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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Emirates NBD Bank PJSC v Almakhawi and Ors [2024] JRC 265 (04 December 2024) URL: http://www.bailii.org/je/cases/UR/2024/2024_265.html Cite as: [2024] JRC 265 |
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Before : |
Sir Timothy Le Cocq, Bailiff, and Jurats Averty and Le Heuzé |
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Between |
Emirates NBD Bank P.J.S.C. |
Plaintiff |
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And |
(1) Rashad Abdulaziz Almakhawi (2) HSBC Trustee (CI) Limited (3) HSBC Private Banking Nominee 3 (Jersey) Limited (4) Vojin Investments Limited (5) Redington Holdings Limited |
Defendant |
Advocate W. A. F. Redgrave for the Plaintiff.
Advocate D. S. Steenson for the First Defendant.
Advocate A. Kistler for the Second to Fifth Defendants.
judgment
the bailiff:
1. This is a Pauline action brought by Emirates NBD Bank PJSC ("Emirates"), the Plaintiff, in which it alleges that transfers of assets made by or at the behest of Rashad Abdulaziz Almakhawi ("RAM"), the First Defendant, to HSBC Trustee (CI) Limited ("HSBC Trustee"), the Second Defendant; HSBC Private Banking Nominee 3 (Jersey) Limited ("HSBC Private"), the Third Defendant; Vojin Investments Limited ("Vojin"), the Fourth Defendant; and Redington Holdings Limited ("Redington"), the Fifth Defendant, were made in order to defeat RAM's creditors.
2. Before dealing with the substance of the application, it is right that we explain the somewhat unusual circumstances of the hearing before us. At all times, Emirates indicated that it was proceeding on the basis of documentary evidence alone and would not be calling live evidence in support of its claim. It was assumed that RAM would give live evidence in defence of Emirates' claim. HSBC Trustee, HSBC Private, Vojin and Redington are in effect taking a neutral stance. Accordingly, the only live evidence before the Court was to have been given by RAM.
3. The hearing of this matter was scheduled to take place before this Court on 22 January 2024 with a time estimate of five days. On 19 January, RAM made an application to adjourn the proceedings to which, for the reasons set out in an ex tempore judgment with further reasons in writing prepared on 12 April 2024, the Bailiff acceded. The bases of the application were concerns relating to RAM's health.
4. Shortly before the re-fixed hearing of this application, there was a further application by RAM to adjourn the hearing. Evidence was heard from an expert psychiatrist tendered on RAM's behalf. For the reasons set out in an ex tempore judgment, the Bailiff refused the request for an adjournment and the hearing proceeded. The Court had anticipated that it would be possible for RAM to give evidence by video link with a suitable number of breaks and with support as necessary. He had already given lengthy evidence in proceedings before the High Court of England and Wales on an earlier occasion.
5. At the commencement of the hearing, counsel for RAM confirmed that RAM would not be giving evidence. Accordingly, we heard no live evidence although we had the benefit of affidavit evidence and statements from RAM and indeed other witnesses. We will refer to these as necessary. The arguments before us were based entirely upon affidavits and the papers.
6. On 29 November 2023, the Master of the Royal Court ruled that the judgment of the Dubai Court of Cassation dated 7 July 2019 ("the Dubai Judgment") should be recognised in Jersey. That judgment held that RAM owed Emirates the sum of AED 211,299,040.31 (a sum in excess of £45 million) plus interest. The relief sought by Emirates is an attempt to enforce that judgment against RAM by seeking the reversal of certain disposals of his assets to the Second to Fifth Defendants.
7. The ability to set aside a transfer undertaken in fraud of creditors has been recognised by Jersey law. In the case of Golder v Societe de Magazine Concord Limited [1973] JJ 721, the Court held that in order to succeed in an action of this nature, the creditor must prove an intention to defeat creditors, their actual defeat, and that the debtor was insolvent or became insolvent as a result of the alienation of assets which it was sought to set aside.
8. Further consideration was given to the nature of a Pauline action in Re Esteem Settlement [2002] JLR 53, where the Court said, at paragraph 261 et seq:
9. In Eckman v Sidem [2009] JRC 233, the Court particularised the ingredients of a Pauline action in the following terms:
10. It is therefore necessary for the claimant to prove in this case that RAM was insolvent or rendered insolvent. In Esteem [supra], the Court considered how insolvency might be established and at paragraph 202 et seq stated:
11. Following from the statements above, it is also necessary to consider whether or not the transactions entered into by RAM had been made with the substantial intention of the defeat of his creditors. Once again, the Court in Esteem (supra) gave consideration to this element and at paragraph 223 stated as follows:
And, at paragraph 225:
12. The above citations set out the legal principles and tests which the Court must consider and apply before Emirates can succeed in its claim to reverse certain transactions entered into by RAM by way of transferring assets to the Second to Fifth Defendants.
13. We do not, in this judgment, go into the minute detail of the facts of this case. Indeed, much of the factual position is agreed by all of the parties. What is not agreed by RAM is his insolvency at certain times and his intention to defraud creditors at the time the transactions were entered into.
14. The background to the application does not appear to be in dispute. The factual statements that we make hereunder are taken from what we take to be the undisputed statement in the skeleton arguments and / or pleadings, substantiated where appropriate by affidavit evidence to which, in some instances, we make reference. We do not, however, refer to all of the documentation filed by the parties in support of the factual position as we understand it.
15. RAM was originally the sole beneficial owner of System Construct Dubai LLC ("System Construct"). He was one of the three directors of that company, the others being Mr Fadi Mahmoud Chehabeddine and Mr Naji Mahmoud Chehabeddine (together referred to as "the Chehabeddines").
16. On 25 January 2010, System Construct entered into an agreement with Emirates under which Emirates provided certain financial facilities. RAM and the Chehabeddines each signed the facility agreement relating to that facility as directors of System Construct. They also each provided personal guarantees to support System Construct's borrowings.
17. The facility agreement contained provisions to the effect that if System Construct defaulted on the loan then the outstanding liabilities became due and payable on Emirates' simple demand.
18. The personal guarantees executed by RAM and the Chehabeddines provided that each guarantor "unconditionally guaranteed and promised to pay on demand...any and all sums of money that System Construct is obliged to pay...under the facility agreement".
19. Although the facility agreement went through a number of amendments, at each stage RAM and the Chehabeddines confirmed their personal guarantees in respect of any increased liabilities each time the facility agreement was amended.
20. System Construct sustained heavy losses, and by October 2014 it had defaulted on the loan to Emirates. RAM, accordingly, under his personal guarantee became a debtor of Emirates as at that date. RAM claims that in early 2014 he had discovered that the Chehabeddines had misappropriated funds from System Construct and he decided to liquidate that company in September. In any event, on RAM's application System Construct was placed into insolvent liquidation on 28 September 2014. RAM commenced proceedings against the Chehabeddines in 2015 and obtained judgment against them in the sum of AED 200,000,000 which remains unsatisfied.
21. In June 2015, Emirates sent formal letters of demand to System Construct, RAM and the Chehabeddines for the monies owed by System Construct and the guarantors.
22. On 19 October 2015, Emirates filed a statement of claim and thereby commenced proceedings against System Construct, RAM and the Chehabeddines ("the Dubai Defendants") in the Dubai Court of First Instance Center for Amicable Settlements of Disputes. On 27 December 2015 the proceedings were referred to the Dubai Court of First Instance.
23. On 16 January 2017 the Dubai Court of First Instance entered judgment in favour of Emirates, ruling that the Defendants, which included RAM, were jointly and severally liable to pay all the monies owed to Emirates as a result of the breach of the facility agreement. They were each ordered to pay AED 142,303,347.42 plus interest.
24. The Defendants appealed to the Dubai Court of Appeal and whilst that process was underway Emirates obtained an attachment against certain of the Defendants' UAE-based assets.
25. The appeals against the judgment of the Dubai Court of First Instance were dismissed on 27 February 2019 although the value of the debt was reassessed on the basis of further evidence to be AED 218,299,040.31 plus interest.
26. The Defendants in the Dubai proceedings further appealed to the Dubai Court of Cassation and that court found that one guarantee letter in the sum of AED 7,000,000 had been returned to Emirates and cancelled in 2015 and thus modified the Court of Appeal's ruling as to quantum, ordering the Defendants in the Dubai proceedings to pay Emirates on a joint and several basis the revised sum of AED 211,299,040.31. That ruling is final and conclusive and is not subject to further appeal. It is that ruling that is referred to at paragraph 6 above and is recognised in this jurisdiction. An affidavit filed by Oasha Obaid Khalifa Abdulla Almehairi, the senior vice president and head of financial restructuring and remediation of Emirates of 25 May 2023, indicates that together with accrued interest at that time, the overall claim that Emirates has against RAM is AED 613,170,559.76, with interest accruing from that date on a daily basis. Limited recoveries have been made.
27. Further background is relevant in as much as for the purposes of the exercise before us, it is important to understand the factual matrix that applied when RAM entered into the transactions which are the subject of the instant claim.
