England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		22 January 1999

The Hon Mr Justice Ferris

1. The plaintiff in each of the actions on which I am now giving judgment is Sheikh Ahmed Jaber Al-Sabah ("Sheikh Ahmed"). He is a son of the Emir of Kuwait. Both actions arise out of Sheikh Ahmed's claim that he has, by means of forged Transfers, been deprived of the ownership of two residential properties in London. The effective defendants are Mr. Fehmi Mohamed Ali, an Iraqi who has lived in London for more than twenty years, who benefited under the allegedly forged Transfers; Messrs Brain & Brain who, through a solicitor then employed by them, acted or purported to act as solicitors for Sheikh Ahmed and Mr. Ali in the transactions of which the forged Transfers were part; and the Land Registry, which made entries in the register of the title to the properties in question on the basis that the allegedly forged Transfers were genuine. Some other parties have also been named as defendants but the actions have not been pursued against them. I shall explain in due course the part which they played.
2. Sheikh Ahmed is normally residential in Kuwait, but he has made regular visits to this country, mainly to London, during the last twenty-five years or so. In about 1982 he made the acquaintance of Mr. Ali. Until about 1983 Sheikh Ahmed stayed in hotels during his visits here, but in that year he decided to purchase a flat for the use of himself and his family. He found what he considered to be a suitable flat at 55 Cumberland Mansions, Seymour Place, London W1, and agreed to buy it for £130,000. Mr. Ali assisted him by introducing him to a solicitor named John Brickwood who was then practising on his own account as Brickwoods. Sheikh Ahmed and Mr. Brickwood had a meeting together in a London hotel, probably at about this time. According to Sheikh Ahmed they never met again. Mr. Brickwood acted for Sheikh Ahmed in the purchase, which was completed by a Transfer dated 14th June 1983. There seems to be no doubt that the purchase price of £130,000 was paid by Sheikh Ahmed and he was duly registered as the proprietor of the flat, which I shall henceforth refer to as "55 Cumberland Mansions". At that date there was no mortgage on this flat.
3. According to Sheikh Ahmed he arranged that Mr. Ali would look after 55 Cumberland Mansions while he was not here. He would pay the liabilities in respect of the flat and when Sheikh Ahmed was in London he would refund to Mr. Ali the amounts which he had laid out, to which he added a supplement by way of recompense for Mr. Ali's services.
4. In 1984 Sheikh Ahmed decided to purchase another flat in London, while still retaining 55 Cumberland Mansions. He said that Mr. Ali identified as being suitable for his purposes a flat which was 4C Collier House, 163/169 Brompton Road, London SW7 ("4C Collier House"). Sheikh Ahmed agreed to purchase 4C Collier House for £128,000. Once again Mr. Brickwood acted for him in the purchase, which was completed by a Transfer dated 3rd August 1984, Sheikh Ahmed being subsequently registered as the proprietor. The whole of the purchase price was paid by Sheikh Ahmed without there being any mortgage. Sheikh Ahmed said that Mr. Ali managed 4C Collier House on his behalf in the same way as he managed 55 Cumberland Mansions.
5. Sheikh Ahmed said that after his purchase of a second flat he himself used to stay at 4C Collier House when he was in London and his family would stay at 55 Cumberland Mansions.
6. At some time in 1988 there was brought into existence a document which appears to be dated 25th April 1988 and which is expressed to be a general power of attorney given by Sheikh Ahmed to Mr. Brickwood. According to Sheikh Ahmed he knew nothing of this document until a copy of it was obtained from the Land Registry during the course of investigations which were made on his behalf in 1994 or 1995. Although the document appears to be signed by him, Sheikh Ahmed said that he had never signed such a document. His evidence in this respect derives support from Mr.D.G. Jones, a handwriting expert, who gave evidence that, subject to an element of caution arising from the fact that he was only able to examine photocopies, not original documents, it is unlikely that the signature on the purported power of attorney is a genuine signature of Sheikh Ahmed.
7. In 1988 Sheikh Ahmed, who said that he was again acting on the recommendation of Mr. Ali, decided to purchase a third flat. This was 380 The Water Gardens, London W2 ("380 The Water Gardens"). Sheikh Ahmed agreed to purchase this flat. Few of the conveyancing details relating to this purchase are available, but it seems that the purchase was completed on 21st November 1988. Part of the purchase price was borrowed from National Home Loans Corporation on the security of a mortgage over 380 The Water Gardens which bears that date, the balance of the purchase price being paid by Sheikh Ahmed. Once again Mr. Brickwood acted for Sheikh Ahmed. Sheikh Ahmed said that 380 The Water Gardens was purchased as an investment. Mr. Ali was to manage it on his behalf and select appropriate tenants. The monthly mortgage instalments were to be paid out of Sheikh Ahmed's London bank account under direct debit arrangements. Other outgoings were to be paid out of the rent received, so far as such rent was available. Mr. Ali was to account to Sheikh Ahmed from time to time, when he would be recompensed for any excess of expenditure over income.
8. As is well known Iraq invaded Kuwait at the beginning of August 1990 and remained in occupation of it until the end of February 1991. During this period the Emir of Kuwait and his family, including Sheikh Ahmed, left Kuwait and lived in Saudi Arabia. For some time, although it is not clear how long, Sheikh Ahmed was unable to visit London. He was undoubtedly in London again in 1994, when he said that Mr. Ali gave him documents purporting to be accounts of the receipts and outgoings for the three flats for various periods down to about May 1994. These are of great importance and I shall come back to them.
9. In March 1995 Sheikh Ahmed received by fax in Kuwait a letter, written in Arabic and signed by a person who was unknown to him, warning him that Mr. Ali had been defrauding him. Sheikh Ahmed said that he took no action on receiving this letter, because he saw no reason to distrust Mr. Ali. About a month later, on 21st April 1995, Sheikh Ahmed received a second letter from the same informant, warning him of Mr. Ali's dishonesty. He decided to investigate matters. He said that he telephoned Mr. Ali and asked him for an up to date account of the income and outgoings for the flats. About ten days later Mr. Ali informed him that everything was ready. Sheikh Ahmed said that he would send a friend to London to collect the account from Mr. Ali. He did send a friend to London. He also came here himself at the same time, although he did not tell Mr. Ali of this. The friend met Mr. Ali and reported back to Sheikh Ahmed that Mr. Ali had said the accounts were not ready after all. This raised Sheikh Ahmed's suspicions still further and he instructed a solicitor to make investigations concerning his properties in London. These investigations revealed that there had been a number of dealings with 55 Cumberland Mansions and 4C Collier House which, according to Sheikh Ahmed, were previously unknown to him.

Dealings with 4C Collier House

10. So far as 4C Collier House is concerned it was ascertained that in June or early July 1988 National Westminster Bank Plc applied to the Land Registry to register a mortgage over this property. Very little is known about this mortgage except that on 12th July the Land Registry seems to have asked the Bank to lodge a certified copy of the general power of attorney granted by Sheikh Ahmed. From this it appears that the mortgage had been executed by Mr. Brickwood in exercise of the purported power of attorney I have already mentioned. The Bank replied by a letter dated 19th August enclosing

"a fresh mortgage dated 11th August 1988 together with a certified photocopy which should substitute the mortgage document which you hold which has been executed incorrectly"

11. In response to this the Land Registry asked for evidence that the donor of the power executed it after being told of its contents and purport. This requisition was made in accordance with the Land Registry's usual practice when asked to act upon documents executed in foreign (i.e. non-Roman) characters, which was the case with the signature on the purported power of attorney. It was passed on to Mr. Brickwood who wrote direct to the Land Registry on 7th December saying

"We act generally for Ahmed Jaber Al-Sabah in connection with his affairs in London and indeed acted on the acquisition of this property for our client.

Our client lives generally in Kuwait and is only occasionally in London visiting this or one of his other properties in the UK.

In the circumstances, to save unnecessary problems where documents needed to be executed quickly, our client himself suggested that he wished to empower the undersigned to execute documents on his behalf. The matter was discussed with him fully and the Power of Attorney which has been disclosed to you was duly executed.

In these circumstances we assume that the matter is not open to any question. We should mention that our client writes and understands English to a good standard but he normally signs documents with his Arabic signature."

12. The mortgage to National Westminster Bank Plc was, however, never registered. On 21st December 1988, the Bank wrote to the Land Registry saying that the property was being re-mortgaged to Duncan Lawrie Limited and withdrawing its application for registration. An "all moneys" Legal Charge in favour of Duncan Lawrie Limited and dated 12th January 1989 was subsequently executed by Mr. Brickwood as attorney on behalf of Sheikh Ahmed.
13. There was no evidence before me about what happened to the £50,000 apparently borrowed from National Westminster Bank. Nor was there evidence, beyond that relating to the amount later repaid to Duncan Lawrie which I shall come to, to show how much was borrowed from that source. Presumably it included enough to repay National Westminster Bank, whose mortgage was treated as being discharged. Whether there was more, and if so what became of it, remains obscure.
14. The investigations carried out on behalf of Sheikh Ahmed further revealed that there had been brought into existence a Transfer dated 11th May 1990 by which Sheikh Ahmed expressed himself to transfer 4C Collier House to Mr. Ali in consideration of £300,000. This transfer appears on its face to have been executed by Sheikh Ahmed himself in the presence of a witness. It has also been executed by Mr. Ali in the presence of Mr. Brickwood. Sheikh Ahmed denied all knowledge of this Transfer and, as will appear, these proceedings were commenced on the basis that it was a forgery. It is convenient, therefore, to mention at once that Mr. Ali has formally admitted that he signed Sheikh Ahmed's name on the Transfer. This admission was made in the form of answers to interrogatories in which Mr. Ali said that he signed Sheikh Ahmed's name at the offices of Mr. Brickwood.
15. In fact by May 1990 Mr. Brickwood had become employed by Messrs Brain & Brain at their London office. The address given by Mr. Ali as that of the office where he signed Sheikh Ahmed's name is the London office of Brain & Brain. It is admitted by Brain & Brain that they, acting by Mr. Brickwood, were instructed to act on behalf of Sheikh Ahmed and Mr. Ali in this transaction. The proceedings have been conducted on behalf of Brain & Brain on the basis that their instructions to act on behalf of Sheikh Ahmed came from Mr. Ali, who was Sheikh Ahmed's agent for the purpose of giving such instructions.
16. There was no direct evidence whether or not the consideration of £300,000 referred to in the Transfer dated 11th May was ever paid. Sheikh Ahmed denied having received it. Indeed he denied all knowledge of the Transfer and said that he never sold 4C Collier House to Mr. Ali. Moreover the entries in Brain & Brain's ledger which I shall mention in a moment strongly indicate that Sheikh Ahmed personally received nothing in respect of the apparent sale beyond the discharge of the charge in favour of Duncan Lawrie which on the face of the title was Sheikh Ahmed's liability, although he denies that it was binding on him.
17. There was also brought into existence on 11th May 1990 a Legal Charge whereby Mr. Ali, as the owner of 4C Collier House by virtue of his supposed purchase, charged 4C Collier House to Leamington Spa Building Society to secure a loan of £250,750. In due course Brain & Brain submitted the Transfer and the Legal Charge to the Land Registry for registration and Mr. Ali was duly registered as proprietor of 4C Collier House, subject to the Legal Charge.
18. Although Brain & Brain's files in connection with these and other transactions undertaken on behalf of Sheikh Ahmed and Mr. Ali have not been found (they are said to have been handed over to a firm of solicitors named Georgiou Nicholas which was later instructed by Mr. Ali, but cannot be traced by that firm) Brain & Brain have produced a computer print-out of certain of their ledger entries. This print-out appears to have been generated in December 1992. I understand that the original ledger entries have now been deleted from the computerised records. The print-out identifies Brain & Brain's client as Sheikh Ahmed and describes the transaction to which the entries relate as "Purchase of 380 The Water Gardens". This is clearly an erroneous description of the transaction as the entries relate for the most part to 1990 and the purchase of 380 The Water Gardens had been completed in November 1988.
19. The entries recorded in the print-out begin with a credit of £248,743.75 on 8th May 1990. This is clearly the advance made by Leamington Spa Building Society. A number of outgoings are then recorded, of which the most significant are payments of £189,696.05 to Duncan Lawrie Ltd and £51,168.09 to Lloyds Bank Limited. The payment to Duncan Lawrie Ltd is obviously the amount payable on redemption of the Legal Charge which that company held over 4C Collier House. It is not clear what the sum paid to Lloyds Bank was for. The print-out describes it as "Redemption". The Land Registry have been able to produce a copy of a letter dated 14th May 1990 from Lloyds Bank to Brain & Brain confirming the receipt of £41,168.09 (not £51,168.09 as stated in the print-out) and enclosing "Land Registry Search Certificate (Form 94D) expiring 28th May 1990". Lloyds Bank confirmed that its protection under this certificate was now waived. From this it seems that Lloyds Bank had been in the process of taking security over 4C Collier House but had gone no further after the money due to it was repaid.
20. Most of the remaining entries recorded in the print-out are in respect of expenses of the kind that one would expect to be incurred in a conveyancing transaction of this kind. The sum remaining in the hands of Brain & Brain as at 17th July 1990 was a mere £333.68. Thereafter there were some more small receipts and payments, producing a balance of £458.31 as at 31st August 1992. There was nothing to show how, if at all, this was disposed of.
21. Mr. Ali soon defaulted on the payments due from him under the Legal Charge. At some stage the Leamington Spa Building Society was absorbed by the Bradford and Bingley Building Society. That Society took possession of 4C Collier House as mortgagee and on 25th June 1993 it sold 4C Collier House as mortgagee for £168,000. The purchaser was a company named Lange Enterprises Ltd.

Dealings with 55 Cumberland Mansions

22. The available documentation shows that on 1st February 1988 a Panamanian corporation named Alsabahia Incorporated ("Alsabahia"), which was the freehold owner of 55 Cumberland Mansions, issued a writ against Sheikh Ahmed as defendant claiming forfeiture of the lease of 55 Cumberland Mansions on the ground of non-payment of service charges amounting to £7234.81. Mr. Brickwood, who was then still in practice on his own account, acknowledged service on behalf of Sheikh Ahmed. On 12th April 1988 he served a defence and counterclaim putting in issue the claim in respect of the service charge and counterclaiming in respect of alleged breaches of the landlord's repairing obligations, which were said to have resulted in the property being damaged by the incursion of water on a number of occasions. After Alsabahia had taken proceedings under Order 14 the action was disposed of by a consent order under which it seems that the whole of the unpaid balance of the money claimed by Alsabahia was agreed to be due. It is not clear whether it was in fact paid. There is correspondence which indicates that in February 1989 the representatives of Alsabahia were pressing Mr. Ali for an unpaid balance of £2850. Whether he paid it or not is unknown. It is also unclear how much, if anything, Sheikh Ahmed knew about this litigation.
23. The next event revealed by the investigations made on behalf of Sheikh Ahmed was that on 3rd October 1990 Brain & Brain, acting by Mr. Brickwood, applied to the Land Registry for the issue of a replacement Land Certificate in respect of 55 Cumberland Mansions. The application was supported by a statutory declaration made by Mr. Ali in which he said that the original Land Certificate and accompanying documentation had been left behind in Kuwait by Sheikh Ahmed at the time of the Iraqi invasion and had since been lost or destroyed.
24. It also appears that at some time in October 1990 Mr. Ali applied to the Town & Country Building Society for a mortgage loan on the security of 55 Cumberland Mansions. He represented that he was purchasing 55 Cumberland Mansions from Sheikh Ahmed at the price of £266,000 and he sought an advance of £199,500. On 31st October 1990 the Town & Country Building Society offered an advance of £195,000 and this was accepted by Mr. Ali on 8th November.
25. There was then brought into existence a Transfer dated 15th November 1990 by which Sheikh Ahmed was expressed to transfer 55 Cumberland Mansions to Mr. Ali in consideration of the payment of £266,000. The Transfer appears on its face to be signed by Sheikh Ahmed himself in the presence of a witness. However, in the answers to the interrogatories already mentioned, Mr. Ali has made the same admissions in respect of the signature of this Transfer as he made in respect of the signature of the earlier Transfer of 4C Collier House. Brain & Brain, in the shape of Mr. Brickwood, again acted or purported to act as solicitors for both Sheikh Ahmed and Mr. Ali in the supposed sale and purchase, their instructions to act on behalf of Sheikh Ahmed coming from Mr. Ali as before.
26. On 15th November 1990 Mr. Ali executed a legal charge over 55 Cumberland Mansions to secure a loan of £195,000 provided by Town & Country Building Society. Brain & Brain subsequently applied to the Land Registry for registration of the Transfer and Legal Charge and in due course Mr. Ali was registered as the proprietor of 55 Cumberland Mansions subject to the Legal Charge in favour of Town & Country Building Society.
27. There is the same paucity of information in respect of the financial aspects of this transaction as in the case of 4C Collier House. Once again the main source of such information as exists is the print-out of certain ledger entries of Brain & Brain. This print-out names the client as Sheikh Ahmed and describes the matter as "Miscellaneous". It records the receipt by Brain & Brain of the sum of £194,990 on 16th November 1990. This must be the net amount of the advance made by Town & Country Building Society. The major disbursements are of £145,000 to "Arab Bank Plc Money to go to Customers a/c"; £7800 to "Commercial Bank of London Credit to Customers Account"; and £16,895 to "Leamington Spa Building Society Payment of Mortgage Areas" (sic). The last of these is clearly a payment in respect of the mortgage on 4C Collier House. There was nothing to show who was the holder of the accounts to which the payments to Arab Bank Plc and Commercial Bank of London were made.
28. As in the case of 4C Collier House, Mr. Ali did not comply with his obligations under the mortgage of 55 Cumberland Mansions. Town & Country Building Society merged with Woolwich Building Society and on 11th May 1994 the latter sold 55 Cumberland Mansions as mortgagee in possession to Alsabahia, the freehold owner, at the price of £128,000.

Commencement of Proceedings

29. Sufficient information was obtained within a day or so of Sheikh Ahmed instructing solicitors to make inquiries on his behalf to cause those representing him to commence proceedings. On an ex parte application made on 19th May 1995 Carnwath J granted a Mareva injunction against Mr. Ali. The writ in the first of the actions which is now before me was issued on 22nd May. When the writ was issued the defendants were Mr. Ali and Lange Estates Ltd and Alsabahia, the purchasers of 4C Collier House and 55 Cumberland Mansions respectively. Much later, on 7th January 1998, the writ was amended by adding the Land Registry as a defendant. It was subsequently accepted on behalf of Sheikh Ahmed that he was unlikely to succeed in upsetting the title of Lange Estates and Alsabahia, both of which appeared to have purchased in good faith and without any notice that the Transfers in favour of Mr. Ali were forgeries. The proceedings against these two defendants were discontinued pursuant to orders made on 11th February 1998. Sheikh Ahmed consented to an order under which he was to pay the costs of Lange Estates, which were to be taxed if not agreed. He also consented to an order that he pay the sum of £10,000 to Alsabahia in respect of its costs.
30. On 9th May 1996 a second action was commenced on behalf of Sheikh Ahmed. The defendants named in the writ in the second action are Mr. Brickwood, Brain & Brain and Georgiou Nicholas. Long before this writ was issued Mr. Brickwood had left Brain & Brain and gone to Australia where, apparently, he remains. The proceedings have never been served on him. The writ was, it seems, served on Georgiou Nicholas, but no claim against that firm was particularised in the statement of claim and that firm has taken no part in the proceedings, which were discontinued as against it by notice served on 11th March 1997. The only effective defendant in the second action is thus Brain & Brain, against whom the claim is brought on the basis that they acted negligently as solicitors to Sheikh Ahmed.
31. Two other matters need to be noted. First Brain & Brain have served a third party notice on Mr. Ali claiming that, if they are liable to Sheikh Ahmed, they are entitled to be indemnified by Mr. Ali, who instructed them to act on behalf of Sheikh Ahmed and thereby warranted that he had authority to do so. On 15th June 1998 an order was made that the third party notice should stand as the statement of claim, that Mr. Ali should serve a defence by 13th July and that the question of Mr. Ali's liability to indemnify Brain & Brain should be tried at the trial of the main action.
32. Secondly there is an issue about how Sheikh Ahmed's claims against Brain & Brain on the one hand and against the Land Registry on the other interact with each other. The claim against the Land Registry is based upon Section 83(2) of the Land Registration Act 1925 (as substituted for the original provision by Section 2 of the Land Registration Act 1997). Under this subsection

"Where an error or omission has occurred on the register, but the register is not rectified any person suffering loss by reason of the error or omission shall, subject to the provisions of this Act, be entitled to be indemnified".

If Sheikh Ahmed satisfies me that a mistake or mission has occurred in the register by reason of the registration of the Transfers in favour of Mr. Ali and the subsequent dealings, the abandonment of the claims against Lange Estates and Alsabahia will prevent the register being rectified against them. Sheikh Ahmed thus seeks an indemnity from the Land Registry under this subsection. The Land Registry contends that Sheikh Ahmed's claim against Brain & Brain must be taken into account when ascertaining the amount payable under this indemnity, which will only extend to so much of the loss suffered by Sheikh Ahmed as is not recovered from Mr. Ali or Brain & Brain.

The successive adjournments of the trial

33. I must now deal with the difficulties which have arisen in bringing these actions to trial. The actions were originally due to be heard by me on Monday 16th February 1998. On 10th February the solicitors who had hitherto acted for Mr. Ali came off the record and Mr. Ali gave notice of his intention to act in person. Almost immediately he approached the court seeking an adjournment of the trial on the ground of his ill health. He does not appear to have given notice of this desire to any of the other parties, but when I looked at the court file immediately before the hearing on 16th February I understood that a formal application for an adjournment was likely to be made by Mr. Ali. Another event then intervened. It was a time of tension in the Middle East and air strikes against Iraq were being threatened. Fearing retaliation from Iraq against Kuwait, Sheikh Ahmed informed his solicitors on 13th February that he was unable to leave Kuwait to attend trial. His solicitors therefore prepared an application for an adjournment on his behalf, apparently in ignorance of the similar application which Mr. Ali had indicated to the court that he wished to make. I heard the application on behalf of Sheikh Ahmed when the case was called on 16th February. It was opposed by the representatives of Brain & Brain and the Land Registry. Mr. Ali was not himself in court but his nephew, a Mr. Abdul, asked to speak on his behalf. Mr. Abdul sought to take advantage of the situation by joining in the opposition to the adjournment sought on behalf of Sheikh Ahmed. Presumably he hoped that if the application was refused Sheikh Ahmed would have to abandon his case because he was not here to give evidence in support of it and Mr. Ali's own professed inability to attend court would have no adverse consequences. I took the view that an adjournment ought to be granted and directed that the trial should take place on a later date to be fixed in the usual way.
34. The date subsequently fixed as the new date for the trial was 27th April 1998. However in the middle of March Sheikh Ahmed's solicitors were informed that Mr. Ali had undergone surgery and would need at least eight weeks in which to recuperate. The trial date was then vacated by agreement.
35. The solicitors who had previously represented Mr. Ali came back on to the record on 27th March. Subsequently the trial was re-fixed to commence on 15th June. However at the end of May it was suggested on behalf of Mr. Ali that he would not be well enough to attend court on the date fixed. Mr. Ali was examined both by his own doctor, who reported that he was unfit to attend court, and by a doctor nominated on behalf of Sheikh Ahmed, who reported that he was fit. There was no agreement about vacating the new trial date, so the actions were listed for hearing by Potts J, sitting as a Judge of the Chancery Division, on 15th June. On that date all the other parties, including Sheikh Ahmed, were present in court, but neither Mr. Ali nor his solicitors were there. Faced with this position Potts J adjourned the trial once more to a new date to be fixed. On 24th June Mr. Ali's solicitors once more took their name off the record and Mr. Ali gave notice of acting in person.
36. The trial date which was then fixed was Monday 26th October. During the intervening period the solicitors for Sheikh Ahmed communicated with Mr. Ali's solicitors on a number of occasions, emphasising that the trial must proceed on 26th October and indicating that any further request for an adjournment would be strenuously resisted. A day or so before the date fixed for the trial Mr. Ali withdrew his instructions from his solicitors. On Friday 23rd October Mr. Abdul applied on behalf of Mr. Ali to Rattee J, as judge in charge of the list, for an adjournment on the ground that Mr. Ali was again seriously ill. The application was supported by a brief certificate from Mr. Ali's doctor, who provided a second, somewhat more detailed, report on 23rd October. Rattee J declined to grant an adjournment but said that the application might be renewed before the trial judge at the beginning of the trial, by which time it was expected that further medical evidence would be available.
37. On Monday 26th October the trials were again listed for hearing before me. Mr. Abdul renewed his application for an adjournment. I was also shown a much more detailed report than either of those provided by Mr. Ali's doctor. This was given by Dr Stuart Rosen, the doctor nominated by Sheikh Ahmed, who had examined Mr. Ali on 23rd October. He expressed firm opinions which were in important respects at odds with those expressed by Mr. Ali's doctor. Having considered this material I refused the application for an adjournment and directed that the trial must proceed. Soon afterwards Mr. Abdul left the court and neither he nor Mr. Ali himself took any further part in the proceedings.
38. I did not, therefore, hear any evidence from Mr. Ali. I also heard nothing from Mr. Brickwood who, as I have said, is in Australia and with whom little or no contact has been made. The court was thus denied the opportunity to hear the accounts of two of the three most important actors in the events with which it is concerned. The third actor, Sheikh Ahmed, did give evidence, but he was a most unsatisfactory witness, as I shall explain. I am therefore even more dependent than usual on the documentary material, which is itself somewhat meagre, in order to decide what happened.

Liability of Mr. Ali

39. While Mr. Ali has admitted that he wrote the signature of Sheikh Ahmed on the Transfers in favour of himself, this does not amount to an admission of the claim against him. Mr. Ali's pleaded Defence is largely negative in character, putting in issue the material averments in the Statement of Claim. But in two respects the Defence advances a positive case. First Mr. Ali alleges that he was the donee of a power of attorney granted by Sheikh Ahmed. Secondly he claims that everything he had done had been done with the express authority of Sheikh Ahmed. While Mr. Ali has not himself attended to give evidence in support of either of these assertions or called other witnesses to do so, I do not think that these assertions can simply be disregarded. The burden of proving his case lies upon Sheikh Ahmed and as the allegations which he makes against Mr. Ali are serious allegations involving forgery and fraud the burden is a comparatively heavy one, albeit that it is necessary for the court to be satisfied only on the balance of probabilities, not beyond reasonable doubt.
40. That being said, I do not think that the case for Sheikh Ahmed faces much difficulty in respect of the suggestion that there was a power of attorney in favour of Mr. Ali. There is nothing to suggest that such a power was ever granted. Mr. Ali did not expressly purport to execute any document as Sheikh Ahmed's attorney. Moreover if such a power of attorney had been brought into existence the assistance of an English solicitor would almost certainly have been required. The only solicitor who is suggested to have had any involvement in the matter was Mr. Brickwood, but he himself claimed to be the donee of a power of attorney granted by Sheikh Ahmed. Whether or not Sheikh Ahmed's signature on that power of attorney is genuine, it seems certain that Mr. Brickwood prepared the document. If this be right, it seems most unlikely that he would have prepared another power of attorney in favour of Mr. Ali. In any event it is Mr. Ali who has asserted the existence of such a power and he has made no attempt to prove his assertion.
41. The assertion that Sheikh Ahmed gave Mr. Ali a more general, informal, authority to act on his behalf is, however, more difficult to evaluate. To a large extent this depends upon Sheikh Ahmed's own evidence and he was not an impressive witness. His command of English does not appear to be great and he gave evidence through an interpreter. This, of course, is not a matter of criticism. But one would expect a person of the standing and substance of Sheikh Ahmed to be able, through an interpreter, to give clear answers to straightforward questions about his affairs. Sheikh Ahmed could not do this, except in relation to the specific matters which lie at the heart of this case on which he had, no doubt, prepared himself. I am sure the problem did not lie with the interpreter, who appeared to be competent and was undoubtedly doing her best, but who seemed to have difficulty at times in making Sheikh Ahmed understand the question and herself understanding his answer. Sheikh Ahmed's evidence was vague or even evasive on a number of matters where one would expect him to be able to give clear answers. He seemed at times to be trying to distance himself from the mortgage of 380 The Water Gardens, although the mortgage payments were made out of his own bank account under arrangements which he must have put in place himself. He was vague about the number of his visits to London and their timing. He gave no precise account of the extent to which he gave Mr. Ali authority to act on his behalf, although it is clear that Mr. Ali did have some authority and Sheikh Ahmed said he had power to do what was necessary. He was also vague about the extent to which Mr. Ali was expected to, or did in fact, consult him about lettings. He was uncertain about the extent to which he made Mr. Ali account to him. He insisted that he always had plenty of money available to pay his liabilities, notwithstanding evidence that outgoings in respect of his properties were unpaid and that his bank at one time declined to honour the direct debit mandate in respect of the mortgage payments due to National Home Loans Corporation because his account was overdrawn. He gave no satisfactory explanation of a letter which he wrote to Mr. Ali, apparently in the late 1980's, apologising for his failure to pay money due to Mr Ali and saying (as translated)

"God only knows how I managed to get this sum. God willing the rest of the sum will be delivered to you shortly."

42. I have therefore a great deal of hesitation about accepting the truth of matters which depend only on the oral evidence of Sheikh Ahmed, even though that evidence was uncontradicted by the evidence of any other witness. Nevertheless I have reached the conclusion that Mr. Ali did not have the authority of Sheikh Ahmed to carry out the transactions in 1990 under which the title to 4C Collier House and 55 Cumberland Mansions was apparently transferred from Sheikh Ahmed to Mr. Ali. This conclusion is not dependent only on my view of Sheikh Ahmed's oral evidence but on the following facts and considerations each of which I find cogent in itself and, in conjunction with each other, seem to me to leave no room for any other conclusion.

(1) Mr. Ali has admitted signing Sheikh Ahmed's name on the Transfers in his own favour. This is extraordinary enough in itself. It becomes even more extraordinary when it is seen in the light of the fact that Mr. Ali must surely have known that there existed an apparently regular general power of attorney in favour of Mr. Brickwood.

(2) There is no explanation why Mr. Ali should have wanted to purchase Sheikh Ahmed's properties at what seem to be very high prices.

(3) Documents obtained from Bradford and Bingley Building Society in respect of the 4C Collier House transaction show that Mr. Ali applied to Leamington Spa Building Society in March 1990 representing that he was purchasing 4C Collier House for £340,000 and seeking an advance of £289,000. The Building Society offered only a loan of £250,750, which Mr. Ali accepted. Brain & Brain were instructed to act for the Building Society as well as Sheikh Ahmed and Mr. Ali and when reporting to the Building Society on 12th April 1990 they stated that the price had been reduced to £300,000. There is nothing to show how this had been brought about. It is hard to suppose that there had been some process of bargaining in which Sheikh Ahmed took part.

(4) There are discrepancies between the ways in which Mr. Ali described himself in the mortgage applications for 4C Collier House and 55 Cumberland Mansions. These, plus the fact that Mr. Ali defaulted under both mortgages at an early date, cast further doubt upon Mr. Ali's genuineness.

(5) Although it is necessarily implicit in the case which was pleaded on behalf of Mr. Ali that the sales were genuine sales, it has not been pleaded that the price apparently payable to Sheikh Ahmed was duly paid, nor has Mr. Ali produced anything to show that it was paid or from what source and by what means he raised the difference between the amount that he borrowed and the purchase price named in the Transfers. Such evidence as is provided by Brain & Brain's ledger entries suggests that the purchase price for each sale was never paid. In the case of 4C Collier House the liability to Duncan Lawrie, which on the face of the title was Sheikh Ahmed's liability, was discharged by Mr. Ali out of the money which he borrowed, not out of purchase money belonging to Sheikh Ahmed. In the case of 55 Cumberland Mansions the money borrowed from Town & Country Building Society went not to Sheikh Ahmed but to bank accounts which appear to be nothing to do with Sheikh Ahmed.

(6) Sheikh Ahmed gave evidence that in 1994 Mr. Ali produced to him handwritten accounts of the income and expenditure for 4C Collier House, 55 Cumberland Mansions and 380 The Water Gardens, together with copies of vouchers for the expenditure referred to in the accounts. Sheikh Ahmed produced these documents in evidence. He said that the accounts were in Mr. Ali's handwriting. There was little or no challenge to this part of his evidence and I accept that the documents produced in evidence are documents produced to Sheikh Ahmed by Mr. Ali in 1994, the accounts being in Mr. Ali's own handwriting.

43. The significance of this is that the accounts cover various items of expenditure said to have been incurred between 1992 and 1994, that is to say at times after 4C Collier House and 55 Cumberland Mansions had been transferred to Mr. Ali. A number of the vouchers produced in support of these items of expenditure had, however, been altered in highly material ways. In some cases demands for rent and service charge for 4C Collier House or 55 Cumberland Mansions in respect of periods in 1993 and 1994 which had been addressed by the relevant landlord or its agent to Mr. Ali as tenant had been altered to make them appear to be addressed to Sheikh Ahmed as tenant. In other cases rate demands for 4C Collier House or 55 Cumberland Mansions in respect of periods in the 1980's had been altered so as to make them appear to be demands in respect of 1993 or 1994. The fact that the documents which Sheikh Ahmed produced as having been given to him by Mr. Ali had been altered in this way was proved by unchallenged evidence from the representatives of those responsible for issuing the original documents.
44. The material shows conclusively that Mr. Ali was trying to account to Sheikh Ahmed in 1994 on the footing that Sheikh Ahmed was still the owner of 4C Collier House and 55 Cumberland Mansions. But at that time Mr. Ali knew very well not only that the properties had been transferred into his own name but that the building societies from which he had borrowed money had already taken possession as mortgagees and had effected a sale of at least 4C Collier House. (The sale of 55 Cumberland Mansions was not completed until 11th May 1994, which may have been later than the time when Mr. Ali gave the documents to Sheikh Ahmed, although it is difficult to suppose that Mr. Ali did not at least know that a sale was in progress). It is impossible to reconcile this conduct on the part of Mr. Ali with any suggestion that Sheikh Ahmed knew and intended that 4C Collier House and 55 Cumberland Mansions had been sold by him to Mr. Ali in 1990. The only inference which it is possible to draw is that Mr. Ali was fraudulently attempting to demonstrate that Sheikh Ahmed remained the owner of both properties.
45. I find, therefore, that Mr. Ali forged the signature of Sheikh Ahmed on the Transfers of 11th May and 15th November 1990 and thereby defrauded Sheikh Ahmed of the ownership of 4C Collier House and 55 Cumberland Mansions.

Liability of Brain & Brain

46. Brain & Brain accept that Mr. Brickwood was their employee at the time of the purported sales of 4C Collier House and 55 Cumberland Mansions to Mr. Ali and that they are liable for the negligent acts of Mr. Brickwood as acts of the firm. They also accept that, even though there was no contract between Sheikh Ahmed and them if Sheikh Ahmed is right in his claim that Mr. Ali had no authority to retain them to act for him in such sales, they must be regarded as having assumed responsibility for protecting Sheikh Ahmed's interests and thus owed Sheikh Ahmed a duty of care in tort. On liability the issue between Sheikh Ahmed and Brain & Brain depends first on whether or not Mr. Ali was entitled to do what he claimed to do on behalf of Sheikh Ahmed and secondly, if he was in fact not so entitled, whether Brain & Brain could properly act on the basis that he had ostensible authority to do what he did.
47. My conclusion as to Mr. Ali's liability is based on a finding that Mr. Ali was not entitled to act as he did. This makes it impossible to find in favour of Brain & Brain on the first issue.
48. As to the second issue, it is clear that a solicitor cannot properly act for a client unless he has instructions from the client so to act. It is the solicitor's duty to satisfy himself that he has been so instructed. If instructions come to a solicitor not from the client himself but from a third party claiming to represent the client, the solicitor needs to take special care to satisfy himself that the client wishes him to act, by seeking the client personally or obtaining written confirmation from the client or taking some other step which is sufficient, in the circumstances, to show that the client wants the solicitor to act for him in the matter in question. This reflects a passage in The Law Society's Guide to the Professional Conduct of Solicitors quoted in the judgment of Judge Kolbert in Penn v Bristol and West Building Society [1995] FLR 938 at 948. In my judgment a solicitor who fails to act in accordance with this principle will not only fall foul of the rules of professional conduct but, if he causes prejudice to the interests of the person he supposes to be his client, even in doing something which it would be perfectly proper for him to do if he were duly retained, he will be liable in negligence.
49. In the present case the need for caution on the part of Mr. Brickwood, and therefore on the part of Brain & Brain, was even greater than in the ordinary case where a solicitor is asked by someone other than the client himself to represent the client in a dealing with another party. Here Mr. Brickwood purported to act on behalf of Sheikh Ahmed in a transaction in which Sheikh Ahmed was selling property to the very person who was giving instructions on behalf of Sheikh Ahmed and who was instructing Mr. Brickwood to act on his own behalf as well. In such circumstances it was imperative that Mr. Brickwood should obtain confirmation of his instructions from Sheikh Ahmed himself. He did not do so. He thus acted for Sheikh Ahmed in a transaction which he only knew about from what Mr. Ali, the other party to the transaction, told him. It can only have been Mr. Ali who told Mr. Brickwood that Sheikh Ahmed wanted to sell 4C Collier House and later 55 Cumberland Mansions. It can only have been Mr. Ali who told Mr. Brickwood who the purchaser was to be, namely Mr. Ali himself. It can only have been Mr. Ali who told Mr. Brickwood what the price was to be and, in the case of 4C Collier House that the original price of £340,000 had been reduced to £300,000. It must also have been Mr. Ali who brought to Mr. Brickwood the Transfers and represented that they had been duly executed by Sheikh Ahmed. There is nothing to suggest that Mr. Brickwood did anything to verify any of this information. In my judgment he, and thus the firm which employed him, were in clear breach of their duty of care to Sheikh Ahmed and, now that it appears that all the important information on which they chose to act was incorrect, they are liable in negligence.
50. The case against Brain & Brain does not, however, end there. In my view when a solicitor acts for the vendor of property it is part of the duty of the solicitor to satisfy himself that the price is paid at or before the time when the sale is completed. The usual practice, of course, is that the solicitor will receive the price on behalf of the vendor and duly account to him. I would not say that this practice has to be followed in every case, but where it is not followed a special burden must lie upon the vendor's solicitor to satisfy himself that the vendor does not part with his property before the price has been paid. Here there does not appear to have been any attempt by Mr. Brickwood, in his purported capacity as solicitor to Sheikh Ahmed, to see that the purchase price was paid by Mr. Ali and received by Sheikh Ahmed.
51. In my judgment Sheikh Ahmed has lost 4C Collier House and 55 Cumberland Mansions not only as a result of fraud and forgery on the part of Mr. Ali but as the result of negligence on the part of Brain & Brain, acting by Mr. Brickwood.

Liability of the Land Registry

52. The circumstances in which the Land Registry is bound to provide a statutory indemnity to injured parties are prescribed by Section 83 of the Land Registration Act 1925 as amended, which I have already set out. This Section goes hand in hand with Section 82, which governs rectification of the register. Under Section 82 (1) (d) the register may be rectified where the court or the registrar is satisfied that any entry on the register has been obtained by fraud. On my findings the entries recording Mr. Ali as the proprietor of 4C Collier House and 55 Cumberland Mansions respectively and recording the charges over those properties purportedly granted by him as proprietor were obtained by his fraud and, if one looks no further than Section 82 (1) (d), are thus susceptible to rectification by being expunged by the register. If the register were rectified in this way the subsequent registrations of Lange Estates and Alsabahia as proprietors would have to be expunged as well, because these are dependent upon Leamington Spa Building Society and Town & Country Building Society having had valid legal charges.
53. The material part of Section 82 (3) provides, however, that the register is not to be rectified so as to affect the title of a proprietor who is in possession unless it is considered that it would be unjust not to rectify the register against him. Lange Estates and Alsabahia are proprietors in possession of 4C Collier House and 55 Cumberland Mansions respectively. Sheikh Ahmed has accepted advice, in which the Land Registry has concurred, that it is unlikely that the register would be rectified against these parties, which is why the proceedings against them were discontinued.
54. If the register were rectified against Lange Estates and Alsabahia Sheikh Ahmed would have his property restored to him and would not have lost anything as the result of Mr. Ali's fraud and Brain & Brain's negligence except perhaps the loss of the intermediate income of these properties. But the Land Registry would then be liable to compensate Lange Estates and Alsabahia under Section 83 (1). Accepting as it does that the register cannot be, and never could have been, rectified against Lange Estates and Alsabahia, the Land Registry recognises that the necessary consequence of my finding of fraud is that it is liable to indemnify Sheikh Ahmed under Section 83 (2). However the Land Registry raised the following contentions in respect of that liability:

(1) The indemnity is to be in respect of the loss suffered by reason of the error or omission in the register. To the extent that Sheikh Ahmed recovers damages from Mr. Ali or Brain & Brain he will not have suffered such loss. Although it is doubtful whether the judgment which I shall give against Mr. Ali will be satisfied, there is or should be no doubt that any judgment against Brain & Brain will be satisfied in full.

(2) By Section 83 (6), where loss is suffered partly as the result of the exercise of proper care on the part of the person seeking to be indemnified, the indemnity may be reduced to such an extent as is just and equitable. The Land Registry suggested that Sheikh Ahmed may not have exercised proper care in this case.

(3) The Land Registry takes the point in respect of the Duncan Lawrie charge which I shall deal with later.

(4) The Land Registry claims that the money raised on mortgage by Mr. Ali must be taken into account as it was credited to Sheikh Ahmed's client account with Brain & Brain. If Brain & Brain have not properly accounted to Sheikh Ahmed for the money in this account then Sheikh Ahmed must look to Brain & Brain for compensation. This is not loss suffered by reason of the error in the register.

55. I agree with point (1). I think that the scheme of the Act is to make the Land Registry in substance an insurer of last resort in respect of registered titles. The loss against which the Land Registry must indemnify Sheikh Ahmed should, in my judgment, be ascertained after taking into account amounts actually recovered by Sheikh Ahmed from those, including Brain & Brain, who were responsible for the error in the register being made.
56. As to point (2), finding as I do that Sheikh Ahmed knew nothing of the fraudulent acts of Mr. Ali or the negligent acts of Brain & Brain until long after the relevant events, I reject the suggestion that Sheikh Ahmed failed to exercise proper care.
57. As I have said, I shall deal with point (3) later. As to point (4), my finding that Brain & Brain were never properly retained as solicitors to Sheikh Ahmed in respect of the purported sales means that they were never entitled to receive or hold any moneys on behalf of Sheikh Ahmed. In any case the money received from Mr. Ali's mortgagees was received by Brain & Brain in their capacity as Mr. Ali's solicitors and they could not make it become Sheikh Ahmed's money by carrying it to a client account in Sheikh Ahmed's name.

Quantum of the claim against Mr. Ali and Brain & Brain

58. Prima facie the loss flowing from Mr. Ali's fraud and Brain & Brain's negligence is the value of the property of which Sheikh Ahmed was deprived, ascertained at the date of the fraud or negligence, namely 8th May 1990 n the case of 4C Collier House and 15th November 1990 in the case of 55 Cumberland Mansions. The valuers instructed by the parties have agreed that the values at these dates were £240,000 for 4C Collier House and £192,000 for 55 Cumberland Mansions.
59. In respect of 4C Collier House there is, however, a complication. At the 8th May 1990 4C collier House was subject to the Duncan Lawrie charge securing indebtedness which (as appears from Brain & Brain's ledger entries) amounted to £189,696.05. On the face of the title this represented an incumbrance on the interest of Sheikh Ahmed as registered proprietor and the value of that interest was not the unencumbered value of 4C Collier House but that value less £189,696.05, namely £50,305.95. Mr. Pooles argued that if, as I have held, Brain & Brain are liable in negligence their liability can only be for the smaller figure. If this is a good point so far as Brain & Brain are concerned it must, I think, also be a good point for Mr. Ali too.
60. On behalf of Sheikh Ahmed Mr. Warwick contended that the Duncan Lawrie charge could and should be disregarded because it was executed by Mr. Brickwood pursuant to the power of attorney in his favour, which was itself a forged document. I accept that the evidence of the handwriting expert, taken with Sheikh Ahmed's own evidence that he did not sign the power of attorney and the absence of any contradictory evidence, does indicate that the power of attorney was a forgery, in which case nothing purportedly done under it can have been valid. But I do not accept that the Duncan Lawrie charge can be brushed aside in this easy manner. It is a serious matter to declare that a document is ineffective because it was not executed by the person who purports to have executed it. This cannot and should not be done, in my view unless there is a clearly pleaded claim to this effect.
61. In the pleadings in the action in which Mr. Ali and the Land Registry are defendants there is no mention at all of the purported power of attorney in favour of Mr. Brickwood or of the Duncan Lawrie charge. Mr. Warwick pointed out that it is pleaded that Sheikh Ahmed's loss includes the full value of 4C Collier House, which is put at £250,000 and is clearly intended to be the unencumbered value of that property. But this does not, in my view assist. Once it is established, as it has been, that 4C Collier House was not unencumbered at that date then the loss cannot be the unencumbered value unless the incumbrance is set aside. But it would only be right to set aside the Duncan Lawrie charge if a specific claim for that relief were pleaded. That is something which has not been sought in the action as it is now constituted and which, if it were to be sought, would probably involve Duncan Lawrie, either directly or through third party claims.
62. The position is similar in respect of the action against Brain & Brain except that there is a passing reference to the Duncan Lawrie charge in Amended Further and Better particulars of the Statement of Claim served on 5th December 1997. These Particulars include in the matters in which Mr. Brickwood is said to have acted as Sheikh Ahmed's solicitor.

"In 1988 and 1989 in effecting a charge over Collier House in favour of Duncan Lawrie Limited."

This assertion seems to suggest that, far from being ineffective by reason of being executed under a forged power of attorney, the Duncan Lawrie charge was regarded as valid.

63. I therefore consider that on the pleadings as they stand it is not open to Sheikh Ahmed to ask me to treat the Duncan Lawrie charge as void, or at least as not binding upon him.
64. Faced with the possibility that this might be the view that I would take, Mr. Warwick asked me, on the last day of the trial, in the course of his reply to the submissions of Mr. Pooles and Mr. Evans, to give leave to amend the pleadings in accordance with a draft which he submitted. Having heard argument on the point I refused leave to amend, saying that I would incorporate my reasons in my judgment. This I now do.
65. The amendment which Mr. Warwick sought leave to make was one by which the particulars of loss in the second action (i.e the action in which Brain & Brain is the only effective defendant) would be amended by adding a note which makes it clear that the alleged loss is the full value of 4C Collier House without any deduction being made in respect of the money secured by the Duncan Lawrie charge. The note goes on to explain that the basis on which this contention is advanced is that the Duncan Lawrie charge was not executed by Sheikh Ahmed or authorised by him. No amendment was proposed to be made to the pleadings in the first action.
66. In seeking leave to make this amendment Mr. Warwick reminded me of the well-known principles on which the court acts when it is asked to give leave to amend, as recently reiterated by the Court of Appeal in Gale v Superdrug Stores plc [1996] 1 WLR 1089 at page 1098. He also pointed out that Sheikh Ahmed's witness statement had expressly claimed that the power of attorney in favour of Mr. Brickwood was a forgery and that, without objection being made by any other party, the case had been opened and Sheikh Ahmed had been examined in chief on this basis. It did not appear to me, however, that this is a case in which I ought to exercise my discretion by giving leave to amend.
67. There are two main reasons why I took this view. First the amendment was not, in my judgment, apt to achieve the purpose for which it was designed, namely the leaving out of account of the indebtedness secured by the Duncan Lawrie charge. Secondly an amendment which was apt to achieve this purpose could not, in my view, be made without causing substantial prejudice which would not be remediable by means of an order for costs.
68. As to the first reason, I have already explained why, in my view, the avoidance of the Duncan Lawrie charge is a serious matter which cannot be achieved by some kind of side wind. I take the view that there is no half-way house between regarding the Duncan Lawrie charge as fully effective, in which case it secured indebtedness which was the liability of Sheikh Ahmed, and setting it aside on the ground that it was wholly ineffective as being executed by someone who had no power to execute it, in which case it secured no indebtedness at all. The proposed amendment does not seek to have the Duncan Lawrie charge set aside. In my judgment it affords Sheikh Ahmed no escape from the difficulty presented by the pleadings as they stand.
69. As to the second reason, if the amendment provided an escape route for Sheikh Ahmed it is one which could not be followed without injustice to Brain & Brain and Mr. Ali. As to the first of these, a moment's thought reveals that the position of Brain & Brain in relation to the Duncan Lawrie charge is much more complex than it may appear to be. At the time when that charge was executed Mr Brickwood was not an employee of Brain & Brain but was in practice on his own account. Plainly Brain & Brain are not responsible for any wrongdoing of Mr. Brickwood in connection with the creation of the Duncan Lawrie charge. But how then are they to be fixed with the consequences of this charge being ineffective, if that is what it was? Sheikh Ahmed's case in this respect is far from clear. Even assuming this difficulty to be overcome, Brain & Brain would, at the very least, need to make further investigations. On the case presented in the pleadings Brain & Brain have been content not to obtain evidence from Mr. Brickwood. But if the case were to be enlarged in the way proposed, they may need to reconsider their approach in this respect. Moreover they would almost certainly want to approach Duncan Lawrie to obtain further details of the transaction. They may need to consider taking third party proceedings against Duncan Lawrie.
70. So far as Mr. Ali is concerned, Mr. Warwick had, no doubt, hoped to avoid difficulty by not amending his pleadings in the action to which Mr. Ali is a defendant. Even on this basis it would be anomalous, in my view for Brain & Brain to be faced with a larger claim than Mr. Ali who, if the case in respect of the Duncan Lawrie charge is well-founded, was the principal wrongdoer. In truth, however, the amendment of the pleadings in the second action but not the first will not avoid prejudice to Mr. Ali. This is because of Brain & Brain's third party claim for an indemnity from Mr. Ali. Any enlargement of the claim against Brain & Brain would therefore at least potentially enlarge the liability of Mr. Ali. The latter has not, however, received any notice of the application for leave to amend and has not been able to make submissions or obtain advice on the application or on the underlying substantive issue. To some extent, of course, this is the result of Mr. Ali's own failure to participate in the trial. But although he is fixed with the consequences of his absence from a trial of the issues as they were formulated in the pleadings as they stood when his representative withdrew, it would not be just, in my view, to fix him with the consequences of absence from a trial of more extensive issues of which he has had no notice.
71. To some extent these injustices might have been alleviated by adjourning the trial while further investigations took place. But such an adjournment would have involved another injustice in the form of the postponement, for a fourth time, of the achievement of finality in these proceedings. That would, in my view, be particularly unjust when it was Sheikh Ahmed who successfully pressed me to proceed with the trial, against the opposition of Brain & Brain who would have preferred to wait until Mr. Ali might be able and willing to come to court.
72. I conclude, therefore, that Mr. Ali and Brain & Brain are liable, in respect of the loss of 4C Collier House, only for the value of that property as at 11th May 1990 less the amount required at that date to discharge the Duncan Lawrie charge. If the Land Registry has to indemnify Sheikh Ahmed under Section 83 (2) (i.e. if the judgments against Mr. Ali and Brain & Brain are for any reason unsatisfied) its liability will be limited in the same way.

