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Claim No: CFI 020/2014

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai

IN THE COURT OF FIRST INSTANCE
BEFORE JUSTICE SIR JEREMY COOKE

BETWEEN

GFH CAPITAL LIMITED

Claimant

and

DAVID LAWRENCE HAIGH

Defendant

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JUDGMENT

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Transcribed from the oral judgment delivered on 4 July 2018, revised and approved by the Judge.

ORDER

UPON the trial of the claim and counterclaim herein.

AND UPON the Court refusing the Defendant’s application, by application notice dated 28 June 2018, for an adjournment of the trial.

AND UPON HEARING Counsel for the Claimant and the Defendant being neither present nor represented.

AND UPON READING the documents contained in the Core Bundles, and in particular the affidavits and/or witness statements of the following witnesses:

- James Sinclair
- Emma Kettleton
- Alexander Taylor
- Nicholas Bortman
- Richard Phillip Rocher
- Jinesh Patel
- Imran Sami
- The Defendant
- Asim Al Raisi
- Eugene Smirrnov
- Arthur Abduramanov

and the further documents referred to in the course of the trial.

AND UPON the Court receiving the oral evidence of Jinesh Patel.

IT IS HEREBY ORDERED THAT:

1. Judgment be entered for the Claimant in the amounts of AED 8,735,340, USD 50,000 and GBP 2,039,793.70, plus simple interest from 28 May 2014, accruing at the rate of EIBOR (three month rate) + 1 per cent.

2. It is declared that the sums of AED 8,735,340, USD 50,000 and GBP 2,039,793.70, when received by or on behalf of the Defendant, were received by him on constructive trust for the Claimant.

3. The Defendant’s counterclaim is dismissed.

4. Save where the subject of previous costs orders, which remain in force, the Defendant shall pay the Claimant’s costs of the proceedings on the indemnity basis, to be assessed if not agreed.

Issued by:
Ayesha Bin Kalban
Assistant Registrar
Date of Issue: 4 July 2018
At: 3pm

REASONING

Introduction

1. This litigation has a protracted procedural history, the details of which appear in Appendix 1 to this Judgment. The Defendant, who has throughout the proceedings failed to comply with orders of the Court and sought to adjourn hearings, did not appear at the trial, did not give disclosure of documents and did not put in any evidence. As had occurred on previous occasions with interlocutory hearings, he also requested an adjournment of the hearing at the last moment and made an application to do so on the second morning of the trial. He produced no contemporary medical evidence of unfitness to attend despite it being made plain in previous pronouncements of the Court in orders and directions that this would be required for any adjournment to be considered on such grounds.

2. On 9 June 2018 the Defendant was, in accordance with the Court’s previously expressed statements, offered the option of appearing in court in person, or if that was not possible because of immigration or other issues, of appearing by video conference call, skype or telephone. He had appeared by telephone in the Court of Appeal hearing last year. He chose not to avail himself of any of these options.

3. Following various exchanges of emails in which the Defendant claimed, contrary to all the evidence, that he had not received various orders made by the Court nor documents from the Claimant and the failure of his last minute email request for an adjournment, the Court, at his request, attempted to contact the Defendant by telephone on the number given by him but received on three occasions, following two rings of the ordinary ringing tone a tone which ordinarily signals that the number is not an accessible number or is otherwise unobtainable. Further emails followed. This was followed by an application for an adjournment made on the proper form (but without paying fees) sent by email with supporting witness statements. That was refused for reasons given separately. The Court had made it plain and has continued to make it plain that the Defendant could participate in the trial by telephone or other means, should he wish to do so. The Court was not however prepared to adjourn the hearing on the basis of unsubstantiated assertions of illness and hospitalisation without proper medical evidence. In consequence the trial took place in his absence with Counsel for the Claimant accepting the responsibility owed to the Court of explaining the points which it would have been open for the Defendant properly to take by way of defence and drawing attention to the points he had previously taken in witness statements and affidavits filed in interlocutory proceedings and in the Defence and Amended Defence and Counterclaim.

4. The Court is entirely satisfied that the Defendant has had full and proper notice of these proceedings, has been served with the Court’s orders and all the trial documents. He has chosen not to appear by any of the means offered and has over the period since the decision of the Court of Appeal following the hearing last year, ignored Court orders and chosen not to produce any evidence which could properly support an application for, or justify, an adjournment of the trial. He has had every opportunity to present his case and has elected not to do so.

5. During the course of these proceedings and in particular in the first 6 months thereof following the grant of a freezing injunction on 3 June 2014, the Defendant was represented by no less than 4 firms of solicitors and two leading counsel, who acted for him in seeking variations of the freezing order. He has instructed accountants and received a report and advice from them. When the English proceedings are taken into account, the total number of lawyers and accountants instructed exceeds those figures. Whilst seeking to enunciate some form of defence in both jurisdictions, no-one has ever come forward with a coherent explanation for the fact that large sums of money found their way into the bank accounts of the Defendant and that false invoices were created with payment instructions which disguised the receipt of those sums by the Defendant. If there was any real defence to the claim, it would have been put long since and the Defendant would be able, with or without lawyers, to put it now. Instead he has embarked on a series of delaying tactics and made extravagant allegations against the Claimant.

6. Notwithstanding constant complaints about unavailability of documentation, the Defendant has, as the evidence shows and his current solicitors in February 2015 stated, access to a computer outside Dubai containing documents upon which he has been able to draw. He has not been slow to put forward documents which are said to support his position and drafts of supposedly agreed contracts.

7. The Court, bearing in mind the seriousness of the allegations made, is satisfied on the evidence that the Defendant is a fraudster who caused to be paid into his own bank accounts and that of his close friend, monies belonging to the Claimant in the sums of £2,039,793.70, AED8,735,340 and US$50,000. Moreover, his conduct throughout these proceedings has been entirely consistent with that finding, in seeking to delay matters, in failing to give disclosure and in seeking to manipulate or play fast and loose with the court’s procedures. This course of conduct is evident from previous judgments given by judges of this court and from the procedural history set out in Appendix 1.