28. Judgments were also obtained against RAM and the Chehabeddines by other parties and were being pursued in the Dubai courts at the same period when Emirates was pursuing its claim against those Defendants. It is not in dispute that other judgments were obtained in Dubai against RAM, the Chehabeddines and System Construct. They are as follows:
(i) On 29 July 2018, the Dubai Court of Cassation upheld a judgment obtained by the Commercial Bank of Dubai against the Dubai Defendants for AED 16,178,179.60 plus interest. Those proceedings had been commenced on 29 December 2014 and the judgment of the Court of First Instance issued on 10 March 2016;
(ii) On 10 February 2019, the Dubai Court of Cassation upheld a judgment obtained by National Bank of Fujairah against the Defendants in the Dubai proceedings in the sum of AED 26,905,114 plus interest. Those proceedings had been commenced in 2015;
(iii) On 9 October 2019, the Dubai Court of Cassation upheld a judgment obtained by the Union National Bank against the same Defendants for AED 3,874,980.17 plus interest. Those proceedings were commenced on 7 June 2017 and the judgment of the Court of First Instance was issued on 29 October 2018;
(iv) On 17 November 2019, the Dubai Court of Cassation upheld a judgment obtained by the United Arab Bank against the same Defendants for AED 60,453,283.83 plus interest. Those proceedings were commenced in 2016 and the judgment of the Court of First Instance was issued on 18 July 2017;
(v) On 21 June 2020, the Dubai Court of Cassation upheld a judgment obtained by National Bank of Umm al Quwwain against the same Defendants for AED 46,264,928.50 plus interest. Those proceedings had been commenced in 2014 and the judgment of the Court of First Instance was issued on 31 December 2015.
29. It is not in dispute that those judgments in Dubai remain unsatisfied and it follows that RAM is liable for a significant sum, in excess of AED 150,000,000 (approximately US$ 41 million), in judgment debts to creditors other than Emirates.
30. We now turn to the transactions that Emirates impugns.
31. As early as December 2006, RAM had set up a trust known as the "Yellow Flower Trust" ("YFT") with UBS Trustees (Jersey) Limited ("UBS"). The beneficiaries of the YFT included RAM, his spouse and his children. Before System Construct had been placed into insolvent liquidation as set out above, RAM had transferred by way of settlement approximately US$4.7 million to the YFT between December 2006 and January 2007.
32. After System Construct was placed into insolvent liquidation, however, the frequency and amount transferred into the YFT by RAM increased significantly. Between March and June 2015, RAM settled approximately US$47.5 million, CHF 213,000 and EUR 2.67 million into that trust. In December 2016, which was shortly before Emirates obtained judgment against the Dubai Defendants, RAM settled a further US$8.5 million and EUR 2 million on to the YFT. In May 2017, RAM settled a further US$10 million on that trust. These transactions were confirmed in the second affidavit of Fiona Margaret Whitehead, an officer of UBS, on 9 January 2024.
33. After Emirates had obtained judgment against RAM on 16 January 2017, it is alleged that he took steps to move valuable assets from his personal estate to other persons. There were monetary transfers and transfers of interests in properties, including those in Dubai, New York and London. Some of the assets were gifted to family members and others were transferred into newly created trusts subject to the law of Jersey for his and his family's benefit. It is Emirates' case that a substantial reason for the transfers was to place RAM's assets beyond the reach of his creditors.
34. On 23 October 2017, a Settlement Deed was executed between RAM as Settlor and the Second Defendant, creating a trust called the Violet Trust. RAM is described in the instrument of trust as the only discretionary lifetime beneficiary and his three children become beneficiaries only following his death. The trust was revocable at RAM's option and was capable of variation and amendment by him. The trust also provides that RAM is entitled to direct that the trustees pay over to him the whole of the income of the fund, and the trustees are permitted to pay the whole or part of the fund to RAM during his lifetime.
35. The letter of wishes executed by RAM on 25 October 2017 states:
"My reasons for settling the trust include:
(1) To benefit the beneficiaries and provide for their education, advancement, maintenance and support;
(2) A desire to avoid the delay, and hardship which can be brought about by lengthy probate procedures;
(3) Succession planning;
(4) To protect the assets of the trust as much as possible from disruptive events such as the bankruptcy of a beneficiary."
36. The Fourth Defendant, Vojin, was incorporated on 24 October 2017. The shares in Vojin were held by entities on behalf of the Second Defendant as trustee of the Violet Trust. On 21 December 2017, RAM gave instructions to transfer US$20,911,312.82 of his own funds from an account with HSBC Private Bank in Luxembourg to Vojin, which sum was added to the Violet Trust's nominal initial assets of AED 100. The transfer was executed on 28 December 2017 and was described as settling funds into the Violet Trust by a letter from RAM dated 8 January 2018. This is described as "the Vojin transfer".
37. Vojin holds an investment account with HSBC Private Bank (Suisse) SA containing a portfolio. The portfolio appears to have been funded almost entirely by cash paid into Vojin's account on 28 December 2017 by RAM. We are informed that as at 1 November 2021, the portfolio's valuation was US$20,872,666.
38. On 9 October 2019, a further Settlement Deed was executed between RAM as Settlor and the Second Defendant as trustee in terms similar to the Violet Trust. The deed provides that RAM was the sole discretionary lifetime beneficiary and that his daughter and her issue would become beneficiaries after RAM's death. This trust was known as the Redington Trust. Redington Holdings Limited, the Fifth Defendant, was incorporated on 15 October 2019, again, held by nominees but this time for RAM. It was in effect, therefore, RAM's company.
