Abdullah v Jalil & Ors

This appeal raises a number of serious problems concerning the conduct of an action between Mr Abu Abdullah (the Claimant) and three Defendants, Azizur Rahman Jalil (“Mr Jalil Junior”), Abdul Jalil (“Mr Jalil Senior”) and Abdul Rouf. Mr Jalil Junior is the registered proprietor of the property known as 5 Avenue Parade, Winchmore Hill, London N21 2AX. The question for decision in the action was whether the Claimant was entitled to a beneficial interest in the property, and, if so, the magnitude of that beneficial interest. The sums at stake were substantial. The property, which consists of a restaurant premises on the ground floor, first floor commercial premises and a residential maisonette over, was valued by a local valuer in March 2003 at £340,000 with full vacant possession. The core of the claim was that the Claimant had contributed 25% of the deposit put down by Mr Jalil Junior for the purchase of the property. In his amended Particulars of Claim, which was the document upon which the trial was held, it was not alleged that the Claimant had made any contribution to the income or outgoings in respect of the property, but rather (in broad outline) that there was a pre-existing agreement or understanding that the beneficial interests in the property should reflect the contributions of the respective contributors to the deposit, the purchase of the property being financed by the rent paid to the freeholder by the restaurant business carried on at the premises.

Before turning to the details of the allegations made, the evidence and the analysis of the facts, I should give a procedural outline of the action.

The action appears to have been begun by a claim form issued in the Queen’s Bench Division (Torquay and Newton Abbot District Registry) by the Claimant somewhere round about the first half of June 2003. The claim was then formulated as a partnership dispute, and the Particulars of Claim, signed by a solicitor and partner in the firm of Boyce Hatton who remain the Claimant’s solicitors, alleged by paragraph 1 that in 1999 the Claimant and the three Defendants began to carry on a partnership business, being the purchase of the property with a view to letting it. It was alleged that, by notice dated 14^th May 2003, the Claimant notified the Defendants of his intention to dissolve the partnership, and asked for the usual partnership relief. This claim was answered by Mr Rouf on 23^rd June 2003 in a letter to Boyce Hatton. Mr Rouf’s case was that he had purchased a 50% share of the freehold in the property, and that the Claimant and he owned an equal share of the 50%, that is, 25% each. The remaining 50% was, according to Mr Rouf, the beneficial property of Mr Jalil Senior. Mr Rouf contended that Mr Jalil Junior held the freehold as trustee for the three beneficial owners in the shares I have stated. Mr Rouf gave three important pieces of information in this letter:

Mr Rouf complained that no accounts had been given to him by either Mr Jalil Senior or Mr Jalil Junior, and also indicated that he was moving to Bangladesh. As I understand it, he remains there.

Only Mr Jalil Junior appears to have put in a Defence and Counterclaim on the printed form provided for the purpose. He says that

“I do not know Mr Abdullah – never met him! I am the freeholder of 5 Avenue Parade – I do NOT have any partners in this! I purchased via a mortgage. I DO NOT UNDERSTAND how Mr Abdullah can claim such a thing as he and I have never met . . . I assume this case has nothing to do with me – it may relate to matters between the claimant and my father since I have spoken to my dad and he has never had any business dealings with the claimant either. I enclose the letter I received from the claimant’s solicitor which I did not respond to as I did not believe it was addressed to me and did not refer to 5 Avenue Parade or anything other than my dad, my dad’s name “Jnred” (i.e. me) and Mr Rouf. I did pass this on to my dad, he suggested it must be some kind of hoax, I therefore ignored it.”

Unsurprisingly, the Particulars of Claim were ordered to be amended by the order of District Judge Cox of 29^th October 2003. The allegation of partnership was replaced by an allegation that the Claimant and the Second and Third Defendants agreed to purchase the property together. It was further alleged that they agreed to share the property, and the rents receivable thereon, in the proportions set out in Mr Rouf’s letter. It was alleged that apart from the agreement to hold the property in the stated proportions, it was agreed that the deposit of £35,000 should be contributed to in the same proportions. Finally, “in order to raise a mortgage loan for the balance, the Claimant and Second and Third Defendants agreed that the property would be held in the name of the First Defendant, the son of the Second Defendant, and that he would execute a mortgage”.

