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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Knowlden v Tehrani & Ors [2008] EWHC 54 (Ch) (23 January 2008) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2008/54.html Cite as: [2008] EWHC 54 (Ch) |
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CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
RICHARD PAUL KNOWLDEN |
Claimant |
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- and - |
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(1) SIMIN NAFIS TEHRANI (2) STEPHEN PULESTON WILLIAMS (3) TRIUMPH TRADING COMPANY LIMITED (4) BOBBETTS MACKAN (a firm) |
Defendants |
____________________
Mr Nigel Meares (instructed by Staple Inn Partnership) for the First and Third Defendants
Hearing dates: 28 and 29 November 2007
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Crown Copyright ©
The Honourable Mr Justice Henderson :
Introduction and Background
"In short I wanted to see us both benefit from something that she had proposed and I was to fund."
(a) In March 1994 Ms Tehrani insisted that Mr Knowlden should sign a document which she had produced entitled "A Contract for a Healthy and Happy Life". This was a bizarre document, which laid down detailed rules about personal hygiene, stinginess ("not allowed in any form") and manners which Mr Knowlden was required to observe, on pain of a penalty of £100 for any transgression. It quickly became clear to him that this document was not a joke, and was meant entirely seriously. Although he found it rather upsetting, he agreed to sign it. The covering letter from Ms Tehrani, dated 25 March 1994, claimed that she had kept all the promises she made to him, including "when you were looking for a one bedroom flat for around £80,000 I promised you I would find you a two bedroom flat for that price, which I did". This appears to be a clear reference to the acquisition of Flat 7, and implicitly acknowledges that the purchase price was indeed provided by Mr Knowlden.
(b) Shortly after the formation of Triumph Trading, Ms Tehrani asked Mr Knowlden to sign a formal document recording their joint beneficial ownership of the company. She told him that the document had been prepared by Mr Williams to record their oral agreement. Mr Knowlden had no problem with it, and was happy to sign it. He returned the document to her, but did not keep a copy. Unfortunately, no copy of it now survives, but his recollection is that it was a relatively straightforward short document that he had no difficulty in understanding.
(c) In September 1994, at Ms Tehrani's request, Mr Knowlden went through what he believed to be a civil Muslim ceremony of marriage with her in London. The ceremony was apparently effective only under Sharia law, and in fact neither Mr Knowlden nor Ms Tehrani was in a position to contract a valid marriage under English law at that date because they were both still married to their previous spouses. Nevertheless, Mr Knowlden entered into the ceremony with enthusiasm and was happy to treat Ms Tehrani as his wife.
(d) Finally, in September 1994 Mr Knowlden began to give Ms Tehrani a monthly allowance of £1,000, and at the same time she opened a second joint account in their names at Midland Bank, 117 Great Portland Street, W1. The monthly allowance was then paid into this joint account until Mr Knowlden cancelled it in August 2002. He never saw the statements for the account, and in practice Ms Tehrani used it as a personal account.
(a) Mr Knowlden should be asked to move out of 43 Graham Terrace, on the pretext that she could then rent out the property for substantial sums;
(b) he should acquire an alternative property to live in while 43 Graham Terrace was rented out;
(c) the acquisition of the freehold interest in 43 Graham Terrace by Mr Knowlden should be completed, but both the freehold and leasehold titles to the property should then be transferred into the sole name of Ms Tehrani;
(d) the endowment policy securing the RBS mortgage over 43 Graham Terrace should likewise be transferred into her sole name;
(e) an attempt should be made to re-mortgage 43 Graham Terrace in her name rather than Mr Knowlden's; and
(f) Cae Haidd Bach should be transferred from Triumph Trading into her own name.
The Present Action
(a) Ms Tehrani had a godfather in Iran, Mr Mehdi Gharat, who had assumed the role of parent to her following her father's death in 1981, and who gave her moral and financial support. In particular, by a power of attorney dated 4 December 1991 he authorised her in the widest terms to receive money sent by him from Iran and to spend it, and to deal with any property thus acquired, in accordance with his instructions.
(b) Triumph Trading was acquired by Ms Tehrani at Mr Gharat's request to hold property investments of which Mr Gharat was the beneficial owner.
(c) The sale of Cae Haidd Bach to Mr Lumley in March 1993 was a genuine transaction at the best price reasonably obtainable on the open market. Mr Lumley was a nominee for Mr Gharat, who was an undisclosed principal and provided all of the purchase money.
(d) Flat 7 was purchased by Ms Tehrani on behalf of Mr Gharat who provided all the purchase money, and Zaal Zoroaster was at all times a nominee for him, although he acted to the order and on the directions of Ms Tehrani and did not know of Mr Gharat's existence. Mr Knowlden was permitted to occupy Flat 7 by Ms Tehrani, and lived there free of charge, making no contribution towards the outgoings. It is expressly alleged that he was not involved in the purchase, and made no direct or indirect financial contribution to the purchase price.
(e) Flat 8 was likewise purchased by Ms Tehrani on behalf of Mr Gharat as an undisclosed principal, who provided all of the purchase money. Maryam Salour acted as a nominee in the same way as Zaal Zoroaster. Mr Knowlden was again not involved in the purchase, and made no direct or indirect contribution to the purchase price.
(f) In February 1994 Mr Gharat asked Ms Tehrani to acquire an offshore company as a vehicle to hold the properties she had bought on his behalf, and she therefore instructed Mr Williams to acquire such a company and to arrange for the transfer of Cae Haidd Bach, Flat 7 and Flat 8 to it. Triumph Trading was then established, and the Silver Owl Trust was constituted in order to hold the shares in Triumph Trading and "to complete the discreet offshore structure which Mr Gharat required". Mr Knowlden had nothing to do with, and was not told about, either Triumph Trading or the Silver Owl Trust, and he made no financial contribution to the cost of establishing them. Ms Tehrani opened the Jersey account of Triumph Trading in exercise of her power of attorney for Mr Gharat, and thereafter directed the affairs of the company.
(g) The leasehold of 43 Graham Terrace was purchased by Mr Knowlden as a nominee for Triumph Trading. The purchase was made in Mr Knowlden's name in order to enable him to raise a mortgage loan which would be serviced and repaid by Triumph Trading. It was arranged that he would be paid cash in advance for all his expenditure in relation to the property, and would continue in effect to live there for free. This arrangement was reflected in the deed of trust dated 1 March 1996, which conclusively declared the beneficial trusts of the property. Thereafter Ms Tehrani paid Mr Knowlden in cash the full amount of all the interest payments due to RBS, all premiums due to Standard Life and all outgoings on the property, the source of the cash being Mr Gharat.
(h) Devonshire House was acquired by Mr Knowlden as a nominee for Triumph Trading, which provided the necessary money through Ms Tehrani. The arrangement was reflected in a deed of trust dated 21 September 1996, in similar terms mutatis mutandis to the deed of trust dated 1 March 1996 relating to 43 Graham Terrace. All interest payments due to Midland Bank, and all the outgoings on the property, were paid in cash by Ms Tehrani to Mr Knowlden, the source of the cash again being Mr Gharat. When the property was sold in December 1999 the net proceeds of sale were paid into Triumph Trading's Jersey account.
(i) The transfer of Cae Haidd Bach from Triumph Trading to Ms Tehrani was effected after consultation with Mr Gharat, who decided that the assets held for him in the offshore trust and company structure should be extracted from Triumph Trading and held by Ms Tehrani in her own name as his nominee. Mr Gharat was the source of the £56,750 which was used to re-purchase the property.
(j) The purchase of the freehold reversion of 43 Graham Terrace was financed by Triumph Trading, and Mr Knowlden took the transfer of the legal estate at the direction of Triumph Trading and as nominee for Ms Tehrani, as he acknowledged in a written declaration of trust dated 30 June 2001. Subsequently, at Ms Tehrani's direction, he transferred the legal estate into her name by the transfer dated 18 July 2001. By a further assignment dated 1 November 2001 he assigned his interest in the Standard Life policy to her. She then held both the freehold estate and the benefit of the policy as trustee for Mr Gharat.
(k) Munster Road was purchased by Ms Tehrani on behalf of Mr Gharat. She provided the deposit of £18,000, and it was agreed that she would discharge the instalments on the mortgage taken out by Mr Knowlden. By a declaration of trust dated 28 November 2001 he acknowledged that he held the property upon trust for her absolutely. The reason for his move to Munster Road was that he was due to undergo a hip operation and by August 2001 he found the stairs at 43 Graham Terrace too difficult for him to live there comfortably. She agreed that he could move to Munster Road until he had recovered from his operation, and arranged to furnish the flat for him.
(l) Devonshire Terrace and Dalgarno Gardens were purchased by Ms Tehrani in her own name, as attorney for Mr Gharat who provided the necessary funds.
(m) In August 2002 Mr Knowlden agreed to the transfer and re-mortgage of the leasehold interest in 43 Graham Terrace, and signed a letter of 27 August to Bobbetts Mackan which Ms Tehrani had prepared for him. On the following day, however, his attitude suddenly changed and he began to make various demands. Since that date his attitude to Ms Tehrani had been hostile, and he wrongfully asserted beneficial ownership of the properties which he held as nominee for Triumph Trading and herself.
(n) The transfer of £202,000 on 3 September 2002 from Triumph Trading's Jersey account was effected by Ms Tehrani on the express oral instructions of Mr Gharat.
"Dear Sirs
Re: Knowlden v Nafis Tehrani and others
Please note that the first defendant will not now be calling any witnesses in support of her Defence, and she will not be advancing a positive case in relation thereto.
Our clients will, however, be putting your client to proof of the allegations that he has made.
In the circumstances, we believe that the likely length of the trial is now seven days."
Ms Tehrani's solicitors subsequently confirmed that she herself would not be giving evidence.
"Triumph Trading abides by all such orders as the Court might make, and makes no submissions."
The hearing on 28 and 29 November
"What I thought might have been lurking in the background was some contention of an attempt to hide assets from [Mr Knowlden's] former wife in the context of the divorce proceedings",
to which Mr Meares replied:
"No, we are treating the claimant's evidence as truthful. We are not challenging any of it as untruthful. What we are saying is, where it needs elaborating, we want him to elaborate, and where there may have been inconsistencies, we are inviting him to revisit it."
Mr Meares also submitted that he was entitled to rely on the declaration of trust signed by Mr Knowlden in relation to the leasehold interest in 43 Graham Terrace, because it formed part of Mr Knowlden's own case and he admits having signed it. Mr McParland was unhappy about this, but I expressed the view that it was open to Mr Meares to make submissions based upon Mr Knowlden's uncontradicted evidence, even if that might lead to a conclusion different from that which Mr Knowlden sought to advance.
Common Ground
(a) that Mr Knowlden is the sole person beneficially entitled to Munster Road (on the basis that he is the registered proprietor, and there is nothing to rebut his evidence that he paid the deposit of £18,000 and has also made all the mortgage repayments to date); and
(b) as I have already indicated, that Mr Knowlden and Ms Tehrani should be treated as beneficially entitled in equal shares to Devonshire Terrace and Dalgarno Gardens (on the basis that it was their common intention to acquire them as equally owned investment properties, and not to hold them through Triumph Trading).
Accordingly, the argument before me concentrated on the leasehold and freehold interests in 43 Graham Terrace, and on the Welsh property, Cae Haidd Bach.
43 Graham Terrace
"IT IS HEREBY AGREED and recorded that:
(1) The deposit monies, professional fees, agents' costs and disbursements arising out of and in connection with the purchase by Mr Knowlden of 43 Graham Terrace have been paid for and provided by the Company; and
(2) Mr Knowlden acknowledges that the Company is the equitable owner of the entirety of the value of the property."
In the remaining operative clauses, it was acknowledged that Triumph Trading would be making any payments due under any mortgage taken out by Mr Knowlden in respect of the initial acquisition of the property, provision was made for the treatment of "the term life policy" on Mr Knowlden's death, Mr Knowlden agreed to execute a transfer of the property in favour of Triumph Trading or its nominee upon request without unreasonable delay, and Triumph Trading acknowledged that any other policies required by the mortgagees as security should belong to Mr Knowlden absolutely.
"Before the legal process was very far advanced Simin proposed to me that we buy the property through Triumph Trading and hold it jointly in exactly the same way as Flat 8 was held. We discussed this and I agreed to do as she suggested. I had not thought of this myself and I was not clear what the tax benefits would be but Simin was insistent that it would be a good idea as she claimed that any gain would be taxed at a more advantageous rate. I agreed solely for this reason. I was happy to give Simin an interest in the house as I had been to give her the same interest in Flat 8."
Cae Haidd Bach
"The property was purchased outright by [her] some years ago, although it was for various reasons placed in an offshore company whose shares were owned by an offshore trust. The property is now in the course of being transferred into the name of [Ms Tehrani] or her nominee."
There was no suggestion that the proposed transfer was to be effected by means of a sale.
Illegality
"The property in which I live is rented. When I was granted the tenancy it was on the basis that two years rent was paid in advance. Accordingly, I will commence payment of rent in April 1995."
There was no indication in the affidavit that he had provided the purchase price of Flat 7, and he clearly purported to rely on the alleged tenancy as a genuine transaction. When asked by Mr Meares whether the account which he had given in this affidavit, at the time of the events in question, was more likely to be correct than his evidence in the present case, Mr Knowlden answered: "My Lord, I wish to be silent on that answer". He was then shown a tenancy agreement dated 20 July 1993 by which Zaal Zoroaster purported to let Flat 7 to him for an assured shorthold tenancy of two years from 23 July 1993 in consideration of an advance payment of rent of £48,750 for the whole two year period. Mr Knowlden admitted that he had signed this document.
(a) his initial provision of the purchase price of Flat 7;
(b) the fact that the legal title to Flat 7 was vested in Zaal Zoroaster, a person in respect of whom no presumption of advancement arose, with the consequence that he held the property on a resulting trust for Mr Knowlden;
(c) the transfer of Flat 7 by Zaal Zoroaster to Triumph Trading for a nominal consideration;
(d) the subsequent sale of Flat 7 by Triumph Trading; and
(e) the application by Triumph Trading of some or all of the proceeds of sale in or towards the acquisition of the freehold of 43 Graham Terrace.
The important point is that Mr Knowlden does not need to rely in any way on the purported letting of Flat 7 to him by Zaal Zoroaster between 1993 and 1995, or on Zaal Zoroaster's title as his ostensible landlord. Nobody is now asserting the tenancy agreement against him, so he does not need to adduce any evidence to rebut it.
"It is, therefore, now settled that neither at law nor in equity may a party rely on his own fraud or illegality in order to found a claim or rebut a presumption, but that the common law and equity alike will assist him to protect and enforce his property rights if he can do so without relying on the fraud or illegality. This is the primary rule."
Conclusion