Dan Simantob v Yacob Shavleyan
| Jurisdiction | England & Wales |
| Judge | Lord Justice Simon |
| Judgment Date | 28 June 2019 |
| Neutral Citation | [2019] EWCA Civ 1105 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A2/2018/2038 |
| Date | 28 June 2019 |
[2019] EWCA Civ 1105
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
The Hon Mr Justice Kerr
Sir Geoffrey Vos, CHANCELLOR OF THE HIGH COURT
Lord Justice Simon
and
Lord Justice Henderson
Case No: A2/2018/2038
James Ramsden QC (instructed by Devonshires) for the appellant, Mr Simantob
Keith Knight (instructed by Greenwood & Co) for the respondent, Mr Shavleyan
Hearing date: 23 May 2019
Approved Judgment
This the judgment of the Court.
Introduction
This appeal from the decision of Kerr J (‘the Judge’), turns on the extent to which a forbearance to raise a defence later found to be without legal merit can constitute sufficient consideration to support an agreement between the parties.
The facts giving rise to this issue are complex, and are fully set out in the Judge's judgment, [2018] EWHC 2005 (QB). For present purposes, a summary will suffice.
Both parties were in business as dealers in Islamic antiquities. The appellant is based in Los Angeles and the respondent in London. Difficulties arose in the course of their association and sums became due from the respondent to the appellant.
On 1 May 2010, a Settlement Agreement was reached between them by which the respondent agreed to pay the sum of US$1,500,000 in full and final settlement of all claims between the parties. Payment in full was due two days after the net proceeds became available from an auction sale which was due to take place on 19 May 2010. The Settlement Agreement also stipulated that in the event of non-payment by that date, the respondent would pay to the appellant, ‘1,000 dollars… for each extra day as a penalty’.
It was common ground that the sale proceeds were paid to the respondent on 19 May and that the sum of $1,500,000 became payable to the appellant by 21 May, that no such payment was made on that date, and that the ‘$1,000 per day clause’ became operative from 22 May 2010.
As the Judge noted, on the first day on which the principal was not paid, the $1,000 per day clause represented an annual rate of interest of 24.333%. He regarded this as a high rate of interest, but accepted evidence that it was not particularly unusual in the market in which the appellant and respondent operated.
The respondent made a part payment of $500,000 under the Settlement Agreement on 9 August 2010. However, the effect of the ‘$1,000 per day clause’ was that interest continued to accrue at the same rate, without any abatement to take into account that one third of the principal sum had been paid.
In the course of his judgment the Judge noted, at [24]:
… the effect of the clause is that the ‘rate’ of ‘interest’ — if that is the right phrase — increases in inverse ratio to the amount of principal remaining outstanding. Thus, if $100,000 remains outstanding, the $1,000 a day clause represents a rate of 1 per cent per day or 365 per cent per annum. And if only $1 of the principal remains outstanding, ‘interest’ remains payable at $1,000 a day, a ‘rate’ which is one thousand times the principal amount due.
The Judge accepted the respondent's evidence that he always regarded the agreement as unfair and unconscionable, and that it was not binding on him until a decision of Master McCloud on 17 October 2017, in which she found that the respondent had no arguable defence to a claim based on the $1,000 per day clause. We will return later to this decision.
On 1 June 2011, the respondent made a further payment of $500,000 on account of the sums due under the Settlement Agreement. In 2012, he gave the appellant a postdated cheque dated 30 March 2013 (expiring 6 months later on 29 September 2013) for $800,000. As the Judge noted, the amount of the cheque represented a full payment of the principal sum of $1,500,000 plus $300,000 by way of interest. However, on what he described as a ‘literal’ interpretation of the ‘$1,000 per day clause’ as at the date of the cheque 1,026 days of interest had accrued and not 300 days.
Following this, the respondent gave the appellant two further post-dated cheques for $100,000 and $800,000 (dated respectively 16 August and 26 November 2013), which were intended to replace the earlier $800,000 post-dated cheque with interest. The August 2013 cheque was presented and cleared two days later. By this time the respondent had therefore paid $1,100,000 of the principal, leaving a balance of $400,000. However, the interest accrued under the $1,000 per day clause was now $1,540,000.
On 21 January 2014, the parties entered into what was the first of a number of agreements in relation to what were referred to as ‘the woods’ (13–14th century beams and two wooden screens); and which were acknowledged as being self-standing agreements.
Following this, at a meeting which the Judge concluded occurred at some time between 11 April and 24 May 2014, the respondent provided the appellant with 8 post-dated cheques for $100,000: one for each month from June 2014 to January 2015. The appellant's case was that these represented payments on account of sums due under the Settlement Agreement. The respondent's case was that they represented a modified agreement whereby the sum of $800,000 would be accepted in full and final settlement of his liabilities under the Settlement Agreement. The Judge found that the cheques were presented in the presence of two witnesses, who gave evidence that the appellant and the respondent had kissed and shaken hands on a deal at that meeting. At [68] of the judgment, the Judge explained why the appellant had accepted the 8 cheques when he had a claim under the Settlement Agreement which, if the $1,000 per day clause were enforceable and enforced, would have entitled him to $3,063,000, notwithstanding $1,100,000 of the principal sum of $1,500,000 had been paid. The reasons included social pressure from the local Persian business community to reconcile his differences with the respondent. It is convenient to refer to this as ‘the April/May 2014 variation agreement’, without at this stage forming any view as to whether it constituted a legally enforceable agreement. That is the issue which arises on the appeal.
The commercial relationship between the parties continued, although the detail does not bear on the present dispute. It is sufficient to say that the appellant was expressing justifiable concern that the respondent did not have sufficient funds to cover the 8 cheques he had signed.
By late 2014, none of the 8 cheques had been presented by the appellant for payment; and at a meeting at the respondent's gallery, he provided 4 further post-dated cheques in substitution for the 8 cheques for an overall sum of $860,000. The respondent regarded the increase of $60,000 over the previous amount as a reward for past forbearance and an encouragement to exercise patience for a while longer.
In the event the appellant did not present the 4 new cheques for payment; and these were replaced by 4 substitute post-dated cheques in mid-2015 in the overall sum of $900,000.
The Judge summarised the position as follows:
78. The use of post-dated cheques as a form of currency combined with an element of security and comfort became an agreed method of doing business between these two men. The increases by way of ‘interest’ rewarded the creditor's forbearance and reduced the threat that he would deposit cheques and trigger dishonour of a cheque. That could mean court proceedings, which neither party wanted, and which are regarded with disfavour by the Persian art dealing community in London. It prefers its disputes to be settled in-house.
79. A rupture in their business relations would deprive Mr Simantob of access to Mr Shavleyan's expertise, which he valued as shown by his willingness to deal in the woods and, subsequently, the Judeo Persian documents even though Mr Shavleyan owed him a lot of money. On the latter's side, access to Mr Simantob's funds and the antiques he owned was a useful source of business to Mr Shavleyan.
In October 2015, the appellant presented the first of the 4 substituted post-dated cheques (in the sum of $220,000) for payment, which was dishonoured. However, on 16 February 2016, the respondent transferred $200,000 to the appellant. In March 2016, the respondent asked the appellant not to present the other three of the most recent post-dated cheques.
On 7 April 2016, close to the sixth anniversary of the Settlement Agreement, the appellant's solicitor sent a letter before claim demanding payment of the full sum due under the terms of the Settlement Agreement. Of the total claim for $2,378,000, $2,178,000 (all but $200,000) represented interest under the $1,000 per day clause. In its response, the respondent's solicitors rejected the claim for interest at $1,000 per day as a penalty.
The appellant's Claim Form was issued on 29 April 2016, shortly before the expiry of the limitation period. The claim had increased to $2,454,000, together with continuing interest at the rate of $1,000 per day.
