England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
THE HON MR JUSTICE NEWEY

		Royal Courts of Justice Strand, London, WC2A 2LL
		08 /03/2012

Lord Justice Mummery:

Applications

1. There were two applications at the start of the hearing of this appeal from a possession order made by Newey J on 5 November 2010. Permission to appeal and a stay of execution were granted by Arden LJ on 20 April 2011.
2. The first application was by the respondent Bank of Scotland (the Bank) to set aside the order granting permission to appeal and to dismiss the appeal; alternatively, for a range of orders setting stringent conditions for the continuation of this appeal.
3. The second application was by Mr Azam Qutb (Azam). He is named in the Appeal Notice as the litigation friend of his mother, Mrs Mona Qutb. She is named as the appellant. She was born in 1924 and suffered from Alzheimer's disease for a number of years. From about 2004 she lived in the USA with her daughter. Azam applied for an adjournment of the respondent's application and of the hearing, so that he could obtain legal advice and representation for the application and the appeal.

The proceedings

4. I will trace, as briefly as possible, the long and complicated history of the litigation in order to explain the present predicament. As Newey J said in the opening words of his judgment:-

"1. The case raises a familiar question: which of two innocent parties is to bear loss caused by the wrongdoing of a third party?"

5. In March 2002 the Bank brought these proceedings in the Brentford County Court for possession of residential property at 30 Drayton Road, Ealing W13 (the Property). It is now estimated to be worth £430,000.
6. The first defendant was Mr Afzaal Hussain. He had bought the Property from Mrs Qutb in 2001. He charged it to the Bank by a charge dated 29 January 2001 to secure a loan of £145,000. Later in 2001 Mrs Qutb (acting by Azam as her litigation friend) began proceedings against Mr Hussain, alleging that the sale was at an undervalue, had been procured by undue influence and was an unconscionable bargain. A plea of non est factum was added later.
7. In May 2002 the Bank's action was transferred to the High Court, Chancery Division. It was then stayed pending the trial of Mrs Qutb's 2001 action against Mr Hussain. Mr Hussain was later convicted of conspiracy to defraud Mrs Qutb by dishonest means in relation to the Property, and her bank accounts and stocks and shares. He was sentenced to 5 years imprisonment. Confiscation and compensation orders were made against him on the basis of his conviction. Similar orders were made against his wife. In 2009 a receiver was appointed over Mr Hussain's property to enforce the confiscation order.
8. In 2005 Mr Nicholas Warren QC, sitting as a Deputy High Court Judge, tried Mrs Qutb's action, to which the Bank had been joined as a party. He made an order setting aside the transfer by Mrs Qutb and for the Property to be transferred back to her, subject to the charge. He also ordered that the Bank's costs be added to its security.
9. Following that decision the Bank's action for possession was revived and the stay was lifted. Mrs Qutb was added as an additional defendant. She claimed that she had an overriding interest in the Property. The question thus arose whether the charge over the Property granted by Mr Hussain to the Bank was binding on Mrs Qutb.
10. In the conduct of his mother's defence to the Bank's action, Azam acted as her litigation friend under CPR 21.1, as he had done in her action against Mr Hussain. On 4 May 2006 Azam was appointed her receiver by the Court of Protection, which gave him authority to carry on the litigation. As an existing receiver he became a deputy on 1 October 2007 by Schedule 5 of the Mental Capacity Act 2005 with all the functions that he had as receiver. An order of the Court of Protection dated 24 November 2009 stated that Azam remained authorised to act as litigation friend for his mother and to progress the litigation.
11. As litigation friend, Azam gave instructions to solicitors, Prince Evans, at a time when his mother was in receipt of legal aid, but that was withdrawn in October 2009. Since then Azam has enlisted some pro bono advice and assistance, but, for most of the time, he has acted in person, as is currently the case.
12. The Bank made an unsuccessful attempt to strike out the defence and to obtain summary judgment against Mrs Qutb. The trial of the Bank's action before Newey J, which took place in late 2010 after a number of adjournments on the application of Azam was conducted in the belief, which was positively encouraged by Azam, that his mother was alive and living with her daughter in the USA and that he was acting as her litigation friend. As appears from the judgment, Newey J was clearly proceeding on that understanding.
13. In paragraph 7 of a witness statement dated 28 February 2010, Azam said:-

"I am the son of Mona Qutb and am acting as her litigation friend in this action. My mother suffers from Alzheimer's disease and I am appointed as her Deputy by the Public Guardianship Office since 2006."

