Schofield J
IN THE GRAND COURT OF THE CAYMAN ISLANDS IN THE GRAND AT GEORGE TOWN, GRAND CAYMAN HOLDEN AT GEORGE TOWN, GRAND CAYMAN CAUSE NO: 389/92 BETWEEN (1) INTERNATIONAL CREDIT & INVESTMENT COMPANY (OVERSEAS) LTD (In Liquidation) (2) FINANCE AND INVESTMENT INTERNATIONAL LIMITED PLAINTIFFS AND (1) SHAIKH KAMAL ADHAM (2) FAISAL SAUD AL FULAIJ (3) GHAITH RASHAD PHARAON (4) PHARAOH HOLDINGS LIMITED (5) LHASA INVESTMENTS LIMITED (7) CONCORDE INTERNATIONAL TRADING S.A. DEFENDANTS Mr. Lawrence Cohen Q.C. with Mr. Ewan McQuatar and Mr. Huw Moses for the plaintiffs Mr. Ramon Alberga Q.C. with Mr. Edward Sibley and Ms. Linda Chisholm for the 5th and 7th defendants JUDGMENT SCHOFIELD J. I am greatly indebted to Counsel for reaching substantial agreement on the facts and for agreeing the outstanding issues. The first three parts of this judgment, the introduction and agreed facts, the outlines of the plaintiffs' case and the case for Lhasa and Concorde, and the agreed statement of issues are the results of their efforts. I 2 have been able substantially to adopt the agreed facts as my own outline of the facts of the case. I have only strayed from the draft presented by the parties in matters of presentation. As this judgment affects parties who have chosen not to be present at these proceedings it is proper that I record that the facts as agreed and as outlined are supported by the evidence. INTRODUCTION AND AGREED FACTS The Parties to this Action. This action was commenced by a writ issued on 28th October 1992. The plaintiff when it was commenced was International Credit and Investment Company (Overseas) Limited ("ICIC"), a company incorporated in the Cayman Islands on 6th April 1976 and which was licensed to carry on business as a bank from 14th April 1976 until 22nd July 1991. On 5th July 1991 the Governor of the Cayman Islands appointed a receiver to assume control of the affairs of ICIC. On 22nd July 1991 this Court appointed provisional liquidators of ICIC. On 29th April 1992 this Court ordered that ICIC be wound up and appointed liquidators. when the action was commenced there were the following six defendants:- (1) Sheikh Kamal Adham ("Adham"): Although served with the proceedings, Adham has neither entered an appearance nor appeared before the Court at any stage of the action; (2) Faisal Saud Al Fulaij ("Fulaij"): Fulaij was served with these proceedings and entered an appearance. Since that time he has not played any active part in the proceedings; (3) Ghaith Rashad Pharaon ("Pharaon"): It was declared by this court on 8th December 1993 that service of these proceedings on Pharaon had been duly effected. Pharaon has not entered an appearance; (4) Pharaoh Holdings Limited ("Pharaoh"): Pharaoh is a company incorporated in The Bahamas. Although served with the proceedings, pharaoh has neither entered an appearance nor appeared before the court at any stage of the action; (5) Lhasa Investments Limited ("Lhasa"), a company incorporated in the Cayman Islands: Despite being served with these proceedings at their outset, Lhasa initially decided to play no active part in them. However, in June 1993, it requested ICIC to agree to an extension of time in which to appear. That extension was agreed by ICIC. Appearance was entered on 19th July 1993. Lhasa served a Defence on 30th September 1993. Thereafter it has participated fully in the proceedings and has appeared by counsel to dispute the claims made against it throughout the trial; (6) Finance and Investment International Limited ("FIIL"), a company incorporated in the Cayman Islands: The beneficial ownership of all the shares in FIIL was originally one of the issues in the action. The order of Harre CJ in this action dated 9th June 1994 recited that it appeared to the Court that ICIC was the beneficial owner of (at least) 80% of the FIIL shares ICIC's entitlement to the majority of the FIIL shares having been established, FIIL was pursuant to a further order dated 24th June 1994 struck out as a Defendant and added as a Plaintiff, to enable it to advance and for Concorde International Trading SA ("Concorde") claims on its own behalf. Leading counsel for Lhasa appeared on that application but did not object to the addition of FIIL as a Plaintiff. Adham is a Saudi Arabian businessman. Fulaij is a Kuwaiti businessman. Both have extensive business interests in the Middle East. Pharaon is a businessman who states in his witness statement that he is a Saudi Arabian national of Syrian descent. It appears that Pharaon has at various times held business interests in a number of countries around the world. The amendment to add Concorde as a defendant Concorde is a company which was incorporated in Panama on 9th March 1987. It was added as a party to this action on 10th November 1992, but it decided initially to play no part in the proceedings. Like Lhasa, in June 1993, it requested that ICIC agree to an extension of time in which to appear. That extension was agreed by ICIC. Concorde entered an appearance on 19th July 1993 thereby voluntarily submitting itself to the jurisdiction of this Court. It served a Defence on 30th September 1993 in similar terms to that of Lhasa and has played an active role throughout the subsequent proceedings. Concorde was represented at the trial by leading and junior counsel and evidence was given on its behalf by one of its directors, John Van Husan Whitbeck ("Whitbeck"), who has served since 1979 as general counsel to the non-Saudi companies owned by Pharaon and his family. Whitbeck is or has been the director and/or secretary of many companies owned or controlled by Pharaon, including Lhasa and Concorde. other important dramatis personae The Attock Oil Company Limited ("AOC") is a company which was incorporated in England in 1913. AOC holds majority shareholdings in two subsidiaries namely Pakistan Oilfields Limited ("POL") and Attock Refinery Limited ("ARL"). These two subsidiary companies operate, run and have interests in oil fields and an oil refinery in Pakistan. Until 24th November 1991, FIIL was the registered holder of all but 200 of the nine million issued shares in AOC. The remaining 200 shares were held by nominees for FIIL. Falcon Properties Limited ("Falcon") is a company incorporated in the Bahamas. It is currently a subsidiary of Concorde. Agha Hasan Abedi ("Abedi") was closely involved in setting up and running the group of companies known as Bank of Credit and Commerce International ("the BCCI group"), namely:- (a) BCC Holdings (Luxembourg) SA; (b) Bank of Credit and Commerce International SA ("BCCI (SA)"); (c) Bank of Credit and Commerce International (Overseas) Limited ("BCCI(O)"). Kuwait International Finance Company SAK ("KIFCO") is a Kuwaiti finance corporation closely connected with the BCCI group. Abedi controlled the BCCI group until his health deteriorated in about March 1988. Swaleh Naqvi ("Naqvi") was Abedi's second in command and in about March 1988 he took over the de facto running of the BCCI group from Abedi. Abedi is currently in Pakistan; he is now in a very poor state of health, having suffered from one or more strokes and having undergone a heart transplant operation. He appears to be incapable of giving evidence to any court, wherever situate. Naqvi is in custody in the United States having been sentenced to a term of imprisonment for his role in illegal activities on the part of the BCCI group. Abedi and Naqvi exercised de facto control over the affairs of ICIC. Saudi Research and Development Corporation ("Redec") is a Saudi Arabian Corporation controlled by Pharaon. Categories of issues Three broad categories of issues arise out of the facts:- 1) the FIIL shares: Is ICIC the beneficial owner of 100% of the issued shares in FIIL or is it the beneficial owner of only 90% of those shares? 2) the AOC shares: 8 Is FIIL the beneficial owner of 100% of the issued shares in AOC or are they beneficially owned as to 88% by a Pharaon company and as to the remainder by Adham and Fulaij? 3) conspiracy and related claims: Are the defendants liable to ICIC and FIIL for conspiracy, knowing assistance in breach of fiduciary duty and similar wrongs? A more detailed analysis of the issues will appear later. Agreed facts These issues arise from a set of basic undisputed facts which are set out below. Before setting out these facts the following should be pointed out. It is part of the plaintiffs' case that certain loan transactions on the books of ICIC and other banks were not genuine loans at all. Many loans which will be referred to are described by the parties as "non-recourse loans". The plaintiffs have not agreed that these loans, some of which are referred to below, are genuine. The question of whether loans were genuine or not will be dealt with later. Furthermore there is an issue between the parties as to the proper meaning of the phrase "non-recourse loan". This issue will be dealt with later. On 9th May 1977 FIIL was incorporated in the Cayman Islands. The first FIIL share issue took place on 11th July 1977. By that issue FIIL raised US$1m. The shares in FIIL were registered in the register of members of FIIL in the names of Adham, Fulaij and Pharaon in the numbers and proportions set out below. A set of documentation was executed in 1977 which may be summarised as follows:- a) an agreement signed by Pharaon and Naqvi, in the latter case purportedly on behalf of ICIC, which is entitled "Option Agreement" ("the 1977 Agreement"). The agreement provided that Pharaon had agreed to acquire shares of FIIL to the extent of US$850,000 out of which he had agreed to sell to ICIC or its nominees shares of the value of US$750,000. It further provided that in consideration of the above "option", ICIC had guaranteed a loan of US$750,000 to Pharaon for the purchase of these shares in FIIL. The "option" was expressed to be exercisable by ICIC within a period of five years. It is not disputed that this agreement was executed in about June 1977. However the effect and significance of the agreement are in dispute; b) an undated letter signed by Pharaon purporting to record two loans of $750,000 and $100,000 from ICIC to Pharaon secured by the pledge of shares in FIIL to the paid up value of $850,000; c) two promissory notes for US$750,000 and $100,000 executed by Pharaon in favour of ICIC: d) a letter of disbursement dated 24th June 1977 signed by Pharaon purporting to instruct ICIC to pay two amounts of $750,000 and $100,000 to FIIL as Pharaon's subscription for FIIL's shares of equivalent amount: e) an agreement signed by Fulaij and Naqvi (in the latter case, purportedly on behalf of ICIC) dated 6th August 1977. In summary it recited that Fulaij had agreed to acquire shares in FIIL to the extent of $50,000 out of which Fulaij had agreed to sell to ICIC or its nominee shares of the value of $30,000. It further provided that in consideration of the above "option", ICIC had guaranteed a loan of US$50,000 to Fulaij for the purchase of these shares in FIIL. The "option" was expressed to be exercisable by ICIC within a period of five years. The FIIL Shareholdings FIIL was incorporated on the 9th May 1977. The original share capital of FIIL comprised 100 ordinary shares of US$10 each which were held by subscriber shareholders. All of the shares of FIIL subsequently issued by the four share issues described below were also of $10 each. There is set out below particulars of the allotments of the shares of FIIL issued in the subsequent four share issues as recorded in the Register of Members of FIIL. The First Issue. This took place on 11th July 1977. No. of Shares Nominal Value Sub. Price Total Shares after this issue Percentage after this issue Fulaij 5,000 10 50,000 5,000 5 Adham 10,000 10 100,000 10,000 10 Pharaon 85,000 10 850,000 85,000 85 100,000 1,000,000 100,000 100 * includes 100 shares acquired from original subscribers. The Second Issue This took place on 30th June 1980. No. of Shares Nominal Value Sub. price Total shares after this issue Percentage after this issue Fulaij 25,000 10 250,000 30,000 5 Adham 50,000 10 500,000 60,000 10 Pharaon 425,000 10 4,250,000 510,000 85 500,000 5,000,000 600,000 100 The Third Issue This took place on 18th June 1982 No. of Shares Nominal value Sub. Price Total Shares after this issue Percentage after this issue Number of Shares Sub. Price Total Shares after this Issue Percentage after this Issue Fulaij 26,000 10 260,000 50,000 2 Adham 130,000 10 1,300,000 250,000 10 pharaoh 1,144,000 10 11,440,000 2,200,000 88 TOTAL 1,300,000 13,000,000 2,500,000 100 The Fourth Issue (including transfers). The fourth share issue took place on 8th November 1983. Name Number of Shares Percentage Fulaij 50,000 2 Adham 250,000 10 Lhasa 2,200,000 88 Total 2,500,000 According to the Register of Members of FIIL, on 8th November 1983 all the 1,020,000 shares formerly held by Pharaoh were transferred to Pharaoh and 36,000 out of the 60,000 shares held by Fulaij were transferred to Pharaoh. The 1,300,000 new shares issued in the fourth share issue were allotted in proportions corresponding to the proportions in which the shares were held after those transfers. According to the Register of Members of FIIL on 10th March 1986 all the shares in FIIL held by Pharaoh were transferred to Lhasa. As at that date the registered shareholders of FIIL were as follows: There were no further changes in the shareholdings of FIIL until the Orders made in these proceedings which are mentioned below. It is common ground that these changes have not in any way altered the beneficial ownership of these shareholdings as opposed to the legal title to the shares. The acquisition of AOC Until 1977 the shares in AOC were owned by Attock Petroleum Limited ("APL") a company not connected with the parties to this action. APL was quoted on the London stock exchange. FIIL entered into a written agreement dated 5th July 1977 for the purchase of the AOC shares from APL ("the Attock Agreement"). Pharaon did not personally participate in the negotiations for FIIL to purchase the AOC shares. In summary the Attock Agreement provided as follows:-- a) the parties to the agreement were APL, FIIL and KIFCO; b) the agreement recited that AOC had an authorised share capital at that time of £4,562,000 consisting of 4,562,000 ordinary shares of £1 each, of which 2,900,001 had been issued and were held by and on behalf of APL and 1,661,999 shares (referred to as "the Renounceable Shares") had been allotted, credited as fully paid up to the holders of the registered shares in proportion to their holdings; c) the agreement recited that APL had agreed to sell to FIIL the 1,669,999 Renounceable Shares and 664,621 of the 2,900,0001 shares held by or on behalf of APL. FIIL had therefore agreed to purchase a total of 2,326,620 shares, the consideration for which was to be the cash sum of £2,326,620, as appears from clause 2 of the agreement; d) following the sale of 2,326,620 of the AOC shares to FIIL, APL would be left with 2,235,360 shares (referred to in the Agreement as the "Option Shares"). By clause 10(b), FIIL granted to APL a put option by which FIIL could be required to purchase all, or such lesser part as FIIL might agree, of the Option Shares on the terms and conditions referred to; e) clause 3 of the Attock Agreement provided for an increase in the authorised capital of AOC from £4,562,000 to £9,000,000 by the creation of £4,438,000 new ordinary stock of AOC. APL agreed to waive its rights to subscribe for any ordinary stock of AOC proposed to be issued on the terms set out in clause 3 of the agreement. The authorised share capital of AOC is currently £9 million consisting of nine million Ordinary Shares of £1 each. FIIL is recorded in the Register of Members and Share Ledger of AOC as at 17th July 1980 as the holder of all nine million shares of AOC. FIIL acquired shares in AOC by transfer or allotment on the dates and in the numbers as follows:-- Acquisn Date Registrn Date Number of shares Tranche Allotted (A) Transferred (T) Total of Shares held 25.07.77 29.07.77 1,661,999 1 A 1,661,999 25.07.77 09.08.77 664,621 1 T 2,326,620 09.03.79 08.02.80 4,438,000 2 A 8,514,620 01.06.79 28.11.79 1,750,000 3 T 4,076,620 08.05.80 17.07.80 485,380 4 T 9,000,000 In fact the Register of AOC also records that on the acquisition of shares on 17th July 1980 by FIIL, a certificate was issued in respect of 485,180 shares rather than 485,380, the remaining 200 shares being held by nominees for the beneficial owners. The funding of the FIIL shares By the first FIIL share issue (which took place on 11th July 1977) FIIL raised $1m. As appears below, there is a dispute as to who paid for this issue. The plaintiffs' case is that ICIC paid for all of the shares. Ihasa and Concorde contend that Pharaon paid for $850,000 worth of the shares in this issue, the balance being paid for by ICIC. The following facts relating to the funding of this share issue are not however in dispute. The $1m raised on this issue was paid by ICIC to FIIL, by debiting ICIC's account 01000504 and crediting FIIL's account 1002175. $850,000 of the $1m was debited to an account numbered 80019 with ICIC in the name of Pharaon. On or about 1st July 1979 account 80019 was split into two and designated as accounts 80019A and 80019B, both held with ICIC in the name of Pharaon. In June 1980 2 loans were made as follows $4.2m by BCCI (O) Paris to Redec; and $900,000 by KIFCO to Pharaon. The loan of $4.2m by BCCI (O) Paris to Redec was non-recourse in nature. It is in dispute whether the $900,000 was an ordinary commercial loan or was non-recourse in nature. On 30th June 1980, $100,000 out of the loan of $900,000 by KIFCO to Pharaon was credited to account 80019A. On the same date $750,000 out of the loan of $4.2m by BCCI (O) Paris to Redec was credited to account 80019B. As to the second, third and fourth FIIL share issues, which took place on 30th June 1980, 18th June 1982 and 8th November 1983 respectively, ICIC paid for all of the FIIL shares issued on these issues. Pharaon did not buy or pay for any of the FIIL shares issued on the second, third or fourth FIIL share issues. The monies which ICIC paid for shares in FIIL were recorded in its books as loans. With the exception of the loan of $850,000 on account 80019 and the loan of $900,000 by KIFCO to Pharaon, it is agreed that all the loans made by and on behalf of ICIC in respect of the acquisitions of shares in FIIL were non-recourse in nature and that no repayments of those loans were made by or on behalf of Pharaon. The funding of the AOC shares It is not in dispute that FIIL paid for all of the AOC shares. As appears below, Ihasa and Concorde contend that, although it was FIIL which paid for the AOC shares, Pharaon then in turn paid FIIL for 88% of the AOC shares. This is disputed by the plaintiffs. The following facts relating to the funding of the AOC shares are not in dispute. FIIL paid for all of the nine million shares recorded in the Register of AOC as having been acquired by FIIL. The nine million shares in AOC were acquired by FIIL in four tranches. Pharaon lent SR (Saudi Arabian Riyals) 15m to FIIL, the approximate equivalent of US$4m. The loan is recorded in a board resolution of FIIL dated 11th July 1977, a promissory note signed on behalf of FIIL ("the FIIL promissory note") and a letter of arrangement dated 11th July 1977. FIIL deposited SR 15m with KIFCO. Against that deposit FIIL borrowed US$5m from KIFCO. The $5m borrowed from KIFCO and the $1m raised on the first FIIL share issue were both credited to account 1002175 of FIIL at BCCI (O) Paris. From the sums of $5m and $1m FIIL paid for 2,326,620 shares in AOC and paid the other sums which were at that time due to be paid by FIIL under the provisions of the Attock Agreement. The sums so paid were $4,048,089, $113,794 and $961,283, a total of $5,123,166. The 1982 Agreement In 1982 a further agreement was signed, "the 1982 Agreement". The 1982 Agreement was signed by Pharaon and initialled by him on each page. The witnesses to his signature include Naqvi. Burney, an officer of ICIC, signed the 1982 Agreement, purportedly on behalf of ICIC. In summary, the 1982 Agreement recited as follows:- a) that Pharaon was holding in his own name 85% of the capital of FIIL, that is, shares of the paid up value of $US5,100,000; b) that out of the said 85% shares of FIIL held by Pharaon, 70% of the shares had been paid for and belonged to ICIC as beneficial owners; c) that Pharaon had delivered over the said 70% shares of FIIL to ICIC as the beneficial owners thereof, together with transfer forms signed in blank. d) that it was deemed desirable to set out the terms and conditions on which the said 70% shares of FIIL were held by Pharaon in a fiduciary capacity on behalf of ICIC; The agreement then purported to give effect to these recitals. The 1982 Agreement introduced an error as to the percentages of FIIL shares which (the parties intended) should be held beneficially by ICIC and Pharaon respectively. It is common ground that the 1982 Agreement should have recorded that Pharaon held on behalf of ICIC 75% (not 70%) out of his holding of 85% of FIIL shares. The 1988 Agreement A further agreement was signed in 1988 ("the 1988 Agreement"). The 1988 Agreement is dated "March 1988" and purports to be made between Pharaon, Lhasa and ICIC Holdings Limited ("ICICH"). It is agreed that the reference to ICICH is a mistake for ICIC. The 1988 Agreement was initialled by Pharaon in his personal capacity and was also signed by him on behalf of Lhasa. Pharaon's signature was witnessed by Imran Imam who was a senior officer in BCCI in London. The agreement was also signed by Kazmi, purportedly on behalf of ICICH. Kazmi was an officer of BCCI who took over responsibility for ICIC in about 1979. Each page of the agreement has been initialled by Pharaon. In summary, the 1988 Agreement provided as follows:- a) that Pharaon was entitled to all of the shares of Lhasa as the absolute beneficial owner thereof; b) that Lhasa was owning and holding 88% of the share capital of FIIL, that is, shares of the paid up value of US$22 million; c) out of the said 88% shares of FIIL held in the name of Lhasa, 73% shares had been acquired by ICICH as beneficial owners by arranging for finance for the cost and acquisition thereof; Pharaon had arranged to get Lhasa to