39. On 28 May 2020, RAM requested a transfer of US$1,000,002 from the Violet Trust and requested the Second Defendant as trustee of the Redington Trust to accept US$1,000,000 as a contribution to the trust fund. Those requests were acted upon and therefore US$1,000,000 was transferred from the Violet Trust to the Redington Trust on 10 June 2020 by means of a bank transfer ("the Violet distribution").
40. RAM owned an apartment in New York city, namely Unit 26C, 39 East Twenty-Ninth Street ("the New York apartment"), which he had purchased in 2008 for US$2,209,602. On 3 September 2020, he transferred ownership of that apartment to the Fifth Defendant for no consideration.
41. On 1 July 2021, RAM transferred by instrument of gift his beneficial interest in the Fifth Defendant to the Second Defendant as trustee of the Redington Trust ("the Redington gift") and declarations of trust were subsequently executed by the Second Defendant and an associated company acknowledging that they held the shares as nominee and on trust for the Redington Trust. It is not in dispute that RAM was insolvent at the time of, or as a result of, making the gifts.
42. We have had the benefit of reviewing a number of the Second Defendant's internal documents and documents disclosed by HSBC Private Bank (Suisse) it does not appear that RAM informed the Second Defendant or HSBC Private Bank (Suisse) of the existence of the claims and judgments to which he was subject. In a meeting of 11 June 2017 with HSBC Private Bank (Suisse), for example, a meeting note reflects in the summary that "RAM is a very private person and does not like others to be aware of his affairs. Most of his assets are held in cash and he wants to protect this for his family whilst ensuring that Sharia applies in terms of distribution".
43. It is to be noted that at that time the Dubai Court at first instance had already entered judgment against RAM and the other Dubai Defendants for the benefit of Emirates. He was, accordingly, a judgment debtor of Emirates at the time that the Violet Trust and the Reddington Trusts were created.
44. As we have already indicated, the Violet Trust contains an express power of revocation by RAM at clause 3.1 and the letter of wishes includes the desire to protect the assets in trust as much as possible from disruptive events such as the bankruptcy of a beneficiary. Very similar provisions apply to the Redington Trust, and in clause 3, that mirrors the powers contained in the Violet Trust, the following provisions are to be found:
"3.1 Subject to clause 3.2 the settlor may by deed revoke this settlement in whole, or with the prior written consent of the trustee (who may have regard exclusively to the trustee's own interests in deciding whether to grant or withhold consent) in part.
3.2 No exercise of the powers conferred by clause 3.1 above:
(a) shall take effect until the deed by which such power is executed is actually received by the trustee; or
(b) may prejudice or effect the validity of any payment of capital or income or other act or thing made or done prior thereto."
45. This, with the other powers contained in the deeds setting up both the Violet Trust and the Redington Trust, seem to us to make it clear that RAM intended to and did retain a significant amount of control over the assets of the trusts.
46. As part of the evidence before us, Emirates lists a number of other disposals that RAM made after Emirates had obtained judgment against him in the Dubai proceedings. This, so it is alleged, demonstrates a pattern of RAM dissipating his assets during a period where he was subject to a number of claims for substantial debt. Those transfers include:
(i) On 28 November 2018, RAM transferred four Dubai properties to his children for no consideration. They have a value of approximately US$5.3 million.
(ii) On 28 February 2019, which was the day after the Dubai Court of Appeal gave judgment as set out above, RAM transferred a further Dubai property to his children for zero consideration. It has a value of approximately US$2.7 million.
(iii) RAM transferred the legal title to his London property that he had purchased in 2007 for £1.69 million to his son, Abdulaziz, for no consideration on or about 8 July 2019; and
(iv) The transfer of £200,000 and £2,336,873.28 to the same son's UK bank account on 16 August 2019 and 18 October 2019.
47. Other transfers have been identified by Emirates that took place since the commencement of the instant proceedings and Emirates' case is, in short, that when considered in the round, all of the disposals demonstrate a clear pattern of dissipation by RAM of his valuable assets after he had become a judgment debtor in respect of very substantial debts and that these had the effect of placing valuable assets outside the reach of his creditors.
48. RAM denies that the disposals to which we have made reference reveal any pattern of deliberate dissipation to avoid creditors. We note, however, the transfers of the London property and the money transfers set out in paragraphs 46(c) and 46(d) above were the subject of proceedings in the High Court under the heading Emirates NBD Bank PJSC v Almakhawi and Another [2023] EWHC 1113 (Comm). In that judgment, Emirates sought to claim the English property and the money transfers on the basis either that the assets were still beneficially owned by RAM and were thus subject to a resulting trust in his favour under English law, or that they amounted to transactions to defraud creditors within the meaning of Section 423 of the Insolvency Act 1986.