14. Similar statements about his mother's mental condition were made by him in paragraph 1 of a witness statement dated 12 July 2010 served for the purpose inter alia of obtaining an adjournment of the trial and in a skeleton argument prepared in July 2010 by pro bono counsel for his application to adjourn the trial. Mrs Mona Qutb was described as "not an ordinary applicant" and reference was made to "her unusually difficult circumstances." I suppose that it might be said that those statements were accurate up to a point, since Mrs Qutb had died in the USA on 1 January 2010 and would not, in those "unusually difficult circumstances", be "an ordinary applicant."
15. The transcript of evidence given at the trial shows that Azam continued this charade throughout the trial. He gave evidence in cross examination on 13 September 2010 that his mother "lives" in America (at an address which he considered it was unnecessary to disclose in court), "goes to a Day Centre every day for her illness" and "has been undergoing a regime of medical treatment that is unavailable to her in the UK." The post-judgment discussion was conducted on that basis.
16. Azam's explanation of, and his excuse for, his deception of Newey J and of the Bank were not convincing. He attributed his conduct to "errors in thought, in writing and speech." He claimed that he honestly did not know that his mother's death would affect the case in any way. He blamed the lack of legal representation. His sister told the court about his depression since their mother's death and about other health problems.
17. The judge made a possession order dated 5 November 2010 against Mrs Qutb. The order also declared that she did not have the overriding interest asserted in her counterclaim and that the Bank's rights as mortgagee were not subject to any right of hers to be the registered freehold proprietor free of the mortgage, or to occupy or possess the Property. The Bank's costs of that action, as of Mrs Qutb's action, were ordered to be added to the Bank's security.
18. In his judgment Newey J rejected the Bank's submissions that the matter of the charge was res judicata; that there was an issue estoppel as between Mrs Qutb and the Bank; that the judgment in her action operated to extinguish her claim by merger; and that her defence and counterclaim were an abuse of process. The judge found as a fact that she was in actual occupation of the Property when the charge was granted to the Bank.
19. However, the judge went on to hold that Mrs Qutb was bound by the Bank's charge on the basis of consent and estoppel. Notwithstanding her lack of capacity, the judge applied the principle that her rights were to be subject to those of the Bank, as she had so conducted herself as to give the Bank reasonable grounds for believing that she consented to the creation of a charge, which would have priority to her interest, and was thereby estopped from asserting a prior interest. See Paddington BS v. Mendlesohn (1985) 50 P& CR 244; Abbey National BS v. Cann [1991]1AC 56 at 94; Skipton BS v. Clayton (1993) 66 P & CR 223 at 228-9; and Thompson v. Foy [2009] EWHC 1076 (Ch) at para 142. Alternatively, the doctrine of estoppel by convention applied. Viewed objectively, Mrs Qutb and the Bank had a shared assumption that the Property would be vacant on completion and that she would be bound by the Charge, or the Bank made such an assumption and she acquiesced in it.
20. The appeal notice was issued by Azam as litigation friend on 3 December 2010 and amended on 2 February 2011. The grounds were drafted in terms clearly indicating that Mrs Qutb was alive. Thus, according to the amended Grounds of Appeal received in the Civil Appeals Office on 7 February 2011:-

" 6.3 It cannot be right that the Second Defendant [Mrs Qutb], as a consequence of reclaiming title to the property from the First Defendant [Mr Hussain] (and thereby bettering her position) finds herself in a worse position than that in which she previously stood before she recovered title to the property.

6.4 The Second Defendant would be content for an appeal to fail on this ground on the express basis that the Claimant will have to redeem the Second Defendant's prior right by paying her the first £80,000 of the net proceeds of the sale of the property."

