England and Wales High Court (Chancery Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Mr Justice Ferris)

		Royal Courts of Justice Strand London WC2
		29th June 2000

1. LORD JUSTICE ALDOUS: The appellant (who I will refer to as "Sheikh Ahmed") contends on this appeal that the judge wrongly assessed the damages for negligence in respect of the transfer of a flat known as 4C Collier House, 169 Brompton Road, London SW7. He also asserts that the judge was wrong to deprive him of part of his costs.
2. There were two actions brought by Sheikh Ahmed which were heard together. The effective defendants were Mr Ali, an Iraqi who lived in London; Brain & Brain, a firm of solicitors who employed a Mr Brickwood; and the Land Registry. Mr Brickwood was also a defendant, but he had moved to Australia and was not served.
3. Sheikh Ahmed met Mr Ali in 1982. In 1983 he decided to purchase a flat and, with the assistance of Mr Ali, agreed to buy 55 Cumberland Mansions, Seymour Place, London W1 for £130,000. To complete the transaction, Mr Ali introduced Sheikh Ahmed to a solicitor, Mr John Brickwood. He was then practicing on his own account as Brickwood's. The transfer was completed on 14th June 1983, with the money being supplied by Sheikh Ahmed. Sheikh Ahmed was duly registered as the proprietor of that flat.
4. According to Sheikh Ahmed he arranged that Mr Ali would look after 55 Cumberland Mansions while he was not there. The arrangement was that Mr Ali would pay the liabilities in respect of the flat and that, when Sheikh Ahmed was in London, he would refund Mr Ali the amounts which he had laid out, to which were added supplements by way of recompense for Mr Ali's services.
5. In 1984 Sheikh Ahmed decided to purchase another flat in London whilst still retaining 55 Cumberland Mansions. He identified as being suitable for his purposes 4C Collier House. Sheikh Ahmed agreed to pay £128,000 for the flat. Once again Mr Brickwood acted for him in the purchase. The whole of the purchase price was paid by Sheikh Ahmed and the transfer dated 3rd August 1984 was duly registered.
6. In 1988 Sheikh Ahmed, on the recommendation of Mr Ali, decided to purchase a third flat. This was 380 The Water Gardens, London W2. It appears that the purchase was completed on 21st November 1988, with part of the price being borrowed from the National Home Loans Corporation on the security of a mortgage over the flat. According to Sheikh Ahmed, this property was purchased as an investment. Again Mr Ali was to manage it on his behalf and to select an appropriate tenant. The monthly mortgage instalments were to be paid out of Sheikh Ahmed's London bank account under a direct debit arrangement. 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.
7. In March 1995 Sheikh Ahmed received 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 did not take the matter up immediately, but later that year made enquiries which resulted in him instructing a solicitor to make appropriate investigations. I will come later to consider in depth what was discovered in relation to 4C Collier House, but will first set out, in brief, the events that had occurred in respect of the other two properties.
8. The available documents show that on 1st February 1998 a Panamanian corporation, which was the freehold owner of 55 Cumberland Mansions, issued a writ against Sheikh Ahmed claiming forfeiture of the lease. Those proceedings were defended by the Sheikh with Mr Brickwood (who was still then acting on his own account) acting as the solicitor. The action was disposed of by consent under an order which required that the whole of the unpaid balance of money claimed by the company was agreed to be due.
9. Sometime 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 the property from Sheikh Ahmed at a price of £266,000. He sought an advance of £199,500. Subsequent to that there was 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 a payment of £266,000. The transfer appears on its face to be signed by Sheikh Ahmed in the presence of a witness. However, as the judge held, it was a forgery. Brain & Brain, in the shape of Mr Brickwood, acted, or purported to act as solicitors for both Sheikh Ahmed and Mr Ali in the supposed sale and purchase. Their instructions on behalf of Sheikh Ahmed coming from Mr Ali as before. Also on 15th November 1990 Mr Ali executed a legal charge over 55 Cumberland Mansions to secure a loan of £199,500 provided by the Town & Country Building Society. Brain & Brain subsequently applied to the Land Registry for registration of the transfer and the legal charge, and in due course Mr Ali was registered as the proprietor of the lease of 55 Cumberland Mansions, subject to the legal charge in favour of Town & Country Building Society.
10. Mr Ali did not comply with his obligations under the mortgage. The Town & Country Building Society merged with the Woolwich on 11th May 1994 and they sold the property, as mortgagee in possession, to the freeholder at a price of £128,000. The judge held that the negligence of Brain & Brain had resulted in Sheikh Ahmed losing his property, with the result that damages in an amount assessed as the value of the property became payable.
11. The dealings in 4C Collier House adopted a somewhat similar pattern. It seems that in July 1988 the National Westminster Bank applied to the Land Registry to register a mortgage over this property. There was little evidence before the judge of how that came about. However, it appeared to the judge that the mortgage had been executed by Mr Brickwood in the exercise of a purported power of attorney granted by Sheikh Ahmed. The Land Registry asked for further evidence, and it appears that the mortgage was never registered.
12. On 21st December 1988 the bank wrote to the Land Registry saying that the property was being remortgaged to Duncan Lawrie Ltd and therefore they were withdrawing their application for registration. An "all moneys" legal charge in favour of Duncan Lawrie, dated 12th January 1989, was subsequently executed. It was registered upon proof of the general power of attorney in Mr Brickwood's favour.
13. The investigations carried out on behalf of the solicitors acting for Sheikh Ahmed revealed that by a transfer dated 11th May 1990 Sheikh Ahmed appeared to transfer 4C Collier House to Mr Ali in consideration of £300,000. It appears to have been executed by Sheikh Ahmed in the presence of a witness. But as the judge held it was a forgery, as must have been apparent to Mr Ali, and if Mr Brickwood had made proper enquiries to Mr Brickwood who by that date had become employed by Brain & Brain at their London office. There was no direct evidence as to whether the £300,000 was paid, but the judge held that upon the balance of probabilities it was not.
14. There was also brought into existence on 11th May 1990 a legal charge, whereby Mr Ali as the owner of 4C Collier House charged the lease of 4C Collier House to the 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. That was done upon proof of the power of attorney. It appears from the printout maintained by Brain & Brain that the money supplied by the Leamington Spa Building Society was used in part to discharge the loan made by Duncan Lawrie Ltd.
15. 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 and, on 25th June 1993, sold the property for £168,000.
16. The judge concluded that Sheikh Ahmed had lost 4C Collier House and 55 Cumberland Mansions not only as the result of forgery by Mr Ali, but also as the result of negligence on the part of Brain & Brain acting by Mr Brickwood. He also found the Land Registry liable on their statutory indemnity. I shall come to consider the claim against them separately.
17. The judge went on to deal with quantum and concluded at page 30 of his judgment:

"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 in the case of 4C Collier House and 15th November 1990 in the case of Cumberland Mansions. The value 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."

18. The judge continued:

"In respect of 4C Collier House there is however a complication. At the 8th May [I think he meant 11th 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 encumbrance 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."

19. For my part, I cannot see that what the judge referred to as a good point could be a good point for Mr Ali. He was involved in the fraud throughout and I cannot see that he could rely upon fraudulent acts to absolve him from having to pay. However, he has not appeared on this appeal and it seems that he is a defendant of straw. In those circumstances, it is necessary to go on to consider the real issue which is whether the solicitors, Brain & Brain, are liable for the full amount, namely £240,000, or only £50,305.95.
20. The judge analysed the pleadings and concluded that as they stood it was not open to Sheikh Ahmed to ask him to treat the Duncan Lawrie charge as void, or at least as not binding upon him. He then went on to record that he had refused Sheikh Ahmed leave to amend, for reasons set out in his judgment. He concluded that Mr Ali and Brain & Brain were liable in respect of the loss of 4C Collier House only for the value of that property as it stood at 11th May 1990, less the amount required at that date to discharge the Duncan Lawrie charge. It followed, according to the judge, that if the Land Registry was required to indemnify Sheikh Ahmed, because the judgments against Mr Ali and Brain & Brain became unsatisfied, its liability would be limited in the same way.
21. Mr Simon Berry QC, who appeared on behalf of Sheikh Ahmed, submitted that the pleading of Sheikh Ahmed could not be criticised. He drew attention to the statement of claim in which it was alleged that Sheikh Ahmed was entitled to recover "the loss of the full value of Collier House". That, according to Mr Berry, was exactly what he did lose. He obtained no benefit from Mr Ali's apparent payment from Duncan Lawrie because Duncan Lawrie had no viable claim against Sheikh Ahmed, as the mortgage entered into with Duncan Lawrie was fraudulent. He submitted that if the respondents were relying upon the charge as reducing the damages, then it was up to them to plead the relevant facts. He drew attention to the amendment that had been made to the Rules of the Supreme Court in 1989. Order 18, rule 12(1)(c) provided for the first time that where a claim for damages was made against a party, the particulars of the facts upon which the party relied on in mitigation of, or otherwise, in relation to the amount of damages had to be pleaded. Thus he submitted it was the respondents that needed to raise the question of the mortgage, and if that had been done then the reply would have dealt with it in the appropriate way. That being so, the correct approach ought to have been that, first, the judge should have concluded that the Duncan Lawrie charge no longer existed at the time of the transfer because it had been redeemed. In any case it was, in any event, no longer on the register and, as between the parties to the action, there would be no useful purpose in setting it aside and involving Duncan Lawrie. Secondly, any conclusion reached by the judge would not have bound the other parties. Thirdly, the charge was void and in those circumstances did not reduce the value claimed. Alternatively, Mr Berry sought leave to meet the judge's criticism by amendment.
22. Mr Michael Pooles QC, who appeared on behalf of Brain & Brain, supported the judge's conclusion and reasoning. He submitted that the defendants were entitled simply to deny the loss, which they had done. It was the duty of the claimant to plead that the Duncan Lawrie charge was void and therefore could not reduce the apparent loss. The charge was on the register, and that prima facie established its validity with the result that it could be relied on by the defendant without the necessity of it being pleaded. If he was wrong on that, both the defendants and the Land Registry had made their position clear in their skeleton arguments that the value of 4C Collier House was the encumbered value. He went on to submit that there was no basis for a conclusion that the Duncan Lawrie charge was worthless. The fact that the power of attorney was forged (if it was) did not mean that the transaction had not been entered into with the authority of Sheikh Ahmed. Nor that he had not received a benefit from it, which would at least have given Duncan Lawrie an equitable right. That being so, there was no basis for the conclusion, either in the pleadings or upon the findings of the judge, that would enable this court to arrive at a figure of loss which did not reflect the fact that in 1990 4C Collier Mansions was subject to the Duncan Lawrie charge.
23. Upon the findings of the judge, Sheikh Ahmed purchased 4C Collier House with his own money. Thus his loss upon transfer in 1990 was the value of the flat, estimated at about £240,000, subject to any value that the charge might have. If it was valueless, as was the case advanced on behalf of Sheikh Ahmed, then the loss was £240,000. If it had value, then the loss was reduced by that value. The judge did not decide as between the parties what was the value. He said, at page 30 of his judgment:

"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."

24. I note in passing that there is no need to make any declaration at all. The question for the judge was an inter partes dispute as to the value of the charge.
25. The judge then considered the pleadings and concluded in this way, at page 32 of his judgment:

"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."

26. In effect, the judge rejected Sheikh Ahmed's claim to recover the full value because he had not pleaded that the Duncan Lawrie charge was void and therefore valueless. In my view, the judge was not right to so conclude, nor to conclude that there was a duty upon the claimant to plead that the Duncan Lawrie charge was void until that was raised by the defendant. The re-amended statement of claim pleaded negligence and a claim for:

"Loss of full value of Collier House as at 25th May 1990, being £251,000 together with interest upon that sum thereafter."

