On 3 February 2017, Mr Justice Nugee dismissed an application to set aside a search order that had been granted against non-parties in legal proceedings – the first time this has happened.
The search order has been described as one of the Court’s two “nuclear weapons” as its consequences are considered to be draconian and oppressive. (The other atomic device is the freezing order, which restricts a Respondent’s rights to deal with his or her own property.) Once granted, a search order required a Respondent to allow an Applicant’s solicitors to enter his or her premises or home to search for, copy and remove specified documents and information.
That this order has been made against a party who is not a defendant to a claim in the English courts makes this decision somewhat remarkable. It is also notable from the perspective of successful claimants hoping to obtain satisfaction from underhanded opponents.
Procedural and Factural Background
The underlying claim was brought by (1) Mr Albert John Martin Abela [“Mr Abela“], (2) Albert JM Abela SRL and (3) Albert JM Abela Catering and Interactive Services Limited [together, the “Claimants“]. Mr Abela was heir to a substantial catering business operating internationally.
In 2002, the Claimants purchased 40% of the shares of an Italian company, Gama Spa [“Gama“], for $14m. Two percent of Gama was owned by the defendant, Mr Ahmad Baadarani, a Lebanese businessman. At the time of the purchase, the Abela group owned the remaining 52% of the balance of Gama shares, while Mr Abela was Gama’s Chairman. The purchase agreement was governed by English law, with disputes arising from it subject to the non-exclusive jurisdiction of the Courts of England and Wales.
The Claimants alleged they were induced to purchase an interest in Gama as a result of fraud by Mr Baadarani and others, who concealed Gama’s true financial position from them.
Mr Abela alleged that, following his father’s death in 1998, he lapsed into depression and that, whilst depressed, and unknown to him, Mr Baadarani conducted the business of Gama so that its assets were substantially diminished. Mr Baadarani had significant interests of his own in Kazakhstan and used a Kazakh subsidiary to divert Gama’s funds for his own benefit.
In 2009, the Claimants issued what became proceedings in the English courts. Initially, Mr Baadarani defended the claim and disagreed that the English courts had jurisdiction. This question reached the Supreme Court in December 2013. Mr Baadarani lost and was ordered to pay the Claimant’s costs of the appeal, which were substantial.
Mr Baadarani was similarly unsuccessful in defending the underlying claim. On 3 June 2015, after failing to comply with various orders made against him, Chief Master Marsh entered judgment in default against him, for a sum of just over $20m.
Having obtained judgment against Mr Baadarani, the Claimants sought to enforce it. This process proved to be lengthy, not helped by Mr Baadarani’s lack of co-operation and efforts to avoid his liabilities. On 19 June 2014, he was required to attend Court to provide information about his means to aid the enforcement process. During his cross-examination, it became clear that Mr Baadarani had failed to disclose numerous documents. This discovery began a long process of unsuccessful attempts to obtain full disclosure from him.
Eventually, the Claimants obtained a worldwide freezing order against Mr Baadarani and third party disclosure orders against an individual and company that had had dealings with him, being Mr Fakih and Leesdel Limited.
One of the documents disclosed by one of Mr Fakih and Leesdel Limited relating to Mr Baadarani’s possessions included a statement of assets, dated 17 April 2013, which Mr Baadarani had signed. The Claimants understood this had been provided to the National Bank of Kuwait in connection with the re-mortgage of a leasehold property in Hanover Gate Mansions, London.
This document proved to be forged: it has been created in 2015 but was backdated to 2013, a discovery was made as a result of a separate third party disclosure order the Claimants had obtained from the National Bank of Kuwait.
Following this discovery, the Claimants applied for a search order against both Mr Fakhi and Leesdel Limited. The order was granted. Mr Fakih and Leedsel Limited applied to have it set aside. It was this application that gave rise to the decision of Mr Justice Nugee.
The “Nuclear” Decision
As stated above, search orders are considered to be a remedy of “nuclear” impact. In making such an order against a non-party to proceedings, the Judge was sending a clear signal as to how and when such an order could be used. The importance of the decision is underscored by the fact that this is the first Court decision in this area in at least twenty years.
Mr Fakih and Leesdel Limited’s lawyers argued that the wording of the Civil Procedure Act 1997 (the statute that gives the Court the power to grant search orders) made clear that this power could only be exercised in ongoing “proceedings”. They submitted that, as judgment had been given and the parties were now dealing with enforcement, it was too late to make a search order.
Mr Justice Nugee rejected this argument, and concluded that there was no need for such restrictive interpretation, nor did the authorities (some of which pre-dated the Civil Procedure Act) support that view. The word “proceedings” could include steps taken to enforce a judgment. He found there was no doubt that the Claimants were actively pursuing Mr Baadarani under the judgement, and hoped to obtain information via the search order to identify assets against which to execute that judgment.
In rejecting the application to set aside the search order, Mr Justice Nugee made it clear that he was taking a pragmatic approach.
He also rejected the proposition that a search order could not be granted against a person against whom the Applicant has no cause of action. All that was necessary was for the Respondent to have the relevant evidence in their possession and that there be good reason to grant an order so as to preserve that evidence.
Practical Lessons
In claims involving fraud, a dishonest opponent is often willing to use all manner of underhanded tactics at the pre-action stage, throughout proceedings, and during trial, even to the extent of lying under oath. Such behaviour is unlikely to end at the point at which a judgment is given.
Mr Justice Nugee’s decision strengthens the hand of successful claimants who are still grappling with an opponent after judgment and shows that the Court will be willing to act in a pragmatic fashion against potential conspirators attempting to help a judgment debtor shield his assets from enforcement. Making search orders against non-parties may be a “nuclear” option, but that does not mean the Court is not willing to use it if it is persuaded that it is just and fair to do so.