8. The Court heard evidence from Mr Jinesh Patel, the former Senior Executive Officer of the Claimant appointed just over a month before the resignation of the Defendant from his position as Deputy Chief Executive Officer on March 14 2014. It also received in evidence affidavits and witness statements, as appears hereafter, and extensively examined the documents, invoices, bank statements and accounting information in the trial bundles. It has borne in mind the statements made by the Defendant and witness statements produced by him for the Court of Appeal hearing even though not put in evidence at the trial. It has taken account of every explanation the Defendant has offered in the course of these proceedings for the fact that so much of the Claimant’s money was transferred to his bank accounts.

Overview

9. What emerges from the evidence is a clear picture of the Defendant procuring payments of the Claimant’s funds to himself or to his order with the creation of false invoices in an attempt to conceal the reality of his defalcations. Despite a number of risible explanations, there is no gainsaying the fact that money belonging to the Claimant ended up in the bank accounts of the Defendant, who was a senior employee in what he admits was a fiduciary position. None of the funds have been returned and there is, despite attempts to justify the receipt of funds, no proper basis for the Defendant having received them or for retaining them.

The Legal Principles

10. It is common ground, as shown by the Defence which was drafted by lawyers and the Amended Defence and Counterclaim which was evidently drafted with the assistance of lawyers, that the Defendant, as Deputy Chief Executive Officer of the Claimant, owed the Claimant duties as a fiduciary to act at all times in the best interest of the Clamant, and to act honestly towards the Claimant and that his contract of employment contained implied terms to the same effect.

11. It is also common ground that in the course of his employment the Defendant was authorised to approve invoices raised by third parties for payment by the Claimant and was authorised as a Category A signatory, with Mr Biju Matthew (a bookkeeper and Category B signatory) (“ Mr Biju”) to authorise payments by the Claimant up to a value of $50,000 (worth approximately AED 185,000).

12. The only two authorities which it was necessary for the Claimant to cite to the Court were FHR European Ventures LLP and others v Cedar Capital Partners LLC [2015] AC 250 and In Re H [1996] AC563.

13. The allegations made against the Defendant here are serious as are the allegations which he makes against the Claimant of a system of false invoicing and regulatory evasion and the use of false documentation in a number of different ways for business purpose. Those allegations appear in various paragraphs of the Amended Defence and Counterclaim (which I treat as being supported by a Statement of Truth from the Defendant) and in various witness statements made by the Defendant in interlocutory proceedings in this jurisdiction, as well as elsewhere in the world.

14. The Defendant, in his Amended Defence and Counterclaim pleaded that the parent company of the Claimant, Gulf Finance House BSC (“Gulf”) was a Bahraini Islamic investment bank providing investment opportunities to high net worth individuals, with headquarters in Bahrain and shares listed on the London Stock Exchange as well as the equivalent exchanges in Bahrain, Kuwait and the Dubai Financial Market. He alleged that the Group was financially distressed and that Gulf was under a lengthy investigation by the Central Bank of Bahrain (CBB), that the Claimant was used as a “booking centre” by Gulf, its purpose being to eliminate the need for CBB or Gulf Board of Directors’ consent to the activities and decisions of Mr Al Rayes, the CEO of Gulf. He further alleged that the latter had day to day control of the Claimant as its Managing Director and CEO, and that payments were made to the staff of Gulf which had to be hidden by a false audit trail, false payment details and concocted documents put in place on the latter’s instructions. Mr Al Reyes would run existing and new projects through the Claimant out of sight of the CBB and the Gulf Board, with payments made in a clandestine manner. It was said that the Claimant engaged in regular practices of false invoicing and accounting from late 2012 to 2014 and that such methods were used to make payments to employees other than the Defendant. The Defendant’s case was that he had never created false invoices or procured the creation of false invoices, but that this was a regular practice at the Claimant’ offices and that he had threatened to “whistleblow” and report the accounting violations to the DFSA and law enforcement authorities. He claimed that any payments received by him in the context of false invoices were payments made to his bank accounts with the full knowledge of the Claimant, “in payment of his salary, commission/referral fees entitlement, legitimate ongoing expenses, and monies that the Defendant had paid personally on behalf of the Claimant and Gulf in relation to certain ongoing projects and also as part of an ongoing practice of false invoicing by the Claimant”.

15. In the case of the allegations made against the Defendant, I find them proved by the most cogent evidence. In the case of the allegations made by him against the Claimant, there is no evidence whatsoever which could be relied on to support such a finding. Quite apart from the lack of any evidence adduced by the Defendant in support of his case on this or any other aspect, the evidence of Mr Patel and Mr Sami establishes the contrary. It is most convenient to start with the evidence of the Bank Accounts, the forged invoices, the funds transfer forms and the instructions of the Defendant. These documents as shown by the affidavits and witness statements of persons outside the Claimant establish the fraud.

The Bank Accounts

16. The evidence shows clearly that the bank accounts, into which various sums of money were paid which are now the subject of claim, belong to the Defendant, with the exception of one account into which three payments totalling £136,800 were made.

The Forged Invoices

17. It is common ground that a series of forged invoices were created and utilised to provide a false audit trail for payments made out of the Claimant’s accounts. The evidence from representatives of those entities clearly establishes, even where there is no admission, that the invoices did not emanate from the companies or individual whose name appeared at the top of the invoice and that those companies or individual did not own the bank accounts into which the payments were made.

Instructions to pay

18. In a number of cases there are express email instructions sent by the Defendant from his email address requesting Mr Biju, the Claimant’s junior employee in the Dubai office who was under the Defendant’s line control, to pay invoices which are now seen to be forged. Although the Defendant has never admitted that these instructions came from him, it is not possible that they came from anyone else given the nature of the exchanges between Mr Biju and the author of the emails in question. He needed the assistance of Mr Biju as, for transfers of sums under $50,000 there was a need for two signatories, one from Category A (the defendant himself) and one from Category B (in this case Mr Biju) for the Claimant’s bank, Mashreq Bank, to accept the instructions. For sums over $50,000, two Category A signatures were required which meant another senior figure at Board level was needed. Generally, where the figure in question was over $50,000, the Defendant asked Mr Biju to split the figure into smaller amounts so that the limit was not exceeded, with invoices to match. To these requests, Mr Biju acceded.

