![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |||||||||
England and Wales Court of Appeal (Civil Division) Decisions |
||||||||||
PLEASE SUPPORT BAILII & FREE ACCESS TO LAW
To maintain its current level of service, BAILII urgently needs the support of its users.
Since you use the site, please consider making a donation to celebrate BAILII's 25 years of providing free access to law. No contribution is too small. If every visitor this month gives just £5, it will have a significant impact on BAILII's ability to continue providing this vital service.
Thank you for your support! | ||||||||||
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Yafai v Muthana [2012] EWCA Civ 289 (16 March 2012) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2012/289.html Cite as: [2012] EWCA Civ 289 |
[New search] [View without highlighting] [Printable RTF version] [Help]
ON APPEAL FROM Chancery Division, Leeds District Registry
HHJ Langan QC
8LS30007
Strand, London, WC2A 2LL |
||
B e f o r e :
LORD JUSTICE PATTEN
and
LORD JUSTICE PITCHFORD
____________________
MAGEED AHMED KASSEM MOHAMMED YAFAI |
Defendant / Appellant |
|
- and - |
||
MOHAMMED ABDULLA MUTHANA |
Claimant / Respondent |
____________________
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400, Fax No: 020 7404 1424
Official Shorthand Writers to the Court)
Derek Sweeting QC and Hugh Preston (instructed by SHK Solicitors) for the Respondent
Hearing dates: 6 March 2012
____________________
Crown Copyright ©
The Chancellor:
(1) Mr Yafai, as beneficial owner of 50% of the single issued share in both CMS and PTL holds and has since 1st April 2003 held that beneficial interest in trust for Mr Muthana absolutely;
(2) Eden Park was at the time of its sale to PTL in 2003 held by Mr Yafai as an asset of the partnership between him and Mr Muthana.
The judge gave permission to appeal against all such declarations.
"1.1 In this Agreement the following words and expressions shall have the following meanings unless they are inconsistent with the context:-
"Assets" means the property, assets and rights of the Business to be purchased by the Purchaser as described in Clause 2.1.
"Business" means the business of vehicle repairs, sales and an MOT testing garage business carried on by the Vendor at the Property under the name of Grenoside Service Station.
"Business Name" means Grenoside Service Station.
"Property" means land and buildings on the north east side of Penistone Road, Grenoside, Sheffield registered at HM Land Registry with Title Absolute under Title Numbers SYK111326 and SYK70082.
"Fixed Assets" means the fixtures, fittings and equipment used in the Business particulars of which are set out in the First Schedule hereto.
"the Excluded Assets" means all cash in hand or at the Bank of the Vendor, the Book Debts and the Liabilities."
It is common ground that the registered title referred to in the description of "Property" is that of Eden Park.
"2.1 Subject to the terms and conditions of this Agreement the Vendor shall sell to the Purchaser who shall purchase as at the Completion Date the Business as a going concern and all the Assets which comprise:-
2.1.1 the Property;
2.1.2 the Goodwill; and
2.1.3 the Fixed Assets
but excluding the Excluded Assets.
2.2 The provisions of the Third Schedule hereto shall more particularly apply in relation to the sale of the Property."
The Third Schedule contained provisions relating to the Property such as title guarantee, the relevant conditions of sale and other similar matters.
"3.1 The consideration for the Assets shall be the sum of £190,000.00 which shall be apportioned as follows:-
3.1.1 as to the Property £175,000.00;
3.1.2 as to the Goodwill £10,000.00; and
3.1.3 as to the Fixed Assets £5,000.00."
Although clause 3.2 provided for a deposit of £19,000 to be paid on the date of the contract and the balance on completion as the contract was made and completed on the same day presumably the whole of the £190,000 was paid on 8th November 1999.
"1.1 By an Agreement dated 8th November 1999 (the Contract) and made between David Nicholson and James Anthony Stevenson (1) [Mr Yafai] (2) the Premises and the Business known as Grenoside Service Station situate at Penistone Road, Sheffield was purchased by [Mr Yafai] at a price of £175,000.00.