deliver over the said 73% shares of FIIL to ICICH, along with the relative transfer forms signed in blank, as beneficial owners of the said shares; d) it was deemed necessary to record the said fiduciary holding of 73% shares of FIIL, by Lhasa on behalf of ICICH; The agreement then purported to give effect to these recitals. The percentages referred to in this agreement are explained as follows. On 8th November 1983, 3% of the FIIL shares are recorded in the Register of Members of FIIL as having been transferred from Fulaij to Pharaoh. This 3% became part of the 88% of shares in FIIL which were transferred to Lhasa on 10th March 1986. By 1988 therefore, Lhasa was the registered holder of 88% of the shares in FIIL (including the 75% previously held by Pharaon and 3% previously held by Fulaij). The 1988 Agreement perpetuated the mistake in the 1982 Agreement referred to above. Instead of referring to 73% of the FIIL shares being held on behalf of ICIC, it should have referred to 78%. It is common ground that Pharaon, Adham and Fulaij signed a series of audit confirmation letters relating to accounts held at ICIC in their names and (in the case of Pharaon) in the names of Pharaoh and Lhasa. In the case of Pharaon the signed audit confirmation letters which have been produced to the Court bear dates between 1985 and 1989. It is also common ground that, at or about the same time as the audit confirmation letters, Pharaon used to receive letters signed by Abedi or Naqvi confirming that Pharaon would not personally be required to repay the loans referred to in the audit confirmation letters. Dealings with the AOC shares On 5th July 1991 a receiver was appointed over the affairs of ICIC and on 22nd July 1991 provisional liquidators were appointed. On 22nd July 1991 ICIC's Banking Licence was revoked. After this time, further events took place relating to the AOC shares. Before 24th November 1991, the Register of Members of AOC recorded that FIIL was the owner of 8,999,800 shares in AOC, being all but 200 of the issued shares in AOC. The balance of 200 shares was held by nominees for the beneficial owner. The Register of Members records that on 24th November 1991, 7,920,000 shares in AOC were transferred to Lhasa (a company controlled by Pharaon), 900,000 shares were transferred to Adham and 180,000 shares were transferred to Fulaij. The instruction for this transfer was given by Pharaon and executed by Whitbeck. The stock transfer form dated 17th November 1991 purporting to transfer 7,919,900 shares in AOC from FIIL to Lhasa was exhibited. The form is signed by Pharaon and states the consideration for the transfer to be "nil". Lhasa and Concorde have also disclosed two documents purporting to be share certificates in favour of Lhasa for 7,919,900 and 100 shares in AOC respectively. The Register of Members of AOC further records that on 4th December 1991 the 7,920,000 shares held by Lhasa were transferred to Falcon. The instruction for this transfer was again given by Pharaon and executed by Whitbeck. Two stock transfer forms dated 26th November 1991 purporting to transfer 7,919,900 and 100 shares in AOC from Lhasa to Falcon were exhibited. The transfer forms are signed by Pharaon and state the consideration to be "nil". By these transactions the AOC shares were removed from FIIL. The witness statement of John Brian Sheedy Many more facts relating to the issues in this case, in addition to those which are summarised above, are agreed between the parties. The witness statement of John Brian Sheedy contains a detailed description of the facts as alleged by the plaintiffs. Sheedy, a Chartered Accountant, carried out investigations into the case on behalf of the liquidators. Counsel for Lhasa and Concorde have marked up some sections of Sheedy's statement indicating those passages with which they disagree by underlining them. The remaining passages are agreed. In agreeing the basic facts, no concessions were intended to be made as to the legal implications of those facts. The history of this action The writ was issued on 28th October 1992. On that day the Court made an Order pursuant to which the shares in FIIL were vested in ICIC and in Sheedy (as a representative of the liquidators of ICIC) and granted certain injunctive relief against the Defendants. Concorde was joined as a defendant on 10th November 1992. On 10th November 1992 the court appointed John Matthew, a chartered accountant of Morris Brankin & Co, as receiver of the assets and undertaking of Concorde and of the assets of Pharaon, so far as such assets were situate within the jurisdiction of this court. The Statement of Claim was served on 30th June 1993. In summary the relief claimed in the writ and Statement of Claim as originally framed was twofold:- a) a declaration that ICIC is the beneficial owner of the entire issued share capital of FIIL; b) claims for damages for conspiracy and for compensation for knowing assistance in breaches of fiduciary duty. Ihasa and Concorde each served a Defence on 30th September 1993. Those Defences each made certain allegations relating to the ownership of the AOC shares. By a summons dated 25th November 1993 ICIC applied for leave to re-re-amend the writ and to amend the Statement of Claim. The effect of the amendments was in summary to add FIIL as a plaintiff rather than a defendant, and to add a claim for a declaration that FIIL is the beneficial owner of the entire issued share capital of AOC. Following a contested hearing at which Ihasa and Concorde were represented by leading and junior Counsel, Harre CJ, in a ruling dated 24th June 1994 allowed these amendments. Applications by Ihasa and Concorde to have parts of the Statement of Claim struck out and to have the claim relating to the AOC shares stayed were dismissed. Harre CJ made a further order dated, 27th July 1994, granting leave to make further amendments to the writ and Statement of Claim. Ihasa and Concorde appealed from all the decisions referred to above. On 16th December 1994 the court of Appeal dismissed those appeals. Two features of these applications and appeals are worthy of comment. First, one of the contentions of Lhasa and Concorde in these applications, and in the appeals, was that this Court did not have jurisdiction to hear the claim relating to the AOC shares; alternatively that it should decline jurisdiction to hear this claim on grounds of forum non conveniens. These arguments were rejected by Harre CJ and by the Court of Appeal. Second, the Court of Appeal in its judgment stated:- "It can reasonably be concluded the claims in the re-re-amended writ claiming declarations as to the beneficial ownership of the AOC shares flowed from the averment in the defence that they had been dealt with differently from the rest of the assets held by FIIL. Up until then shares in AOC had been treated as merely part of the assets of FIIL." An application for leave to appeal to the Privy Council against the decision of the Court of Appeal has been rejected. There has been voluminous discovery in this action. The trial commenced on 6th March 1995. The Court heard oral evidence and read a considerable amount of documentary evidence. The Court also read a number of hearsay statements admitted under the provisions of the Evidence Law 1978 and the Civil Evidence Rules 1978 and certain expert reports of accountants and forensic document examiners. The parties agreed to Orders that the reports of the two accounting witnesses and the report of Dr Giles, the plaintiffs' forensic document examiner, be admitted in each case under cover of an affidavit sworn by the expert concerned. The plaintiffs agreed that the reports of the defendants' forensic document examiner be admitted into evidence by agreement and the plaintiffs made the concession that the conclusion of the defendants' forensic examiner was correct, namely that the letter dated 21st June 1979 could have been prepared as dated. The plaintiffs however deny that it was so prepared. The bulk of the evidence was completed by 7th April 1995. A witness statement of Pharaon was admitted into evidence under the Evidence Law 1978. It was signed by him on 20th February 1995. A number of applications were made to the Court during the course of the proceedings relating to Pharaon's evidence. By a summons dated 14th July 1994 Lhasa and Concorde applied to the Court for an order that Pharaon's evidence be taken out of the jurisdiction in Saudi Arabia. The parties subsequently agreed an Order dated 10th February 1995 to the effect that Pharaon's evidence would be taken by way of a live video-link between Grand Cayman and Saudi Arabia, with the Court sitting in Grand Cayman and Pharaon attending in Saudi Arabia. In that Order Pharaon gave certain personal undertakings to the Court, including undertakings that he would sign a number of documents connected with the examination and that he would comply with any further orders and directions which might thereafter be made by the court in relation to his examination. Pharaon ultimately, on 1st March 1995, signed the required documents in the form stipulated by the Court's Order, having first signed modified versions of the documents. Pharaon's witness statement was served on 21st February 1995. On 28th February 1995 Lhasa and Concorde served a notice under the Evidence Law 1978 in respect of Pharaon's witness statement enabling it to be admitted in evidence as hearsay without Pharaon giving oral evidence, on the ground that he is beyond the seas. Counsel for Lhasa and Concorde indicated that it was still at that time their intention to have Pharaon's evidence taken by video-link. On 9th March 1995 on the application of Lhasa and Concorde the Court extended time for service of the Evidence Law notice in respect of Pharaon's witness statement. During the Plaintiffs' opening it was agreed by counsel for the plaintiffs and Counsel for Lhasa and Concorde that Pharaon's witness statement should be read by the Court. The Court was informed by Counsel for Lhasa and Concorde early in the trial that there were technical problems in setting up the video link. The parties then agreed that Pharaon's evidence should be taken by way of a telephone link between Grand Cayman and Saudi Arabia, with a video being made of Pharaon giving his testimony. Arrangements were made for this to take place starting on 3rd April 1995. The court was later informed that Counsel for Ihasa and Concorde objected to the date of 3rd April 1995 on the ground that Pharaon could not get visas for his Pakistani legal advisers to be in Saudi Arabia by 3rd April. This ground of objection was not pursued, but on 24th March the Court was informed that Counsel for Ihasa and Concorde objected to the date of 3rd April 1995 on the new ground that copies of the transcripts of the Plaintiffs' opening had been sent to Pharaon, that they had not yet arrived and that he would not have sufficient time to consider them before 3rd April. The court ruled on that occasion that there should be no further delay in the examination and that it should go ahead on 3rd April 1995. Counsel for Ihasa and Concorde then informed the court on 27th March that Pharaon would not be giving oral evidence. Counsel for the plaintiffs submitted that this was in breach of Pharaon's personal undertaking to the court given in the Order dated 10th February 1995, namely that he would comply with any further orders and directions which might hereafter be made by the Court in relation to his examination. On that occasion (28th March), at the suggestion of Counsel for the plaintiffs, Counsel for Lhasa and Concorde informed the Court that they would urge Pharaon to comply with his undertaking. Counsel for Lhasa and Concorde informed the Court on 4th April 1995 that they had sent a fax to Pharaon urging him to comply with his undertaking, but that there had been no response of any kind. In the event Pharaon did not give oral evidence to the Court although his written statement was received in evidence. Whitbeck informed the court during his evidence that it was his hope that Pharaon would give testimony in these proceedings and that Pharaon had changed his mind about giving oral evidence on the advice of his Pakistani lawyers. I have permitted these facts to become part of my judgment, although not strictly necessary as part of the factual foundation for my decisions, because I am aware that the proceedings in this suit will be the subject of examination in the Courts of at least one other jurisdiction. I shall deal, outside the agreed facts, with the question of whether Pharaon has submitted to the jurisdiction of the Court. Proceedings in The Bahamas On 2nd November 1992 ICIC also commenced proceedings against Pharaon and Pharaoh in the Supreme Court of The Bahamas, Equity Side. Concorde was joined as a defendant on 9th November 1992. On 2nd November 1992 the Supreme Court appointed Mr Clifford Culmer ("Culmer") as receiver of Pharaoh (which is incorporated in The Bahamas). After Culmer had been appointed as receiver of Pharaoh, he discovered that assets of Pharaoh, including the share capital of Falcon, had been transferred to Concorde. This can be seen from the register of members of Falcon. On 9th November 1992 the Supreme Court appointed Culmer as receiver of the assets and undertakings of Concorde within the jurisdiction of the Bahamian Court. Falcon is incorporated in The Bahamas and its shares are included in concorde's Bahamian assets. On 10th November 1992 Culmer, acting as receiver of Concorde's assets in The Bahamas (including the shares in Falcon), removed all of the existing directors and officers of Falcon. Mr William Hogg of Culmer's firm was appointed as a director of Falcon. On 20th November 1992 Concorde issued a Summons in the Bahamian proceedings for orders striking out Concorde's name from the proceedings and discharging the receivership. The application was supported by an affidavit of Whitbeck, also sworn on 20th November 1992. On 3rd December 1992 Gonsalves-Sabola CJ dismissed the application to strike out Concorde, holding that the Bahamian Court did have jurisdiction in the matter. A Notice of Appeal from this decision was issued but was later withdrawn. The application made in November 1992 to discharge the receiver was never pursued. A new application was issued by Concorde much later, on 30th January 1995, for the discharge of the receiver. This application had not been heard at the time of hearing of this suit. The receiver, Culmer, applied to the Bahamian Court by Summons dated 17th December 1992 (that is, prior to the trial in the English proceedings referred to below) for directions, including a direction as to what steps if any he ought to take to defend the English proceedings. In his affidavit in support of that application sworn on 17th December 1992 Culmer deposed to the attempts which he and his staff and lawyers had made to obtain the assistance of Whitbeck, as a former officer of Falcon who would have knowledge of the relevant facts, in order that they could present Falcon's case in the English proceedings. Whitbeck was until September 1992 a director of Falcon and was until 10th November 1992 its assistant secretary. He is also a director of Concorde. As appears from Culmer's affidavit when his assistance was sought, Whitbeck refused to assist, adopting the position that Culmer should resign. On Culmer's application for directions, the Bahamian Supreme Court made an Order dated 28th January 1993 that Culmer be at liberty to instruct solicitors in England and act on such advice as he may receive from them as to such defence as he was able to make on behalf of Pharaoh and Falcon in the English proceedings. Concorde did not attend at the hearing of that application and did not seek to influence the directions to be given by the Bahamian court. The English proceedings ICIC commenced proceedings by writ in England on 29th October 1992. FIIL was then added as a co-plaintiff. The relief claimed by the plaintiffs (ICIC and FIIL) in the English proceedings includes a claim for a declaration that FIIL is the beneficial owner of the entire issued share capital of AOC. The defendants to the English proceedings are Adham, Fulaij, Falcon, AOC, Pharaon, Pharaoh and Ihasa. On 28th October 1992 the English High Court appointed Mr Timothy Hayward ("Hayward") of KPMG Peat Marwick as receiver of the AOC shares. By this Order, Harman J also directed Hayward to reconstitute the board of AOC, which he proceeded to do on 29th October. On 2nd November 1992 Falcon applied to the English Court for disclosure to it of certain documents. On that occasion Knox J made an Order which recited an undertaking given by Falcon not to use the material in the documents otherwise than for the purpose of defending the English proceedings through its President, Pharaon, and its solicitors and attorneys Berwin Leighton and Whitman & Ransom. By a letter dated 5th November 1992 to Lovell White Durrant, the plaintiffs' London solicitors, Berwin Leighton stated that they acted for Falcon and were instructed to acknowledge service of proceedings on their behalf. By a further letter dated 9th November 1992 Berwin Leighton stated that Falcon had not submitted and did not intend to submit to the jurisdiction of the English Court and that, in their view, England was not the proper forum for the resolution of the question of the ownership of the shares in AOC. On 27th November 1992 Harman J made an order in the English proceedings providing for the trial of certain issues in advance of other issues. Those issues included the issue of whether or not FIIL was beneficially entitled to the whole or some, and if so which, part of the issued share capital of AOC. On 18th January 1993 Berwin Leighton, Falcon's solicitors, applied for and were granted an Order that they cease to be the solicitors acting for Falcon in the English proceedings. By a letter to Watson Farley & Williams dated 26th February 1993, Lovell White Durrant stated that, having considered the matter further, it had been decided not to join Concorde as a defendant. The trial of the issues (ordered by the Court on 27th November 1992) took place in open court before Harman J between 10th and 12th March 1993. The plaintiffs say that this was a trial on the merits. Following this trial Harman J gave judgment and made an Order relating to the AOC shares. In his Order Harman J declared that Adham, Fulaij and Falcon held upon constructive trust for FIIL those shares registered in their respective names in the register of members of AOC. He ordered that the register of members of AOC be rectified to record FIIL as the owner of the entirety of the issued share capital of AOC. Harman J's Order also declared that the new directors of AOC appointed on 29th October 1992 had been validly appointed. The register of AOC has been rectified pursuant to this order. Falcon was represented at the trial in the English proceedings by solicitors and Counsel (Mr David Marks) instructed by its new board. Falcon by its Counsel put the plaintiffs to strict proof of their claim to the AOC shares. Culmer swore an affidavit on 5th March 1993 in the English proceedings. He produced a further exchange of correspondence between his London solicitors Watson Farley & Williams and Whitbeck dated 1st and 2nd March 1993. In this exchange Whitbeck again refused to assist Culmer in relation to the English proceedings. On 30th April 1993 Lhasa applied to the English Court for orders setting aside service of the English proceedings on it and setting aside the judgment and Order of Harman J. That application was dismissed. Lhasa appealed this decision, but the appeal was later dismissed by consent. By a Summons dated 24th January 1995 the plaintiffs applied to the English Court for orders that Falcon and Lhasa account for all dividends, profits, distributions and other benefits which they had or should have received by reason of their holdings of or dealings with the AOC shares. On the hearing of that application Harman J made an Order dated 13th February 1995 that Falcon and Lhasa do account for their dealings with the AOC shares. The Order also contains declarations relating to the question of the effect of Harman J's judgment and order dated 12th March 1993. Pursuant to Harman J's Order dated 13th February 1995, an affidavit was sworn in the English proceedings by Djouhri, a director of Lhasa. Whitbeck is the assistant secretary of Lhasa. In his evidence to this Court he said that Lhasa had submitted to the jurisdiction of the English Court. Proceedings in Pakistan A large number of proceedings have been commenced in Pakistan. The details of these proceedings need not be set out for present purposes. Reference should however be made to two of the proceedings which have been the subject of evidence in this trial. On 14th November 1992 proceedings were commenced by Concorde in the Court of the Senior Civil Judge in Rawalpindi against eighteen defendants, including AOC, POL, ARL, Hayward (the court appointed receiver of the AOC shares), Mr Robert Axford (one of the liquidators of ICIC) and ICIC. These proceedings have been referred to during this trial as "P2", being the second set of proceedings commenced in Pakistan. In P2 Concorde alleges that the order of the English Court appointing Hayward as receiver of the AOC shares was obtained by fraud and misrepresentation. On 14th March 1993, after the trial in the English proceedings, Pharaon and Concorde brought a further set of proceedings in Pakistan against ICIC, Sheedy and others. These proceedings have been referred to during this trial as "P8". AOC is also named as a plaintiff in P8, although the plaintiffs do not accept that those who purport to act for AOC in P8 have authority to do so. The proceedings sought to bring into issue in Pakistan the ownership of AOC. In P8 Pharaon and Concorde refuse to recognise the judgment and Order of Harman J dated 12th March 1993, claiming among other things that it has been procured by fraud and in breach of the principles of natural justice and that Harman J was biased against Pharaon as a Muslim. THE PLAINTIFFS' CASE AND THE CASE OF LHASA AND CONCORDE In this section the case put forward by the plaintiffs and the case put forward by Lhasa and Concorde are summarised. The Plaintiffs' Case The