27. The defence did no more than put in issue the claim. Mr Pooles sought to draw comfort from a reply to a request for further and better particulars as to when Mr Brickwood acted for Sheikh Ahmed. But when sensibly read, there was no allegation made on behalf of the Sheikh that the Duncan Lawrie charge had been carried out pursuant to the instructions of Sheikh Ahmed.
28. There the pleadings rested: a claim for full value had been made, and a general denial. As was pointed out by Mr Berry, by 1991 Order 18 had been amended so that when a claim for damages were made, a general traverse of allegations of loss was not sufficient. The deficiency is demonstrated in this case. The re-amended defence did not indicate that any positive case was to be made, despite the requirement in the rules that the facts on which a party wished to rely upon in mitigation needed to be pleaded. Thus upon the pleadings the defendants were not putting forward a positive case in respect of the claim that had been made.
29. In my view, if some fact was to be relied on as reducing the claim which had been made - such as the existence of the Duncan Lawrie charge - it was for the defendants to plead and prove it. If they had done so, then it would have been incumbent upon the claimant to prove that the charge was void and therefore the loss was the pleaded full value of the flat.
30. I therefore conclude that the judge was not right to refuse to consider whether the charge was void and valueless merely because the matter was not pleaded by the claimant. It was for the defendants to plead it if they wished to rely upon it. The matter was in fact before the court, as Mr Pooles pointed out, in that the matter was put in the skeleton arguments and I see no reason why the judge should not have decided the issue upon the evidence that was before him. It follows that this court should do so.
31. The judge held that he had a great deal of hesitation about accepting the truth of matters which depended only on the oral evidence of Sheikh Ahmed. However, he held at page 20 of his judgment:

"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."

32. I need not deal with the particular matters that the judge relied on.
33. The judge also held, in a passage which I have already read, but which I read again for convenience, that:

"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."

