Al Khudairi & Anor v Abbey Brokers Ltd & Ors

This case concerns sums which the Claimants borrowed in 2002 and 2007 on the security of a property they own at 40 Hogarth Road, London SW5 (“40 Hogarth Road”). It is the Claimants’ case that £150,000 of the 2002 loan was paid to the Third Defendant, Wharfland Limited (“Wharfland”), and that Wharfland has failed to account satisfactorily for some of that money. The Claimants’ larger claims arise out of the 2007 loan, of £1,495,000. £1,348,546.86 of this (i.e. £1,495,000 less certain costs and the amount needed to redeem the 2002 mortgage) was paid into an account in the name of the Fourth Defendant, Mr Hugo De Mel (“Mr De Mel”), and then disbursed in accordance with instructions given by the Second Defendant, Mr Joe Silva (“Mr Silva”). The Claimants allege that the First Defendant, Abbey Brokers Limited (“Abbey”), which (they say) advised and acted for them, is liable to them for the £1,348,546.86 (plus interest). They further allege that they are entitled to recover against Mr Silva both for dishonestly assisting Abbey to breach its fiduciary duties and for deceit. Mr De Mel is also said to be liable for dishonest assistance.

A central issue, as was recognised by all the parties, is as to the basis on which the £1,348,546.86 was paid into the account held by Mr De Mel (“the De Mel Account”).

The dispute has clearly caused a serious rift within the Claimants’ family. The Second Claimant spoke of the family having been “shattered because of this matter”, primarily because of the part played in relevant events and the present proceedings by Dr Mohamed Sunba (“Dr Sunba”), who is married to the Claimants’ eldest daughter.

The First and Second Claimants are husband and wife. They are both Iraqi nationals, but they have been living in the United Kingdom since the early 1990s and attained British residency in 1996. The First Claimant, Mr Abdul Sattar Al Khudairi (“Mr Al Khudairi”), is now aged 80, and the Second Claimant, to whom I shall refer as “Mrs Al Khudairi” although she is named in the Claim Form as, and also called, “Fathia Dawood Salman”, is 76 years of age.

Neither Mr nor Mrs Al Khudairi speaks very much English. Mr Silva was inclined to suggest that Mr Al Khudairi speaks reasonable English, and Dr Sunba asserted that Mr Al Khudairi understands English perfectly. However, I am satisfied that even Mr Al Khudairi’s spoken English is poor. I also accept that Mr and Mrs Al Khudairi do not write or read in English.

Mr Al Khudairi was evidently a successful businessman in Iraq. He owned a large electrical shop in Baghdad and was part owner of a plant which manufactured powdered drinks. He was, he said, able to make sufficient money to live a good life in Iraq.

Mr and Mrs Al Khudairi have three daughters and a son. Their son and one of their daughters live in Jordan and Syria respectively. Their other daughters live in this country. It is the older of these, Shatha, who is married to Dr Sunba. The other, Reem (“Mrs Alkhedairy”), is married to Mr Saad Alkhedairy (“Mr Alkhedairy”).

The Claimants were represented by Mr Hugh Norbury.

Abbey, the First Defendant, was incorporated in 2004 and carries on business as a mortgage and insurance broker from premises in Croydon. Mr Silva, the Second Defendant, is a director and shareholder of the company, and the other directors and shareholders appear to be members of his family. Mr Silva said that he was the only director taking an active role in the company.

Wharfland, the Third Defendant, which was incorporated in 1978, is, in effect, a predecessor of Abbey. Like Abbey, it traded as “Abbey Brokers” from an address in Croydon and, as with Abbey, the directors and shareholders comprised Mr Silva and other members of his family.

The successive “Abbey Brokers” businesses have been subject to regulation. Abbey is now regulated by the Financial Services Authority. Before the Financial Services Authority became responsible for the regulation of “Abbey Brokers”, the business was regulated by another body.

Mr De Mel, the Fourth Defendant, has worked for “Abbey Brokers” (whether Wharfland or, more recently, Abbey) as office manager since 1993. Before that, he had worked for more than 20 years for National Westminster Bank, latterly in the lending section. He has known Mr Silva since childhood. The two were at school together in Sri Lanka, and they have remained close friends.

The Al Khudairis were introduced to Mr Silva by Dr Sunba, who himself first met Mr Silva in the early 1980s. Mr Silva and Dr Sunba clearly know each other well, and they went on holiday to Sri Lanka together in July 2008. They differed somewhat in the evidence they gave about their business dealings. Mr Silva said in cross-examination that Dr Sunba had introduced various clients to him over the years (“maybe about two or three a year”), though he said that Dr Sunba was never paid for the introductions. He said, too, that Dr Sunba had helped him with the refurbishment of some premises in Fulham (for which he had been paid) and that Dr Sunba had wanted to come into partnership in relation to that property. Mr Silva also said that Dr Sunba had wanted to provide foreign exchange services at the premises and had “introduced a lady to come and do that counter”, although he (Dr Sunba) closed that down after a couple of months. In contrast, Dr Sunba said that he never wanted to go into partnership with Mr Silva and that he was not paid for the services he provided at the Fulham premises. He also said that a foreign exchange trading business was “just a talk” and that he “never did it in my life”. He further said that he had introduced only about one person a year to Mr Silva. In my judgment, however, Mr Silva is unlikely to have overstated the links between himself and Dr Sunba. I therefore consider that Dr Sunba probably introduced more clients to Mr Silva than he (Dr Sunba) was prepared to admit, was paid for work at the premises in Fulham, wanted to enter into a partnership in relation to that property and took steps to provide foreign exchange services there.