FIIL shares ICIC's case is that it is the sole beneficial owner of the entire issued share capital of FIIL. ICIC contends that those shares have always been held on resulting trust for it because all the FIIL shares were paid for by ICIC and the presumption of resulting trust applies. ICIC's case is that Lhasa and Concorde could only seek to rebut the presumption of resulting trust by relying on and proving a dishonest scheme. The dishonest scheme alleged by the plaintiffs is a scheme to conceal and misrepresent the true financial position of ICIC (and in particular to conceal its ownership of FIIL), to falsify ICIC's accounts and to mislead the Inspector of Banks and Trust Companies in the Cayman Islands. The same alleged facts found the plaintiffs' claim in conspiracy; the scheme is described in more detail under that head of claim. According to ICIC, the different findings of fact which are possible are:- 1) there was no intention to give the defendants any beneficial interest in the FIIL shares. In these circumstances the presumption of resulting trust will apply and the defendants will have no beneficial interest; 2) there was an intention to give Pharaon and/or Adham and/or Fulaij a beneficial interest in some portion of the FIIL shares. In these circumstances ICIC contends that the presumption of resulting trust will apply to vest the beneficial interest in ICIC and the defendants cannot seek to rebut that presumption by relying on an intention (as part of a dishonest scheme) that they should have a beneficial interest; 3) the 1977 Agreement, the 1977 Fulaij Agreement, the 1982 Agreement and the 1988 Agreement (collectively "the nominee agreements") give various percentages of FIIL shares which, according to those agreements, were to be owned beneficially by the defendants. When the error in the 1982 and 1988 agreements is corrected, the nominee agreements indicate that 78% of the FIIL shares were to be owned beneficially by ICIC and the balance by the defendants. ICIC contends that these varying percentages do not affect the matter. First, it remains the case that the presumption of resulting trust will operate to vest the beneficial interest in all the FIIL shares in ICIC and the defendants still cannot seek to rebut that presumption by relying on an intention (as part of a dishonest scheme) that they should have a beneficial interest. Secondly, the differences in percentages are immaterial in the light of Ihasa and Concorde's admission that at least 90% of the FIIL shares were beneficially owned by ICIC. It has already been conceded that ICIC owned rather more than 78% of FIIL. The AOC shares The plaintiffs' case is that FIIL is the sole beneficial owner of the entire issued share capital of AOC. The plaintiffs contend that this issue has already been tried in open court and on the merits and determined by Harman J in the English proceedings. They say that the English High Court is and was a competent court having jurisdiction over the question of the title to the shares in AOC, a company incorporated in England. Indeed they go so far as to say that the English Court is the only Court which could have jurisdiction to grant rectification of the register of members of AOC, which was one of the provisions of the Order of Harman J dated 12th March 1993. The plaintiffs say that the determination of the English court is binding on the defendants in this action and should be recognised in this jurisdiction. The plaintiffs make the further or alternative contention that it has been proved in the evidence that FIIL is the sole beneficial owner of the entire issued share capital of AOC. The basis for this contention is that FIIL bought the AOC shares pursuant to the terms of the Attock Agreement and paid for all of those shares. The provisions of the Attock Agreement have already been summarised. Pursuant to this agreement FIIL acquired all nine million shares in AOC in four tranches, details of which are set out above. In short, FIIL acquired some 2,326,620 shares at about the time of the Attock Agreement. It acquired a further 4,438,000 shares in a rights issue on or about 8th February 1980 and acquired two further tranches of 1,750,000 and 485,380 shares from API when API exercised its put option under the Attock Agreement on two occasions in November 1979 and July 1980. All of these shares were paid for by FIIL. conspiracy and related claims The plaintiffs' case is that a fraudulent scheme was conceived and carried out, in relation to the FIIL shares and the AOC shares, by individuals both inside and outside ICIC. The dishonest scheme as it is alleged by the plaintiffs is summarised below. The question of whether this scheme has been proved is dealt with later. Abedi, with Naqvi's assistance, determined that ICIC would acquire AOC, an oil company, from its owner APL. For reasons set out below, ICIC could not do this openly. The scheme was conceived in the first half of 1977 when Abedi and Naqvi agreed with Adham, Fulaij and Pharaon that they (Adham, Fulaij and Pharaon) would acquire and hold the FIIL shares on behalf of ICIC, that ICIC's shareholding in FIIL would be concealed and that ICIC would use FIIL as a corporate vehicle through which to purchase AOC. Other individuals, both inside and outside ICIC, joined in the scheme as it was developed and carried out. It was fundamental to the scheme that ICIC's interest in FIIL should be concealed and that one of the reasons for this was bank regulation. In order to maintain its Banking Licence, ICIC would have to provide its audited accounts to the Inspector of Banks and Trust Companies in the Cayman Islands ("the Inspector") annually. In looking at those audited accounts the Inspector would be concerned with the adequacy of the capital and liquidity of ICIC for the banking business which it carried on. The audited accounts were an important tool for the Inspector in performing his regulatory functions, the purpose of which was the protection of depositors and the maintenance of confidence in the banking system. If ICIC's interest in FIIL had been revealed, its acquisition of FIIL would have been apparent from the face of its accounts, which would either have led to the withdrawal of the Banking Licence or would have caused the Inspector to impose conditions on the Banking Licence. One of the reasons for this is that the investment in FIIL was recorded as loans which created the impression of a more favourable liquidity position. ICIC could not be seen by the Inspector to be making an investment in the shares of AOC directly or indirectly through the medium of FIIL without adversely affecting the Banking Licence. In particular:- a) the sum involved in making the acquisition was large in relation to the capital base and net assets of ICIC at that time; b) investing such a sum in shares in a private company was converting cash (that is, depositors' money or borrowings from other banks) into an investment which was not liquid or readily capable of being liquidated. Effectively, depositors' money in a bank would be applied in making wholly inappropriate investments by a bank; c) each of the above matters was exacerbated both from the regulatory and commercial points of view because an investment in a volatile industry such as oil is and was subject to a high level of risk, both in the industry itself and from the point of view of exposure to currency restrictions. The acquisition of FIIL and thereby, AOC, was wholly inconsistent with ICIC's status as a bank. The acquisition of AOC was therefore effected by FIIL, which was set up for that purpose. The shares were registered, not in the name of ICIC, but in the names of Adham, Fulaij and Pharaon (and later, in the names of companies controlled by Pharaon). They held either all or some of the shares on ICIC's behalf as nominees. Nominees were therefore used to disguise ICIC's ownership of FIIL. If nominees had not been used, ICIC's ownership of the FIIL shares, and its use of creditors' money in their acquisition, would have been apparent forthwith on perusal of the next set of ICIC financial statements following the acquisition. Indeed this would have been made public even before the financial statements, in a public circular sent to the shareholders of APL on the acquisition of AOC. Notwithstanding that Adham, Fulaij and Pharaon paid nothing for the FIIL shares, nominee agreements were signed when the scheme was set up in 1977 (and subsequently in 1982 and 1988) which purported to record that, while the majority of the FIIL shares was indeed held in a fiduciary capacity for ICIC, there was a smaller proportion of shares which was to be held by Pharaon and Fulaij beneficially. These arrangements represented a "pay off" to Pharaon and Fulaij for their participation in the dishonest scheme. Having set up FIIL, the parties to the scheme proceeded with the acquisition of AOC by FIIL. The Bank of England were told that the investors who proposed to purchase AOC were Adham and Fulaij. The shareholders of APL were told that FIIL's principal shareholders were Kuwaiti and Saudi citizens with extensive trading interests in the Middle East. Since ICIC owned FIIL, these statements were false and misleading. Putting the FIIL shares into the names of nominees would not alone effect the desired disguise. Although this prevented the shares being held in the name of ICIC, it would still raise the question of how to account for the investment in ICIC's books. If properly recorded as an investment in shares, the nominee arrangements would not achieve the desired disguise of ICIC's ownership. The asset acquired (that is, the FIIL shares) would still have to be recorded as an asset of ICIC, despite being held in a nominee's name. To complete the disguise, the acquisition costs funded by ICIC were falsely recorded in the books of ICIC as if they were secured, interest bearing loans, that is, perfectly normal transactions for a bank to have entered into. As between the parties, these loans were "non-recourse", there being no obligation on the part of the borrower to repay. The recording of these payments for the FIIL shares as interest bearing secured loans also had a beneficial effect on ICIC's liquidity, profitability and capital adequacy, as they appeared in ICIC's accounts. The payments which ICIC made for those shares were included in the figures for loans and advances in its financial statements, rather than appearing as investments in a private company. No indication was given in these financial statements that the loans had been granted on a non-recourse basis. Further steps were necessary to maintain the disguise. Once the acquisition costs of the FIIL shares had been treated as if they were loans, the loans would attract interest in the books of ICIC. In the normal course of events, year by year on the audit, the auditors would be concerned to consider with the management of ICIC whether provision needed to be made for bad or doubtful debts. The effect of such a provision would be to introduce a charge in the profit and loss account (thereby reducing profits) and to reduce the assets of ICIC in its balance sheet by a similar amount. Large loan accounts which were simply increasing without servicing of interest and/or capital would be targets for the auditors' consideration. The longer a loan remained in this category, the greater the attention it would be likely to attract from the auditors. Such attention would have been perceived as likely to have uncovered the existence of the scheme. An important device used to conceal the non-performing nature of these loan accounts was the provision to ICIC's auditors of audit confirmation letters that did not confirm the non-recourse nature of the loan. On a regular basis Adham, Fulaij and Pharaon signed such letters confirming, for the purposes of ICIC's audit, the indebtedness on their loan accounts, the rates of interest and the security (being the FIIL shares). The responses to the audit confirmation letters, which were endorsed on those letters, were false and were given fraudulently. The plaintiffs say that this is simply demonstrated by a series of "non-recourse letters" written to the debtors in question by Abedi, Naqvi and others stating, in differing formulations, that the debtors were not liable to repay the loan accounts in question. In the normal course of events, audit confirmation letters alone for large non-performing loans would be unlikely to hold the auditors at bay. Certain steps would also be required to give the appearance of performance. Among these steps was the "migration" of indebtedness on non-recourse accounts. One means of migration was for a non-recourse loan and interest on it to be repaid in whole or in part from a fresh non-recourse loan made in a new account. Another method was to "migrate" an account to a different but related bank in the control of the same individuals. The unlawful means alleged by the plaintiffs are breach of fiduciary duty by ICIC's employees and agents, the misrepresentation of the true financial position of ICIC, the falsification of its accounts and the dishonest deception of the Inspector. The plaintiffs also contend that removal of the AOC shares from FIIL in 1991 was carried out dishonestly and was part of this fraudulent conspiracy; alternatively it was a second conspiracy to defraud the plaintiffs. They contend that FIIL was and is the beneficial owner of the AOC shares and that the AOC shares were removed from FIIL without proper authority, for no legitimate purpose and (in the case of Pharaon) in breach of fiduciary duty. The plaintiffs contend that the same facts also give rise to claims in breach of fiduciary duty, knowing assistance in breach of fiduciary duty, breach of trust, knowing participation in breaches of trust and to a claim that there have been fraudulent dispositions (in particular the dispositions of the AOC shares). By reason of an Order of Harre CJ made in these proceedings on 4th March 1994 the quantum of damages for conspiracy and the amount of compensation for the other alleged wrongs are not to be determined at this stage, although it is necessary to consider the question of whether some loss and damage has been suffered under the heads claimed by the plaintiffs. Should the plaintiffs succeed, quantum will be determined at a further hearing. During the course of the trial Ihasa and Concorde both applied for leave to re-amend their Defences and to amend particulars of the Defences which had been given. The court granted such leave on 30th March 1995. The FIIL shares and the AOC shares Lhasa and Concorde allege that Pharaon paid US$850,000 for 85,000 shares issued in the first FIIL share issue as part of a perfectly legitimate business transaction. They say that Pharaon borrowed this $850,000 from ICIC on an ordinary and genuine recourse loan, secured on 85,000 shares in FIIL. They allege that, although the 1977 agreement was described as an option agreement, it was in fact a binding commitment of ICIC to purchase 75% of the shares in FIIL at a pre-determined price within five years, the timing of the transaction to be decided by ICIC. They agree that FIIL acquired the AOC shares under the Attock Agreement, that FIIL paid for the AOC shares and that, prior to the oral agreement to which reference is made below, FIIL was the legal and beneficial owner of the AOC shares. Ihasa and Concorde allege however in paragraph 29 of their Re-Amended Defences that on or about 20th or 21st June 1979 Pharaon met Abedi and that, at the meeting, an oral agreement was made between Pharaon and Abedi, with Abedi "acting for BCCI and ICIC". They allege that the following were terms of this agreement ("the 1979 agreement") :- a) the FIIL promissory note should be automatically extended for a 12-month period on the same terms and conditions and should be due to Pharaon on demand with all accrued interest upon six months notice; b) the option granted to ICIC pursuant to the 1977 Agreement should, if exercised in writing, apply to 75% of the FIIL shareholding and all its subsidiaries to the exclusion of the shareholding in AOC, 85% of which was to be beneficially owned by Pharaon (the remainder to be beneficially owned by Adham and Fulaij); c) the affairs of AOC should be under Pharaon's direct control whereas the affairs of all other FIIL subsidiaries should be managed by ICIC selected managers; d) all liabilities of FIIL relating to AOC (including those arising under the Attock Agreement) should be assumed by AOC and/or Adham and/or Fulaij and/or Pharaon each in pro-rata of his individual shareholding; e) a fee to be mutually agreed upon should be paid annually by the oil trading subsidiaries of FIIL for benefits derived from their association with AOC. The FIIL promissory note referred to is a promissory note from FIIL in respect of the loan of SR 15m from Pharaon to FIIL in about July 1977, a matter to which reference has already been made. Lhasa and Concorde allege that in 1980 the following occurred:- 1) the loan of $900,000 made by KIFCO to Pharaon in June 1980, which they allege was a recourse loan, was used to repay the loan of $850,000 by ICIC to Pharaon in respect of the first FIIL share issue; 2) the FIIL promissory note was cancelled on or about 2nd July 1980; 3) Pharaon relinquished his beneficial interest in all but 10% of the shares in FIIL; Pharaon acquired the beneficial interest in 85% of the shares in AOC. Ihasa and Concorde allege that from 30th June 1980, insofar as Pharaon appeared to own more than 10% of FIIL, that ownership was as nominee for ICIC. They agree that loans made by and on behalf of ICIC in respect of acquisitions of shares in FIIL in the second, third and fourth FIIL share issues were non-recourse in nature. They contend however that Pharaon remains entitled to 10% of all the FIIL shares by virtue of the 1979 agreement. Ihasa and Concorde allege that in June 1981 Pharaon's loan of $900,000 from KIFCO and interest thereon was repaid out of the proceeds of a French Franc deposit of Redec with Bank of Credit and Commerce Luxembourg of FRF 51,797,619.39. Ihasa and Concorde allege that Pharaon became the beneficial owner of 85% and subsequently 88% of the AOC shares by virtue of the 1979 agreement. They further contend that Pharaon paid FIIL for 88% of the nine million AOC shares in the following manner:- a) by transferring to FIIL $750,000 in respect of Pharaon's share capital in FIIL; b) by the cancellation of the FIIL promissory note. It is part of Lhasa and Concorde's case that the loan of SR 15m from Pharaon to FIIL in about July 1977 which gave rise to this promissory note was not repaid but was used by Pharaon to acquire shares in AOC; c) by the payment of dividends from AOC. Lhasa and Concorde ask for no declaration as to the ownership of the AOC shares. Conspiracy and other claims Lhasa and Concorde's case is that they were not involved in any scheme and/or conspiracy whereby the shares of FIIL were to be held by nominees in order to conceal ICIC's ownership of those shares. Pharaon's acquisition of 85% of the FIIL shares in 1977 was part of a legitimate and arms length business transaction. They say that Pharaon as the beneficial owner of 85% of the FIIL shares in the first issue was not a party to any scheme to conceal the true ownership of the FIIL shares. Pharaon was not, they say, a party to any scheme or conspiracy to suppress from the audited accounts of ICIC at any time that ICIC had a commitment to acquire 75% of the FIIL shares pursuant to the terms of the 1977 Agreement. They say that Pharaon was not a party to any scheme or conspiracy to present ICIC's investments in the FIIL shares as loans to the shareholders of FIIL. They say that Pharaon was not a party to any false statements which may have been made to the Bank of England in 1977 and had no knowledge of any of the correspondence which took place with the Bank of England. They say that Pharaon knew nothing of the manner in which loans were migrated in the accounts of ICIC or other banks so as to give the appearance that non-recourse loans were active and performing recourse secured loans. Apart from the audit confirmation letters sent by Pharaon to ICIC in respect of the years ending 30th June 1985 (on behalf of Pharaoh) and 1987 and 1988 (on behalf of Lhasa) Pharaon was not involved in a scheme and/or conspiracy to mislead the auditors of ICIC or the Inspector. The transfers of the AOC shares from FIIL to Lhasa to Falcon in November 1991 were, they say, effected in the honest belief that the shares were beneficially owned by Lhasa. Lhasa and Concorde contend that, even if (which is denied) the scheme or conspiracy is proved, the deficit claim in paragraph 12.6 of the Re-Amended Statement of Claim is not sustainable in law, nor is the claim for costs which is made in paragraph 12.5 of the Re-Amended Statement of Claim. For the reasons set out above, Lhasa and Concorde deny that they have been in breach of fiduciary duty, knowing assistance in breach of fiduciary duty, breach of trust, knowing participation in breach of trust or fraudulent dispositions (in particular the dispositions of the AOC shares). THE PLAINTIFFS' RESPONSE For present purposes, two points made by the plaintiffs by way of response to Lhasa and Concorde's case should be noted:- a) the plaintiffs deny that the alleged 1979 agreement was ever made and contend that it is a fabrication; b) the plaintiffs allege that the loan of SR 15m made by Pharaon to FIIL in about July 1977 was repaid in about May 1978, that is, more than a year before the alleged 1979 agreement. The matters set out above in the plaintiffs' response are denied by Lhasa and Concorde. AGREED STATEMENT OF ISSUES The remaining issues as agreed by the parties and as accepted by me are as follows. Remaining Issues relating to FIIL 1) Is ICIC the beneficial owner of 100% of the issued shares in FIIL or is it the beneficial owner of only 90% of those shares? This principal issue breaks down into a number of more detailed sub-issues, as follows. 2) Was the first loan (or loans) of $850,000 (debited to account 80019 held with ICIC in the name of Pharaon) an ordinary commercial recourse loan or was it a "non-recourse" loan? 3) Was the loan of $900,000 by KIFCO to Pharaon in June 1980 an ordinary commercial recourse loan or was it a "non-recourse" loan? 4) Was the loan of $900,000 by KIFCO to Pharaon in June 1980 used to repay the first loan of $850,000 on account 80019 (and subsequently on accounts 80091A and 5) Was Pharaon's loan of $900,000 from KIFCO discharged out of a French Franc deposit of Redec? 6) Subject to paragraphs 2 and 3 above, it is common ground that all of the loans made by ICIC in respect of the acquisitions of shares in FIIL were non-recourse. What is meant by "non-recourse?" Does "non-recourse" mean, as the plaintiffs contend, a sham transaction recorded in the books of ICIC as a normal secured interest bearing commercial loan to disguise the acquisition cost incurred by ICIC in respect of the FIIL shares? Or does it mean, as contended by the defendants, a bona fide commercial transaction which was a loan, the repayment obligation of which was limited on the part of the "borrower" to repayment from the proceeds of sale of the security (the FIIL shares)? 7) The sums which ICIC paid for the FIIL shares were accounted for in the books and accounts of ICIC as interest bearing secured loans and these loans were moved or "migrated" through other banks from time to time. Why were the sums accounted for in this way? Why were these loans migrated through other banks? 8) Pharaon's knowledge:-- a) What did he know of the scheme of which the acquisition of FIIL and the funding of the FIIL shares were part? b) What did he know of the movements around of the funds? c) What did he know of the non-recourse loans? 9) Did Pharaon take any shares in the first issue as the beneficial owner of those shares rather than as nominee for ICIC? 10) What is the effect of the 1977 "option" agreement? 11) Was the alleged 1979 agreement entered into and, if so, what was its effect in law? In relation to the FIIL shares, did it make Pharaon the beneficial owner of 10% of the FIIL shares (including 10% of the FIIL shares issued on the sec Remaining Issues Relating to the Ownership of the AOC Shares 12) Is FIIL the beneficial owner of 100% of the issued shares in AOC or are they beneficially owned as to 88% by a Pharaon company and as to the remainder by Adham and Fulaij? This principal issue breaks down into a number of more detailed sub-issues, as follows. 13) Did the judgment and Order of Harman J dated 12th March 1993 in the English proceedings determine the issue of the beneficial ownership of the AOC shares as between the parties to this action? 14) Should the judgment and Order of Harman J dated 12th March 1993 in the English proceedings be recognised in this action? This issue itself divides into a number of sub-issues:- a) were the judgment and Order pronounced by a court of competent jurisdiction?; b) are the judgment and Order final and conclusive on the merits?; c) can the judgment and Order be impeached on the ground that the proceedings in which they were obtained were opposed to natural justice?; d) do the judgment and Order bind Concorde as a privy of Pharaon and/or Ihasa and/or Falcon? 15) Can Ihasa and Concorde prove the alleged 1979 agreement?
