England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
(MR JUSTICE MITTING)

		Royal Courts of Justice Strand London, WC2
		19th January 2006

1. LORD JUSTICE CHADWICK: This is an appeal from an order made on 14th April 2005 by Mitting J in proceedings brought by Ajmal Ebrahim Hameed against Mohammad Ali Qayyum, Quaiser Mansoor Malik and the personal representatives of Raihan Mahmud to enforce payment of a fee or commission said to be due under a written service agreement made between the parties and dated 12th May 1995. The sum claimed in the proceedings was US$1 million with interest. The judge gave judgment for the claimant in the amount of $1,115,890.40 and he ordered that the first and second defendants pay the claimant's costs on an indemnity basis. He refused permission to appeal.
2. Permission to appeal was granted by this court (Rix LJ) on 10th June 2005 but was limited to ground 1 in the appellants' notice. The first and second defendants (but not the third and fourth defendants) seek to renew their application for permission to appeal on ground 2 in the appellants' notice. That application is also listed before us.
3. An oral agreement between the claimant (on the one hand) and the first and second defendants and Raihan Mahmud (on the other hand) made on or about 12th May 1995 was first recorded in an exchange of letters written shortly thereafter (but bearing that date). But the terms of the agreement were subsequently incorporated into a more formal document, described as a service agreement, which -- although dated 12th May 1995 -- was executed on 22nd August 1995. It is upon the terms set out in that document that the claim is brought. The judge accepted that the contract between the parties was governed by -- "and alone governed by" -- the written service agreement. In reaching that conclusion he rejected the contention -- advanced on behalf of the defendants at the trial -- that the written service agreement did not reflect the full terms of the contract between the parties. In particular, he rejected -- as "wholly bogus" -- manuscript attendance notes (purporting to record the oral agreement) upon which the defendants relied. There is no appeal against that finding of fact. It was on the ground that the first and second defendants had advanced a defence in reliance on attendance notes which they must have known to be false that the judge made the order for indemnity costs that he did.

The terms of the service agreement

4. The written service agreement is made between Mohammad Ali Qayyum, Quaiser Mansoor Malik and Raihan Mahmud (together described as representing the BCCI Campaign Committee, a association of former employees of the Bank of Credit and Commerce International SA) of the one part and the claimant (there described as an International Law Consultant and Legal Analyst) of the other part. The agreement is expressed to be governed by (and is to be construed in accordance with) the laws of England; save in a case where the application of English law violates the Islamic Sharia (in which case the Sharia shall apply). It is not now suggested that this is such a case.
5. The circumstances in which the parties entered into the service agreement are described in the preamble to that agreement. Put shortly, it is recited in that preamble that, following BCCI's collapse in July 1991 and the appointment of liquidators, the liquidators had commenced proceedings in jurisdictions throughout the world. In particular, there were proceedings in the courts of Luxembourg in which the liquidators had sought and obtained approval to a settlement of the claims of the principal commercial creditors by the payment to the liquidators of $2.2 billion by the principal shareholders of the BCCI group. Former employees of BCCI (including three who were members of the Campaign Committee) had intervened in those proceedings, by way of appeal, to challenge the approval of the settlement and to seek an order restraining the BCCI liquidators from executing and entering into a settlement agreement with the majority shareholders of BCCI. It was said, in those proceedings, that the settlement agreement (which made no provision for the claims of former employees) would not be in the best interests of former employees -- including (in particular) those former employees who were members of the Campaign Committee. The Campaign Committee ("the CC") was said to be "a representative body of former employees of BCCI, recognised by the Liquidators and the Courts concerned with the liquidation". The preamble includes the following paragraphs:

"As the appeal before the Luxembourg court proceeds, the CC continues to attempt to negotiate an agreement with the Liquidators, outside of the liquidation and the Settlement Agreement, with the intention of substantially enhancing the recovery of claims on behalf of its members.