Although formerly represented by solicitors, Mr Silva and Mr De Mel each appeared in person at the trial, and Mr Silva also represented Abbey and Wharfland. However, the Defendants’ Defences were drafted by counsel.

The Claimants’ witnesses comprised Mr and Mrs Al Khudairi themselves, Mr and Mrs Alkhedairy and Mr Barrie Grossman.

Mr Grossman is a chartered accountant and a consultant with the Claimants’ solicitors. His evidence essentially involved an explanation of a spreadsheet which he had prepared. He was not cross-examined.

Both the Defendants and Dr Sunba attacked Mr Alkhedairy in strong terms. Mr Silva spoke of Mr Alkhedairy exploiting “an opportunity to eclipse Dr Sunba” and “to expand his own property empire”, Mr De Mel of Mr Alkhedairy’s “insane jealousy and hatred for Dr Sunba”. I can see no basis for these accusations. Mr Alkhedairy struck me as a careful, measured and reliable witness.

The other witness whom Mr Silva and Mr De Mel cross-examined at some length was Mr Al Khudairi. My impression was that Mr Al Khudairi’s recollection of events was less clear than Mr Alkhedairy’s, and I am not well-placed to judge the accuracy of his evidence about, for example, the circumstances in which he and his wife omitted to pay any United Kingdom tax for some years. However, I accept that Mr Al Khudairi gave a truthful account of the events with which I am essentially concerned.

There was no sustained cross-examination of either Mrs Al Khudairi or Mrs Alkhedairy.

As regards the Defendants’ witnesses, Mr Silva and Mr De Mel each gave evidence, as did Dr Sunba. Dr Sunba attended pursuant to a witness summons; he had earlier sworn at least one affidavit and made at least one witness statement.

I was not impressed by the evidence of Mr Silva or Dr Sunba. I do not consider that either was a reliable or truthful witness.

I shall come back to Mr De Mel’s evidence later in this judgment (see paragraphs 141 and 142).

Mr and Mrs Al Khudairi bought 40 Hogarth Road in 1986. The property was purchased as an investment and let out.

Mr Al Khudairi said that he and his wife authorised Dr Sunba to manage the property on their behalf, although from about 2001 management was undertaken by both Dr Sunba and Mr Al Khudairi. More generally, Mr Al Khudairi said that, until he and his wife moved to England in the early 1990s, Dr Sunba and his wife managed their affairs in the United Kingdom using powers of attorney. Mr Al Khudairi described Dr Sunba as his agent and “in charge”, and he said that he “was relying entirely on [Dr Sunba]”.

For his part, Dr Sunba was insistent that he was not in charge of managing 40 Hogarth Road and said that he could not remember ever having held a power of attorney for the Al Khudairis. On the other hand, he also said:

“After 33 years of absolute slavery, they used me very well, to the bone.”

Further, Mr and Mrs Al Khudairi produced during the trial copies of powers of attorney which they had given to Dr Sunba and his wife in 1986.

Here, as elsewhere, I prefer Mr and Mrs Al Khudairis’ evidence. I therefore find that the Al Khudairis relied substantially on Dr Sunba and, more specifically, that Dr Sunba was responsible for the management of 40 Hogarth Road, albeit with the assistance of letting agents and, from about 2001, jointly with Mr Al Khudairi himself.

In June 2002 Mr and Mrs Al Khudairi borrowed some £150,000 from GE Money Home Lending with a view to renovating 40 Hogarth Road. The net advance (of £181,500) was initially deposited in an account which Mr and Mrs Al Khudairi held with Lloyds Bank, but sums totalling £150,000 were transferred on. According to Mr Al Khudairi:

“This £150,000 money was for the purposes of the renovation works but Mr Silva (through Wharfland, we understood) would hold it for us from the outset.”

Mr Silva suggested in cross-examination that the £150,000 was deposited in an account in his own name. Regardless of whether he was correct about that, the money is, in my view, properly regarded as having been paid to Wharfland. Not only was Mr Al Khudairi’s evidence to the effect that he understood himself to be dealing with “Abbey Brokers” (which, at the time, would have meant, Wharfland), but Mr Silva substantially accepted in cross-examination that the money was transferred to “Abbey Brokers” (referring to the £150,000 having been “tucked into Abbey Brokers account”). Moreover, Dr Sunba spoke of money having been left with “Abbey Brokers”.

At some stage, Mr and Mrs Al Khudairi were supplied with a statement of account covering the period from June 2002 to August 2003. This records the receipt of the £150,000. It also includes a number of entries in respect of interest and some transfers to Lloyds Bank. The outstanding balance as at 4 August 2003 is given as £56,009.03.

