Maqsood v Mahmood & Anor

On 25th November 2010 His Honour Judge Seymour Q.C. sitting as a judge of the High Court, dismissed the application made by the claimant, Mr Gohar Maqsood, for an adjournment of the trial of his claim, struck out and dismissed the claims against each of the two defendants, Mr Muzafar Mahmood and his former wife Nina Ahmad and ordered the claimant to pay the defendants’ costs. The claimant appeals with permission granted by Baron J.

In a written agreement dated 3rd March 2006 the first defendant confirmed that:

By a second agreement bearing the same date, 3rd March 2006, but from the text made on 5th April 2006, the first defendant confirmed that:

Given the way the case has developed, it is necessary to set out how the claim was pleaded. The brief details of the claim given in the claim form state no more than:

Although it is not necessary to recite the defences in full, it is worth noting that the first defendant acting in person throughout, eventually filed a homemade defence, the essence of which was this. He handed over to the claimant his keys to the premises on 5th April 2006 and enabled the claimant to carry on his (the first defendant’s) share of the business with his former partner, Mr Wasim Butt. He instructed his solicitors to carry out the assignment of the lease. Thus he denied being in breach of the agreement. He alleged that the claimant continued to “operate from the business premises for years after taking over the premises and the business effectively. The claimant never made any request to both the defendants. The claimant in fact never even asked me for the return of his money prior to this claim, as he was continuing to operate from the premises for years after taking over the premises and business effectively.” His case was that:

The second defendant’s defence, either homemade or made with the help of her brother who from time to time has acted as her McKenzie Friend, pleaded that the claim against her was misconceived, that she was not a party to any agreement with the claimant and so there is no cause of action alleged against her.

I must next chronicle the material events leading to the trial before His Honour Judge Seymour. On 31st May 2010 Master Jervis Kay Q.C. ordered the parties to exchange witness statements of all witnesses of fact they wished to call to give evidence by 4pm on 24th May 2010. In breach of that order witness statements were not exchanged.

On 23rd April 2010 at a case management conference before Master Kay further directions were given after hearing the solicitor for the claimant and the first and second defendants in person. Those directions included that the trial should take place before a judge sitting alone, category B, and, importantly, the trial window was to be 11th October 2010 to 17th December 2010. The time estimate for the trial was to be 2-3 days.

On 26th May 2010 the claimant’s solicitors advised the Queen’s Bench listing officer that the dates to avoid for the trial over that window were between 1st December and 31st December 2010. There was then a listing appointment to fix the date for trial. The second defendant’s brother attended on her behalf but there was no attendance by either the claimant or the first defendant. At that appointment the listing office fixed the trial date for the week commencing 22nd November 2010. That notice of the trial date was sent by the court to the claimant’s solicitors and the date stamp on that notice shows that it was in fact received by the claimant’s solicitors on 9th July 2010. The claimant’s solicitors are, therefore, fixed with knowledge of the trial from that date.

On 21st September 2010 the second defendant wrote to the claimant’s solicitors reiterating that the trial window had been set for the week beginning 22nd November 2010, the date that had been given at the listings hearing held on 22nd June 2010. She pointed out that the parties had to agree a trial bundle at least 7 days prior to the hearing and she awaited to hear from the claimant in that regard. That letter was acknowledged by the claimant’s solicitors on 4th October 2010 so there again the claimant’s solicitors had a reminder of the forthcoming trial. On 25th October 2010 the second defendant wrote threatening to apply for a “debarring order” against the claimant unless “you agree by 29th October 2010 to (a) agree to exchange witness statements by 5th November 2010 and (b) give the requested specific disclosure requested in my previous letter.” The response was that “until full disclosure is made to us per List of Documents as well as documents from the Croydon case we cannot proceed to exchange witness statements and the listing of the case.” The second defendant complained again on 7th November 2010 that the trial is listed to be heard in a trial window starting on 22nd November 2010 and “Your continued failure to comply with that order [of 31st March 2010] is affecting my trial preparation.” She again threatened to apply for “debarring order”.

