Musawi v RE International (UK) Ltd & Ors, Court of Appeal - Chancery Division, December 14, 2007, [2007] EWHC 2981 (Ch)

Resolution Date:December 14, 2007
Issuing Organization:Chancery Division
Actores:Musawi v RE International (UK) Ltd & Ors
 
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Neutral Citation Number: [2007] EWHC 2981 (Ch)

Case No: HC05C00497

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 14/12/2007

Before:

MR JUSTICE DAVID RICHARDS

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Between:

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Gwilym Harbottle (instructed by Tilbrooks) for the Claimant

Aditya Kumar Sen (instructed by Sohal & Co) for the Defendants

Hearing dates: 21, 22, 23, 24, 25 May, 5, 6, 7, 8, 11, 14, 18, 19, 20 June, 5 and 26 July 2007

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JudgmentThe Hon. Mr Justice David Richards:

Introduction

  1. This case concerns a 4.1 acre undeveloped site in South Way, Wembley, London adjoining the Wembley Stadium (the Wembley land). The acquisition, development and ownership of the land was the subject of a series of agreements and alleged agreements between 1987 and 2002 involving the claimant and some or all of the defendants. From 1988 to 2004, the registered proprietor of the freehold title to the land was the first defendant R.E. International (UK) Limited (REI). The dispute in this case concerns the interest of the claimant in the Wembley land. The land was the subject of a compulsory purchase order made on 20 February 2004 by the London Development Agency and confirmed on 13 October 2004 by the Secretary of State. The London Development Agency took possession of the site on 14 September 2004. Any interest of the claimant is therefore now in the sum payable in compensation. The London Development Agency has put forward a valuation of £900,000 and paid £800,000 on account. The valuation is disputed and will have to be determined by the Lands Tribunal, if it cannot be agreed. It is said that the value was several millions of pounds. The parties are cooperating in relation to this issue.

  2. There have been a number of unusual complicating factors. First, it was the position of all parties, in their statements of case and at the start of the trial, that all the relevant agreements were governed by Shia Sharia law. In the light of the Contracts (Applicable Law) Act 1990 and the decisions at first instance and on appeal in Halpern v Halpern [2007] EWCA Civ 291, as well as the decision of the Court of Appeal in Shamil Bank of Bahrain EC v Beximco Pharmaceuticals Ltd [2004] 1 WLR 1784, both counsel agreed that Shia Sharia law could not be the applicable law, at least for any of the agreements made after the 1990 Act came into force on 1 April 1991. They agreed that so far as those agreements were concerned, the applicable law must be the law of a country and that on the facts of this case it had to be English Law. Mr Harbottle for the claimant nonetheless submitted that at common law an agreement could be governed by a system of law which was not the law of a country and that the agreements at issue in this case made before 1 April 1991 were governed by Shia Sharia law. Mr Sen for the defendants submitted that this was not the correct position at common law and that all the relevant agreements were governed by English law.

  3. Secondly, ad valorem stamp duty had not been paid on one of the relevant agreements. It was an agreement in writing made on 27 December 1990 providing for a transfer of the claimant's beneficial interest in the land to the second defendant Sayyed Mohammed Ali Shahrestani (Dr Shahrestani) in consideration of various payments, one of which was to be satisfied by the transfer of an interest in a nursing home in Hove (or, as the defendants submitted, shares in the company with registered title to the nursing home). It was subject to stamp duty under section 59(1) of the Stamp Act 1891 as a contract for the sale of an equitable estate or interest in property. This was not a point which either side had taken, nor were they or their solicitors and counsel obliged to take it; indeed, it used to be a breach of the Code of Conduct of the Bar for counsel to take a stamp duty point. It is, however, the duty of the court to take the point. When it occurred to me, some way into the trial, that the agreement should have been stamped, I raised it with counsel and gave them an opportunity of considering whether stamp duty should have been made and, if not, the consequences. Mr Harbottle submitted that stamp duty should have been paid and Mr Sen, while not formally accepting it, offered no submissions to the contrary.