21. Anyone reading those grounds submitted by Azam in February 2011 would be surprised to learn that by then Mrs Qutb had been dead for over a year.
22. The main grounds of appeal were that the judge was wrong in law to find that the consent and estoppel line of cases and that the doctrine of estoppel by convention applied, as it had been found in Mrs Qutb's action that she did not have capacity to enter into the transaction with Mr Hussain and could not be taken to have authorised the charge on her Property to the Bank, and lacked the capacity to acquiesce in any assumption made by the Bank as to the priority of its charge. Newey J should have found that, as she was in actual occupation, her right to receive the Property back overrode the Bank's charge.
23. This appeal was originally fixed for hearing for 2 days starting on 9 November 2011.
24. Shortly before the hearing, the Bank, having received an earlier tip off from Mr Hussain in August 2011, had established that Mrs Qutb had in fact died in the USA on 1 January 2010. Yet Azam did not inform the Bank or the court of her death. This was not just a case of oversight or failure to disclose in the belief that her death made no difference to the case. He positively represented that she was alive when he knew that she had died. The trial had gone ahead with the participation of Azam as his mother's litigation friend. Permission to appeal was granted on the same basis.
25. The hearing of the appeal was adjourned when the Bank informed the court of its news.
26. The Bank issued an application on 1 November 2011, which was amended and re-issued on 20 January 2012, to strike out the notice of appeal as an abuse of process and a nullity, alternatively to set aside the permission under CPR r.52.9(1) (b), or to make the permission conditional on payment of the Bank's costs of the trial pursuant to CPR r.52.3(7) and/or r.52.9(1) (c) and/or r.3.1(3) and/or r.3.1(5), or for security for costs to be provided in respect of the appeal pursuant to CPR r.52.10 and/or r25.15.
27. Adjournments of the appeal were requested by Azam, who is no longer in receipt of pro bono advice and representation (Mr Matthew Feldman of counsel has ceased to act on a public access basis) and is now acting in person, but were refused.
28. At the hearing Azam made a number of points, but, before he did so, he was alerted by the court to his right not to incriminate himself. He said that he has limited resources and cannot afford counsel to review the latest modifications to the Bank's case; that he needs time to get proper legal advice to consider the latest developments; that the Bank has made substantial amendments to the listed application and has made tactical moves, not for the first time; that the hearing bundles have been modified, some documents being removed and others added; that he does not have the modified bundles or details of the modifications; that an email had passed between the Bank's solicitors (Mr Twomey) and Azam's previous counsel (Mr Matthew Feldman) on 19 January 2012 about the contents of a 10^th witness statement of Mr Twomey.
29. After the hearing, while the court was putting its judgments into writing, a letter dated 1 February 2012 was received in the Civil Appeals Office from Azam. He enclosed a copy of Grant of Letters of Administration dated 30 January 2012 granted to him by the Principal Registry of the Family Division of the High Court to his mother's estate on the basis that on 1 January 2010 she died domiciled in Virginia USA intestate. He submitted the grant in support of a repeat of his application for an adjournment to obtain proper legal advice and in opposition to the Bank's application to strike out the appeal
30. The hearing was also attended by Azam's sister, Miss Azra Qutb, and by a neighbour of their late mother, Mr Rudolph Leuthold. The court allowed each of them to say what they wanted to.
31. Miss Qutb explained that her mother lived with her in Virginia until her death. She knew that her brother was conducting the defence of proceedings by the Bank in England, but she did not know that her brother had, after their mother's death, given false evidence and made untrue representations to the courts that their mother was still alive After her death Miss Qutb obtained letters of administration dated 13 October 2011 from the Commonwealth of Virginia, Circuit Court of the County of Arlington in relation to her mother's estate on the basis that her mother had died intestate on 1 January 2010. Miss Qutb told the court that the court officer there informed her that that was the correct form of grant of representation.
32. Mr Rudolph Leuthold told the court that, although he knew that there were legal proceedings about the Property, he did not know that Azam had given false evidence and made untrue representations to the court that Mrs Mona Qutb was still alive. Mr Leuthold's involvement with Mrs Qutb and her family was as a neighbour in Ealing. He had been asked to be executor of a will purported to have been made by her in late 1998 or early 1999 on a printed stationer's form of will leaving her estate to her two children. The will had not been revoked. Mr Leuthold said that he had been content for Azam to continue with the litigation against the Bank.
33. The first problem with the alleged will is that nobody in court was able to produce it, or a copy of it. The court was told that the will, which had been mentioned in evidence at the trial of Mrs Qutb's case and in the criminal proceedings, could not be produced, as it had been stolen along with other property belonging to Mrs Qutb.
34. The second problem was that, according to Mr Leuthold, the witness signature required was obtained from a next door neighbour, Mrs Julia Chester. In his written statements he made reference to the will being witnessed by Mrs Chester. Only when it was pointed that the Wills Act required two witnesses did Mr Leuthold say that he had also witnessed it. He has not attempted to prove the will which he has not produced and is unable to produce.
35. The Bank's debt is approximately £458,000, including costs of around £160,000. The Bank did not seek an order for costs against Mrs Qutb personally at the trial, having regard to its understanding about the state of her health at that time. It would have taken a different course, had it known the true position. If successful on this appeal, the Bank will face a shortfall.

Legal position

36. In my judgment, the legal position is as follows.
37. Azam ceased to be his mother's litigation friend on her death on 1 January 2010. There ceased to be a "protected party" within the meaning of CPR 21.
38. CPR 19.8(1) makes provision for the death of a party and for the appointment of a person to represent the estate of the deceased. No application has been made for such an order.
39. Neither at trial nor when he obtained permission to appeal did Azam have any standing to conduct litigation on behalf of his mother's estate. He has no legal standing to conduct this appeal on the basis of that permission, even though he has now obtained a grant of letters of administration to his mother's estate. The grant on 31 January 2012 has not retrospectively given him a capacity that he did not have to issue an appeal notice or to apply for and obtain the permission to appeal from Arden LJ on 20 April 2011: see Millburn-Snell & Ors v. Evans [2011] EWCA Civ 577; [2012]1 WLR 41, a decision on the nullity of proceedings commenced on behalf of an estate without first obtaining a grant of letters of administration. An administrator's title is derived solely from the grant of letters of administration, which does not retrospectively validate antecedent suits.
40. Azam should have informed the court, the Court of Protection and the parties of his mother's death, instead of carrying on with the litigation while positively asserting that his mother was alive. He actively and intentionally misled the court and the Bank and his pro bono advisers that his mother was alive. He did so in witness statements in February and July 2010; in evidence on oath at the trial in September 2010 saying that his mother was living in the USA, and in relation to obtaining permission for this appeal.
41. I would set aside the order granting permission to appeal on the basis that there is a compelling reason for so doing: CPR 52.9(2). Arden LJ would not have granted Azam permission to appeal, had she been informed, as she should have been, that Mrs Qutb had died and that Azam had no legal standing to act for her or for her estate.
42. I would strike out the appeal notice for the same reason. See CPR 52.9 (1)(a).
43. That does not mean that the order of Newey J is a nullity. Like all orders of the court, it stands and has effect, unless and until it is set aside on an application to the Chancery Division, which may impose conditions on granting such an order, or on an appeal to this court. So far as this court is concerned, the permission to appeal was obtained by the deception of a person without standing to launch an appeal or to obtain permission to appeal and, on the permission being set aside for those reasons, there is no appeal to be decided and so it must be dismissed.

Result

44. Things have happened and cannot be changed. The High Court, the Court of Appeal and the Bank cannot be undeceived. The fact that Mrs Qutb was swindled out of her house by Mr Hussain and that Azam and his sister may have suffered indirectly from Mr Hussain's fraudulent acts are no excuse for Azam's abuse of legal process.
45. There is no point in granting Azam's application for an adjournment that can change nothing regarding this appeal. This court is not dealing with the administration of his mother's estate. It is only dealing with the disposition of this appeal. As far as the appeal is concerned, the permission for it is set aside. In the absence of a permission, the appeal cannot be pursued and must be dismissed. There is no application before the court by any other person for permission to appeal against the order of Newey J, which therefore stands as a valid order, unless and until it is set aside.

Lord Justice Toulson:

46. I agree.

Lord Justice Kitchin:

47. I also agree.