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Claim No: 024/2009

THE JUDICIAL AUTHORITY OF THE DUBAI INTERNATIONAL FINANCIAL CENTRE

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

IN THE COURT OF FIRST INSTANCE

Between

TRUSTEE IN BANKRUPTCY AND LIQUIDATOR OF CASH PLUS LIMITED AND RECEIVER OF CASH PLUS' SUBSIDIARIES AND AFFILIATES

Applicant

- and -

(1) CARLOS HILL

(2) BERTRAM HILL

(3) HILL GROUP LIMITED

(4) BANK JULIUS BAER (MIDDLE EAST) LIMITED

Respondents

Counsel: Mr R. Briggs (instructed by Hadef & Partners) and Mr A. Witts (instructed by Lawrence Graham) appeared on behalf of the Applicant.

Mr M. Hoyle QC (instructed by Al Tamini) appeared on behalf of the Fourth Respondent.

Mr Shanahan appeared on behalf of the DFSA to assist the Court.

The First to Third Respondents did not attend and were not represented.

Hearing Date: 14 October 2009

JUDGMENT OF JUSTICE SIR ANTHONY COLMAN

1. On 27 September 2009 Justice Ali Al Madhani made a freezing and disclosure order against the Respondents, to which I refer as "the Disclosure Order". The applications now before this Court are:

2. That part of the Disclosure Order which related to the freezing of assets of the 1st, 2nd and 3rd Respondents was in these terms:

7. Paragraph 6 applies to all of the 1st to 3rd Respondents' assets whether or not they are in their own names and whether they are solely or jointly owned. For the purpose of this Order, the 1st to 3rd Respondents' assets include any asset which they have the power, directly or indirectly, to dispose of or deal with as if it were their own. The 1st to 3rd Respondents are to be regarded as having such power if a third party holds or controls the asset in accordance with their direct or indirect instructions.

3. As regards the Fourth Respondent the Disclosure Order was in these terms:

20. Except for the purpose of obtaining legal advice, and except to enable it to comply with this Order, the 4th Respondent must not directly or indirectly inform anyone of these proceedings or the contents of this Order or warn anyone that proceedings have been brought against the Respondents by the Applicant until 4.30pm on the Return Date or further order of the Court.

4. The background to the Claimant's application for a freezing order is a claim that the 1st, 2nd and 3rd Respondents were parties to a Ponzi scheme centred in Jamaica, one facet of which was the wrongful removal by them from Cash Plus and/or its subsidiaries or affiliates of funds to which those Respondents had no right or entitlement and the warehousing of those funds in bank accounts in the DIFC. Although it is not alleged that the Fourth Respondent was complicit in these fraudulent activities, it is alleged that accounts at the Fourth Respondent's office in the DIFC were used by the other Respondents to hold funds wrongfully derived from the Cash Plus companies.

5. The basis upon which it was and is now alleged that the Claimant is entitled to obtain from the Fourth Respondent the information and disclosure specified in the order is that identified in Norwich Pharmacal Co. V. Customs & Excise Commissioners [1974] AC 133, or alternatively in Bankers Trust Co. V. Shapiro [1980] 1 WLR 1274.

6. The Claimant's application to amend the order arises from the events at the first hearing (on 1 October 2009) of the Fourth Respondent's application to discharge the Disclosure Order against it. In the course of that hearing, evidence was adduced by the Fourth Respondent that it was not a bank, but only an advisory office and that, although its premises were located in Emirates Towers, just outside the main geographical perimeter of the DIFC, it operated under a license from the DIFC and for that reason must be deemed to be within the DIFC but that its business was defined by a DFSA Category 4 license which did not permit it to open client accounts or to hold the money or assets of its clients. Following discussion in the course of the hearing, those representing the Claimant indicated an intention to apply to amend the Disclosure Order to confine the ambit of disclosure to documents relating to any accounts of the 1st, 2nd and 3rd Respondents at Bank Julius Baer whether such accounts were inside or outside the DIFC. The amended wording eventually formulated by the Claimant in its application to amend the Disclosure Order read as follows:

7. The Respondent now submits that for the following reasons the Disclosure Order as against the Fourth Respondent should be discharged and the application to amend that Order should be refused and further that the Fourth Respondent should be removed as a party to the proceedings.

8. I now consider these three grounds:

The only evidence before the Court, both on the without notice application and on the present application, which suggests that the Fourth Respondent might have information and documents covered by the Disclosure Order is an email dated 7 July 2009, marked "Confidential" and addressed to the Liquidator of Cash Plus Ltd, Mr Hugh Wildman. It was expressed as follows:

9. As to this email, I set out paragraphs 43 to 49 of the affidavit of Andrew Witts of the Applicant's London Solicitors, Lawrence Graham LLP, which was before Justice Ali Al Madhani and which describes what was done about this document:

12. From this evidence it is clear, in my judgment, that the Fourth Respondent's account of its business activities and those of the Representative office is true and that the information contained in the email of 7 July 2009 is almost certainly bogus. It is unclear why Mr Saed thought fit to send it or then to persuade the Trustee to entrust to him the obtaining of information from Dubai. The probability is that he was perpetrating a fraud on the Trustee for the purpose of obtaining an air ticket from Canada to Dubai. There is no evidence of any subsequent contact by Mr Saed with the Applicant, which gives rise to the strong inference that he had no intention to travel to Jamaica much less to provide to the Applicant any information about the bank accounts identified by the 7 July email.

13. The exercise of the Court's jurisdiction to grant disclosure orders against innocent outside parties, such as banks and other financial institutions has to be exercised with some care. In Bankers Trust v Shapira [1981] 1 WLR 1274 Lord Denning MR said at p 1282:

14. Although, in order to obtain a freezing injunction, the Claimant is required to demonstrate a good arguable case on the underlying claim: see The Niedersachsen [1983] 2 Lloyd's Rep. 600 at pages 614-615, where on a without notice application the claimant seeks an order for disclosure against an innocent outside party such as a bank, there must be a more demanding standard of proof than that of a good arguable case. The correct test, in my judgment, is whether on the balance of probabilities the defendant maintains accounts at or keeps assets with the outside party. To deploy a less exacting standard of proof would not adequately protect banks and other financial institutions from invasive and ill-founded demands for what may turn out to be time-consuming and inconvenient searches or would at least force an outside party to appear in court to get the order against it discharged. Moreover, the primary purpose of a freezing injunction is to protect the claimant against the risk of inability to execute any future judgment by reason of the defendant's conduct in making itself execution-proof by disposing of assets. Accordingly, to require a claimant to prove that the claim would succeed on the balance of probabilities would be to superimpose a mini-trial of the main issues at a very preliminary stage in the proceedings; hence the relatively low standard of proof demanded. By contrast, it is important that, before an innocent outside party is troubled by a disclosure order, there should be sufficiently cogent evidence of the possibility that it holds the defendant's assets or information as to their whereabouts to warrant imposing such a burden upon it. In this connection there can be no logical justification for distinguishing between applications under the Norwich Pharmacal or Bankers Trust principles.

15. I have no doubt that on the whole of the evidence in this case the Claimant has failed to satisfy the standard of proof that the Fourth Respondent holds bank deposits or assets or information as to the property of or relating to Cash Plus to justify the granting of the Disclosure Order. Further there is insufficient evidence to justify an order for disclosure as now sought to be modified in the application to amend the order.

16. On this ground alone I would discharge the Disclosure Order as against the Fourth Respondent and refuse the application to amend.

17. The second ground relied on is that the Fourth Respondent does not fall within the Norwich Pharmacal pre-action disclosure principle.

18. Amongst the grounds for granting such an order is that the outside party must be shown to have been mixed up in or to have facilitated the wrongdoing or the default, albeit innocently.