1.2 [Mr Yafai] has purchased the Business in his sole name with the benefit of a Legal Charge (the Mortgage) in favour of National Westminster Bank Plc dated the 8th November 1999 to secure the sum of £126,000.00 and interest costs and expenses as therein mentioned.
1.3 [Mr Muthana] has in fact contributed towards the purchase price of the Business and [Mr Yafai] HEREBY DECLARES that he holds the Business and any other Partnership Property acquired after the date of this Deed UPON TRUST for the Partners on the terms hereinafter contained."
"In this Deed unless the context otherwise requires the following words and expressions shall have the following meanings:-"
The relevant definitions are:
"Senior Partner" means [Mr Yafai] or his successors in office as Senior Partner of the Partnership.
"Business" means the Business of the Sales, Service, Repair and M.O.T. Testing of Motor Vehicles carried on by [Mr Yafai] under the style or title of Grenoside Service Station from the Property.
"the Property" means Grenoside Service Station Penistone Road, Sheffield and registered at H M Land Registry under Title Numbers SYK111326 and SYK70082."
The title numbers in the definition of "the Property" are the same as those used in the Sale Contract and are referable to Eden Park.
"3. COMMENCEMENT NAME AND BUSINESS
3.1 The Partners shall carry on the Business in Partnership at the Property or such other place as the Partners shall agree.
3.2 The Partnership shall commence on the 8th November 1999 and shall continue until it is terminated as provided in this Deed."
"4.1 Each Partner shall be just and faithful to the other and [Mr Yafai] shall devote the whole of his time and attention to the Partnership Business diligently and faithfully work for the benefit of the Partnership.
4.2 [Mr Muthana] shall devote such of his time and attention to the Partnership Business as [Mr Yafai] considers reasonable and necessary.
4.6 [Mr Yafai] shall have the power to run the Business in accordance with the terms of this Deed but otherwise as he shall think fit."
"5.1 The Property is owned by [Mr Yafai] and the Business should be carried on at the Property and such other property as the Partners shall from time to time agree.
5.2 [Mr Yafai] grants to the Partners and all persons duly authorised by them the right in common with himself to use the Property for the purpose of the Partnership upon terms that:
5.2.1 The said rights shall continue until it is terminated by not than less one months notice in writing given by [Mr Yafai] to the other Partners or by the Partners to [Mr Yafai].
5.2.2 As long as the said right continues the Partners shall pay for all heating, electricity, gas, water and other supplies to the Property as well as any Rates levied in respect of them and shall reimburse [Mr Yafai] in the full cost of the premiums which he undertakes to pay for the insurance of the structure of the Property to its full value.
5.2.3 The Partners shall keep and maintain the Property in the same condition as they are now in fair wear and tear excepted.
5.2.4 The Partners shall pay to [Mr Yafai] such sum as [Mr Yafai] is required to pay on the Mortgage.
5.3 The provisions of this Clause shall constitute a Licence only. Possession of the Property is retained by [Mr Yafai] subject to the rights granted by and to the other provisions of this clause and nothing in this clause is intended to confer any tenancy upon the Partnership.
5.4 [Mr Yafai] undertakes not to give notice terminating the Licence granted in this clause so long as the Partnership continues and she [sic] remains a Partner and the provisions of this clause are duly complied with.
5.5 For the purposes of clause 18 of this Deed notices given by or to the Partners in connection with the said Licence shall be sufficiently given if they are signed by [Mr Yafai] as Property Owner or by [Mr Muthana] on behalf of the Partnership and comply with the other requirements of that clause."
"6.1 The Partnership Property consists of the assets purchased via the Contract and also any Stock previously owned by [Mr Yafai] and entered into the Partnership Books. The Partnership Property shall unless otherwise agreed in writing by all the Partners belong to the Partners in equal shares.
6.2 The Partnership Capital shall consist of:-
6.2.1 [Mr Yafai]'s Property and such further assets as may be acquired as Partnership Property.
6.2.2 Such items of money as the Partners shall from time to time contribute to the Partnership by way of capital (and not as advances).
