ON APPEAL FROM THE HIGH COURT OF JUSTICE
MR DAVID DONALDSON QC
(SITTING AS A JUDGE OF THE HIGH COURT)
HC07 CO 2423
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE ELIAS
MR JUSTICE DAVID RICHARDS
| (1) MOYNUN ISLAM (2) MINERA KHATUN ISLAM
- and -
(1) SHAHJAHAN HOSSAIN MOHAMMAD AL-SAMI
(2) SALMA BEGUM
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Mr Timothy Sisley (instructed by Goldkorn Mathias Gentle Page LLP) for the Respondents
Hearing date: 12 January 2011
Crown Copyright ©
Mr Justice David Richards :
The alleged loan agreement and charge
"equitable mortgage by virtue of a loan of £200,000-00 to the registered proprietor Salma Begum to be secured on the property plus statutory interest at 8% per annum from the date of the loan."
"An agreement made on the 3rd day of April two thousand and two
Shahjahan Mohammed Al-Sami of 1, Great Eastern Street, EC2A 3EY (hereinafter called "The Lender" of the one part and (Saima Choudhury 104 Park Ave East Ham London E6 2SR (Title no EGL435989) called "The Borrower" of the other part.
Whereby it is agreed as follows:
The lender lends the sum of £200,000 (Two hundred pounds only), against the security on the Property known as 104 Park Avenue East Ham London E6 2SR (Title no EGL435989) at a statutory interest for an unspecified period.
The Borrower accepts the loan of £200,000 (Two hundred thousands pounds) from the lender at a statutory interest whereby the borrower agrees to provide security on the property known as 10 Park Ave East Ham London E6 2SR (Title no EGL435989).
Signed & delivered by The Lender
Signed & delivered by the Borrower
In the presence of: Name
"The Loan Agreement related to various sums which by 3rd April 2002 had either already been advanced or were in the contemplation of the parties to be advanced by our client to Ms Begum or to third parties on her behalf by way of loan to Ms Begum."
"(1) Monies due under a licence agreement. It is accepted by the Claimants that from around April 2001 Mr Momin ran a restaurant, named the "Masala Cuisine", at premises on the ground and basement floors of 1 Great Eastern Street. There is a dispute as to whether it was Mr Momin or his wife who ran the restaurant and whether the occupation ceased at the end of 2002 or on 31 March 2003. The premises were below the offices where Mr Al-Sami worked, and were owned by Proofasset Limited. Mr Al-Sami says that the occupation was based on a licence agreement dated 27 April 2001 which Proofasset entered into with Mrs Begum, and which provided for a payment of £1000 per week and various other sums including 70% of insurance premiums. Mr Al-Sami further says that by a Transfer Agreement dated 20 December 2001 the assets of Proofasset and in consequence the right to receive accrued or future monies under the licence agreement were transferred to Mr Al-Sami. The total alleged to be due under this head is £97,333.
(2) Borrowings by Mrs Begum. Mr Al-Sami claims that at various times he lent a total of £33,490 to Mrs Begum. A further £4,600 is said to have been disbursed on her behalf.
(3) Services to Mrs Begum. The balance of the £200,000 was said to be "more than accounted for" by Mr Al-Sami's invoices dated 21 August 2003 and 18 September 2003 to Mrs Begum and her husband for "professional fees"."
The parties' cases
"..arranged for her to give that charge (in fact she only signed a blank sheet of paper at his request) not so as to protect any genuine debt but saying that he would take a charge on her property pending resolution of the action against the Claimants, to protect her and her children as no one would be able to touch the property."
They pleaded that further, and in any event, there was no indebtedness of Mrs Begum to the appellant to which the loan agreement related or which was secured by the charge in his favour. This was advanced on two bases. First, none of the indebtedness on which the appellant relied in fact existed. This raised numerous issues of facts to which I will later refer. Secondly, and in any event, it fell outside the terms of the loan agreement and was not therefore secured by the charge.
"..It is admitted that some of the indebtedness included in the sum of £200,000 was incurred after 3 April 2002. The sum of £200,000 was identified on that date in recognition of existing indebtedness and in contemplation of the provision of further services and/or advances."
"(a) whether Mr Al-Sami has established the existence of the debts from Mrs Begum to himself, and if so
(b) whether, given their nature and creation, they are relevant "matrix" material to support the argument of Mr Al-Sami that they were the "loan of £200,000" referred to in the loan and security agreement."
"…the "loan of £200,000" had to be interpreted as referring to the past and future indebtedness identified in the letter of 13 June 2007 and relied upon in the present proceedings. For this purpose he sought to found on Mr Al-Sami's testimony that the parties had fixed a figure for the existing borrowings, had in mind a liability for rent and other sums both past and future, and then estimated a figure for other services which might be provided in the future in relation to the litigation."
As to this submission, the deputy judge said:
"52. I regard both the argument and the evidence as quite fanciful. It is wholly implausible that anybody, including these two parties, would have described or referred to this as the making of a loan of £200,000. Moreover, apart from some part of the alleged borrowings, any indebtedness, even on Mr Al-Sami's case, would have been to a person or entity other than Mr Al-Sami.
53. It follows from what I have found and concluded so far that there was no "loan of £200,000" made by Mr Al-Sami to Mrs Begum. That in itself is sufficient to deprive the alleged charge of any content and require judgment in favour of the Claimants."
"54. In these circumstances, it is not strictly necessary to determine how, when and why the document came into existence, and I will therefore deal with this aspect of the case somewhat more shortly than I might otherwise have done."
He referred to some of the evidence relevant to this, in particular the evidence of the appellant and Mrs Begum and of the handwriting experts called by the Islams and by the appellant.
"..A more important question is why the document was produced. On this point, I find assistance in some evidence given to me by Mrs Begum, which appeared to me wholly credible. She recounted that Mr Al-Sami had proposed that he would take a charge on her property as a means of protecting her home against possible execution by the Islams, and that she had replied that he should do what he thought best. That would account for the registration of the caution on 3 May 2002. It also provides a convincing explanation for the creation (probably at a later date) of the loan and security agreement as evidence of the mortgage to which the caution could be said to be referable. In purporting to create a charge in respect of a non-existent loan, the document – whether or not Mrs Begum's handwriting was forged – was no more than a lie addressed to a potential creditor. Whether Mr Al-Sami's motives were at that time entirely altruistic towards Mrs Begum, or whether even then he contemplated that he might use the document for his own benefit, is a question beyond the scope of these proceedings."
Grounds of appeal
Liability for rent
Liability for services
Liability for loans
"47. Mr Al-Sami has produced a number of receipts signed by Mrs Begum or her husband, and also a list of sums totalling £32,245 dated 23 October 2001. They either dispute their signatures or say that they were written on blank sheets of paper which have had text added later.
48. I regard the evidence presented by Mr Al-Sami as quite unsatisfactory. He told me that on each occasion he kept the original receipt or acknowledgment in a file dedicated to Mrs Begum. As an accountant he could be expected to have retained the entirety of such receipts and kept a running total. Nothing of the sort has been produced.
49. What is, however, clear is that these sums cannot possibly provide a basis for the suggestion that a loan of £200,000 was made by Mr Al-Sami as referred to in the loan and charge agreement.
50. In these circumstances, it is unnecessary for me to burden this judgment further with a discussion of each of these amounts and documents."
Consequences of the above findings
Construction of the loan agreement
"..It is wholly implausible that anybody, including these two parties, would have described or referred to this as the making of a loan of £200,000."
Validity of the loan agreement
Lord Justice Elias:
Lady Justice Arden: