Naghshineh v Chaffe
| Jurisdiction | England & Wales |
| Judge | Jonathan Crow |
| Judgment Date | 27 November 2003 |
| Neutral Citation | [2003] EWHC 2107 (Ch) |
| Court | Chancery Division |
| Docket Number | CLAIM NO. HCO2 C01413 |
| Date | 27 November 2003 |
[2003] EWHC 2107 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London WC2A 2LL
Jonathan Crow
(sitting As A Deputy Judge Of The High Court)
CLAIM NO. HCO2 C01413
PETER McMASTER (instructed by Lane & Partners) for the 1st & 3rd claimants
JOHN DAGNALL (instructed by Halliwell Landau) for the 1st defendant
ANTHONY ELLERAY QC (instructed by JMW) for the 3rd & 4th defendants
Hearing dates: 20 & 21 November 2003
Pursuant to CPR PD 39A, paragraph 6.1, I direct that no official shorthand note shall be taken of this judgment, and that copies of this version handed down may be treated as authentic.
INTRODUCTION
The Appeal:
This is an appeal against an order made on 2 June 2003 by deputy master Rhys, permission to appeal having been granted on 24 September 2003 by Lawrence Collins J. By his order, the master required the 2nd and 4th claimants to provide £120,000 by way of security for costs, and to pay £7,500 in respect of the costs of the application for security. There is no appeal against that part of his order. In the event, those claimants did not provide the necessary security in time, and as a result their claim stands dismissed. They have also failed to pay the costs of the application for security.
The master ordered the 1st and 3rd claimants to provide £5,000 by way of security. This lesser amount was said to be justified by reference to the estimated additional cost of enforcement against these claimants, who are resident in Canada, over and above the estimated cost that would be incurred by a defendant enforcing against a claimant resident in this jurisdiction. The master made no order for the costs of the application against the 1st and 3rd claimants, on the grounds that no substantial security had been ordered. The appeal before me is against that part of his order.
The appeal is brought by the 1st defendant ("Mr Chaffe") and the 3rd and 4th defendants ("the Farshchi-Heidaris"). The 2nd defendant ("Goostrey Properties") was dissolved on 3 April 1997. The 5th defendant, the late Gholam Reza Farshchi-Heidari, died in November 2002 before these proceedings were served on him. For convenience, I will refer in this judgment to the1st, 3rd and 4th defendants as "the defendants", and I will refer to the 1st and 3rd claimants as "the claimants".
It is common ground that this is a review, not a rehearing. Accordingly, the defendants can only succeed if they can show that the master failed to exercise his discretion, or that he exercised it on wrong principles, or that his decision was one that could not reasonably have been reached.
The issues
The appeal is essentially based on two alternative allegations. Either:
the master's approach to the exercise of his discretion was wrong in principle, or
5.2 even if limited security is appropriate, the sum of £5,000 was too low, and the right order would have been double that figure.
The substantive action
The underlying dispute is principally concerned with the beneficial ownership of a property known as Archery House, Leycester Road, Knutsford, Cheshire ("the Knutsford Property"). The issue is essentially whether the beneficial owners were limited to members of just two families, the Ardakanians and the Farshchi-Heidaris, or whether they also included the claimants.
The Property was formerly owned by Goostrey Properties, a Liberian company with bearer shares. Mr Chaffe was the shareholder. It is said that, in 1996, the bearer shares were transferred to the 5th defendant, and the Knutsford Property was transferred to and registered in the names of his son and daughter-in-law, the Farshchi-Heidaris. The claimants say that they never agreed to any such transfer of their beneficial interests in the Knutsford Property or the shares. Accordingly, the claims brought against the defendants are principally for breach of trust, including allegations of dishonest assistance against the 3rd defendant.
The defendants' answer is that the Knutsford Property was intended as a home for the Farshchi-Heidaris, and that the claimants have no interest in it. In seeking to establish that defence, they rely on (among other things) oral instructions, declarations and assurances given by various interested parties, and on provisions of Iranian law. They also plead a defence based on laches.
In short, this is a complex factual dispute, in which the respective parties' knowledge and intentions are critical. Its resolution will turn to a considerable extent on oral evidence.
