Chaudri v Khan

SIR MARTIN NOURSE: This is an application for permission to bring a second appeal, which means that the applicants must establish that the appeal would raise an important point of principle or practice or that there is some other compelling reason for this court to hear it.

The applicants, Abdul Khan and his wife Nargis Khan, are acting in person, so that their application has been adjourned straight into court and has not been dealt with on paper first. However, they and the court have had the great advantage of having the assistance of Miss Bicarregui, who has been instructed on their behalf by the Bar Pro Bono Unit. She has put in a detailed skeleton argument and has appeared here this morning.

A brief but adequate background chronology is set out in paragraph 7 of the skeleton argument. The essence of the background is as follows. On 28 February 1990 the claimant, Safaa Chaudhri, obtained a default judgment in the Queen’s Bench Division against Mr Khan while he, as he maintains, was absent in Tanzania. The amount of the judgment was £11,952, allegedly in respect of unpaid wages, plus £736.77 for interest at the rate of 15 per cent from 31 August 1989 to judgment, making a total of £12,688.77 plus £120 for costs. Unfortunately, as it must now be said, Mr Khan never applied to set the judgment aside, and nothing has ever been paid in or towards its satisfaction.

On 7 March 1994 Miss Chaudhri obtained a charging order absolute over Mr Khan’s beneficial interest in 118 Deans Lane, Edgware, Middlesex (“the property”), a freehold property of which Mr and Mrs Khan are the joint registered proprietors and the joint beneficial owners. At all material times the property has been their home, as it still is. On 8 March 2005, 11 years after the charging order was obtained, Miss Chaudhri issued an application in the Reading County Court seeking an order for the sale of the property. The application came in turn before two district judges, and on 25 July 2005 the second of them made an order for the sale of the property after the expiry of one month from that date. I interpose to say that the property has not yet been sold, and that there is an informal arrangement between the parties which it is hoped will make it unnecessary for it to be sold.

At both the hearings before the district judges there was discussion as to the interest payable on the judgment, that being the first occasion – at any rate since the default judgment was obtained – when that topic was discussed. It is unnecessary to go into what took place before the district judges, because when the matter came on appeal before HHJ Ann Campbell on 27 April 2006, each side being then represented by counsel, it was agreed between them that the basis of the decisions below was wrong.

In her judgment Judge Campbell said that two issues arose on the appeal: first, what rate of interest should apply in respect of the original judgment and, secondly, over what period of time should the interest be payable. She answered the first question by holding that the rate of interest should be 15 per cent, which was of course the judgment rate in 1990, and the second by holding that interest was payable at that rate from the date of the judgment, namely 28 February 1990. Her order contained a consequential declaration that as of that date the amount required to satisfy the judgment debt, and thus to discharge the charging order, was £43,792.23.

In regard to the first question, the judge regarded herself as bound by the decision of Parker J in Rocco Giuseppe & Figli v Tradax Export SA[1984] 1 WLR 742. On the footing that she was so bound, she held that interest should run at the rate in force when the judgment was entered and should not vary as the judgment interest rate varies in accordance with section 17 of the Judgments Act 1838, section 44(1) of the Administration of Justice Act 1970 and statutory instruments made from time to time under the latter sub-section. Miss Bicarregui submits that the judge erred in this respect and that interest should have been calculated at 15 per cent up to 31 March 1993, when the judgment rate was varied, and thereafter at the reduced and still current rate of 8 per cent. She says that the practical result of her submission, if correct, would be that the interest element in the amount owing would be reduced from about £30,000 to about £19,000, a significant reduction.

As for the second question, it is necessary to read the material parts of Civil Procedure Rules Part 40.8, which is headed “Time from which interest begins to run”. 40.8 provides:

Now the judge accepted that there was a discretion under 40.8(1)(b), but she held that that discretion was only exercisable when the judgment was entered and by the court that entered it. Again Miss Bicarregui submits that the judge erred in this respect. She says that there was a discretion to curtail the period during which interest (at whatever rate) is payable, and that the judge ought to have exercised it accordingly.

