England and Wales Court of Appeal (Civil Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
JOHN MARTIN QC (sitting as a Deputy Judge of the High Court)

		Royal Courts of Justice Strand London, WC2
		10th December 2004

1. MR JUSTICE NEUBERGER: This is an unusual application made in relation to a case which is itself very unusual. On 30th July 2004 Mr John Martin QC, sitting as a deputy judge of the Chancery Division, after a hearing lasting five or six days, decided to enforce an agreement between the claimant, Mr Nasser Eid and the defendant, Mrs Bushra Zaid Al Kazemi, for the transfer of shares in a company called Ramelle Investments Corporation ("Ramelle") to Mr Eid by Mrs Al Kazemi. Mrs Al Kazemi's contention was that the agreement was vitiated by it having been entered into by her under the undue influence of Mr Eid. In a judgment running to 60 paragraphs and 22 pages the judge considered the very unusual history of the case and crucially, for present purposes, decided (a) that there was an agreement and that the terms of the agreement were as alleged by Mr Eid; (b) that on the facts there was no undue influence exercised by Mr Eid over Mrs Al Kazemi; (c) that, if there was any undue influence, Mrs Al Kazemi's conduct precluded her from having the agreement set aside on that ground; and (d) that in those circumstances there was no reason not to order specific performance.
2. Mrs Al Kazemi sought permission to appeal. I granted permission to appeal in writing. Although the notice of appeal sought to attack the judge's determination on the first three grounds identified, it was sensibly made clear that the first ground, namely the existence of and terms of any alleged agreement was not going to be challenged. Therefore the two grounds which were live, upon which Mrs Al Kazemi had to succeed on both if she was to overturn the judgment were firstly, the judge's finding there was no undue influence, and, secondly, the judge's finding of affirmation or estoppel precluding Mrs Al Kazemi from setting the agreement aside.
3. I had some reservations about granting permission to appeal for the reasons I explained, namely that the judge had given very careful attention to the facts and had come to clear conclusions which on the face of it he was entitled to come to. Nonetheless, I thought that (a) in light of the decision of the Court of Appeal in Maclan v Dowsett (unreported) 14th June 2004 to which, not surprisingly, the judge had not been referred, there was an argument that he had gone wrong on undue influence and, (b) on the issue, the facts might just about justify reinvestigation of the judge's conclusion on that issue. I dealt relatively quickly with affirmation, as did the judge, and came to the conclusion that "in connection with a case such as this [it] is not always easy, and I think the applicant's case is sufficiently arguable on this issue also". I also granted a stay of enforcement of the order but gave Mr Eid liberty to apply to vary the stay.
4. What next happened was that I received a substantial further bundle together with a full skeleton argument on behalf of Mr Eid saying that the question of permission to appeal should be reconsidered and that, if permission to appeal was nonetheless still granted, Mrs Al Kazemi should be put on terms and that the stay should be lifted.
5. Mr Peter Ralls QC, who appears with Mr Christiaan Zwart, as he did below, for Mrs Al Kazemi, has to my mind realistically accepted that Mr Eid should have the right to invite me to reconsider the question of permission to appeal. Mr Daniel Lightman, who appears with Miss Jennifer Haywood for Mr Eid, as he did below, has put forward a large number of arguments on this issue. However, the essential point on the question of whether or not he should be entitled to invite me to reopen the question of permission, upon which there are a number of authorities that I do not need to consider, is that his instructing solicitors asked for and should have been provided with a copy of the skeleton argument in support of the application for permission to appeal and of the appeal and that the skeleton argument was intentionally withheld by Mrs Al Kazemi's solicitor. When I say "intentionally withheld" it was withheld not because the question of supplying it was overlooked because it was asked for, but I see no reason not to accept the evidence of the solicitor concerned, Mr Daulby, when he says that he was unaware of the fact that he was under an obligation to provide Mr Eid's solicitors with a copy of the skeleton argument.
6. It seems to me, whatever allegations and cross-allegations and previous failures on the part of either or both parties and their respective solicitors there may have been, it is almost fanciful to think he would have deliberately withheld the skeleton argument in the sense of intentionally breaking the rules knowing what the consequences might be. The rules seem to be in something of a state of constant revolution and perhaps one should not be too surprised even if experienced solicitors sometimes fail to observe all of them.
7. The essential point is, as Mr Ralls rightly accepts, that as Mr Eid should have been given the opportunity to make representations to me before I decided on the application for permission to appeal, and particularly as I indicated that this was not an easy or plain case for giving permission to appeal, it would simply be unjust on Mr Eid and give an unfair benefit to Mrs Al Kazemi if I did not allow Mr Lightman to pursue his application.
8. Just as Mr Ralls has been realistic so has Mr Lightman. He has not sought to reopen the question of whether there was undue influence. I take this opportunity to acknowledge again the fact that plainly Mr Eid would have a powerful argument on maintaining the decision below on this issue but it is not one where I think it would have been appropriate to develop much argument at this stage.
9. Where Mr Lightman has concentrated his argument is on the issue of affirmation. It can be put in a number of other ways: estoppel; inequity; blowing hot and cold; election. But the essence of his case is that because of events which took place principally in September/October 2003 the judge was at the very lowest plainly entitled to conclude that affirmation had taken place.
10. The background facts are very complicated and even the judge's full judgment does not deal with all of them, and it would be inappropriate for me, on this application, to go into to much detail on the facts. Basically, the facts are these. A very close relationship developed between Mr Eid and Mrs Al Kazemi. By September 2002 there was a commercial relationship between them in the sense that money changed hands and assets had been purchased. That is explained in paragraphs 5 to 12 of the judgment and the position by September 2002 is summarised by the judge at paragraph 11. On 20th September 2002 three documents were executed which are set out or summarised in paragraph 13 of the judgment. The important aspect is that they included an agreement that Mrs Al Kazemi would sell her shares in Ramelle to Mr Eid for £350,000 of which £200,000 was to be paid immediately and the remainder was to be paid in January 2003.
11. Agreement was said by Mrs Al Kazemi to be tainted by undue influence. Very shortly after that agreement, as the judge went on to explain, Mrs Al Kazemi had second thoughts about it. She went to solicitors, Philip Ross & Co, who remain her solicitors, and in particular Mr Gilinsky. As the judge said in paragraph 15, they wrote to the accountants who had drawn up the agreements explaining that they had advised Mrs Al Kazemi that she could set aside the agreements on grounds of undue influence.
12. As a result of this, in early October 2002 Mr Eid and Mrs Al Kazemi came to a revised agreement which effectively involved (see paragraph 16 of the judgment) the sum payable for Ramelle being increased to £400,000. The agreement was confirmed by a handwritten document of 13th November 2002, also set out in paragraph 16 of the judgment. It recorded the fact that she received £200,000 of the £400,000 on 6th and 12th November 2002 respectively:

"... in part satisfaction on the transfer of my interest in Ramelle ..."

13. There was some argument before the judge as to whether in fact the price was to be £400,000 or £500,000. The principal issue before the judge seems to have been whether the parties were at ad idem. The judge considered that issue in various places between paragraphs 24 and 32 of his judgment. For the reasons he gave, which seem to me to be plainly defensible, to put it at its very lowest, he came to the conclusion that the price was £400,000 and not £500,000. The only reason for thinking it might have been £500,000 was a mistake in one letter from Mr Eid's solicitors for which the judge accepted Mr Eid's explanation, that it was simply a mistake. Indeed Mr Eid said that he had not seen the letter before the trial.
14. I am quite unpersuaded that there is anything in the judgment to support the proposition that there was something unconscionable because Mrs Al Kazemi or her solicitors wrongly believed that the price was £500,000 and that they were accordingly acting under a mistake at the time. As the judge points out, they both signed written statements which confirmed that the terms of the contract were as the judge found and as every document supported, apart from the one mistaken letter from Mr Eid. It does appear that it was the eagle eye of Mr Ralls, when he became involved in the case, shortly before the beginning of the trial, that resulted in the mistake in the letter being spotted. To my mind, it is clear from the judgment that the judge took the view, which to my mind again was to put it at its lowest a defensible view (and I would go rather further than that), that Mrs Al Kazemi took advantage of that oversight to put forward a new case which the judge rejected. Having made that comment it is right to record that the judge made it clear neither party behaved like an angel, either in terms of how each behaved to the other while their relationship deteriorated and after it had ended or in relation to conduct during the proceedings both in court and out of court. I do not want to be taken as suggesting that there was anything outrageous in what either did, but neither of them behaved particularly well as is often inevitable when a very close relationship falls apart. The judge expressed himself in measured terms, as Mr Ralls points out, and I would not criticise him for that; on the contrary.
15. Matters move on to June and July 2003 when after the involvement of solicitors, Mrs Al Kazemi and Mr Eid renegotiated their agreement yet again. Despite the involvement of solicitors this renegotiation was effected directly between themselves; Mrs Al Kazemi's evidence was that Mr Eid persuaded her to dispense with solicitors. This negotiation produced a new agreement which was effectively a reversion to the original agreement, ie £350,000 rather than £400,000, if I can put it in shorthand. That agreement, the July variation, was said by Mrs Al-Kazemi to be initiated by undue influence. The judge rejected that. But as with the first agreement, 1st September 2002 agreement, I am assuming, as is Mr Lightman, that the appeal succeeds on that issue.
16. What then happened, in October 2003, was that Mrs Al Kazemi received £142,839, which I will round down for the purposes of the judgment to £140,000, which Mr Eid obtained by selling a property, Conistone Court, as I will call it (otherwise known as Edgware Road) and her son received a Mercedes, said to be worth £18,000, which I will round up to £20,000. It is quite clear from the evidence that Mr Eid believed that those two payments, in particular the £140,000, were made on the basis that they were part payment for the Ramelle shares, ie they were completing the aggregate payments due under the agreement originally entered into as varied shortly afterwards in 2002 and then as re-varied by the July variation in 2003. On his case, therefore, Mrs Al Kazemi had received the two lots of £100,000 she had acknowledged, the £140,000 for the sale of Conistone Court and £20,000 for the Mercedes: £360,000 in all. As I say, when making over the £140,000 and the £18,000, Mr Eid believed that he was completing his obligations under the agreement as finally varied by the July variation. Mrs Al Kazemi had discussed the matter with her six children or some of them; she had plainly discussed the matter with her solicitor, Mr Gilinsky. She well knew, and indeed intended, that Mr Eid would be paying this £160,000 in total, in the reasonable belief that it was completing his obligations under the July variation in return for which she would transfer the Ramelle shares to him.
17. This, however, as Mr Lightman put it before the judge, and the judge agreed, "amounted to a trick" (see paragraph 46 of the judgment). It was a trick because Mrs Al Kazemi, as she instructed Mr Gilinsky, according to his note, was going to treat the £160,000, or at any rate the £140,000, as part payment (almost complete repayment) of a loan that she had made, a loan to which I have not so far made reference. The loan had been in a sum of £215,000. Of that loan £65,000 had been repaid. The evidence was somewhat confused about this loan in that it was not clear whether it had been made to Mr Eid, to Mr Eid and his family, or through Mr Eid to his family and, in the event that it was to his family in whole or in part, to which members of his family. The evidence was somewhat unclear on this and while, as Mr Ralls says, lending money to someone's "family" is not a very satisfactory concept, it was not a matter that was gone into in great detail and, as Mr Lightman points out, Mrs Al Kazemi's own pleaded case did reflect the fact that £65,000 had been repaid (in instalments, including one instalment as recently as September 2003 in the sum of £15,000) by Mr Eid's family. Because there was no claim for repayment of the loan, even in the alternative, and no argument that, if Mr Eid succeeded in all aspects of his case, that Mrs Al Kazemi should be entitled to recover the outstanding part of the loan from him, some £150,000, the judge said it was unnecessary for him to decide who the borrower actually was (see paragraph 20 of the judgment).
18. I have been taken to nothing in the pleadings or in the skeleton arguments or in the transcript of submissions to suggest that this was an issue in this case. If Mrs Al Kazemi fails today on this application (or if there is an appeal, she fails on her appeal) it may well be that it will be open to her to sue Mr Eid and/or members of his family for recovery of the balance of this loan. It may, however, be that she would be estopped under the rule in Henderson v Henderson, although I must say I would have thought that unlikely. But it is not a point that has been gone into other than for the purpose of explaining how Mrs Al Kazemi was intending to treat payments by Mr Eid in November 2003 in accordance with her "trick".
19. Reverting to the final variation, if Mrs Al Kazemi is to be treated as having been paid the £140,000 and the £20,000 under the final agreement then those two payments represented the completion of Mr Eid's obligations thereunder. He had paid £350,000, if one takes into account the two lots of £100,000 paid to or drawn out by Mrs Al Kazemi in November 2002. Indeed he had paid some £10,000 more than £350,000. In those circumstances the judge concluded in paragraph 57 of his judgment (tab 4, page 33 of the bundle) his reasoning:

"57. Had I taken a different view about that, I would have concluded that the actions undertaken by Mrs Al-Kazemi in September 2003 when she tricked Mr Eid into making a payment in the belief that it was in respect of the purchase of the shares in Ramelle as she well knew having been aware of the contents at least of the e-mail, would have amounted to a sufficient affirmation of the transaction to prevent her subsequently avoiding it on the ground of undue influence. There can be no possible suggestion that in September 2003 Mrs Al-Kazemi was acting under undue influence, and probably hardly acting at all under the influence of Mr Eid. At that time she hatched with the assistance or at least knowledge of her children a plot which was designed to get him out of her life, and to get her back as much as possible of the money that she had paid out on his account without giving him in return the one thing he expected for it, which was the shares in Ramelle. Knowing that the money was being paid by him on that footing and not asserting to him before he made the payment that she would not accept it on that basis seems to me to amount to conduct, whether one categorises it as affirmation or estoppel probably does not matter, which is so unconscionable as to prevent her thereafter from relying upon any right she might otherwise have had to set aside the agreement."

20. Mr Lightman says that this was either the only conclusion the judge could have reached on the evidence or a conclusion which the judge was plainly entitled to reach and with which no appellate court could interfere. He says that on that basis the question of undue influence falls away because, assuming in her favour that Mrs Al Kazemi establishes undue influence, she has affirmed the contract is estopped from denying it. It seems to me that, in the absence of being referred to authority, Mr Ralls is right to submit, particularly as the case has proceeded on the basis of equitable principles both before the judge (see his relation to affirmation or estoppel) that whether one characterises the agreement as affirmation or estoppel probably does not matter. He says that the essential point is that it is framed very much in terms of equity. In those circumstances it seems to me that Mr Ralls is right to say that this may well not be an absolutely strict principle. I am attracted by his point that, if Mrs Al Kazemi had received a relatively small amount of money under the contract, it could not be right that the court would be completely debarred from saying that, while she should account for the money she had received, she should be entitled to go back on her apparent affirmation.
21. So it seems to me that it would be wrong at this stage to proceed on any basis other than the fact that this sort of affirmation or election is to some extent a matter of fact and degree and is not subject to a strict rule to the effect that once anything is done which could be said to be a performance of the contract, after the undue influence has ceased, that is the end of any possibility of setting aside the contract on grounds of undue influence.
22. Having considered the arguments and the facts, I have reached the conclusion that even applying that test there is no real possibility of an appellate court interfering with Mr Martin's conclusions on this particular issue. First, it seems to me quite clear that, by the time of the alleged affirmation, Mrs Al Kazemi was completely free of any undue influence; any taint which might be held against Mr Eid had been fully disposed of. One only has to look at what she did. She played a trick on him. She threw him out of the flat (as she was fully entitled to do, and bearing in mind where the relationship had got to, it may be said that no blame can be attached to her for that). She was closely consulting with solicitors. She was relying on her family. She was getting some £160,000 from him. Plainly, if anybody was behaving unconscionably in relation to that particular aspect of the transaction it was Mrs Al Kazemi and not Mr Eid. So there was no question of undue influence at that point. Therefore the plain possibility of affirmation arises.
23. Secondly, and this seems to have weighed quite a lot with the judge, and I think it is undoubtedly relevant, but it may not be the central point, she behaved unconscionably towards him. In the circumstances of this case I am not sure that I would have given that as much weight as the judge. However, her whole case is based on an equitable principle of unconscionability, therefore what Mr Ralls called equitable fraud. It therefore seems to me that Mr Eid is entitled to say with some force that if equitable fraud is what tainted the original agreement what is sauce for the goose is sauce for the gander and equitable fraud was plainly involved in the way she behaved, which was deceitful.
24. Thirdly, and more importantly to my mind, the contractual arrangement was such that Mrs Al Kazemi was behaving in a way which was only referable and was intended only to be referable to the enforceability of the July variation. As a result, she not merely received a benefit but it was a benefit (a) which was very substantial, £160,000 odd in total and (b), as Mr Lightman was at pains to point out, which represented the sole remaining benefit she was entitled to enjoy under the July variation. Mr Eid's liabilities under the July variation were, as a result of the payments, at least on the face of it at an end. It does not lie in her mouth to say that she was not actually performing the July variation because she set out intentionally to lead Mr Eid to believe, and did indeed lead Mr Eid to believe, that she was doing so, and, to be more specific, that he was performing that agreement for her benefit. All that remained under the agreement was to transfer the shares and that was her obligation to him.
25. In those circumstances, particularly when one has the added factor of the equitable fraud, however one chooses to characterise it, it seems to me that if this is not a case where affirmation could properly be found by a judge, it is hard to think of a case where that could be done. There was a very substantial some of money paid to the first party as a result of which the other party has completed all his obligations under the agreement and has been expressly led to believe by the first party that he is going to get the sole benefit he is to enjoy under the agreement, namely the transfer of the shares, which is now sought to be denied to him.
26. Furthermore, to say that the money could have been treated -- on the way the case was pleaded and argued before the judge -- by Mrs Al Kazemi as repayment of the loan seems to me impossible to maintain. I accept that on analysis it may transpire that the £215,000 should be treated as (subject to the £65,000 repaid) being the liability of Mr Eid, possibly solely, possibly with others, to Mrs Al Kazemi. But the case before the judge was not argued or pleaded on that basis, as is illustrated by the judge's finding that he did not need to resolve who the loan was to, and who was responsible for its repayment (see again paragraph 20 of his judgment).
27. I should also refer to a very useful schedule showing payments made to and by Mrs Al Kazemi, at the end of the skeleton argument presented on her behalf to the judge below. It shows an amount owing to her "in any event" of some £195,000. It includes the £215,000 and the £65,000. If one omits them, it means that the amount owing in any event would be reduced to some £44,000. If one then removes the £325,000, the amounts advanced by Mrs Al Kazemi in relation to the properties which were included or owned by Ramelle, then it could be said with some force that she was heavily in credit, not in debit. The trouble with all these exercises, to my mind, is that they do not really address the main issue which is being argued before me: affirmation. In any event there is room for argument as to whether one includes the figures I have just mentioned. Even if one includes all monies which were paid out on the properties, which were owned by Ramelle, which to my mind for the reasons given by Mr Lightman is very questionable, but one takes out the £215,000 and the £65,000 one comes to the result that she was on her own figures only £44,000 out of pocket. If one then omits the monies paid out on the properties owned by Ramelle then she is heavily in credit. However, that is not the central issue in this case.
28. Mr Ralls made much of the fact that Mrs Al Kazemi was very anxious when accepting the money from Mr Eid, the £140,000 and the £20,000 I have referred to, to draw a line under their relationship. I can understand that, but it seems to me that that is a point which could be said to be better in Mr Eid's favour. If the purpose was indeed to put an end to things, then the specific performance order will indeed put an end to matters, not in a way that she may have wanted, but in a way which accords, to my mind, with justice.
29. In those circumstances, having reconsidered this matter much more fully and with gratitude for the arguments advanced, I do think this is a case where I should revoke the grant of permission to appeal for the reasons I have set out.

Order: Grant of permission to appeal revoked; question of costs adjourned.