Against that background the second defendant applied on short notice for an unless order against the claimant for specific disclosure, the exchange of witness statements and delivery of trial bundles. A trainee in the claimant’s solicitors filed a witness statement in response to that application complaining about the first defendant’s failure to disclose documents relevant to the allegation that the first defendant had sold the business to Mr Ali in September 2004 and that Mr Ali had in fact had to take proceedings in the Croydon County Court to regain possession of the premises in the face of a trespass by the first defendant. The claimant statement requested the court to give “specific directions for disclosure and to allocate a new trial window to take into account the new disclosure as well as further disclosure by the defendant in the interests of justice and in line with the overriding objective.” It is thus clear that the claimant’s solicitors were fully aware of the looming trial date.

That application came before Dobbs J. on 15th November 2010. Having heard counsel for the claimant and counsel for the second defendant and upon reading the second defendant’s application and her witness statement and the witness statement of the claimant’s solicitor she ordered that:

The claimant then applied to stay the order of Dobbs J. “because the order cannot be complied with since the trial date has not been set and trial bundles cannot be provided without disclosure of documents and service of witness statements.” No order was ever made on that application. The second defendant applied for an order that the claim against her to be struck out pursuant to the provisions of CPR 3.4(2)(c). In her witness statement supporting that application the second defendant said:

Thus the trial came to be listed before His Honour Judge Seymour QC on Thursday 25th November 2010. The trial bundles had been delivered to the second defendant’s counsel at about 5 pm the previous day. No skeleton argument for the claimant was filed.

When the case was called on before Judge Seymour Ms Cheryl Reid, appearing for the claimant as she had before Dobbs J., immediately applied to adjourn the hearing for reasons which had been set out in the witness statement of the claimant’s solicitor, Mr Samuel Lee, the senior partner in the firm, who had conduct of this matter on the claimant’s behalf. He complained that he had never been advised of the fact that the matter was to be listed on 25th November until he received the order of Langstaff J. on 24th November. He was unable to find counsel of sufficient seniority to accept a brief on the claimant’s behalf. He accordingly instructed Ms Reid to attend to seek an adjournment adding, “she is unable to conduct a full trial due to her commitments to other clients.” She submitted to the judge that her instructing solicitors had indicated that the claimant needed an interpreter and,

That application was opposed by Mr van Tonder for the second defendant. He moved to strike out the claim and the first defendant adopted his arguments.

He held it was plain that the particulars of claim disclosed no cause of action whatsoever against Mrs Ahmad. It was not alleged nor could it be alleged that she was a party to the agreement for the sale of the leasehold interest or the business. It was not alleged that she owed any sort of fiduciary duty to the claimant. It was not alleged as against the first defendant that he received the sum of £77,500 on trust to apply that money in any particular way. In the result he held:

He then turned to the “recent course of this action” which he described as having been “unhappy”. So far as the order of Dobbs J. made on 15th November was concerned, he pointed out that the trial bundles were not served by 4.30 pm on 22nd November, they were served the day before the matter came for hearing, namely on 24th November. The parties did not exchange witness statements by no later than 4.30pm on 19th November, because the claimant’s witness statement was not made until Tuesday of that week, two days previously. Skeleton arguments on behalf of the claimant and first defendant were not lodged no later than 2pm the day before the start of the trial. No skeleton arguments in relation to the trial have been served or lodged on behalf of the claimant or the first defendant. “So, in fact, there has been a failure to comply precisely with the directions given by Dobbs J. on 15th November.”

He recited from the witness statement of the claimant’s solicitor filed in support of the application for an adjournment in which, as I have set out, Mr Lee asserted that he was not aware until the making of the order of Langstaff J. that the trial was to take place that day. The judge said:

He recited the well known judgment of Lord Woolf M.R. in Biguzzi v Rank Leisure Ltd [1999] 1 WLR 1926 which pointed out that in many cases there are alternative approaches which can be taken under the new Civil Procedure Rules which would enable the case to be dealt with more justly without taking the draconian step of striking the case out. He reminded himself that under Part 24 or under Part 3.4(2)(c) the merits of the claim, or the lack of merits in the claim, are relevant considerations to take into account. There is greater prejudice to a defendant having to meet a very weak claim than there is to meet a claim of substance.

