Al-Wazir v Islamic Press Agency Inc.

JurisdictionEngland & Wales
JudgeLORD JUSTICE ROBERT WALKER,SIR ANTHONY EVANS,LORD JUSTICE HENRY,Lord Justice Robert Walker,Sir Anthony Evans
Judgment Date31 July 2001
Neutral Citation[2001] EWCA Civ 1276
Docket NumberCase No: A3/2000/0397
CourtCourt of Appeal (Civil Division)
Date31 July 2001

[2001] EWCA Civ 1276

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION (EVANS-LOMBE J)

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice Henry

Lord Justice Robert Walker and

Sir Anthony Evans

Case No: A3/2000/0397

Islamic Press Agency Inc
Appellant
and
Al-wazir
Respondent

Mr Roger Kaye QC and Mr John McCaughran (instructed by Herbert Smith for the appellant)

Mr Nigel Davis QC and Mr Paul Teverson (instructed by Rooks Rider for the respondent)

LORD JUSTICE ROBERT WALKER
1

This appeal raises an unusual question as to whether equitable interest must be paid in order to redeem a charge, even though the charge does not expressly provide for interest. It is an appeal from an order of Evans-Lombe J made on 14 February 2000 in proceedings between Abdullah Abbas Al-Wazir ("Abdullah") as claimant and Islamic Press Agency Inc ("Inc") as defendant. Abdullah's claim was for a declaration as to the existence of an equitable charge on an office building at East Burnham, Buckinghamshire, and for enforcement of the charge by an order for sale and other ancillary relief.

2

The judge's order was made after two hearings. The first was concerned with some disputed issues of fact and also with issues about the sufficiency of a memorandum under s.40 of the Law of Property Act 1925 and the equitable doctrine of part performance (the events in question occurred before the enactment of the Law of Property (Miscellaneous Provisions) Act 1989). This hearing resulted in a fairly lengthy reserved judgment handed down on 28 October 1999. That judgment made findings of fact and reached conclusions of law, as to the existence of an enforceable equitable charge, which are not challenged on this appeal. It is therefore possible to summarise the facts relatively shortly.

3

There was then an unfortunate delay before the judge heard further argument on the issue of interest. That hearing took place on 14 February 2000 and the judge gave a further extempore judgment on that issue (and also on issues as to costs). The judge decided that interest should be paid at the judgment rate from the contractual date for repayment (1 September 1985). It is that decision that is challenged on appeal by Inc.

4

Inc is a Panamanian company which was incorporated on 29 March 1982 for the purpose of acquiring and holding office premises known as Crown House, East Burnham, Buckinghamshire. An offshore company was used for tax reasons. Inc bought the premises for £630,000, and the purchase was completed on 30 April 1982. It bought the premises for occupation by an English company, Islamic Press Agency Ltd ("IPAL") which had been incorporated on 21 February 1980. IPAL's main activity was publishing magazines and books concerned with Islam and the Islamic world. It seems to have been regarded as an arm (although it was not a subsidiary) of a publishing business in Jeddah called the Islamic Press Agency.

5

Abdullah had four uncles, the Al-Wazir brothers, who shared many business interests. The other individual who played a central part in the sequence of events is Mohammed Salahuddin Hussein Omar ("Salahuddin"). Salahuddin was until 1989 a long-standing friend and business associate of the Al-Wazir brothers. He was a director of both IPAL and Inc and he held one-third of the shares in each company. Abdullah's uncle Mohammed was also a director and one-third shareholder of each company. The remaining third was held by a Liechtenstein corporation called Han Mai on behalf of various other investors including King Faisal of Saudi Arabia. Inc had a third director until 1992 but he played little part in the relevant events.

6

Until the acquisition of Crown House IPAL had only a nominal issued capital. But on 31 March 1982 its authorised capital was increased to £3m and on the following day 1,499,998 shares were issued at par, for cash. The judge did not make any findings about the issued share capital of Inc or of how its purchase of Crown House was financed. The arrangements may have been informal. Abdullah (who was never a director or shareholder of either company) said in his witness statement that he thought IPAL and Inc "were one venture or two sister companies owned by the same shareholders". He first became concerned in the matter because the Al-Wazir brothers had put him in charge of running another publishing venture in Jeddah, Saudi Publishing and Distribution House.

7

The business carried on by IPAL was never commercially successful. It appears that between 1982 and 1984 the shareholders paid to the company (in unequal proportions) substantial sums in addition to what had been due in respect of the shares issued at par on 1 April 1982. But these payments came to an end in December 1984 and the company was in severe financial difficulties.

8

On 2 January 1985 Abdullah signed a cheque on his own account, payable to Salahuddin, for 120,000 Saudi Riyals. The cheque was handed to Salahuddin's brother Mustafa who signed a receipt acknowledging it as a loan to Salahuddin. Then in May 1985 Abdullah arranged a further payment to IPAL of £200,000 (921,800 Riyals at the rate of exchange then current). The mechanics by which this payment was made were fairly complicated but are no longer relevant. On 16 May 1985 a memorandum typed on IPAL's headed writing paper was signed by Salahuddin and (later) Mohammed.