19. I have no hesitation in concluding that emails emanating from the Defendant’s account were sent by him, both in this context and in the context of other instructions which appear below. There is absolutely no evidence of any hacking by others into his account nor any reason for such emails to be sent directing payment into the Defendant’s own accounts. Notwithstanding any assertion by the Defendant to the contrary, it is plain that instructions to Mr Biju by email to pay sums “and to split if needs be” or instructions on similar lines, all came from the Defendant and were treated as such and followed accordingly. There were limited numbers of staff at the Claimant’s Dubai office (6 according to the Defendant) and the Defendant was the most senior person there.

20. In a number of other cases there are email instructions from the Defendant to the Claimant’s solicitors Messrs Gibson, Dunn and Crutcher (“GDC”) to pay sums standing to the credit of the Claimant in its client account to one or other of the Defendant’s accounts set out in paragraph 8 of this judgment above. Those requests were sometimes supported by false invoices but on other occasions were paid out by GDC on the Defendant’s instructions alone. It is clear that GDC accepted such instructions as coming from the Defendant and the exchanges between him and them, as well as between himself and Mr Biju in this context, mean that the only realistic conclusion is that the emails came from the Defendant himself.

21. In virtually every case, the Court has seen a funding request to the Claimant’s bank, Mashreq Bank, seeking payment of a forged invoice to one or other of the accounts set out in paragraph 8 above, belonging to the Defendant. Each such funding request is signed by Mr Biju and by the Defendant with either an original signature, an electronic signature or a facsimile, save for one request which is countersigned by an unknown signatory in addition to the signature of the Defendant, where the sum in question exceeded $50,000 and a second Category A signatory was needed apart from that of the Defendant. As the funding form set out the name of the beneficiary as the third party supplier, no one who was not familiar with the accounts held by that supplier would readily recognise that the numbered account to which the payment was to be made did not in fact belong to the supplier at all, but was that of the Defendant.

22. Throughout the second half of 2013 the Defendant was rarely in Dubai, so it is clear that, during that period, he required assistance from his PA there, who, on the oral evidence which I heard, was the only person the Defendant entrusted with his stamp and also from Mr Biju, who was required to be the second signatory for the funds transfer form. The Defendant’s PA also had control over the Defendant’s electronic signature. When, in the spring of 2014, the Claimant carried out its review of expenditure incurred, the conclusion was reached that Mr Biju had done what he was told (being dominated by the Defendant and the latter’s PA who together ran the office with a culture of fear), but was not himself dishonest, despite following instructions from the Defendant to split invoices for payment to avoid the need for a Category A signature in addition to that of the Defendant. Between them, the three must have concocted the forged invoices, impressed the Defendant’s stamp on the forged invoices and placed the two necessary signatures on the funds transfer forms, although who was responsible for which element is unclear. What is clear is that the instructions came from the Defendant and could only have come from the Defendant because he stood to benefit from payments to his bank accounts.

23. If it is asked how banks such as NatWest, HSBC and the Co Operative Bank could accept payments into accounts known to be held and owned by the Defendant or Mr Utiyama, when the fund transfer forms sent to Mashreq Bank identified the beneficiary of the payment as GPW, Millnet, Lincoln or David Murray, as the case may be, the answer is that the practice at the time was for the recipient bank only to check the number of the bank account and not the name of the beneficiary, however surprising that may seem. Thus, for the fraud to be discovered and known, the account number had to be identified by personnel at the Claimant as different to that of the supposed recipient. It was only when Mr Patel became Senior Executive Officer at the Claimant in February 2014, saw the large expenditure to service providers in litigation and arbitration in the context of a review of the operations of the Claimant, appreciated that there was an anomaly and instituted a review (including a review by an internal audit team) that the account numbers were identified as accounts not belonging to the third party suppliers. Checking with the purported issuers of the invoices and supposed beneficiaries of the payments resulted in the appreciation that the invoices were forged and the actual beneficiary of the payments was the Defendant.

Millnet

24. Three payments were made without forged invoices but at the request of the Defendant in respect of sums purportedly owed to a company called Millnet which provides support services in the nature of data production, photocopying and production of documents and the like for litigants.

b. Similar instructions were given on 1 August and 6 September 2013 in respect of the sums of £41,600 and £38,200. In each case the request was in the following terms: “can you arrange to pay this please today from the GFH monies on account by same day wire.” The reference on each of these payments was however different. On the 1 August request it was “Project Juliana scanning and processing room fees” whilst on the 6 September request it was “Project Juliana Data room fees”.

25. Whilst Project Juliana was the name for a piece of litigation or arbitration in which the Claimant was involved, Millnet had not been involved in any work in relation thereto. Project Rafael was not a genuine project name for any work of the Claimant but the account in question belonged to a close friend of the Defendant a Mr Rafael Utiyama. The bank statements obtained by court order from NatWest show receipt of those sums from GDC client account and payment out of those sums respectively of £55,957 to the estate agents KFR (with the return of £1000 from KFR) and of £36,023 and £37,023 to the Defendant (less bank charges).

26. The Claimant had engaged Millnet in April 2013 and it had provided services between that date and May 2014 for which it had raised 11 invoices with bank details to which payments should be made. The total value of these invoices was £65,664.64. On 30 October 2013 Millnet had sent an invoice to the Defendant, copied to GDC to which the Defendant had responded:” please send these direct to me only.”

27. There can be no doubt that the Defendant deliberately caused GDC to pay monies held for the Claimant into Mr Utiyama’s account for his own benefit whilst misrepresenting to GDC that the payments were in satisfaction of genuine invoices from Millnet. The first payment which was used to pay KFR appears to have been a payment for sums owed by the Defendant to KFR although the latter has declined to answer any questions in relation to its purpose. On the material available to the Court, it was either payment for accommodation for him and his friend or for sums owed in relation to property deals by the Defendant. Either way it was not authorised expenditure for the Claimant. The latter two payments essentially found their way into the Defendant’s bank accounts, with small deductions by Mr Utiyama for his own or the Defendant’s purposes or living expenditure.

28. I reject the Defendant’s case set out in statements and other documents produced by him that he was entitled to the first payment as expenses in relation to an apartment in London, which was authorised by the Claimant and that the later payments were simply a mistake by other employees of the Claimant who copied the original request. There is simply no evidence of any of these matters and in particular of any such authorisation and, if it had been authorised, why would the payments not be made to the Defendant himself, even if not made directly to KFR? The requests were made by the Defendant to GDC in order to secure payments to himself or to his order, using slightly different forms of words which show that a measure of thought went into each separate request which was made with the deliberate intention of causing GDC to part with the Claimant’s money for a purpose which was not the true purpose.

29. Moreover, if the second and third payments had been made in error, they would on his case have been the subject of reconciliation on an expense account in due course and the Defendant should have notified the Claimant of the error and brought it into account, which he never did. He has never, since putting forward his Amended Defence in which the mistake was given as an explanation, tendered the money in question. In reality, however, the different references given for each payment show that each transfer was deliberately effected with the object of deceiving GDC and any later enquirer as to the purpose of it. There can be no good reason other than to disguise the fact that the payment was to be made for the Defendant’s own unauthorised purposes.

30. The same point applies here as applies across the board to all the payments in question. If the payments were made in respect of a genuine entitlement of the Defendant as he has sought to make out, why would the Claimant or anyone in the Claimant’s offices want to disguise the object for which the payment was made to the Defendant? Only the Defendant would have a motive for such deceit.

GPW

31. The Defendant utilised a similar modus operandi in requesting GDC to make payments into one of two accounts of his at the Co Op Bank in August 2013 in respect of what was described as business intelligence work.

32. Further examples of this method appear between September and November 2013 and the total paid into the Defendant’s account in this way is £480,569.23, as is admitted by the Defendant. In each case a reference was given for the payment, and with the odd exception, false invoices were supplied (in one other case no invoice was supplied, although promised to GDC). The instructions to make payment to the Defendant’s account, in every case always came from the Defendant by email.

33. On 22 September the Defendant requested Mr Biju to pay two numbered invoices ostensibly from GPW for £27,000 and £30,800, Each invoice directed payment into account 675 and, as they now appear, have the Defendant’s stamp on it approving payment. Funding transfer requests to Mashreq Bank appear with the signatures of Mr Biju and the Defendant on them, either original or electronic or facsimile, instructing payment into that account at the Co Op Bank in Manchester. Once again the invoices are not genuine.

34. This system of false invoices with stamp and funding transfer forms with two original or facsimile signatures was utilised over a concerted period between the end of July 2013 and the end of December 2013 to create a false audit trail in respect of payments into account 675 by reference to forged GPW invoices. The total figure paid into the account in this way was £367,751.47. The Defendant did not specifically plead to the allegation of receipt of these payments but it is clear that, as they went into the same account as before, he did receive them. This, when added together with sums paid by GDC, total £848,320.70.

David Murray

35. The system of false invoices and funding transfer forms was operated between December 2012 and December 2013 in respect of a member of the Bar from FCC in London, whose identity was hijacked for payments into account 771 at the Co Op Bank. There are examples of the Defendant instructing Mr Biju to pay sums to this account, splitting the invoices as necessary, evidently to bring each invoice within the $50,000 limit. As there were no genuine invoices for the larger amount, it might well be thought that the Defendant was asking Mr Biju to split a genuine invoice into smaller amounts to avoid the authority issue alone, without the latter appreciating that the numbered account was not that of David Murray but that of the Defendant. The total paid into account 771 by means of false invoices and funding transfer forms which named David Murray, but gave the relevant account number for the Defendant’s account, was £1,054,675.

36. The Defendant admits that account 771 was operated by him but having, in his original Defence admitted receipt of 26 payments, in his Amended Defence and Counterclaim neither admits nor denies receipt of all the payments in question. Self- evidently all were paid into the same account which belonged to him. The amount in question contrasts with genuine fee notes raised on behalf of David Murray by his Clerk in the sum of £11,855.

Lincoln Associates FZE (“Lincoln”)

37. Lincoln was another provider of legal support services to the Claimant which had submitted legitimate invoices to the latter which were duly paid. The total for legitimate invoices submitted by Lincoln and paid by the Claimant was AED 214,200 but a further 7 genuine invoices for a total of AED 857,000 were met by the Defendant himself (approximately US$235,000). These 7 invoices were nowhere to be found in the Claimant’s records. In addition, however, a total of AED8,735,340 and US$50,000 was paid into the 050 account and the 131 account with a false audit trail of stamped invoices in the name of Lincoln and signed funds transfer forms of the same kind as set out earlier in this judgment in relation to other suppliers. The invoices directed payment to one or other of the 050 account or the 131 account and the funds transfer forms, although naming Lincoln as the beneficiary, sought payment into one or other of those accounts.

38. Mr Sinclair of Lincoln confirms in his affidavit that he emailed invoices to the Defendant “in a word format”, which meant in practice that alteration would not be difficult.

39. In his original Defence, the Defendant admitted that these accounts were operated by him but in his Amended Defence and Counterclaim, he made no admissions. He stated that he might have made requests for monies to which he was entitled. In the original Defence he admitted receipt of 25 of the 55 payments which subsequently formed part of the Amended Particulars of Claim. In the Amended Defence and Counterclaim, the Defendant maintained that all payment made to his bank accounts were made with the Claimant’s knowledge in payment of his salary, commission/referral fee entitlement, legitimate ongoing expenses and money that the Defendant had paid personally on behalf of the Claimant and Gulf in relation to ongoing projects, and as part of an ongoing practice of false invoicing by the Claimant. This was specifically repeated in relation to the Lincoln invoices.

40. What emerges from consideration of the timing of payments in and out of the Defendant’s HSBC bank accounts, as set out in Schedule 2 to the Claimant’s Skeleton Argument, is that each payment of a genuine Lincoln invoice by the Defendant himself (none of which appeared in the Claimant’s records) was made shortly after the receipt by him of much larger sums from the Claimant in respect of forged invoices that purported to emanate from Lincoln (and signed funds transfer forms) as set out above. It thus transpires that the payment to Lincoln of genuine invoices by the Defendant to the tune of $235,000 approximately was effected as part and parcel of the fraud that he was perpetrating on the Claimant.