34. As the judge pointed out, there was no contradictory evidence. In fact Sheikh Ahmed said in chief and in cross-examination that he had not signed that power of attorney.
35. Mr Pooles submitted that we should not conclude that the power of attorney was a forgery, as that had not been pleaded. However, forgery was alleged against Mr Ali in all forms. The evidence of the handwriting expert was led and it confirmed that the power of attorney was, just as the judge found, a forgery. I therefore have no doubt that upon the findings made by the judge the power of attorney was a forgery.
36. It is accepted that the Duncan Lawrie charge was registered upon the basis pursuant to a signature that was said to be authorised by the forged power of attorney. It follows, as the judge pointed out, that the registration was void, as it was achieved by and was based upon the forged power of attorney. On the findings of the judge, the entry in the register was void and the register would therefore have been rectified upon that basis. The charge therefore appears to have been valueless, as the judge indicated in the passage which I have read.
37. Mr Pooles submitted that even if we concluded that the claimant need not have pleaded that the charge was worthless, and even if we concluded the power of attorney was a forgery, it was still not appropriate for this court to go on and conclude that it was worthless. That matter had not been investigated by the judge. He drew to our attention Sheikh Ahmed's evidence relating to the mortgage on The Winter Gardens property. In his evidence he accepted that that property had been mortgaged with his authority, but he said that he had signed nothing. Mr Pooles submitted that it was possible, perhaps probable, that a similar position could have arisen in respect of the Duncan Lawrie charge. The matter had not yet been investigated. Sheikh Ahmed could have obtained a benefit from the charge, or he could have authorised it. As the matter had not been fully investigated, it should be remitted back to the judge for further consideration.
38. For my part, I would not remit the matter back to the judge. Despite the fact that this issue was not properly pleaded, the evidence shows that it was investigated at trial. Sheikh Ahmed said in his evidence-in-chief that the Duncan Lawrie charge was not authorised by him. That is to be contrasted with his evidence in respect of The Winter Gardens charge. No objection was taken to that evidence. He was cross-examined on the point and repeated his evidence that the charge was entered into without his authority.
39. That evidence showed a different approach to that adopted in The Winter Gardens transaction. In that case, as I have said, he accepted that he had entered into the charge and that he had paid the mortgage instalments. It follows that there was, in my view, evidence before the judge that not only was the charge void on its face, having been entered into pursuant to the forged power of attorney and registered upon that basis, but also because it was unauthorised by Sheikh Ahmed. I conclude that the Duncan Lawrie charge did not have a devaluing effect upon the property in 1990. That being so, the negligence of the solicitors caused the loss of the flat, with compensation to be assessed as the full unencumbered value.
40. Mr Evans, for the Land Registry, drew to our attention that the registration that had featured largely in the submissions in this court was the registration of the Duncan Lawrie charge which had occurred in 1989. However, the negligent act relied on (and held to be the relevant negligent act) was the transfer in May 1990. That submission is correct, but what happened in 1989 was only relevant to the assessment of the quantum of damage.
41. In my view, the Land Registry is liable under its statutory duty to indemnify for the full amount. Of course that indemnity is a port of call of last resort.
42. I therefore would allow the appeal, give judgment for the claimant in the sum of the value of 4C Collier House, as of May 1989, which amounts, I believe, to the full unencumbered sum of about £240,000.
43. LORD JUSTICE CHADWICK: I agree that the appeal should be allowed.