In assessing the merits, Mr van Tonder had “very helpfully” taken him through a number of documents included in the trial bundle from which it was clear that following the making of the agreement on 3rd March 2006 the claimant had instructed solicitors to act on his behalf in relation to the necessary legal aspects of completing the transaction. Those solicitors wrote to the claimant’s bankers seeking their reference for the claimant that he would be able to meet the rent of £21,000 but unhappily from the claimant’s point of view, the National Westminster Bank was “unable to reply, insufficient information held”. Other references were sought but the surveyors acting on behalf of the landlord informed the claimant’s solicitors that they did not regard the references “to be particularly acceptable, especially the reference from Nat West.” Thus it appeared to the judge that the reason no assignment of the residue of the term of the lease held by the first defendant jointly with another was completed was simply that the references were not provided which satisfied the landlord that it was appropriate to consent to the assignment. However it also appeared that:

The grounds of appeal settled by Mr James Holmes Milner alleged first that the learned judge erred in law in refusing to grant the adjournment because he failed to take certain listed relevant factors into account; his assessment of the merits of the claim was wrong and the sanction of striking out was disproportionate and unfair. The second ground of appeal was that the decision of the judge was unjust because of a serious procedural or other irregularity in that the judge failed to give proper weight to the fact that the claimant’s solicitors were given only 24 hours notice that the claim was listed for trial, were unable to instruct counsel in time and were unable to secure the attendance of an interpreter in time. In assessing the merits of the claim the judge was not entitled to conduct a trial on the papers and gave no proper weight to the fact that the first defendant had assigned the lease in question to Mr Sakhawat Ali, which issue was the subject of proceedings in the Croydon County Court and was material to the claim against the first defendant. He supported those grounds in a skeleton argument.

Mr James Petts was then retained, filed a supplemental skeleton argument and appeared before us. He was of the view, correctly, that if the appeal against the strike out is refused, the appeal against the refusal to grant an adjournment will not assist the appellant. Conversely he submitted, if the appeal against the strike out is allowed, then “since the matter was determined by the strike out and there was no determination by a trial, the matter would inevitably have to be remitted for a fresh trial in any event.” In those circumstances the appellant decided no longer to pursue his appeal against the refusal to grant an adjournment. In his oral submissions, Mr Petts steadfastly maintained that position and limited his submissions to the merits of the claims against each of these respondents.

There is, in my judgment, an air of unreality about that submission. If Judge Seymour, having heard both the claimant’s application to adjourn and the defendant’s applications to strike out the claim, had concluded that the case should not be adjourned but that it would be wrong to strike out the claim, what would have happened then? There is only one answer to that hypothetical question. The claims would have been dismissed with costs which is the end result of the order that was made. As counsel for the claimant, Miss Reid, laudably acknowledged to the judge, she was instructed for the limited purpose of seeking an adjournment, she was not instructed to represent the claimant at any trial and was wholly unprepared and unable to do so. Having carefully read the transcript of the hearing, it is plain to me that she had but cursory acquaintance with the trial bundle, was unable to assist the judge on the merits and was so professionally embarrassed that, had the judge decided he would try the claim there and then, she would have had to seek to withdraw from the case. Nothing in these observations is intended to be critical of Miss Reid. She had been put in an impossible position by the limited instructions given to her. Had she withdrawn, there is no way this claimant could have conducted the case on his own behalf. The application to adjourn had been presented on two bases, the first that there was no senior junior counsel able in time to act for the claimant but the second was that there was no interpreter present and as Miss Reid informed the judge (page 3F of the transcript):

Let me, however, deal with the merits of his case so ably presented to us by Mr Petts. Acknowledging how difficult it is to upset a case management decision he searches for and finds the necessary error of principle in the judge’s approach to be the judge’s assessment that the pleaded claim against the first defendant of a total failure of consideration was “extremely weak” and that the claim against the second defendant was “wholly unsustainable” and plainly disclosed no cause of action whatsoever against her.

As for the case against the first defendant, Mr Petts submits that the contract made between the parties was one which, sensibly construed, was intended to give the appellant exclusive occupation of the premises from which he could carry on the restaurant business in his own name using as his the fixtures and fittings on the premises. He submits that there was a total failure of consideration for the sale of the business because there was in effect nothing to sell: the first defendant had already sold everything to Mr Sakhawat Ali. Mr Petts relies in particular upon these matters:

By way of an alternative case, Mr Petts submits that upon proper construction of the agreement, the balance of £69,750 was only payable on completion of the assignment and since no assignment was ever obtained, there was no consideration for the payment that was made.

He submits he is supported by established authority. He directs our attention to Comptoir d’Achat et de Vente du Boerenbond Belge S/A v Luis de Ridder Limitada (The Julia) [1949] A.C. 293 where Lord MacDermott gave this analogy at p. 322:

Mr van Tonder responds:

As for the alternative case, Mr van Tonder submits that the agreement which provided that the claimant “will complete the deal and pay the balance of £69,750 within 30 days from the date of the agreement” was not one which upon its proper construction made payment of the balance conditional upon completion. The claimant was to complete the deal whenever he could but he was to pay the balance within 30 days from the date of the agreement as in fact, given a day or two, he did.

We are much better informed about the merits than was the judge below. Miss Reid told him (page 15E of the transcript):

But was the judge wrong to find as he did when, apart from a passing reference to the alleged sale to Mr Ali and the proceedings in the Croydon County Court, little was placed before the judge to challenge the defendants’ submissions? Given the inability of the claimant’s counsel to assist the judge at all on the merits, it cannot be said the judge was wrong to decide the case as he did for he should not be expected to fish around in a trial bundle filed late to see how the claimant’s case could be put and I would be loath to find in circumstances like that that he had erred. I shall return to this question later.

Turning now to the claim against the second defendant, I would have thought that even the most prescient sibyl at the oracle at Delphi would have struggled to forecast how a cause of action against the second defendant could have been spelled out of these particulars of claim; but Mr Petts, making up for the deficiencies in the way the case was presented below, has been assiduous in putting forward the best possible case that can be made for the appellant.

Mr Petts accepted that his client’s claim against the Second Defendant depended on his making out a case against the First Defendant based on failure of consideration, not merely of breach of contract. He argued that a restitutionary claim of that kind, for either the whole amount paid or, as a fall-back, at least the balance paid of £69,950, could be asserted against the First Defendant and that, if so, it gave rise to an equitable claim against the First Defendant who would hold the relevant amount on trust for the Claimant. Logically the Claimant could then trace any part of that money with which the First Defendant had parted in favour of another into the hands of that other unless he or she were a bona fide purchaser for value without notice (which he or she would have to allege and prove).

In support of this argument he cited a passage from the speech of Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v Islingon Borough Council [1996] AC 669 at 715B. The passage is part of his examination of the decision of Goulding J in Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105. The latter case concerned a situation in which Chase Manhattan had paid a sum, correctly, to the Defendant bank, but had then, mistakenly, made a second payment of the same amount to the same bank. Goulding J held that, merely because of the mistake, the recipient held the second payment on trust for the payer. Lord Browne-Wilkinson did not accept that reasoning. He went on to say this:

Lord Browne-Wilkinson’s speech was one of those in the majority on the matter directly in issue in the case, namely whether interest could be awarded on a compound basis in favour of the bank against the council. In fact all members of the House of Lords held that the bank could not make good its claim to such interest on the basis that it had an equitable cause of action against the council for the return of the money. Lord Goff and Lord Woolf would have held that it was open to the court to award compound interest on a different basis. It was accepted that (as held in the courts below) the bank had a personal claim against the council for restitution of the money that had been paid under contracts which were (unknown to the parties at the time) void because they were ultra vires the council. Lord Goff said that he did not need to review the decision in Chase Manhattan: see [1996] AC page 690G. Lord Slynn agreed with Lord Browne-Wilkinson and said nothing about Chase Manhattan. Lord Woolf agreed with both Lords Goff and Browne-Wilkinson that the bank was not entitled to proceed by way of proprietary claim, the recipient of money paid under an ultra vires contract not being regarded as owing the duties of a trustee to the payer of the money: [1996] AC page 720H. Neither he nor Lord Lloyd of Berwick mentioned Chase Manhattan.

What Lord Browne-Wilkinson said about a possible correct basis of the Chase Manhattan case was therefore no part of the ratio of the Westdeutsche Landesbank case, and it was in any event tentative (“may well have given rise to a constructive trust”). The case itself is authority from the proposition that the recipient of money under a contract which is void because it is ultra vires one of the parties does not hold the money received on trust for the payer.

Despite this, Mr Petts argued that the passage cited supports the proposition that the recipient of money under a contract under which there is a total failure of consideration, the recipient being aware at the time of payment of the facts which give rise to the failure of consideration, holds the money received on a constructive trust for the payer. This seems to me to be inconsistent with the policy recognised by the House of Lords, that it is not as a general rule desirable to introduce equitable proprietary remedies into the realm of commercial contracts, and thereby to give the counterparty under the particular contract the additional security and priority of a proprietary remedy: see Lord Goff at page 684A-C, and Lord Browne-Wilkinson at pages 703G to 705C.

This is not the time or place in which to decide whether the Claimant did have such a claim against the First Defendant, and therefore potentially against the Second Defendant. Mr Petts’ argument was that the claims against the First Defendant could not properly be struck out on the basis that they were weak, and that the judge was also wrong to strike out the claim against the Second Defendant on the basis that it was wholly unsustainable. Although the judge made his striking out order on the basis of failure to comply with procedural requirements of rules and orders, rather than because there was no viable claim, he nevertheless took into account his view of the merits in the exercise of his discretion. So, Mr Petts argued, this exercise was vitiated because of the judge’s incorrect perception of the merits of the claims.

For my part, in relation to the proprietary claim as now advanced by Mr Petts against the First Defendant and consequentially against the Second Defendant, it seems to me that the judge could reasonably be excused for failing to perceive that this was a viable claim. To put it at its lowest, the material facts can only be distilled from the allegations in the Particulars of Claim by a process of deduction and inference. The reader of the statement of case would not readily suppose that an essential ingredient in the claim was the fact that the First Defendant knew, when he received payment under the contract, that the Claimant could not in fact get what he was entitled to receive in return. Furthermore, the proposition relied on by Mr Petts is one which is far from clear as a matter of law. It is not something which the judge could be expected to think of for himself.

It can also be said that one of the reasons why these features of the proprietary claim against the Defendants would not have been apparent to the judge is the very fact that Counsel had not been instructed in time for the Claimant, and therefore no skeleton argument had been prepared and lodged for the trial. Thus, the judge’s omission to take account of any argument along the lines of that ingeniously advanced by Mr Petts before us is directly attributable (among other things) to the very procedural failures which were the ground on which the judge did strike the proceedings out.

In those circumstances it does not seem to me that the judge’s order striking out the claim as against the Second Defendant, and any proprietary aspect of the claim against the First Defendant, can properly be criticised as a deficient exercise of the judge’s discretion.

If it is appropriate to review the judge’s decision because his assessment of the weight of the case against the claimant was wrong, then I must exercise my discretion to decide whether or not to strike out on the basis of the arguments presented to us. The power to strike out a statement of case is conferred by CPR 3.4(2) which provides:

From the outset of this litigation the claimant was in default. He breached the order of Master Kay made on 31st March 2010 for the exchange of witness statements by 24th May 2010. It is difficult to see what progress the claimant had been making properly to prepare his case. The trial window in the Michaelmas term was fixed by Master Kay on 23rd April and the trial date was fixed at the listing appointment in June which the claimant did not attend. His solicitors were, however, notified by the court of the trial period commencing in the week beginning 22nd November. The second defendant was agitating about the lack of progress as demonstrated by her letter of 21st September yet again little seems to have been done to make proper progress to have the case fit for trial in the week allocated for it. In desperation the second defendant applied to Dobbs J. when the claimant’s application to adjourn was rebuffed. The case cried out for urgent attention. That was not given by the claimant’s solicitors despite their having assured the second defendant in a letter dated 8th November 2010, “Rest assured that we are fully aware of our duties under CPR/Directives ...”. I rather doubt it. They failed to comply with the order of Dobbs J. as the judge found. They did not attend the hearing before Langstaff J. of which they had notice, albeit short notice. They seemed astonished to find the case listed for trial on 25th November, the last two days of the window of which they had known for 5 months or more. This was, therefore, the most lamentable failure by the claimant’s solicitors to ensure that the case was dealt with expeditiously and fairly. In my judgment the failure was egregious enough to justify the exercise of the power to strike out. The obvious alternative was to adjourn but that was ruled out. Given the hopeless position in which the claimant was placed following the refusal of the adjournment, this case was doomed to be dismissed. I therefore have no hesitation in dismissing the appeal.

I agree that the appeal should be dismissed for the reasons given by Ward LJ. I would in particular endorse what he has said about the claim against the Second Defendant and the proprietary claim against the First Defendant at paragraphs 34 to 41 above.

I too agree that the appeal should be dismissed for the reasons given by Ward LJ.