The Evidence of Mr Patel

41. Mr Patel had worked with Gulf between 2007-2011, covering the period of and the aftermath of the financial crisis in 2008 as head of Investment Bank Strategy. In that period he had met Mr Haigh only once when the latter was making a visit to Bahrain as the Head of the Claimant’s Legal Department. He was not in contact with the Claimant or Gulf in the years 2012 – 2013 and had no direct contemporary knowledge of the events giving rise to the claim. He was asked in late 2013 to become Senior Executive Officer of the Claimant with the object of growing the business and improving its profitability following the strains and difficulties presented in the years following 2008 which had led to downsizing and major restructuring (the staff of 44 were reduced to single figures). The Claimant acted as the Investment Banking vehicle for the Gulf group and one such investment that had been made prior to his arrival was in Leeds United Football Club (“LUFC”). He took up his post in Dubai in early February 2015 whereupon he conducted an initial review of all the operations and systems of the Claimant. He realised that there was a lot that required change to mirror the policies of the parent company with better communication between the two. Gulf was a pre-eminent bank in the region and both it and the Claimant were subject to stringent regulatory control in Bahrain and Dubai. He saw no institutional practice of false invoicing in his time at either Gulf or the Claimant where he remained for some two years. Had there been any such practice, the regulatory body, the DFSA, which was keeping a close eye on the Claimant as a result of the problems caused by the financial collapse in 2008 and earlier suspicions about the former Chairman of the parent company, would have discovered it. As a wholesale Deposit-Taking bank, the parent company was subject to stringent regulation in Bahrain and the Claimant, as a subsidiary in relations with it, as its investment arm was carefully scrutinised by the regulatory authorities. If there had been such irregularities of the kind suggested by the Defendant they would have been uncovered. There was no question of turning a blind eye to any source of capital and close attention was paid to the need for compliance. On discovery of the forged invoices at issue here, the DFSA was notified and it carried out its own investigations and uncovered nothing other than the discrepancies associated with the Defendant which are the subject of this action. There was a need to show that the Claimant was strong and had imposed proper controls in the light of the Defendant’s activities. If there had been any other wider problems they would have come to light. The Claimant was given a clean bill of health apart from the matters involving the Defendant.

42. Whereas the Defendant suggested that a claim was fabricated against him in the early part of 2014 because of whistleblowing threats by him, the true position was that investigations conducted by Mr Patel and an internal audit team had revealed the Defendant’s fraudulent activities and there had been no threat by the latter of the kind referred to. Mr Patel had worked in financial services for some 22 years, including a period of 5 ½ years when he worked with the FSA and had experience in risk management as a consultant with PWC. His own experience equipped him to ascertain what irregularities there were at the Claimant and all that he discovered was notified to the DFSA and neither he nor they found any irregularities other than those concerning the Defendant.

43. He overlapped with the Defendant for a period of just over one month but hardly met him because the latter was in England, acting as managing director of LUFC. At the time the Claimant had less than 10 employees all told, including the Defendant, his PA and the bookkeeper Mr Biju. The office was dominated nonetheless by the absent Defendant and his PA who inculcated an atmosphere of fear. The Defendant had been in day to day control of the office and did so through his PA when abroad. Mr Patel took it upon himself to review everything on arrival, as the new CEO. The personnel side was relatively straightforward but what struck him when reviewing expenditure was the large expenditure which was being incurred in payment for third party services in the conduct of litigation and arbitration. That led him to investigate the position. In about his third week, he enquired about the size of the fees paid to Lincoln but no explanation or sensible answer was forthcoming from the head of Internal Audit at head office in Bahrain or from the external auditors KPMG. What he found, from looking at the invoices apparently issued by Lincoln, was that payments were going to different accounts, purportedly belonging to Lincoln, for sums in the same currency in respect of such invoices, which was, in his experience unusual. With the approval of the Board, he called for a review by Internal Audit of the invoices and it was discovered that smaller amounts were going to one account and much larger sums to another. This led to checking whether all the bank accounts were indeed those of the supplier and whether all the invoices did come from them. Some were genuine but nearly all the larger invoices were not and payment pursuant thereto was going to accounts that did not belong to Lincoln.

44. The audit review resulted in the discovery over the course of time that payments were going to accounts of the Defendant in respect of invoices purporting to come from Lincoln and also in respect of payments purportedly made to other suppliers – although the full extent of this only emerged on obtaining the assistance of the English Court and further investigation following the obtaining of a freezing order in this country and in England in support of the claim in respect of the earliest discoveries.

45. Mr Patel verified a number of affidavits and witness statements made by him at earlier stages in these proceedings and also verified Schedules 2 and 3 to the Claimant’s Skeleton Argument. He gave evidence as to the need for two signatories in Category A for expenditure over $50,000 and a signature from one Category A and one Category B person for expenditure under that level. The Defendant was a Category A signatory and Mr Biju was a Category B signatory. He explained that because banks at that time only checked payments against account numbers and not the name of the beneficiary set out in fund transfer requests, it was possible to procure payment by Mashreq Bank into a numbered account which was held by a person other than the beneficiary named in the request. Only the Defendant should have had access to his stamp which was used to validate invoices for payment but in fact the position was that his PA had control of it when he was not in the country. She also had an electronic signature of his which she could use, a practice not confined to the Defendant in the Gulf group and authorised for a limited number of individuals.

46. There was however no loose arrangement for dealing with expenses as a matter of theory which would enable the Defendant to run up large bills at the expense of the Claimant, whether or not such bills might qualify as expenses incurred in the course of carrying out his functions as an employee of the Claimant. The policy and required practice was for expenses to be paid by the employee and thereafter justified by reference to invoices if they were to be reimbursed by the Claimant for them. Prior approval from the chairman or CEO was required for personal expenditure in the nature of flights, and direct payment would be made by the Claimant. Other expenditure had to be evidenced by invoices which were to be submitted, reviewed and processed for payment in arrears. There was no system of advances being made to employees for future expenditure with later reconciliation, although there was an annual or semi-annual reconciliation of all expenses incurred by employees.

47. The Defendant had an employment contract with the Claimant (under its previous name) dated 13 January 2008. This provided for salary payments to him as Legal Counsel, a position which was subsequently changed when he became Head of Legal and subsequently Deputy Chief Executive Officer. There was no practice of paying disguised salary or benefits above and beyond the contractual entitlement and no reason to do so. Salary payments were invariably made into the Defendant’s 001 account. The contract provided for termination immediately without notice in the event of any misappropriation, embezzlement or defalcations with respect to any money of the Claimant and the contract was governed by the law of the DIFC. Any suggestion made by the Defendant that un-named individuals within the Claimant set up a sophisticated conspiracy to conceal his salary, expenses payments and commissions by falsely attributing them to payments to 3rd party suppliers of legal and connected services, creating a fraudulent paper trail of invoices/fee notes and payment instructions and hacking into his email account to send fraudulent instructions both to Mr Biju and to the Claimants solicitors in the UK (GDC) had no basis in reality at all. That would have been ascertained by him and the DFSA, had it occurred.