The facts relevant to security
The claimants are resident in Toronto, Canada. They have no assets within the jurisdiction of this court, and their only disclosed assets are in Canada and the USA. The evidence shows that each owns a residential property jointly with his wife in Canada, and each owns a number of bank accounts or investments. Each of them has a number of children undergoing full-time education in Canada. They both say that they intend to remain there for the foreseeable future.
The evidence shows that the 1st claimant's assets have the following values:
The matrimonial home is worth about £239,000, and is unencumbered. There is no credible challenge to the reliability of that valuation. He says that he owns it in equal shares with his wife. The defendants complain that there is no evidence to this effect from the wife. I reject that complaint. There is no reason to go behind the 1st claimant's statement, and in the absence of any credible challenge to his evidence I see no reason why the defendants should be entitled to raise any complaint about a lack of corroboration.
His cash deposits in Canada were worth about C$286,000 as at May 2003 (which is equivalent to about £128,800 at today's rate of about C$2.22 to £1). The defendants point out that he held as much as US$320,000 a month earlier: a significant sum was subsequently invested in the New York stock market. The significance of this movement will be discussed later.
His investments in the New York stock market were worth US$187,167 as at May 2003. The defendants object that they do not understand the exhibit to his witness statement, but in my judgment that complaint is irrelevant. There is no credible basis for going behind the clear statement made in paragraph 10(1) of the witness statement itself, where he gives the then current value of the investments.
Turning to the position of the 3rd claimant, the evidence shows that his assets have the following values:
The matrimonial home is worth about £183,000, and is unencumbered. There is no credible challenge to that valuation. The 1st claimant's witness statement says that the 3rd claimant owns the property jointly with his wife in equal shares. Once again, the defendants complain about the lack of corroborative evidence from the wife, but I reject that complaint for the reasons I have already given.
He had credit balances in his Canadian bank accounts totalling US$138,000 and C$253,000 in May 2003 (which is equivalent to about £195,000 at today's rates). This had risen from about £88,000 in April 2003. No explanation is given for the increase, but the defendants can hardly complain about it.
It is common ground that there is a reciprocal enforcement treaty with Canada ("the Treaty"), which has been given force in domestic law by The Reciprocal Enforcement of Foreign Judgments (Canada) Order 1987, SI 1987/468.
THE LEGAL PRINCIPLES
Since the main thrust of this appeal is against the master's approach to the exercise of his discretion, it is convenient first to consider the applicable legal principles. All parties based their submissions on three key cases Nasser v United Bank of Kuwait [2001] EWCA Civ 556, [2002] 1 WLR 1868, De Beer v Kanaar & Co [2001] EWCA Civ 1318, [2003] 1 WLR 38, and an unreported decision of Lightman J in Leyvand v Barasch, 15 February 2000. From these cases, and from the relevant rules of court, I derive the following propositions that are relevant to the present case.
14.1 The overriding test is that the court must be satisfied, having regard to all the circumstances of the case, "that it is just to make an order" for security CPR rule 25 13(1)(a). No amount of judicial interpretation can supplant that test. Accordingly, the discretion is (subject to the principles discussed below) entirely at large.
14.2 The jurisdiction is triggered in this case by the fact that the claimants are resident outside the jurisdiction of this court, and also outside the jurisdiction of any signatories to the Brussels or Lugano Conventions ("non-Convention residents") CPR rule 25 13(2)(a).
14.3 The exercise of the court's discretion must not violate a claimant's right of access to the court under Article 6 of the European Convention on Human Rights ("ECHIR") in a manner that is discriminatory in breach of Article 14: Nasser at paragraphs 47–51.
14.4 A difference in treatment between two classes of claimant will not violate Article 6 of the ECHR, taken together with Article 14, if it has a reasonable and objective justification, and is proportionate: Nasser at paragraph 48.
14.5 The fact that the claimants are resident in Canada can be no more than a precondition to the exercise of the court's discretion to require security. Of itself, it cannot also be a ground for exercising that discretion, because that would involve unlawful discrimination: Nasser at paragraph 58.
14.6 As a matter of principle, the only legitimate basis on which the court can require a non-Convention...
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