(1) Andrew Erlam and Others v (1) Mohammed Lutfur Rahman (A Bankrupt) (First Defendant) (2) Ayesha Khatun Farid (Second Defendant)
| Jurisdiction | England & Wales |
| Judge | Chief Master |
| Judgment Date | 29 January 2016 |
| Neutral Citation | [2016] EWHC 111 (Ch) |
| Docket Number | CLAIM No: HC-2015-002955: HC-2015-002955 |
| Court | Chancery Division |
| Date | 29 January 2016 |
[2016] EWHC 111 (CH)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Rolls Building
7 Rolls Building
London EC4A 1NL
Chief Master Marsh
CLAIM No: HC-2015-002955: HC-2015-002955
Simon Johnson instructed by Richard Slade & Company appeared for the Claimants
The first Defendant did not appear and was not represented
Steven Fennell instructed by the Platinum Partnership appeared for the Second Defendant
The Claimants are a group of private individuals who challenged the election on 22 nd May 2014 of the first Defendant ("Mr Rahman") as Mayor of the London Borough of Tower Hamlets. The grounds of their petition were corruption, dishonesty, intimidation and unlawful spiritual influence. In a lengthy judgment [2015] EWHC 1215 (Comm) dated 23 rd April 2015 Commissioner Richard Mawrey QC upheld the petition and, among other things, declared Mr Rahman's election to be void. Mr Rahman was ordered to pay the Claimants' costs and to make an interim payment of £250,000. That sum remains unpaid.
The Claimants obtained in the Queen's Bench Division an interim charging order and were granted a final charging order dated 26 th June 2015 over Mr Rahman's interest in 3 Grace Street, London E3 3DJ title no: EGL478193. The title was registered in the sole name of Mr Rahman on 29 th July 2005. The title entries show that the price paid for the property on 13 th June 2005 was £230,000. The title is subject to a registered charge in favour of Mortgage Express. Mr Rahman was given notice of the interim charging order and of the date of the hearing for the court to consider making it final. He did not appear before Master Yoxall on 26 th June 2015 but gave notice through his solicitors that he did not oppose the order.
The Claimants also obtained an interim charging order over Mr Rahman's interest in 30 Deal Street, London E1 5AH which is registered in his sole name under title no: NGL399462. However, shortly before the hearing to consider whether the interim order should be made final, the second Defendant, who is Mr Rahman's wife, made an application to be added as a party to the proceedings for the purposes of determining her beneficial interest in 3 Grace Street and 30 Deal Street. Although Master Yoxall made the interim charging order in relation to 3 Grace Street final, he directed that the interim charging order in respect of 30 Deal Street should continue until further order and he gave directions for there to be a trial to determine the extent of the beneficial interest (if any) of the second Defendant ("Mrs Farid") in both properties. He also directed that the claim should be transferred to the Chancery Division for the trial. On 16 th July 2015 the Claimants obtained a further interim charging order over 5 Grace Street, London E3 3DJ which is registered in the sole name of Mrs Farid. Master Yoxall made a similar order in connection with that property and the issue as to beneficial ownership in the property was transferred to the Chancery Division for trial.
Before the trial could take place, Mr Rahman was made bankrupt on 18 th November 2015 on his own petition. The bankruptcy order does not affect the Claimants' rights under the final charging order over 3 Grace Street but they were unable to pursue the trial in relation to the two other properties. On 24 th November 2015 I ordered that the Claimants' applications in relation to 5 Grace Street and 30 Deal Street be stayed until further order pursuant to section 285 of the Insolvency Act 1986.
Mr Rahman did not appear at the trial and was not represented. Instead, he wrote a letter to the Court dated 9 th November 2015 which was received by the Court on 30 th November 2015. The bankruptcy order was made against him between these two dates. In summary, he said in the letter that he had no role to play in the litigation, that the purpose of the charging orders was to obtain an advantage for the Claimants' financial backers over those who paid Mr Rahman's legal costs in the election claim and that he could see no purpose in filing evidence or taking an active part in the proceedings. He referred to the evidence he had filed in connection with a freezing order obtained by the Claimants and said it was available to any party who sought to use it.
A further point of procedural background to the trial arises from Mrs Farid's application notice dated 23 rd June 2015 when she applied to be joined as a party to the proceedings. The basis of the application was expressed to be that "…she is the sole beneficial owner of the property at 30 Deal Street, London E1 5AH and have a more than half beneficial entitlement to the property at 3 Grace Street, London E3 3DJ." (Sic). Although in many contested issues which arise out of charging orders it will not be necessary for there to be statements of case, or points of claim and defence, both Counsel in this case have expressed regret, for different reasons, that the issues were not defined with greater clarity prior to the opening of the trial. The issues were left to emerge from the witness statements made by or on behalf of the parties which has proved to be less then satisfactory. That is because:
(i) Mrs Farid's witness statement dated 23 rd June 2015 made in support of her application to be joined as a party exhibits two declarations of trust dated 16 th May 2006 made between Mr Rahman and herself relating respectively to 3 Grace Street and 30 Deal Street. She refers to her interest in the properties being "evidenced by the Deeds of Trust" and that she has a 74% interest in 3 Grace Street. She also said that her beneficial interest in the properties arose from her direct financial contributions towards their purchase price.
(ii) The Claimants have proceeded on the basis that Mrs Farid's claim arises from those alleged contributions and the declaration of trust concerning 3 Grace Street is evidence of those contributions. In other words the Claimants say the declaration of trust declares the existence of a trust which arose at the date of purchase and does not purport to show a gift of an interest in the property from Mr Rahman to Mrs Farid. The Claimants' case in relation to the deed is that its authenticity is accepted but it is a sham of no legal effect.
(iv) On the other hand, Mrs Farid's case, as it became clear from Mr Fennell's skeleton argument, is that it begins and ends with the declaration of trust and it is unnecessary to examine the contribution to the purchase price which is said to lie behind it.
(v) Neither party had articulated the precise jurisdiction under which the trial arose or upon whom the burden of proof rests. However, it was common ground that the application is best treated as being made under section 3(5) of the Charging Orders Act 1979 for a variation of the final charging order to record the percentage of Mr Rahman's interest in the property. It is not an application to discharge the final charging order in entirety.
It was also common ground between counsel that when a final charging order has been made against a title held in a person's sole name, and that person raises no objection to the final charging order being made, the applicant seeking to vary that order must establish a basis for doing so. In other words, the onus of proof lies on Mrs Farid to establish that Mr Rahman's beneficial interest in 3 Grace Street is less than 100%. The only exception to that approach concerns the allegation made by the Claimants that the declaration of trust is a sham. It is accepted by the Claimants that the deed was validly executed and the onus of proof is on them to establish that it was a sham.
The Witness Statements
The Claimants' evidence principally consists of three witness statements made by Mrs Caroline Turner who is a solicitor at Richard Slade & Company. Other than events relating to the election petition, and the procedural steps taken subsequent to the Electoral Commissioner's decision, she is not able to provide any first hand evidence which is relevant to the proceedings. Her evidence, principally her 8 th witness statement, does provide, however, a helpful summary of certain evidence which is relevant. In addition to her evidence, the Claimants provided a witness statement from Mr Helal Uddin Abbas who was formally a Councillor of Tower Hamlets Council. Mrs Farid did not require Mrs Turner to prove her witness statements in the witness box. Mr Abbas was called to give evidence and briefly cross-examined.
I was provided with Mr Rahman's 3 rd affidavit made in connection with the freezing order obtained by the Claimants against him. Given that he decided not to come to court, it was common ground between the parties that I could place no reliance on it.
Mrs Farid has made two witness statements. There are, in addition, witness statements from a number of persons who claim to have loaned money to Mrs Farid to enable her to acquire 30 Deal Street and to acquire an interest in 3 Grace Street:
Mr Tahid Miah
Mr Kamal Ahmed
Mr Mohammed Abdul Gaffar
Mr Syed Nazrul Rahman (the person who arranged a loan from Mr Ahmed).
Mrs Afia Farid is Mrs Farid's sister and she has made two statements. Her second statement was made shortly before the trial but, nevertheless, I gave permission for it to be relied upon.
All of Mrs Farid's witnesses, and Mrs Farid herself, were called to give evidence and were cross-examined.
The Background Facts
Mr Rahman and Mrs Farid married in 1992....
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