"In the light of the position of the consequence of the appeal before the Luxembourg Court the CC (including the 4 Appellants in Luxembourg's appeal) has requested Hameed to assist the CC to negotiate a settlement with the Liquidators.

"Hameed has agreed to provide his assistance, resources and advice which will assist the CC to achieve an acceptable settlement with the Liquidators."

Article I of the service agreement provides that the preamble "forms a specific and integral part of this Agreement".

6. Article III sets out the "Purposes and Object" of the agreement:

"3.1 Purpose and Object

"The CC as the representative body of former employees representing interests of employees is a claimant in the liquidation of BCCI. In that respect it seeks to recover in the liquidation what it is legally entitled to under the applicable law. The purpose of this agreement to enable the CC to avail itself of any assistance and support of Hameed to reach an acceptable settlement with the liquidators in relation to withdrawal of Luxembourg appeal and Staff Benefit Fund Litigation.

The object of this Agreement in the light of its expressed purpose as set forth above is to set the legal parameters of the duties and obligations of the parties hereto."

The term "Staff Benefit Fund Litigation" is not defined in the agreement. But it is common ground that that is a reference to litigation then pending in the English courts in relation to the misappropriation by BCCI of $150 million from the Staff Benefit Trust set up by one of the companies in the BCCI group.

7. Article V ("Consideration/Contingent Fee") is in these terms, so far as material:

"5.1 Consideration

"In consideration for the services' advice, assistance, negotiation and resources provided by Hameed pursuant to the terms and conditions of this Agreement the CC shall pay to Hameed a fee contingent on the successful achievement of the purpose of this Agreement.

5.2 Contingent fee

"Within fifteen (15) days of the date that the CC or anyone on its behalf receives from the Liquidators such sum as the CC agrees to accept from the Liquidators as a result of the advice, assistance, negotiations and resources provided by Hameed as covered by the terms of this Agreement, the CC or anyone on its behalf shall pay Hameed a sum equivalent of 2% of the total sum received from the Liquidators. Payment of this contingent fee shall represent the sole obligation, monetary or otherwise of the CC."

The claim in those proceedings is for payment of the contingent fee (in an amount equal to 2% of $50 million) said to become due to the claimant in the events which happened.

8. Article VII contains representations and warranties made and given -- or purportedly made and given -- on behalf of the Campaign Committee. They are in these terms:

"The CC represents and warrant to Hameed as follows:

"7.1 Organisation: Good Standing

"The CC is a representative body of former employees pursuant to mandate by certain former employees of BCCI. Mr Mohammmed A Qayyum, Mr Qaiser M Malik and Raihan Mahmud representing the CC, have all requisite power to settle the Luxembourg Appeal and Staff Benefit Fund Litigation and to enter into this Agreement.

"7.2 Enforceability

"The execution and delivery of this Agreement will result in a valid and legally binding obligation on the part of the CC enforceable against it or anyone on its behalf in accordance with the respective terms and provisions hereof."

9. The phrase "the CC or anyone on its behalf" appears in article 5.2 (in two places) and in article 7.2. In that context "anyone" is to be given a wide meaning. It means "any individual, partnership, corporation, unincorporated co-operative or association, trust or other entity" -- see the definition in Article 2.1 of the agreement.

The BCCI Campaign Committee

10. It pertinent to keep in mind that the Campaign Committee is not a body corporate. It is -- as the description of the parties, the preamble and articles 3.1 and 7.1 of the service agreement each make clear -- an unincorporated association (or representative body) of former employees of BCCI. The circumstances in which it came into being are conveniently summarised in a briefing note prepared, I think, by one or other of the appellants in April 1996 in connection with a claim for reimbursement of expenses and remuneration following settlement of the Luxembourg appeal and the Staff Benefit Fund Litigation:

"BACKGROUND TO THE BCCI CAMPAIGN COMMITTEE

"Formation:

"1. The staff of BCCI had no formal representative body or association while the bank was in operation.

"2 Immediately following the sudden closure of BCCI in July 1991, a number [of] the staff in UK got together on an informal basis to protect the general interests of the former employees in the liquidation. This formed the basis of setting up of the formation of the BCCI Campaign Committee for Employees of BCCI (CC).

"3. Many clients/creditors affected by the closure of the bank approached the CC, and for a while, this expanded into a larger committee taking into account the interests of both the creditors and the employees. The formal name 'Committee Representing Employees and Creditors' was then adopted.

"4. However, after 3rd October 1991 when the majority of the employees were made redundant the committee once again focused on the issues mainly to ex-BCCI employees. The committee became known as the 'BCCI Campaign Committee'.

"Working Committee

1. As the CC has always remained informal in its structure so it did not elect any office bearers nor was it registered as an official body.

"2. The hardcore working committee had up to eight regular members at one time who were at the outset involved in campaigning and lobbying parliament to seek compensation for employees. However the numbers fluctuated as some of the working committee members could not devote time.

"3. Since 1993 the hardcore working committee consists of Messrs Raihan N Mahmud, Qaiser M Malik and Mohammed A Qayyum, all ex-BCCI staff. They have attended to staff concerns on full time basis, and in most have assisted the acting solicitors/professional in the Staff Benefit Fund litigation, Messrs Manches & Co and Hallewell Bunyard, as would be evidence by all correspondence and meeting notes.

"4. From 1991 to 1992 there was an additional working committee member (M A Saleem) who was actively concerned with the Staff Benefit Trust Funds litigation and the Luxembourg proceedings.

"Employee Numbers

"1. On 3 October 1991 majority of the 1100 employees in the UK who were made redundant due to the bank's closure gave their mandates to CC to represent staff concerns in the courts and with other bodies. However, the CC irrespective of the mandates held always attended to the concerns of all former BCCI employees affected by the bank's closure including those who contacted them from abroad.

"2. Currently, there are some 3,000 ex-BCCI staff on the CC mailing list. The bulk are in the UK. Others are ex-BCCI staff from Isle of Man, Gibraltar, Luxembourg, Germany, Spain, UAE, Yemen, Canada, Pakistan, Indian, Bangladesh, Sri Lanka, Hong Kong, Zambia, Middle East, etc. The numbers contacting the CC continue to expand.

"3. Over 300 former employees and their families have assisted individually, by providing guidance to solicitors and professional advisers to formalise their counter claims, particularly that of the Staff Benefit Fund.

"4. Additionally, some 126 Plaintiffs in the two separate Staff Benefit Trust Funds litigation in UK have given mandates to the CC to instruct the two concerned acting solicitors, Manches & Co and Hallewell Bunyard."

11. The service agreement was made by the three named individuals (members of "the hardcore working committee" described in that briefing note) as representatives of a larger association of ex-BCCI employees, the members of which are unnamed and (on the material available) unidentifiable. The position of individuals who contract on behalf of members of an unincorporated association is explained by the editors of Chitty on Contracts (29th Edition 2004) at paragraph 9-077, in a passage to which the judge referred. The named individuals are personally liable on the contract. Whether or not the other members of the association are (a) also liable on the contract and (b) under any obligation to indemnify the named individuals -- or to make contribution -- depends on the extent and terms of the authority which they have given to those individuals. In the present case, article 7.1 of the agreement contains an express warranty by the named individuals that they have "all requisite power...pursuant to mandate" to enter into the agreement. The other party to the agreement (Mr Hameed) was entitled to rely on that warranty of authority. It was not for him to enquire what arrangements the named individuals had made with the other members of the association for indemnity and contribution in the event that the contingent fee for which article V provided became payable.