49. RAM, in his defence, contended that the property and the money transfers represented gifts to his son, principally for the purposes of succession or inheritance planning, and whilst it was accepted that the transfers were gratuitous, they were not made for any prohibited purpose set out in the Insolvency Act of 1986.
50. The provisions of the Insolvency Act 1986 are not applicable in this jurisdiction and the Emirates claim in these proceedings proceeds under a different heading. Notwithstanding this important consideration, it is of interest to note the findings of the learned judge in the English proceedings.
51. Emirates, in the English proceedings, as in these proceedings, points to the pattern of transfers as establishing that they were made for a prohibited purpose and RAM, for his part, maintains that they involve succession and inheritance planning against the background of a dispute within RAM's own family about an inheritance and his desire to avoid the same problem arising again. It is of interest to note that at paragraph 181 et seq of the English judgment, it was clear that the learned judge was fully informed about RAM's difficulties in giving evidence for medical reasons and, indeed, received a report from the same consultant psychiatrist referred to at paragraph 4 above whose evidence was tendered in support of RAM's application to adjourn the Jersey proceedings. RAM nonetheless gave evidence in the English proceedings, although the learned judge took the challenges that he faced into account. After hearing the evidence, the learned judge expressed the view that he needed to approach RAM's evidence with caution.
52. At paragraph 314 of the judgment, the learned judge said that RAM's "evidence was unsatisfactory in a number of respects, and I simply do not accept his evidence that the transfers had nothing to do with the Dubai proceedings or the desire to protect his assets from creditors; on the contrary, in my judgment the matters explored during the course of his evidence are consistent with the opposite being the case".
53. Furthermore, the judge found that RAM had in his judgment relied upon a false document. At paragraph 223, he says:
54. The judge also found that there was little evidence of any steps taken by RAM to transfer assets prior to 16 January 2017 when judgment was given against him by the Dubai Court at first instance and the Court there gave relief under Section 423 of the Insolvency Act 1986 on the ground that the transfers were transactions defrauding creditors within the meaning of that section. At paragraph 320, the Court says:
55. RAM has not, so we are informed, appealed from that judgment.
56. During the course of the judgment, the Court had cause to consider the creation of the Violet Trust. That of course is one of the matters within which we are concerned. The letter of wishes setting up the Violet Trust was put to RAM by counsel in the English proceedings and specifically it was put to him that he had told the Second Defendant that the purpose of the proposed trust was in part to protect his assets for the benefit of his family, and it was suggested to him that this was to avoid them being taken by his creditors. The question and answer between counsel and RAM is recorded in the English judgment in the following terms:
57. The learned judge went on to say that the answer given by RAM gave the impression that the Second Defendant had come up with the idea of putting assets into trust but that that was inconsistent with the HSBC meeting report.
58. As we have already indicated, we fully appreciate that the English High Court was not dealing with the transactions that are being impugned before us in the instant case. The arguments, although the legal principles to which they were directed were different, were very similar between the English proceedings and the proceedings before us. Furthermore, of course, those arguments were tested before an English judge because RAM gave evidence and was subject to cross-examination. We do not, of course, in this Court treat the determination by the learned judge of the High Court as determinative of the factual matters raised or of the arguments before us, but we view with interest the findings of that Court and the fact that those findings have not been appealed.
59. We understand that there are other proceedings in New York and Switzerland relating to the enforcement of the Dubai judgment including against the apartment in New York, and the transfer by RAM to Redington as set out above. We understand that RAM is no longer represented in the New York proceedings and that Emirates has been granted a default judgment in respect of recognition and enforceability of the Dubai judgment. Similarly, the Geneva Court has ruled that the Dubai judgment is enforceable in Switzerland and the Geneva Court of Appeal has dismissed RAM's appeal against that judgment. He has, so we are informed, filed a notice of appeal to the Swiss Supreme Court which has now been determined and dismissed.
60. In essence, Emirates seeks orders setting aside both the Vojin transfer and the Redington gift on the basis that a substantial purpose of those disposals by RAM was to defeat his creditors, including Emirates. It is entirely common ground that the assets were transferred gratuitously but RAM maintains that neither the Vojin transfer nor the Redington gift are impeachable because they are legitimate asset management and succession planning steps.
61. RAM has accepted that he was insolvent at the time of the Redington gift in 2021 (see paragraph 21.3 of RAM's answer). The issues, according to Emirates, that remain to be determined are (a) with regard to the Vojin transfer, whether RAM was insolvent when the transfer was made or became insolvent as a result of it; and (b) in respect of both the Vojin and the Redington gift, whether the transactions were entered into by RAM with the substantial intention of defeating his creditors, and whether such prejudice was in fact caused to Emirates.
