife, subject to any
liabilities to which those companies might be found by the English court to
be liable. To that end, we propose to order, subject to paras. 32 and 33
below, that the trustees comply with para. (4) (a) (e) of the order of the
High Court of December 3rd, 2004.
32 This order will not, however, take effect until the Attorney General has
been given the opportunity to make such submissions as he may think fit on
behalf of the Government of Pakistan, on behalf of which he was given leave
to intervene on July 4th. We will also wish to hear any submissions which
the Attorney General may wish to make on behalf of the States of Jersey
Police in relation to the refusal to consent to any
ROYAL CT. IN RE FOUNTAIN TRUST 2005 JLR 374
dealing in the shares of DM and Midfield pursuant to the Proceeds of Crime
(Jersey) Law 1999. We direct the legal advisers for the wife to make the
necessary application to the Bailiffąs Judicial Secretary forthwith. Notice
of that hearing should also be given to Standard Chartered so that it may be
given the opportunity to make any submissions that it may think fit arising
out of the proposed order.
33 Under the proposed order, the trustees will be authorized to retain
US$100,000, or such other sum as the court may order, pending argument
between the trustees and the wife as to the extent to which it is proper to
order the payment of the trusteesą fees, expenses and costs out of the trust
fund. The court is prepared to hear counsel on the question of costs.
Ruling accordingly.