The settlement

12. It is common ground that there was a settlement of the Luxembourg appeal and the Staff Benefit Fund Litigation on 1st November 1995. The settlement was achieved in conjunction with a settlement of other disputes relating to staff loans. The judge described the position at paragraph 50 of his judgment ([2005] EWHC 1150 QB):

"... on 1st November 1995 the liquidators offer of $50m to be paid to a trust for the benefit of the beneficiaries of the Staff Benefit Trust and of an unnamed third party to pay $20m into a trust to resolve disputes relating to the staff loan book on condition that the Staff Benefit Trust litigation and Luxembourg appeal were discontinued, together with the liquidators counterclaim against the Luxembourg appellants, was accepted by the Committee and the Luxembourg appellants and that in September 1996 both sums were received by trustees of independent trusts set up in the Cayman jurisdiction to administer them. The object of the written agreement of 22nd August 1995 was thus achieved."

The claim to the contingent fee

13. The claimant limits his claim in these proceedings to a fee of 2% on the $50 million paid by the liquidators. Plainly, he is correct to do so. Settlement of the staff loan book litigation was outside the purpose and object of the agreement, as defined by article 3.1. There was no evidence that he had, in fact, played any part in securing from the unnamed third party an agreement to pay the $20 million that was paid in settlement of that litigation. And, in any event, the fee was to be computed as a percentage of "the total sum received from the liquidators" -- article 5.2: a sum which, on any view, was limited to $50 million.
14. The fee payable under article V of the agreement was payable "on the successful achievement of the purpose of the agreement" -- article 5.1. There can be no doubt that that contingency was satisfied. As the judge pointed out: the purpose of the agreement -- as defined by article 3.1 -- was achieved on 1st November 1995. But there were three further contingencies, incorporated in the terms of article 5.2 of the agreement. The contingent fee payable was a percentage of the total sum received from the liquidators by "the CC or anyone on its behalf". The sum received must be "such sum as the CC agrees to accept." And the sum must be received "as a result of advice, assistance, negotiation and resources provided by Hameed as covered by the terms of this agreement".
15. The judge found as a fact that the $50 million paid by the liquidators in settlement of the Luxembourg Appeal and the Staff Benefit Fund Litigation was paid as a result of Mr Hameed's efforts. He reached that conclusion at paragraph 81 of his judgment:

"The only question is whether that settlement [of 1 November 1995] and not any other resulted from Hameed's efforts. That it did not do so only from his efforts is plain. The work of the Committee, the decisions of the liquidators and the offer by the unnamed third party all contributed. No deal could have been struck without any of them. For that reason Mr Chapman [on behalf of the defendants] rightly accepts that the test in a complex multi party negotiation such as this cannot be whether Hameed was the - let alone the only - effective cause of the settlement. It is enough that he was an effective cause. I have no doubt that he was. He judged what terms would ultimately prove acceptable to the Committee and advised them to abandon unrealistic or unattainable expectations. His discussion with Cihra [the Canadian lawyer acting for the liquidators] on 22nd September 1995 procured the offer of $50m which formed the basis for the settlement. He revived negotiations when they had been broken off. The component of the deal which he had brokered by those actions was a large and essential element of the package finally accepted. Without his efforts that settlement would not have been achieved when it was or on the terms that it was."

16. In reaching that conclusion the judge had the benefit of the evidence of Mr George Cihra QC, who had negotiated the settlement on behalf of the liquidators. He described Mr Cihra as a witness whose honesty and reliability was not in question. As the judge said (at paragraph 52 of his judgment) Mr Cihra's evidence provided powerful support for Mr Hameed's claim. Further, the judge observed at paragraph 53 of his judgment, that until "some time in 2000, the defendants believed and acknowledged that Hameed had earned his fee". He pointed out, at paragraph 62, that:

"Both Qayyum and Malik were active, knowledgeable participants in the negotiations which led to the settlement. I am satisfied that they knew in 1995 exactly what was going on and that their belief from then until 2000 that Hameed had brokered the settlement was founded mainly on their own knowledge of what had occurred. It too is powerful evidence in support of Hameed's case."

