England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		09/07/2015

His Honour Judge Richard Seymour Q.C. :

Introduction

1. This action arises out an attempt to develop land situate in Dubai, United Arab Emirates, by construction of a tower block of flats ("the Tower"). The site of the land in question ("the Site") was in an area described as intended to be called City of Arabia ("the Overall Development Site"). The Site itself was described as "approximately 20,000 square feet identified as Parcel No. 3003 in the Development Phasing Schedule" relating to the Overall Development Site. At the material time the freehold title, or Dubai equivalent, of the Overall Development Site was vested in Dubai Tourism Development Company LLC ("Dubai Tourism"). By an agreement in writing date 1 March 2004 and made between (1) Dubai Tourism and (2) Ilyas Galadari and Mustafa Galadari ("the Galadaris") Dubai Tourism agreed to sell the Overall Development Site to the Galadaris. Subsequently, by an agreement ("the Purchase Agreement") in writing dated 1 December 2005 and made between Ilyas & Mustafa Galadari Group ("the Group"), a company incorporated under the laws of the United Arab Emirates, and Dubai Property Ring Ltd. ("the Nazran Company") the Nazran Company agreed to purchase the Site from the Group. Presumably by 1 December 2005 the Group had acquired title to the Overall Development Site from the Galadaris.
2. The Nazran Company was incorporated in the Republic of Seychelles on 28 July 2005. It seems to have been incorporated expressly for the purpose of acquiring the Site and causing the Tower to be constructed.
3. In the Purchase Agreement the Site was called "the Property" and the expression "Completion Date" was defined in clause 2.1 as meaning "the date on which the Purchaser has paid the final installment [sic] of the Purchase Price". The Purchase Agreement contained other provisions which are material to the issues in this action as follows:-

"3. SALE OF THE PROPERTY

Subject to the terms and conditions of this Agreement, the Seller agrees to sell the Property and the Purchaser agrees to purchase the Property.

4. PURCHASE PRICE

4.1 The Purchase Price for the Property shall be AED 40,000,000/- (UAE Dirhams Forty Million only).

4.2 The Purchase Price shall be paid in Post Dated Cheques as follows:

No. Date Amount (Dhs.)

1 10^th December 2005 6,500,000/-

2 31^st March 2006 8,375,000/-

3 31^st July 2006 8,375,000/-

4 30^th November 2006 8,375,000/-

5 31^st March 2007 8,375,000/-

4.3 …

4.4 If the failure to honor [sic] any of the checks [sic] as stated in Clause 4.2 hereof has not been remedied within fifteen (15) days from the date of written notification from the Seller of the failure to deliver or honor any such checks, the Seller shall be entitled to terminate this Agreement by written notice to the Purchaser in accordance with Clause 12.1 hereof.

…

6. POSSESSION

6.1 Subject to signature of this Agreement and upon receipt of the Seller of the 40% payment of the Purchase Price, the Seller shall grant and provide to the Purchaser exclusive unrestricted and unlimited physical access to and exclusive physical possession of the Property in writing to enable the Purchaser to develop the Property and to plan, design and commence construction of the Building.

6.2 Subject to Clause 6.3 hereof, on the Completion Date the Seller shall transfer to the Purchaser Freehold Title to the Property and provide the Purchaser with evidence of the registration of the Purchaser's Freehold Title at, and a Freehold Title deed in the Purchaser's name issued by, the Dubai Lands Department. In connection therewith, the Parties shall bear the respective governmental fees imposed by the Dubai Lands Department on a seller and purchaser for transfer of title.

…

9. REPRESENTATIONS AND WARRANTIES BY SELLER

The Seller represents and warrants to the Purchaser that:

…

9.5 the Purchaser shall have the right to Sell the Property, Building and/or Units;

…"

4. In 2005 the claimants, Dr. Jagtar Singh Pooni and his wife, Jaswinder Kaur Pooni, were seeking investments to fund the education of their children. They came into contact with the defendant, Mr. Tervinder Singh Nazran, who was at that time seeking to raise funds to put into the Nazran Company to enable it to undertake the purchase of the Site and to finance the construction of the Tower. Mr. Nazran sought to interest prospective providers of funds in the opportunity to purchase a flat in the Tower when it was constructed. Dr. and Mrs. Pooni were interested in acquiring the right to two flats, and agreed to put up £100,000 in respect of each flat. The Nazran Company produced a document called a "Form IP1 – Investor & Purchase Reservation Form" which those interested in purchasing a flat in the Tower were invited to complete. Dr. and Mrs. Pooni completed two such forms, one dated 19 October 2005 and the other dated 25 November 2005. Each form as completed was in very similar terms. The only details of the flat to be purchased inserted in either form were that it was to be a two bedroom flat with one car parking space, the first on the fifteenth floor of the Tower and the other on one of the tenth to fifteenth floors. The "Terms and Conditions" on each form included:-

"DPR [i.e. the Nazran Company] guarantees the buyer:

1. To buy back the Apartment at £200,000 by date 1^st March 2007 (should extension be required it will not be more than 6 months from the completion date). Or instead the Buyer can keep the Apartment (the decision to keep the Apartment is to be made in writing to DPR 3month [sic] prior to the completion date or indicate it now by circling one the following: Keeping apartment or Buy Back).[Neither was circled]

2. The Apartment is Freehold as per the Dubai Laws.

3. A contract of purchase will be issued by DPR in due course on a standard format, subject to the approval of the master developer – City of Arabia. In the unlikely case of non approval of the project, DPR will refund the full amount deposited."

5. The two sums of £100,000 which Dr. and Mrs. Pooni agreed to pay were paid, in the first instance, not to the Nazran Company, but to Mr. Nazran personally. Mr. Nazran entered into two written agreements ("the Guarantees"), the first dated 24 November 2005 and the second dated 25 November 2005, but in identical terms, with Dr. and Mrs. Pooni. Each of the Guarantees was drafted by English solicitors instructed by Mr. Nazran, Ansons LLP. That limited liability partnership acted for Mr. Nazran in this action. I have called the Guarantees by that name in this judgment because each was, on its face, described as "Personal Guarantee Relating to the purchase of an apartment in the City of Arabia Development". However, the Guarantees were not what one would ordinarily call guarantees. The material terms of each of the Guarantees for present purposes were these:-

"INTRODUCTION

A) A site has identified a site [sic] in the development area in Dubai, United Arab Emirates known as the City of Arabia ("Land") where it is proposed to construct a building comprising of apartments ("Tower").