48. The Defendant’ entitlement was to salary and a discretionary bonus and no other benefit. The policy was that no employee who sat on the board of any company in which the Claimant invested was entitled to any pay over and above the salary paid by the Claimant. The Defendant had a contract with LUFC dated 28 August 2013 which entitled him to a fee, as Executive Director and later Managing Director of LUFC, of 500 Bahraini dinars for each day in which he carried out his duties in the UK. Clause 4.6 of that contract provided that if there was a change of control of LUFC and, within 12 months following that change of control “directly or indirectly in connection with it” his employment or office as a director came to an end a sum of £100,000 was payable to him. There was no record of any kind showing that the Claimant had undertaken any obligations in relation to this contract, which gave rise to obligations on LUFC alone. In an internal audit report in August 2013 a “Management Response” (meaning the Defendant) to an item relating to legal and travel expenses stated that “Leeds expenses have been charged back to Leeds and going forward are being invoiced directly to Leeds”. The fact that the daily fee payable by LUFC was expressed in Bahraini dinars, suggested to Mr Patel that Gulf might have accepted some responsibility for LUFC’s obligations, but the terms of the Defendant’s contract with the Claimant gave rise to no entitlement in relation to his functions as Director/Managing Director of LUFC between 1 July 2013 and 11 April 2014, whether in relation to the per day fee or expenses. The Claimant continued to pay his salary throughout 2013 and 2014 until the date of his resignation from the Claimant’s employment on 10 March 2014, whilst he stayed in the UK in practice throughout the second half of 2013.

49. The evidence of Mr Patel was that there was no possible reason for the Claimant to wish to disguise payments of salary to the Defendant nor payment of legitimate business expenses or other sums owed to him. The idea that false invoices would be used as a mechanism for concealing payments to which the Defendant was contractually entitled had no basis. There were no disguised payments to support LUFC or the Defendant. When referred to a “Salary Certificate” with the Claimant’s letterheading dated 7 October 2013 signed by the Defendant’s PA which stated that “Mr Haigh’s salary, bonus and stock option package from his roles within our group, including Leeds United Football Club, is in excess of 750,000 GBP per year”, Mr Patel said that not only did the PA have no authority to sign Salary Certificates but that a salary at that level would have made him the highest earner in the whole of the Gulf group, including the CEO of the parent company. The Defendant was given no stock options and his package consisted simply of salary plus discretionary bonus (which sometimes took the form of shares). At the time that he resigned, the salary of the Defendant was 65,000 AED per month, equivalent to approximately $213,700 p.a.

50. So far as the Defendant’s expenses were concerned, they should have been the subject of approval by the Chairman or CEO and processed accordingly. They were in fact apparently approved only by his PA. He had a personal Diners Card and, without any supervision, ran two expense accounts, one “personal” and the other “travel” with the Claimant, although the records showed that the distinction was not observed. When the most accurate records of expenses incurred by him and paid by the Claimant were examined – in the Oracle System - a summary of his expenses over the two years prior to his resignation was revealing. In total it was found that he owed $581,506.99 to the Claimant, being the difference between what he had claimed as legitimate expenditure and what the Claimant had actually paid in supposed expenses. The total absence of any control or supervision had resulted in him obtaining payment of $845,395.52, of which the vast majority was entirely personal expenditure without reference to the business of the Claimant and by way of wholly unauthorised advance.

51. On 23 December 2013 Mr Biju had asked the Defendant to pay $181,494.18 as monies owed to the Claimant on his “expense accounts”, but far more was actually owed. What also emerged from an examination of the accounts was that, when he did make payments in apparent reimbursement for personal expenditure, he did so after procuring payments to himself by fraudulent invoices or requests for payment to third party suppliers as appears in this judgment. The payments made by him of AED 365,015 and AED 220,000 in December 2012 and June 2013 to repay sums owed by him to the Claimant for its outlay on his personal expenditure fall into this category. He thus used money obtained from the Claimant to “repay” the latter for personal expenditure for which it had already paid. Such an examination also showed that there was no relationship between the date when expenses, which were capable of being classed as legitimate business expenses, were incurred by the Defendant and the dates of false invoices and payments to his bank accounts.

52. As to referral fees/commission, in his review of operations, following arrival at the Claimant, Mr Patel had asked the Defendant, whom he saw about three times in Dubai before the latter resigned, about contracts concluded by the Claimant and for copies of all relevant contracts and agreements in which the Claimant was involved. No mention was made of any referral/commission contract between the Claimant and a company called Seven Dash Limited (“Seven Dash”) or the Defendant. No disclosure was made to him of any contract/agreement or understanding whereby the Defendant was entitled to commission or referral fees for the introduction of investors or a percentage of any price obtained by the Claimant on the sale of an investment and such would run entirely counter to the policy and practice of the Gulf Group where salaries and bonuses were payable by the employer but no other compensation was payable in respect of successful investments, work done in relation thereto or the realisation thereof. He had found no record of any agreement of the kind suggested by the Defendant and to his knowledge, no agreement was concluded between the Claimant and Seven Dash whereby the latter was to be paid commission or referral fees. The sale of the Claimant’s 75% shareholding in LUFC was concluded by the Claimant after the arrival of Mr Patel in March/April 2014 and he was involved in the final negotiations of the sale and purchase agreement. No mention was made of any agreement with the Defendant for him to receive a commission or referral fees from the Claimant in the event of a sale of the club to a purchaser/ investor, whether or not that purchaser/investor had been introduced to the Claimant by the Defendant. As far as he was concerned, there was no such agreement.

53. Mr Patel was asked about the contents of a witness statement of Asim Al Raisi dated 21 March 2017 and a witness statement of Arthur Abduramanov dated 2 April 2017 which the Defendant had put before the Court of Appeal.