17. The judge found, also, that the sum of $50 million paid by the liquidators to the trustees of an Cayman Island trust (the Hexagon Trust) was received by "the CC or anyone on its behalf" within the meaning to be given to that expression for the purposes of article 5.2 of the agreement. He directed himself, correctly, that those words had to be construed "both against the factual matrix in which the agreement was made and in the context of the other terms of the agreement". At paragraph 21 of his judgment he said this:

"21. The factual matrix includes the following. The litigation to be settled was brought for the benefit of a large number of ex-employees of BCCI group companies. It was essential from the point of view of the liquidators that the settlement bound all relevant ex-employees. Settlement with and payment to the Committee could not achieve that end. The only means of doing so was by a court approved independent trust administered for the benefit of the ex-employees, and an order of the court under rules of the Supreme Court Order 15 Rule 13(4) or a similarly numbered and, I understand, similarly worded Cayman Islands rule. The Committee knew that this was so and themselves proposed payment into independent trusts - see, for example, their letter to Cihra of 6th July 1995."

And, after referring to the claim made in the draft statement of claim in the Staff Benefit Fund Litigation -- which was limited to a declaration that the liquidators were to restore $150 million to the Staff Benefit Trust out of the assets of the BCCI companies in their hands -- he went on to say this (at paragraph 23):

"Thus all parties to the agreement contemplated that it was at least very highly likely that all settlement monies, and certain that the bulk, would be paid to trustees and not to Committee or any agent or trustee holding the funds for the Committee beneficially."

18. It was against that background of fact that the judge concluded (at paragraph 25 of his judgment) that:

"The words 'or anyone on its behalf' cannot mean 'for the benefit of' the Committee because it was acting in a representative capacity. The meaning which most closely approximates to that which must have been intended was 'on behalf of the ex-employees and/or the Staff Benefit Trust represented by the Committee".

He rejected the submission, made on behalf of the defendants, that such a construction does not give proper effect to the words "the CC or anyone on its behalf" and that "at a minimum those word require receipt by a person or persons answerable to the Committee; alternatively controlled by the Committee". He observed that the difficulty with that construction was that it made the agreement wholly unworkable. On the basis of that construction, the purpose of the agreement set out in Article 3.1 could never have been achieved in such a way as to entitle the claimant to a fee under Article 5.1. Given that the whole object of the agreement was to secure Mr Hameed's assistance in return for a success fee that construction would give rise to absurdity.

The application for permission to appeal on ground 2

19. Ground 2 of the appellants' notice challenges the judge's conclusion that Mr Hameed negotiated the eventual settlement between the appellants and the liquidators. It is pointed out, correctly, that it was Mr Hameed's case that he had negotiated a $50 million settlement which was incorporated in the final $70 million settlement, but that the remaining $20 million had not been negotiated by him. It is said to be common ground that the appellants would not have accepted the $50 million settlement if it had not been for the additional $20 million; and that the $50 million payment and the $20 million payment were in settlement of two separate issues between the appellants and the liquidators. And it is said that the judge was wrong to find that the claimant had established that he had been "an effective cause of the settlement between the appellants and the liquidators in circumstances where the claimant's own case was that he had brokered only one element of the eventual settlement, and where the appellants had already rejected a settlement based on that single element".
20. The judge refused permission to appeal. Rix LJ, when granting permission to appeal on ground 1 (the effect of the words "or anyone on its behalf" in article 5.2) refused permission on ground two. He observed that it was not suggested that the judge was wrong to hold that the test was whether Mr Hameed's efforts had been an effective cause (rather than the -- or the sole effective cause) and he took the view that there was no real prospect of success on an appeal against what was essentially a finding of fact by the judge on the evidence at the trial.
21. The application for permission to appeal on ground 2 was renewed at the hearing of the appeal on ground 1. At the conclusion of the argument we indicated that we did not think it appropriate to grant that application. In my view a challenge on the basis of ground 2 would be bound to fail. I am content to accept that the settlement of the Luxembourg Appeal and the Staff Benefit Fund Litigation at $50 million would not have been achieved if it had not been for the third party offer to pay $20 million in settlement of the staff loan book claims. But that, as it seems to me, provides no answer to the claim to a contingent fee under the service agreement. The purpose and object of the service agreement was the settlement of the Luxembourg Appeal and the Staff Benefit Fund Litigation. That purpose was achieved. And, as the judge found as a fact, on the evidence which he reviewed in his judgment, that purpose was achieved with the assistance of -- or "as a result of advice, assistance negotiations and resources" provided by -- the claimant. It was no part of the claimant's role, under the agreement, to provide assistance in achieving a settlement of the staff loan book claims -- whether as a separate exercise or as part of an overall settlement. The claimant did what he was required to do under the terms of the agreement.

The appeal

22. I turn, therefore, to the appeal on ground 1. It is said that on a correct construction of Article 5.2 of the service agreement, no fee would become payable to the claimant unless and until a settlement sum negotiated by him had been paid "either to the Appellants or to a third party whom the Appellants can direct to pay a fee to [the claimant]". Because the settlement sum was in fact paid to an independent trustee to be held on discretionary trusts, the "trigger" for payment of the fee under Article 5.2 has not occurred.
23. I would reject that submission. The key to the interpretation of the words in Article 5.2 -- "the date that the CC or anyone on its behalf receives from the liquidators such sum as the CC agrees to accept" -- lies in the judge's finding (with which the appellants have no quarrel) that "it was at least very highly likely that all settlement monies, and certain that the bulk, would be paid to trustees and not to the Committee or any agent ... holding the funds for the committee beneficially". As the judge pointed out (at paragraph 21 of his judgment) the only way in which the liquidators could achieve a settlement which bound all relevant ex-employees was by the payment into an independent trust the terms of which were approved by the court. And it would have been fanciful to think that the liquidators would or could accept a settlement which did not bind all relevant ex-employees. Payment to trustees was plainly contemplated -- see the definition of "Person or Anyone" in Article 2.1. On a true analysis, payment to trustees was an inevitable pre-condition of a settlement with the liquidators.
24. Approaching the words in Article 5.2 on that basis the choice is between construing the phrase "anyone on its behalf receives" (i) in a way which enables the claimant to earn his contingent fee if he achieves a settlement on the only terms upon which a settlement could be achieved -- payment to trustees for the benefit of ex-employees (whether or not members of the Campaign Committee) -- or (ii) in a way which leaves it to the will of the Campaign Committee (or the named individuals) to decide whether or not the claimant should be paid for the fruits of his efforts. I put it in that way because it was wholly within the control of the Campaign Committee to decide whether or not to insist that the terms of settlement contain some provision for payment to the claimant out of the settlement monies; (subject always to the need to obtain the approval of the court). The claimant could not prevent the Campaign Committee from agreeing a settlement with the liquidators which did not contain such a term. It would be bizarre to construe article 5.2 in a way which denied the claimant the right to payment of fee which he had earned by his efforts because, in the event, the Campaign Committee decided to accept settlement terms which made no provision for payment of that fee out of the settlement monies. That cannot have been the intention of the parties. The phrase "anyone on its behalf receives" in article 5.2 of the service agreement must be construed so as to include the receipt by trustees of monies upon trusts for the benefit of the ex-employees whose interests the Campaign Committee claimed to represent in seeking an acceptable settlement with the liquidators in relation to the withdrawal of the Luxembourg Appeal and the Staff Benefit Fund Litigation. To construe the phrase in that way gives effect to the purpose of the agreement. The construction for which the appellants contend frustrates that purpose.
25. In my view the judge was write to reach the conclusion that he did. I would dismiss this appeal.
26. LORD JUSTICE KEENE: I agree.
27. SIR PETER GIBSON: I also agree.

Order: Appeal dismissed. The appellants are to pay the respondent's costs, assessed summarily in the figure of £19,000, including VAT. The sum of $685,000 is to be paid to the claimant within 28 days, subject to any further order, and parties other than the 1st and 2nd defendants can apply to a Master of the Chancery Division for any order in relation to that sum. Permission to appeal to the House of Lords refused.