19. Here again the only possible evidence of being mixed up in the wrongdoing of the 1st, 2nd or 3rd Respondent is the 7 July 2009 email. The evidence demonstrates that this is an entirely unreliable document and goes further to the extent of showing that the Fourth Respondent holds no client accounts or deposit boxes and is not permitted to do so. Accordingly, the basis for a Norwich Pharmacal order is not established, there being no other manner in which the Fourth Respondent could be suggested to have been mixed up or involved in the other Respondents' disposal of funds.

20. I would only add that, even if I had applied to the first and second ground relied on a standard of proof analogous to that generally required with regard to a claimant's underlying claim- namely a good arguable case — that standard would not have been satisfied in this case.

21. Thirdly, the Fourth Respondent submits that there was non-disclosure of material facts on the hearing of the without notice application.

22. What is said here is that the Applicant was wrong to take the 7 July email at its face value and should in particular have investigated its accuracy, provenance, and reliability. In particular, it was represented to the Court in the affidavit of Mr Witts, paragraph 11, that the Fourth Respondent was a "bank" registered in the DIFC. Cursory investigation of the DFSA register generally available on its web site would have shown this to be untrue. Nor did it enquire whether the Bank Julius Baer (Middle East) Ltd identified in the 7 July email was inside or registered in the DIFC. Had it done so, it would probably have discovered that

23. Whereas I accept that the application for a freezing injunction must have been prepared with some urgency with the purpose of catching assets before they could be removed, the Claimant was not absolved from the duty to avoid non-disclosure of material facts by making all proper enquiries in the circumstances of the case. In the present case, the Claimant might have believed that the 7 July 2009 email contained accurate information, but I have no doubt that it was put on enquiry as to the reliability of that information by the circumstances in which Mr Saed provided that information and then disappeared with the benefit of an air ticket to Dubai. These events should have put on bright red lights for the Trustee and those advising him who should have spotted that the email referred to two Julius Baer entities and should have then gone to the DFSA register to verify if either was covered by a DIFC license, given that the physical address in the email was outside the area of the DIFC.

24. In Brink's Mat Ltd v Elcombe [1988] 1 WLR 1350 at 1358 Ralph Gibson L.J. in enumerating principles applicable to non-disclosure included the following:

(5) If material non-disclosure is established, the Court will be 'astute to ensure that a plaintiff who obtains [an ex parte injunction] without full disclosure . . . is deprived of any advantage he may have derived by that breach of duty': per Donaldson, L.J., in Bank Mellat v Mohammad Ebrahim Nikpour at p. 91 citing Warrington, L.J., in the Kensington Income Tax Commissioners case [1917] 1 K.B. 486, 509.

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

25. That the result of such further enquiry would in the present case have been highly material to the decision whether to grant the Disclosure Order against the Fourth Respondent is, in my judgment, absolutely certain. No Judge, if provided with such information, would have granted that order against the Fourth Respondent. The omission of the Claimant to make such further enquiries as the circumstances demanded has caused there to be made against the Fourth Respondent potentially damaging allegations of involvement, albeit innocent, with the other Respondents' wrongful conduct for which there was no reliable evidence whatever and has made it necessary for the Fourth Respondent to come to Court to put the record straight and to disengage from these proceedings.

26. For these reasons the order against the Fourth Respondent will be discharged.

27. The Fourth Respondent is, it is conceded, entitled to its costs. They must be assessed on an indemnity basis, to be assessed if not agreed.

28. The Fourth Respondent will henceforth cease to be a party to these proceedings.

29. I further direct that the Claimant will forthwith take all reasonable steps to procure that the editor of The Jamaica Observer will publish a brief synopsis of this judgment in words to be agreed with the Fourth Respondent.

30. This judgment is to be published in full on the website of the DIFC Courts in the usual manner.

Justice Sir Anthony Colman

Date of Issue: 11 November 2009

At: 3pm