54. Mr Patel said that he had seen no evidence of the creation of false documents save for those in the present case. It was true that the Defendant was not in Dubai, to the best of his knowledge, in the second half of 2013. Payment instructions were signed in the name of the Defendant in that period and his stamp applied to fabricated invoices. He was not aware of any practice of cutting out logos or signatures but the Defendant’s PA who had access to the Defendant’s electronic signature, which was a permitted practice, was in a position to apply that to the funds transfer forms. When matters came to light, Mr Biju was interviewed by Mr Patel and others together and the conclusion reached was that he did not know of the destination of the funds, whilst wrongly obeying instructions from the Defendant to split invoices so that the sums in question which he was asked to pay to suppliers fell within the limit of $50,000 per invoice, which meant that he, as a Category B signatory could sign the funds transfer form along with the Defendant as a Category A signatory. As those forms identified the beneficiary as the supplier, whilst directing payment to an account number which was held by the Defendant, it was concluded that Mr Biju was negligent or dim rather than dishonest. In an office dominated by fear of the Defendant and his PA, he did what he was told without question. He was not dismissed but was put on probation and, so far as Mr Patel knew, was still in the Claimant’s employ. The Defendant’s PA left the Claimant’s employment within two months of the Defendant’s resignation but after the claim form was issued in these proceedings.

55. In his oral evidence, Mr Patel was asked questions relating to his third witness statement which was adduced in support of the application by the Claimant for immediate judgement in this court. It is a comprehensive witness statement which he verified before me in court, in which he set out the salient facts upon which the Claimant relies.

56. In that witness statement the following (inter alia) is evidenced, in addition to matters to which I have already referred:

57. The evidence of Mr Sami adduced under a hearsay notice pursuant to DIFC Rule 29.103 dated 12 June 2018 took the form of a witness statement dated 18 April 2018. Mr Sami is a Senior Director (Legal) employed by the Claimant’s parent company and sets out his awareness of the Defendant’s allegations of serious misconduct and criminality against it and some of its past and present officers. He referred to paragraphs 7 (b), 10, 16 and 17 – 17 G of the Amended Defence and Counterclaim and the non-admission of those matters in the Reply as being irrelevant to the subject matter in issue. As he points out, the Defendant’s assertions about the Claimant and its parent company, its place in the group of companies, and the activities of each, in no way go to explain the receipt by the Defendant of very substantial sums of the Claimant’s money into his bank accounts in Dubai and the UK between late December 2012 and January 2014. Nevertheless “for the record” he made it clear on behalf of the parent company that all those allegations against the parent company and the Group were denied and that insofar as any allegations were made against individual officers of the parent company, whether past or present, the parent company had no reason to believe that any of the matters alleged against them were in any way true. Furthermore, if it was to be suggested that individuals engaged in such misconduct for the benefit of and with the approval of the parent company, that was not true. So far as conduct internal to the Claimant itself was concerned, he pointed out that, throughout the relevant period, the Defendant was not only an officer of the Claimant but actually effectively ran its business as its Deputy Chief Executive Officer, whilst Mr Al Reyes was in Bahrain.

The Defendant’s Case

58. The Defendant’s case has been the subject of evolution over the period of time since the claim was first made as appears from the third witness statement of Mr Patel. Its latest iteration is to be found in the Amended Defence and Counterclaim which withdrew a number of admissions previously made. I have already set out what the evidence establishes, regardless of admissions, non- admissions or denials by the Defendant of his part in obtaining payment from the Claimant into his bank accounts. The evidence clearly establishes his involvement in the procuring and preparation of false invoices, stamping of invoices and signature of bank transfer forms or other requests for payment of the Claimant’s monies into his own bank accounts. The evidence clearly shows fraud on his part in obtaining such payments and his allegations of knowledge on the part of the Claimant and of systemic false invoicing are unevidenced and wholly implausible.

59. When the Defendant’s bank statements are examined what is shown is a series of interbank transfers made for no apparent reason other than to obfuscate and hide the source from which the original payments came,

60. The only remaining elements which fall to be dealt with are his claims for entitlement to salary, fees and commissions which could theoretically give rise to a defence of set off if the Defendant could establish that the Claimant owed him monies to set off against his liability to it as a fiduciary and in contract. They are also the subject of his counterclaim. Such cross claims, even if capable of amounting to set-off, are not the subject of any cogent evidence however. He has not appeared to pursue his counterclaims, but I did not strike them out because of his absence and have examined them for what they are and because they are related to his defence.

61. As pointed out by the Claimant, there is an inconsistency in the two major themes of the defence put forward. On the one hand, the Defendant has said that the whole claim is fabricated against him with a view to stopping him from whistle-blowing in respect of the Claimant’s criminal and regulatory failings in false invoicing and the like; on the other hand he has said that the payments, where made at his request, were made to him because of a legitimate entitlement on his part. Moreover, any entitlement to referral fees and commissions on the basis that the Defendant alleges could not have accrued at the time that many of the payments took place.

62. In both his Defence and Counterclaim the Defendant contended that any requests made by him for payments into his accounts were for payment of sums to which he was properly entitled as an employee of the Claimant or LUFC.

63. Additionally, at paragraph 79 of the Amended Defence and Counterclaim, it was alleged that the Claimant was liable for non-payment of the Defendant’s salary, expenses bonus and bonus shares as set out in Claim CFI 2014 – 0034. Further, the Claimant was liable to pay end of work entitlements under the DIFC Employment Law representing one month’s final salary for each year worked and payment of a penalty in respect of unpaid wages under Article 18.2 of that Law.

64. It was further alleged that the Claimant was liable for the payment of salaries/expenses under the LUFC contract of employment, it being an implied term of his contract with the Claimant that it would pay such sums for which LUFC was liable. The Defendant maintained that “the Claimant “in effect employed the Defendant to work for LUFC and/or impliedly guaranteed payment of the sums due to the Claimant under the terms of the contract of employment with LUFC” and/or it was an implied term of the employment contract with the Claimant that such sums would be paid. Furthermore, clause 4.6 of the LUFC employment contract provided that if, on a change of control of LUFC within 12 months and in connection with the change of control, the Defendant’s employment as Managing Director ceased, LUFC was liable to pay a sum equivalent to £100,000 within one month. Such a change occurred on or around 10 April 2014 leading the Defendant to terminate his employment the following day with LUFC as a result of the change of control with the result that £100,000 became payable by the Claimant to the Defendant.

