England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
APPLICATION FOR PERMISSION TO APPEAL
A STAY OF EXECUTION ORDER TO BE SET
ASIDE AND A STAY OF PROCEEDING

		Royal Courts of Justice Strand London WC2 Wednesday, 17th July 2002

1. LORD JUSTICE WALLER: Mr Kalaji is the brother of Feda Kalaji, the second defendant. It appears to be Feda Kalaji who was the party to a dealing agreement with the claimants. The claimants allege that the dealing done on various shares was actually done by Mr Kalaji in Feda Kalaji's name. One deal was done at the beginning of the year 2000 and that produced a substantial loss of nearly £24,000 which, taken together with a further debit already on the account, gave rise to an indebtedness of £24,382.26 owed to the claimants.
2. The claimants looked to the first defendant, Mr Kalaji, for payment. That took place in correspondence, but, not hearing from him, they then wrote to the second defendant care of the same address (that letter is at page 37 of the bundle). That identified an indebtedness in the region of £24,500. Miss Kalaji responded on 5th October that she had just received that letter. She said it gave her much surprise as she did not know about this. She said:

"Would you send me please full copy of the account from start and account open forms and any power of Attorney made for I have not used account with you at Wise Speke for very long time.

Please send me soon so I check and send you answer and please only correspond with me on this matter."

3. The solicitors acting for the claimants wrote a letter before action to the first defendant and that again was sent to that same address, that is, 35 Old Court House, Old Court Place, London:

"We have been asked to write to you to ask you to settle the long overdue outstanding account which you have been operating for some years in the name of Miss F E Kalaji.

As you may be aware, there is now an outstanding indebtedness in relation to the account in the sum of £24,475.67 before the application of contractual interest.

Our clients have of course provided a detailed breakdown of the sum of £24,475.67 both to you and to Miss Kalaji.

Unfortunately to date you have both declined to settle this account notwithstanding the assurance which you personally gave to Mr Hagger more than 6 months ago on 10 May when you promised that the account would be settled within 10 to 15 days.

Our clients are unable to leave such a large sum outstanding for any longer, and in the circumstances, we are instructed to advise you that unless this account is settled in full within the course of the next 14 days our clients will have no alternative but to reluctantly instruct me to commence proceedings against you for its recovery, together with interest and full legal costs on an indemnity basis."

4. The response to that letter was a letter sent by Mr Wheeler from Old Court House. Mr Wheeler, I understand, works for the companies for which Mr Kalaji works. That letter states:

"I refer to your letter ..... and to our telephone conversation.

I have spoken to Miss Kalaji re the above and she requests that Messrs Brewin Dolphin Securities Ltd reply to her letter of 5th October 2000 enclosing the documentation that she asked them to send her, so that she may respond to them regarding this matter.

This confirms the message I left with your secretary Linda Yates on Friday last."

5. There was further correspondence between Mr Wheeler and the solicitors Shammah Nicholls, who were acting for the claimants. Nothing produced any response in terms of payment from either Mr Kalaji or from his sister.
6. In the result, proceedings were commenced on 15th June 2001. Those proceedings named the defendants as two defendants with various names but describing two persons. His Honour Judge Kershaw QC later ruled that the intention was to name Mr Kalaji as the first defendant and Feda Kalaji, who was his sister, as the second defendant. There can be little doubt, having regard to the correspondence, that it was those two persons with whom the claimants had had contact in relation to this overdue account. Those proceedings were served again at the same address to which the correspondence had been directed, that was 35 Old Court House, Old Court Place; that also appears to be a property co-owned by the first defendant, Mr Kalaji, but is the property from which the business of his companies is carried out. The service of proceedings was followed by letters seeking an acknowledgement of service, and again there was no response to those letters. Thereafter attempts were made to serve Mr Kalaji personally both at the same address and at the address where he resided with his wife. Upon any view the first defendant did not make it easy, as he could have done, for the proceedings to be served. In the result no acknowledgement of service was ever sent by the defendant and no defence was put in.
7. It was then on 4th October that, as a result of an acknowledgement of service, judgment was entered by the claimants in default. By this stage the sum involved was £27,766.95, that being the sum due to the claimants plus interest, plus costs. A copy of that judgment was sent to both addresses. Once again, the fact that judgment had been entered was simply ignored. That led to the issue of a writ of fieri facias for the purpose of enforcing the judgment. It is at that stage that an application was made to set aside the default judgment. That application, wrongly dated 4th October 2001, was made on behalf of those named in the proceedings and said that the basis on which it was asking to set aside was - "because none of us have ever had an account at Brewin Dolphin Securities nor have had any commercial dealings in any account with Brewin Dolphin Securities to the best of our knowledge. The only person who had an account with them was Feda Kalaji who lives in Jordan and whose address is PO Box 295, Amman, Jordan."
8. Unfortunately, initially no fee was paid in relation to that application and ultimately it was not submitted until 5th November. What then happened was that the application came on for hearing on 4th December before District Judge Jones and was adjourned to the Mercantile Court. Just prior to that hearing in the Mercantile Court Mr Kalaji, the first defendant, instructed solicitors - I think Mason & Co - to represent him. Those solicitors instructed counsel, Mr Spedding, to represent him at the hearing.
9. At the hearing before Judge Kershaw QC on 11th January the statement put in by Mr Kalaji was to the effect that this was not his debt, it was the debt of his sister. But the evidence put in by the claimants suggested that this was not simply the debt of the sister, this was an account operated by the first defendant in his sister's name and thus it was on that basis they were saying the first defendant was liable. There was no suggestion in any statement put in by Mr Kalaji at that point in time to suggest that if, by any chance, the judge thought it right to give leave to defend but only on condition of a payment into court, that Mr Kalaji could not meet that payment. What the judge said at the end of that judgment of 11th January was:

"It seems to me that this is a very strong case for setting aside the judgment on condition ..... to pay a sum of money into court. The first defendant does not suggest in his witness statement that he is unable to pay any particular sum or more than a particular sum, or that it would cause him undue hardship to do so. Such evidence there is as to his means - and it would be for him to raise that point - is on the contrary, that he resides in what might colloquially be called a millionaire's row, in an area with many very well known names.