62. The evidence provided on behalf of RAM largely consists of his second witness statement dated 26 August 2023. As we have already indicated, it was originally believed that RAM would give evidence before this Court and he has, of course, not done so. The contents of his witness statement are untested and inevitably that must limit the weight that this Court can give to it. There is, to the Court's mind, a material distinction between looking at contemporaneous records and documentation and drawing inferences from their contents and taking at face value, untested, the assertions made in witness statements as to intent.
63. There is no doubt that RAM is an educated individual who was described by the English High Court as articulate when he gave evidence before that Court.
64. His witness statement discloses that he is a UAE national and at the time of its deposition was seventy-six years of age. He had previously held high office, including that of the UAE ambassador to Kuwait, Japan, Lebanon, Germany, Finland and Sweden and he had served as a member of the UAE federal parliament. He speaks a number of languages but describes his command of English as basic. He has three doctorates.
65. He accepts that he was a personal guarantor of facilities afforded to System Construct by Emirates, and notes that by 2014 it was clear that System Construct was suffering substantial losses. He maintains that a significant cause for System Construct's losses was mismanagement by the other shareholders, the Chehabeddines, who had, he alleged, misused the company's credit facilities and used credit facilities to pay for work being undertaken by a different company. RAM speaks of the proceedings commenced by Emirates against him and maintains his view that he did not have a fair hearing in the proceedings in Dubai. That being said, as we have already noted, the highest court, the Dubai Court of Cassation, upheld the decisions of the lower courts and the relevant judgments have been declared enforceable in this jurisdiction.
66. RAM also raises concerns about claims made under performance guarantees and says that without further information relating to them, he cannot advance any further evidence as to the legitimacy or otherwise of the amounts paid out by Emirates under those performance guarantees. He also raises concerns relating to the evidence of the Dubai banking expert. He complains that there should have been a panel of three experts but only one was appointed in his case and he asserts that the expert did not carry out his work in accordance with the scope as mandated by the Dubai Court.
67. He raises in his witness statement other concerns relating to reports filed in connection with the bankruptcy of System Construct and also remarks that Emirates are seeking to enforce a judgment including what he characterises as punitive interest.
68. The nub of his defence, however, appears from paragraph 60 et seq of his witness statement in which he asserts that he has not taken steps to dispose of numerous assets to preserve them from his creditors including Emirates. He had wished, instead, to begin the process of transferring assets to his children as an inheritance while he was still alive and that he had begun to take those steps before the Dubai judgment was obtained and continued to do so afterwards. He claims he did so in a legitimate, open and transparent way and upon the advice of professional wealth managers. The sole objective behind these transfers, he maintains, was estate planning.
69. He was anxious because his brother Mohammed's death had led to an acrimonious family dispute relating to inheritance. The death had taken place on 21 November 2014 and the dispute remains unresolved.
70. RAM asserts in his witness statement that he had begun succession planning for the benefit of his children in 2015 because of a dispute regarding his brother's estate and his own declining health. He claims that he started having discussions with his children regarding his succession planning in 2015 and he had instructed his Dubai lawyers in 2015 to start transferring various assets to his children. He did not think any progress had been made and in 2017 he had sought to transfer various assets for the benefit of his children.
71. He explains the creation of the Redington Trust and the Violet Trust and he refers to advice taken from a Carly Botterill of HSBC Private Bank (Suisse) in February 2019. As a result of the arrangements then put in place, the Redington Trust was settled on 9 October 2019. He explains the mechanism for the various transfers made into the Violet Trust and he explains the transfer of the London property which was, of course, the subject matter of the English proceedings referred to above. He maintains that he had decided to transfer the London property to his son Abdulaziz in 2015 when his children and he were discussing succession plans together. With regard to the money transfers that were the subject matter of the English proceedings, he maintains that those transfers were made as part of his succession planning, as well as an attempt to repay Abdulaziz for the cheques he had issued on RAM's behalf.
72. In conclusion, RAM says that Emirates has not given any credit for the recoveries it has made against the Chehabeddines, that System Construct was gravely mismanaged and its funds were misappropriated by the Chehabaddines, and that Emirates had successfully obtained a judgment against him on the basis of an expert report that inaccurately calculated the judgment sum due. He had gifted various assets to his children after the death of his brother and the timing of the transfers were not, so he maintains, influenced by any claims that Emirates had against him.
73. We have not set out in the above paragraphs all the detail provided in RAM's witness statement. We observe however that there were no supporting witness statements and, as indicated above, in the event RAM did not give evidence before us, and neither did any member of his family with whom his conversations about inheritance would have taken place.
74. RAM's argument through counsel was based on the fact that it could not be established that RAM was insolvent at the time of the Vojin transfer. It is clearly the case that the assets that RAM had already transferred into trusts could not be counted for the purpose of his solvency. In Re Esteem (supra) at paragraph 212, the Court, considering a similar issue in that case, said:
75. To the extent that RAM's arguments were based upon the assets already settled in trust, we cannot accept them as pointing towards his solvency.