65. There are a series of problems with these allegations, which amount to no more than assertions, albeit I treat them as accompanied by a statement of truth from the Defendant. In the absence of supporting evidence and in the circumstances where he has been responsible for the creation of false invoices, deceitful requests to solicitors and to banks, the author of that statement of truth lacks credibility.

66. The Defendant did bring a claim for monies owing under his employment contract with the Claimant in this Court in CFI 2014 – 0034. The Particulars of Claim were signed by Leading and Junior Counsel. The claim was for damages for failure to pay performance bonus, in cash and shares. This was struck out on 14 May 2015 for want of prosecution and because it seemed effectively hopeless although liberty was given for the Defendant to apply to set aside the order within 21 days, which he failed to do. Any other claim relating to employment benefits should and would clearly have been brought at the same time if there was any substance to them. The rule in Henderson v Henderson may apply.

67. Regardless of that, however, it is clear however that the Defendant resigned his position with the Claimant, without giving any notice and was not entitled to any further payments from the Claimant in respect of his employment, whether as a matter of contract or under the provisions of DIFC Employment Law. Moreover, in the circumstances as they are now known to be, his employment was terminable without notice on the ground of his fraud.

68. There is equally no basis for any contention of an implied term in his contract of employment with the Claimant that the latter would pay or guarantee the payment of sums owing by LUFC to the Defendant under his contract of employment with that entity. There could be no entitlement, as against the Claimant for the daily fee, for expenses or for the termination payment on change of control for which his contract with LUFC provided.

69. The Defendant did not produce any contract executed by Seven Dash and the Claimant and if one existed, although he protested otherwise, he should have had no difficulty in proving it because it would be readily available from the fiduciary services provider that administered the company on the Defendant’s behalf. Equally, no executed letter of assignment was produced by which Seven Dash assigned the benefit of any such agreement to the Defendant. Once again that would be readily available to him if it existed. The closeness in time between the dates of these supposed documents in itself raises issues, since any tax benefit available to the company would not apply to the Defendant who said that the assignment occurred following “his relocation from Dubai to the UK” (i.e. from a tax free jurisdiction to a taxed one), but no trace of any such documents has been found by the Claimant. As I have already mentioned, the Claimant has no record of any such agreement and it would run counter to the Gulf Group policy for any such agreement to exist. The original defence stated that a signed version of the assignment would be disclosed as soon as the Defendant had access to the document and when he had “sufficient time”. It has not been produced.

70. Clause 3.2.4 of a draft Referral Fee agreement that the Defendant did produce provided that a referral fee of 10% would apply to “all investments referred, negotiated or managed by the LUFC managing director David Haigh”. “Investment” was defined as “ a debt and/or equity investment in LUFC by way of an acquisition of part or all of the issued (or to be issued) share capital of LUFC and/or making an investment in LUFC and/or any sponsorship of LUFC or other commercial transaction with LUFC by the Investor.” That, in itself, is a highly unlikely agreement for the Claimant or its parent company Gulf to make.

71. The Schedule includes, on Mr Patel’s evidence claims for investments that were not made or did not relate to LUFC. It claims commission on loans made by him or his companies to LUFC, where he demanded repayment and instituted a winding up petition to secure repayment. It claims commission on the purchase of LUFC by Italian purchasers in circumstances where he has alleged a breach by the Claimant of a rival contract with his own consortium and company which hoped to purchase it.

72. The Defendant produced no evidence to establish the existence of the alleged Referral/Commission Agreement and assignment, nor of the referrals set out in the Schedule. Since, as already pointed out, any alleged commission in respect of the sale to the Italian purchasers and the loan for that purpose could not fall due until a date after the Defendant had left the employment of the Claimant, there could be no justification therein for obtaining many of the payments for which the Claimant sues, at the time they were made. A draft Referral Agreement produced in other litigation carries a typed date of 22 October 2013, whilst the alleged assignment is said to have taken place in November 2013 and the Loan Agreement between Sport Capital Ltd and LUFC is dated 28 November 2013. The loans took place against the background of the Sale and Purchase Agreement between the Claimant and Sport Capital, which came to nothing as set out above. The Defendant’s attempt to purchase LUFC himself, with a consortium fell through and the idea that he should receive commission in such circumstances is risible.

73. Reference should also be made to Mr Patel’s third witness statement at paragraphs 153-154, where he addresses the allegation of entitlement in respect of some of the individual items in the Schedule which is inconsistent with that produced earlier by the accountants PWC whom the Defendant engaged, where a total of only £913,500 was the figure claimed. The points made there carry weight and are uncontroverted. Without descending into the detail of the witness statement to which reference can be made if necessary, it is worth pointing out that the Defendant issued and publicised a claim made by Sports Capital Ltd of the BVI against the Claimant in which he asserted that, far from being an investment which he procured for the benefit of the Claimant, the investment by the Italian purchasers into LUFC was secured by the Claimant in breach of the sale and purchase agreement concluded by the Claimant with it. His own fraud would also vitiate claims relating to loans made to LUFC because the source of the funding was money obtained from the Claimant. The cross-claims have all hallmarks of a fictitious invention of a desperate defendant seeking to find some way of challenging sums which are indisputably due from him as a result of his own fraud. No credence can be given to any of the allegations made by the Defendant in this regard. No evidence has been adduced to make good any claims against LUFC or the Claimant for any part of the entitlement claimed and the cross claims must therefore be dismissed

Credit for sums paid to Lincoln

74. It might be thought that, insofar as the Defendant did personally pay sums amounting to AED 857,000 in respect of genuine Lincoln invoices, he should receive credit for that against his liability to the Claimant. That element of credit has never been put forward, perhaps for the two reasons which follow, neither of which can be ignored, since each is relevant to any such potential credit.

Conclusion

75. In these circumstances and for these reasons, the Claimant succeeds in both its claim for the payment of the sums in question and its claim that, as fiduciary, the Defendant, when receiving such sums himself or for his benefit as payments to his order, held them on constructive trust for the Claimant. Furthermore, the conduct of the Defendant in these proceedings is such as to take this case well beyond the norm. He has done his best to frustrate these proceedings from first to last and, given the end result, must pay the Claimant’s costs on the indemnity basis. Therefore:

Issued by:
Ayesha Bin Kalban
Assistant Registrar
Date of Issue: 4 July 2018
At: 3pm