CIVIL DIVISION
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
(Mr Justice Hart)
The Strand London Friday 3 May 2002 |
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B e f o r e :
Vice President of the Court of Appeal, Civil Division
LORD JUSTICE LAWS
LADY JUSTICE ARDEN
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THE COMMISSIONERS OF INLAND REVENUE | Claimant/Respondent | |
and: | ||
(1) MOHAMED AKRAM HASHMI | ||
(Executor of the Estate of Muzamil Ghauri Deceased) | Defendant | |
(2) OMAR GHAURI | Defendant/Appellant |
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MISS K SELWAY (instructed by Commissioners of Inland Revenue, Solicitors Office, Somerset House, London WC2R) appeared on behalf of the Respondent
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Crown Copyright ©
Friday 3 May 2002
"(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 provide no consideration; or. . .(c) he enters into a transaction with the other for a consideration the value of which, in money or money's worth, is significantly less than the value, in money or money's worth, of the consideration provided by himself.
(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."
"For the purposes of this appeal, though without deciding the point, I am content to assume in favour of the plaintiffs that the relevant purpose which has to be established in the application of s 423 is substantial purpose, rather than the stricter test of dominant purpose."
"I start with the words of section 423(3), set in the context of the mischief at which the section is directed. The subsection itself does not apply any epithet to the word 'purpose'. . . Once that is accepted, and given that, notwithstanding section 423 is entitled 'Transactions defrauding creditors', it is not necessary for the trustee to establish dishonesty, I confess that I find some difficulty in distinguishing between a 'dominant' purpose and a 'substantial' purpose. On the basis that there is a difference, however, and that 'substantial purpose' is indeed a lesser test than 'dominant purpose', I am content to proceed in the instant case on the footing that 'substantial purpose' is the correct test. I emphasise, however, that I do so on the same basis as the Court of Appeal in Royscot Spa: that is to say, on the basis that if the trustee cannot meet the lesser test, a fortiori he could not meet the stricter one."
"Their Lordships consider that the Court of Appeal did not take sufficient account of the difficulty faced by an appellate court in making a verdict on the basis of evidence, which the trial judge has disbelieved. It may be the case that if the judge had known that one of the reasons that he gave for rejecting the evidence of a witness was wrong, he would have been willing to accept it. On the other hand, it may have made no difference. Not having seen the witnesses, the appellate court cannot easily form a view about their general credibility. It must be remembered that in reversing the judgment of a civil court, the appellate court (unless it orders a new trial, which in this case is not a practical possibility) is substituting a positive finding in favour of the losing party. It has often been said on the highest authority that it should not take such a step unless it is satisfied that the judge's conclusion was 'plainly wrong'. As Page-Wood LJ said in The Alice (1868) LR 2 PC 245, 252:-
' ... we should be most unwilling to come to a conclusion different from that of the Judge of the Court below merely upon a balance of testimony; and on its being affirmed by the Appellant that the testimony ought not to have been credited by the Judge of the Court below. He had an opportunity of testing, in the most ample manner, the conduct and demeanour of the witnesses; and we should require evidence that would be overpowering in its effect on our judgment with reference to the incredibility of the statements made by any witness, and the general testimony to which credit has been so given, before we could venture to come to a conclusion not only in favour of an Appellant in a case of this kind, but of course a conclusion adverse to a Respondent; thus inflicting on the Respondent a loss occasioned by the Board coming to a conclusion different from that which was come to on evidence, as to the value of which we have not the same facilities and means of forming a judgment as were possessed by the learned Judge who decided in the first instance.'
The Court of Appeal noted that the judge had not expressly said that he attached importance to the demeanour of the witnesses. But their Lordships would not expect or require judges to make specific mention of so obvious a matter. As Lord Wright said in Powell v Streatham Manor Nursing Home [1935] AC 243, 267:-
' ... where the evidence is conflicting and the issue is one of fact depending on evidence, any judge who has had experience of trying cases with witnesses cannot fail to realize the truth of what Lord Sumner says: as the evidence proceeds through examination, cross-examination and re-examination, the judge is gradually imbibing almost instinctively, but in fact as a result of close attention and of long experience, an impression of the personality of the witness and of his trustworthiness and of the accuracy of his observation and memory or the reverse.'"