44. The judge held that the respondents, Brain & Brain, were in breach of duty to the appellant, Sheikh Ahmed, when purporting to act for him in the sale to Mr Ali of the flat at 4C Collier House, Brompton Road. The breach lay in failing to confirm with Sheikh Ahmed the instructions which Mr Ali was purporting to give on his behalf. The judge accepted that Mr Ali had no authority to give those instructions on behalf of Sheikh Ahmed; and it is, I think, implicit in his judgment that he accepted, also, that, if confirmation of those instructions had been sought by the respondents from Sheikh Ahmed, that confirmation would not have been forthcoming. It is implicit, also, that the judge was satisfied that had the respondents, through Mr Brickwood as their employee, done what they ought to have done, the sale of 4C Collier House would not have proceeded in May 1990.
45. No part of the purchase monies payable by Mr Ali in respect of his purchase of the flat was paid to Sheikh Ahmed. In those circumstances, it is common ground that the damage suffered by Sheikh Ahmed as a result of the breach of duty by the solicitors is the loss of the value of the flat. It was agreed that the unencumbered value of the flat at the relevant date was £240,000. But at the date of the sale, the flat was subject to a registered charge in favour of Duncan Lawrie Limited; and it appeared from the ledger entries in the respondent's books of account that they had applied £189,695.05 out of the purchase monies payable on the sale of the flat in payment to Duncan Lawrie, in order to secure a discharge of that registered charge.
46. The only issue on this appeal is whether the judge was right, when quantifying the damages to be awarded to Sheikh Ahmed in respect of the respondent's breach of duty, to take that sum (£189,695) into account by way of deduction from the £240,000 which Sheikh Ahmed would otherwise have been entitled to receive as compensation for the loss of the flat. In my view, on the basis of the findings of fact which he had made, the judge was wrong to do so.
47. The charging document was dated 12 January 1989. It was executed by Mr Brickwood, purportedly as attorney for Sheikh Ahmed. The power of attorney upon which Mr Brickwood relied for his authority, and upon the basis of which the charge was accepted for registration by Her Majesty's Land Registry, is dated 25 April 1988. The judge found as a fact that that power of attorney was not signed by Sheikh Ahmed; he found it to be a forgery. It followed, as the judge acknowledged, that nothing purportedly done under that power of attorney could have been valid.
48. It must follow, as it seems to me, that the charge dated 12 January 1989 was invalid as a legal or registrable charge. It was invalid because the authority under which it was purportedly executed was itself of no effect. It is pertinent to have in mind that section 53(1)(a) of the Law of Property Act 1925 requires that an interest in land can be created only in writing, signed by the person creating the same, or by his agent thereunto lawfully authorised in writing. The existence of an effective authority in writing authorising Mr Brickwood to execute the charge was an essential prerequisite to the validity of the charge as a legal or registrable charge.
49. It follows on the basis that the power of attorney was a forgery (as the judge held) that there could have been no answer to a claim to rectify the register at Her Majesty's Land Registry by deleting the entry in respect of the charge dated 12 January 1989. Subject, perhaps, to some allowance for the costs of obtaining rectification of the register, there was no basis for valuing the flat, 4C Collier House, on the assumption that it was subject to a registered charge. That is because the entry of the charge on the register could not have been maintained.
50. The judge did not take that view. He held that it was a serious matter to declare that a document was ineffective because it was not executed by the person who had purported to execute it. But the relevant document in that context was the power of attorney, which the judge had already held to be a forgery. That was the document which had not been executed by the person who had purported to execute it. The invalidity of the registered charge follows as a matter of law from the finding of fact that the power of attorney was a forgery. Further, the judge held that it would not be right to set aside the 1989 registered charge, in the absence of a specific claim in the pleadings for that relief; or in the absence of Duncan Lawrie as a party to the action. But it was unnecessary, and it would have been inappropriate, for Sheikh Ahmed to seek an order setting aside the legal charge; or for him to join Duncan Lawrie as a party to the action for that purpose. The charge had already been discharged by payment. There was no longer an entry on the register at Her Majesty's Land Registry in respect of the charge. No order declaring it to be invalid was required. The question for the judge was not whether the registered charge should be set aside. The relevant question was whether the fact that the charge had been registered by an entry at Her Majesty's Land Registry at the date of sale was to be taken into account in determining the value of the property lost by Sheikh Ahmed when the flat was sold without his consent in May 1990. For the reasons which I have sought to give, that question ought to have been answered in the negative.
