Gadhok v Shamji

J U D G M E N T

1. LORD JUSTICE SIMON BROWN: Lady Justice Arden will give the first judgment.

2. LADY JUSTICE ARDEN: This is an appeal with the limited permission of Rix LJ by Mr Bridge Gadhok and a cross-appeal by the defendant in the action, Mr Shamji, against an order of Patten J dated 20th March 2003 allowing the appeal of Mr Shamji from the order of Mr Recorder Merriman QC and dismissing the claim. The Recorder had by his order, dated 13th November 2002, dismissed the defendant's application to strike out the claim, alternatively for summary judgment on the defence. The Recorder also gave the appellant leave to amend his claim.

3. The background to this application may be briefly stated. I propose to do so, to start with at least, by reference to the proposed draft re-amended particulars of claim. The appellant from 1986 to 1994 was the company secretary of Gomba Holdings UK Ltd ("Gomba") and the respondent was at all material times the chairman of Gomba. In about 1986 Gomba and the defendant, Mr Shamji, entered into an agreement with Mr Geoffrey Silver and Mr Donald Abili, whereby Messrs Silver and Abili agreed to purchase the assets of Gomba from the then receivers of Gomba. As a term of that agreement, Mr Silver and Mr Abili agreed to discharge Gomba's debt to its bankers, on condition that Gomba and Mr Shamji paid the costs of the transaction incurred by Mr Silver and Mr Abili. Messrs Silver and Abili claimed £350,000 for those costs. Mr Shamji asked Mr Gadhok to draw two personal cheques in favour of Messrs Silver and Abili in the sums of £150,00 and £200,000 respectively, representing that Gomba and Mr Shamji did not then have available to them the sums needed to pay the sum of £350,000 and promising that by the time the cheques were presented the funds would be available. In fact the funds did not become available and Mr Gadhok countermanded the cheque. Mr Gomba paid Mr Silver in respect of the £150,000 cheque, but neither Gomba nor Mr Shamji paid Mr Abili.

4. At the request of Mr Shamji, Mr Gadhok and his wife transferred to Mr Abili a property at 20 Garden Road, Bromley, subject to a charge in favour of the Abbey National Building Society. The transfer was expressed to be for a consideration of £250,000, the receipt of £150,000 of which was acknowledged with the balance to be for the redemption of the mortgage by the transferee. In fact Mr Abili did not pay the sum of £150,000 to Mr Gadhok or his wife, as that sum was treated as the equity of the property and was taken by Mr Abili in satisfaction of the cheque drawn by Mr Gadhok in his favour, and in addition the liabilities of Gomba and Mr Shamji as evidenced by letters dated 30th June and 25th July 1996. In consideration of the transfer, Mr Shamji promised to pay to Mr Gadhok the sum of £150,000 plus interest.

5. On 28th February 1989 Mr Shamji paid Mrs Gadhok the sum of £120,000 in satisfaction of his liability to her in respect of the transfer. At the same time, Mr Shamji and Mr Gadhok agreed that a like sum was still outstanding from Mr Shamji to Mr Gadhok. This appears in paragraph 13 of the proposed re-amended points of claim and appeared in earlier pleadings. The respondent submits that this point suggests that the condition precedent to the repayability of the loan was satisfied in 1989.

6. Hereinafter the terms of repayment are controversial. I will not refer to the proposed re-amended points of claim, but to seven versions which are put forward by the appellant and I will deal with them in chronological order.

7. The first version is in the original points of claim. I should say that the claim form was issued on 20th November 2001. The points of claim were served subsequently. In the points of claim the appellant alleged an agreement between himself and the respondent for the repayment by the respondent "almost immediately". There was no reference to any party being unable to pay.

8. On 1st April 2002 the respondent served a defence which, among other matters, relied on the Limitation Act 1980. The second version of the terms for the repayment of the monies outstanding came on 30th October 2002, when the appellant served first draft amended points of claim, not being in the form subsequently permitted by the Recorder. In those points of claim it was averred that:

"The Defendant agreed ... to repay the total costs involved in providing him with this property with which to pay his debt. This agreement was verbal."

Accordingly there was no mention in this version of a condition precedent.

9. The third version came in the claimant's witness statement signed on 7th November 2002. In this Mr Gadhok stated that he agreed with the defendant that the defendant would:

"... pay off the debt when either he or Gomba had money ...