B) Dubai Property Ring Limited (registered in the Seychelles) having its place of business at [address given] has been established as the corporate entity which will acquire the Land and procure the construction of the Tower.

C) Dubai Property Ring Limited has offered to sell two bedroomed apartments in the Tower to each of T S Nazran and a syndicate of others (including the Buyer [defined as both Dr. Pooni and Mrs. Pooni] for £100,000 (one hundred thousand pounds sterling).

D) This Agreement sets out the terms which apply to the £100,000 provided by the Buyer to T S Nazran for the purchase of an apartment in the Tower.

IT IS AGREED as follows:

1. Investment

T S Nazran hereby confirms receipt of the sum of £100,000 (one hundred thousand pounds sterling) from the Buyer.

T S Nazran undertakes to use the £100,000 received from the Buyer, subject to the terms of this Agreement, for the acquisition for the Buyer of a two bed roomed apartment in the Tower, as identified on the DPR [i.e. Nazran Company] IP1 form issued to the Buyer by Dubai Property Ring Limited ("Apartment").

The £100,000 provided by the Buyer will be repayable in accordance with the terms of this Agreement.

2. Assurances

In consideration of the Buyer providing £100,000 to him, T S Nazran warrants to the Buyer that:

2.1 T S Nazran is both a shareholder and a director of Dubai Property Ring Limited;

2.2 full legal and beneficial title, in accordance with the laws of Dubai, to the Land vests in Dubai Property Ring Limited (subject to the payment of further instalments of the purchase price for the Land);

2.3 T S Nazran has purchased an apartment in the Tower for £100,000 and such purchase has been made on terms no more favourable than the terms of this Agreement;

2.4 T S Nazran will not release any of the £100,000 provided by the Buyer to Dubai Property Ring Limited until it is confirmed that T S Nazran will be entitled to sell the Land and to reimburse the Buyer in accordance with the provisions of this Agreement; and

2.5 T S Nazran will ensure that the £100,000 provided by the Buyer will only be released to Dubai Property Ring Limited upon satisfactory confirmation by Dubai Property Ring Limited to the Buyer of ownership of the Apartment by the Buyer.

3. Repayment

T S Nazran undertakes that if appropriate detailed terms cannot be agreed with Dubai Property Ring Limited that he shall not release the £100,000 provided by the Buyer to Dubai Property Ring Limited and shall ensure that the £100,000 shall be returned to the Buyer, in which event the Buyer shall not become the owner of the Apartment.

T S Nazran further undertakes that the £100,000 provided by the Buyer will only be released to Dubai Property Ring Limited on the following terms:

3.1 Dubai Property Ring Limited undertakes to inform the Buyer when it is about to commence construction of the Tower, the Buyer shall then be entitled by written notice to Dubai Property Ring Limited to require it to procure the purchase of the Apartment (such right to be exercised by notice to Dubai Property Ring Limited within two weeks of receiving notification that construction is about to commence0.

In the event of such notice being served by the Buyer then within four weeks Dubai Property Ring Limited shall (subject to delivery to it of such title and transfer documentation to the Apartment by the payment to the Buyers in Dhirams [sic]of an amount equivalent to £200,000 converted at the Exchange Rate (as defined in clause 5.1). For the avoidance of doubt if the Apartment is valued at more than the amount payable to the Buyer in accordance with the terms of this clause such excess shall belong to Dubai Property Ring Limited; or

3.2 if the construction of the Tower has not commenced by the expiry of eighteen months from the date of this Agreement then Dubai Property Ring Limited shall (subject to delivery to it of such title and transfer documentation to the Apartment as it shall reasonably require) procure the purchase of the Apartment by the payment to the Buyer in Dhirams [sic] of an amount equivalent to £100,000 converted at the Exchange Rate (as defined in clause 5.1). For the avoidance of doubt if the Apartment is valued at more than the amount payable to the Buyer in accordance with the terms of this clause such excess shall belong to Dubai Property Ring Limited.

If Dubai Property Ring Limited has informed the Buyer of its intention to commence construction of the Tower and the Buyer fails to serve notice in accordance with clause 3.1 above then title to the Apartment shall continue to vest in the Buyer and the Buyer shall be deemed to have forgone any right to require Dubai Property Ring Limited to procure the purchase of the Apartment.

…"

6. Unhappily it is apparent immediately upon reading those parts of the Guarantees which I have quoted that the Guarantees were not well-drafted. Recital C) was confusing as to who precisely was to pay the Nazran Company £100,000 and for what. The recital was certainly capable of being interpreted as recording that there were to be only two payments – one by Mr. Nazran, and one by "a syndicate of others". It was also unclear as to how many apartments had been agreed to be sold for the sum of £100,000. Perhaps more significantly, clause 2.4, as drafted, seemed to have the effect that Mr. Nazran was required, before releasing any of the £100,000, to have acquired from the Nazran Company title to the Site so as to be able to sell it himself. Clause 2.5 appeared, as drafted, to have the consequence that title to the apartment had to be transferred to Dr. and Mrs. Pooni by the Nazran Company before the purchase price could be handed over to the Nazran Company by Mr. Nazran. The second undertaking of Mr. Nazran in clause 3 appeared cumbersome, in that Mr. Nazran was in effect undertaking to procure undertakings in favour of Dr. and Mrs. Pooni from the Nazran Company. Not all of these difficulties in construction of the Guarantees were of significance in this action, but it was upon some of the clauses in the Guarantees, specifically clause 1, clause 2.4, clause 2.5 and the first undertaking of Mr. Nazran in clause 3, that Dr. and Mrs. Pooni based their claims in this action.
7. It was not in dispute, by the time of the trial, that what Mr. Nazran had actually done with the total of £200,000 provided to him by Dr. and Mrs. Pooni was that pleaded at paragraph 12 of his Re-Amended Defence:-

"… the Defendant released the Claimants [sic] total funds for the two apartments of £200,000 to a holding account in which syndicate funds were deposited as a collective, funds were transferred from this account on behalf of DPR [i.e. the Nazran Company] directly to the master developer and land Seller's account in or about December 2005 towards the first instalment of the land as per the LandSPA [i.e. the Purchase Agreement] terms in which DPR is the registered purchaser. The Defendant did not withhold or utilise the Claimants [sic] funds for any other purpose."

8. Dr. and Mrs. Pooni requested the return of the £200,000 they paid to Mr. Nazran, but no sum has been forthcoming. In the Re-Amended Particulars of Claim in this action their claim for repayment of the £200,000 is put in a number of ways, some more exotic than others. The most straightforward were that, releasing their money to the Nazran Company to enable the Nazran Company, in conjunction with other funds, to make the first payment due under the Purchase Agreement amounted to breach of the obligations of Mr. Nazran under clause 1, clause 2.4, clause 2.5 and the first undertaking in clause 3 of the Guarantees; alternatively, that the £200,000 had been paid to Mr. Nazran to hold on trust only to be used in accordance with the provisions of the Guarantees which I have identified, so that the money has been paid away in breach of trust. As a result of the breaches of the Guarantees and breaches of trust complained of, it was said, Dr. and Mrs. Pooni had suffered loss in the amount of the sums given to Mr. Nazran, £200,000.
9. In answer to the claims of Dr. and Mrs. Pooni various points were raised in the Re-Amended Defence of Mr. Nazran. Many of those points were not pursued at the trial by Mr. James Morgan, who appeared on behalf of Mr. Nazran, but who had not drafted the Re-Amended Defence. In response to the most straightforward bases of claim it was said that, on proper construction of the Guarantees, Mr. Nazran was entitled to use the monies provided by Dr. and Mrs. Pooni as he did. That contention was also advanced as the answer to the alleged breaches of trust. As a matter of pleading the case of Mr. Nazran was put in this way at paragraph 26 of the Re-Amended Defence:-

"Paragraph 5 is denied. As is set out fully above, the Defendant as managing director for DPR, in accordance with the terms of the agreement, released the funds of £200,000 directly to the master developer [i.e. the Group] (as part of the first instalment to purchase the land) for DPR on or about December 2005 on the date the LandSPA was signed without delay and therefore utilised the Claimants [sic] funds for the purpose they were intended for, i.e., to purchase the land. Therefore, neither the Defendant not the Company [i.e. the Nazran Company] hold any funds on trust for the Claimants, either as pleaded or at all, and further these funds were released in accordance with the agreements with the Claimants."

10. The pleas in paragraph 26 of the Re-Amended Defence were elaborated by Mr. Morgan in his written skeleton argument:-

"35. [Reliance upon the actual words of clause 1 (or of clause 2.4, clause 2.5 or clause 3)] ignores other provisions in the Guarantees, the background knowledge of the parties and the clear commercial purpose of the arrangements with the early investors. In particular:

a. It is clear from the Form [IP1] and is accepted by the Pooni's [sic] that their "purchase" of the apartments was off-plan and prior to construction of even the tower;

b. That is underlined by §3.1 and §3.2 of the Guarantee which specifically identified that DPR would give notice when it was about to commence construction of the tower and/or would "purchase" the apartment if construction of the tower had not commenced;

c. Moreover, clear background facts known to the parties were that DPR (i) could not construct the apartments without first acquiring the Property and (ii) could not acquire the Property without using the early investments to pay for the initial instalments;

d. It would therefore make no commercial sense at all if as Mr. [sic] Pooni suggests later in his statement, the investment was not to be released until "we were actually going to own the apartments as a finished product and would have something to show for our investment, something that we could either sell back to DPRL…"

e. Accordingly, words such as "sell", "purchase" and "acquisition" have to be construed accordingly: they did not mean the sale/purchase of a then physically identifiable apartment or the use of investments to acquire such a thing;

f. That quoted part of clause 1 cannot be construed as a catch-all promise that in the event that the Pooni's [sic] did not become owners of a physically constructed apartment, Mr. Nazran would be liable to reimburse them their investment. This was something that only DPR promised pursuant to §3.2 of the Guarantee.

36. Accordingly, the quoted part of clause 1 has to be read in terms that the investment was to be used in connection with, or as a step in the process of, the acquisition of an apartment in the tower. The use of the investment to purchase the Property on which the tower (that would contain the apartment) was to be built, was well within the scope thereof and there was no breach. That is supported by the other "terms of this Agreement", including §2.4 and §2.5 referred to below."

11. The other point which was relied upon in answer to the claim for £200,000 for breach of the terms of the Guarantee was pleaded in the Re-Amended Defence at paragraph 35 in this way:-

"Further, the Claimants have failed to mitigate their loss by not accepting the £200,000 offered to them by DPR in or about May 2008."

12. That point was elaborated in the written skeleton argument of Mr. Morgan:-

"Mitigation of Loss

44. The Pooni's [sic] are not entitled to recover for any loss which they ought to have avoided by taking reasonable steps to so do: McGregor on Damages (19^th ed) at 9-014 et seq.

45. During 2008 to 2009 there were various offers by DPR of alternative agreements to facilitate payment of at least the total investment of £200,000 to the Pooni's [sic]. They say that these offers were conditional, they did not provide a guarantee of payment and in any event they wanted the full £400,000 (plus compensation) in accordance with their contractual rights.