  4. Provision is made as to the effect of the non-payment of stamp duty by section 14 of the Stamp Act 1891 (as amended):

    ``(1) Upon the production of an instrument chargeable with any duty as evidence in any court of civil judicature in any part of the United Kingdom, or before any arbitrator or referee, notice shall be taken by the judge, arbitrator or referee of any omission or insufficiency of the stamp thereon, and the instrument may, on payment to the officer of the court whose duty it is to read the instrument, or to the arbitrator or referee, of the amount of the unpaid duty, and any interest or penalty payable on stamping the same, and of a further sum of one pound, be received in evidence, saving all just exceptions on other grounds.

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    (4) Save as aforesaid, an instrument executed in any part of the United Kingdom, or relating, wheresoever executed, to any property situate, or to any matter or thing done or to be done, in any part of the United Kingdom, shall not, except in criminal proceedings, be given in evidence, or be available for any purpose whatever, unless it is duly stamped in accordance with the law in force at the time when it was executed.''

  5. The unstamped agreement is not therefore admissible in evidence, nor may secondary evidence be given of its contents: Re Brown & Root McDermott Fabricators Ltd's application [1996] STC 483. The usual course adopted by the court in relation to an unstamped document is to accept an undertaking from the solicitors for the party wishing to put it in evidence to submit it for adjudication and to pay the duty and any interest and penalty found to be due. In this case, the solicitors for neither side were prepared to give this undertaking. It follows that the agreement is not admissible in evidence and cannot form the basis of any claim. I had, of course, read the agreement and it had been the subject of submissions in opening and questions in cross-examination. I will refer to it only to the extent necessary to make intelligible the course of events. As it happens, my decision in this case would not in any event depend on this agreement.

  6. Thirdly, it does not appear that any of the agreements were made with the benefit of legal advice.

  7. Fourthly, there has been considerable apparent confusion on the part of members of the Shahrestani family as to how interests on their side in the Wembley land were held and as to the identity of parties to an arbitration argument which is central to the case. This has led to a number of amendments and re-amendments to their defence, which have been significantly inconsistent.

    Parties

  8. The claimant is Sayyed Mohammed Musawi (Mr Musawi). He was born in 1955 and was an Iraqi citizen until 1991. He trained as a theologian at Najaf in Iraq and in 1980 became the leader of the Shia community in India. In that capacity supporters made funds available to him to be invested by him so as to produce income for charitable purposes in the Shia community. He was forced to leave India in 1991, although as I understand it he retains his standing in the Shia community there. He has lived in London since 1991 and became a British citizen in July 2000.

  9. Religious and community activities are the focus of Mr Musawi's life. Although it would appear that there are substantial sums available to him for investment on the basis mentioned above, he is not commercially sophisticated. I found him to be a direct and forceful witness, with a clear and straightforward idea of what he was seeking to achieve in the relevant transactions. In general, I found his evidence to be reliable.

  10. The Shahrestani family is Iranian in origin. Dr Shahrestani is 75 years old and is an architect and engineer. He was for many years a permanent resident in the UK but since 2003 he has been spending most of his time in Iraq, where he and other members of the family have business interests. Mr Musawi has great respect for Dr Shahrestani and it was because of that respect that he invested in the Wembley land. Dr Shahrestani was not due to give evidence in the case, because he is living in Iraq for most of the time and because of his health which is not good. However, overcoming considerable health difficulties, he did attend to give evidence. He is an impressive person and a truthful witness, although his recollection was in some respects patchy.

  11. Dr Shahrestani's son, Ehsan, gave evidence and was the first witness for the defendants, although not himself a party. Dr Shahrestani has a brother, Seyed Mehdi Shahrestani (Mehdi), who is also an engineer and lives in Iran. He did not give evidence. His two sons, Sayyed Reza Shahrestani (Reza) and Sayyed Saleh Shahrestani (Saleh), are the third and fourth defendants. Both provided substantial witness statements but only Reza gave oral evidence. Saleh was in court for at least some of the trial and was available to give evidence. His failure to give oral evidence was adversely commented on by Mr Harbottle. I have disregarded his statement. The quality of the evidence of Ehsan and Reza was mixed.

    The parties' claims

  12. Mr Musawi's principal claim is for a declaration that he holds a 60.4% interest in the Wembley land and any proceeds of sale. This claim is based on an award dated 3 June 2004 given by Ayatollah Mohsen Araki pursuant to an arbitration agreement dated 27 September 2003. The defendants deny this claim on a number of grounds, principally because the award was outside the scope of the arbitration agreement and...

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