Mohammed Saleem Khawaja v Stela Stefanova & Ors

Andrew Twigger K.C. : Introduction

1. This is one episode in a long-running dispute between the Petitioner (“Mr Khawaja”) and the First Respondent (“Ms Stefanova”). I will need to consider more of the background below, but in outline on 6 November 2023 Mr Khawaja obtained an interim charging order over Ms Stefanova’s flat in Highgate, London (“the Property”). Ms Stefanova resists that order being made final on the basis of a document entitled “Deed of Trust” dated 7 December 2022, in which she declared herself trustee of her interest in the Property for her daughter, Victoria. That document has been referred to by various names, but I shall call it the “Trust Deed.”

2. On 21 June 2024 ICC Judge Barber directed that a final hearing be listed before a High Court Judge for determination of the following issues: i) Whether the Trust Deed is a document executed by Ms Stefanova to give third parties or the court the appearance of creating between her and the beneficiary purported trust rights different from the actual rights which Ms Stefanova intended to create; ii) Whether the Trust Deed is a transaction to defraud creditors within the meaning of section 423 of the Insolvency Act 1986 (“ Section 423 ”); and iii) Whether in all the circumstances of this case and in the events which have occurred, the interim charging order should be made final.

3. The hearing ordered by ICC Judge Barber was listed before me for two days in June 2025 and this is my judgment answering the three questions she posed. It is organised under the following headings: i) Conduct of the Hearing and the Evidence; ii) Background Facts; iii) The Law; iv) Findings as to Ms Stefanova’s Subjective Intention; and v) Conclusions. i) Conduct of the Hearing and the Evidence

4. Mr Khawaja was represented at the hearing by Mr Gideon Roseman of counsel. Ms Stefanova represented herself, with the assistance of a McKenzie Friend, Mr Parham Partovi (whom I understood also to be her partner). Ms Stefanova is not legally qualified and it was obvious that, understandably, she found the process of presenting her case stressful and, at times, upsetting. I have endeavoured to make allowances for that and I am satisfied that, with Mr Partovi’s assistance, Ms Stefanova had a fair opportunity to tell me all the matters she wished me to take into account.

5. I should record that, at the beginning of the hearing, Ms Stefanova applied for an adjournment, both on mental health grounds and because Mr Khawaja had failed to produce the bundles in accordance with the timetable in ICC Judge Barber’s order. I refused the adjournment for reasons which I gave at the time, but essentially on three grounds.

6. First, the medical evidence relied on by Ms Stefanova was a letter from a General Practitioner which was more of a summary of what the GP had been told by Ms Stefanova than the GP’s opinion that some medical consequence would follow if the hearing went ahead. In the light of the evidence I was shown about Ms Stefanova’s previous requests for adjournments based on similar grounds, I was not satisfied that there was any sufficiently serious medical reason for an adjournment. It did not seem to me that it would be any less stressful for Ms Stefanova for the hearing to be delayed.

7. Secondly, whilst it was correct that the bundles had not been produced in accordance with the court’s directions, I was not satisfied that Ms Stefanova would suffer any prejudice as a result of their being produced late. They had been provided more than a week before the hearing and their contents were almost exclusively documents produced in connection with earlier hearings in which Ms Stefanova had been involved. She was evidently well familiar with most of them, and I permitted her to provide me with other documents which were not in the bundles.

8. Thirdly, the interim charging order had been made in November 2023 and it was not, in my view, fair to Mr Khawaja or to other litigants, to delay the final hearing any further.

9. The dispute between the parties has generated copious amounts of documentary material. Understandably, therefore, the bundles contained only a selection of the documents, being the ones to which the parties wished to refer. This has meant that, in some places, the contemporaneous documents are missing and I have had to fill in gaps by reference to other sources, including findings made in other judgments. I will, in particular, refer below to the judgment of Richard Smith J of 29 March 2023 (“the Contempt Judgment”) and that of Ms Penelope Reed KC of 9 September 2024, refusing Mr Khawaja’s application for summary judgment (“the SJ Judgement”). I will also refer to the unfair prejudice petition in these proceedings dated 12 December 2022 (“the Petition”) and Ms Stefanova’s Points of Defence dated 26 April 2023 (“the Points of Defence”).

10. I heard live evidence from two witnesses. Ranjeet Johal was called by Mr Khawaja. He is a solicitor in the firm of Mills Chody LLP, Mr Khawaja’s solicitors, and has been involved in this dispute from an early stage. His twentieth witness statement was produced for the hearing before me and helpfully summarised the background. He was cross-examined by Ms Stefanova and was able to provide some further useful information, but his evidence was necessarily of limited assistance to me in deciding the critical issue concerning Ms Stefanova’s intention when she executed the Trust Deed.

11. Ms Stefanova also gave evidence and was cross-examined by Mr Roseman in some detail. As I shall explain below, her evidence has been disbelieved in the past, she has been found to have been in contempt of court for numerous breaches of orders to provide information, and she is the subject of an Extended Civil Restraint Order on the basis that she has made numerous applications found to be totally without merit. Even without that background, I would have found her an unreliable witness. I will give examples of her evidence in the course of considering the background facts below. She repeatedly sought to avoid answering questions, responding instead with questions of her own, or allegations about Mr Khawaja, or purported explanations which made no sense. A particularly troubling example of the latter is her evidence about the email from the MHRA in April 2022, which I discuss below. That evidence was wholly implausible.

12. I reached the view that I could not rely on Ms Stefanova’s evidence about why she executed the Trust Deed, other than what she said about her concern for her daughter’s welfare and inheritance. I accept that evidence because it is an entirely natural concern for a mother to have. The unreliability of Ms Stefanova’s evidence makes it necessary to consider, and make findings about, the background facts in some detail, so that appropriate inferences can be drawn. Background Facts

13. On 6 October 2021 His Honour Judge Gerald gave judgment following the trial of a number of preliminary issues in proceedings issued by Mr Khawaja against Ms Stefanova and the Third Respondent (“Dermamed”) in the Central London County Court. He held that, in a restaurant in Harringay in April 2018, Ms Stefanova had orally agreed to share equally with Mr Khawaja the profits and expenses of a business distributing and supplying beauty filler products produced by an Israeli company called Luminera Derm Ltd. (“Luminera”). The terms agreed included that the business would be carried on through Dermamed, and that Mr Khawaja would become an equal shareholder in, and director of, that company.

14. In the course of his judgment, HHJ Gerald found Ms Stefanova not to be a credible witness. He did not accept her contention that Mr Khawaja was in breach of his obligations, saying that her evidence that he had failed to store products in a temperature-controlled environment was “ a pure invention. ” In paragraphs 31 and 32 of his judgment he contrasted the picture Ms Stefanova was painting to Luminera in October 2018 of a business going well, with an email she sent the next day to Mr Khawaja saying that things were not going well. When asked about this in evidence before me, she accepted that she was trying to cut Mr Khawaja out of the business when that email was sent, and repeated the allegation that he was in breach of his obligations, which HHJ Gerald had said was a pure invention.

15. HHJ Gerald concluded that Mr Khawaja was in principle entitled to specific performance of the agreement for half the shares in Dermamed to be transferred to him, and that he be appointed a director. He continued: “ However, at this point in time, I am not prepared to make an order for specific performance because there is insufficient material before me upon which I could make such a decision. The reason I say that is that it appears possible that the second defendant no longer contracts with Luminera. It is possible, but it is not presently known, that it may have a completely different business from the cosmetic filler business. It might, of course, be possible that there is a midway point which is that the second defendant still supplies and distributes cosmetic fillers, not from Luminera but from another supplier. None of that is presently known. If, for example, it turns out that the second defendant now runs a completely different business from fillers, it may well follow that it would be quite wrong for an order for specific performance to be granted and that, instead, there should enquiry as to damages. ”

16. Consequently, he adjourned the question of whether to order specific performance or damages in lieu and ordered Ms Stefanova to serve a witness statement by 27 October 2021 explaining what had become of Dermamed’s contract with Luminera, whether other suppliers were providing products substantially similar to those supplied by Luminera and what other business Dermamed had undertaken within the period 1 April 2018 to the date of the order. He also directed disclosure of various items, including Dermamed’s bank statements, financial statements and accounting documents and bank statements of any bank account on which Ms Stefanova was a signatory.

17. HHJ Gerald’s order reserved the costs of the proceedings. I have been shown a transcript of the debate following his judgment in which he made clear that he was reserving the costs because Ms Stefanova’s counsel had revealed that there had been a Part 36 offer. Nevertheless, he expressed the view that “ at this point in time, it looks more likely than not that [Ms Stefanova] will have to pay [Mr Khawaja’s] costs, but I just do not know at the moment… ” As I explain below, it is clear from subsequent events that Ms Stefanova appreciated that she was likely to be liable for the costs. (Mr Roseman submitted that it had been improper to reveal the Part 36 offer, but I do not need to, and do not, make any finding about that, one way or the other.)

18. According to paragraph 5 of the Contempt Judgment, although Ms Stefanova “ purported to comply ” with HHJ Gerald’s orders to provide a witness statement and disclosure, Mr Khawaja considered she had not properly done so and, on 4 April 2022, served a lengthy request for further information and for specific documents. Ms Stefanova responded to this in “ cursory, and somewhat dismissive terms, indicating that most of the requests could only be complied with at disproportionate expense. ”

19. Mr Khawaja then made a further application which was granted by HHJ Gerald on 13 May 2022. His order of that date required Ms Stefanova to respond to numerous detailed questions listed in Schedule 1, and to provide copies of twenty-seven separate categories of document listed in Schedule 2, by 24 June 2022. Whilst I have not seen the material which had previously been provided by Ms Stefanova, it is apparent from these Schedules 1 and 2 that she had disclosed at least some bank statements from her personal account with Barclays Bank, since some of the requests ask about certain entries in those statements. HHJ Gerald also ordered “ the Defendants ” to pay Mr Khawaja’s costs, summarily assessed in the sum of £8,753.

20. I was provided with a transcript of the hearing before HHJ Gerald on 13 May 2022, from which I note two points of potential relevance for what happened subsequently. The first is that at the conclusion of the hearing, Mr Roseman asked for it to be made clear that the costs should be paid by Ms Stefanova herself, rather than by Dermamed. HHJ Gerald responded “ I am really sorry if you wish to argue this point I will relist it for another day. ” Ms Stefanova seems to have misunderstood this remark as a rejection by HHJ Gerald of Mr Roseman’s submission that she was not entitled to use Dermamed’s money to pay the legal costs of the proceedings. Nevertheless, it seems to me that she is likely to have understood from the exchange at the hearing that Mr Khawaja’s case was that she should have paid those costs personally.

21. The second point of note in the transcript is that, at internal page 31, HHJ Gerald was encouraging the parties to agree what disclosure should be ordered. He is then recorded as saying, “ One alternative is that the defendant just submits to specific performance now and then the claimant - she would then have the pleasure of sharing the Board of Directors with the claimant. That is one option. And then the other option is that she just has to disclose everything, which actually is what has already been ordered …. So unless on instructions [counsel] is prepared to adopt the sensible and reasonable approach, then I will order one of those two. ” This seems to me to have been the genesis of what happened next.

22. On 20 June 2022, just four days before the deadline for providing the disclosure ordered, Ms Stefanova’s solicitors wrote to Mr Khawaja’s then solicitors making an open offer to settle the proceedings. The essence of the offer was that Mr Khawaja would be made a director and 50% shareholder of Dermamed and his costs would be paid on the standard basis. The offer relating to costs shows that Ms Stefanova appreciated that she was likely to be ordered to pay them in due course. The substance of the offer, however, needs to be seen against the background of the decisions which Ms Stefanova had been taking in relation to Dermamed since she lost the trial.

23. At an earlier stage, on 1 October 2020, Ms Stefanova had incorporated the Second Respondent (“Biotech”). That was less than two months after Mr Khawaja had commenced the proceedings which led to the trial before HHJ Gerald. Ms Stefanova says that Biotech was incorporated to carry on a pharmacy business, selling different products from Dermamed. Biotech does not, however, appear to have started trading as a pharmacy until at least 2023. In an “affidavit” which is unsworn and undated, but which I understand was produced on 20 December 2022, Ms Stefanova said that, at that time, Biotech was her new company “ which will trade as a pharmacy and I have applied to pharmacy council for a pharmacy licence and I am going to start renting pharmacy premises in January. ”

24. Although, therefore, Biotech’s pharmacy business did not begin until 2023, Ms Stefanova accepted in paragraph 63 of her Points of Defence that Biotech had been trading “ alongside ” Dermamed from February 2022. The bank statements which I have seen show that an account was opened at Barclays Bank for Biotech on 15 February 2022, with relatively substantial sums being paid in to that account each month thereafter until 13 October 2022 (when the statements shown to me end). Biotech must, therefore, have been trading during the period from February 2022 onwards as something other than a pharmacy.

25. On 12 April 2022, the Medicines Health Regulatory Authority (“MHRA”) sent Ms Stefanova the email concerning Dermamed to which I referred above, saying “ You have not reviewed your MHRA registration as a medical device manufacturer / UK Responsible person / Authorised Representative (Northern Ireland) and submitted the Renew registration application. Consequently your account has been suspended. You will not lawfully be able to new place [sic] devices onto the UK market … It is an offence to place a non-compliant device on the market in the UK. ” The e-mail continued by explaining how to renew the registration and reactivate the account.

26. In paragraph 60 of her Points of Defence Ms Stefanova says that Dermamed had never had an MHRA licence, but that she was nevertheless worried by the risk of committing an offence, and so she decided to “ limit trading ” through Dermamed at that time. She accepted in the Points of Defence and in evidence before me that Dermamed had ceased trading in around May 2022. That is consistent with the bank statements I have seen, which show decreasing sums being paid into Dermamed’s account from around February 2022, and nothing at all from May 2022 onwards. In cross-examination, it was put to Ms Stefanova that she could simply have taken steps to renew the MHRA registration and continued trading through Dermamed, but she stuck to her story that there was no licence to renew and that she could not risk being prosecuted.

27. Ms Stefanova’s evidence concerning this email was unconvincing. If it is true that Dermamed never had, and did not require, an MHRA licence, the obvious step to have taken was to write to the MHRA to clarify the position. If there was an MHRA licence which had expired, the email explains how to renew it. I do not believe Ms Stefanova’s evidence that she was so “ traumatized through this vicious and relentless litigation ” by Mr Khawaja (to quote her Points of Defence), that she was rendered incapable of resolving the MHRA difficulty. Whilst Ms Stefanova’s oral evidence did demonstrate that she understandably found the litigation stressful, it also demonstrated her determination to achieve her goals, when required. Contacting the MHRA to resolve the situation seems to me substantially less difficult and stressful than moving suppliers and customers over to a new company. I consider the MHRA email was merely an excuse to explain why Ms Stefanova no longer traded through Dermamed.

28. Thus, by the time Ms Stefanova made the offer in June 2022 to make Mr Khawaja a director and 50% shareholder in Dermamed, it no longer had any business. I accept that Mr Khawaja was unaware of that in June 2022. Ms Stefanova’s evidence to me that she had solicitors and did not know what conversations they might have had about this with Mr Khawaja’s solicitors was an obvious attempt to avoid admitting that she knew he had no idea that Dermamed had ceased trading.

29. Moreover, it is now common ground that between August 2020 and the time the offer was made, around £250,000 of the money in Dermamed’s bank account had been used in ways which benefitted Ms Stefanova but which Mr Khawaja says amounted to breaches of duty (see paragraph 17 of the Petition and paragraph 52 of the Points of Defence). These payments included around £116,000 to cover legal fees relating to the claim brought by Mr Khawaja, just under £68,000 to purchase a Mercedes and £60,000 towards her pension (together with various smaller amounts which are immaterial for present purposes). Ms Stefanova says, however, that these payments were legitimately made, for various reasons. I am leaving to one side further sums totalling around £165,000 paid to Ms Stefanova by Dermamed which she says represented her salary, dividends and directors’ loan repayments. There is a dispute about these entitlements which I am not in a position to resolve, and it is unnecessary to do so for present purposes.

30. In paragraph 38 of the SJ Judgement, Ms Reed KC said, “ …I do consider that Ms. Stefanova has no reasonable prospects of success of defending the claim that she is in breach of duty in taking sums from the Company even if there might be some question as to the amount (in terms of salary). ” Despite that view, Ms Reed KC declined to grant a declaration to that effect and did not grant Mr Khawaja summary judgment on the Petition.

31. Accordingly, the question whether the various payments totalling around £250,000 amount to breaches of duty is one of the issues which will have to be decided at the hearing of the Petition in due course, and I do not consider it is necessary or appropriate for me to attempt to decide it now, on the basis of the limited evidence I have seen. What matters for present purposes, in my judgment, is that Ms Stefanova had, whether legitimately or not, spent a substantial amount of the cash available to Dermamed by the time she made the offer to Mr Khawaja. I accept that Mr Khawaja was unaware of this at the time, since it only came to light when Dermamed’s bank statements were obtained in late 2022 (as I explain below).

32. Thus, the offer Ms Stefanova made to Mr Khawaja in June 2022 was a hollow one. Dermamed no longer had any ongoing business, nor any substantial amount of cash representing profits from its erstwhile business. In her evidence to me, Ms Stefanova suggested that she made the offer because she understood, as a result of advice she had received, that this would enable Mr Khawaja to obtain all the information he wanted, without her having to incur the costs of providing it. Mr Roseman submits that Ms Stefanova made the offer to avoid providing disclosure, which would reveal that Dermamed had ceased trading and that she had misappropriated its cash.

33. It seems to me that the offer was, in fact, prompted by HHJ Gerald’s remarks at the hearing on 13 May 2022, to the effect that there were two “ options ”: make Mr Khawaja a director, or give disclosure. I agree it is likely that Ms Stefanova made the offer to avoid providing the disclosure, but she may have believed that was an option which HHJ Gerald had offered her. That is consistent with the letter Ms Stefanova’s solicitors wrote on 22 June 2022 (just two days after the offer was made) to say that, since the offer granted Mr Khawaja what he was seeking, “ there is no point in our client complying with the order for further information and disclosure. ” I am not convinced that Ms Stefanova believed that the effect of her offer would be to conceal what she had spent Dermamed’s money on, or that it had ceased trading. If Mr Khawaja had accepted the offer to become a director of Dermamed, he is likely to have found that out reasonably swiftly. It seems to me more likely that Ms Stefanova believed that the offer would bring the proceedings to an end, without any order being made for her to pay a cash sum to Mr Khawaja (other than his costs). She may not have thought that Mr Khawaja would subsequently be entitled to challenge what she had done, or that he would have an inexhaustible appetite for further litigation (although, if she thought that, she was plainly wrong).

34. In the event, Mr Khawaja did not accept the offer. But on 5 July 2022 Ms Stefanova went ahead regardless, so far as she could, and drew up Dermamed’s statutory books showing Mr Khawaja as a 50% shareholder since 30 April 2018. She could not, of course, unilaterally make him a director without his consent. There was then a hearing by telephone on 8 July 2022 before HHJ Gerald, at which counsel for Ms Stefanova argued that it was no longer necessary for her to comply with the order for disclosure made on 13 May 2022 because Mr Khawaja had obtained, or been offered, the relief he was seeking in the proceedings, namely specific performance of the agreement to appoint him a director and make him a 50% shareholder.

35. Mr Johal’s unchallenged evidence in his witness statement for the hearing before me was that HHJ Gerald said at that hearing that it was not for Ms Stefanova to decide what remedy Mr Khawaja was entitled to and that making him a shareholder did not prevent him from pursuing his claim in damages. The Judge speculated that Ms Stefanova may have asset-stripped the company, making it worthless. Ms Stefanova told me that she did not attend the telephone hearing, so she did not know what the Judge said. I infer, however, that either her counsel or her solicitors relayed the gist of the judge’s remarks to her, consistently with their duties.

36. HHJ Gerald’s order following the hearing on 8 July 2022 extended the deadline for Ms Stefanova to comply with his order of 13 May 2022 until 5 August 2022. He also ordered submissions to be filed by Mr Khawaja explaining, amongst other things, what relief he was seeking in the proceedings, with responsive submissions from Ms Stefanova to follow and a subsequent directions hearing on 16 September 2022.

37. In advance of that hearing, on 7 September 2022 Mr Khawaja issued an application notice seeking to strike out Ms Stefanova’s Defence and debar her from any further participation in the proceedings, on the basis that she had failed to comply with HHJ Gerald’s order. The same application notice also sought a third-party disclosure order against Barclays Bank. As I understand it, the application sought copies of all bank statements in the period between 6 October 2021 to the date of the order in relation to four identified bank accounts. One was Ms Stefanova’s personal account (of which, as I have already mentioned, some disclosure must already have been given) and one was Dermamed’s account. Disclosure was also sought from Barclays Bank of all bank accounts to which Ms Stefanova was, or had been, a signatory, and disclosure of copies of all bank statements for those accounts for the period from 1 April 2018 to the date of the order.

38. It was HHJ Parfitt who heard these applications on 16 September 2022 and I have been shown a transcript of that hearing. By this stage, Ms Stefanova was acting in person, but with the assistance of Mr Partovi, acting as a McKenzie Friend. He had been introduced to Ms Stefanova through a mutual friend. He is described in the documents I was shown as qualified with the Institute of Paralegals and he holds himself out as having knowledge and experience of litigation and commercial law.

39. HHJ Parfitt adjourned the application for disclosure against Barclays Bank to be heard by HHJ Gerald at a later date, since Barclays Bank had not responded to the application by that stage (and that hearing was subsequently listed for 7 December 2022). HHJ Parfitt declined to strike the Defence out there and then, or to make a debarring order, but ordered that, unless by 4 November 2022 Ms Stefanova answered the same detailed questions, and provided copies of the same twenty-seven separate categories of document, referred to in HHJ Gerald’s order of 13 May 2022, the Defence would be struck out. The judge suggested including a penal notice on the order, which was done.

40. HHJ Parfitt also ordered Ms Stefanova to pay Mr Khawaja’s costs of the hearing before him and the hearing before HHJ Gerald on 8 July 2022, summarily assessed in the sum of £14,510. I note from the transcript of the hearing that in the course of the argument about costs, Mr Roseman submitted that, by that point, Mr Khawaja’s total costs were “ knocking on the door of £100,000. ” At the end of the hearing, HHJ Parfit told Ms Stefanova that the costs liability was hers personally, and that she should not be meeting it from assets belonging to Dermamed. His remark was recorded in a recital to the order. Although that warning related only to the costs of that hearing, I consider it likely that, even if Ms Stefanova had previously believed that she had been entitled to use Dermamed’s money to pay the legal costs of the proceedings, she now realised that it was at least possible that she had not been entitled to do so.

41. On 10 October 2022 Mr Khawaja’s solicitors wrote to Ms Stefanova in connection with an application which she had issued on 4 October 2022 (but which is not, so far as I am aware, in evidence before me). That letter further stressed Mr Khawaja’s case that she was not entitled to use Dermamed’s money to pay legal costs. Amongst other matters, the letter went on to explain the issues then remaining in the proceedings as follows: “ … the relief our client is entitled to, being (a) damages; (b) specific performance; or (c) damages in addition to specific performance. As you have already made our client an equal shareholder of the company, you have pre-empted part of the relief he is seeking, which means there still needs to be an inquiry as to how much money you have, in excess of the £2,000 per month salary the parties agree you were entitled to, have received from the company since 1 April 2018 to date; our client being entitled to 50% of the said sum. ”

42. This letter further highlighted to Ms Stefanova the risk that she would ultimately be ordered to pay a sum of money and that Mr Khawaja contended that the sum should be calculated as half of all the sums paid to Ms Stefanova by Dermamed, less an allowance for her salary. I make no finding one way or the other as to whether Mr Khawaja was entitled to damages or whether his calculation of 50% of all sums received, less salary, was appropriate. I nevertheless infer that, as a result of HHJ Gerald’s words at the hearing on 8 July 2022 and the clear explanation in this letter, Ms Stefanova understood by this time (if not earlier) that there was a real risk of an award of damages being made against her and that Mr Khawaja’s case was that it should be calculated in that way.

43. On 4 November 2022 Ms Stefanova attempted to comply with HHJ Parfitt’s order and filed a seven-page letter together with some documents. This letter is important, because it reveals aspects of Ms Stefanova’s state of mind just over a month before the Trust Deed was executed. The second paragraph begins by explaining that there were two reasons why Ms Stefanova had defaulted on previous disclosure orders. The first was her poor mental health. The letter then continues as follows (reproducing the typographical errors in the original): “ Secondly my solicitor Blake Turner LLP charged me £25,000 + VAT for previous disclosure orders and quote me £30,000 + VAT to deal with this disclosure order and a further £10,000 to £20,000 + VAT to deal with correspondence related to this disclosure. Please refer to attached letter from my solicitors, as you can appreciate it would have costs me roughly £50,000 + VAT just to deal with this disclosure order. This is a substantial amount of money, I am not a millionaire, and cannot afford such costs ... Please note in the CMC the costs budgets agreed were substantially lower and I have to date spend over £110,000 in legal costs and to have continued with solicitors acting for me would have bankrupt me … The claimant is purposely bringing up and wasting costs in this claim to penalise me ... … I submit that the claimant has purposely requested so many information to purposely bring up costs as they have won at trial and are contemplating to recover their costs and as a tactic are misusing part 18 applications to bring up more costs and waste the court’s time and resources and the claimant should be penalised by way of sanctions when the court is to consider costs. ”

44. These words are significant in several respects. First, they show that Ms Stefanova recognised that she had lost at trial. As I have already held, she had attempted to bring the proceedings to an end by making Mr Khawaja a shareholder and offering to appoint him a director, but that had failed. It is likely that she realised by this stage that there was a risk that she would be liable to pay damages. Secondly, Ms Stefanova appreciated that she would be liable to pay Mr Khawaja’s costs. Mr Roseman had indicated at the hearing before HHJ Parfit that those costs were in the region of £100,000, which was broadly comparable to the legal costs she said she had herself paid, and I infer that she realised that her eventual costs liability to Mr Khawaja could be of that magnitude. Thirdly, Ms Stefanova feared that Mr Khawaja would (as she saw it) continue to find ways to increase costs to “ penalise ” her, so that her ultimate costs liability could be greater still. I make no finding one way or the other as to whether this fear was justified, but the important point is that Ms Stefanova in fact believed Mr Khawaja would continue to seek orders for her to pay substantial sums. Finally, Ms Stefanova was concerned that she would ultimately be unable to pay the full amount of any damages and costs ultimately awarded to Mr Khawaja. She had stopped instructing lawyers at that point because she was worried she could not afford it. I asked Ms Stefanova whilst she was giving evidence whether this passage in the letter represented how she felt at the time, and I understood her to confirm that it did.

45. In the Contempt Judgment, Richard Smith J found that Ms Stefanova breached HHJ Parfitt’s order by failing to provide the information requested in fourteen paragraphs of Schedule 1, and that she further breached the order by failing to provide copies of documents in ten categories listed in Schedule 2. In fairness to Ms Stefanova, I should record that many of the relevant breaches were admitted by the time of the hearing before Richard Smith J. Nevertheless, he held that they were all “ deliberate breaches of the orders to avoid the disclosure of information which might otherwise have given grounds for more serious and earlier intervention by the court ” (a finding which, I note, the Court of Appeal held he was entitled to reach, in its judgment of 19 October 2023). Richard Smith J was satisfied that Ms Stefanova had deliberately avoided providing information to buy herself time to extract the sums totalling around £250,000 from Dermamed referred to above.

46. It appears from Mr Johal’s first affidavit dated 12 December 2022 (which was not included in the bundle prepared by Mr Khawaja’s legal team but was available to me on CE File) that Ms Stefanova disclosed statements from her main personal account and from Dermamed’s account around a month before the third-party disclosure application against Barclays Bank on 7 December 2022. Paragraph 28 of that affidavit identifies the sums making up the total of over £250,000 paid out of Dermamed’s bank account for Ms Stefanova’s benefit, referred to above, which had been discovered from an analysis of the bank statements she had provided.

47. This obviously does not affect Richard Smith J’s findings of breaches of HHJ Parfitt’s order (which related to disclosure of different items), but it is relevant to what Ms Stefanova is likely to have anticipated might be about to happen on 7 December 2022, when she executed the Trust Deed. It no longer mattered whether Barclays Bank was ordered to disclose the statements for her main personal account and Dermamed’s account, since she had already provided them. She knew by 7 December 2022 that Mr Khawaja was now in a position to see that Dermamed had ceased trading and that she had spent a good deal of the cash previously in its account.

48. What Ms Stefanova had not disclosed by the time of the hearing on 7 December 2022 (as she accepted in her later affidavit of 22 December 2022) was Biotech’s bank statements. Mr Khawaja’s lawyers had, however, begun to ask questions about that company. Paragraph 22 of the Petition states that Mr Partovi had admitted in an email of 2 December 2022 that sums totalling £50,000 shown in the bank statements as payments from Ms Stefanova’s personal account in February and March 2022 were made to Biotech. As mentioned already, the application made on 7 December 2022 did not specifically identify Biotech’s account, presumably because Mr Khawaja was unaware of the existence of that account at the time the application notice was issued in September 2022. Nevertheless, the application sought disclosure of bank statements for all accounts to which Ms Stefanova was a signatory, which (as a matter of fact) included Biotech’s account at Barclays Bank.

49. That was how matters stood when the Trust Deed came to be executed. On the late evening of 6 December 2022 there was a series of text exchanges between Mr Partovi and Ms Stefanova. During those exchanges, Mr Partovi asked for the full name of Ms Stefanova’s daughter, the full address of the Property, the price for which it was purchased and the date of purchase, all of which Ms Stefanova provided or confirmed. By 23.29 he said he would “ sort everything out ”. I asked Ms Stefanova what she understood Mr Partovi to have meant by that phrase, but she said she could not remember. Mr Partovi’s texts continued by reminding Ms Stefanova to bring identification the next day. When she asked why, he said, “ to sign the trust deed ” and “ to be witnessed by a solicitor. ” He then sent attachments including the title certificates for the Property. The series of texts continued on the morning of 7 December 2022 by making arrangements to meet at court.

50. It is common ground that the Trust Deed was drafted by Mr Partovi. Two copies of the Trust Deed were executed, both of which were in evidence. Both are signed by Ms Stefanova and witnessed by Mr Michael Clarke, a solicitor at Mishcon de Reya LLP. Mr Clarke dated one of them 7 December 2022 and (despite earlier doubts) Mr Khawaja now accepts that the Trust Deed was executed on that date, although it is not known whether this occurred before or after Ms Stefanova attended the hearing before HHJ Gerald.

51. The recital to the Trust Deed records that Ms Stefanova “ owns the lease hold ” of the Property, which is identified by reference to the Land Registry certificates of title which Mr Partovi had attached to his texts the night before. Ms Stefanova is identified as the settlor and the beneficiary’s mother. The operative part of the Trust Deed provides that the settlor “ acknowledges that she holds all her interest ” in the Property “ including legal and beneficial interest in trust for the entire benefit of the beneficiary. ” There is no dispute that, subject to Mr Khawaja’s contentions that the Trust Deed is either a sham or that it should be set aside pursuant to section 423 , it was effective to declare a trust of the Property in favour of Ms Stefanova’s daughter absolutely. I will return to Mr Khawaja’s contentions below.

52. Events from 7 December 2022 onwards are relevant only in so far as they shed light on Ms Stefanova’s state of mind on that date, or otherwise relate to the application for a charging order. I will not, therefore, attempt to summarise everything which happened.

53. At the hearing on 7 December 2022, HHJ Gerald made an order that Barclays Bank provide disclosure of bank statements relating to the four identified accounts (including Ms Stefanova’s personal account and Dermamed’s account) and also of statements relating to all accounts to which Ms Stefanova was a signatory.

54. By coincidence, on 7 December 2022 the Central London County Court made an interim charging order over Ms Stefanova’s interest in the Property in respect of the costs of £14,510 which she had been ordered to pay Mr Khawaja by HHJ Parfitt on 16 September 2022. Although Mr Khawaja had applied for that order on 7 October 2022, it was common ground before me that Ms Stefanova would have been unaware of the application until she was served with the interim order. It cannot, therefore, have had any impact on her intentions when she executed the Trust Deed. Its relevance, however, is that, when Ms Stefanova subsequently made arrangements to pay the debt, she sent an email to Mr Johal on 13 January 2023 saying, “ Don’t forget to cancel the charge on my flat once you have received the funds… ”. Mr Roseman submits that this shows Ms Stefanova continued to regard the Property as hers, despite having executed the Trust Deed.

55. In the meantime, based on something Mr Partovi had told Mr Khawaja’s solicitors on 1 December 2022 about Ms Stefanova being about to purchase a house, Mr Khawaja applied to the High Court on a without notice basis for a freezing order. I understand there to be a dispute about what was said on that call and whether the freezing order was justified, but it is not necessary to resolve that dispute for present purposes. The substantive proceedings in support of which the freezing order was sought involved Mr Khawaja using his status as a shareholder of Dermamed to present the Petition in the High Court, to which Biotech is a Respondent, along with Ms Stefanova and Dermamed.

56. On 13 December 2022 Zacaroli J (as he then was) granted the freezing order. Paragraph 9 of that order required Ms Stefanova, in the usual way, to provide information within 48 hours of service of the order about all her assets in England and Wales exceeding £1,000. Paragraph 11 of the order required her to provide copies of bank statements for all accounts to which she was a signatory, including any account used by Biotech, for the period from 1 November 2022 onwards.

57. The return date hearing of the freezing order took place on 20 December 2022 before Meade J. Shortly before that hearing, Ms Stefanova provided an unsworn “affidavit” by her and another unsworn “affidavit” by Mr Partovi, neither of which provided the disclosure ordered. In his ruling, Meade J said that Ms Stefanova had “ … conspicuously, and I very strongly suspect deliberately, not complied with the disclosure order of Zacaroli J .” He nevertheless allowed more time for her to do so. I note that, in her unsworn affidavit, Ms Stefanova said, amongst other things, that Mr Khawaja was “ given access to ” the bank statements of Biotech on 7 December 2022. She had evidently appreciated that this was the effect of HHJ Gerald’s order of that date.

58. In an attempt to comply with Meade J’s order, Ms Stefanova produced an affidavit dated 22 December 2022. She included the Property in her list of assets but made no mention of the Trust Deed. She claimed in her evidence to me that this was what she had been advised to do.

59. On 1 February 2023 Mr Khawaja made the applications which led to Richard Smith J’s Contempt Judgment on 31 March 2023. He found Ms Stefanova guilty of 30 separate grounds of contempt of court and sentenced her to 8 months in prison, suspended for 18 months. He also ordered her to pay £57,000 in costs.

60. Ms Stefanova appealed Richard Smith J’s order, both in relation to sentence and in relation to costs. Since the costs were unpaid, Mr Khawaja applied for a third-party debt order (“TPDO”) to obtain payment out of the sums in her account with Barclays Bank. An interim TPDO was made on 23 April 2023 and the matter was listed for a further hearing on 22 May 2023. Shortly before that hearing, Ms Stefanova filed a witness statement, in paragraph 15 of which she said (amongst other matters) that she “ has other assets such as her apartment which [Mr Khawaja] could have sought to secure the cost order on by way of charging order pending the outcome of the Court of Appeal proceedings. ”

61. The hearing on 23 May 2023 was adjourned pending the outcome of the appeal. Once permission to appeal the costs order was refused by Newey LJ, the final hearing in relation to the TPDO came on before ICC Judge Mullen on 24 July 2023. Ms Stefanova was represented at that hearing by David Berkley KC. Amongst other arguments, he submitted that a final TPDO ought not to be made as a matter of discretion, in circumstances where Mr Khawaja could obtain a charging order over the Property instead. ICC Judge Mullen nevertheless made a final TPDO in respect of the costs plus interest, totalling £58,436.71. He also ordered Ms Stefanova to pay Mr Khawaja’s costs of the application for a TPDO, in the sum of £13,342.

62. The day after that hearing, 25 July 2023, Ms Stefanova signed an Appellant’s Notice seeking permission to appeal the TPDO supported by grounds of appeal drafted, and signed, by Mr Berkley KC. Ground 8 was that the judge had failed to have any or any sufficient regard to, amongst other things, “ the alternative remedy available to the Petitioner, of obtaining of a charging order over [Ms Stefanova’s] interest over her home… ”

63. Mr Roseman submits that Ms Stefanova’s conduct in connection with the TPDO was inconsistent with her genuinely intending that the Trust Deed should take effect. She had repeatedly urged the court, through her witness statement and through her counsel, to decline to make a TPDO on the basis that a charging order could be obtained over the Property instead. When asked about this, Ms Stefanova’s evidence to me was that what was said in her affidavit was an error. She denied having giving instructions to Mr Berkley KC to make the submissions he made, or to draft the grounds of appeal. I do not accept that evidence, which seems to me entirely implausible. It is unreal to suggest that Mr Berkley KC would have drafted grounds without obtaining Ms Stefanova’s approval, and the fact that she signed the Appellant’s Notice which attached them puts it beyond reasonable doubt that she did approve them. Nevertheless, it does not necessarily follow that Ms Stefanova did not intend the Trust Deed to take effect when she signed it. I will return to this below.

64. It is clear from the bank statements relating to Ms Stefanova’s personal account that, by the time the TPDO was made final, only just over £57,400 was left in the account. It was put to Ms Stefanova in cross-examination that she had stopped paying any other money into that account and must, therefore, have been using another account (for example, to pay Mr Berkley KC) which she had not disclosed. She replied that all payments were approved by solicitors acting for Mr Khawaja in accordance with the freezing order. This evidence was obviously unsatisfactory, because it sidestepped the question as to which other account was used.

65. On 11 October 2023 HHJ Baumgartner (sitting as a judge of the High Court) heard a number of applications relating to the Petition. In his judgment dated 13 October 2023 he dismissed the two applications made by Ms Stefanova as totally without merit. Amongst other matters, he ordered that Ms Stefanova be restrained from opening any more bank accounts and ordered to pay all money received from any commercial activity into Biotech’s account with Barclays Bank. This was in response to evidence that Ms Stefanova had opened three bank accounts subsequent to the freezing order and had failed to disclose bank statements in relation to them. Moreover, she had stated in her affidavit in March 2023 (responding to the contempt application) that the only bank accounts she had in addition to those at Barclays Bank were accounts at Santander Bank and Metro Bank. She omitted to mention an account in Biotech’s name with Revolut, into which nearly £18,000 had been paid and then spent at shops such as Argos, Ikea and Amazon. I understand that Ms Stefanova has an explanation for her failure to mention this account and the payments made, but it is not necessary to consider it for present purposes.

66. HHJ Baumgartner also referred, in paragraph 38(a) of his judgment, to evidence that Biotech’s bank account balance had decreased after 2022, suggesting Ms Stefanova must be using a different account. Further, in paragraph 40 he explained why Ms Stefanova’s evidence about the source of certain payments she had made did not add up, further suggesting that she must have been making payments from an undisclosed bank account.

67. Whilst the matters referred to in the preceding three paragraphs provide more evidence of dishonesty and further damage Ms Stefanova’s credibility, I do not consider it necessary to make any findings (in addition to those already made by HHJ Baumgartner) about whether Ms Stefanova is now using, or did in 2023 use, an undisclosed bank account. The evidence all relates to the period after 7 December 2022 and I do not derive much assistance from it in deciding whether she intended the Trust Deed to have effect.

68. Mr Roseman also drew my attention to paragraph 8 of HHJ Baumgartner’s judgment, in which he said, “ Following a non-party disclosure application against Barclays Bank, it emerged that Ms Stefanova had used significant amounts of Dermamed’s monies for her own purposes and had diverted the entirety of Dermamed’s business to the Second Respondent Biotech. ” My reading of this part of HHJ Baumgarten’s judgment is that it is intended as a summary of Mr Khawaja’s case. I do not think he intended it as a conclusive finding that Dermamed’s business had been diverted to Biotech, which is a matter to be determined at the final hearing of the Petition.

69. I note that in HHJ Baumgartner’s order of 20 October 2023 he ordered Ms Stefanova to pay Mr Khawaja’s costs on the indemnity basis and ordered a payment on account of £30,000. He also ordered her, amongst other things, to serve an affidavit setting out various information, including a list of her assets.

70. Ms Stefanova’s appeal against Richard Smith J’s committal order was dismissed on 19 October 2023. The Court of Appeal ordered Ms Stefanova to pay 75% of Mr Khwaja’s costs of the appeal in the sum of £18,000.

71. On 20 October 2023 Richard Smith J dismissed Ms Stefanova’s application to stay enforcement of the final TPDO. He ordered that she should pay Mr Khawaja’s costs, summarily assessed in the sum of £7,000 (including VAT).

72. On 6 November 2023 Mr Khawaja issued the application for a charging order over the Property which is now before me. At that stage the application was based on the costs ordered to be paid on 29 March 2023 (Richard Smith J, less the sum realised by enforcement of the TPDO), 21 July 2023 (ICC Judge Mullen), 19 October 2023 (Court of Appeal), 20 October 2023 (HHJ Baumgartner) and 20 October 2023 (Richard Smith J). ICC Judge Mullen made the interim charging order the same day and ordered a further hearing on 17 January 2024.

73. Ms Stefanova’s affidavit served pursuant to HHJ Baumgartner’s order was dated 7 November 2023. In paragraph 149 she listed her assets and, in relation to the Property, she said “ … it has to be noted she has put this apartment in to an irrevocable Trust and holding its benefit under trust for her 11-year old daughter Victoria. The Trust was executed as a deed on the 07 December 2022. ” This appears to be the first time Ms Stefanova disclosed the existence of the Trust Deed to Mr Khawaja. I note that this occurred in an affidavit dated the day after the interim charging order had been made, but I understand the order may not have been served on her at that stage. I will, therefore, assume she disclosed the existence of the Trust Deed before she knew of the charging order.

74. Nevertheless, in paragraph 3 of a “ Statement of Case ” dated 11 January 2024 responding to the application for a charging order, Ms Stefanova relied on the Trust Deed as a ground of opposition to the order. On 17 January 2024 ICC Judge Barber continued the interim charging order and adjourned the application for a longer hearing on the first available date after 29 January 2024. That hearing took place on 5 February 2025 before Deputy ICC Judge Frith, when (the unchallenged evidence of Mr Johal is that) Mr Berkley KC argued against the order being made final by reason of the Trust Deed, despite the outstanding appeal of the TPDO on the ground (amongst others) that Mr Khawaja could apply for a charging order on the Property instead. The hearing was again adjourned and on 21 June 2024 ICC Judge Barber ordered that it should be listed before a High Court Judge, which is how the matter ultimately came before me.

75. On 18 July 2024 Ms Penelope Reed KC (sitting as a Deputy High Court Judge) dismissed Mr Khawaja’s application for summary judgment on the issue of whether he has suffered unfair prejudice for the purposes of section 994 of the Companies Act 2006 . I have already referred to Ms Reed’s conclusion that Ms Stefanova has no realistic prospect of defending the claim that she is in breach of duty in taking sums from Dermamed. For the reasons I have given, I do not consider that Ms Reed KC made a final determination on that matter, or that it is necessary or appropriate for me to do so. I note that Ms Reed KC also expressed a view in paragraph 35 of her judgment concerning the allegation that Ms Stefanova has diverted Dermamed’s business to Biotech. She said, “ while I was taken to an analysis of bank statements which lends support to this having happened and appreciate that HHJ Baumgartner was persuaded that there was a strong case, I do not consider that I have seen enough evidence or am in a position to come to a conclusion that Ms Stefanova has no realistic prospects of success on this issue without conducting a mini-trial. ” I will return to this below.

76. I note for completeness that on 16 May 2025 Mr Simon Gleeson (sitting as a Deputy High Court Judge) granted an Extended Civil Restraint Order against Ms Stefanova on the basis that she had made, including the application dismissed by him, 11 totally without merit or misconceived applications. Mr Roseman understandably drew my attention to this decision, but I do not consider it helps me to decide what Ms Stefanova’s intention was when she executed the Trust Deed. iii) The Law Sham Transactions

77. As Birss J (as he then was) pointed out in JSC Mezhdunarodniy v Pugachev [2017] EWHC (Ch) 2426 , at [145], there is no such thing as a “ sham trust ”: it is the document purporting to create the trust which may or may not be a sham. The essence of a sham is that the parties subjectively intended to create rights and obligations different from those appearing from the relevant document and, in addition, they must have intended to give a false impression of those rights and obligations to third parties (as Birss J said at [147] by reference to Hitch v Stone (Inspector of Taxes) [2001] EWCA Civ 63 , [2001] STC 214 ).

78. Mr Roseman based his submission that the Trust Deed is a sham principally on the similarities between this case and Midland Bank plc v Wyatt [1997] 1 BCLC 242 . In that case, the claimant bank obtained a judgment against Mr Wyatt on 26 July 1991 and thereafter sought to enforce it by way of a charging order in respect of the family home, Honer House, which had been acquired jointly by Mr Wyatt and his wife. In opposition to the making of a final charging order Mr Wyatt deployed a declaration of trust executed in June 1987 pursuant to which he had purported to divest himself of his interest in Honer House in favour of his wife and two daughters, his daughters being 11 and 17 at the time of the declaration.

79. Mr Wyatt’s evidence was that he had been professionally advised to enter into a trust arrangement with his wife, giving his equity in the property to her and his daughters. He said the reasons for this were to formalise his intention to endow his children at what was considered the “ right ” age and to safeguard the family from long-term commercial risk if he set up his own company, which he was then contemplating. Nevertheless, once the trust document had been executed, he stored it in the family safe at home. Thereafter Mr Wyatt held himself out to the claimant bank as continuing to enjoy a beneficial interest in Honer House. The property was already security for borrowing from the bank and Mr Wyatt obtained further loans from the bank, for which he offered Honer House as security, without mentioning the trust. Later, following a separation from his wife, he also sought to agree with her an equal split of the proceeds of sale of Honer House, without telling his solicitor about the declaration of trust.

80. David Young QC (sitting as a deputy High Court Judge) held as follows: “…subsequent to the execution of the trust deed, nothing had changed in Mr Wyatt’s behaviour or attitude with regards to his dealings involving Honer House. I do not believe Mr Wyatt had any intention, when he executed the trust deed, of endowing his children with his interest in Honer House, which at the time was his only real asset. I consider the trust deed was executed by him, not to be acted upon but to be put in the safe for a rainy day. As Mr Wyatt states in his affidavit, it was to be used as a safeguard to protect his family from long-term commercial risk, should he set up his own company. As such, I consider the declaration of trust was not what it purported to be but a pretence, or as it is sometimes referred to, a ‘sham’. The fact that Mr Wyatt executed the deed with the benefit of legal advice … does not, in my view, affect the status of the transaction. It follows that, even if the deed was entered into without any dishonest or fraudulent motive, but was entered into on the basis of mistaken advice, in my judgment such a transaction will still be void and therefore an unenforceable transaction if it was not intended to be acted upon but was entered into for some different or ulterior motive. Accordingly, I find that the declaration of trust sought to be relied upon by Mr Wyatt is void and unenforceable. ”

81. The case has subsequently been the subject of some debate, including in the Pugachev case referred to above, because the Judge held that it did not matter that Mr Wyatt’s wife, who signed the trust documentation, gave no thought to the content or effect of the document, so that she did not share any “ shamming ” intention. The judge said that the document was still a sham if one of the parties went along with the “ shammer ” not knowing or caring about what she was signing. As Birss J explains in Pugachev at [150], it has subsequently been made clear that the settlor and trustee must have a common intention, although reckless indifference is enough to qualify as intention. The judge’s findings in the Wyatt case have been interpreted as reckless indifference.

82. These clarifications of the judgment in the Wyatt case do not affect the analysis in the case before me, because the settlor and trustee in relation to the Trust Deed are the same person, Ms Stefanova. Nevertheless, I bear in mind the guidance in the Pugachev case, and in particular that “ A finding of sham requires careful analysis of the facts. External evidence is relevant. The fact that an arrangement is artificial is not the same as saying it is a sham. The fact that parties subsequently depart from an agreement does not necessarily mean they never intended the agreement to be effective. ”

83. Ms Stefanova relied on National Westminster Bank v Jones [2001] 1 BCLC 98 , in which the defendant husband and wife owned a house and land, on which they ran a farming business. In order to protect the farm’s assets from the bank, to which they had granted a mortgage of the land, they sold the farming assets to a company and granted it a 20-year agricultural tenancy at full market rent. No rent was, however, ever paid by the company and the defendants had taken no steps to enforce their rights as landlords. It was, therefore, argued that the tenancy and the sale agreements were highly artificial and a pretence. However, Neuberger J (as he then was) held that the defendants’ intention was genuinely to enter into the agreements, part of the purpose of which was to improve their position as against the bank. There were plausible reasons for the non-payment of the rent, which were that the business had been less profitable than expected and the bank had commenced proceedings and obtained an injunction.

84. Neuberger J said at [68] that “ Both principle and the authorities indicate that the court is slow to find that an agreement is a sham, and that, before the court can reach such a conclusion, it must be satisfied that the purported agreement is no more than a piece of paper which the parties have signed with no intention of it having any effect, save that of deceiving a third party and/or the court into believing that the purported agreement is genuine. ” That test had not been satisfied. Section 423

85. Section 423 of the Insolvency Act 1986 provides, so far as material: “ Transactions defrauding creditors. (1) This section relates to transactions entered into at an undervalue; and a person enters into such a transaction with another person if: (a) he makes a gift to the other person or he otherwise enters into a transaction with the other on terms that provide for him to receive no consideration; … (2) Where a person has entered into such a transaction, the court may, if satisfied under the next subsection, make such order as it thinks fit for: (a) restoring the position to what it would have been if the transaction had not been entered into, and (b) protecting the interests of persons who are victims of the transaction. (3) In the case of a person entering into such a transaction, an order shall only be made if the court is satisfied that it was entered into by him for the purpose: (a) of putting assets beyond the reach of a person who is making, or may at some time make, a claim against him, or (b) of otherwise prejudicing the interests of such a person in relation to the claim which he is making or may make.”

86. Section 436(1) defines a “ transaction ” as including a “ gift, agreement or arrangement ”. The settlement of property into trust is a “ transaction ” (see Kazakhstan Kagazy plc v Zhunus [2021] EWHC 3462 (Ch) at [222]). There can be no dispute in the case before me that the Trust Deed was a transaction at an undervalue, since Victoria provided no consideration.

87. Section 424 of the Insolvency Act 1986 identifies who may apply for an order under section 423 , which includes “ a victim of the transaction ”. Butcher J pointed out in Gordian Holdings Limited v Sofroniou [2021] EWHC 235 (Comm) at [16] that the concept of a “ victim ” is a deliberately wide one. It extends beyond creditors with present or actual debts. Whether a person is a victim turns on actual or potential prejudice suffered.

88. In JSC BTA Bank v Ablyazov [2018] EWCA Civ 1176 the Court of Appeal considered what an applicant has to prove in order to establish the relevant purpose under section 423(3) . Despite the title to the section, there is no requirement to prove “fraud.” At [13] Leggatt LJ (as he then was) referred to authority establishing that, where the transaction was entered into by the debtor for more than one purpose, the court does not have to be satisfied that the prohibited purpose was the dominant purpose, let alone the sole purpose, of the transaction. At [14] he said, “ it is sufficient simply to ask whether the transaction was entered into by the debtor for the prohibited purpose. If it was, then the transaction falls within ” section 423(3) , even if it was also entered into for one or more other purposes. The test is not more complicated than that.

89. By way of illustration of this principle, at [9] Leggatt LJ had summarised the facts of Inland Revenue Commissioners v Hashmi [2002] EWCA Civ 981 , [2002] 2 BCLC 489 . That summary included the following: “ The judge accepted evidence that the defendant was a caring father who wanted to secure his son’s future and that this was a purpose of transferring the ownership of the property to him. But the judge also found that the defendant transferred the property when he did “because he could not be sure, given the inherently risky way in which his taxation affairs were conducted, that he would be able to make the provision at a later date”, and that in these circumstances the transaction was also entered into for the prohibited purpose. ”

90. The Court of Appeal in the Hashmi case upheld the Judge’s decision. I note that National Westminster Bank v Jones , to which Ms Stefanova referred, is another example of a case in which the court held that documents entered into in order protect assets against enforcement by a creditor were not shams, but were nevertheless entered into for the purpose prohibited by section 423 . Indeed, the defendants in that case conceded that the tenancy and sale agreements had been entered into for that purpose, and the argument was solely about whether they involved transactions at an undervalue. Despite having sympathy for the defendants, Neuberger J set the tenancy and sale agreements aside pursuant to section 423(2) . Conclusion on the Law

91. This consideration of the legal principles highlights that the outcome of the hearing before me turns almost entirely on a single issue, which is what Ms Stefanova subjectively intended to achieve by executing the Trust Deed.

92. If Ms Stefanova did not intend the Trust Deed to create an effective trust in favour of her daughter, but instead intended only to produce it at a later stage to defeat enforcement of a judgment, by way of a charging order or otherwise, then it will be void as a sham. If she did intend to create an effective trust in favour of her daughter, but nevertheless executed the Trust Deed, at least in part, for the purpose of putting the Property beyond the reach of Mr Khawaja, then it will be a transaction falling with section 423 . If she intended to create an effective trust without any intention to avoid liability to Mr Khawaja (or anyone else), then the Trust Deed cannot be challenged and is available as a ground for resisting the charging order being made final. iv) Findings as to Ms Stefanova’s Subjective Intention

93. In her witness statement and her submissions Ms Stefanova says the Trust Deed was executed as part of an ongoing process of succession planning about which she had been receiving advice from various sources. She points out that, on 7 December 2022, the Petition had not been issued, no freezing order had been granted and she had not been found to be in contempt. No award of damages had been made in the County Court proceedings. She was solvent and had substantial liquid funds available, so that she had no reason to think there was any need to put assets out of the reach of Mr Khawaja.

94. Mr Roseman says that Ms Stefanova is “ fundamentally dishonest. ” By 7 December 2022 she had lost the County Court proceedings. She had misappropriated a substantial sum from Dermamed and diverted its business to Biotech. She had failed to provide disclosure which would reveal these matters and had made Mr Khawaja a shareholder with a view to avoiding disclosure. Mr Roseman says it was inevitable that Ms Stefanova would have to pay Mr Khawaja’s costs and 50% of Dermamed’s profits, which would include 50% of Biotech’s profits, since Dermamed’s business had been diverted to it. It is, he says, “ almost laughable ” that the reason Ms Stefanova was in central London when she executed the Trust Document was that she was attending a hearing to oppose an order which would result in disclosure of her financial position and that of Dermamed and Biotech. Thereafter, she led Mr Khawaja and the court to believe that the Trust Deed did not exist, until she deployed it in opposition to the charging order application.

95. In the circumstances of this case, I think it is helpful to consider these rival contentions by reference to the following four questions: i) On 7 December 2022, did Ms Stefanova believe she was at risk of a personal liability which she would be unable to meet from her cash resources? ii) Is there a good explanation for the execution of the Trust Deed which does not involve preventing enforcement against the Property? iii) What inferences can be drawn from the timing of the Trust Deed and the circumstances surrounding its execution? iv) What inferences can be drawn from the subsequent events? On 7 December 2022, did Ms Stefanova believe she was at risk of a personal liability which she would be unable to meet from her cash resources?

96. In my judgment, the principal emotion which has driven Ms Stefanova’s conduct since HHJ Gerald gave judgment against her in October 2021, or perhaps even before that, has been an overwhelming sense of injustice. As sometimes happens in litigation, she believes HHJ Gerald’s decision was wrong and is unable to accept it. She plainly feels that she created Dermamed’s business, she laboured long and hard to make a success of it, Mr Khawaja contributed very little to it, and the profits of that business are rightfully hers. She has, therefore, done everything she can think of to prevent Mr Khawaja sharing any of those profits. I stress that this is a finding about Ms Stefanova’s motivation. Whether her actions amount to breaches of duty is a question for another day.

97. For the reasons I have given, I do not accept that Ms Stefanova was so traumatised by the litigation that she was unable to deal with the MHRA email saying that Dermamed’s registration had been suspended. That was simply a convenient excuse to cease trading through that company, which she did in May 2022. I doubt whether Ms Stefanova’s thinking at that stage was particularly sophisticated. She simply thought that if Dermamed was not making any money, there would be no future profits for Mr Khawaja to share. That, then, raises two questions: first, did Ms Stefanova think by 7 December 2022 that she might have a liability to Mr Khawaja in respect of the profits Dermamed had made prior to May 2022? And second, did she think by that date that she might also have a liability to him in relation to the business she was then running through Biotech?

98. So far as the profits Dermamed had made in the past are concerned, as I have already said, it is not necessary or appropriate for me to decide whether the payments totalling around £250,000 which she made for her benefit from Dermamed’s account during the first half of 2022 amounted to breaches of her duties to Dermamed. What matters for the purpose of ascertaining her intention on 7 December 2022 is whether she believed there was a risk that she would be ordered to make a substantial payment to Mr Khawaja.

99. Even if Ms Stefanova honestly believed that she was entitled to make the relevant payments for her benefit (as to which I make no finding), she nevertheless knew that Mr Khawaja’s case was that he was entitled to half the profits made by Dermamed from April 2018 onwards. Ms Stefanova knew that she had relatively recently used around £116,000 of Dermamed’s money to cover legal fees relating to the claim brought by Mr Khawaja, just under £68,000 to purchase a Mercedes and £60,000 towards her pension. It was not difficult for her to work out that, once he found out about these payments, Mr Khawaja would, at the very least, be claiming half of them, amounting to around £122,000.

100. It seems that, as a result of HHJ Gerald’s comments at the hearing on 13 May 2022 about the two “ options ”, Ms Stefanova may for a while have believed that she could bring the proceedings to an end simply by making Mr Khawaja a shareholder and offering to appoint him as a director, and that there would be no further liability, other than costs. I do not need to decide whether she really thought that would work in circumstances where she was already in the process of bringing Dermamed’s business to an end and spending the money in its bank account. It is unnecessary to decide that because Ms Stefanova certainly knew by the end of the hearing on 8 July 2022 that her attempt to bring the proceedings to an end in that way had failed. HHJ Gerald explained at the hearing that if the company had been asset-stripped, an award of damages would be likely to be made. I consider it likely that that message was conveyed to Ms Stefanova and that she understood it.

101. That message was then reinforced by the letter of 10 October 2022 from Mr Khawaja’s solicitors, which made clear that he was seeking 50% of all sums she had received from Dermamed since 1 April 2018, less an allowance for salary. Although Ms Stefanova’s letter of 4 November 2022 is principally concerned with her liability for costs, it demonstrates that she recognised that she had lost the trial and understood that disclosure was being sought with a view to determining what liability she might have. Even at that stage, however, she resisted providing disclosure of her and Dermamed’s bank statements until she could avoid it no longer. I consider it is to be inferred that she resisted for so long because she realised that, once Mr Khawaja had that information, there was a real risk that she would be ordered to pay him a substantial sum of money.

102. Before 7 December 2022, however, she provided the bank statements. Accordingly, I consider it is likely that Ms Stefanova believed by 7 December 2022 that there was an imminent and real risk that Mr Khawaja would obtain an order for payment of a substantial sum (meaning at least £122,000 and possibly considerably more) from her in respect of the profits made by Dermamed since April 2018. She is likely to have thought that such an order might be made reasonably soon. She did not, at that stage, anticipate the High Court proceedings and the subsequent protracted litigation.

103. So far as Biotech is concerned, Mr Roseman urged me to make a finding that Dermamed’s business was diverted to Biotech. Whilst I have been shown some bank statements from what I understand to be the principal accounts of the two companies, and have had the benefit of some oral evidence from Ms Stefanova, I do not consider that I am in a significantly better position to make a finding about this than was Ms Reed KC. Although Ms Stefanova admits that Biotech was dealing with some of the same suppliers and customers as Dermamed, she says this is less than 20% of Dermamed’s former clients. I have no way of determining whether this is correct. Moreover, I do not appear to have a complete set of bank statements from all the relevant accounts and I have no documentary evidence showing whether the same products were being bought and sold by both companies. Nor do I have any other financial information or analysis from experts. Whether Dermamed’s business was diverted to Biotech will be a key issue at the final hearing of the Petition, when further and better evidence will be available. In those circumstances, it would be inappropriate for me to make any findings about that issue now.

104. Moreover, whether there has, in fact, been a diversion of business does not seem to me to be the right question for the purpose of determining Ms Stefanova’s intention. The question is whether, when she signed the Trust Deed, Ms Stefanova believed she was at risk of a personal liability in connection with the business she was conducting through Biotech.

105. In my judgment, it is more likely than not that she did have such a belief. That can be inferred from the way in which Ms Stefanova strove to conceal the business she was carrying on through Biotech. So far as I can tell from the material I have seen, Mr Khawaja first became aware of Biotech, and the possibility that Ms Stefanova was trading through it rather than Dermamed, as a result of Ms Stefanova providing her personal bank statements, and some of Dermamed’s statements, in advance of the hearing on 7 December 2022. Mr Khawaja’s solicitors were asking questions about Biotech at around that time. It is now common ground that Biotech had, by that stage, been trading for around ten months. During that time, Ms Stefanova had provided no information about it to Mr Khawaja.

106. It is more likely than not that Ms Stefanova only produced the statements from her personal account and Dermamed’s account when she did because she appreciated that an order was likely to be made on 7 December 2022 for Barclays Bank to disclose them. Even then, she did not disclose Biotech’s statements. As I understand it, it was Barclays Bank which ultimately disclosed Biotech’s statements pursuant to the order at some time in early 2023. If Ms Stefanova had considered that there was no risk that Mr Khawaja might be able to make a claim to a share of the profits of Biotech, she would, at the very least, have produced its bank statements along with her own and Dermamed’s, before 7 December 2022.

107. I do not think it is likely that Ms Stefanova understood the legal basis on which a claim might be made in relation to Biotech, or precisely what the amount of any liability might be. But she knew that Mr Khawaja was claiming 50% of the profits of Dermamed, and I consider it is likely that by 7 December 2022 she believed there was a real risk that Mr Khawaja would make a claim against her for 50% of the profits generated by Biotech (or at least to any part of those profits which could lawfully be paid to her by way of dividends). Paragraph 14 of her witness statement for the hearing before me confirms that Biotech had over £235,000 in its bank account on 7 December 2022 which she says was all available to be paid to her as dividends. She is therefore likely to have anticipated that Mr Khawaja might claim at least 50% of that sum, being £117,500.

108. I do not consider it likely that Ms Stefanova believed she would successfully be able to resist HHJ Gerald making the third-party disclosure order against Barclays Bank. As I have already explained, the unsworn “affidavit” she subsequently produced in December 2022 demonstrates that Ms Stefanova understood that Barclays Bank would be obliged to disclose Biotech’s bank statements pursuant to the order of 7 December 2022. It is therefore likely that Ms Stefanova believed, even before the hearing on 7 December 2022, that Mr Khawaja was likely to obtain the information from Barclays Bank reasonably soon which would enable him to seek an order for payment of a substantial sum from her in respect of Biotech’s profits.

109. In addition to potential liability for profits generated by Dermamed and Biotech, it is in my view clear that Ms Stefanova understood that she would be liable for Mr Khawaja’s costs. Her concern about that liability is apparent from her letter of 4 November 2022. As she says in that letter, she had spent over £110,000 of Dermamed’s money on legal fees and she was present at the hearing on 8 July 2022 when Mr Roseman said that Mr Khawaja’s costs were “ knocking on the door of £100,000. ” So she must have anticipated a liability for at least that amount, and she expressed concern in the letter that the amount would be likely to increase.

110. For these reasons, Ms Stefanova’s claim that she did not have any creditors on 7 December 2022 apart from her mortgage lender and her credit card provider goes nowhere. Section 423 applies where a person “ is making, or may at some time make ” a claim. Ms Stefanova knew that Mr Khawaja was making a claim, or at the very least that he may at some time do so. Moreover, she knew that he now had, or would soon obtain (from Barclays Bank), the statements which might enable him, for the first time, to assert claims to particular sums of money.

111. She is also likely to have anticipated that his claim would be for at least £122,000 (Dermamed), £117,500 (Biotech) and £100,000 (costs), totalling £339,000. For the avoidance of doubt, these figures are not intended in any way as an indication of the sums Mr Khawaja might be entitled to, about which I make no findings; he may end up entitled to more or to less. They are intended only as a rough indication of the amount which I consider Ms Stefanova is likely to have anticipated (on 7 December 2022) that Mr Khawaja might claim from her, and for which there was a real risk she might be liable.

112. Ms Stefanova says that, on 7 December 2022, she had access to over £540,000. This included £156,836 in her personal account and £235,919 in Biotech’s account, on which she said she could draw in full. She also says she had a personal overdraft of £5,000, a further overdraft of £62,130 on her Mortgage Current Account, around £5,000 in Dermamed’s business account, an available limit on her credit card of over £10,000, a Mercedes worth £65,000, and Biotech’s stock inventory which was worth £40,000. Even allowing for errors in valuation of the Mercedes and the stock, that all adds up to more than my conservative estimate of the sum Ms Stefanova is likely to have anticipated Mr Khawaja claiming in the preceding paragraph.

113. Nevertheless, it does not follow that Ms Stefanova is unlikely to have been concerned about Mr Khawaja’s claim on 7 December 2022. She is likely to have appreciated that there were numerous contingencies which could result in her being unable to pay Mr Khawaja’s claim in full. His claim could end up being for a greater sum, possibly substantially greater. The sums available in her account, and in Biotech’s, could be reduced for other reasons. At the very least, she needed to continue paying her mortgage and covering her living expenses. She might not lawfully have been able to take all of Biotech’s cash as a dividend; presumably Biotech had creditors and ongoing liabilities. The Mercedes and the stock might have been worth less than she thought, they would have taken time to sell, and Biotech would be likely to the need to buy further stock in order to continue in business. In any event, it does not follow from the fact that someone might theoretically be able to scrape together enough cash to meet a potential claim that they would have no concern about the possibility of a substantial judgment being enforced against a property they own, especially if that property happens to be their home.

114. Ultimately, Ms Stefanova’s letter of 4 November 2022 reveals her true state of mind and undermines her evidence that she did not owe any money at this time and had plenty of money to meet any potential liability. She said in the letter that to have continued to instruct solicitors would bankrupt her. Possibly that was an exaggeration to engage the court’s sympathy (although she did not say so in her evidence to me), but I consider that it is more likely than not that, on 7 December 2022, Ms Stefanova was seriously concerned that she would, in the near future, end up owing more to Mr Khawaja than she would be able to pay from her cash resources. Is there a good explanation for the execution of the Trust Deed which does not involve preventing enforcement against the Property?

115. In paragraph 12 of her witness statement for the hearing before me, Ms Stefanova said (reproducing the typographical errors in the original): “ It is impostant to note that the beneficiary is Ms Stefanova’s only biological daughter “Victoria” whom is a minor and at time of this witness statement is 12 years old. Victoria is Ms Stefanovas only child and immediate family. Ms Stefanova’s mother and father have both passed away from cancer, she has a brother who is unmarried and is older than her with whom she has limited communication. Ms Stefanova turned 50 years of age in January 2022 and was advised by friends, accountant and financial advisor to consider putting her property … into a trust deed in the name of Victoria considering her age. Victoria is Ms Stefanova’s sole daughter and sole inheritor. ”

116. In a further witness statement served shortly before the hearing, Ms Stefanova said that she had instructed Mr Richard Toothill, a professional estate and family succession planner, to draft her will, in which she left everything to her daughter. She claimed that Mr Toothill told her to put the Property into a trust in Victoria’s name, but that he could not draft the trust without “ proper legal advice. ” She understood the purpose of the trust to be to bypass the probate process and save on taxes. Ms Stefanova exhibited a copy of the will, dated 16 July 2021, and some communications with Mr Toothill about the will in March and May 2021. These do not, however, refer to any advice about creating a trust. When asked about that in cross-examination, she said that she never imagined she would have to provide evidence about that advice. It was suggested to her that she might have asked Mr Toothill for something in writing to confirm to the court the advice he had given. She said that she had emailed him, but the email bounced back, and that she had tried to call him, but the telephone number was no longer valid.

117. In the same witness statement Ms Stefanova said that she had also been advised to put the Property into a trust by her financial advisor, Mr Phil Weddle, when he advised her to set up a legacy preservation trust in 2021. She exhibited a copy of the legacy preservation trust documentation which she signed on 24 April 2023 and which nominates Victoria as the default beneficiary under a trust of any sum payable by Ms Stefanova’s pension trustees in the event of her death. She also exhibited an email from Mr Weddle dated 30 May 2025, in which he explains that “ we were introduced by your accountant in 2021 and I have been your financial advisor since then, advising on your pension, investment and protection needs… ” Again, there is no mention of advice concerning a trust of the Property.

118. Ms Stefanova also exhibited letters dated 1 June 2025 from the two executors named in her will. The first is from a General Practitioner, who asserts that the Trust Deed is a genuine transfer made as part of Ms Stefanova’s estate planning. The second is from Victoria’s godfather, who says that he had discussions with Ms Stefanova in early 2021, when she said that she was going to put the Property in trust for Victoria. Neither of these individuals was called to give evidence.

119. In her oral evidence, Ms Stefanova said she had also been encouraged by friends to set up a trust of the Property in favour of Victoria and claimed that the friends were happy to provide a witness statement.

120. After she had concluded her evidence, in the course of her closing submissions, Ms Stefanova gave a further explanation, to the effect that her parents had sold a property in Bulgaria to provide her with money towards the purchase of the Property. She viewed it as her inheritance which she wanted to pass on to her daughter. When I asked why the will was not sufficient for that purpose, she said that she was worried that her estate would be liable for 50% tax and also that, if she died, her ex-husband would somehow sell the Property and keep the money for himself. She told me the same could not happen once the trust was in place, because the Trust Deed had been registered at the Land Registry. When Mr Roseman pointed out that there was nothing on the title register when it had last been checked, Ms Stefanova said that an application had been made. I was not shown any documentary evidence to support that assertion.

121. Quite apart from the point that none of the matters referred to in the preceding paragraph strictly formed part of Ms Stefanova’s evidence, I do not accept any of her increasingly implausible explanations. Given that an effect of the Trust Deed is that, when Victoria turns eighteen, she would be entitled to require Ms Stefanova to transfer the legal title to the Property to her and, thereafter, to do what she wanted with the Property, I consider it unlikely that Ms Stefanova would have been advised to enter into it. If she had received advice about such a trust, it is likely that a competent advisor would have put that advice in writing. If Mr Toothill had given such advice, I see no reason why he could not also have drafted the trust documentation, even if he considered that Ms Stefanova should obtain a second opinion. I think it most unlikely that a financial advisor dealing with Ms Stefanova’s pension would have suggested a trust of the Property, and if he had, I think it is likely that he would expressly have mentioned it in his letter, which Ms Stefanova exhibited. Letters from individuals named as executors who cannot be regarded as impartial and have not given evidence, written years after the events on which they comment, do not carry any weight.

122. The reality is that there is not a single document dated prior to 7 December 2022 which supports the suggestion that Ms Stefanova had considered (let alone been advised) to execute a trust of the Property. It is far more likely that the idea of a trust was first suggested to her by Mr Partovi shortly before it was executed, for reasons I will come to.

123. For all these reasons, I find that Ms Stefanova’s evidence that the Trust Deed represented the culmination of a lengthy period of estate planning is untrue.

124. On the other hand, I do accept that Ms Stefanova’s desire to do the best for her daughter is genuine and that she would much prefer to give the Property to Victoria than to allow Mr Khawaja to obtain a charging order over it. What inferences can be drawn from the timing of the Trust Deed and the circumstances surrounding its execution?

125. Ms Stefanova told me that the Trust Deed was executed on 7 December 2022 because she and Mr Partovi were going to London for the hearing before HHJ Gerald and it was convenient to have it witnessed at the same time. In my judgment, there was a greater connection than that between the timing of the execution of the Trust Deed and the hearing.

126. I have already explained why I consider that Ms Stefanova was, by early December 2022, very concerned that an order might be made in the near future requiring her to pay substantial sums to Mr Khawaja. She is right to say that the Petition had not yet been issued and she did not know that Mr Khawaja might obtain an injunction within a week or two. But she did know that she had recently given him the bank statements which would allow him to see what had happened with Dermamed for the first time, and that Barclays Bank would soon be disclosing Biotech’s banks statements.

127. It is in that context that Mr Partovi’s messages on 6 December 2022 asking for the details to be included in the draft of the Trust Deed and saying “ I will sort everything out ” must be read. Mr Partovi had legal knowledge and was able to prepare the Trust Deed, apparently at some speed. He knew how to go about having it witnessed by a solicitor and that identification documents would be required. He claims to have experience of litigation which, I infer, is likely to include the process of enforcement. I infer that it is likely that he had warned Ms Stefanova of the risk that, if Mr Khawaja obtained a money judgment, he could enforce it by means of a charging order, or perhaps by a bankruptcy petition, and that he had suggested that the Trust Deed would prevent the property being available to creditors. I also consider it likely that he and Ms Stefanova realised that it would be better to execute the Trust Deed before Mr Khawaja applied for an order for payment, or at least before he obtained one. Even if they did not think that Mr Khawaja would apply for such an order at the hearing on 7 December 2022, I consider it likely that they thought he would apply for one soon afterwards, once Barclays Bank had disclosed the Biotech statements. That explains the urgency surrounding the preparation of the Trust Deed late in the evening of 6 December 2022 and is why Mr Partovi said he would “ sort everything out ”. What inferences can be drawn from the subsequent events?

128. I do not consider that much can be gleaned from Ms Stefanova’s email to Mr Johal on 13 January 2023 reminding him to cancel the charging order over “ my flat. ” It would not be natural (at least for a non-lawyer) to refer in an email of that kind to “ the flat I hold on trust for my daughter. ” Ms Stefanova lived in the flat and it was natural to call it “ my flat ”, whether or not she intended the Trust Deed to be effective.

129. The fact that Ms Stefanova listed the Property as hers in her affidavit responding to the freezing order, without referring to the Trust Deed, carries more weight. Ultimately, however, I do not consider it possible to infer from this that Ms Stefanova did not intend the Trust Deed to be effective. She was under pressure to prepare an affidavit at short notice, just before Christmas, whilst dealing with the stress arising from having her assets frozen. In those circumstances, even though the Trust Deed had only been executed a couple of weeks earlier, I do not think it can be said to be likely that, if she had thought it was effective, she would have said something about it in this affidavit. The fact that she omitted to mention it is simply neutral.

130. The final series of subsequent events relied on by Mr Roseman involves the evidence, submissions and grounds of appeal in connection with the TPDO, to the effect that Mr Khawaja could have proceeded by way of charging order against the Property instead. Given that the Trust Deed was subsequently produced, possibly even before she knew about the application for a charging order, I do not think it likely that Ms Stefanova had forgotten about it when the relevant statements were made. So, the difficulty for Ms Stefanova is that, if she intended the Trust Deed to be effective, then the argument that Mr Khawaja could have applied for a charging order was (at the very least) disingenuous. She was asking the court to act on the basis that she was the beneficial owner of the Property, whilst believing that the beneficial owner was actually her daughter.

131. The court is accordingly faced with two possibilities, both of which involve Ms Stefanova acting discreditably. Either she did not intend the Trust Deed to take effect but executed it as a sham in the hope of defeating an application for enforcement against the Property, or she did intend it to take effect, but then sought to mislead the court about the availability of a charging order.

132. I have given this careful consideration. Ultimately, I do not think Ms Stefanova’s true intentions can be determined by what she has told the court in the past. I consider that she frequently tells the court whatever she thinks might lead to a decision in her favour at the hearing in question. It follows that, on balance, I do not consider that Ms Stefanova’s previous contention that Mr Khawaja could have proceeded by way of charging order against the Property demonstrates that she did not intend the Trust Deed to be effective.

133. In my view, the more likely alternative is that Ms Stefanova did intend the Trust Deed to be effective, because she wanted to prevent Mr Khawaja being able to enforce any judgment against the Property and she believed the Trust Deed would achieve that end. She far preferred giving the Property to her daughter, for whose welfare she was genuinely concerned, than allowing Mr Khawaja to obtain a charge over it.

134. In case it is not clear, nothing I have said should be read as a suggestion that Mr Berkley KC acted in any way improperly. I have already said that I do not believe Ms Stefanova’s evidence that she had not instructed Mr Berkley KC to make the submissions he made or to settle the grounds of appeal. There is nothing to suggest that he knew about the Trust Deed when he did so. v) Conclusions

135. I answer the three issues identified by ICC Judge Barber as follows. Whether the Trust Deed is a sham instrument

136. It follows from my findings above that the Trust Deed was not a sham. Ms Stefanova did subjectively intend her daughter to have an interest in the Property and did intend that the Trust Deed would be effective, so as to prevent the Property being available for enforcement by Mr Khawaja.

137. The situation is not on all fours with the facts of Midland Bank v Wyatt , despite the similarities. There was no dispute between Mr Wyatt and the bank when he borrowed money. His failure to reveal the declaration of trust at that time was inconsistent with him really intending it to be effective. Ms Stefanova, by contrast, executed the Trust Deed after she had already lost the claim brought by Mr Khawaja and failed to reveal it in the context of an ongoing bitter dispute. That failure is fully consistent with her intending that the Trust Deed should be effective to defeat enforcement in due course, but not wanting to reveal her hand until the last moment (even if it is right that she revealed it shortly before she knew about the application for a charging order). That situation is, in my judgment, closer to the facts of IRC v Hashmi and National Westminster Bank v Jones . Ms Stefanova genuinely wanted to secure her daughter’s future and intended the Trust Deed to take effect, but nevertheless entered into it when she did because she feared an order being made imminently which might be enforced against the Property. Whether the Trust Deed is a transaction to defraud creditors

138. As I have explained, it is more likely than not that Ms Stefanova formed the intention to give her daughter an interest in the Property precisely because she wanted to put it beyond the reach of Mr Khawaja. She knew that he was making, or was about to make, a claim for a substantial sum of money against her. She believed that an order might soon be made in his favour, because she had recently disclosed her personal bank account statements and those for Dermamed, and she realised that Barclays Bank were likely to disclose those for Biotech soon. She believed those bank statements would enable him to calculate a sum of money which he could ask the court to award and she was worried that it might be more than she could satisfy from the cash resources available to her. That meant that Mr Khawaja might seek to enforce his money judgment against the Property, whether by means of a charging order, or by making her bankrupt, or in some other way. She feared that somehow or other the Property might end up being sold to pay him and she executed the Trust Deed to try to prevent that.

139. It follows that the execution of the Trust Deed was a transaction falling within section 423 . Mr Khawaja is a “ victim of the transaction ” since the intention behind the Trust Deed was to defeat enforcement by him specifically.

140. In Kazakhstan Kagazy plc v Zhunus [2021] EWHC 3462 (Ch) at [227] Henshaw J cited Sales J’s decision in 4Eng Ltd v Harper [2009] EWHC 2633 (Ch) , in which he held that, once it was established that a transaction had been entered into for a purpose prohibited by section 423 : “ A wide jurisdiction is then conferred upon the court to fashion a suitable remedy. The broad objective of the remedy is set out in ” s. 423(2) (to “restor[e] the position to what it would have been if the transaction had not been entered into” and to “protect[] the interests of persons who are victims of the transaction”), but leaving a wide margin of judgment to the court to decide what order is appropriate (it is to “make such order as it thinks fit for” the defined objective). An extensive, non exhaustive list of the wide range of orders which may be made in pursuit of that objective is set out in s. 425. This includes making an order to transfer any property transferred in the relevant transaction at an undervalue to any other person (such as the transferor, so as then to enable his creditors to execute a judgment against it, or directly to the transferor’s creditors) (s.425[(1)](a))…

141. In this case, Mr Khawaja simply seeks an order that the Trust Deed be declared to be void and of no effect, such that Ms Stefanova remains the sole beneficial owner of the Property. That will then enable Mr Khawaja in principle to obtain a charging order against the Property, although of course the court retains a discretion whether to make the order final.

142. I have considered whether it is appropriate to make the order sought, given the potential interest of Ms Stefanova’s daughter. Whilst I have sympathy for a minor who bears no responsibility for the dispute in this case, she is a “volunteer” who gave no consideration for her interest in the Property. Since I have found that the Trust Deed was not a sham, Victoria’s interest as a beneficiary is, and has been, represented by Ms Stefanova as her trustee (pursuant to CPR 19.10), until such time as an order setting the Trust Deed aside takes effect, at which point she will cease to have, or ever to have had, any interest.

143. In the circumstances, I consider it is appropriate to exercise the court’s power under sub- section 423(2) to set the Trust Deed aside and to declare it void ab initio and of no effect. That will restore the position to what it would have been if the Trust Deed had not been entered into, as contemplated by that sub-section. It does not seem to me to be necessary to rely on section 425 of the 1986 Act (which is expressed to be without prejudice to the generality of section 423 ), but if necessary I consider that the order I have described has the effect of requiring the Property to be vested absolutely in Ms Stefanova, pursuant to section 425(1) (a). Whether in all the circumstances of this case and in the events which have occurred, the Interim Charging Order should be made final

144. The court has a discretion, pursuant to CPR 73.10A, whether or not to make the interim charging order final. The principles governing the exercise of that discretion are those summarised at paragraph 73.4.5 of the White Book 2025. These include that all the relevant circumstances must be taken into account and that the discretion should be exercised equitably, having regard to the interests of all parties involved, including other unsecured creditors, as well as those of the judgment creditor and the judgment debtor.

145. I note that it does not follow from the making of a charging order that the Property will be ordered to be sold. Different considerations apply to the exercise of the court’s discretion whether to enforce a charging order by sale pursuant to CPR 73.10C, and I am not concerned with those.

146. I have been provided with a schedule of nine costs orders in respect of which sums remain outstanding and it is those outstanding amounts in respect of which the charging order is now sought. Some of the costs Ms Stefanova was ordered to pay by order of Richard Smith J dated 29 March 2023 have been paid as a result of the TPDO, and the amount outstanding pursuant to that order has been further reduced by a sum which was subsequently ordered to be set off in Ms Stefanova’s favour. A further award of costs in Ms Stefanova’s favour was ordered to be set off against the costs she was ordered to pay by HHJ Baumgartner on 20 October 2023. I am told that the sums shown on the schedule have been reduced by the relevant amounts. Interest has also been calculated and added to the sums claimed. Accordingly, the total outstanding as at 5 June 2025, in respect of which the charging order is now sought, is £92,586.73.

147. I am satisfied that it is appropriate to exercise my discretion to make the charging order final in that sum. Most of the costs orders have remained unpaid for a significant period of time; the first six date from 2023. If Ms Stefanova has money available in a bank account to enable her to pay these debts, she has not disclosed the relevant account(s) to Mr Khawaja, so a third-party debt order is not a possibility. My finding that Ms Stefanova entered into the Trust Deed for the purpose of putting assets beyond Mr Khawaja’s reach demonstrates that Ms Stefanova is likely to make it as difficult as possible for him to enforce the costs orders. There is no realistic alternative to a charging order. I am not aware of other creditors who could be affected. There is an existing charge on the Property in favour of Barclays Bank, but that will, of course, take priority over the charging order, so the bank will not be prejudiced.

148. I will, therefore, order that: i) The Trust Deed be aside and declared void ab initio and of no effect pursuant to section 423 ; and ii) The interim charging order be made final in the sum of £92,586.73.

149. I anticipate that it may be necessary to list a short consequential hearing to deal with costs, but I nevertheless encourage the parties to attempt to agree an order, if possible, with a view to saving further costs.