46. But by refusing at least the revised draft agreement dated 15^th February 2009 [C166-169], the Pooni's [sic] failed to take reasonable steps which would have led to them recovering the £200,000 that they now claim. In particular:

a. The draft agreement provided for payment of the £200,000 by 31^st March 2009;

b. In the event that payment was not made as promised, then the new agreement would be "null and void" meaning that the Pooni's [sic] were not prejudiced if payment was not made;

c. There is good evidence that had the Pooni's [sic] entered into the new agreement then they would have received payment as was the case with other early investors, including Mr. Sahota …

d. The Pooni's [sic] refusal appears to have been based on the erroneous assumption that they were entitled to the full £400,000 from DPR under §3.1 of the Guarantees, but in fact their rights were limited to the £200,000 under §3.1 …

e. A claim at the level of £400,000 has not been pursued against Mr. Nazran or DPR."

13. In the result there were, effectively, two questions requiring resolution in order to determine the most straightforward bases of claim advanced on behalf of Dr. and Mrs. Pooni – whether, on proper construction of the Guarantees, Mr. Nazran was entitled to release the total of £200,000 paid to him by Dr. and Mrs. Pooni to contribute to the first payment in respect of the Site due under the Purchase Agreement, and, if not, whether Dr. and Mrs. Pooni, acting reasonably, ought to have accepted some offer of payment made to them by the Nazran Company. As I understood the submissions of Mr. Morgan, he contended that the consequence of Dr. and Mrs. Pooni not accepting the offer, or one of the offers, upon which Mr. Nazran sought to rely, was that they were unable to recover any sum at all from Mr. Nazran.

Construction of the Guarantees

14. There was no difference between Counsel before me in relation to the principles to be applied in determining in English law the proper construction of a document in writing. The now classic exposition is that of Lord Hoffmann in Investors Compensation Scheme Ltd. v. West Bromwich Building Society [1998] 1 WLR 896 at pages 912H to 913E:-

"The principles may be summarised as follows.

(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2) The background was famously referred to by Lord Wilberforce as the "matrix of fact", but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.

(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] AC 749.

(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera SA v. Salen Rederierna AB [1985] AC 191, 201:

"if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion which flouts business commonsense, it must be made to yield to business commonsense."

15. In the light of the submissions of Mr. Morgan the fourth of Lord Hoffmann's principles was probably the most important to which to have regard in the circumstances of the present case. However, that principle needs to be understood properly. The vital clause is, "the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean". The process of construction is the assessment of the meaning of a written document which contains words. The words used are not to be ignored. The words used are critical, because it was by the selection of those words and the use of them grammatically to construct the sentences in which they were employed that the parties sought to express the meaning which they desired. That meaning is to be determined objectively. The question is what the use of the particular words in the particular way in which they were used, against the background in which the document was produced, would reasonably convey to a reasonable man with knowledge of the relevant background. The question is not whether the parties would have been better advised to make an agreement other than the one which they in fact made. It is not open to the court to seek to improve upon the agreement which the parties made for themselves.
16. Logically the process of construction has to start somewhere, and generally, at any rate, the most convenient place at which to start is by reading the words used in the document which fall to be construed and seeing what they seem to convey simply as a matter of the ordinary use of the English language. Depending upon the particular context it may be necessary to consider possible use of language in some technical sense, or some slang use, or whether the ordinary English understanding of the words used is affected by some background fact or circumstance known to the parties at the time the agreement was made.
17. The need for a process of construction to be undertaken is obviously most evident if there is ambiguity in the use in the document of the English words employed. If there is no ambiguity, however, there is, perhaps, at least a modest presumption at the outset that the parties intended to mean what the words used convey as a matter of English – per Lord Hoffmann, "… we do not easily accept that people have made linguistic mistakes, particularly in formal documents.". Obviously such modest presumption yields readily to any background fact or circumstance known to the parties which could affect the meaning which they intended, but the process of construction necessarily proceeds by stages.
18. As a matter of the use of the English language it has to be said that the effect, so far as relevant to the claims of Dr. and Mrs. Pooni, of the provisions of the Guarantees upon which they relied is tolerably clear.
19. The provision in clause 1, "T S Nazran undertakes to use the £100,000 received from the Buyer, subject to the terms of this Agreement, for the acquisition for the Buyer of a two bed roomed apartment in the Tower, as identified on the DPR IP1 form issued to the Buyer by Dubai Property Ring Limited", amounted, on its face, to a promise by Mr. Nazran to use the £100,000 only for the acquisition of the apartment mentioned in the IP1 form, unless some other use was permitted by the other terms of the Guarantee. Given that the apartment in question was to be constructed as part of the Tower, and that the Nazran Company was to procure the building of the Tower, what the term amounted to was that Mr. Nazran would use the money to pay the Nazran Company for conveyance of the title to the apartment to Dr. and Mrs. Pooni.
20. I have already pointed out that clause 2.4 of the Guarantees has some difficulties as to its exact meaning. However, those difficulties do not affect the force of the provision on the important point in what circumstances was it open to Mr. Nazran to use the money provided by Dr. and Mrs. Pooni. The words, "T S Nazran will not release any of the £100,000 provided by the Buyer to Dubai Property Ring Limited until it is confirmed that T S Nazran will be entitled to sell the Land and to reimburse the Buyer in accordance with the provisions of this Agreement", could, perhaps, have been intended to mean not that the money was not to be released until Mr. Nazran personally was in a position to sell the Site, but rather that the money was not to be released until the Nazran Company was in a position to do that. However, that is not the critical question for present purposes. The critical question for present purposes is whether it was open to Mr. Nazran to release the money when neither Mr. Nazran nor the Nazran Company was able to sell the Site.
21. The literal meaning of clause 2.5 of the Guarantees, "T S Nazran will ensure that the £100,000 provided by the Buyer will only be released to Dubai Property Ring Limited upon satisfactory confirmation by Dubai Property Ring Limited to the Buyer of ownership of the Apartment by the Buyer" did seem to have the effect that the purchase price of the apartment would not be paid until after title to it had been conveyed to Dr. and Mrs. Pooni. Although it would be unusual for the purchase price to be paid after conveyance, in circumstances in which the purchase price was held by Mr. Nazran and could be paid immediately upon completion of the conveyance it was of no practical effect. What was clear, however, as a matter of the use of the English language, was that the only use which Mr. Nazran could make of the money was to pay the purchase price of the apartment.
22. Once again, it seems to me that, as a matter of use of the English language, the relevant effect of the other provision upon which Dr. and Mrs. Pooni relied, that in clause 3 that, "T S Nazran undertakes that if appropriate detailed terms cannot be agreed with Dubai Property Ring Limited that he shall not release the £100,000 provided by the Buyer to Dubai Property Ring Limited and shall ensure that the £100,000 shall be returned to the Buyer, in which event the Buyer shall not become the owner of the Apartment", was clear. Mr. Nazran was to hold onto the money until terms for the purchase of the apartment had been agreed between Dr. and Mrs. Pooni and the Nazran Company.
23. It is right to say that it can be discerned from the Guarantees themselves, in clause 2.2, that the parties to the Guarantees knew perfectly well that there were outstanding instalments of the purchase price of the Site to be paid in the future. Given the terms of the provisions of the Guarantees upon which Dr. and Mrs. Pooni relied, it appears that the parties specifically had in mind that the money provided by Dr. and Mrs. Pooni to Mr. Nazran should not be used in the making of any contribution towards payments of that category.
24. The case for Mr. Nazran did not, by and large, involve any suggested verbal modification to the words actually used in the provisions upon which Dr. and Mrs. Pooni relied, but ignoring them. The justification for ignoring them was said to be that complying with them would have had no commercial purpose, and that the obvious commercial purpose of Dr. and Mrs. Pooni paying £200,000 at the time they did was to assist in the financing of the purchase of the Site.
25. Mr. Morgan did submit that the provision in clause 1 of the Guarantees relied upon by Dr. and Mrs. Pooni should be read as if it said, in material part, "in connection with, or as a step in the process of, the acquisition of" and so comprehending the use of the money for the purpose of purchasing the Site upon which the Tower containing the relevant apartments was to be constructed.
26. He submitted that there was in any event no breach of clause 2.4 of the Guarantees because Mr. Nazran controlled the Nazran Company and the Nazran Company was entitled to sell the Site. That contention was based on the warranty in clause 9.5 of the Purchase Agreement. However, in my judgment that warranty, that "the Purchaser shall have the right to Sell", not that "the Purchaser has the right to Sell", was plainly directed at a point in time after the Nazran Company had paid the full purchase price, not at any earlier point.
27. As to clause 2.5 of the Guarantees, Mr. Morgan submitted at paragraph 40 c of his written skeleton argument that:-