Mr Al Khudairi said that he asked Mr Silva to return what was left of the £150,000 when he saw him at the wedding of one of Dr Sunba’s daughters in 2005. Mrs Al Khudairi gave evidence to similar effect. Mr Silva denied the incident, but I prefer Mr and Mrs Al Khudairi’s evidence.

In July and August of 2008, Abbey Brokers sent Mr and Mrs Al Khudhairi further statements, for the period between 4 August 2003 and 31 December 2007. These list additional deductions as a result of which there is shown to be no outstanding balance by the end of 2007.

By October 2008, however, the Al Khudairis had queried certain deductions. In an email of 3 October, Mr Alkhedairy asked Mr Silva to explain items totalling £26,272. The deductions were also referred to during the meeting of 10 October to which reference is made below (see paragraph 58). An email sent in Mr Al Khudairi’s name on 20 October from Mr Alkhedairy’s email address asked that Mr Silva:

“Return the following amounts wrongly debited from my account during 2004, 2005, and 2007 by the end of the week….

Date	Description	Value	Comment
1. 1st Jan 2004	Account Certificate	£216-54	Please clarify
2. 31st Dec 2004	Transfer Lloyds	£5886	No money was received
3. 31st Dec 2004	Transfer Lloyds	£5886	No money was received
4. 15 Jun 2005	Transfer Lloyds	£6000	No money was received
5. 21st May 2007	Account fees	£8500	Please clarify

On 21 October, Mr Alkhedairy noted in an email to Mr Silva that the latter had confirmed in a telephone conversation that morning that the “bank in Jersey is investigating the disputed sums deducted in 2004, 2005, and 2007 and will send their report in the coming few days”. On 10 November, Mr Alkhedairy chased Mr Silva for the “report about the missing funds”. On 16 December, Mr Silva informed Mr Alkhedairy in an email:

“Incidentally, we have now received details of the debits raised, which I shall pass over on Monday.”

The meeting which had been planned for the next Monday (22 December) not in the event having taken place, and no details of the debits having yet been supplied, Mr Alkhedairy told Mr Silva in an email dated 5 January 2009 that he was to remit, among other things, “the £27 K odd that was illegally deducted from the 2003 account immediately”. In a letter which the Al Khudairis received soon afterwards (although dated 24 December 2008), Mr Silva said:

“We have received the detailed information regarding the charges to the account, which we will pass on to you when we meet.”

In cross-examination, Mr Silva said that he did not think that there was discussion at the 10 October 2008 meeting of the money from the 2002 mortgage, that he thought that the reference to “investigating the disputed sums” related to the 2007 mortgage, and that he could not remember which debits he had intended to “pass over on Monday”. On each of these points, however, I reject Mr Silva’s evidence.

In any event, no payment has ever been made in respect of the queried deductions. Neither has Mr Silva (or Wharfland) given the Al Khudairis any further information about the deductions. In cross-examination, Mr Silva said that he could not accept or deny that the £56,000 odd was retained because he had “no recollection of this at this moment in time”.

Aside from the £26,272 deductions, the statements of account feature two transfers of £20,000 each, dated respectively 28 September and 30 October 2007. I shall return to these transfers below (see paragraphs 74, 113 and 144).

In 2007, Mr and Mrs Al Khudairi obtained a loan of £1,495,000 from Northern Rock plc (“Northern Rock”) on the security of 40 Hogarth Road.

Mr and Mrs Al Khudairi gave evidence to the effect that they wanted to put the flats at 40 Hogarth Road into the names of their children, with each daughter receiving one flat and their son two, and that the £1,495,000 was borrowed with a view to achieving this objective. Mr Al Khudairi explained as follows in his witness statement:

“Dr Sunba told us that Mr Silva had a way of effecting the transfer of the 5 flats to minimise the likely tax payable on any transfers. Mr Silva advised us through Dr Sunba that we would have to borrow only about £300,000 in total and that each flat would be transferred one at a time. We understood that this would be a tax efficient way of transferring the flats to our children. The scheme was explained to us as follows:

(i)

We should obtain a mortgage in the sum of £300,000 to £400,000 for the first flat. This sum would be held by Abbey and used to show that the first child was buying the flat from us, then it would be used similarly for the other flats.

(ii)

We should register the flats one at a time.

(iii)

This would take 3 to 4 months for each flat.

(iv)

The interest payments we would receive from Abbey on the funds drawn down would equal or exceed the interest payments we had to make under the mortgage.

We were subsequently asked by Dr Sunba if we in fact wanted to accelerate the process and complete all 5 flats together. He explained to us that we would then need to get a mortgage of approximately £1.5m to be held by Abbey. We agreed to this hoping to finalise the transfer in the shortest possible time. I still do not know precisely what was proposed but I assumed at the time that it was all entirely legitimate.”

Mr Silva’s version of events is very different. His case is in essence that it was agreed that he should be entitled to use the net advance from Northern Rock as he wished for at least five years. He also maintains that the Al Khudairis were dealing with him personally rather than with Abbey.

I return to the conflicts between the parties on these points later in this judgment. The linked questions of why the £1,495,000 was borrowed from Northern Rock and the basis on which the net advance was paid into the De Mel Account are addressed in paragraphs 88-105, and the issue of whether the Al Khudairis were dealing with Abbey or Mr Silva personally is considered in paragraphs 106-111.

On 23 March 2007, Abbey sent Barrington Charles Edwards & Co, a firm of solicitors often used by Abbey, a letter authorising them to act on behalf of Mr and Mrs Al Khudairi in connection with the Northern Rock loan. The letter, which was signed by Mr and Mrs Al Khudairi, concluded as follows:

“Please forward a cheque for 2% of the mortgage advance to Abbey Brokers Ltd … on completion in respect of the brokerage fee and we shall let you have instructions for dispersal of the net proceeds through Abbey Brokers Ltd nearer completion.”

A letter dated 9 May 2007 from Mr and Mrs Al Khudairi to Barrington Charles Edwards & Co stated as follows:

“We would like to have an initial draw down of £550,000.00 … immediately on completion and the balance in two or three equal instalments, which we would authorise Abbey Brokers Limited … to deal with, which would be in line with our proposed property purchase programme ….

Please note that it is essential to complete this matter before Friday 11^th May 2007 as we have already gone passed the dates to complete other associated business as this matter was due to conclude by 4^th May 2007.”

Although this letter was signed by Mr and Mrs Al Khudairi, there can be no question of it having been drafted by them. Mr Silva said that there was a 50% chance that he dictated the letter and a 50% chance that it was prepared by someone else, but he was unable to identify anyone else who realistically could have drafted the letter. In my judgment, it was clearly drafted by Mr Silva.

It was put to Mr Silva in cross-examination that he was pressing for urgent completion because he was running out of money. He rejected this suggestion, but I come back to the point later in this judgment (see paragraph 126(iii)).

Mr Al Khudairi said in his witness statement that in April/May 2007 Dr Sunba’s wife (his eldest daughter) brought him and his wife some documents which they were told were to register the first flat at 40 Hogarth Road in her name and that, as asked, they signed the documents and put them in an envelope addressed to Mr Silva at Abbey. Mrs Al Khudairi speaks in her witness statement of this incident having happened “in around September or October 2007”, but I think the likelihood is that it in fact occurred shortly before completion and that the documents in question related to the Northern Rock mortgage. It is difficult to see what documents could have been signed by the Al Khudairis later in the year.

The transaction was completed on 16 May 2007 when Northern Rock was granted a legal charge over 40 Hogarth Road and £550,000 was drawn down. £111,321.95 of the £550,000 was paid to GE Money to redeem the 2002 mortgage. A further £32,000 was paid to Abbey in respect of its brokerage fee, and certain other costs were also deducted. The balance of the £550,000, amounting to £404,134.36, was transferred by Barrington Charles Edwards & Co to the De Mel Account, which was opened and operated for the benefit of Mr Silva.

It can be seen from a ledger that Mr De Mel kept in respect of the De Mel Account that most of the £404,134.36 was disbursed very quickly. According to the ledger, the account was overdrawn to the extent of £1,525.16 before the £404,134.36 was credited to it on 17 May 2007. A payment of £18,756.33 was made that same day. On the next day, 18 May, there were withdrawals totalling more than £136,000. By 2 June, the balance on the account had fallen to £21,454.78.

In cross-examination, Mr Silva accepted that he had all but spent the £404,134.36 within three weeks of receiving it. He said that the various payments were made in respect of debts he owed. As regards the position he would have been in without the £404,134.36, he said:

“I would have paid those debts, yes, certainly I would have. But it would not have been paid in that time, it might have been a bit later ….”

The remainder of the loan from Northern Rock was drawn down in five tranches. £250,000 was drawn down on 5 June 2007, £125,000 on 9 August, £125,000 on 25 September, £250,000 on 23 October and £195,000 on 2 November. On each occasion, the money (less costs) was transferred by Barrington Charles Edwards & Co to the De Mel Account. (The precise sums credited were £249,882.50, £124,882.50, £124,882.50, £249,882.50 and £194,882.50, so that, in total, £1,348,546.86 was credited to the De Mel Account.) Mr Silva accepted in cross-examination that he drew down funds when he needed them and, more specifically, that he had to make the £250,000 draw-down in June 2007 so that he could repay creditors.

Barrington Charles Edwards & Co attendance notes exist for all these draw-downs. By way of example, an attendance note dated 21 September 2007 reads as follows:

“Attending receiving telephone call from Abbey Brokers Limited … when I spoke to Joe Silva. He informed me that our clients wanted me to withdraw a further £125,000 from Northern Rock secured against 40 Hogarth Road, Earls Court. I said that I would ask for funds. Joe Silva informed me that he wanted the money to be sent to the account of H R S D’Mel with Abbey National plc.”

As regards the 9 August draw-down, Barrington Charles Edwards & Co’s instructions were confirmed in a fax dated 8 August which was signed “For and on behalf of Abbey Brokers Limited” and sent on paper headed “Abbey Brokers Limited” and giving Abbey’s details.

The first payment to Northern Rock in respect of interest, of £3,083.01, was made on 15 June 2007. The monthly interest payments increased as more money was drawn down, rising to a peak of £9,086.01 in December 2007. The payments fell back somewhat as interest rates declined.

In the autumn of 2007, 40 Hogarth Road was discussed at a meeting attended by Mr and Mrs Al Khudairi, Dr and Mrs Sunba and Mr and Mrs Alkhedairy. It was on this occasion, I think, that, as Mr Alkhedairy remembered events, Dr Sunba said that he was tired of asking Mr Silva what had happened to the transfer of the flats. Following this meeting, Mr Alkehdairy contacted Mr Silva and asked him for a receipt for the money and about his instructions.

That led to Mr Silva sending a letter to Mr and Mrs Al Khudairi dated 28 December 2007 in the following terms:

“… Our instructions are the subject property was purchased several years ago and it is your wish to transfer same in favour of your family. The purchase consideration has been set at £1,495,000.00 … and it is your intention to mitigate capital transfer taxes and other tax liability wherever possible.

The mortgage facility of £1,495,000.00 would be shown as part payment for the respective transfers and the interest on the deposit is being transferred to your joint current account at Lloyds TSB … periodically until this transaction has been completed. You will note the sum of £40,000.00 … has already been credited on account of drawings this would enable you to service the mortgage facility outside your own resources.

Despite being quite a complicated transaction in view of your personal circumstances we shall extend every assistance to bring this matter to a satisfactory conclusion at the earliest opportunity.”

When giving oral evidence about this letter, Mr Silva explained that the idea was that the children would buy the flats at 40 Hogarth Road for a total of £1,495,000 using the money their parents had borrowed from Northern Rock on the basis that the Al Khudairis were giving this money to their children.

On 10 March 2008, a Mr Joe Hills of Northern Rock sent Mr Silva an email in which, after referring to a telephone conversation, he said that he had been “told there are two ways we could approach this”. The first was for “the clients simply [to] add the daughter to the title”, in which case Northern Rock would “require a new legal charge”. Mr Hills summarised the second option as follows:

“If add the daughter to the title and the loan, we would need a ‘TR1 form’ from solicitors, a net worth statement, personal details … and … probably ID too”

Mr Silva said in evidence that he had started exploring how a transfer could be effected “when we got the request for the transfer”. He said that the telephone conversation mentioned in Mr Hills’ email could have been “a matter of weeks” before the email was sent.

Mr Silva was asked in cross-examination where the money would have come from given that the sums paid into the De Mel Account had already been spent. He said:

“they were talking about over a long period of time, so then we could find the money and then pay it into the payments.”

He gave no real explanation of how he could have found the money.

By the autumn of 2008, Mr Alkhedairy was asking Mr Silva for interest payments and for a meeting. On 3 October, Mr Alkhedairy sent Mr Silva an email in which, among other things, he said that he and his parents-in-law were “somewhat perturbed” that Mr Silva had “not kept [his] promise to arrange a meeting as agreed 3 weeks ago”. Within a few minutes, Mr Hills’ email of 10 March was forwarded to Barrington Charles Edwards & Co on Mr Silva’s instructions. Later that day, Mr Silva rang Barrington Charles Edwards & Co, and there was discussion of the two approaches outlined in Mr Hills’ email. Barrington Charles Edwards & Co’s attendance note in respect of the conversation includes this passage:

“Joe Silva informed me that it is intended that father and mother will transfer the property at 40 Hogarth Road … from their joint names and will also add their daughter Mrs Shatha Abdul Sattar Al-Khudairi … subject to the existing Northern Rock Plc mortgage.”

On 10 October 2008, Mr Silva attended a meeting with Mr and Mrs Al Khudairi and Mr Alkhedairy. Mr Alkhedairy said in evidence, and I accept, that Mr Silva explained that his scheme was for each of the children to be added to the deeds of 40 Hogarth Road and then to make it look as though they were buying the flats. Mr Alkhedairy also gave evidence to the effect that Mr Silva said at the meeting that the net advance from Northern Rock was in an offshore consolidated account in Abbey’s name and that it was a 90-day notice account. Likewise, Mr Al Khudairi spoke of Mr Silva having said that “the money will be overseas for 90 days and it will be back”, and Mrs Al Khudairi related that Mr Silva said that the funds were held in an offshore consolidated account in the name of Abbey on a 90-day deposit. For his part, Mr Silva accepted that he told the Al Khudairis that they could not have their money back straightaway, but said that he could not recollect “with any degree of accuracy” whether he mentioned that the money was held in a 90-day consolidated account in Jersey. I accept the evidence given by Mr and Mrs Al Khudairi and Mr Alkhedairy, especially as it is consistent with the contemporary correspondence (see below).

Following the meeting on 10 October 2008, Mr and Mrs Al Khudairi decided not to proceed with any transfer of 40 Hogarth Road. On 13 October, Mr Alkhedairy sent Mr Silva an email in which he said:

“… It appears that [Mr and Mrs Al Khudairi] had a different understanding of the procedures to that explained by you on Friday, and decided to call the whole matter off.

Please let me know when you give the 90 days notice to return the £1.5M to the lender.”

Mr Alkhedairy attached to his email a letter dated 12 October which he explained that his parents-in-law had asked him to draft. This read as follows:

“Following your visit to our house last Friday (Oct 10^th) and the discussions we had about 40 Hogarth Road, I regret to inform you that my wife and I have decided not to proceed with the transfer/registration of this property. This decision was taken based on the following considerations:

•

At the time of our initial contacts, we were led to believe that the matter would take a few months at best, and would involve borrowing about £500,000 only. The sum borrowed far exceeded this amount (about £1.5M), and it has been 18 months since the monies were withdrawn. This has caused us considerable hardship in trying to pay the monthly interest charges, despite our repeated and unsuccessful calls for you to release the interest on the £1.5M in a timely manner over the past 12 months.

•

The method of transfer was only explained properly to us in last Friday’s meeting. We cannot agree to this method since any obstacles that may arise in the future will leave only one or two of our children in possession of large stakes in the property. This was never our intention.

•

We could not obtain a convincing explanation as to why it has taken so long to make such little progress, despite the positive messages over the past 18 months. In October last year, you informed our son-in-law Saad that the first flat will be registered in Shatha’s name in March 2008, and then the other flats in our other children’s names to follow every three months thereafter.

We appreciate the efforts you have exerted but must now ask you to give the 90 days notice immediately to release the £1.5M and return it to the lender. The lender is to have the money by the middle of January 2009.”

No response having been received from Mr Silva, an email was sent in Mr Al Khudairi’s name on 20 October 2008 in which Mr Silva was requested, among other things, to confirm within 48 hours that he had “given the 90 days notice to the offshore syndicated account where you are keeping my £1.5M mortgage (to be returned in the same amounts as originally taken plus all accrued interest)”. On the next day, Mr Alkhedairy sent Mr Silva an email in which he referred to a telephone conversation that morning and said that he was pleased that Mr Silva had confirmed, among other things, that “All the outstanding interest” would be in Mr Al Khudairi’s account by the end of the month and that “The 90 day notice to withdraw the total funds has been given”; Mr Alkhedairy confirmed in his witness statement that Mr Silva had said on the telephone that he had given the 90-day notice to release the money. On 16 December, after a number of chasers, Mr Silva sent Mr Alkhedairy an email stating as follows:

“Thank you for your numerous emails and faxes and to reiterate my comments once would be sufficient.

I would like to confirm an appointment at your father-in-law’s residence on Monday 22^nd December 2008 at around 11.30am.

It is imperative for Dr Sunba to … attend this meeting to clear any misconceptions that seem to be crowding the issue. Furthermore, he was available throughout and, therefore, his presence would be essential.

We are awaiting the transfers to come through and upon receipt shall forward the payment. This is not a tactic but procedures to follow ….

You are free of course to seek whatever measures but would suggest that you wait to consider the audit report which is quite comprehensive and legally binding in areas of taxation. Therefore, we can only suggest calm progress and not regret with substantial costs, which is bound to be the consequence in hasty decisions and actions ….

We shall contact you as soon as funds are received and ready to transfer. It is fair to state that we take umbrage at your comments especially when all we do is save enormous costs, which would be unavoidable if one wrong move is made.”

Mr Silva accepted that he was not in a position in December 2008 to repay the £1,348,546.86 deposited in the De Mel Account. He said in cross-examination:

“I was at that stage trying to make some arrangements if possible, and that’s what I was waiting for. But I couldn’t come through with it …. I was trying to see whether I could get most of the funds or part of it or something like that but it was not possible for me to get it at such short notice.”

In the event, the meeting scheduled for 22 December did not take place. On 22 December, Mr Alkhedairy sent Mr Silva an email in which he said:

“I am very disappointed that the meeting which we have been waiting for for a number of weeks was cancelled today [because] Sunba is sick. This meeting was considered by us as the last chance you have to implement the numerous written and verbal instructions to return the monies which you hold in your possession, and to provide proof that you have given the 90 days notice to release our £1.5M, and to give a firm written commitment to return all the £1.5M (including all accrued interest) by the end of January 2009 ….

The meeting must proceed tomorrow at 11 am with or without Sunba as you have already been informed that he is no longer authorised to deal with you on this matter.”

In an email to Mr Silva of 5 January, Mr Alkehdairy expressed “great disappointment” at Mr Silva’s “continued postponement of the meeting between us” and said:

“Also we wish to make it clear beyond any shadow of a doubt that we expect to receive all the £1.5 M from you by the end of January 2009. No delay will be accepted nor partial payments. Northern Rock have been contacted and told to expect to close out the mortgage by end of January. You told us that the money is in a consolidated account in the name of Abbey Brokers and that you gave the 90 day notice to release the money last October, so it should be ready by then ….”

Shortly after this, a letter to Mr and Mrs Al Khudairi dated 24 December 2008 was received from Mr Silva. This said the following:

“Your son in law Mr Saad Al-Khudairy has been dealing with this matter recently. Unfortunately it appears that he is not appreciating the enormity of the situation which we have attempted quite successfully to remedy and thereby avoid a substantial loss. These being the original instructions.

It would be preferable if we could meet by convenient appointment and it would be necessary for Dr Sunba to be present.

Needless to say we were surprised that he was not advised of our last meeting and his presence would reconfirm our approach to this matter, as conflicting views seem to permeate.

We have obtained the services of Chartered Management Tax Consultants and we would make a copy of their report available for your serious consideration ….

This matter has progressed over a period of some twenty-three years and it would be a futile exercise and folly to try to remedy it in a couple of months duration ….

Please be advised that one wrong move would result in massive payments and it is a problem that can be solved to your satisfaction as all parties originally intended ….

We were initially advised that it is your intention for the property to pass on to your children in equal shares mitigating tax liabilities and the programme in hand was precisely aimed to achieving this end.

We have made arrangements for the interest payment withdrawals, which would enable you to service the loan facility. Please note these are paid gross ….”

It is noteworthy that neither in this letter nor elsewhere did Mr Silva (a) suggest that he was entitled to retain any of the Northern Rock money for five years (as he now claims had been agreed) or (b) disabuse the Al Khudairis of the idea that the money was in a 90-day notice offshore account.

In their reply of 19 January 2009, Mr and Mrs Al Khudairi said:

“… The original instruction to you was rescinded following our meeting last October, and you were asked to return all monies in your possession all as per our letter of 12^th October and as confirmed in Saad’s numerous phone calls, emails and faxes. You were not asked to employ a management tax consultant, nor act as our tax consultant. Our tax affairs will be handled by our solicitors and should not be your concern.

We can meet if you wish (including Sunba) but the standing instructions for the return of all monies in your possession by the end of this month (including all accrued interest) still stand and no delays will be accepted as you’ve had more than enough notice to arrange it ….”

Soon after this, Dr Sunba delivered to Mrs Al Khudairi a letter dated 5 December 2008 from Sagexcel Accountancy Limited (“Sagexcel”), described as “Chartered Management Accountants and Tax Consultants”. This letter contained the following warning:

“Before your client commits to any course of action, make sure that he would be happy for all the facts and documentation to be laid out before the HM Inspector of Taxes.”

Later in the letter, Sagexcel said:

“We strongly feel steps are being taken to remove substantial share of the equity of the property by way of the mortgage facility gives the client substantial benefit and relief ….

In approximate terms it is best for your client to progress with the family transfers proposed to minimise the tax burden rather than repay the mortgage facility and increase the liability substantially.

On the average figures in hand we can very conservatively estimate the tax due with penalties and interest on unpaid tax to date would be in excess of £889,067.50 ….”

It can be seen from the envelope that Abbey sent this letter to Dr Sunba on 22 December 2008.

Mrs Al Khudairi said that, when Dr Sunba gave her the envelope, he begged her and her husband not to proceed with any action against Mr Silva. Dr Sunba said that he never begged anybody, but that he had been concerned about how long legal proceedings would take and their cost.

Mr Silva said that he obtained the Sagexcel report because he was “just really trying to be helpful”, not to frighten the Al Khudairis. Dr Sunba said that he gave the report to the Al Khudairis “just to warn them about the implication of not paying tax”.

Notwithstanding their evidence to the contrary, it seems to me that Mr Silva and Dr Sunba were both seeking to deflect the Al Khudairis from pressing for the return of the money which had been paid into the De Mel Account and, moreover, that they were doing so for reasons other than any concern about the delay and cost associated with legal proceedings. I note in this context Mr Silva’s references to the “enormous costs” and “massive payments” which could arise if “one wrong move” were made, the fact that Dr Sunba urged the Al Khudairis not to proceed against Mr Silva and the fact that the Sagexcel report was obtained and supplied to the Al Khudairis without their having requested any such report. Contrary to Mr Silva’s and Dr Sunba’s evidence, the Sagexcel report was, in my judgment, intended to frighten the Al Khudairis.

On 26 December 2008, Abbey wrote to Northern Rock asking for an interest statement to be supplied “at [their] earliest convenience” as “we are finalising the tax returns for these clients”. However, Mr Silva accepted in cross-examination that he was not in fact involved in preparing tax returns for the Al Khudairis.

After the Sagexcel letter had been delivered, Mr Alkhedairy sent Mr Silva an email on 5 February 2009 in the following terms:

“Dr Sunba delivered a letter written by your tax consultant regarding my in laws tax affairs and said that he and you would like to discuss this with us.

So please arrange a meeting with my in laws and myself as soon as you return to the UK.

At this meeting we will need to see proof that the £1.5M is ready to be transferred to the account advised to you in my 6^th January email ….”

By now, Mr and Mrs Al Khudairi had taken steps to obtain tax advice for themselves. At the end of 2009, Mr and Mrs Al Khudairi were calculated by HM Revenue and Customs to owe about £34,000 by way of tax on profits from UK land and property for the years 2003-2004 to 2007-2008. The amounts claimed were paid in January of this year.

Both Mr Silva and Dr Sunba asserted that they had advised the Al Khudairis to take tax and legal advice earlier on. However, Mr Al Khudairi denied this, and I prefer his evidence.

Between September 2007 and April 2008, the Al Khudairis were paid sums totalling £60,000 by Abbey/Mr Silva, but £40,000 of the £60,000 was charged to the account relating to the 2002 mortgage, leaving a balance of £20,000 (see paragraph 35 above). Some further payments were made in late 2008.