I return to the first question. I start by saying that I am satisfied that this question does raise an important point of principle which clearly could affect other cases. The second point I wish to make is that this court, unlike Judge Campbell, would not be bound by the decision of Parker J in the Tradax case. Miss Bicarregui does not submit that the Tradax decision is distinguishable, but she says that it was erroneous and would be held to be so by this court on a ground which it appears was not argued in that case. Shortly stated, that argument is to this effect. Parker J’s decision was based on what he regarded as the plain wording of Article 2 of the relevant statutory instrument made under Section 44(1) of the Administration of Justice Act 1970. However, Miss Bicarregui says it is necessary to go back to the Judgments Act of 1838, section 17 of which, as currently in force, provides:

She then goes to section 44(1) of the 1970 Act, which provides:

Miss Bicarregui then argues that the statutory instrument, in particular insofar as it uses the words “in relation to any judgment entered up after the coming into force of this order” – those were the words on which Parker J particularly relied – is ultra vires the powers conferred by section 44(1) of the 1970 Act. By that process she submits that it is open to this court to overrule the decision in the Tradax case, and to hold in consequence that the rate payable on the judgment in this case, though it started at 15 per cent until 31 March 1993, was then reduced to 8 per cent. In my opinion it is by no means certain that the full court would take the view that the decision in Tradax should be overruled. But it does seem to me that there is, in the way Miss Bicarregui’s argument has been developed, an arguable point on which it is not possible to say that the applicants would have no real prospect of success.

Accordingly, I propose to grant permission to appeal in respect of the first question.

I turn to the second question which again, I am satisfied, raises an important point of principle which could well apply to other cases. I agree with Judge Campbell that Part 40.8(1)(b) does confer a discretion to order that interest shall begin to run from a date other than that on which the judgment is given. But it does seem to me to be arguable that that discretion is not conferred exclusively on the court which enters the judgment and on that court alone. It seems to me that it may be unduly restrictive to say that that should be the only occasion on which the discretion can be exercised. In my view it is arguable that the discretion can be exercised, at any rate on the first occasion when the question of interest is raised, which in this case was not before the hearing before the first district judge in the court below. I think I would come to that view without regard to an authority on which Miss Bicarregui has relied, an unreported decision of this court not cited to the judge: Powell v Herefordshire Health Authority, 27 November 2002. That was a case where interest on an award of costs was being considered, and this court relied on Part 40.8(1)(a) – in other words, on a rule in another Part which made different provision. That was Part 44.3(6)(g), a provision which had not been cited to the Master in that case. What Miss Bicarregui says about that decision is that it shows that under the combined effect of 40.8(1)(a) and 44.3(6)(g) it was possible for the discretion to be exercised; and it shows that that discretion could be exercised by a court other than the court which had entered the judgment in question. So she says that that case gives support to the view that Part 40.8(1)(b) is not to be interpreted as restrictively as Judge Campbell thought was necessary.

I have asked Miss Bicarregui this morning where, if she were to succeed on that point, it would get Mr and Mrs Khan. As a matter of strict approach, unless there was agreement to the contrary, it would seem that, the discretion not having been exercised by Judge Campbell, there would have to be a remittal to the County Court for the question to be considered. But Miss Bicarregui has told me that, as at present advised, Mr and Mrs Khan would primarily be relying on the very considerable delay, a delay of 11 years, between the making of the charging order and the application for the sale of the property. I can quite see that if the point is a good one, it might well lead to some reduction in the period for which it would be appropriate for interest to run. I do not propose to say anything more about that matter at present. I simply affirm that it does seem to me that Mr and Mrs Khan also have a real prospect of success on the second question, just as they do on the first.

I therefore propose to grant permission to appeal on the second question as well.

It remains for me say two things further: first, to renew my thanks to Miss Bicarregui for her assistance; secondly, to say that I propose to order that the appeal shall be heard by a court consisting of three Lords Justices, one of whom should have commercial experience and another of whom should have Chancery experience. At the moment my view is that the estimate for the length of the hearing would properly be half a day, but that is a point I will now discuss with Miss Bicarregui.