"The clause can be properly understood as only requiring confirmation by DPR to the Pooni's [sic] that upon construction of the relevant apartment (and assuming that the option under §3.1 of the Guarantee had not been exercised) they would be the owners of it;"

28. In support of the contention that the parties to the Guarantees knew that the Nazran Company had not, as at the date of the Guarantees, paid anything for the Site, and thus that it was obvious that the money contributed by Dr. and Mrs. Pooni was to be used as part of the money necessary to be paid to purchase the Site, Mr. Nazran gave evidence, at paragraphs 11 and 12 of his witness statement for the purposes of this action, that:-

"11. The Claimant's [sic] entered into two Guarantee's [sic] with me on 24^th and 25^th November 2005. These were witnessed by Mr. Stanley Dcosta [sic] who was working for ARE. As per Exhibit 24.

1.2 [sic] Prior to making the investment of £200,000 to secure the apartment units in the off plan development with DPR. [sic] The 1^st Claimant attended a number of presentations met with myself and Mr. Stanley D'costa prior to investing. Almost always the 1^st Claimant attended with Mr. Gary Sahota and another investor by the name of Mr. Ajaib Benning, who was also introduced by Mr. Gary Sahota. The Claimant took away DVD's marketing material, copies of the Personal Guarantees, and reservation form, later further meetings were held to talk through the Reservation Department, Personal Guarantee document and a specimen "Land Sales Purchase Agreement" document that was issued by IMG [i.e. the Group], which later became the agreement on which basis the land was purchased. The last page showed the master plan that was to be constructed. Exhibit 2.

12. The 1^st Claimant was shown

12.1 a draft LAND Sales Purchase Agreement (LandSPA) and a a [sic] refund clause (Clause 12). A specimen version of the LandSPA had been issued from the master developer (IMG) of the City of Arabia, to show each of the Syndicate members and obtain their interest and consent to proceed. The Claimant's [sic] were shown the LandSPA document and its contents were explained on a word for word basis to the Syndicate members by myself. The 1^st Claimant at the time often attended meetings with Gary Sahota and Mr. Ajaib Benning.

12.2 The 1^st Claimant were [sic] informed of my decision to participate in the Dubai's realestate [sic] market and its vision to expand and create a city of tourism all of which was backed by the worlds [sic] press reports

12.3 We also discussed the great possibilities of growth on completion of the tower and the master plan of the City of Arabia

12.4 In addition to the Land SPA e [sic] a secondary Government contract which underpinned the making of the City of Arabia and referred to it as The Plan, this was a contract from the Govt Dept of Tourism which bound IMG to perform and complete (deliver) the City of Arabia within a certain time.

12.5 The claimants told me that they were confident in Dubai's real-estate market and its booming growth

12.6 I told them that they had direct access to myself in DPR and that the company DPR was a new company that had a clean sheet and no debts

12.7 The claimants as they were going to make payments to me, I made them aware of how I would act in the Guarantee to make sure that their funds were safely invested. I also explained that if the project was not to proceed before off plan sales, their funds were to return from DPR in which I would do my best in selling off the land in the open market, or if construction of the project had not proceeded within 24 months DPR would arrange for a refund as per clause 3.2. The growth would come only if the business proceeded and successfully completed with off plan Sales [sic] and with the Construction [sic] of the Tower starting, the fail safe mechanism and final resort to receive funds back was by actioning the refund clause 12 of the LANDSPA [sic].

12.8 I made the Claimants also aware of the risks n [sic] the presentations that DPR:

12.8.1 was not owning the land; but purchasing the land via a staged Syndicated fund raising process

12.8.2 Was to apply for planning and design approvals and that no planning approvals on the building design of the Tower from government authorities [sic]

12.8.3 Would have to find customers and market the towers [sic] presence in the region to make the sales possible

12.8.4 Was buying the land in City of Arabia which that at the time was a desert landscape with no infrastructure."

29. It was common ground that Mrs. Pooni was only involved personally in one meeting with Mr. Nazran, in May 2008. Both Dr. Pooni and Mrs. Pooni were called to give evidence at the trial. In cross-examination Dr. Pooni agreed that Mr. Nazran had told him before the Guarantees were entered into that the Nazran Company was purchasing the Site via a staged syndicated fund raising process, but Dr. Pooni understood that he was, as it were, in a second phase of a syndicate and that money provided by the first phase had covered the payment necessary to be made to acquire the Site, subject to the need for further instalments of the purchase price to be made. Dr. Pooni said in cross-examination that no draft or version of the Purchase Agreement was presented to him before the Guarantees were entered into, and, indeed, he had not seen a copy until one was, reluctantly, disclosed on behalf of Mr. Nazran in this action.
30. On behalf of Mr. Nazran Mr. Morgan drew to my attention that at paragraph 20 of his witness statement dated 22 October 2014 made for the purposes of this action Dr. Pooni had said:-

"The nub of the arrangement, as it was explained to me, was that a number of investors would 'forward purchase' apartments in the block, that is to say, buy them off plan and before they were built, the purchase monies thereby raised being used to buy the land and to fund the development of the site. Accordingly we were being invited to buy apartments, not the land itself, and we were definitely not investing in or becoming shareholders of DPRL, despite what Mr. Nazran asserts."

31. Mr. Morgan submitted that that passage was entirely consistent with Mr. Nazran's case that Dr. Pooni knew perfectly well that the money he provided was to be applied to making a payment in respect of the purchase of the Site. When that was put to Dr. Pooni in cross-examination he said that, on reflection, paragraph 20 of his witness statement might have been better expressed. The point he said he had been trying to make was that what he had been invited to do was to buy an apartment, or rather two apartments, not to invest in the Nazran Company or to provide money for the purchase of the Site. Mr. Morgan suggested to Dr. Pooni that that explanation was inconsistent with a comment in an e-mail Dr. Pooni sent to Mr. Nazran on 3 November 2010 that, "After all you did b[u]y the land with our money". Dr. Pooni observed that that comment reflected the position as it seemed to him in 2010 in the light of what had happened between the provision of the money and the date of the e-mail, not what he understood the position to be in October/November 2005.
32. Plainly it is necessary to reach a conclusion as to whether to accept the evidence of Mr. Nazran that a draft of the Purchase Agreement was shown to Dr. Pooni before the making of the Guarantees, or to accept the evidence of Dr. Pooni that it was not. I accept the evidence of Dr. Pooni on this point. Although criticised by Mr. Morgan in his closing submissions as inclined to rely on the terms of the Guarantees rather than answering questions put to him, I was impressed by Dr. Pooni as a witness. I do not think that the criticism made of him was justified. His position was that what was said to him by Mr. Nazran about the project involving the Tower was reflected in what the English words used in the Guarantees said, so he was not in fact evading Mr. Morgan's questions, but answering them to the effect that what was in the Guarantees reflected what he had been told. By contrast I was not impressed by Mr. Nazran as a witness. He was inclined to be evasive, launching upon long, and often irrelevant, disquisitions in response to questions which were perfectly capable of being answered "Yes" or "No". Mr. James Quirke, who appeared on behalf of Dr. and Mrs. Pooni, roundly submitted in closing that Mr. Nazran's evidence was dishonest, and that he was dishonest. That, I think, was rather harsh, but not unfair. Mr. Nazran was inaccurate in some of his evidence, and I formed the view that his professed recollection of what was said to Dr. Pooni, or shown to him, prior to the provision of the £200,000, was what Mr. Nazran wished the position to have been, rather than an actual recollection of what it had in fact been. That "rose-tinted" recollection affected also Mr. Nazran's account of the meeting with Dr. and Mrs. Pooni in May 2008 to which I shall come. However, a vivid illustration of the problem of accepting the evidence of Mr. Nazran arose out of discussion in cross-examination of various versions of what may be described as a "Settlement Agreement", on the face of it intended to be made between (1) Mr. Nazran (2) the Nazran Company and (3) usually an "Investor", but sometimes Dr. Pooni. I shall come later in this judgment to the versions of the Settlement Agreement which are relevant to the issue of mitigation of loss. For the present it is enough to observe that each version contained a number of recitals. Recital (A) of each version included this sentence, "The Investment, together with other funds to be utilised in connection with the development opportunities, are presently held in an Escrow Account (hereinafter defined) in Dubai and controlled by HSBC Bank on behalf of DPR". In each version of the Settlement Agreement there was a definition of the expression "Investment". The definitions varied a bit, but the effect of each of them was that it meant "the original investment sum". Mr. Quirke pressed Mr. Nazran with the proposition, plainly correct, that the terms of Recital (A) represented, falsely, to Dr. and Mrs. Pooni that their money had not been utilised, but had been placed in the escrow account, and so was safe. Mr. Nazran would not have it. He maintained that all that had been asserted was that there was a fund in the escrow account out of which Dr. and Mrs. Pooni could be repaid. The furthest Mr. Nazran was prepared ultimately to go, after a considerable amount of time had been spent on the point, was that there was some infelicitous use of language.
33. Notwithstanding my acceptance of the evidence of Dr. Pooni that he was not shown a draft, or any version, of the Purchase Agreement before the Guarantees were entered into, the point remains that, on his account, Dr. Pooni was providing money to Mr. Nazran which could not be used until the Tower was completed and Dr. and Mrs. Pooni had had conveyed to them two apartments. Mr. Morgan urged upon me that that was a very uncommercial result, such that it could not possibly be what the parties had intended.
34. That submission focused, of course, not on the commerciality of the Guarantees, but upon the commerciality of the underlying transaction. Although the commerciality of the underlying transaction was undoubtedly a factor to take into account in construing the Guarantees, of greater significance was the commerciality of the Guarantees. Even Mr. Nazran accepted that the purpose of entering into the Guarantees was to give confidence to Dr. and Mrs. Pooni that they were not giving their money to a recently-formed Seychelles company, but to a British citizen resident in England who promised to deal with the money in accordance with the terms of the Guarantees. If Mr. Morgan's submission was sound the apparent confidence created by the Guarantees was worthless, because Mr. Nazran could simply pass the money straight to the Nazran Company to enable it to make a payment to the Group in respect of the purchase of the Site. A reasonable person considering the meaning of the Guarantees objectively would not reach the conclusion that the parties intended them to be useless pieces of paper.
35. Actually I do not accept the submission of Mr. Morgan that the provision of money by Dr. and Mrs. Pooni to Mr. Nazran on terms that he would hold it until the Tower was completed and two apartments could be conveyed to Dr. and Mrs. Pooni, or they could take a profit of 100%, was uncommercial. There may well have been some value to Mr. Nazran, or the Nazran Company, in being able to say to potential lenders that not merely had two apartments been pre-sold, but that they had actually been paid for in full. That information may have provided an incentive to a lender to lend, because it would know that, subject only to completion of the Tower, money lent could be repaid.
36. In the result, therefore, I reject the construction of the Guarantees urged upon me by Mr. Morgan. On the plain meaning of the English words used in the clauses relied upon on behalf of Dr. and Mrs. Pooni Mr. Nazran applied their money in breach of the Guarantees and is, subject to the question of mitigation of loss to which I am about to come, bound to repay the sum of £200,000. Mr. Morgan accepted that at paragraph 47 of his written skeleton argument.