The Amended Particulars of Claim set out a grant of a lease in respect of the premises to Mr Jalil Senior, Mr Rouf and a third party, Mr Alam. It is pleaded that the rent was £15,000 per annum and the Particulars of Claim continue with an allegation concerning a “rent profit statement”. I shall return to this document below. At this point, it is to be observed that the Claimant’s case is in certain respects surprising. While it is entirely understandable that three individuals trading in partnership as a restaurant, and being provided with the opportunity to purchase the freehold, might well think it a good idea to hold the freehold in some stated proportions through a neutral third party and pay off the mortgage effectively by trading the restaurant business, it is less easy to see why a person who contributes to the purchase price only, but does none of the work in the business carried on at the premises, should be entitled to an equal interest with one who does. The Jalils put in two amended defences, both of which were manifestly written by Mr Jalil Junior. He had already submitted a “statement to have claim dismissed” on 13^th October 2003.

It is in Mr Jalil Senior’s defence and in the “statement to have claim dismissed” that the principal substantial objection of the Jalils to this claim is set out. They allege that Mr Jalil Senior borrowed £17,000 from Mr Rouf. This sum was paid into Mr Jalil Senior’s bank account in the form of two cheques, one for £8,500 from the Claimant.

By this stage also there were two comparatively lengthy statements from Mr Jalil Senior and Mr Jalil Junior.

On 27^th August 2003, the Claimant had made a lengthy and circumstantial witness statement which was supported by a further witness statement dated 11^th November 2003 by one Luthfur Rahman, which purported to record a meeting that took place on 27^th October 2002 in an attempt to resolve a dispute between the Claimant, Mr Jalil Senior and Mr Rouf. This account is accompanied by another account from Mr Alaur Rahman, also of 24^th November 2003, which goes some way (but certainly not the whole way) to corroborate the account given by his cousin Luthfur Rahman. In December, Mr Jalil Senior and Mr Jalil Junior also submitted further witness statements. These clearly allege a pre-existing debt owed by Mr Jalil Senior to Mr Jalil Junior which was discharged by the £17,000 paid by Mr Rouf. The payment of this £17,000 enabled Mr Jalil Junior to put down the deposit, and it is, as far as I can see, accepted that the result was that Mr Jalil Senior owed £17,000 to Mr Rouf.

The action was therefore a complex dispute in which the principal issues related to the existence of the alleged agreement as to the shares in which the premises should be held, and the source of the deposit that was paid. The Jalils’ defence was based upon the straightforward contention that the contribution from Mr Rouf (to which Mr Abdullah, the Claimant, had himself contributed) was by way of loan. It was therefore essential to deal with this allegation at the trial.

In the result, the case was, for reasons which I still find difficult to understand, assigned to the Fast Track by HHJ Cotran, who also heard the action at Shoreditch County Court. Being assigned to the Fast Track, the duration of the trial was to all intents and purposes limited to one day. I should record that I consider that this assignment to the Fast Track was wrong in principle, and the value of the premises, together with the complexity of the dispute and its importance to the parties, required a Multi Track trial, something that the judge should have realised when he first saw the papers.

The fact that the trial was a Fast Track trial with limited available time necessitated a disciplined approach to the taking of the evidence. The Claimant was represented by Counsel. The Jalils were in person, and Mr Rouf was unrepresented and did not appear. There is almost no page of the transcript on which there is no judicial intervention. The judge constantly interrupted the evidence and I have to record that my impression of the transcript taken as a whole is of a trial that was out of control. This lack of control resulted in two litigants in person having to conduct a serious action absent any proper support or instruction from the judge and absent also any opportunity, as it turned out, to make a closing speech. The judge rose at the close of the cross-examination of Mr Jalil Junior, as far as I can tell from the transcript, and left the parties to put their submissions in writing. The hearing of the trial was in March and judgment was delivered on 31^st July, and is notable for the failure of the judge to deal in any way with the Jalils’ principal defence of loan.

The ground upon which the judge gave judgment in favour of the Jalils was a rejection of Mr Abdullah’s principal case. This was, as he put it, “whether there was an express agreement between the Claimant and the three Defendants that the Claimant should have a 25% interest in the property, i.e. was there a constructive trust created.” He clearly rejects, and was in my view entirely entitled to reject, the suggestion of an express oral agreement. In paragraph 26 of his judgment he finds that the contribution of the Claimant was a contribution made by agreement with Mr Rouf alone “that if he provides some money, he, Mr Rouf, would give him half his share.” Then in paragraph 32 of his judgment he finds that

“I accept that that cheque [sc. the cheque for £8,500] was handed to Mr Rouf, who in turn handed it to Mr Jalil Senior, who put it in the account of his son. That is a very far cry from making this man, the Claimant, a 25% beneficial owner. It is true that it may well have represented half the £17,000 which was the share of Mr Rouf as deposit. But as I say, that does not show in any way that there was a constructive trust or a common intention that the Claimant should beneficially have 25% of the freehold.”