Costs of the proceedings against the purchasers

73. Whether these costs are recoverable by Sheikh Ahmed from those defendants against whom his claim has succeeded depends, in my judgment, on whether it was reasonable for him to have pursued the purchasers in the hope that he would be able to have the register rectified and so regain his properties. Nobody doubts that it was right for Sheikh Ahmed to have abandoned his claims against the purchasers. The question is whether he was justified in making these claims the subject of proceedings in the first place and, if he was, whether he should have abandoned them sooner.
74. On behalf of the Land Registry Mr. Evans supported Mr. Warwick's argument that Sheikh Ahmed had acted reasonably. Indeed it appears that it was at the instance of the Land Registry that proceedings were commenced and prosecuted against the purchasers. It seems that a claim for an indemnity under Section 83 (2) was made against the Land Registry long before the Land Registry was formally joined as a defendant. The attitude of the Land Registry was that the claim would be considered only after Sheikh Ahmed had exhausted his rights against the purchasers or it had been established that rectification would not be obtainable. The Land Registry was not satisfied about these matters until after discovery had been given by the purchasers and witness statements had been obtained. Once the Land Registry was satisfied, Sheikh Ahmed promptly discontinued the proceedings. It is not suggested by the Land Registry that the terms of discontinuance which Sheikh Ahmed accepted were less favourable than he could have obtained. Hence if Sheikh Ahmed has to be indemnified under Section 83 (2) the Land Registry accepts that the indemnity will include the costs which he has to pay to the purchasers.
75. The attitude adopted on behalf of Brain & Brain was very different. Mr. Pooles submitted that, there being no evidence of bad faith on the part of the purchasers and nothing to support the view that the sales to them were colourable transactions, proceedings against them were doomed to failure from the start and should never have been commenced. I assume that Mr. Ali would have made a similar submission had he been present in court or represented.
76. In my judgment the matter was not as straightforward as the approach urged by Mr. Pooles assumes. There was from the outset strong evidence that the Transfers under which Mr. Ali, the building societies from which he borrowed money and the purchasers from the building societies derived their title were forgeries. This view of the matter is one which I have upheld. It has not been disputed that the registration of Mr. Ali as proprietor of the properties constituted an error in the register. There was therefore power for the court to rectify the register under Section 82(1). If that power had been exercised then not only would Mr. Ali's title have been extinguished retrospectively but the title of all those claiming under him, including the building societies and the purchasers from them, would have been extinguished as well. It seems to me that where it is shown, as it was shown here, that an error has been made by giving effect to a forgery there must be a leaning towards rectification of rectification can be granted without contravening some statutory provision and without causing injustice to the party against whom rectification is granted which is not remediable by the payment of compensation under Section 83(1). In the present case the reason why it was ultimately concluded, rightly in my view that rectification would not be granted against the purchasers is that to rectify would contravene Section 82(3). But the terms of that subsection are not absolute and the evaluation of the factors which may be relevant to its application is not straightforward. In my judgment Sheikh Ahmed was fully justified in acting as he did, particularly in the light of the Land Registry's attitude that he must exhaust his possible remedies against the purchasers before looking to the Land Registry for compensation under Section 83(2).
77. I would therefore include the costs in question in the sums recoverable, whether as damages or by way of an award of costs, against Mr. Ali and Brain & Brain or, if it comes to an indemnity under Section 83(2), against the Land Registry. It seems likely that the same reasoning will apply to Sheikh Ahmed's own costs of proceeding against the purchasers, but I think that these will properly fall to be dealt with, like other costs, after I have handed down this judgment.

Compensation for loss of income

78. The claim presented on behalf of Sheikh Ahmed in the pleadings includes, by way of damages, not only the capital values of 4C Collier House and 55 Cumberland Mansions at the relevant dates but the loss of the rental income of these properties. Presumably the loss of rental income was envisaged as beginning only from the times of the Transfers to Mr. Ali, although this was not expressly stated. While Mr. Warwick's written outline opening referred to the detailed relief claimed in the Statement of Claim, which included this alleged loss of income, Mr. Warwick did not really seek to sustain this part of the claim. In this he was, in my view, quite correct. Once the possibility of rectification had been excluded, the court could only compensate Sheikh Ahmed for what he has lost by awarding him damages equal to the value of his properties at the time they were misappropriated. Thereafter Sheikh Ahmed had no right to the notional income of the properties and he cannot be awarded compensation for the loss of this notional income as such. But as he will not receive any income from his compensation for loss of capital value until the damages are actually paid, it would be right to order that interest be paid on the amount of damages for the period between the relevant Transfer and the time when the consequential damages are actually paid. The rate of interest should, in accordance with the usual practice, be the judgment rate for the time being in force.

The third party proceedings

79. Finally I come to the third party proceedings between Brain & Brain and Mr. Ali. The latter has served a short defence in which he admits that he instructed Mr Brickwood (but not Brain & Brain) to transfer 4C Collier House and 55 Cumberland Mansions into his own name and that Mr Brickwood thereafter acted on behalf of Sheikh Ahmed. Clearly there is no significance in the attempted distinction between Mr Brickwood and Brain & Brain. The defence is tantamount to an admission by Mr Ali that he instructed Brain & Brain on behalf of Sheikh Ahmed and thereby warranted that he had authority to do so. This allegation being made good in this way, it appears to me to be inevitable, in the light of my other findings, that I must find that Mr. Ali was in breach of this warranty of authority. The loss flowing from this breach is the amount that Brain & Brain will have to make good to Sheikh Ahmed under the award of damages that I have made in his favour. In other words, Brain & Brain are entitled to the indemnity which they seek against Mr. Ali and I shall make an order accordingly.