Mitigation of loss

37. By the end of the trial the case of Mr. Nazran as to mitigation of loss had become refined to the issue whether what was presented to Dr. and Mrs. Pooni at the meeting they had with Mr. Nazran in May 2008 was the version of the Settlement Agreement for which Mr. Nazran contended, or the version for which Dr. and Mrs. Pooni contended. Mr. Morgan accepted that, if the version presented was that for which Dr. and Mrs. Pooni contended, they acted reasonably in declining to enter into that Settlement Agreement.
38. The principal difference between the various versions – there seem to have been at least four produced at different times – of the Settlement Agreement was in the terms of repayment of the original investment of Dr. and Mrs. Pooni provided for in clause 3.
39. Clause 3 of the version of the Settlement Agreement which Mr. Nazran asserted that he had offered Dr. and Mrs. Pooni in the meeting in May 2008 was in these terms:-

"The Investor hereby acknowledges receipt of the Investment from DPR and hereby releases TSN [Mr. Nazran] from all obligations and liabilities pursuant to the terms of the Existing Personal Guarantee."

40. That version of the Settlement Agreement was in effect but a receipt for money handed over. Mr. Nazran contended that Dr. and Mrs. Pooni were not prepared to enter into a Settlement Agreement in those terms because they wanted to hold out for payment of the promised profit and compensation for delay. It should be remembered that, on Mr. Nazran's account, this version of the Settlement Agreement was offered two and a half years after the money had been paid by Dr. and Mrs. Pooni, at a time when work on the Site had not started, the world financial crisis had intervened, and the Government of Dubai had established the Real Estate Regulatory Authority and passed a law requiring money paid in respect of apartments sold off plan to be placed in stringently regulated escrow accounts. This version of the Settlement Agreement itself refers to money in an escrow account in Recital (A). In other words, on Mr. Nazran's evidence the Nazran Company was prepared to refund to Dr. and Mrs. Pooni £200,000 with no conditions immediately in return for signature of the Settlement Agreement, notwithstanding the fact that the money to make repayment had to come from the escrow account.
41. Clause 3 of the version of the Settlement Agreement which Dr. and Mrs. Pooni both contended was that presented to them by Mr. Nazran at the meeting in May 2008 provided:-

"In consideration of the premises herein the Investor hereby releases TSN from all obligations and liabilities pursuant to the terms of the Existing Personal Guarantee.

The Investor acknowledges that repayment of the Investment by DPR to the Investor has been agreed to and accepted by the legal authorities in Dubai strictly on the understanding that any such repayments must not be made to the detriment of other investors nor to the detriment of the construction programme generally and, consequently, agrees to accept repayment of the Investment at some time following the Commencement of Construction provisionally (but not absolutely) scheduled for sometime in 2009.

The Investor hereby acknowledges that payment of the above mentioned sum must be by way of withdrawals from the Escrow Account with such withdrawals being subject to the rules and regulations of the Escrow Account for the time being in force. The Investor shall not hold DPR responsible for any delays occasioned in paying the above mentioned payment to the Investor where such delays are occasioned through no fault of DPR."