If the defendants can prove the 1979 agreement, what legal effect does it have? 17) Did Pharaon repay FIIL in respect of the payments which FIIL made for the AOC shares? 18) Pharaon lent SR 15m to FIIL in about July 1977. Was this loan, as the plaintiffs say, repaid in about May 1978? Or, as the defendants say, was the FIIL promissory note (given in respect of this loan) discharged or cancelled in pursuance of the 1979 agreement? Issues on Conspiracy and Related Claims 19) Are the defendants liable to ICIC and FIIL for conspiracy, knowing assistance in breach of fiduciary duty and similar wrongs? This principal issue breaks down into a number of more detailed sub-issues, as follows. 20) Can the plaintiffs prove the agreement and the alleged scheme relating to the FIIL shares and the AOC shares which are described in their recitation of their case under the heading "Conspiracy and related claims". 21) Did the scheme involve the use of unlawful means? 22) What did Pharaon know about the alleged scheme? Did he participate in the scheme? 23) What did Whitbeck know about the alleged scheme as a director or officer of Lhasa, Concorde or Falcon? 24) Did Pharaoh, Lhasa and Concorde participate in the alleged scheme? 25) Were such knowledge and participation sufficient to render Pharaon and companies controlled by him (Pharaoh, Lhasa and Concorde) liable to the plaintiffs in conspiracy? 26) Have the plaintiffs suffered some loss and damage under all or any of the heads claimed in paragraph 12 of the Re-Amended Statement of Claim? Which of the defendants is liable under which head of damage? 27) Is the Plaintiffs' submission correct that a conspirator is liable for all damage caused irrespective of when he joins the conspiracy or is the submission of Lhasa and Concorde correct that a conspirator is liable only for damage that is caused after he joins the conspiracy? 28) Are the heads of damage in paragraphs 12.5 and 12.6 of the Re-Amended Statement of Claim properly claimable in law? 29) Do the same facts give rise to causes of action against the defendants in breach of fiduciary duty, knowing assistance in breach of fiduciary duty, breach of trust, knowing participation in breaches of trust and to a claim that there have been fraudulent dispositions (in particular the dispositions of the AOC shares)? FINDINGS ON THE ISSUES Before I attempt to answer the issues I ought to make three general points. First, as already stated, although at one stage it appeared that Pharaon was going to testify in the trial he ultimately declined to do so. I have been asked by Counsel for the plaintiffs to make a finding on whether Pharaon submitted to the jurisdiction. Although strictly not necessary in determination of the issues raised in the statement of claim I am persuaded to do so because of the existence of current proceedings in other jurisdictions which, it may be argued, could be affected by the outcome of this suit. Of course whether or not Pharaon submitted to the jurisdiction of the Grand Court does not affect the question of whether my findings bind him. He was properly served as a party to the suit and had every opportunity to be represented at the hearings. Whitbeck accepted that in a practical sense Pharaon has controlled the defences of Lhasa and Concorde. Pharaon was to give evidence on behalf of the two companies. To that end Pharaon himself gave various undertakings, through counsel, which were recorded in an Order of this Court of the 10th February 1995. Pharaon also prepared and signed a witness statement which was tendered in these proceedings. He has not confined himself in that statement, or in any step he has taken in these proceedings, to questions of this court's jurisdiction. His contribution covers all the issues for determination. He has conducted himself in a manner which recognises the jurisdiction of the Court. Pharaon has submitted to this Court's jurisdiction. If my determination of the issues goes in favour of Lhasa and Concorde no doubt Pharaon will take advantage of my judgment. He should likewise accept my findings if they go against the defendants. The second general point I make relates to the documents submitted in evidence. Much time in preparation and some time in Court was spent on questions of admissibility of various documents. Ihasa and Concorde objected to admissibility on various grounds and I made rulings on the question. The objections were, for example, to documents which were in manuscript where there was no indication of whose handwriting it was and objection to a copy document being admitted where the absence of the original was unaccounted for. Of course all the documents were recovered from the offices of the parties. However, when I reach a detailed consideration of them I take into account the defence objections when considering the weight to be attached to the documents objected to. At the end of the day many of the objections to admissibility fell away, although in the case of many documents Counsel for Ihasa and Concorde do not accept the inferences the plaintiffs ask me to draw from the documents. Third, neither Adham nor Fulaij make any claim to the FIIL or AOC shares. In connection with the proceedings in England before Harman J. Adham effected a settlement with the plaintiffs in which he agreed to resign as a director of AOC and executed stock transfers in favour of the Receiver of the AOC shares appointed in the English proceedings. Adham also undertook not to argue in any proceedings in any jurisdiction that the shares he previously held in AOC do not belong to FIIL. The plaintiffs have settled with Fulaij. When Fulaij was asked on behalf of the liquidators to repay the balance recorded as being overdrawn on an account with ICIC and secured on the FIIL shares registered in his name Fulaij replied by letter dated 23rd February 1992 in which he said: "Please be hereby advised that I personally have never received such an amount, nor disposed of any such funds nor got any benefit of consideration of any kind out of the same. As arranged by ICIC (overseas) management, the proceeds were directed towards the purchase of BCCI and other companies' shares to be kept in my name as just nominee. I never received those share certificates which were always kept with ICIC management." Of course any admissions by Adham and Fulaij are evidence as against each one individually and are not evidence against any other defendant. The FIIL ownership issues A key to my consideration of the determination of the facts, and indeed to the issues of ownership of the shares of FIIL and AOC, is the alleged 1979 oral agreement and my determination of issue 11. Upon the existence and terms of that alleged agreement rests Pharaon's claim to a 10% interest in the second, third and fourth tranches of the FIIL shares and a beneficial interest in 88% of the AOC shares. By far the strongest piece of evidence to support Pharaon's claim is the letter he has produced dated the 21st June 1979 setting out the main terms of the alleged agreement. I say the main terms, for in his witness statement Pharaon asks the Court to accept that there were other terms which were not set out in his letter. On Pharaon's evidence his business dealings are mainly based on Arab traditions and are not document orientated. However it is surprising that such an important agreement was not set down as a formal document, particularly when one considers that agreements in 1977, 1982 and 1988 were all fully documented properly. The financial and business implications of the alleged 1979 agreement were enormous. It is very odd that the letter of the 21st June 1979 was first referred to by Lhasa and Concorde in their list of documents of the 17th February 1994 and was only produced pursuant to a Court order of the 3rd August 1994. There had been proceedings in England resulting in Harman J's judgment and Order of 12th March 1993 in which no mention was made of the existence of the 1979 agreement. There is no mention of the existence of the agreement in Whitbeck's affidavit in the Bahamian proceedings of November 1992. Whitbeck was only told of the existence of the 1979 agreement in May 1993. Baqi, an employee of FIIL and Managing Director of AOC, was never told by Pharaon or Abedi about the agreement and said he would be surprised if such an agreement existed. The original of the letter dated 21st June 1979 has never been found. Whilst it is possible that documents have not been uncovered in the liquidators' searches, extensive investigations have been carried out and no other copy of this letter has been found. Nor is there any other document produced which directly points to the genuineness of the 1979 agreement. We can add to all this the evidence of Dr. Giles, an expert in forensic document examination, that the signature bears a close resemblance to genuine signatures of Pharaon and that it is more similar to signatures made in the period 1988 to 1992 than to signatures which she examined from 1979, and that the available evidence suggests that the signature was written by Pharaon possibly in the period 1988 to 1992. Lhasa and Concorde produced the report of Peter V. Tytell, a document examiner, who concludes that the type style involved in the production of the letter could have been one that was available on the market well before 1979 and that the original/prototype could have been prepared as dated. Counsel for Lhasa and Concorde argue that it is not consistent with common sense for Pharaon to have had a letter typed in the period 1988 to 1992 on a typewriter with a pre-1979 type face and then to sign it with his contemporaneous signature. However, an intelligent man would readily have in mind that a letter asserted to be from 1979 should not be produced on a 1990 word processor. He may not so readily have in mind that one's signature changes over the years. He may not be able to repeat his 1979 signature. The Court is driven to the conclusion that the letter dated the 21st June 1979 is a recent concoction. Indeed the evidence relating to the implementation of the alleged 1979 agreement and Pharaon's own actions from 1979 drive me to the conclusion that not only is the letter a recent concoction but that the agreement it purports to evidence did not exist. The first term of the alleged agreement is that the FIIL promissory note should be automatically extended for a twelve month period on the same terms and conditions and should be due to Pharaon on demand upon six months notice. I shall reserve for later consideration the plaintiffs' assertion that the loan in respect of which the promissory note had been given was repaid before the alleged 1979 agreement was entered into. The third term of the agreement was that the affairs of AOC should be under Pharaon's direct control whereas the affairs of all other FIIL subsidiaries should be managed by ICIC selected managers. This term, and Pharaon's assertions in relation thereto, are in direct conflict with the evidence of Bagi. True is it that Bagi has been convicted at the central Criminal Court in London on six charges of furnishing false information to the BCCI auditors and had been fined therefor. Furthermore he was asked about possible bitterness he holds regarding his treatment at the hands of Pharaon and FIIL on termination of his employment. Taking all that into consideration I still found Baqi to be an honest and straightforward witness. Having observed him give evidence I cannot accept that this elderly man, whose health is doubtful, travelled from Pakistan to these Islands to perjure himself merely out of a sense of bitterness. He had nothing to gain, other than to exact revenge, by testifying. The same cannot be said for Pharaon. Baqi's evidence was clear. From 1979 he continued to take instructions from Abedi and Naqvi and Pharaon's role in relation to AOC did not change until after Abedi's health gave way in 1988. Pharaon until then had no involvement in the decision making process of AOC. Baqi also flatly contradicted Pharaon's evidence that he, Pharaon, controlled the exploration and refining operations of AOC whilst ICIC concentrated on the oil trading operations. Baqi gave clear examples of his own involvement in exploration and refining projects. Baqi's evidence supports and is supported by various documentation. Baqi's evidence receives support from the statement of Mohammed Afzal Khan admitted under the Evidence Law. He was a director of AOC from 1979 to 1990 and he was AOC's chief representative in Pakistan. He said he did not know of the existence of the letter of 21st June 1979 until it was shown to him in September 1994. He said "The position as set out in the letter does not correspond with how AOC matters operated in practice. Mr. Pharaon did not behave as if he was the owner of AOC". Whilst I am asked by Lhasa and Concorde to place little reliance on this statement it is significant that the evidence of all the witnesses, apart from that of Pharaon, points to Pharaon taking little part in AOC's operations until 1988. He obviously played some part in AOC operations in his capacity as an officer of the company, but it cannot be said that AOC was under his direct control at least until very late in the day. This is in direct contradiction to the third term of the alleged 1979 agreement. The fourth term of the alleged 1979 agreement was that all liabilities of FIIL relating to AOC should be assumed by AOC and/or by Adham, Fulaij and Pharaon each in pro rata of his existing shareholding. This is inconsistent with Pharaon's witness statement in which he says that the money to purchase the fourth tranche of AOC shares would be advanced by ICIC and would be repaid from dividends declared by ICIC and from commissions received by FIIL for the use of AOC's name in the oil trading business. From Pharaon's own statement he seems to accept that FIIL paid for all the AOC shares and borrowed money to do so. The case of Lhasa and Concorde, by amendment to their pleadings on the 30th March 1995, that Pharaon paid for AOC shares by the payment of AOC dividends to FIIL, appears to be inconsistent with the fourth term of the agreement. There is no evidence that the fourth term of the alleged 1979 agreement was ever put into effect. The fifth term of the alleged 1979 agreement is that a fee to be mutually agreed upon should be paid annually by the trading subsidiaries to FIIL for the benefits those subsidiaries would derive from their association with AOC under the FIIL structure. There is no evidence that such fees were paid. The example given by Ihasa and Concorde of a letter of the 21st July 1980 enclosing a consultancy fee to FIIL for the year ended 31st December 1979 is from AOC and not from any one of the trading subsidiaries. Such fees were paid, it seems, to reimburse the salaries of such executives as Baqi who did work for AOC. The plaintiffs also point to the commercial improbability of the 1979 agreement. Abedi, they maintain, would simply not have entered into such an agreement because the interests he represented had little or nothing to gain from it. Baqi made a telling point in his statement when he said:- "My first reaction to the document is that it seemed unnatural as it pre-empts what was to come. It was not known in June 1979 what sort of business Attock Oil (UK) Limited ad (sic) Attock Oil (Overseas) Limited would do and that the subsidiaries of AOC would be the most profitable part of the Attock Group of Companies." The plaintiffs have catalogued a great deal of documentary evidence which indicates that the 1979 agreement did not exist. The FIIL financial statements were produced for the periods 30th June 1980 to 30th June 1990. In each set of accounts AOC is treated as an asset of FIIL. In the accounts for 1986, 1987, 1988, 1989 and 1990 a distinction is made between shares held beneficially by FIIL and shares held in a fiduciary capacity. Pharaon was a director of AOC from 1977 to 1992. He was also a director of AOC, as were Adham and Fulaij. The Directors' Reports in each of the annual reports and accounts of AOC for the years 1981 to 1991 contain the following statement:- "Directors' interest in the shares of Group Companies. The directors have no interests in the shares of the Company or its UK subsidiary." Pharaon, Adham and Fulaij thereby acknowledged that they had no interest in the shares of AOC. It is also worthy of comment that the AOC Register of Directors' Interests produced to court is blank. It does not record that Pharaon, or Adham or Fulaij for that matter, had any interest in the shares of AOC. An example of other documentary support for a conclusion that it was Abedi and not Pharaon who controlled AOC, at least until 1988, is a letter from Pharaon to Abedi dated 4th March 1986 and headed "Re: Attock Oil Company." The whole tone of the letter suggests that Abedi and not Pharaon was in the driving seat of AOC. Furthermore the letter contains the following paragraph: "Whereas the Attock Oil management advised us that the net worth value of the company may have doubled, this is of little comfort to a minority investor who cannot realize this value for his shareholding." This appears to be a clear acknowledgment by Pharaon that any interest he had in AOC was as a minority investor. For all these reasons I am convinced that the 1979 agreement was never made and the letter of 21st June 1979 is of recent origin. None of the facts put forward by Lhasa and Concorde other than the letter and Pharaon's statement, may be explained solely by reference to the existence of such agreement: they all are consistent with an alternative state of affairs. I am satisfied that Pharaon has concocted his evidence in regard to the 1979 agreement to support his claim of a majority beneficial interest in AOC and to support his assertion of a 10% interest in all the shares of FIIL. Even if I am wrong in that conclusion the 1979 agreement could have no legal effect. In paragraph 29 of the re-amended defence of Lhasa and Concorde it is stated that the agreement was between Pharaon and Abedi, the latter acting for BCCI and ICIC. The alleged agreement purported to divest FIIL of the ownership of its shares in AOC. Who then represented FIIL in that agreement? It is not, and cannot, be suggested that Pharaon represented FIIL. In their final submissions Counsel for Ihasa and Concorde suggest that FIIL was a party to the agreement through Abedi, its de facto controller. However, earlier in those submissions Counsel say that the agreement was between Pharaon as the 85% shareholder in FIIL and ICIC the company that is obliged to purchase 75% of the shares in FIIL under the terms of the 1977 Option Agreement. Abedi had no authority to act for FIIL. He was not a director or officer of that company. Nor is the agreement expressed to be between FIIL and Pharaon as one of its members and in any event there was no resolution of the board of directors of FIIL to support the distribution of the AOC shares. The parties to this alleged agreement simply did not have the capacity to make it. Those conclusions answer issue 11. I find that the alleged 1979 agreement was not entered into and even if it had been it had no legal effect. It did not make Pharaon the beneficial owner of 10% of the FIIL shares including those shares issued on the second, third and fourth share issues. That my finding involves a finding that Pharaon concocted evidence to support his claim carries over to my consideration of the other evidence in the case, where issues of credibility arise. I shall now deal with issues 2 to 5 which refer to the first ICIC loans totalling $850,000, the loan of $900,000 by KIFCO to Pharaon in June 1980, and the French Franc deposit of Redec. It is contended by Lhasa and Concorde in the re-amended defence that in June 1977 Pharaon acquired 85% of the shares of FIIL with the aid of an ordinary commercial loan of $850,000 from ICIC and that this loan was repaid in June 1980 from a loan by KIFCO of $900,000. Thereafter, say the defendants, on or about 11th June 1981, the KIFCO loan of $900,000 was repaid with interest out of the proceeds of a French Franc deposit of Redec with Bank of Credit and Commerce Luxembourg. The absurdity of these assertions is demonstrated by a simple arithmetical process. The original loan of $850,000 was divided into two, ie a loan of $100,000 expressed as attracting interest at the rate of one per cent over LIBOR for six months, and a loan of $750,000 attracting interest at the rate of 9% per annum with half yearly rests. The original loan account (number 80019) was split into two accounts. The $100,000 loan was recorded in account number 80019A and the $750,000 loan was recorded in account number 80019B. They are evidenced by promissory notes, one of which is dated the 25th June 1977. The defendants allege the loans were repaid in June 1980. With interest as expressed in the promissory notes, those loans could not have been covered out of a further loan of $900,000: there would have been a substantial shortfall. Sheedy has testified, and has demonstrated by reference to the documentation, that the $900,000 loan by KIFCO was not in fact applied in repayment of the $850,000 first loan by ICIC. $100,000 of that amount was credited to account number 80019A. The remaining $800,000 was applied towards the second FIIL share issue and not to account number 80019B. Lhasa and Concorde did not make any payments towards the second, third and fourth share issues of FIIL and all the lending in relation to those issues was non-recourse. If the KIFCO loan was a recourse loan surely it would not have been applied to a non-recourse transaction. A credit of $750,000 was made to account 80019B on 30th June 1980, but that did not come from the KIFCO loan. It came from a loan of $4.2m from BCCI (O) Paris. That loan is accepted by Lhasa and Concorde to be a non-recourse loan. In their final submissions Counsel for Lhasa and Concorde submit that the treatment of the KIFCO loan in ICIC's books was a matter unknown to Pharaon. I have been unable to find any evidence in that regard in the statement of Pharaon, or any other evidence in the record to support that contention. Be that as it may, the manner in which ICIC dealt with the KIFCO loan, when put together with the fact that $900,000 would not repay the two loans totalling $850,000 together with interest, convinces me that the contention of Lhasa and Concorde, that it was Pharaon's intention to repay the $850,000 from a recourse loan, is false. Furthermore the assertion that the loans were repaid at all is contradicted by Pharaon's witness statement. He states that the original loan was a recourse loan, but following the alleged 1979 agreement the loan was converted to a non-recourse loan repayable only out of the shareholding in FIIL. He further states that he was sent audit confirmation letters in respect of the two loan accounts "in the years following the 1979 agreement". If such is the case the loan accounts had not been cleared. In any event, why would a non-recourse loan repayable out of his shareholding in FIIL, be repaid out of a further recourse loan? The point is made by the plaintiffs that in the further and better particulars of Lhasa and Concorde they accept that account 80019A related to a non-recourse loan. If it was non-recourse why would it be repaid from a recourse loan? Lhasa and Concorde made an eleventh hour attempt to amend their further and better particulars to delete that reference to a non-recourse loan, but I disallowed the application on the basis that it would unduly prejudice the plaintiffs. Be that as it may, I do not consider that much rests on that assertion in the further and better particulars. If, as Ihasa and Concorde assert, the $800,000 was misapplied by the bank and a further $750,000 was wrongly applied to account number 80019B from a $4.2 m. loan granted to Pharaon by BCCI (O), Paris, there is no evidence that this misapplication was noticed by Pharaon or those dealing with his accounts, and there is no evidence that the situation was rectified. Does not this apparent disinterest in movements between the various accounts support the plaintiffs' case that the loans were not real loans and there was to be no recourse to Pharaon upon them? I am satisfied that the $850,000 first loan by ICIC and the KIFCO loan of $900,000 were non-recourse loans. It was proved beyond a peradventure that of the $850,000, $750,000 was credited from a non-recourse loan. I simply do not believe that the $100,000 was from a recourse loan. Ihasa and Concorde contended that the KIFCO loan was repaid from FF 50m. held on deposit for Redec with BCCI Luxembourg. The documentary evidence does not drive me to any conclusion in that regard, but on my finding that the ICIC loan of $850,000 and the KIFCO loan of $900,000 were non-recourse it would beggar belief that the KIFCO loan was repaid by Pharaon from a recourse loan. If Ihasa and Concorde are to be believed, in 1977 it was Pharaon who was taking the major interest in FIIL on its incorporation. He was, by means of loans, providing the bulk of the funding, albeit that ICIC was to buy in to FIIL over a period of five years. The evidence shows that entry into the oil operations was Abedi's project. Pharaon's statement itself indicates that it was Abedi who first brought up the subject of acquiring AOC, and Pharaon had his reservations about the project. When FIIL was set up and AOC was acquired the oil operations were run by Abedi recruits from the BCCI offices in London. The shares of FIIL were funded by ICIC. In the light of all this, Pharaon's assertion that he purchased the majority of FIIL shares by means of a loan, in other words that Abedi through ICIC had no interest in FIIL other than an option to purchase 75% of its shares over a period of 5 years, is incredible. I am driven to the conclusion that Abedi was acquiring a majority interest in FIIL through ICIC, using Pharaon, Adham, and Fulaij as nominees. Baqi's evidence is clear. Abedi had to disguise ICIC's interest in the oil industry. A part of the disguise for ICIC's interest were the agreements of 1977. It would be unlikely that Pharaon, Adham, and Fulaij had lent their assistance to the acquisition and disguise without recompense. They must have been compensated for that assistance by the receipt of shares which were recorded in the 1977 agreements. I shall deal with those matters more fully below. I have said enough to answer issues 2 to 5. I now turn to the issue of what is meant by "non-recourse" in the context of ICIC's loans to fund the acquisition of shares in FIIL. The plaintiffs ask me to find that a non-recourse loan was a sham transaction recorded in the bank's books as a normal, secured, interest-bearing commercial loan to disguise the fact that ICIC was acquiring the shares. That the records show that Pharaon, Pharaoh or Lhasa owed the money whereas they were under no obligation to pay it. The defendants ask me to find that the non-recourse loans were bona fide transactions in which the repayment obligation was limited to repayment from the proceeds of sale of the security for the loan. Both parties accept that a transaction of the latter kind may be a valid commercial transaction. However the plaintiffs maintain that in this case the non-recourse loans were sham transactions. The 1982 agreement sets out the following recitals: "whereas: (i) GRP (i.e. Pharaon) is holding in his own name 85% of the capital of Finance and Investment International Ltd (FIIL) a company incorporated in Cayman Islands, that is shares of the paid up value of U.S. $5,100,000.00 (ii) Out of the said 85% shares of FIIL held by GRP, 70% shares have been paid for and belong to ICIC (Overseas) as beneficial owners thereof. (iii) GRP has delivered over the said 70% shares of FIIL to ICIC (Overseas) as the beneficial owners thereof together with blank transfer forms signed in blank. (iv) It is deemed desirable to set out the terms and conditions on which the said 70% shares of FIIL are held by GRP in a fiduciary capacity on behalf of ICIC (overseas)." It is accepted by the plaintiffs and Ihasa and Concorde that reference to 70% of FIIL's shares is an error: it should read 75% of such shares. The 1982 agreement is an acknowledgment by Pharaon that shares were paid for by and belong to ICIC. There is no reference here to loans, the repayment obligations of which were to be paid out of the proceeds of sale of the security. The loans which represented the funding for the purchase of those shares were sham transactions; they were not loans at all. The auditors sent out numerous audit confirmation letters in respect of these loans. The plaintiffs have carefully documented those letters. The letters recite the loan and the interest payable upon it. The interest element is fiction. So is the security, which was ICIC's own property. Many of the letters are signed by Pharaon personally. Why should such false confirmation letters be signed by Pharaon if they were in respect of proper commercial transactions? The answer must lie in the sham nature of the transactions, the nature of which was known to Pharaon. Pharaon's explanation that it was a matter of no great concern to him as to what the outstanding amounts were on those accounts because he used to receive letters from Abedi or Naqvi confirming that the loans were secured by the FIIL shares does nothing to explain his motive for signing them. It simply indicates that, provided his own interests were safeguarded, he had little concern for the accuracy or, indeed, truth of his own statements. It has never been the case of Lhasa and Concorde that the second, third and fourth tranches of the FIIL shares were paid for other than by ICIC. The purchases through nominees were disguised as loans. The reason for that disguise is apparent, and is testified to by Baqi. Abedi did not want ICIC to be seen to own an oil company. Khan supports that evidence. It is difficult to see how in those circumstances Lhasa and Concorde can argue that the non-recourse loans which funded the purchases of the second, third, and fourth issues of the FIIL shares were other than sham transactions. They do assert that the loans which supported Pharaon's purchase of the first issue of FIIL's shares were bona fide loans, but following my finding that those loans were non-recourse and that the defence case in relation to that issue of shares is untrue, I am convinced that the loans to support the purchase of the first issue of shares were sham transactions. The disguise of ICIC's ownership of the FIIL shares by the use of nominees in whose name sham loans were set up would become apparent to ICIC's auditors if the loans remained on its books unpaid for lengthy periods of time. The audit confirmation letters, signed by the purported borrowers, could not satisfy a conscientious auditor for ever. Real commercial loans require repayment. It is the plaintiffs' case, presented through the evidence of Sheedy, that to give the appearance of performance loans were "migrated". Sheedy's evidence reads: "One means of migration was for a non-recourse loan and interest on it to be repaid in whole or in part from a fresh non-recourse loan made on a new account. Another method was to "migrate" an account to a different but related bank in the control of the same individuals". Sheedy sets out in great detail a number of examples of such "migrations". He gives examples where there is a "migration" of funds through a series of accounts so that the original amount becomes merged in a larger sum and loses its identity. Ihasa and Concorde do not challenge his evidence that such "migrations" took place and do not attempt to provide an explanation for many of the transfers between accounts or between banks. In certain cases defence Counsel submits that the bank was "on a frolic of its own". What Ihasa and Concorde, and indeed Pharaon, say is that Pharaon played no part in the various "migrations" and did not know of them. Pharaon says it was an internal arrangement of ICIC and BCCI. Perhaps that is so, and it is probable that Pharaon knew little or nothing of the details of individual "migrations". However many of the "migrations" where into and out of Pharaon's or Pharaon company's accounts and it must be the case that Pharaon knew about the scheme and purpose of such "migrations". I am satisfied from Sheedy's evidence that such "migrations" of funds did take place and that the purpose of them was to further disguise ICIC's ownership of FIIL. Issue 8 requires me to make various findings relating to Pharaon's knowledge. The evidence that Abedi wanted to involve himself, through banks under his control, in the oil industry is clear and unchallenged. Pharaon says that at about the end of 1976 Abedi broached with him the subject of acquiring AOC and explained his desire on behalf of BCCI or ICIC to enter the oil trading business. Pharaon says that despite his initial reservations he was a willing participant in setting up FIIL to acquire AOC. Abedi made Baqi privy to the information that ICIC could not be seen to own an oil company. He made Khan privy to that information as well. Pharaon tells us that he and Abedi developed an intimate and personal relationship. It is inconceivable that, even if Pharaon as an educated and experienced businessman with his own interests in banking, was initially unaware that a bank should not be seen to enter into such a venture, that Abedi did not make him privy to that information. False loan and security documents were set up to effect the disguise of ICIC's ownership of FIIL. Sham agreements were entered into. Pharaon was aware of various of these documents and was a party to them. He assisted ICIC in maintaining the disguise by signing false audit confirmation letters. These were plainly dishonest statements. I am satisfied that Pharaon was privy and party to Abedi's dishonest disguise of ICIC's ownership of the FIIL shares and the steps taken to effect that disguise. It must have been apparent to Pharaon that loans were being "migrated", from the audit confirmation documents which were sent to him, but I do not consider that the evidence demonstrates that he knew of particular movements of funds. Certainly most transfers would not be carried out by Pharaon personally. From the very nature of the acquisition of the FIIL shares and the manner in which FIIL was set up and AOC was acquired, Pharaon must have known that sham loans were being set up which were non-recourse in nature. He was kept abreast of these loans by the audit confirmation letters and by the letters from Abedi and Naqvi confirming that he would not be called upon to pay them. Did Pharaon take any shares in the first issue of the FIIL shares as beneficial owner of those shares rather than as nominee for ICIC? I have already determined that ICIC paid for the whole of the first issue of the FIIL shares and that Pharaon did not acquire the shares by means of commercial loans made to him by ICIC where property is purchased by one party and is conveyed into the name of another a resulting trust in favour of the first party is implied (see Snells Equity 29th Edn. pp. 177-8). Such a presumed intention will not arise where the relation existing between the true and the nominal purchaser is such as to raise a presumption that a gift was intended eg. as between husband and wife (see Snell pp.178-9). This is known as the presumption of advancement. No such relationship exists between the true and nominal purchaser in this case. The presumption of a resulting trust and the presumption of advancement can be rebutted by evidence of the actual intention of the purchaser (see for example Re Schebsman [1944] Ch 83). However such a presumption can not be rebutted if to do so the person claiming ownership would have to rely on evidence of an improper purpose. In Gascoigne v Gascoigne [1918] 1K.B. 223 a husband took a lease of land in his wife's name and built a house upon it with his own money. He used his wife's name in the transaction with her knowledge and connivance because he was in debt and was desirous of protecting the property from his creditors. It was held that the wife was entitled to retain the property for her own use notwithstanding that she was a party to the fraud and the husband could not be allowed to set up his own fraudulent design to rebut the presumption of advancement. In Tinsley v Milligan [1994] 1 A.C. 340, at 375, Lord Browne-Wilkinson had this to say: "....the fusion of law and equity has led the courts to adopt a single rule (applicable both at law and in equity) as to the circumstances in which the Court will enforce property interests acquired in pursuance of an illegal transaction, viz the Bowmakers rule [1945] K.B. 65. A party to an illegality can recover by virtue of a legal or equitable property interest if, but only if, he can establish his title without relying on his own illegality." In that case the plaintiff and defendant formed a joint business venture to run lodging houses. Using funds generated by the business they purchased a house in which they lived together and which was vested in the sole name of the plaintiff, but on the understanding that they were joint beneficial owners of the property. The purpose of the arrangement was to assist in the perpetration of frauds on the Department of Social Security. Subsequently the parties fell out and the plaintiff moved out of the house leaving the defendant in occupation. Thereafter the plaintiff gave the defendant notice to quit and brought proceedings against her claiming possession and asserting sole ownership of the property. The defendant counterclaimed for an order for sale and for a declaration that the property was held by the plaintiff on trust for the parties in equal shares. By a majority the House Of Lords held that the defendant, who did not have to plead or rely on the illegal intentions of the parties to establish the resulting trust, was entitled to the relief she sought. ICIC paid for the first issue in the FIIL shares. A resulting trust exists in its favour. I have found that the intention was to give Pharaon, Adham and Fulaij a beneficial interest in a portion of those shares for taking part in the scheme of disguising ICIC's interest in the shares. To rebut the presumption of a resulting trust in respect of that percentage of the shares Pharaon, Adham and Fulaij would have to rely upon the dishonest scheme of disguise. Adham and Fulaij do not do so in this action. It is part of Lhasa and Concorde's case that Pharaon took a beneficial interest in a portion of FIIL's shares. In the event he will not be permitted to set up a dishonest scheme to claim that interest. Pharaon took no shares of FIIL in the first issue as beneficial owner. What is the effect of the 1977 "option" agreement? This agreement between Pharaon and ICIC provided that Pharaon had agreed to acquire shares of FIIL to the extent of $850,000 out of which he had agreed to sell to ICIC or its nominees shares to the value of $750,000. It further provided in consideration of this "option" ICIC had guaranteed a loan of $750,000 to Pharaon for the purchase of these shares in FIIL. The "option" was expressed to be exercisable by ICIC within a period of five years. The plaintiffs argue that this was not an "option" agreement because ICIC was not given the ability to chose whether to buy the FIIL shares. Counsel for Lhasa and Concorde submit that the agreement comprised a binding commitment on ICIC to purchase the shares at a time of its chosing within five years from the date of the agreement. I am uncertain whether they are thereby suggesting that the option rests on ICIC's ability to chose the timing of the purchase of the shares. However, nothing rests upon the classification of the agreement because from my findings above I am satisfied that the 1977 agreement was a sham agreement in further disguise of ICIC's beneficial ownership of FIIL's shares. The intention was for ICIC, through Adham, Fulaij and Pharaon as nominees, to acquire the shares of FIIL and for the nominees to be granted a small percentage of those shares for their assistance. The 1977 agreement does not affect ICIC's claim to the FIIL shares. It is a further demonstration of the parties' desire to disguise the true nature of ICIC's interest in FIIL and is further proof that Pharaon was a party to that disguise. It also provides an indication of how Pharaon was to be compensated for his involvement in the scheme and the amount of such compensation. It follows from all that I have said that I hold ICIC to be the beneficial owner of 100% of the issued shares in FIIL. I should perhaps add, before I turn to the issues relating to the AOC share ownership, that consideration of the 1982 and 1988 agreements does not affect my findings. Such agreements simply reflect the the parties' intentions as to beneficial ownership of the FIIL shares. I find that the agreements record a beneficial ownership of Pharaon in FIIL to compensate him for his assistance in disguising ICIC's ownership of FIIL, and through FIIL, AOC. The AOC Ownership Issues Did the judgment and order of Harman J. dated 12th March 1993 in the English proceedings determine the issue of beneficial ownership of the AOC shares as between the parties to this action? In the English action the plaintiffs were the same as in the action before me and the defendants were the same, except that Falcon was a defendant in the English action and is not a defendant in this action and that Concorde was not made a defendant in the English proceedings. It will be recalled that Falcon had become registered as owner of 7,920,000 shares of AOC. Adham and Fulaij had become registered as owners of the remaining shares in AOC. Falcon is a subsidiary of Concorde. The English action, begun by writ on the 29th October 1992, sought a declaration that FIIL was the beneficial owner of the entire issued share capital of AOC. After a hearing which lasted three days Harman J. shied away from making the declaration sought, but instead declared that Adham, Fulaij and Falcon hold shares registered in their respective names in the Register of Members of AOC upon constructive trust for FIIL. Lhasa and Concorde appear to rely on a passage of a Court of Appeal judgment on an appeal against various interlocutory orders of Hare C.J. in this action. In their judgment the Court of Appeal said that the declaration of Harman J. "appears to leave at large the issue of whether FIIL is the beneficial owner of the AOC shares". As pointed out by the plaintiffs that passage was obiter, as the question of what Harman J. decided was not a matter before the Court of Appeal for its determination. In any event the passage itself demonstrates that the court was leaving the matter open. Subsequent to the Court of Appeal judgment, by a summons dated 24th January 1995, the plaintiffs applied to the English court for orders that Falcon and Lhasa account for their dealings with the AOC shares and sought an interim payment in respect of the defendants' liabilities in that regard. By an order dated 13th February 1995, Harman J. made the orders sought. That order also contains the following declaration: "Following the trial in open Court and on the merits of the issues directed by the Order of Mr. Justice Harman dated 27th November 1992, this Court has by its judgment and Order dated 12th March 1993 decided that:- (Paras (1) to (4) need not be recited) (5) ... as between the parties to this action, their privies and any party claiming by, through or under them, the second plaintiff (FIIL) was on 12th March 1993 beneficially entitled to the entirety of the issued share capital of AOC and any dividends, profits, distributions and other benefits arising from such shares.". In his judgment Harman J. specifically refers to this action and described as "remarkable" the assertion of Ihasa and Concorde that Falcon is the beneficial owner of 88% of the issued shares in AOC in the face of the proceedings before him. He determined to take the unusual and "basically undesirable" exercise of declaring what he had meant by his judgment of the 12th March 1993, making clear in so doing that he was not affecting the orders he made thereby. He then made various declarations, including the one set out above. That is conclusive of issue 13 of the framed issues before me save for consideration of whether Concorde was bound by such orders. I shall consider below the question of whether Concorde was privy of defendants in the English action, but it is significant to note that notice of the summons and evidence in support thereof leading to the order of 13th February 1995 were served on Concorde. Should the judgment and order of Harman J. of 12th March 1993 be recognized in this action? It is clear that such judgment and order were made by a Court of competent jurisdiction. Harman J. expressly addressed himself to this issue in a judgment in the English proceedings delivered the 27th November 1992. He had this to say: "It follows of course, that the shares of (AOC) which are the prime subject of relief sought by the plaintiffs' claim in this action, are choses in action situate in England and Wales. (AOC) is an English registered company and the jurisdiction of the English Court to deal with claims to its shares, being English sited choses in action, must surely be accepted on all ordinary principles of private international law. I have never heard it alleged by anyone that claims to the shares of a company are not properly the subject of the Courts of the place of incorporation of that company.". Nor have I; and Lhasa and Concorde do not appear to argue in their closing submissions that the English High Court lacked jurisdiction in the English proceedings. Are the judgment and order of the 12th March 1993 final and conclusive on the merits? Can they be impeached on the grounds of natural justice? Although these two questions are framed as separate sub-issues by the parties, argument upon them appeared to merge, so I shall deal with them together. On the 28th October 1992 on the ex parte application of ICIC in the English action Harman J. appointed a Receiver to receive the entire issued share capital of AOC. The Receiver was directed to convene a general meeting of AOC and remove all its directors, save those appointed by him. The action was formally begun by writ the next day, the 29th October, 1992, and such writ was amended the very next day to include FIIL as a plaintiff. On the 30th October 1992 Mavera injunctions were granted against Pharaon, Falcon, Pharaoh and Lhasa. When the new directors of AOC attended the company's offices seeking access to its books and papers Messrs. Berwin Leighton, Solicitors, were consulted, presumably by the former directors of AOC. Messrs. Berwin Leighton were denied access to the affidavit which supported the Orders of 28th October 1992 and so an application was made on behalf of Falcon for an Order that copies of such draft affidavit and the sworn version of it be provided by ICIC. Such an Order was made by Knox J on 2nd November on an undertaking that the documents be not used otherwise than for the purpose of those proceedings. After having had sight of the affidavit, Messrs. Berwin Leighton gave notice to the plaintiffs' solicitors objecting to the jurisdiction of the English Court. In their submissions Counsel for Ihasa and Concorde say that such letter was of the 9th November, 1992, but in fact it was dated 5th November 1992. On the 9th November 1992 ICIC obtained, ex parte and without notice, an order from the Supreme Court of the Bahamas, appointing a Receiver over the entire issued share capital of Falcon. Such Receiver changed the constitution of Falcon's Board of Directors. Messrs. Berwin Leighton no longer had authority to act on behalf of Falcon and on 18th January 1993 obtained an order that they be removed from the record of the proceedings. The Receiver of Falcon applied to the Bahamian court for directions as to what, if any, steps he should take to defend the English proceedings. He obtained an Order dated 28th January 1993 that he be at liberty to instruct English solicitors and to act on their advice as to such defence he may make on behalf of Falcon and Pharoah. In the event Falcon and Pharoah appeared by counsel before Harman J. and put the plaintiffs to strict proof of their claim. They were unable to render to the Court the kind of assistance which they would have preferred but that, undoubtedly from the evidence, was the fault of the former Board of Directors of Falcon. Whitbeck was asked for his assistance by the Receiver and he refused, and has consistently refused, to give it. Lhasa and Concorde argued that Falcon's Receiver should not have submitted to the English jurisdiction, but he did so after obtaining the directions of the Bahamian Court and the advice of English solicitors. Lhasa and concorde argue that by appearing before Knox J on 2nd November 1992, to seek an order for production of an affidavit, Falcon was not submitting to the jurisdiction of the English Court. Harman J. was of the opposite view and so stated in his judgment of the 12th March 1993. Lhasa and Concorde urge me to find that Harman J. was wrong in that view. However, they have cited no authority for the proposition that recognition is affected by submission of a defendant to the jurisdiction. The test must be whether the Court whose Order is sought to be recognized is a Court of competent jurisdiction, and whether a party had an opportunity to be heard, and involves questions which are unaffected by the question of whether each defendant has submitted to such jurisdiction. Otherwise a foreign defendant could escape the effect of an order of a Court of competent jurisdiction simply by electing not to submit to that court's jurisdiction. In this case it is clear that Falcon had notice of the English proceedings and took steps in them, both before and after a Receiver was appointed. Indeed the Receiver put the plaintiffs to proof of their claim. Evidence was heard, considered and evaluated in a considered judgment. In those circumstances it cannot be argued that there was any breach of natural justice. It cannot be argued that the judgment and order of Harman J. was not final and conclusive on the merits. Ihasa and Concorde also argue that Concorde was deliberately not joined in the English proceedings and was thereby deprived of an opportunity to protest the English jurisdiction. Pharaon was a party to the English proceedings and, from the evidence, controlled Concorde. Whitbeck, an officer of Concorde, knew of the English proceedings. Concorde did not chose to intervene in those proceedings. It received notice of the later hearing of 13th February 1995 and has still not intervened in the English proceedings. Concorde does not assert its own title to the AOC shares, its only claim is through Falcon, its subsidiary. Concorde, as a shareholder of Falcon had no locus standi to assert any title to the AOC shares. In all the circumstances I am satisfied that there is no substance in the complaint that Concorde was not joined in the English proceedings Do the judgment and Order of 12th March 1993 bind Concorde as a privy of Pharaon and/or Ihasa and/or Falcon? An estoppel will bind those who are privy to the parties bound and the requisite privity is said to be a privity of either blood, title or interest (see Carl Zeiss Stiftung v Rayner and Keeler Ltd (No2) [1967] 1 A.C. 853). It is not argued by the defendants that Concorde, the sole shareholder of Falcon, has no privity of interest with Falcon. It is argued that Concorde should not be held to be privy to the decision of the 12th March 1993 because it was not joined as a party to the English proceedings. In the Privy Council decision of Nana Ofori Atta 11 v Nana Abu Bonsra 11 [1958] A.C. 95, 102-103, Lord Denning had this to say: "Those instances do not however cover this case, which is not one of active participation in the previous proceedings or actual benefit from them, but of standing by and watching them fought out or at most giving evidence in support of one side or the other. In order to determine this question the West African Court of Appeal quoted from a principle stated by Lord Penzance in Wytcherly v Andrews (1871) L.R. 2P & M. 32, 328. The full passage is in these words: "There is a practice in this court, by which any person having an interest may make himself a party to the suit by intervening; and it was because of the existence of that practice that the judges of the Prerogative Court held, that if a person, knowing what was passing, was content to stand by and see his battle fought by someone else in the same interest, he should be bound by the result, and not be allowed to re-open the case. That principle is founded on justice and common sense, and is acted upon in courts of equity, where, if the persons interested are too numerous to be all made parties to the suit, one or two of the class are allowed to represent them; and if it appears to the court that everything has been done bona fide in the interests of the parties seeking to disturb the arrangement, it will not allow the matter to be re-opened." Mr. Phineas Quass argued before their Lordships that the principle stated by Lord Penzance was confined to wills and representative actions and has never been extended further. No decision, however, was cited to their Lordships which confines the principle to wills and representative actions. Their attention was indeed drawn to one case where a like principle was applied to mortgages in somewhat special circumstances: see Farquharson v Seton (1828) 5 Russ. 45. But assuming, without deciding, that the English decisions have hitherto been so confined, their Lordships would point out that there is nothing in the principle itself which compels it to be limited to wills and representative actions. The principle, as Lord Penzance said, is founded on justice and common sense." Concorde was fully aware of the English proceedings and chose not to intervene. In all the circumstances it must be held to be privy to the parties bound by the decision of 12th March, 1993. It follows from the above findings that the judgment and order of Harman J of the 12th March 1993, being a final judgment which determined the issue that FIIL is the beneficial owner of all the shares in AOC, should be recognized by this Court. It is argued by Ihasa and Concorde that even on that finding I should not make the declarations sought by the plaintiffs because a finding that the judgment and order of Harman J. is conclusive of the AOC share ownership issue is sufficient to determine that issue and renders any further declarations unnecessary and undesirable. I agree with the defendants that declarations should be granted sparingly and with the utmost caution. However it must not be ignored that the AOC share ownership issue was brought into these proceedings as a result of the defendants' own pleadings (see the judgment of the Court of Appeal referred to above and handed down on 5th December, 1994). Throughout these proceedings Concorde, and even Lhasa which appeared in the English proceedings, have called into question recognition of Harman J.'s judgment and order. Parties to this action have called into question Harman J's judgment and order in proceedings in Pakistan. In the circumstances I am persuaded to make the declarations sought both as to the beneficial ownership of AOC's shares and as to the binding effect of Harman J's judgment and order of 12th March 1993. Those findings determine issue 12 of the framed issues relating to the AOC share ownership, but in case there is a successful appeal against those findings I shall go on to determine the factual issues raised relating to that share ownership. I have already answered issues 15 and 16. Lhasa and Concorde have not proved the 1979 agreement. Even if they had, I hold that the agreement could carry no legal effect. As Lhasa's claim to beneficial ownership of 88% of the AOC shares is based on that agreement, Lhasa's claim to them must fail. Be that as it may I shall answer issues 17 and 18 which relate to Pharaon's alleged repayment to FIIL in respect of payments which FIIL made for the AOC shares and which relate to Pharaon's loan of SR 15m to FIIL. Paragraph 34A of the re-amended defence reads: "34A. Pursuant to the terms of the agreement referred in paragraph 29 above Pharaon paid FIIL for 88% of the 9 million shares of L1 each in Attock in the following manner: (1) By transferring to FIIL US$750,000 in respect of his share capital in FIIL (first share issue). (2) By cancellation of the SR15 million Promissory Note being US$4,573,317.31 (the US$ equivalent of 15 million SR as of 11 July 1977) and US$1,366,170.77 being interest therein from 11 July 1977 to 2 July 1980 (the date on which the Promissory Note was cancelled) at 9 % per annum with half yearly rests amounting in total to US$5,939,488.08. (3) By the payment of the Attock dividends set out in Schedule 1 to the Amended Defence." The most obvious point is that the 1979 agreement did not exist and therefore Pharaon had no reason to pay for 88% of AOC's shares. Be that as it may, out of deference to the arguments put before me let us look to the accounting and documentary evidence. I have already held that Pharaon did not pay to FIIL $750,000 or any money in respect of the first share issue of FIIL. It was paid by way of a sham loan from ICIC. In any event, as pointed out by plaintiffs' counsel, if Pharaon paid $750,000 in respect of shares in FIIL, to suggest that this sum was payment for shares in AOC two years later is to claim credit twice for the same amount. Pharaon purportedly made a loan of SR 15m. to FIIL in 1977. Sheedy doubts the genuineness of the loan but nevertheless his written statement carefully takes us through the documentation and presents detailed and convincing evidence that the loan if it was genuine, was repaid by May 1988, that is before the 1979 agreement allegedly was entered into. Lhasa and Concorde do not appear to contest the documents upon which the conclusion is drawn but do dispute the conclusion itself and the inferences made from the documents. I need not recite the evidence in this judgment, for my other conclusions are sufficient to find against the defendants on these issues. It is enough to say that on Sheedy's evidence it is more likely that the SR 15 m loan was repaid in May 1988. Counsel for Lhasa and Concorde ask me to hold otherwise and suggest that there is insufficient evidence upon I should find a repayment of that loan in May 1978. Alternatively, they say, if it was repaid by FIIL the sum of $4m was immediately borrowed by FIIL from Redec. I prefer the plaintiffs' evidence in this regard even when I take into account the defence challenge to the documentation which Sheedy has relied upon. The plaintiffs put to Whitbeck various calculations of the acquisition costs of AOC, which calculations included figures for interest. Whitbeck accepted that, based on the most conservative estimate, the case of Lhasa and Concorde on how Pharaon paid for the AOC shares shows a substantial shortfall. The submissions of Counsel for Lhasa and Concorde that it would have been inconsistent for Pharaon to have been charged interest on the outstanding purchase price in the absence of express agreement ignores the fact that FIIL borrowed money from banks to buy AOC shares and interest would be paid on those loans, liabilities which Pharaon undertook to assume, he says, in the 1979 agreement. On all this evidence I do not accept that Pharaon repaid FIIL in respect of the payments FIIL made for the AOC shares. The FIIL promissory note was not cancelled by the alleged 1979 agreement and it is more likely that the SR 15m was not repaid. In this connection there is an interesting admission in the further and better particulars furnished by Lhasa and Concorde and filed in Court on 3rd April 1995 as follows: "The original promissory note is in Pharaon's possession and in that sense it has not been physically cancelled. However it was intended to be cancelled as part of the arrangements for Pharaon's acquisition of the Attock shares." CONSPIRACY AND RELATED CLAIMS The plaintiffs have adequately proved that Abedi orchestrated the purchase of AOC through FIIL and ICIC and that he knew he had to disguise ICIC's ownership. He did so with the assistance of Naqvi, Pharaon, Adham and Fulaij. Every one of these individuals may not have been present at the conception of the scheme but they played their separate parts in putting the purchase together, through the formation of FIIL, acting as nominees and signing such documentation including agreements, non-recourse letters and audit confirmation letters as would keep the disguise in place. It is not alleged that each party was present at each move in the scheme, and it is not necessary for the plaintiffs so to prove. In the Australian case of R v Robertson and Farrell ACLC 40-441 (at 30,092) O'Brien J. said: "It is not even necessary that the conspirators should all get together and orally form their intention to do the illegal act. They may, of course, do just that. In some cases the Crown brings evidence that they were all assembled in some flat or penthouse, and they there entered into an agreement to carry out some common purpose. But that they should all meet together to concoct the agreement is not necessary. It frequently occurs in conspiracies that there is one person around whom the rest, as it were, revolve - to use the metaphor of the hub of a wheel as the centre and the extremities of the spokes as those who communicate only with the hub. They may each in fact only know one central person who brings all their activities together. What is necessary is that they should have a common intention in which they all share and, except for one, the hub, who knows the lot of them, the others know only the person at the hub." In the present case we may regard Abedi as the hub although it is clear that in some instances the spokes also communicated with each other. Naqvi would be at the hub with Abedi. I am satisfied Pharaon, Adham and Fulaij were at the extremities of the spokes. My findings in relation to Pharaon's knowledge and involvement in the scheme are set out earlier in this judgment and I need not repeat them. What the plaintiffs have to prove to obtain a remedy in conspiracy is succinctly stated by Buckley LJ in Belmont Finance Corporation v Williams Furniture Ltd and Others (No 2) [1980] 1 All ER 393, 404: "To obtain in civil proceedings a remedy for conspiracy, the plaintiff must establish (a) a combination of the defendants, (b) to effect an unlawful purpose, (c) resulting in damage to the plaintiff (crofter Hand Woven Harris Tweed Co Ltd v Veitch per Lord Simon LC). The classic definition of conspiracy is that in Mulcahy v R.: 'A conspiracy consists not merely of the intention of two or more, but in the agreement of two or more to do an unlawful act, or to do a lawful act by unlawful means.' I have used the word 'combination' rather than the word 'agreement' used in that definition and by Lord Simon LC, because the word 'agreement' in this context does not mean an agreement in any contractual sense but a combination and common intention to do the act which is the object of the alleged conspiracy. That Lord Simon LC was so using the word is, in my opinion, clear from later passages in his speech: see also the other speeches in the Crofter Hand Woven case.". The plaintiffs have satisfied me that the combination involved Pharaon and that he had a common intention with Abedi and Naqvi. The plaintiffs also contend that the removal of the AOC shares from FIIL in 1991 so that Lhasa, and subsequently Falcon, held 7,920,000 of the AOC shares, Adham held 900,000 of those shares and Fulaij the remaining 180,000, amounted to a further conspiracy. My finding is that FIIL was and is the beneficial owner of the AOC shares. The plaintiffs contend that they were removed from FIIL without proper authority, for no legitimate purpose and that Pharaon was in breach of fiduciary duty in this regard. It is argued by the plaintiffs that the transfer of shares from FIIL was part of the original conspiracy in that it separated ICIC and FIIL from AOC and this furthered the disguise of ICIC's interest in AOC. The original scheme has, however, been proved without reference to events of 1991. Was the transfer of the AOC shares from FIIL a separate conspiracy? Leaving aside the question of unlawful means, to which I shall return, did the plaintiffs prove an agreement or combination to effect those share transfers? There can be no doubt that Pharaon was a party to the share transfers. He was the one whose interests were sought to be protected or enhanced by the share transfers. Can there be doubt that Adham and Fulaij knew of the transfers of the shares into their names? Whitbeck was an officer of both Lhasa and Concorde. He was, on his own admission, heavily involved in the transfer of the shares from FIIL. He was acting on Pharaon's instructions. An agreement or combination was adequately proved. That agreement or combination was to effect a result different to that of the original conspiracy. It had a different purpose and the means used were different. It involved different parties and it may be said that the hub was different. Abedi and Naqvi were not part of the scheme. Pharaon was the hub. To my mind the 1991 conspiracy was a different conspiracy to the original conspiracy. Did the two schemes involve the use of unlawful means? I do not think it has been disputed by Lhasa and Concorde that if the plaintiffs prove their allegations in relation to the original scheme that it involved the use of unlawful means. Rather they have sought to deny that the scheme existed or, if it did, that Lhasa, Concorde, and Pharaon were involved. My earlier findings lead me to a conclusion that unlawful means were inherent in the original scheme. It involved the entering of sham agreements (e.g. the 1977 agreement), dishonestly furnishing false audit confirmations, the falsification of accounts and accounting records and the dishonest concealment of ICIC's ownership of FIIL (e.g. by the "migration" of loans). What of the 1991 transfer of the AOC shares, "the 1991 conspiracy"? Whitbeck's role in these transfers is significant to a consideration of this issue. Whitbeck acknowledges that at Pharaon's instigation he transferred the AOC shares from FIIL, first to Lhasa and then to Falcon. There was no consideration for either transfer. Whitbeck accepted he did so without regard for potential creditors and that he should have been aware of FIIL's accounting records. The transfer from Lhasa to Falcon was done without regard for Lhasa, which was stripped of its assets thereby, and without regard to its creditors. The admitted intention of these transfers was to safeguard Pharaon's alleged interests in AOC, and Lhasa and Concorde maintain that it was done in a genuine belief that the AOC shares were beneficially owned by Pharaon. It was pointed out by Whitbeck in his evidence that the transfer of shares was a matter of public record and has not been hidden. Pharaon has been proved to be so wanting in integrity and credibility in connection with his asserted shareholding in companies involved in this case that I find it easy to accept he was protecting or enhancing his own interests regardless of its effect upon others, individual and corporate. Whitbeck admitted a lack of integrity in relation to a scheme hatched by Pharaon in March 1991 to defraud a creditor of Pharaoh. I have no reason to believe he has brought any greater integrity into his dealings with the AOC shares. He has transferred shares in the face of orders of this Court preventing him from so doing, albeit, he says, because on taking outside legal advice he thought the order did not strictly cover such a transfer. But he effected the transfer rather than come to Court to seek clarification of the order. He has steadfastly refused to co-operate with a Bahamian court-appointed receiver of Falcon. From his whole attitude towards the process of this and other Courts I am satisfied that Whitbeck was prepared to deal with the AOC shares at the behest of Pharaon regardless of where their true ownership lay. He was at least wilfully blind regarding AOC's true ownership. More probably Whitbeck was being dishonest in his dealings with the AOC shares. When a company has been brought before a reputable Court an honest and straightforward officer of that company will not refuse to co-operate with that Court's officers. Nor will he take steps to avoid the orders of the Court. Rather he will seek to argue his company's case before that Court, even if that case involves an argument that such Court lacks jurisdiction. Whitbeck's argument that ICIC's actions in going to Court ex parte were to prevent Pharaon and his companies from arguing their case appear rather lame in the light of the out-of-Court actions he himself took. Whitbeck was a director of Ihasa at the time the transfer of AOC's shares took place and is still its assistant secretary. He was and is a director of Concorde. The transfer of the AOC shares involved unlawful means. Its purpose was to take the shares away from FIIL. The actions of Pharaon and Whitbeck do not demonstrate that such transfer was only for the purpose of safeguarding the AOC shares until a Court of competent jurisdiction determined upon their ownership. They gave away FIIL's property without considering its creditors, and did the same with Ihasa's property. There is evidence that Pharaon dishonestly misrepresented that AOC's share certificates had been lost. He signed an indemnity form in that regard which was patently fraudulent. It is as well to note that it is not alleged that Whitbeck became a party to the original conspiracy. His knowledge and actions can only be imputed to a company of which he was an officer in respect of the 1991 conspiracy, whereas Pharaon was a party to both conspiracies. It has been proved that Pharaon was the sole director and beneficial owner of Pharaoh. Pharaoh's knowledge is that of Pharaon. On 8th November 1983 all of the FIIL shares, 1,020,000 of them, held by Pharaon were transferred to Pharoah as were 36,000 of the 60,000 shares held by Fulaij. The share issue on that day gave Pharaoh a total of 2,200,000 of the FIIL shares. Sheedy has testified that a number of non-recourse loans were held in Pharaoh's name and these were in respect of accounts which represented sums paid by ICIC for FIIL shares. Pharaon signed a number of audit confirmation letters on behalf of Pharaoh in respect of some of these accounts. So Pharaoh is proved to have knowledge of the original conspiracy, and is also proved to be a participant in it. Lhasa was beneficially owned by Pharaon who was its director. Whitbeck was a director until 22nd September 1992 and remains its assistant secretary. Lhasa's knowledge is that of Pharaon and Whitbeck. On 10th March 1986 all of Pharaoh's shareholding in FIIL was transferred to Lhasa. A number of non-recourse accounts used in the funding of FIIL were held in Lhasa's name as successor to Pharaoh. Pharaoh signed, on behalf of Lhasa, a number of audit confirmation letters in respect of those accounts. On 24th November 1991 7,920,000 of the AOC shares were transferred from FIIL to Lhasa. On 4th December 1991 those shares were transferred to Falcon. Whitbeck acknowledges that these two transfers of shares were executed by him on Pharaon's instructions. All this makes Lhasa a party to the original and to the 1991 conspiracy. It has been proved that Pharaon was a director and president of Concorde. Whitbeck was a director. Concorde's knowledge is that of Pharaon and Whitbeck. On 23rd April 1991 Falcon's shares were transferred to Concorde. On 12th November 1991 Ihasa's shares were transferred to Falcon. Ihasa was the registered owner of 88% of FIIL's shares at that time and Concorde was the parent company. With that structure still in place 88% of AOC's shares were transferred first to Lhasa and then to Falcon. The very purpose of these transfers was to maintain Pharaon's claim to beneficial ownership of the AOC shares in furtherance of the 1991 conspiracy. Concorde, the parent company, was a party to that conspiracy. It is argued by counsel for Lhasa and Concorde that those companies were not sufficiently party to the combination and design as to make them liable. For example it is in evidence that Ihasa and Concorde did not receive certain dividends paid out on AOC in November 1991 and September 1992 for which claim is made by the plaintiffs. That may be so, but to establish liability in conspiracy the plaintiffs do not have to prove that each conspirator took part in or benefited from each transaction. It has been adequately proved that Lhasa was part of the combination in relation to both conspiracies and Concorde was a part of the combination in relation to the 1991 conspiracy to make them liable. I have already found that the knowledge of Pharaon and Whitbeck is imputed to Lhasa and Concorde and the knowledge of Pharaoh to Pharoah. As Buckley LJ said in Belmont Finance Corporation v Williams Furniture Ltd and others (No.2) [1980] 1 All E.R 393, 404:- "... an officer of a company must surely be under a duty, if he is aware that a transaction into which his company or wholly-owned subsidiary is about to enter is illegal or tainted with illegality, to inform the board of the company of the fact. Where an officer is under a duty to make such a disclosure to his company, his knowledge is imputed to the company (Re David Payne and Co. Ltd. [1904] 2Ch 608, Re Fenwick, Stobart and Co. Ltd [1902] 1 Ch 507)." A company acts through its officers. The acts of Pharaoh and Whitbeck can likewise be imputed to Lhasa and Concorde and the acts of Pharaoh to Pharaoh. Pharaoh, Lhasa and Concorde were not involved in the unlawful scheme throughout. Indeed Lhasa was not incorporated until 1985 and Concorde until 1987, so they were incapable of being involved on any schemes until the date of their incorporation. But it is trite law that parties can join a conspiracy after its commencement and can leave a conspiracy before it has come to an end. From the facts I have found above I am satisfied that the knowledge and acts of Pharaoh are sufficient to make it party to the original conspiracy, that the knowledge and acts of Lhasa are sufficient to make it party to both conspiracies, and the knowledge and acts of Concorde are sufficient to make it party to the 1991 conspiracy. Loss and Damage I am not asked at this stage to quantify damages. By order dated 4th March 1994 it was ordered that the question of liability only should be determined at this trial. Of course I must in so doing determine whether the plaintiffs have suffered some loss and damage otherwise the third ingredient of the tort of conspiracy is not proved (see Belmont Finance v Williams Furniture (No.2) (supra). The particulars of the heads of claim are set out in paragraph 12 of the re-amended statement of claim as follows:- "Particulars of Heads of Loss and Damage 12.1 the value of the FIIL shares or that part of the FIIL shares which is not recovered in this action. 12.2 the depreciation in value of the FIIL shares and the AOC shares, that is the difference between the value which those shares would have had, if they had remained under the control of ICIC and/or FIIL, and their actual value. 12.3 the loss of the rights which attach to the FIIL shares and the AOC shares including the loss of all profits, income, receipts, dividends or other benefits attaching to those shares. 12.4 the costs and expenses of investigating the conspiracy or 115 conspiracies. 12.5 the costs and expenses incurred and to be incurred in the English Proceedings and the costs and expenses incurred and to be incurred in the proceedings taking place in Pakistan. 12.6 the whole or part of the amount of the deficit in the assets of ICIC". As the plaintiffs are successful in their claim to recover all the FIIL shares they do not seek damages under paragraph 12.1 of their statement of claim. In paragraph 12.2 of the statement of claim the plaintiffs seek damages for the depreciation in value of the FIIL and AOC shares. The plaintiffs have said very little on this head of damages, but of course until they gain control of AOC's assets they will themselves know very little about any dissipation of assets. We do know that Pharaon in particular has not acted with the utmost probity in relation to FIIL and AOC and a dissipation of assets must be suspected. That suspicion is insufficient for the plaintiffs' purposes. Nevertheless what the plaintiffs have shown is that AOC's name is being used as a plaintiff in proceedings in Pakistan. AOC must be incurring legal costs in those proceedings. That in itself is sufficient for me to hold that the plaintiffs are entitled to damages for depreciation in the AOC shares. Any depreciation in the value of the AOC shares will be reflected in the value of the FIIL shares. The plaintiffs have proved that substantial dividends have been paid out by AOC, which dividends have not been paid to FIIL. Those dividends and any other dividends which should properly have been paid to FIIL had AOC remained under its control must be recoverable by FIIL. Damages are to be awarded under paragraph 12.3 of the statement of claim In paragraph 12.4 the plaintiffs claim as damages the costs and expenses of investigating the conspiracy. In British Motor Trade Association v Salvadori [1949] Ch 556, a case involving a claim in conspiracy to procure breaches of contract, Roxburgh J. had this to say at p 569:- "...... the plaintiffs maintain, and must maintain, a large investigation department, and the money actually expended in unravelling and detecting the unlawful machinations of the defendants which have been proved in this case before any proceedings could be taken must have been considerable. I can see no reason for not treating the expenses so incurred which could not be recovered as part of the costs of the action as directly attributable to their tort or torts. That these expenses cannot be precisely quantified is true, but it is also immaterial. Accordingly, the plaintiffs have proved the damage which is essential to the tort of conspiracy, and they are entitled to an inquiry accordingly." Applying that decision I am satisfied that damages fall to be awarded under paragraph 12.4 of the statement of claim. The plaintiffs also claim as damages the costs and expenses incurred and to be incurred in the proceedings in England and Pakistan. It is well established that the costs incurred in civil proceedings which are in excess of those allowed by the Court on taxation are not recoverable as damages (see Quartz Hill Consolidated Gold Mining Co. v Eyre (1883) II Q.B.D. 674). So if the proceedings in respect of which this head of damages is claimed were taken in Cayman and not in England and Pakistan no such damages would be recoverable. I think it is safe to assume there is a system of awarding and taxing costs in Pakistan as we know there is in England. I can see no difference in principle between awarding damages for a shortfall of costs in respect of proceedings in Cayman and awarding damages for such a shortfall in respect of foreign proceedings. The only possible basis for such an award in respect of foreign proceedings is that there is no system of costs in the foreign court or that the shortfall of costs in the foreign jurisdiction would be substantial. There is no evidence as to the former and, as to the latter, the argument could not hold good in Cayman where (and this is a constant complaint of litigants) the costs awarded on taxation bear no resemblance to the costs actually incurred by a successful party to litigation. I do not award damages under paragraph 12.5 of the statement of claim. The claim under paragraph 12.6 of the statement of claim for the deficit in ICIC is the most difficult head of damages to determine upon. The evidence is that there is a very substantial deficit in ICIC in that its liabilities greatly exceed its assets. The plaintiffs argue that as part of the conspiracy the audited accounts of ICIC were falsified. Had the accounts not been falsified they say, it is likely that the Inspector of Banks and Trust Companies ("the Inspector") would have taken regulatory action against ICIC and would either have suspended its banking licence or revoked it. Had such suspension or revocation occurred the deficit in ICIC would not have occurred, or would have been greatly reduced. It has been proved that in furtherance of the conspiracy the audited accounts of ICIC for the years 1977 to 1988 did not reflect ICIC's true financial position. The reason for the accounts to be presented in that way must have been to get them past the auditor and thereafter past the Inspector who greatly relied upon the audited accounts The plaintiff produced the statement of Adrian Lance Hammond a Certified Accountant and a Fellow of the Chartered Association of Certified Accountants. From September 1983 to July 1994 he was the Audit Partner in the Cayman Islands accountancy and audit firm of Deloitte and Touche. He had regular contact with the Inspector over the eleven years he practised in Cayman. Hammond's statement covered the accountancy aspects of the plaintiffs' claim. Hammond's report is based on certain factual assumptions, inter alia, that all of FIIL's shares have, since 1977, been beneficially owned by ICIC and all of AOC's shares have, since 1980, been beneficially owned by FIIL. Those assumptions have now become my findings. The statement of the accountancy expert of Lhasa and Concorde, Arthur David Harverd, does not for present purposes differ materially from that of Hammond. It is Hammond's opinion that the financial statements of FIIL in the years 1979 to 1990 should have been consolidated to incorporate the assets, liabilities and results of its subsidiaries, including AOC. It is only for the years ended 30th June 1987 through to 1990 that FIIL accounts for AOC. Similarly, Hammond says, ICIC's financial statements should have been consolidated to incorporate the assets, liabilities and results of FIIL. A valid case could be made out for not consolidating the financial statements of those two companies on the basis that their activities are so dissimilar. In that event ICIC's financial statements should have disclosed this fact and included separate financial statements of FIIL as supplemental information. The financial statements of ICIC for the year ended 30th June 1977 to 30th June 1990, excluding the years ended 30th June 1978 (some of which are unaudited but most of which are audited) do not reflect any investment of ICIC in FIIL. The financial statement for the year ended 30th June 1978 was not available. An argument could be put forward that ICIC was a wholly owned subsidiary throughout the period ended 30th June 1984 and could therefore claim exemption from producing consolidated financial statements. However as the Inspector in Cayman regulated ICIC it is Hammond's opinion that the Inspector would have required ICIC's financial statements to reflect its investment in FIIL, for without that information he would not adequately be able to supervise ICIC's business. That opinion is bore out by the evidence of Mr. Jefferson, to which I shall return. The agreement of 5th July 1977 for the purchase by FIIL from APL of 51% of the shares of AOC for L2,326,620 was an event which should have been reflected in the auditor's report on the financial statements of ICIC for the year ended 30th June 1977 as a "material post-balance sheet event." The auditor's report was signed on 13th October 1977. Had that event been noted the reality of ICIC's potentially risky investment in unquoted shares in a volatile industry which was totally disproportionate to its capital base would have become apparent. Hammond says that it would be necessary to consider whether ICIC was insolvent in the light of the real and potential commitment involved in the purchase by FIIL of the AOC shares. John Dwight Jefferson was the Assistant Secretary of Banking in the office of the Inspector from June 1976 to March 1981. Once a banking licence is granted it continues until it is surrendered, suspended or revoked. It was the practice of the Inspector to require the submission of annual audited financial statements within three months of the end of the company's financial year. The Inspector would require material post-balance sheet events to be noted in accounts which were submitted late. Considerable reliance was placed on the auditors. If the notes to the financial statements disclosed investments in subsidiaries the Inspector would need to satisfy himself that these represented ongoing and successful operations to show that the investment was a good one and its value was properly represented in the balance sheet. Loans and advances, on the one hand, and investments on the other, were all factors that had to be closely monitored. Suspension of a bank's licence is the first disciplinary action and almost always precedes a recommendation for revocation. Suspension may be recommended when, for example the submission of audited financial statements is unduly delayed or where a review of the financial statements shows that the capital base is being eaten into by losses. In such cases a bank may be given a period of time to rectify the situation. In the case of persistent default or serious breach of regulations a revocation would be recommended. Jefferson agreed that there was cause for a great deal of concern on the face of ICIC's financial statements for 1980 and 1981. He testified that the Inspectorate would have welcomed a post-balance sheet note to the 1977 accounts reflecting the purchase by FILL of the AOC shares as suggested by Hammond. A commitment of that nature would, he said, "have raised all kinds of red flags" as far as the Inspector's office is concerned. The plaintiffs have to show that had ICIC's financial