The justice of the case is that judgment should be set aside conditionally upon the payment into court."

10. The sum fixed as the appropriate sum is £28,000.
11. If the position were that Mr Kalaji could not meet that sum of £28,000, then immediately he became aware of that order one would have expected him to apply to Judge Kershaw in order to ask him to reconsider that condition or to have appealed Judge Kershaw's judgment. What happened was that on 18th January the solicitors for Mr Kalaji asked for time to pay, seeking to extend the time from 25th January to 4th February. What further happened was that efforts were then made to enforce the judgment once no payment was made. It was during this period that there was an offer from the sister to pay £10,000 in full settlement. A statutory demand was issued and an application was made to set aside that statutory demand, but nothing was done to set aside the order made on 11th January until 5th April. Only at that stage - now well out of time for appealing - was an application made to set aside that order.
12. It was in that context that Mr Kalaji put in an affidavit dealing with his assets. It is not that easy to get a full picture of his assets from that affidavit in that it is clear that he is used to dealing with extremely large figures. He lives in a house which is apparently worth some £3,000,000, in respect of which there is a charge of £600,500. One question raised is whether that belongs to his wife in total or whether he has some equity in it. The value of the other property - 35 Old Court House - appears to be very substantial, but there are charges on that house. He says that he owes banks very substantial sums of money. He suggests that some £1,000,000 is owed to Bank Francaise, and that there is some indebtedness of the company in relation to which he has given a guarantee. He says that his income for the year 5th April 2002 is £10,000 before tax and national insurance. The judge was highly suspicious of that figure - an income of £10,000 - that being, as the judge put it, a neat figure and seeming rather unlikely in the context of the enormous sums in which the defendant deals and having regard to the types of property in which he lives. So the judge had to take a view in relation to what was a very late application, as to whether it was right to vary his order.
13. Of course, one aspect which was not dealt with in that affidavit and still has not been dealt with in any affidavit is what the position is vis-a-vis anyone else from whom the defendant might or might not be able to borrow money. It is not simply the assets of a defendant as to which evidence must be given. What a defendant must demonstrate is that it is not possible, even with the assistance of other persons, to raise the money.
14. In this case thus one has a situation in which there is a debt undoubtedly due; it is one that the sister now says she will meet, but there was evidence that Mr kalaji was liable. There are also other members of the family. There is nothing in the affidavit which demonstrates that any efforts have been made to raise money from those other members of the family.
15. Mr Kalaji now wishes to appeal the order of 11th January by a notice which is well out of time. He then also wishes to appeal the order, in effect, confirming the order made on 11th January made by Judge Kershaw on 12th April when he refused to alter his previous order.
16. The questions which arise ae as follows. First, were the circumstances of the case as at 11th January such as to make a conditional order appropriate? As it seems to me, having regard to the way in which these proceedings had been dealt with by Mr Kalaji - that is to say no effort had been made to put in an acknowledgement of service; or to accept service and put in an acknowledgement of service; or to put in a defence in order to say "this is not me" although the claimants were saying that he was personally responsible for this debt - this was clearly one of those cases where the court would consider making a conditional order. As I see it, there is no reasonable prospect of persuading a court of appeal that it was not reasonable to make a conditional order.
17. The second question which would arise is - was it appropriate, having regard to the financial position of Mr Kalaji, to make an order in the sum of £28,000? It is a well known principle that if the court is going to make a conditional order, it should not make an order which makes it impossible for the person to defend. If someone has no assets at all and no means of raising funds it would be quite wrong to make it a condition of leave to defend that they should raise a sum they have no prospect of raising.
18. So far as the order of 11th January was concerned, it was not even suggested on Mr Kalaji's part that he could not meet a condition of payment in. It was obviously going to be a possibility that that would be an order the court would make. The onus lies on a defendant who is suggesting he has not the means to meet a condition to put in evidence to that effect if that is a point he wishes to take. Mr Kalaji however says, "I was only instructing lawyers at the last minute. It may be they did not appreciate the position, and I should have had an opportunity to put that evidence in."
19. That then brings one to the order of 15th April and the delay from 11th January. Once the order had been made on 11th January requiring payment in of £28,000, if Mr Kalaji's position was that there was no possibility of finding that money, never mind from his own assets but anywhere else, that was the moment for him to say so. He did not do so. He did not instruct his lawyers either to make a further application or to appeal, but instructed them to ask for more time. He tells me - and I accept - he was ill during some of that period, indeed, through much of that period. The difficulty with that is that this application to vary the order was not made until 5th April. That means that although he was ill and in a hospital bed, so he tells me, during much of January, still no effort was made either in February or March to vary this order or to appeal it on the basis that it was not possible for him to find the sum.
20. Even now the affidavit which is put in deals only with his own asset position. It does not deal with any efforts he has made with members of his family, including his sister. There is no issue that this sum is due. The sister is now saying she will meet the debt, but she is not prepared to put the money up. There is no basis for ruling that she and the family cannot put up this money and, having regard to the asset position of Mr Kalaji himself, I am not persuaded that he has any prospect of persuading the Court of Appeal that he cannot put up this money or that the order should not have been made in the circumstances that it was made.
21. Thus, this application for permission to appeal should be refused.
Order: Application refused