The receivership ended in 1986 but Gomba continued to have financial difficulties for a further 3 years until a substantial property (The Skindles Hotel) was sold in 1989."

10. The fourth version appears in the draft amended points of claim produced on 14th November 2002. These represent to a large extent the form of the amendments subsequently permitted by the Recorder. In this document, which became therefore the amended points of claim, the appellant avers:

"The agreement between the defendant, the claimant and his wife did not provide for repayment on or before a fixed or determinable date nor did the agreement made repayment conditional on a demand or any other matter."

This therefore alleged that no terms were agreed making repayment conditional, and thus this document contrasts with the witness statement of 7th November 2002.

11. I should say that on 20th March 2003 Patten J gave his judgment. After he gave judgment, on 7th April 2003 a fifth version was produced in a witness statement by Mr Gadhok in support of permission to appeal. In that witness statement Mr Gadhok said that he had always believed that Gomba was the primary debtor and that he was guarantor. He added:

"... I have always accepted until Gomba was able to repay the monies due I should not take proceedings against Gomba and the proceedings against the Respondent would depend upon the capacity of Gomba to repay. If eventually it became apparent that Gomba was unlikely to be able to repay out of its funds then I would be in a position to take proceedings against the Respondent."

He states that it became apparent in 1994 that Gomba would not be able to repay. If this is the relevant date, I would observe that the limitation period would have expired in 2000 and therefore have expired before the claim form was issued.

12. The sixth version appears to go back to the fourth version and appears in a witness statement dated 25th June 2003, by Mr Gadhok in support of the appeal. He claims in this witness statement that Gomba sold The Mermaid Theatre which it owned, and further that Gomba would have had sufficient cash as a result of that sale, which was completed on 9th January 1998, to repaid the debt owed to the appellant.

13. A seventh version appears in the draft re-amended points of claim, to which I have already referred, which are dated 8th July 2003 but not served until 6th October 2003. In this document the appellant alleges that the defendant was to repay:

"... when either the defendant or Gomba had the money, that is to say sufficient money to repay."

I would observe that it is not clear what this means. It seems to be suggesting that it was not simply a question of Gomba having cash, but of its having sufficient cash. I would also observe that all these documents, except the last that I have mentioned, were accompanied by a statement of truth by Mr Gadhok or on his behalf.

14. We are not concerned with the major part of the judgment. In his judgment the judge found that the arrangements between the parties amounted to a contract for the payment of a sum of money and not one of loan for the purposes of section 5 of the Limitation Act 1980. Up to that stage the appellant was arguing that any condition for repayment was too uncertain to be enforceable, so that the contract was not excepted from section 5 by section 5(2)(b). If it were so excepted, a demand would be necessary to start the limitation period running. For this purpose the judge considered whether the terms alleged for repayment were sufficiently certain to be enforceable. Contrary to the view taken by the Recorder, the judge found that the terms were sufficiently enforceable. He held:

"... the learned Recorder did not have the advantage that I have had of being referred to two decisions, the first in the case of Hammond v Smith , where the debtor who was a baker, wrote to the creditor saying, 'I will pay you as soon as I get it in my power.' That simple statement in an highly informal, oral arrangement was held by the court to be an enforceable term of a contract, in the sense that it was sufficiently certain, and to have the effect of making time run from the date on which it was within the power of the debtor to pay.

Similarly, in a slightly more formal context in the case of Ledingham v Bermeijo Estancia Ltd [1947] 1 All ER 749, Atkinson J held that an agreement to waive interest until such time as the company was in the position to pay the interest, was also sufficiently certain to be enforced by the court."

15. On the basis of these authorities, the judge concluded that the terms agreed were sufficiently certain to be enforceable. He further held that in accordance with the agreed term, the money became repayable on Mr Gadhok's evidence in 1989 and was thus statute-barred.

16. The evidence of Mr Gadhok was summarised in paragraph 30 of the judge's judgment. The judge referred to a letter dated 23rd May 1994 and said that:

"... as the letter goes on to record, the monies did eventually become available in 1989 from the sale of the [Skindles Hotel], and still there was no payment."