statements represented the true position it is likely that the Inspector would have taken such regulatory action which would have reduced the deficit in ICIC. To that end the plaintiffs produced the expert testimony of Sarah W. Hargrove, until recently Secretary of the Department of Banking of the Commonwealth of Pennsylvania, United States of America. As such she was the primary regulator of state-chartered banks, savings and loans associations and credit unions in Pennsylvania. The defendants produced the evidence of Dr. Marcia L. Stigum, president of Stigum and Associates, a money and bond marketing consulting firm. Dr. stigum's evidence was to the effect that even had there been no conspiracy, on the basis of the financial statements of ICIC as they stood, the Inspector should have acted decisively to revoke the licence of ICIC as early as 1977. I will say at once that Dr. Stigum has no experience in banking regulation. She is an economist with no background in banking regulation and no working experience in that field. It is not the area of her expertise. Even if it were I would be very reticent about accepting Dr. Stigum's evidence. Errors in simple calculation were shown up in her statement. Her statement contains severe criticism of Ms. Hargrove and the Cayman Islands Inspector of Banking, of the kind one does not normally find in the report of an expert. Dr. Stigum did not present as having as balanced an approach as Ms. Hargrove. Those who have practical experience in a subject often take a more moderate approach than those who merely theorize about it. Ms Hargrove is an experienced bank regulator. But her evidence is of limited value. She has operated in a jurisdiction where bank regulations provided a stricter supervisory regime; the defence would have it that it provided an "effective" supervisory regime, inferring that the regulation of banks in Cayman at the relevant time was ineffective. For the experts' opinions to be of any value they had to undertake the difficult task of putting themselves in the shoes of a foreign regulator for it is the Cayman Banking Inspector's likely response to honest and accurate financial statements which is in issue. That is the real issue and the concentration of the defence on the alleged ineffectiveness of the banking regulations in Cayman in the relevant years and the Inspector's apparent inactivity in the light of the actual financial statements presented will only influence me if I am satisfied that the Inspector would have failed to take proper supervisory action if the financial statements had contained a representation of the true situation. ICIC's licence was revoked in July 1991. The question is: would there have been an earlier regulatory response if ICIC's interest in FIIL had been properly and adequately reflected in ICIC's financial statements? Lhasa and Concorde say there was sufficient on the financial statements as they stood to warrant regulatory action and if the Inspector did not take regulatory action upon them as they stand then his response would have been no different if the true position had been reflected in the financial statements. In her written report Ms. Hargrave gave her suggested supervisory responses to the financial statements for the years 1977, 1980 and 1984, had ICIC's ownership of FIIL been reflected in those financial statements. Her report reads: "SUGGESTED SUPERVISORY RESPONSES My suggested supervisory actions with regard to the adjustments to the ICIC audited financial statements as set forth above by year are as follows: 1977 Seek information about the investment in or loan to FIIL and almost certainly require divestiture of FIIL. 1980 If the investment continues and the divestiture has not been accomplished, a likely supervisory action would be a suspension of the license pending a now larger divestiture of the interest in FIIL. Additional sanctions as may be available to the Inspector such as fines for non-compliance would be considered. 1984 By 1984 the maximum exposure to FIIL and/or adjustment to the shareholders' equity was felt. At this point had suspension not been accomplished and had divestiture not been effected, there would be undoubtedly have been some more severe sanctions on the part of the Inspector such as revoking the licence and asking for a plan of liquidation from ICIC along with whatever guarantees from the holding company or affiliates would be available and worth anything at that time." Ms. Hargrave testified that the ICIC accounts for 1977 as in fact prepared, without reference to ICIC's interest in FIIL, would have provoked regulatory action in her own jurisdiction. Her own response could have included cease and desist orders. She would have tried to work with the bank to resolve the problems but had she received no satisfactory responses her actions would have become increasingly severe and by 1979 probably a notice of pending suspension would be given and, if that did not provoke compliance, an actual suspension. By his cross-examination of Ms. Hargrave Counsel for Lhasa and Concorde tried to demonstrate that the actual responses of the Cayman Banking Inspectorate to the accounts of ICIC as presented were totally inadequate and that had the accounts been presented in an accurate manner there would have been no difference in the supervisory response. Ms. Hargrave maintained the opinion she stated in her report that by 1984 properly presented accounts would have led to a severe regulatory response whereas her response to the accounts as presented would have been less severe. It is significant to note that Ms. Hargrave testified that had she been the Cayman regulator she would not have closed the bank in 1977. Although her response may have been stronger than the actual response in 1977 she would have tried to work through the problems with ICIC. Her suggested supervisory response to financial statements adjusted to reflect ICIC's interest in FIIL would have been similar. The question is: would the inclusion of ICIC's ownership of FIIL have provoked a suspension or revocation of ICIC's banking licence before such revocation actually occurred in 1991? For the answer to that we go back to the evidence of the auditor, Hammond. His opinion was that had FIIL's commitment to purchase the AOC shares been reflected in ICIC's 1977 financial statements, as it should have been, then it would have been necessary to consider whether ICIC was insolvent. That factor would surely have provoked some response from the Inspector. Counsel for Lhasa and Concorde argue that the plaintiffs have not established that in the period 1977 to 1992 Price Waterhouse, the auditors of ICIC, had no knowledge of the "option agreement". Whether by that they were referring to the 1977 agreement between Pharaon and ICIC or the Attock Agreement to purchase the AOC shares I am uncertain. Be that as it may Price Waterhouse have not been shown to have knowledge of either agreement. It would be a surprising revelation indeed that Price Waterhouse had such knowledge and chose to exclude any reference to the purchase by FIIL of the AOC shares in ICIC's financial statements. It would be especially surprising given the lengths to which the conspirators went to hide ICIC's interest in FIIL. Had FIIL's commitment to purchase the AOC shares been reflected in the financial statements, having regard to the evidence I have heard from Jefferson and Ms. Hargrove, I am satisfied that there would have been some regulatory response. The likely regulatory response would have been to try to work through the problems but would have ultimately led to the suspension of the bank's licence until the situation had been resolved. If it were not resolved the licence would have been revoked. Counsel for Lhasa and Concorde argue that the plaintiffs are not entitled to claim damages because the actions of Lhasa and concorde in concealing ICIC's ownership of FIIL, were not the effective or dominant cause of the deficit loss claimed but only provided an opportunity to sustain loss. They have referred me to the recent English Court of Appeal decision in Galoo Ltd v Bright Grahame Murray [1995] 1 All E.R 16 where the plaintiffs' claim against auditors for damages in respect of trading losses which they alleged they sustained as a result of relying on the negligent auditing of the defendants was struck out. The plaintiffs claimed that but for such negligent auditing they would have ceased trading and thus would not have incurred further trading losses. Glidewell L.J. had this to say at pp. 29-30: "The answer in my judgment is supplied by the Australian decisions to which I have referred, which I hold to represent the law of England as well as of Australia, in relation to a breach of a duty imposed on a defendant whether by contract or in tort in a situation analogous to breach of contract. The answer in the end is 'by the application of the court's common sense'. Doing my best to apply this test, I have no doubt that the deputy judge arrived at a correct conclusion on this issue. The breach of duty by the defendants gave the opportunity to Galoo and Gamine to incur and to continue to incur trading losses; it did not cause those trading losses, in the sense in which the word 'cause' is used in law.". That decision was considered by Creswell J in a decision handed down on 10th February 1994 less than two months after the decision in Galoo was handed down. The case is London United Investment v. Mitchell and others and is as yet unreported. That was a case involving allegations that auditors had been wanting in care in failing to discover and warn that a company's money was being wrongly diverted. Creswell J considered the decision in Galoo. He said: "In my view the decision of the Court of Appeal in Galoo in relation to trading losses was by reference to the particular facts of the case and was not intended to extend (and does not extend) to the very different facts alleged in the present case." He went on: "Because they failed to give that warning the misappropriations continued and the prospects of diverting moneys already diverted diminished. The failure was an effective cause of the loss of further moneys and inability to recover moneys which would have been recovered if a timely warning had been given. To decide otherwise would render the long established duty of auditors to warn and guard against misappropriations and fraud wholly devoid of content." Creswell J. was clearly distinguishing Galoo on the facts and applied a more rigid "common sense test" when dealing with matters involving misappropriation and fraud. In any event the claim in Galoo was against auditors who allegedly failed to detect the insolvency of their clients. In the present case we are dealing with allegations of fraud against the conspirators themselves, not want of care by those whose duty it is to prepare accounts. It has been shown that many of ICIC's losses flowed from the actions of the conspirators. Their actions did not only give ICIC the opportunity to incur losses; some of their actions, for example in relation to loans out of ICIC, are the cause of such losses. It may be true that one head of damages results from ICIC's continued trading, but the cause of the losses were the actions of the conspirators. Counsel for Lhasa and Concorde further submit that the ICIC deficit was not caused solely by the absence of reference to ICIC's interest in FIIL in the financial statements. They argue that the deficit "could" have been caused by many factors eg. bad investments made by ICIC, bad loans made by ICIC or bad management. There is evidence before me which leads me to a conclusion that the wrongly presented financial statements caused the ICIC deficit. There is no tangible or acceptable evidence before me that the ICIC deficit was caused by any other factor. The defendants have not brought other alleged tortfeasors as third parties into the action. They have not pleaded or sought to prove facts which could lead me to the conclusion they argue. In the case cited to me by Counsel for Ihasa and Concorde, Wilsher v Essex Area Health Authority [1988] 2 WLR 557 the House of Lords held that the onus of proving causation was on the plaintiffs and in the particular case there were a number of possible causes of the damage complained of, of which the defendant's was only one. There was conflicting expert evidence on whether the defendant's action could have caused or materially contributed to the damage on which the trial judge had failed to make finding upon. The issue of causation went for retrial. The decision was made on its own facts and was decided upon a question of whether the trial judge had considered material evidence. In the present case I have resolved the question of causation after consideration of all the evidence. There is no evidence to lead me to an alternative conclusion. Counsel for the defendants ask me to introduce the element of foreseeability into my consideration of whether I should award damages under this head. It would be strange indeed if having entered into an unlawful conspiracy to keep ICIC alive the conspirators could argue that they are not obliged to pay damages because they did not foresee that their unlawful activities would cause damage. I think the following passage from the judgment of Lord Denning M.R. in Doyle v. Olby Ltd. [1969] 2 Q.B. 158, at page 167, puts this matter to rest. "On principle the distinction seems to be this: in contract, the defendant has made a promise and broken it. The object of damages is to put the plaintiff in as good a position, as far as money can do it, as if the promise had been performed. In fraud, the defendant has been guilty of a deliberate wrong by inducing the plaintiff to act to his detriment. The object of damages is to compensate the plaintiff for all the loss he has suffered, so far, again, as money can do it. In contract the damages are limited to what may reasonably be supposed to have been in the contemplation of the parties. In fraud, they are not so limited. The defendant is bound to make reparation for all the actual damages directly flowing from the fraudulent inducement.". A final submission of Ihasa and Concorde is that the plaintiffs are precluded from claiming damages because they were too heavily involved in the conspiracy alleged. In Belmont Finance Corp. v Williams Furniture Ltd. [1979] Ch 250 it was held that where a company is the victim of the conspiracy an action for conspiracy will lie even where the conspirators are its own directors. Ihasa and Concorde argue that as regards the FIIL and AOC shares it is fair to say on my findings of fact that ICIC was the victim of the conspiracy. However, it is argued that in regard to the ICIC deficit claim the plaintiffs were not victims of the conspiracy. The object of that part of the conspiracy was to keep ICIC alive and so the true victim was not the bank but it was the depositor who was led to deposit funds with ICIC. This argument would only have merit if by keeping ICIC alive the deficit reduced over the years. However my understanding of the evidence is that such deficit over the years increased and as such the continued existence of ICIC made it a victim of the conspiracy. In any case there were financial activities regarding the FIIL shares for several years from 1977 and the deficits relating thereto could not have transferred themselves to ICIC had the bank been prevented from trading in, say, 1979. The Court having determined that Pharaoh, Pharaoh and Ihasa are liable under this head of damages it is now for the plaintiffs to attempt to quantify the actual increased deficit from the date that ICIC would probably have been suspended from operating until its actual closure in 1991. In determining which of the defendants is liable in damages I have to decide upon the submission of Ihasa and Concorde that they are only liable for damage caused after they joined the conspiracy. Of course, I have found that there were two conspiracies, i.e., what I call the "original conspiracy" which involved the concealment of ICIC's ownership of FIIL and what I call "the 1991 conspiracy" which involved the transfer of the AOC shares from FIIL. Consideration of which defendant joined in which conspiracy involves a I have been directed to no specific authority on the point. It is clear that a conspirator does not have to be present at the conception of the conspiracy and that he can join it after the conspiracy has started. To adopt the defendants' approach is to lead the Court into areas of assessment of degrees of culpability of individual conspirators. It must be the case that once the tortious liability of a conspirator is established he is liable for all the loss and damage held to be properly arising from the conspiracy. Which of the defendants is liable for which head of damages? Damages are not claimed against Adham and Fulaij. Pharaon is liable for all damages which arise pursuant to the original conspiracy and the 1991 conspiracy. It is proved that Pharaoh was a party to the original conspiracy. However it has not been proved that it took any part in the 1991 conspiracy. It has been proved that Ihasa played a part in both the original conspiracy and the 1991 conspiracy. I am not persuaded by the evidence that Concorde played any part in the original conspiracy. That being so no damages in respect of the ICIC deficit are to be awarded against Concorde. However, Concorde is proved to be a party to the 1991 conspiracy, and any damages flowing therefrom are recoverable from Concorde. The plaintiffs ask me to hold that my findings also give rise to causes of action against the defendants for breach of fiduciary duty and knowing assistance in breach of fiduciary duty and breach of trust and knowing participation in breach of trust. Having recognised the judgment and order of Harman J. I am not asked to make a finding on a further claim for fraudulent disposition. The falsification of ICIC's documents, accounts and accounting records by its officers and agents amounted to breaches of their fiduciary duties to ICIC. Adham, Fulaij, Pharaon, Pharaoh and Lhasa knowingly and dishonestly assisted in these breaches of fiduciary duty. I have held that it is not proved that Concorde was a co-conspirator in relation to the pre-1991 conspiracies. Similarly, as a director of FIIL, Pharaon in breach of his fiduciary duties, transferred the AOC shares out of FIIL. Lhasa and Concorde knowingly and dishonestly assisted him in that breach of his fiduciary duties. The transfer of AOC's shares out of FIIL amounted to breaches of trust by Pharaon. Lhasa and Concorde knowingly assisted in such breaches of trust. I find that compensation is recoverable under those heads. I am asked to make no other findings in relation to such compensation at this stage. Conclusion The upshot is that I answer the issues as follows: 1) ICIC is the beneficial owner of 100% of the issued share capital in FIIL. 2) The first loans of $850,000 were "non-recourse" loans. 3) The KIFCO loan of $900,000 was a "non-recourse" loan. 4) The KIFCO loan was not used to repay the first loans of $850,000. 5) It is unlikely that Pharaon's loan from KIFCO was discharged out of a French franc deposit of Redec. 6) The "non-recourse" loans were sham loans. 7) Loans were "migrated" to further the dishonest scheme to conceal ICIC's ownership of FIIL. 8) Pharaon knew of the scheme to acquire FIIL and of the details of the funding therefor. He had a general but not particular knowledge that funds were being moved to further the disguise of ICIC's ownership of FIIL. He had full knowledge of the "non-recourse" nature of the loans to which he and the companies under his control were parties. 9) Pharaon took no shares in the first issue of FIIL as beneficial owner. 10) The 1977 agreement was a sham agreement to further disguise ICIC's beneficial ownership of the FIIL shares. 11) The 1979 agreement was not entered into. Had it been entered into it could have had no legal effect. 12) FIIL is the beneficial owner of 100% of the issued shares in AOC. 13) The judgment and order of Harman J. dated 12th March 1993 determined the issue of beneficial ownership of the AOC shares as between the parties to this action. 14) Such judgment and order should be recognised in this action. 15) Lhasa and Concorde have not proved the 1979 agreement. 16) It would have had no legal effect. 17) Pharaon did not repay FIIL in respect of payments which FIIL made for the AOC shares. 18) It is likely that the SR15m. loan from Pharaon to FIIL was repaid in May 1978. 19) The defendants are liable to ICIC and FIIL for conspiracy and other wrongs. 20) The plaintiffs have proved the agreement and alleged scheme relating to the FIIL and AOC shares as set out in the recitation of their case. 21) The scheme involved the use of unlawful means. 22) Pharaon had full knowledge of and participated in the scheme. 23) Whitbeck knew of the 1991 conspiracy as a director or officer of Lhasa, Concorde and Falcon. 24) Pharaon and Lhasa participated in the original scheme. Lhasa and Concorde participated in the 1991 conspiracy. 25) Such knowledge and participation were sufficient to render Pharaon, Pharaoh, Lhasa and Concorde liable to the plaintiffs in conspiracy. 26) The plaintiffs have suffered some damage under all heads of claim in paragraph 12 of the re-amended statement of claim except for the claim in para 12.5. Pharaon and Lhasa are liable under all heads of damage except for that claimed in paragraph 12.5. Pharaoh is liable for such damages as flow from the original conspiracy. Concorde is liable for such damages as flow from the 1991 conspiracy. 27) A conspirator is liable for all damage caused irrespective of when he joined the conspiracy. 28) The claims in paragraph 12.5 of the reamended statement of claim is not claimable at law. The claim in paragraph 12.6 of the reamended statement of claim is claimable at law. 29) My findings also give rise to causes of action against the defendants in breach of fiduciary duty, knowing assistance in breach of fiduciary duty, breach of trust and knowing participation in breaches of trust. I shall now adjourn the matter until 31st May 1995 for counsel to address me on the orders which flow from this judgment. 22nd May 1995. D. Schofield Judge of the Grand Court