76. It is argued that at the time of the Vojin transfer RAM was solvent but we prefer the argument of Emirates in this respect. RAM has not demonstrated in evidence before us that he was at the material time solvent and remained so after the Vojin transfer. On the question of intention, RAM argues that the Redington gift is appropriately named because he was clearly seeking to provide for his daughter Hessa after his death. This move was consistent with the motive of estate planning. Whilst a gift of this nature may or may not provide a mechanism for estate planning, the context in which the gift took place was the existence of many claims against RAM himself and his admitted insolvency at the time. The fact that he was perhaps providing for his daughter by placing certain of his assets beyond the risk of his creditors does not mean that a substantive intention was not to defeat his creditors - merely to defeat them from claims against assets he wished to see in the hands of his daughter.
77. It is argued that the YFT was established in 2006, the implication being that it was clearly for estate planning because at the time RAM was solvent. The trust itself may have been established for estate planning purposes but, in our judgment, it was also established in order to protect RAM's assets from insolvency of a beneficiary including RAM himself. We also note, as stated above, that the transfers into the YFT increased when the creditors began to close in around him.
78. Paragraph 21 of the skeleton argument filed on behalf of RAM refers to a number of documents which it is said support the claim that the transactions RAM entered into were for estate planning purposes. We have no reason to dispute, for example, that there was family disharmony and disagreement concerning the estate of RAM's brother, nor that there was mutual support on occasion between RAM and Abdulaziz. We do not need to determine these matters and we are conscious that because RAM has not given evidence the assertions that he makes about his intentions and the contents of the documents are simply not capable of being tested. We once again repeat the letter of wishes drafted in 2017 with regard to the Violet Trust which contains the following intention:
"To protect the assets in the trust as much as possible from disruptive events such as the bankruptcy of a beneficiary."
79. We cannot say how RAM would have explained the various documents when probed about them in cross-examination, nor how he would have explained his intention when confronted with the reality of the substantial claims against him at the times of the Vojin transfer and the Redington gift. We are left therefore to give whatever weight we feel is appropriate to the documentation with regard to its content and its timing, and the very significant fact that its contents are untested. We do not view as particularly persuasive the words in various file notes and otherwise, talking about RAM's desire to benefit his children after his death. We would have been surprised, even in a trust instrument that had for its sole purpose the defeat of creditors, not to have seen some dispositive wishes for the time after the death of the Settlor.
80. RAM puts before us the case of Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank and Trust Company [2011] UKPC 17, a decision of the Judicial Committee of the Privy Council on Appeal from the Court of Appeal of the Cayman Islands. In that case, their lordships were considering a trust in which there was a power of revocation which their lordships held was not a fiduciary power and was exercisable at the whim of the settlor. The court there said:
81. We accept that a power of revocation is not a fiduciary power unless qualified as such in the trust instrument. Indeed, RAM also put before us the case of In the Matter of Piedmont Trust and the Riviera Trusts [2018] (2) JLR 306. We think we need go no further than paragraph 1 in the headnote for that case in which the Court said this:
82. These cases were put before us to suggest that in the circumstances where there is a power of revocation the assets of the trust might be taken as assets of RAM when assessing his solvency.
83. We do not accept that argument.
84. It was argued that the allegation of insolvency was made simply on the basis of Emirates' figures. To a significant extent it is correct that Emirates have provided much of the documentation and the trail of payments and claims to support its argument relating to insolvency. However, it is equally fair to say that RAM, who has the benefit of high-level professional advice, has not provided evidence to persuade the Court that he was not insolvent at the material times.
85. We do not understand the Judicial Committee of the Privy Council, in Tasarruf (supra) to be saying that the assets that were subject to the power of revocation were owned by the settlor but rather such a power was tantamount to ownership for certain purposes. We do not take that judgment to be qualifying the statement set out in Re Esteem (supra) that assets settled on trust, even when there is a power of revocation, should not be counted as assets of the settlor for these purposes.
86. The Second to Fifth Defendants inclusive in effect maintain a neutral stance in these proceedings. They admit certain of the facts alleged and put Emirates to strict proof of the other allegations made. A Beddoe order was granted on 19 May 2022 which required the Second Defendant to take a neutral stance in the proceedings and to provide further information and disclosure to the parties and to the Court in compliance with its obligations of discovery.
87. Other than making discovery and providing records, the Second to Fifth Defendants have taken no material part in the proceedings before this Court.
88. It appears to us that taking the references in paragraphs 202 and 204 in Re Esteem (supra), given that RAM accepts that he was insolvent at the time that Emirates brought their proceedings, it is for him to demonstrate that he was not insolvent at the time of the Vojin transfer (his having already accepted, as mentioned above, that at the time of the Redington gift he was or became insolvent). We accept the argument put forward in Re Esteem to the effect that a course of conduct with a series of connected dispositions all made for the same purpose and which taken together contribute to insolvency, would meet the insolvency test for a Pauline action. It is not disputed that by the time of the Vojin transfer the Dubai Court at first instance had already given judgment against RAM and he did not pay that debt - and, indeed, has not done so since. We also note, as set out earlier in this judgment, the other judgment debts against RAM in Dubai which illustrate that as at the date of the Vojin transfer, namely 28 December 2017, he owed very substantial amounts of money, all of which claims appear to have been subsequently vindicated by the Courts in Dubai. The substantial amounts that were owed at the time of the Vojin transfer are also subject to interest. RAM has not in his witness statement or otherwise provided evidence that he could have paid his creditors from available assets after the Vojin transfer and we note once more at paragraph 202 of Re Esteem which states:
89. We note at paragraph 100 of RAM's witness statement that he indicated that "prior to 2014 I had no financial issues and I supported Abdulaziz financially as he was still young and as any father would support his son". At paragraph 102 of the same statement, RAM says:
"Abdulaziz has also given me other funds here and there since I started to experience financial difficulties, but these payments were for smaller amounts in cash and are not documented. Abdul Aziz has always supported me when I needed it and if he was able to do so."
90. The context of those excerpts is the decision by RAM to transfer the London property in 2015 and it suggests that RAM was in fact in financial difficulty and could not have paid his substantial debts at the time of the Vojin transfer.
91. In accordance with the principles that have been set out in Re Esteem, we are satisfied that the burden has moved to RAM to prove to the appropriate standard that he was solvent at the time of the Vojin transfer. He has failed to do so and accordingly on that basis we are satisfied that the insolvency part of the test for Pauline relief is satisfied in this case.
92. Even if the burden had not shifted, in our judgment the juxtaposition of claims against RAM in Dubai and no evidence that he has settled any of them, once again points in our view to his insolvency over a relatively significant period and again, in our view, supports the claim that he was insolvent at the time of the Vojin transfer or became insolvent as a result of it or very soon thereafter (as a result of the Vojin transfer and other dispositive acts).
93. Turning to the question of intention, we again rely on the dicta in Re Esteem (supra) at paragraphs 223 and 226. It is possible for there to be more than one purpose for a transfer and that notwithstanding the requirements of a Pauline action will be satisfied if a substantial purpose of the transaction is to defeat creditors.
94. It would in our view have been entirely apparent to RAM in September 2014 when System Construct went into insolvent liquidation that he was likely to face substantial claims. By the time RAM made the Vojin transfer, Emirates had already obtained a judgment against him at first instance in Dubai, and by the time of the Redington gift, judgment had been issued in the Dubai Court of Cassation. RAM maintains that the Vojin transfer and the Redington gift had for their purposes legitimate succession planning. We do not suggest, nor do we need to reach the conclusion, that there was no interest or purpose relating to estate planning in the actions that RAM took. We merely have to be satisfied that one of the substantial purposes of his actions was protection against creditors.
95. Although assets had been transferred to the YFT earlier, from March 2015 onwards the transfers sped up and increased and this suggests to us that facing the insolvency of System Construct and the claims by Emirates and indeed other creditors, the financial circumstances that he then faced would have weighed heavily on his mind.
96. We have considered carefully the arguments advanced both by counsel for Emirates in the skeleton argument and in oral submissions before us, and that advanced by counsel for RAM. We have also paid due weight to the untested witness statement of RAM. Other than the fact that RAM's brother Mohammed died in 2014 and there appears to have been a serious inheritance dispute, we note that the larger numbers of transfers and indeed the Vojin transfer and Redington gift, took place after RAM was a judgment debtor and at a time that he knew he had obligations to meet. He cannot have been other than fully aware that the result of his transfers would have been to place his assets beyond the reach of his creditors, including Emirates. He knew that he was disposing of very substantial parts of his assets, and we repeat the note made by HSBC Private Bank (Suisse) in June 2017 to the effect that:
"RAM is a very private person and does not like others to be aware of his affairs. Most of his assets are held in cash and he wants to protect this for his family."
97. In our judgment, the balance of probabilities is that in making the Vojin transfer and the Redington gift, RAM was seeking to protect his cash and assets for himself and his family. He was, in our judgment, seeking to put them beyond the reach of his creditors.
98. We infer that the timing of the various transfers set against RAM's knowledge of the claims against him and his insolvency caused him to make the transfers that are impugned in these proceedings to place assets out of the reach of his creditors, including Emirates.
99. We are satisfied that the claim for Pauline relief has been justified and we declare that the Vojin transaction is void and hereby set aside, that the Redington gift is void and hereby set aside, and we make the declarations sought that the settlement of the Vojin transfer of funds on the terms of the Violet Trust and the Violet distribution are void and of no effect. We further order that the Second to Fifth Defendants shall take all steps necessary to give effect to the declarations that we have made above.