He indicates a little later in the judgment that Mr Rouf may have a good case himself.

Unsurprisingly, the Claimant sought permission to appeal on the basis that there was a finding that as between him and Mr Rouf he was entitled to 50% of Mr Rouf’s beneficial share: and that Mr Rouf had been held to have a good case himself. This is capable of being analysed as an agreement between Mr Rouf and the Claimant that the Claimant should be entitled to 25% of Mr Rouf’s beneficial interest. In this way, it was contended that Mr Rouf held half his 50% share as a bare trustee for the Claimant, who was entitled on ordinary principles to sue directly as beneficially entitled to that 25% of the interest in the premises. The County Court Judge refused permission to appeal, but it was granted by Mr Justice Field on 16^th July 2004 upon the ground only that “the Appellant is entitled to a declaration that the Third Defendant has a 50% beneficial interest in the property and holds 50% on trust for the Appellant.” In the result, therefore, the Appellant was entitled to raise a contention as to his share of the beneficial interest which was alleged to exist, in the absence of any clear determination by the County Court Judge of the issue raised fairly and squarely by the Jalils, that the payment by Mr Rouf was by way of loan and that Mr Rouf had no beneficial interest.

When the matter came on for hearing before me, I read the judgment and the transcript of the proceedings before the judge and I took the view that it was likely to be impossible to do justice as between the parties unless the permission granted by Mr Justice Field was widened so as to enable the Defendants to raise their primary case. At the restored hearing of the appeal, it became apparent to me that there was considerable doubt as to whether there were sufficient findings of fact by the judge to enable me to come to a conclusion on the question of loan. Both parties urged me, entirely understandably, to come to a conclusion on the facts if I thought I could do so. I have considered the transcript, and the judge’s conclusions as expressed in the judgment, with great care, and I have to record my deep regret that I am unable to do so. I consider that the judge’s conclusions on the issue of the express agreement are entirely supportable having regard to the facts which he did find: but he has not found any facts which enable me to come to any conclusion as to one limb of the defence. The result must be that there will have to be a retrial before a different judge. My detailed reasons now follow.

Before the events with which the action is concerned, Mr Jalil Senior, Mr Rouf and Mr Alam operated a restaurant business at the property. Although the business was run through the instrument of a company, it appears to have been called Bengal Curry Limited, but I do not believe that anything turns on the existence of this company. Mr Jalil Senior and Mr Alam were the tenants under a lease of the premises from one Mrs Baranowski. In November 1998, it appears that the lease was close to expiry and Mr Alam undertook to negotiate with Mrs Baranowski for the freehold.

The basic structure of the arrangement for the acquisition of the freehold negotiated by Mr Alam was as follows. The arrears of rent would be paid, and the sale would be subject to the existing tenancy, with the consent of the tenants. Mr Alam recorded his desire that any purchaser of the premises should agree to grant a new lease to the existing lessees, that is to say Mr Alam himself, Mr Jalil Senior and Mr Rouf. Mr Alam dropped out of the proposed purchase, and on 5^th March 1999 he wrote to Mrs Baranowski telling her that Mr Jalil Junior was going to buy the freehold with his agreement. Mr Jalil Junior duly acquired the freehold, and the new lease was duly granted to Mr Alam, Mr Jalil Senior and Mr Rouf on 5^th August 1999.

Mr Jalil Junior obtained the mortgage in his own name. It was he who was required to give all the usual information concerning background and the like to the proposed lenders, First National Bank Plc, and it may be significant that two of the items of information which were requested from him by First National were, as one would expect, confirmation via his solicitors that the purchase price of the property was indeed £125,000, and that the balance of the purchase price, approximately £31,250, was being provided from his own resources without recourse to any other borrowing, and that he should afford them proof positive of the source of the cash stake to a minimum of £33,000. He dealt with his sources of funding, and in particular with certain sums that had been paid into his account for which explanation was requested in some detail, informing the lenders that the specific sums mentioned (which included the sums paid by Mr Rouf) were “sourced from my father who was entrusted with my inheritance from my grandfather”. This was confirmed by a letter of 5^th June 1999 to the lenders from Mr Jalil Senior, who confirmed that the sums of £13,500 and £5,000 paid into Mr Jalil Junior’s account during the first half of May 1999 were from him, or rather “from his late grandfather (who left some land in Bangladesh intended for him, these monies are the proceeds from the sale of some of those lands)”.

Thus far the background, so far as revealed by the documents, is consistent with any transaction involving the Claimant being a transaction between him and Mr Rouf alone. There is nothing in the correspondence to explain the payment from the Claimant to the Jalils. The payment from Mr Rouf is understandable enough: he was to be one of the lessees of the premises, where he would be conducting the business that would pay the rent. There appears to be no disclosure from the Claimant in relation to any of his dealings with Mr Rouf. However, the Claimant contended before the judge that Mr Rouf and Mr Jalil Senior had approached him at home for advice in respect of the acquisition of the freehold, being concerned about Mr Alam’s honesty. The Claimant’s case was that he gave them certain advice in relation to the steps that should be taken in respect of Mr Alam. The evidence on this plainly needs scrutiny by cross-examination on the documents, since the Claimant alleges that Mr Alam was trying to purchase the freehold on his own account. There appears to be no doubt that the Claimant was responsible for finding the solicitors who acted on Mr Jalil Junior’s behalf in the purchase: so much appears from a manuscript note relating to the initial instruction that is produced by those solicitors. Those solicitors identify the problem (as of 3^rd February 1999) as being that Mr Alam wished his cousin to purchase the freehold reversion, while Mr Jalil Senior wanted Mr Jalil Junior to purchase it. That confusion was eventually resolved, but it appears from the correspondence that Mr Alam may well have been keeping his own interests alive for some time after that, probably until late April or early May 1999. As I have indicated, the judge rejected, in a manner which cannot be challenged on appeal, any suggestion that there was an express agreement that Mr Abdullah should have a 25% beneficial interest.

The Jalils’ case in relation to how the First Defendant was selected to be the owner of the premises is not by any means entirely clear. Mr Jalil Junior maintains that he was approached to help by Mr Alam, who wanted him to guarantee the mortgage. He said that he was unwilling to help unless he would be the sole purchaser, but that he was prepared to become the sole beneficial owner and grant the lease to the three parties who wished to carry on the restaurant business. As is clear from Mr Alam’s earlier letters, the terms of the lease were of great concern to Mr Alam. The terms of the lease as granted were the same as the terms granted by Mrs Baranowski. That is to say, it was a lease for fifteen years with three-yearly reviews and a starting rent of £15,000. The overall structure of the arrangement from a business point of view is accordingly equivocal. It is certainly consistent with the contention that Mr Jalil Senior owed Mr Jalil Junior money, and that Mr Jalil Junior called in his loan so that he could pay the whole deposit. There is no obvious reason why the beneficial ownership of the premises should be associated with two only of the three tenants who carried on the business.

In his exceedingly helpful skeleton argument, Mr Machell identifies the issues that were to be resolved by HHJ Cotran as follows:-

The reference to a “sub-trust” is a reference to Mr Abdullah’s contention that Mr Jalil Junior holds the freehold reversion upon trust as to one-half for Mr Rouf, who in turn holds that interest as to one-half upon trust for Mr Abdullah.

On the first question, whether the money was a payment from Mr Rouf to Mr Jalil Senior as a contribution to the purchase price, the Jalils’ case had two elements. The first was that Mr Jalil Senior owed Mr Jalil Junior about £20,000 in respect of his grandfather’s estate. Under cross-examination, with some interruption, they seem to have adhered to a story to the effect that part of the grandfather’s estate in Bangladesh was, if not bequeathed to Mr Jalil Junior, earmarked for him, and that part was realised by Mr Jalil Senior for his own benefit because of pressing financial difficulties, thereby placing Mr Jalil Senior under an obligation to his son.

The second stage in the argument is that in order to pay off his obligation to his son, at least in part, Mr Jalil Senior borrowed money from two sources, Mr Rouf and the TSB, so that his son could make up the deposit. This loan was to be interest-bearing, and Mr Jalil Junior says he paid the first instalment of interest on his father’s account to Mr Rouf.

There is one document, the “rent profit statement”, which is central to Mr Abdullah’s case as to the existence of Mr Rouf’s beneficial interest. It is inconsistent with Mr Abdullah’s primary case that there was an express agreement that he should have 25% of the freehold. This document is as follows:

RENT PROFIT STATEMENT (5 Avenue Parade,

(5^th August 1999 to 5^th April 2000)

Total Rents Received (Accrual Basis) = 8/12  15,000

= £10,000

Mortgage payments made = 8  £897 = £7,176

Interest Paid over the period = £7,070.24

Taxable income = £2,929.76

Tax due = 40%  £2,929.76

=£ 1,171.92

 PROFIT net of capital repayment = £10,000 LESS

£7,176 LESS £1,171

=£1,652.08

NET (of tax) PROFIT FOR 5/8/99 to 5/4/00 is £1,652.08

Mr Abdullah’s case is that this document shows that Mr Rouf was receiving the surplus after deduction of the mortgage interest payment from the profits of the premises. It is submitted on his behalf that this is consistent with Mr Rouf having a beneficial interest. Mr Jalil Junior says that this is wrong. The purpose of the document is to calculate the interest due to Mr Rouf, who lent his father the money. The interest is calculated as one-half the net profit. But the rents were in arrear (that is why there is a reference to accruals basis): the business has paid no rent.

The cross-examination of Mr Jalil Junior on this document was more or less taken over by the judge. The judge interrupted the answers, and it is very difficult to see from the transcript how Mr Jalil Junior accounted for it, over and above the outline I have given above. It does, however, seem clear that he considered that Mr Rouf’s interest payment was to be calculated on the surplus profit figure I have indicated: and this derives some support, I suppose, from the consideration that the rent payments were in arrears when the payment of “interest” was made to Mr Rouf, so there was, in fact, no profit. There is no question that Mr Jalil had maintained this from an early stage, since he refers in his statements to the special terms of the loan.

The explanation of the document I have given above is not entirely consistent with the account of it given by Mr Jalil Senior in his statements. There is little doubt that Mr Jalil Junior is responsible for his father’s witness statements, but this does not seem to have been gone into in any detail. It does seem to be consistent with the answers given by Mr Jalil Senior under cross-examination.

Finally on this issue, the Jalils said that Mr Rouf had been paid off in 2003. The payment was said to represent interest plus capital gain, and the total was about £30,000. The underlying calculation appears to be more or less correct. The need for this payment also explains, according to the Jalils, why Mr Jalil Senior agreed to a valuation of the premises with Mr Rouf.

There are a multitude of reasons for challenging the view of the transaction that I have outlined in the foregoing paragraphs. To take an example, Mr Jalil Senior also received the sum of £826 from Mr Jalil Junior after the rent profit statement was prepared. Why, if this was supposed to represent the interest payable to Mr Rouf? For Mr Jalil Senior to receive interest is inconsistent with the whole structure of the transaction alleged by the Jalils, but is consistent with the suggestion that he had an entitlement to half the surplus rent. Equally importantly, there is the evidence of Luthfur Rahman and Alaur Rahman, which was to the effect that Mr Jalil Senior had publicly acknowledged that Mr Rouf, or Mr Rouf and Mr Abdullah, were entitled to a 50% share, evidence rejected by the judge on the basis that this acknowledgment could not create a constructive trust. No doubt this is so, but the judge paid no attention to the evidential force of the acknowledgment on the allegation that Mr Rouf was entitled to a 50% share.

It is obvious from the judgment that the judge did not accept Mr Abdullah’s version of the facts. He rejected Mr Abdullah’s primary story, that there was an agreement to the effect that Mr Abdullah should have a 25% interest, out of hand. Unfortunately he entirely overlooked the fact that Mr Abdullah was, in effect, seeking to claim through Mr Rouf, the issue on which Field J gave leave to appeal, and paragraph 26 of the judgment certainly implies that Mr Rouf was entitled to a half-share.

I consider that the weight to be attached to Mr Rouf’s written evidence needed to be considered in detail. If the judge did accept that he had an interest, he gives no reasons for doing so. Mr Rouf did not appear, and there appears to have been some pressure relating to the proceedings applied to him by Mr Abdullah which was not elucidated at the trial. The Jalils could not put the question whether there was a loan or not from Mr Rouf, nor was there an opportunity to challenge him on the rent profit statement.

My final doubt is whether, in rejecting the story of an express agreement, the judge also necessarily rejected Mr Rouf’s written evidence that there was no loan. As advanced in his defence, Mr Rouf’s story is tied up entirely with the contention that there was an agreement as to Mr Abdullah’s beneficial share, rejected by the judge. Mr Rouf’s account of the Claimant’s drafting of the lease, and of a partnership deed, is equally rejected by the judge. I do not, on reflection, think that this is enough.

These are my reasons for saying that the issue whether there was a loan from Mr Rouf or not has not been resolved by the judge, and this necessitates a new trial. My inclination could have been to say that in the absence of Mr Rouf, the Jalils’ evidence ought to have been accepted, and leave it at that, but on the whole matter, there are insufficient findings of fact to enable me to resolve the difficult and important issues that arise, with any confidence that I am being fair to the parties. The appeal is allowed to this extent: there will be a new trial before a different judge.