17. The judge did not consider the alternative grounds of appeal before him, save to add that had he been satisfied that there was an arguable and viable claim on the basis of the proposed amendment considered against the background of the evidence, he would have concluded that there was no bar under section 35 of the Limitation Act 1980 to the amendments to the particulars of claim proposed by the appellant.

18. The only ground of appeal on which Rix LJ gave permission was the appellant's contention that, on the basis of the evidence served, the judge was wrong to hold that in 1989 either the defendant or Gomba had sufficient funds to repay the debt. In refusing permission on the other issues, Rix LJ said in paragraphs 2 and 3 of his reasons:

"2. I do not think that there is a realistic prospect of success on the 'contract of loan' issue. It seems to me that Patten J was clearly right to say that Mr Shamji's debt was in respect of a liability arising out of a wider transaction, and did not arise out of a loan made by Mr Gadhok to Mr Shamji or Gomba."

3. In the circumstances the 'determinable date' issue does not arise under section 6 of the Limitation Act 1980, but at large. If there was no binding agreement as to the time for payment, then section 5 applies and Mr Gadhok is in any event out of time. If there was an agreement, it is in the terms found by the judge. In any event, there is no room for permission to appeal."

Rix LJ then went on to give permission to appeal on the limited ground that I have mentioned.

19. The appellant, for whom Mr Simon Edwards appears, contends that the evidence simply established that in 1989 the defendant or Gomba had sufficient funds to repay Mrs Gadhok and not Mr Gadhok.

20. I now turn to Mr Gadhok's first witness statement on which this turns. In this witness statement Mr Gadhok states that the receivership ended in 1986, but Gomba continued to have financial difficulties for a further three years until The Skindles Hotel was sold in 1989. He says that at that point he and Mr Shamji agreed that the balance of monies due to him would be repaid in due course. He also states that the settlement of the debt was delayed because the sale of The Skindles Hotel was staggered and the first tranche was used to pay off creditors. He then refers to the fact that his wife became impatient and that as a result the defendant agreed to pay her £120,000, being a half share of the equity of 20 Garden Road plus interest. Mr Gadhok does not deal in this witness statement with the question whether or not Mr Shamji or Gomba was able to pay the debt at a later date.

21. The judge referred to a letter of 23rd May 1994. This is a letter from Mr Gadhok to Mr AJ Shamji and Mr Alim Shamji. It contains a number of workings with which I am not concerned, but in paragraph 4 Mr Gadhok states:

"Firstly the loan was promised to be repaid by 30th June '86, then August '86 and then December '86. Eventually it was stated that no money was available until Skindles was sold."

That is the material part of the letter, which does not refer to there being sufficient money to repay both Mr Gadhok and Mr Shamji. This is the only evidence therefore on the issue when Gomba became able to pay the debt.

22. For the appellant on this appeal, Mr Simon Edwards relies on the agreement in the form that it was put to the judge. He contends that there was insufficient evidence in the witness statement to which I have referred to justify the judge in taking the extreme step of striking out the action on a summary basis. He fairly accepts, however, that before the judge his submission was that there was no fixed or determinable date and that the contract was one of loan, these points being relevant to section 5 of the Limitation Act 1980, and that therefore the question of when Gomba became able to pay the debt did not arise on his submissions, and therefore it was not the focus of his attention. He accepts that the respondent made the point that Gomba had become able to pay the debt, but he submits that this was not the focus of attention.

23. Mr Edwards further contends that nothing turns on who has the burden of proof on the limitation points, a point made by the respondent. He submits that the question whether given the agreement in the form pleaded, which the court must accept, it is for the respondent and not the appellant to show that either the defendant or Gomba became able to pay the debt outside the limitation period.

24. The respondent has filed a respondent's notice. In the first ground for upholding the judge's order it refers to paragraph 3 of the original points of claim, in which Mr Gadhok alleged that the terms of the agreement were that Mr Shamji would pay the debt almost immediately. The respondent contends that this is too vague to amount to a contractual repayment date, and that accordingly the agreement pleaded by Mr Gadhok was an agreement to repay at a present date, with the consequence that the cause of action accrued in 1986 when the debt arose. Alternatively, the respondent contends that if the debt was to be repaid "almost immediately" and was not too vague, it should be construed as an agreement to pay within a reasonable time of the creation of the debt, which would have expired before 21st May 1995, being more than six years before the present claim was issued.

25. The claim that the debt would be paid almost immediately was deleted by the amendments allowed by the Recorder. With respect to the claimant's allegation that the arrangements did not provide for repayment on or before a fixed or determinable date nor make repayment conditional on a demand or other matter, the arrangements on the respondent's submission did not contain a term for repayment, and accordingly again the agreement to repay was a present debt and accordingly the cause of action accrued 1986 when the debt was originally created.

26. In her written skeleton argument, Miss Claire Stanley for the respondent starts with the proposition, upheld by the judge and not challenged on this appeal, that the contract was not one of loan. Accordingly, unless a repayment date or condition was agreed, time, she submits, for the purposes of the Limitation Act began to run from the date of the agreement, namely 1986. She submits that the only pleaded term was that the debt would be payable almost immediately, and that that averment was not sufficiently certain to amount to a time for payment. She also contends in her written skeleton argument that the judge should have confined himself to the pleadings, namely the allegation that the debt was immediately payable. Alternatively, she contends that the judge was right to conclude that Mr Gadhok's evidence was that Gomba had money in 1989. In the absence of further evidence the judge had no alternative, she submits, but to reach the conclusion that he did that the money became payable in 1989. The onus of proof was on Mr Gadhok.

27. Miss Stanley further contends that the words "almost immediately" in paragraph 3 of the particulars of claim require payment in the alternative within a reasonable time of the creation of the debt, and this too would have expired before November 1995. She submits that in effect the burden of proof was on Mr Gadhok, the judge was correct not to give him the benefit of any doubt if his evidence did not make it clear whether Mr Shamji or Gomba had sufficient funds to repay the debt in 1989.

28. I now turn to my conclusions.

29. I would be minded to accept the appellant's submission that there is no evidence which expressly deals with the question whether Gomba or the defendant was in a position to pay the debt due to Mr Gadhok. As this was clearly a matter in issue and would require factual investigation, then, as I see it, it would not be open to the judge to take the view that Gomba had been in a position to pay the debt in 1989. However, I have every sympathy with the judge on this application, given that this point was not directly canvassed in the appellant's submission.

30. Miss Stanley's case is that the court should limit its sight to the pleadings. Mr Edwards' case, on the other hand, is that the court should look at the evidence, but on this appeal limit its sight to the evidence before the judge and effectively disregard the two later witness statements subsequently put in by Mr Gadhok. I should say that leave has not been given for those two witness statements to be deployed, but that does not mean that the court did not read them or could not take them into account.

31. CPR 24 is in these terms:

"24.2 The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if–

(a) it considers that–

(i) that claimant has no real prospect of succeeding on the claim or issue; or

(ii) that defendant has no real prospect of successfully defending the claim or issue; and

(b) there is no other compelling reason why the case or issue should be disposed of at a trial."

32. On an application under CPR 24 the court, in my judgment, is not confined to the pleadings. It is entitled to look at the witness statements and other evidence, and if they provide material on which reliance can be placed on summary application to rely on them. The court can, for instance, look at contemporaneous documents whose authenticity is not challenged. The court should normally proceed on the basis that the respondent to the application will be able to prove what he asserts is his case, but it is not bound to do so in all circumstances, for instance, where the prospect of that party proving his case at trial is fanciful. This may be, for instance, because it conflicts with contemporaneous documents which are not challenged, or because it is itself contradicted by other evidence of the party.

33. In the present case I do not consider that the court is able to place any reliance on Mr Gadhok's witness statement of 7th November 2002. It is contradicted both by his earlier and later versions of the facts. Accordingly, I would dismiss the appeal on this ground.

34. I also add that, subject of course to submissions, there seems to me to be doubt as to whether as a matter of law an agreement in the form set out in the witness statement of 7th November 2002 was sufficiently certain to be enforceable. The judge took the view on the authorities that the agreement was sufficiently certain. As I have set out above, he referred to Hammond v Smith and Ledingham v Bermeijo Estancia Co Ltd . In the first case I note that the report was extremely brief. The Master of the Rolls simply says that the promise by the baker to pay the creditor "as soon as I get in my power" was a distinct promise "to pay the debt when she [the baker] should be of ability." That report is very brief and it is not clear whether there was any great difficulty in that case in determining the assets of the baker.