42. The concept underlying mitigation of loss is that a person who has suffered damage as a result of the wrong of another must act reasonably to reduce, or eliminate, the loss consequent upon the wrong. In the present case what Mr. Nazran's contention amounted to was that, acting reasonably, Dr. and Mrs. Pooni, should have released Mr. Nazran from all liability under the Guarantees in return for the obligation of repayment by the Nazran Company contained in the relevant version of the Settlement Agreement. It is, I think, obvious that acting reasonably, once Mr. Nazran had acted in breach of the Guarantees by paying away money which he had agreed to hold, did not involve releasing Mr. Nazran from his liability. Moreover, it did not involve releasing Mr. Nazran from his liability in return for a claim of dubious worth against a Seychelles company which was dependent upon the views of regulatory authorities in Dubai and the rules and regulations governing the operation of an escrow account in Dubai. The issue of mitigation could only sensibly arise if Dr. and Mrs. Pooni had been offered repayment in cash of £200,000 by the Nazran Company after they had become aware that Mr. Nazran had paid away the money in breach of contract and breach of trust, but had refused it. That, of course, was Mr. Nazran's case. However, it is fair to say that, because of production of various versions of the Settlement Agreement including a Recital (A) recording that the money paid by Dr. and Mrs. Pooni was held in an escrow account, Dr. and Mrs. Pooni did not discover until after the commencement of this action what Mr. Nazran had actually done with their money. It is plain beyond argument that an obligation to mitigate one's loss cannot arise until one has become aware that one has suffered loss.
43. I wholly reject the evidence of Mr. Nazran that the version of the Settlement Agreement which he offered to Dr. and Mrs. Pooni in May 2008 was that for which he contended. If the Nazran Company had free access to £200,000 which could be used to repay Dr. and Mrs. Pooni, the logical way in which to proceed was for the Nazran Company to provide that money to Mr. Nazran and for him to pay it over to Dr. and Mrs. Pooni under the Guarantees. The intervention of a Settlement Agreement was wholly unnecessary as Mr. Nazran would simply have been performing his obligations under the Guarantees. It is difficult to resist the conclusion that the whole purpose of the production of the versions of the Settlement Agreement which were shown to Dr. and Mrs. Pooni was to persuade Dr. and Mrs. Pooni to surrender valuable rights against Mr. Nazran personally in return for speculative rights against the Nazran Company. The position of Dr. and Mrs. Pooni was that they had never seen the version of the Settlement Agreement which Mr. Nazran contended they had been offered at the meeting in May 2008 until after the commencement of this action. I am sure that they are correct in that.
44. By the end of the trial it was common ground that a version of the Settlement Agreement had been sent to Dr. Pooni as an attachment to an e-mail sent on 15 February 2009. Clause 3 of that form of the Settlement Agreement was in these terms:-

"In consideration of the premises herein the Investor hereby releases TSN from all obligations and liabilities pursuant to the terms of the Existing Personal Guarantee

The Investor acknowledges that repayment of the Investment by DPR has been agreed to and accepted by the legal authorities in Dubai strictly on the understanding that any such repayments must not be made to the detriment of other investors nor to the detriment of the construction programme generally and, consequently, agrees to accept repayment of the Investment at some time following the Commencement of Construction provisionally (but not absolutely) scheduled for sometime in 2009

The Investor hereby acknowledges that payment of the above mentioned sum must be by way of withdrawals from the Escrow Account with such withdrawals being subject to the rules and regulations of the Escrow Account for the time being in force. The Investor shall not hold DPR responsible for any delays occasioned in paying the above mentioned payment to the Investor where such delays are occasioned through no fault of DPR."

45. Those terms are identical to the terms set out in the version which Dr. and Mrs. Pooni said was offered to them at the meeting with Mr. Nazran in May 2008. On Mr. Nazran's case as to the offer made in May 2008 the offer which was made in February 2009 was considerably worse than the offer which he made in May 2008 which had been rejected. That could not be right. When that was pointed out to him, Mr. Nazran said that the version sent as an attachment to the e-mail of 15 February 2009, which was actually despatched not by Mr. Nazran himself, but by Mr. Phillip Ulanowski, was not that which Mr. Nazran had intended should be sent. Mr. Nazran asserted that the version of the Settlement Agreement which he had intended to be sent in February 2009 had a clause 3 which provided:-

"The Investor hereby accepts repayment of the Investment in the sum of Two Hundred Thousand Pounds (£200,000) such sum to be paid on or before 31 March 2009 and hereby releases TSN from all obligations and liabilities pursuant to the terms of the Existing Personal Guarantee.

The Investor hereby acknowledges that payment of the above mentioned sum must be by way of withdrawals from the Escrow Account with such withdrawals being subject to the rules and regulations of the Escrow Account for the time being in force. The Investor shall not hold DPR responsible for any delays occasioned in paying the above mentioned payment to the Investor where such delays are occasioned through no fault of DPR.

The Parties hereby acknowledge that the entirety of this Agreement is conditional upon the happening of the Conditional Event [paying the £200,000] in the absence of which this Agreement (in its entirety) shall be null and void and the terms and conditions of the Principal Agreement shall remain in force."

46. That version of the Settlement Agreement, which Dr. and Mrs. Pooni told me, and I accept, was never seen by them before the commencement of this action, was basically an exercise in futility. In effect clause 3 of that version provided that either the Nazran Company would pay Dr. and Mrs. Pooni £200,000 out of the escrow account by 31 March 2009 or they would be left with their rights under the Guarantees. It offered nothing worthwhile. However, it was expressed to be subject to some conditions which did not appear in the version which Mr. Nazran said he had offered Dr. and Mrs. Pooni in their meeting in May 2008. Again I reject any suggestion that Mr. Nazran made his best offer on behalf of the Nazran Company first and thereafter made less attractive offers. Mr. Nazran was unable to explain why the version of the Settlement Agreement which Mr. Ulanowski in fact attached to his e-mail was current in February 2009, if Mr. Nazran's intention had been that the version he identified should have been sent to Dr. Pooni. The truth, I think, is that Mr. Nazran has produced versions of the Settlement Agreement for the purposes of this action which appear to support the case he wishes to advance.
47. In the result there is nothing in the contention that Dr. and Mrs. Pooni had failed to mitigate their loss consequent upon the breaches of the Guarantees and breaches of trust of Mr. Nazran.

Conclusion

48. In the result there will be judgment for Dr. and Mrs. Pooni in the sum of £200,000, together with interest. I think by the end of the trial it was common ground that, if Dr. and Mrs. Pooni succeeded in their claim, interest should be awarded pursuant to statute at a rate calculated at a level above base rate. Understandably Mr. Quirke urged me to be generous. However, the purpose of an award of interest is to compensate a litigant for being kept out of money which should have been paid, and the concept of generosity is irrelevant. It seems to me that the focus of my attention should be the sort of rate of interest which Dr. and Mrs. Pooni might have been able to earn on their £200,000 had it been placed in a bank deposit account. There will be simple interest on the amount of £200,000 from the date Mr. Nazran applied it to payment of part of the sum due to the Group on 10 December 2005 until the date this judgment is handed down at a rate 1 per cent above base rate from time to time during that period. No doubt Counsel can undertake the necessary calculations.