6.2.3 Such freehold or leasehold premises as the Partnership may acquire with the consent of all the Partners."
"7.1 The profits shall be divided in such manner as the Senior Partner shall determine having regard to the contribution that he in his absolute discretion considers each of the Partners including himself shall have made to the earnings of those profits (or in the incurring of losses) and if the Senior Partner shall not have notified the other Partner in writing of his determination under this clause within thirty days after the draft Accounts have been received from the Accountants then the profits shall be divided in equal shares after deducting a first tranche or payment to the Senior Partner of £20,000.00 to compensate the Senior Partner for working full time in the Partnership Business."
"The value of the Partnership Business shall be the value of the Partnership assets (which shall not include goodwill except to the extent that Goodwill is shown in the Balance Sheet of the Partnership) after deducting…"
The Partnership Deed concludes in paragraph 19 with a certificate that the transactions thereby effected did not form part of a larger transaction or of a series of transactions in respect of which the amount or value or the aggregate amount or value of the consideration exceeded £60,000.
"By Clause 5.1 "the Property is owned by [Mr Yafai] who, by subsequent provisions of the same clause, granted the partners a licence to use the Property for the purposes of the business. Notwithstanding what are said to be ambiguities arising from the other terms of the agreement, these provisions seem to me to settle the question of ownership in favour of Mr Yafai: this was, according to [the solicitor], the intention which underlay his drafting. That question is not, however, one which is before me for decision: and, should partnership accounts have to be taken, it remains open for argument by the parties."
"[18] … In the face of the elaborate provisions of clause 5, I can see that one natural conclusion to the debate is that the intention of the parties was to leave Eden Park in Mr Yafai's beneficial ownership. The obligation to pay the mortgage instalments is little different from the obligation, which commonly arises between one partner and his colleagues, to pay rent or a licence fee for the use by the firm of premises owned by that partner. As [counsel for Mr Yafai] correctly says, there is no evidence before the court as to the rental value of Eden Park and thus no basis for supposing that the mortgage instalments amounted to more than would have passed as rent.
[19] The question then comes to this. In the search for the intention of the parties, is greater violence done to the form and content of the agreement by downplaying the clause 5 scheme or by restricting the clause 6.1 reference to assets in the manner advanced by [counsel for Mr Yafai]? In my judgment, [counsel for Mr Muthana]'s submissions [to the effect that clause 5 related to the legal title and clause 6 to the beneficial interest] are to be preferred, because they have the effect of giving effect to every part of the agreement while not running contrary to the very plain words of clause 6.1.
[20] Construction, however, is not purely a question of language. "The meaning which a document would convey to a reasonable man is not the same thing as the meaning of its words": Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 913B (Lord Hoffmann). There are, to my mind, commercial considerations which, at the end of the day, tilt the balance in favour of Mr Muthana.
[21] First, Eden Park was by far the most valuable asset being acquired at the start of the business, and the money contribution made by Mr Muthana was significantly greater than that made by Mr Yafai.
[22] Second, the provision for division of profits combined with the obligation to pay the mortgage instalments out of partnership income could, if Eden Park did not become a partnership asset, produce a result which would be extraordinarily one-sided. As [counsel for Mr Muthana] pointed out, Mr Yafai could on [counsel for Mr Yafai]'s approach receive over the first five years his annual salary of £20,000, full repayment of the loan from National Westminster Bank, and (on Mr Yafai's making annual determinations in his own favour) the whole of the profits of the business. The nil return to Mr Muthana would, in [counsel for Mr Muthana]'s words, "be perverse and lack business common sense." I agree. The reasonable businessman or businesswoman who, with knowledge of the relevant circumstances, took up this partnership agreement, and asked the question - "can they have meant that Eden Park would belong solely to Mr Yafai when the mortgage was paid off?" - would answer with a definite negative."
"The language used by the parties will often have more than one potential meaning. I would accept the submission made on behalf of the appellants that the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so, the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other."
"…where they discussed the reason for the rule excluding evidence of pre-contractual negotiations. In particular they stressed the irrelevance of the parties' subjective intentions and noted that the mere fact that a term in the contract appears to be particularly unfavourable to one party or the other is irrelevant. As Lord Hoffmann put it, the term may have been agreed in exchange for some concession made elsewhere in the transaction or it may simply have been a bad bargain."
Lord Justice Patten
Lord Justice Pitchford