In response the respondent pleaded that the $1,000 clause was void as a penalty, that he had been the subject of duress when he signed the Settlement Agreement and that the Settlement Agreement had been ‘revised’ in the April/May 2014 variation agreement, see [14] above.
The appellant applied for summary judgment under Part 24 of the Civil Procedure Rules.
In his witness statement of 9 February 2017, the respondent contended that after paying $1,100,000 towards the $1,500,000 referred to in the Settlement Agreement, the appellant had pressed him for payment of the shortfall of $400,000 and a further $400,000 for ‘interest’. He emphasised that the validity of the Settlement Agreement had been ‘questioned from the outset’. On this basis, and...
To continue reading
Request your trial
-
Lee Hudson v Jayne Hathway
...assets such as the shares, even if doubtful, would be consideration if it were believed to be valid; see e.g. Simantob v. Shavleyan [2019] EWCA Civ 1105, per Simon LJ at [45]–[53]. Similarly, if detriment was necessary to establish a common intention constructive trust to give effect to an......
-
Pakistan International Airline Corporation v Times Travel (UK) Ltd
...EWHC 88 (Ch)Rookes v Barnard [1964] AC 1129; [1964] 2 WLR 269; [1964] 1 All ER 367; [1964] 1 Lloyd’s Rep 28, HL(E)Simantob v Shavleyan [2019] EWCA Civ 1105, CASmith v William Charlick Ltd (1924) 34 CLR 38Walford v Miles [1992] 2 AC 128; [1992] 2 WLR 174; [1992] 1 All ER 453, HL(E)Yam Seng P......
-
Niki Christodoulides v CP Christou LLP
...Second Defendant, Niki was giving good consideration for the reduction in fees from which she benefitted: see Simantob v. Shavleyan [2019] EWCA Civ 1105. The facts of that case were complicated but concerned $1,500,000 which the respondent had agreed to pay the appellant, and whether that ......
-
Jugar Singh Johal v Sulakhan Singh Johal
...or does not believe to have a reasonable prospect of success is no consideration. Mr Brennan referred to Simantob v Shavelyean [2019] EWCA Civ 1105 at para 49; the point was restated by the Court of Appeal recently in CFL Finance Ltd v Laser Trust [2021] EWCA Civ 228 at para 22 That being......
-
Court Of Appeal Finds Defendant Gave Good Consideration For Varied Settlement In Agreeing To Give Up Defence That Was Later Found To Be Without Merit
...has recently upheld a first instance decision that there was a binding agreement to vary a settlement agreement: Simantob v Shavleyan [2019] EWCA Civ 1105. The claimant argued that there was a lack of consideration for the variation, as the defence which the defendant had agreed not to purs......
-
Forgoing an Unmeritorious Defence held to be Good Consideration by Court of Appeal
...alt="Judge holding gavel in courtroom" width="300" height="225"> The Court of Appeal in Simantob v Shavleyan [2019] EWCA Civ 1105 has held that an unmeritorious defence was good consideration for the variation of a settlement agreement, which resulted in payment to the creditor of a lesser ......
-
Forgoing An Unmeritorious Defence Held To Be Good Consideration By Court Of Appeal
...Court of Appeal in Simantob v Shavleyan [2019] EWCA Civ 1105 has held that an unmeritorious defence was good consideration for the variation of a settlement agreement, which resulted in payment to the creditor of a lesser sum than the debt The Appellant, Dan Simantob and the Respondent, Yac......
-
FRESH CONSIDERATION RULE: INSIGHTS FROM ITS RESURRECTION IN QUACH V MITRUX SERVICES LTD.
...1 WLR 474, [1993] EWCA Civ 8; Rock Advertising Ltd v MWB Business Exchange Centres Limited, [2018] UKSC 24; Simantob v Shavleyan [2019] EWCA Civ 1105. (27) Ms. Toca did not provide any fresh consideration, on the orthodox view of consideration, for Ms. Rosas' forbearance from exercising her......