51. That is not, of course, a complete answer to the question whether Sheikh Ahmed was entitled to recover damages equal to the full unencumbered value of 4C Collier House. It does not follow from the fact that the registered charge itself was ineffective either (i) that Sheikh Ahmed owed no money to Duncan Lawrie; or (ii) that whatever money he did owe was not secured on 4C Collier House. If, for example, Sheikh Ahmed had, in fact, authorised Mr Ali to borrow money on his behalf on the security of 4C Collier House, Sheikh Ahmed would have been liable for the debt; and Duncan Lawrie would have been entitled to an equitable charge over the property. If that was, indeed, the position then plainly the existence of the secured debt would have been relevant in quantifying the loss suffered by Sheikh Ahmed when the flat was sold without his consent.
52. But that was not the respondents' case. They relied only on the registered charge. They did not rely on any underlying debt; nor did they rely on any underlying agreement to charge. If they had wished to raise those matters in relation to the quantification of damages, they should have done so expressly. The judge could then have made findings upon them. He was not asked to do so; and to my mind it is not at all surprising that he did not think it necessary to do so. There was no evidence, whatever, that Sheikh Ahmed had authorised Mr Ali to borrow from Duncan Lawrie on the security of 4C Collier House.
53. In those circumstances, there was no basis upon which the amount of £189,695-odd, paid to Duncan Lawrie, could be taken into account as a deduction when computing Sheikh Ahmed's loss. This appeal should be allowed.
54. LORD JUSTICE BUXTON: I agree that the appeal should be allowed.
55. Mr Pooles argued that whatever may have been the technical pleading position, the existence of the Duncan Lawrie charge of 12th January 1989 had been plainly relied on as reducing the damages payable by Brain & Brain by way of its skeleton argument served before the trial. But that skeleton argument indeed referred only to the actual charge; that is to say, that executed by Mr Brickwood pursuant to the power of attorney. The judge did indeed address that charge and found that it had been entered into on the basis of a forged power of attorney. He should therefore have gone on to hold that the charge was ineffective in any reduction of the loss suffered by Sheikh Ahmed. The only basis thereafter upon which it is suggested that further investigation was required before damages are assessed at the full value of 4C Collier House is that there might have been some other negotiation, apart from that apparent on the face of the power of attorney, between Sheikh Ahmed and Mr Ali, whether or not involving Mr Brickwood, by which Sheikh Ahmed had benefitted from, or authorised the charging of, Collier House.
56. But as my Lord Lord Justice Chadwick points out, that would, on any view, have involved a wholly new case, quite outside anything contemplated either in the pleadings or at the trial, even if the skeleton argument filed by Brain & Brain is taken fully into account. For that reason, there is no ground here for saying that any issue that was legitimately before the court at the trial has not been properly considered. There is no case for remitting this matter to the judge.
57. I agree with both the judgments that have already been delivered.
58. ORDER: Appeal allowed; paragraph 1(a) of the judge below will be set aside and an order substituted for damages of £240,000 plus the appropriate sum of interest; paragraph 2(4) of the judge's order below on costs set aside; the respondent's to pay the appellant's costs of the appeal, to be the subject of a detailed assessment, if not agreed; permission to appeal to the House of Lords refused.
59. (Order does not form part of approved judgment)