The present proceedings were issued on 13 February 2009, and a freezing order was made against Abbey and Mr Silva on the same day.

Mr and Mrs Al Khudairi said, and I accept, that, following the making of the freezing order, Dr Sunba’s eldest daughter visited them and said that she had been told at a meeting she had had with Mr Silva, among other things, that he (Mr Silva) would claim that the Northern Rock money was lost, that he did not mind spending six months in prison, that he would return the money and interest but could not return it all at once, and that he would expose the Al Khudairis for not having paid tax since 1985. In cross-examination, Mr Silva denied speaking to Dr Sunba’s daughter before her visit to her grandparents, but I think it likely that he did.

The freezing order required Mr Silva to provide certain information. On 26 February 2009, Mr Silva swore an affidavit in which he observed that the order was “primarily concerned with funds allegedly received by the Respondents from Northern Rock”, and he continued:

“That allegation is untrue since no funds at all have been received by either Respondents from Northern Rock other than the commission due from Northern Rock which was paid into the 1^st Respondents Office account. No funds the subject of the Order have ever been paid into the Respondents Client or Trust accounts or indeed into any accounts held by the Respondents.”

While this last sentence may have been literally true (because the Northern Rock advances had been paid into the De Mel Account instead of an account in the name of Abbey or Mr Silva), the previous sentence was, at best, highly misleading.

On 1 May 2009, the Claimants’ solicitors wrote to Dr Sunba and his wife asking for (a) accounts for 40 Hogarth Road for 2004 to 2006 and (b) information about a £123,825 transfer made to Dr and Mrs Sunba’s solicitors from the De Mel Account on 4 December 2007. On 28 September, the Claimants’ solicitors wrote again, pressing for papers relating to 40 Hogarth Road to be made available. In a reply dated 15 October, Dr Sunba said merely:

“Thank you for your letter of 24^th September 2009 and would advise you that we do not have any documentation relating to the matter referred to.”

There was no response to the request for information about the £123,825 transfer.

In the course of his oral evidence, Dr Sunba said that he had not supplied Mr Silva with any information for him to use when cross-examining the Al Khudairis. Similarly, Mr Silva denied that Dr Sunba had provided him with material to assist with cross-examination of the Al Khudairis and, more generally, that Dr Sunba had been in contact with him for the purpose of the proceedings.

However, Mr Silva accepted in cross-examination that Dr Sunba “was giving [him (Mr Silva)] any offers that were made to him [Dr Sunba]”. He also said that Dr Sunba had told him that he had made a complaint to the police about the Al Khudairis and that Dr Sunba had supplied him with documents relating to this. In contrast, Mr Bernard Weatherill QC, who appeared for Dr Sunba in connection with the witness summons which had been served on him, said (doubtless on instructions) of one of the documents supplied to the police:

“we have absolutely no idea how that came into Mr Silva’s possession.”

Despite the evidence which Mr Silva and Dr Sunba gave to the contrary, I think it very likely that they collaborated in relation to these proceedings, for example by Dr Sunba providing Mr Silva with cross-examination material (e.g. about a house in Baghdad owned by Dr Sunba’s wife).

The De Mel Account strictly comprised two accounts with Abbey National: the first account was closed, and the second opened in its place, because of a problem in 2008. The earlier of the accounts appears to have been opened in the autumn of 2002.

Mr Silva said that he could not remember why he started using the De Mel Account and that there was “no particular reason” for him using it. Mr Silva maintained that rules governing Abbey did not bear on money paid into the De Mel Account. He said that many of the payments made from the De Mel Account were to people who had “given [him] money at various times”, but that he was not a money-lender: he would merely “introduce somebody who has the money to somebody who needs the money”.

Mr De Mel said in his witness statement that he was initially asked to open the account to help Mr Silva out for a short period and that he was told by Mr Silva that most of the money credited to the account would be in connection with property transactions. He went on to say the following:

“After several months I asked Mr Silva when I could close this account. He said to me words to the effect: ‘Hugo, give me a little more time please, but why are you getting impatient? As you see, the account has given you no trouble and I can assure you that there will never be any problem. So please let it continue and as soon as I am ready I shall make alternative arrangements’ ….

… [F]rom time to time I raised the issue of the continuation of the account with Mr Silva, only to be reassured by him each time that alternative arrangements would be put in place as soon as he had some free time, and that he would not do anything to harm my interests or reputation. Given these assurances, I agreed to continue the account.”

In cross-examination, Mr De Mel said that Mr Silva had told him, “I just want this for a short period of time until I get the banks sorted out”. He accepted that he must have realised that Mr Silva had accounts of his own, but said that he “didn’t think much at all”.

The money in the account, Mr De Mel explained, was not his. It was Mr Silva’s personal money, and the operation of the account was managed by Mr Silva alone. Mr De Mel would never fill out any cheques, but would rather sign cheques in blank, leaving Mr Silva to fill in the details.

The De Mel Account was closed in 2009, when Mr De Mel withdrew £61.97 in cash and gave it to Mr Silva.