35. In the Ledingham case there was a waiver of interest "until such time as the company is in the position to pay the interest." Atkinson J held that he had no doubt what this was:

"'until the company is in a position to pay it out of income.' If it merely meant 'until the company is in position to pay it out of their assets,' they were in a position to pay it that day if they had proceeded to sell. So it is quite clear - especially when one bears in mind that the whole object of the loan was to enable and induce the company to carry on - that what is meant was 'until the company can pay this out of its receipts, out of its income.'"

The Ledingham case therefore is again distinguishable. The judge having so construed the agreement, he found that the agreement was not void for uncertainty because there could be an investigation into the company's receipts at any particular point in time.

36. The agreement here, however, may be of a different quality. The agreement was for repayment when the defendant or Gomba "had money". The effect of such an agreement is unclear. Does it mean that it was necessary that either party should have the necessary amount in cash? Would it be sufficient if the defendant or Gomba had the money in form of book debts owed to it or him? Does it mean that the money had to be free assets, that is assets not required for other purposes? If not, for what other purposes could the money have been used? Could it have been used for new investments or simply for paying existing creditors and, if so, which creditors? Moreover, what was to happen about any accounting adjustment in Gomba's accounts, for instance exceptional items or charges for depreciation? Does it mean that Gomba would only be liable to pay if it considered that it had sufficient assets to pay? If so, it is of doubtful enforceability. Does it mean that the money would be repayable as soon as any cash became available? This seems unlikely on the facts, since the accounts disclose that Gomba had prior charges, including charges on The Mermaid Theatre. Did the agreement mean that Gomba was obliged to use assets to raise money, or the defendant was obliged to raise money from third parties? Mr Gadhok does not appear to contend for these possibilities in his witness statement in support of the appeal, since in his reference to The Mermaid Theatre he proceeds on the basis it was necessary for that asset first to be sold. Lastly, does the agreement mean that Gomba would pay the amount due in the ordinary course of paying its debts? This is simply left unclear.

37. A court will of course be very reluctant to hold that an agreement is void for uncertainty, especially on a summary application. But the court has to be satisfied that the parties have concluded an agreement which is intended to be legally binding. The court cannot rewrite the contract for the parties. As Lord Wright said in Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503:

"Businessmen often record the most important agreements in crude and summary fashion; modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise. It is accordingly the duty of the court to construe such documents fairly and broadly, without being too astute or subtle in finding defects; but, on the contrary, the court should seek to apply the old maxim of English law, verba ita sunt intelligenda ut res magis valeat quam pereat . That maxim, however, does not mean that the court is to make a contract for the parties, or to go outside the words they have used, except in so far as they are appropriate implications of law."

38. There would, in my judgment, be no point in allowing this appeal unless the court were satisfied that there was a real prospect of establishing the defendant's liability. Despite the fact that Mr Gadhok has put in four witness statements, he has still not clarified what his case is as to the nature and effect of the alleged agreement. His description of it is still materially incomplete. For that reason I would dismiss the appeal.

39. That us sufficient to dispose of this appeal. However, for my part, I desire to add that I would leave open the question whether any such agreement as has been alleged would be void for uncertainty and unenforceable. If it was void for uncertainty, it would follow that the amount owed to Mr Gadhok became immediately repayable when the agreement was made. On that basis the limitation period would have expired in about 1992.

40. In those circumstances, I would affirm the judge's order.

41. LORD JUSTICE LAWS: I entirely agree. The claimant's accounts are beset by a farrago of contradictions and there is nothing in my judgment in any of them which can properly save the case from being struck out.

42. LORD JUSTICE SIMON BROWN: Permission to bring a second appeal here was given lest it were unjust to leave in place a summary judgment against the claimant. On close examination of the facts, however, nothing to my mind could be clearer than that the claim which the appellant now wishes to bring against the respondent could not possibly succeed. The difficulties in its path are legion and insuperable; the difficulties arising from successively inconsistent statements, from the uncertainty of the critical terms alleged and from limitation. The only injustice here would be to allow this appeal and thereby subject the respondent to having to defend a hopeless case, and indeed the appellant having to bear the very substantial costs of litigating it to no conceivably useful purpose.

43. The appeal accordingly fails and is dismissed.

ORDER: Appeal dismissed with costs.

(Order not part of approved judgment)

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