9

The memoradum was in the following terms:

"The undersigned directors of Islamic Press Agency Ltd do hereby certify that the Agency's premises known as Crown House and situated at Crown Lane East Burnham near Slough Bucks SL2 3SG (England) has been mortgaged to Mr Abdullah Abbas AlWazir PO Box 2254, Jeddah Saudi Arabia, for a sum of Saudi Riyals, 1,041,800/00 (Saudi Riyals: 1,041800 only).

The above mortgage amount will be paid back to Mr Abdullah Abbas AlWazir on 1st September 1985, either by sale of the said premises or otherwise."

10

The judge reviewed at some length the conflicting evidence about the purposes of the payments and the circumstances in which the memorandum came into existence. The conclusions which he reached (which are not challenged on appeal) are that the payments were loans out of Abdullah's own money, and that they were loans to IPAL, not payments by way of subscription for shares.

11

As regards the circumstances and purpose of the loans the judge's findings were as follows:

"… I find that by the 16th May 1985 Abdullah had agreed with Salahuddin that he would advance a further £200,000 to IPAL upon terms that that sum and his first advance of 120,000 Riyals would be repaid by IPAL on the 1st September 1985 in the meantime to be secured by a charge over Crown House. In entering into the agreement, in which he was later joined by Mohammed, Salahuddin was acting as a director both of IPAL and Inc, as was Mohammed. It does not seem to me that the fact that the memorandum does not expressly refer to Inc is inconsistent with this conclusion. In addition to Abdullah's evidence of Salahuddin's representations as to his authority to charge Crown House there was plainly an agreement to charge it and Inc was a necessary party to effect that.

It is not in issue that to grant a mortgage of its property in support of another company was within the express powers of Inc under its articles of association. To enter into such a contract before being authorised by resolution of the board and of the members would, accordingly, not be a nullity since such a contract would be capable of subsequent ratification. The contract in question was one for the granting of a mortgage over land in England. It follows that English law governs the validity and enforceability of such a transaction …"

12

The judge held that the memorandum did not satisfy s.40 of the Law of Property Act 1925, because it did not identify Inc. But he held that there had been a sufficient act of part performance, citing Steadman v Steadman [1976] AC 536. No issue arises on the appeal as to that.

13

It is the judge's second judgment, given on 14 February 2000, on which the appeal focuses. The judge began by reading into his judgment passages from the judgments in Cityland and Property (Holdings) v Dabrah [1968] Ch 166, 182 and Ezekial v Orakpo [1997] 1 WLR 340, 346. In the former case Goff J said,

"True it is, as a general rule, that a mortgage debt carries interest in the absence of an express provision, but that is because as stated in the Irish case of Carey v Doyne (1856) 5 Ir.Ch.Rep 104, and approved in Re Kerr's Policy (1869) LR 8 Eq 331, it would be inequitable to allow redemption without payment of interest; or, as it was put in Mendl v Smith (1943) 112 LJ Ch 279, interest is allowed unless there is any contractual right or equity to exclude it."

14

In the latter case (which was concerned with the Charging Orders Act 1979) Millett LJ (with whom Neill and Phillips LJJ agreed) said in relation to an equitable charge on land to secure a stated principal sum:

"Such a charge would carry interest even though there were no words allowing interest in the charge itself. That was decided at first instance in In re Drax; Savile v Drax [1903] 1 Ch 781, which was followed by Simonds J in Stoker v Elwell [1942] Ch 243 in somewhat startling circumstances, where the charging order had been made as long ago as 1899."

In fact (as appears below) the decision of Joyce J in Re Drax was affirmed by this court on appeal.

15

Those are the leading modern statements of a principle which goes back at least to Farquhar v Morris (1797) 7 Term Rep. 124. The judge stated that the principle did at first sight apply and he considered four...

To continue reading

Request your trial
2 cases
  • Destine Estates Ltd and Another v Janet Elizabeth Muir and Another
    • United Kingdom
    • Chancery Division
    • 11 Diciembre 2014
    ...is not made unless it is equitable to do so in the circumstances of the case" (to quote from Sir Anthony Evans' judgment in Al-Wazir v Islamic Press Agency Inc [2001] EWCA Civ 1276, [2002] 1 Lloyd's Rep 410). In In re Drax [1903] 1 Ch 781, Romer LJ said (at 794): "Now I take it to be well ......
  • McCaffrey (Patrick Fintan) v McCaffrey (Eugene)
    • United Kingdom
    • Chancery Division (Northern Ireland)
    • 19 Marzo 2014
    ...Drax was relied on by the Court of Appeal of England and Wales in its much more recent judgment in Al-Wazir v Islamic Press Agency Inc (2001) EWCA Civ 1276, [2002] Lloyd’s Rep 410. 7. These principles are explained in the following extract from the judgment of Sir Anthony Evans in Al - Wazi......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT