Mukesh SHAH v Panachand SHAH Dipak SHAH [2001] EWCA Civ 527

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

APPEAL FROM THE HIGH COURT OF JUSTICE,

QUEEN'S BENCH DIVISION

(HIS HONOUR JUDGE P CRAWFORD QC)

[2001] EWCA Civ 527

Case No Case No: A2/20003217

Venue Royal Courts of Justice, Strand, London, WC2A 2LL, Tuesday 10th April 2001

Between

Mukesh SHAHClaimant

Panachand SHAH Dipak SHAHDefendants

Before

Lord Justice Pill

Lord Justice Tuckey

Sir Christopher Slade

Jonathan RAYNER JAMES QC (instructed by Messrs Courtney van der Borgh Shah) for the Claimant

James BONNEY QC and Rupert D'CRUZ (instructed by Messrs Gandecha & Pau) for the Defendants

Date 10 April 2001

[1]PILL LJ: This is an appeal by the third and fourth defendants, Mr Panachand Shah and Mr Dipak Shah, against an order of His Honour Judge Crawford QC, sitting as a Deputy High Court Judge, made on 4 August 2000. Judgment was given against the appellants, jointly and severally, in the sum of £1.5m together with interest of £170,302.86p. The claim by Mr Mukesh Shah ("the claimant") was based on a document headed "Deed" made on 18 February 1999 and signed by the third and fourth defendants. Three issues arose at the trial. The defendants alleged, first, that in signing the deed they did not intend to create legal relations and, second, that they signed under duress. The third defence was that the claimant could not sue upon the document in any event because it was not valid as a deed. Sedley LJ considered the application for permission to appeal on paper. He refused permission on the first and second grounds and adjourned the issue upon the validity of the deed to the full court.

[2]The application was renewed on all three grounds to the court as now constituted. It had been ordered that, if permission were granted, the hearing of the appeal would follow immediately and counsel addressed the court on the application for permission with that in mind. At the hearing, permission was refused on the first two grounds and granted on the third. The reasons why permission was refused on grounds one and two were given in oral judgments at the conclusion of the hearing. The court decided to take time for consideration on ground three, on which permission had been granted.

[3]On 12 August 1998, the claimant met two cousins of the third defendant at a wedding reception in Hertfordshire. (Judgment was given against one of them, the second defendant, in the action but that is not material for present purposes. He does not appeal.) The claimant told them that he was interested in investing money in a bank in Kenya and one of them made enquiries about interest rates at a Kenyan bank known as Reliance of which the third defendant was chairman and his son the fourth defendant was a director. On 14 August, the fourth defendant let it be known that Reliance would repay on 19 April 1999 the sum of £1.665m on an investment by the claimant of £1.5m on 20 August 1998. The claimant accepted that offer and on 20 August 1998 transferred £1.5m to Reliance's account at the Habib Bank at Moorgate, in the City of London, for a sub-account in his name.

[4]The judge found that both third and fourth defendants played an executive role in the management of the Reliance bank whenever they wished. The judge was satisfied that the third defendant, when necessary, had authority in relation to the management of the bank and that the fourth defendant fulfilled the functions of Chief Executive. Both defendants were experienced businessmen.

[5]On 7 September 1998, Reliance was placed under statutory management by the Kenyan authorities. It was unable to repay to the claimant any part of his investment. Moreover, the sum could not be found in the records of the bank.

[6]In February 1999, the claimant's solicitor, Mr Anup Shah, went to Nairobi as the claimant's representative. He conducted negotiations with the defendants which resulted in the third and fourth defendants signing a document described as a deed. The judge accepted Mr Anup Shah's evidence as to what happened. On 14 February, he met the second and fourth defendants at the Norfolk Hotel in Nairobi. He expressed to them the claimant's belief that the loan had been made to the defendants personally and that they were personally liable to repay the money to him. Mr Anup Shah's evidence was that the second and fourth defendants accepted that they and the other two defendants were personally liable to repay the money. He asked them to sign a simple form of guarantee and was told to prepare a document for them and to fax it to them.

[7]The judge found that the defendants had an incentive to repay the money personally because, if a formal claim was made in the liquidation, it would inevitably involve investigation of what had happened to the £1.5m and that would have been at least embarrassing to the defendants. As already stated, the judge rejected arguments that the relevant document was signed without an intention to create legal relations or as a result of duress.

[8]Mr Anup Shah prepared a document in the form of a very short deed. The third and fourth defendants amended the draft in certain respects, had it retyped and signed the document which was in the following form. They took it to reception at Mr Anup Shah's hotel where it was collected by him. The second defendant was not contactable and did not sign. "THIS DEED is made the 18th Day of February 1999 BETWEENa. A. Mukesh Zaverchand Shah of Baytree House, Broomer Place, Cheshunt Herts ("MZ") and

b. B. Panachand Shah and Dipak Panachand Shah ("Messrs Shah") WHEREAS 1. On 20th August 1998 MZ telegraphically transferred the sum of £1.5 million into the account of Reliance Bank Ltd at Habib Bank, AG Zurich in London (Sort Code 60-91-94) for account of Messrs Shah 2. Messrs Shah have jointly and severally agreed to pay the sum of £1.5 million Now This Deed witnesseth as follows:- 1. Messrs Shah hereby jointly and severally agree to pay to MZ the said sum of £1.5 million 2. The provisions of this Deed shall be governed by English Law." Beneath those words it was stated:

"Signed as a Deed by Panachand Shah in the Presence of:" and "

Signed as a Deed by Dipak Panachand Shah in the Presence of:". Each of them signed the deed at the appropriate place and the signature of an attesting witness, the same signature in each case, appears at the appropriate place. The attesting signature is that of Mr Jaydeep Patel. He is a chartered accountant employed by the defendants' companies and had an office in the same building as the defendants. The document was brought to him by the defendants' secretary after it had been signed by them. The judge found that the signature of the attesting witness was added to the document shortly after it had been signed by the parties to the document but not in their presence.

[9]The third and fourth defendants submit that in those circumstances the document is not valid as a deed. The claimant submits that the defendants are estopped from denying its validity, to which the defendants reply that estoppel does not arise on the facts and, even if it does, a document which is not a deed cannot become a deed by reliance on an estoppel.

[10]Section 1 of the Law of Property (Miscellaneous Provisions) Act 1989 ("the 1989 Act") provides, insofar as is material:

"1 Deeds and their execution (1) Any rule of law which— (a) restricts the substances on which a deed may be written; (b) requires a seal for the valid execution of an instrument as a deed by an individual; or (c) requires authority by one person to another to deliver an instrument as a deed on his behalf to be given by deed, is abolished. (2) An instrument shall not be a deed unless— (a) it makes it clear on its face that it is intended to be a deed by the person making it or, as the case may be, by the parties to it (whether by describing itself as a deed or expressing itself to be executed or signed as a deed or otherwise); and (b) it is validly executed as a deed by that person or, as the case may be, one or more of those parties. (3) An instrument is validly executed as a deed by an individual if, and only if— (a) it is signed— (i) by him in the presence of a witness who attests the signature; or (ii) at his direction and in his presence and the presence of two witnesses who each attest the signature; and (b) it is delivered as a deed by him or a person authorised to do so on his behalf."

[11]Mr Bonney QC, for the third and fourth defendants, submits that the terms of the statute prevent the document from being a deed. An instrument shall not be a deed unless it is validly executed as a deed by the parties to it. It can be validly executed only if it is signed by an individual in the presence of a witness who attests the signature. Since the document was not signed by the defendants in the presence of the attesting witness the instrument is not a deed. It is common ground that, because of the absence of consideration, it cannot be relied on as a contract.

[12]Mr Bonney submits that, in any event, the estoppel which it is sought to set up in order to prevent reliance on the statute, is not established on the facts. Mr Anup Shah, as the claimant's solicitor, was not entitled to rely upon the document as a deed. His fax of 16 February 1999, which accompanied his draft, indicated that "the witness should also sign where indicated and must add his/her name address and occupation". That was not done. The signature of the witness, though established in evidence as that of Mr Jaydeep Patel, was not legible. Because of the history of the matter, Mr Anup Shah had reason not to trust the defendants. Moreover, he had no reason to assume their knowledge of the formalities of English law with respect to deeds. In those circumstances, Mr Anup Shah was put on enquiry and was not entitled to rely upon the document as being a deed. It is also submitted that action to the prejudice of the claimant is not established. The judge did not make a finding that, had the defendants been requested upon Mr Anup Shah's receipt of the document to validate it, they would have done so.

[13]I do not accept those submissions. The delivery of the document constituted an unambiguous representation of fact that it was a deed. Mr Anup Shah acted reasonably in relying upon that representation, as in fact he did. The absence of the name and address of the witness, its presence not being a statutory requirement, and the character of the signature did not, in the circumstances, render the reliance unreasonable and there was nothing else in the circumstances which did so.

The judge found:

"(i) that the deed was properly signed by the parties with, as I find, full knowledge and understanding of its contents; (ii) that it was apparently validly witnessed, in the sense that the signature of a witness duly appears against the statutory attestation; (iii) that it was put forward by the defendants as a valid and effective document in the knowledge that it was to be relied on and with the intention, as I find, of being bound by it. The intention was expressed to Mr Anup Shah at the meeting the previous day in Nairobi. I have no reason to suppose that that was not a genuine intention held by them at that time."

Those findings were in my judgment justified. Mr Anup Shah said in evidence that he believed that the third and fourth defendants would have re-executed the document had they been asked to do so. There is no evidence that the formal defect would not have been corrected had Mr Anup Shah been made aware of it upon delivery of the document and the action to the detriment of the claimant is in the loss of the opportunity to go back to the defendants and obtain their signature in accordance with the statute. The judge's finding as to the genuine intention of the defendants amounts to a finding that they would have re-signed had they been asked to do so at the material time so that there was in the event prejudice. I leave open the question whether upon a representation by conduct that it is a valid deed being delivered, it is necessary to establish that the defendants would have cured the defect upon a resubmission to the signatory.

[15]In support of his submission that the doctrine of estoppel does not assist the claimant, Mr Bonney relies upon a statement in Halsbury's Laws 4th edn 1992 re-issue, Volume 16, paragraph 962, cited by Simon Brown LJ in Godden v Merthyr Tydfil Housing Association (unreported transcript 15 January 1997):

"The doctrine of estoppel may not be invoked to render valid a transaction which the legislature has, on grounds of general public policy, enacted is to be invalid … ."

That statement in Halsbury is however qualified by a footnote which states: "As to whether this is the right test see Kok Hoong v Leong Cheong Kweng Mines Ltd

[1964] AC 993

at 1016".

[16]In Yaxley v Gotts

[2000] Ch 162

, Robert Walker LJ cited the relevant passage from Kok Hoong , which had not been cited in Godden . In Kok Hoong the Privy Council decided that there could be no estoppel in face of the Moneylenders Ordnance 1951 of the Federation of Malaya. Delivering the judgment of the Privy Council, Lord Radcliffe acknowledged (p 1015) that there are statutes which "though declaring transactions to be unenforceable or void, are nevertheless not essentially prohibitory and so do not preclude estoppels". He referred (p 1016) to In re A Bankruptcy Notice

[1924] 2 Ch 76

where Atkin LJ, at p 97, referred to "general public policy" in this context. Lord Radcliffe thought that "rather an elusive guide" and stated a more direct test to be applied when it was sought to set up an estoppel in the face of a statute. Where the laws of moneylending were involved the test was "to ask whether the law that confronts the estoppel can be seen to represent a social policy to which the court must give effect in the interests of the public generally or some section of the public, despite any rules of evidence as between themselves that the parties may have created by their conduct or otherwise".

[17]Lord Radcliffe continued (at p 1016) with a general statement:

"General social policy does from time to time require the denial of legal validity to certain transactions by certain persons. This may be for their own protection, as in the case of an infant or other category of persons enjoying what is to some extent a protected status, or for the protection of others who may come to be engaged in dealings with them, as, for instance, the creditors of a bankrupt. In all such cases there is no room for the application of another general and familiar principle of the law that a man may, if he wishes, disclaim a statutory provision enacted for his benefit, for what is for a man's benefit and what is for his protection are not synonymous terms. Nor is it open to the court to give its sanction to departures from any law that reflects such a policy, even though the party concerned has himself behaved in such a way as would otherwise tie his hands."

[18]In Godden , an attempt was made to defeat by an estoppel the provision in section 2(1) of the 1989 Act that "a contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each". Simon Brown LJ stated that the argument that "although Parliament has dictated that a contract involving the disposition of land made otherwise than in compliance with section 2 is void, the defendants are not allowed to say so" was "an impossible argument". Simon Brown LJ regarded the principle stated in Halsbury as a "cardinal rule" the "absolute nature" of which cannot be "outflanked by one of the equitable techniques or types of estoppels sought to be deployed in the present case". Thorpe LJ and Sir John Balcombe agreed with Simon Brown LJ.

[19]The case of Yaxley was also concerned with section 2 of the 1989 Act. An oral agreement purporting to grant an interest in land, though void and unenforceable under section 2 of the 1989 Act, was held still to be enforceable on the basis of a constructive trust under section 2(5) which provides that "nothing in the section affects the creation or operation of resulting, implied or constructive trusts". Robert Walker LJ stated, at p 175:

"Parliament's requirement that any contract for the disposition of an interest in land must be made in a particular documentary form, and will otherwise be void, does not have such an obviously social aim as statutory provisions relating to contracts by or with moneylenders, infants, or protected tenants. Nevertheless it can be seen as embodying Parliament's conclusion in the general public interest, that the need for certainty as to the formation of contracts of this type must in general outweigh the disappointment of those who made informal bargains in ignorance of the statutory requirement. If an estoppel would have the effect of enforcing a void contract and subverting Parliament's purpose it may have to yield to the statutory law which confronts it, except so far as the statute's saving for a constructive trust provides a means of reconciliation of the apparent conflict."

[20]Clarke LJ stated, at p 182, that where a particular estoppel relied upon would offend the public policy behind a statute it is necessary to consider the mischief at which the statute is directed. Where a statute had been enacted as the result of the recommendations of the Law Commission it is appropriate to consider those recommendations. He stated that in his opinion "The contents of that Report ["Formalities for Contracts of Sales etc of Land", Law Com No 164, June 1987] will be of the greatest assistance in deciding whether or not the principles of particular types of estoppel should be held to be contrary to the public policy underlying the Act. In this regard it seems to me that the answer is likely to depend on the facts of the particular case". Beldam LJ stated, at p 191, that "The general principle that a party cannot rely on an estoppel in the face of a statute depends on the nature of the enactment, the purpose of the provision and the social policy behind it".

[21]In my judgment, that statement of Beldam LJ, reflecting as it does the judgment of the Privy Council in Kok Hoong is, with respect, an accurate statement of the law of England and Wales. The Court is entitled to consider the particular statutory provision, its purpose and the social policy behind it when deciding whether an estoppel is to be allowed. Upon such an analysis of Section 2 of the 1989 Act, requiring contracts for sale of land to be made by signed writing I do not, with respect, question the conclusion of Simon Brown LJ in Godden that the section should not on the facts of that case be "outflanked" by an estoppel. I cannot however accept that the principle stated in Halsbury is of absolute or universal application and agree with the comment of Robert Walker LJ in Yaxley (at p 174G and in the context of section 2) that a general assertion of a "no go area" for estoppel would be unmaintainable.

[22]Analysis of section 1 of the Act is required in the context of general social policy. Though in the same statute as section 2, it has its origins in a different Report of the Law Commission ("Deeds and Escrows", Law Com No 163 June 1987) and requires specific consideration. Policy considerations may apply to section 2 which do not apply to section 1.

[23]I first consider the Law Commission Report (No 163). Mr Rayner James QC, for the claimant, relies on paragraph 2.15 headed "Formalities for Deeds: Failure to comply":

"It would be undesirable if failure to have just one signature witnessed, perhaps on a deed which had many, were to render the whole deed invalid. We therefore recommend that failure to have a signature witnessed and attested should have the effect that the signatory would not prima facie be bound but that the deed, if capable of operating without that signatory, would still be valid. The signatory should still be bound if he took the benefit of the deed or through estoppel if someone else had acted on the assumption that the deed was properly executed."

[24]The comment on estoppel is supported by a reference, in a footnote, to TCB Ltd v Gray

[1986] 1 All ER 587

, a then recent decision of Sir Nicholas Browne-Wilkinson V-C dealing with a power of attorney expressed to be signed, sealed and delivered but without an indication or evidence that it had ever been sealed. Mr Rayner James relies upon the reference at the end of paragraph 2.15 to estoppel. He submits that the Law Commission must have contemplated in their Report that estoppel could be asserted in the face of what became section 1 of the Act. The draft bill, which accompanied the Commission's Report, was not materially different from section 1 as enacted.

[25]I consider the reference in the Report to estoppel to be too slender a thread to influence the Court's assessment on the effect of section 1 of the statute. The word appears near the end of a paragraph dealing with a different situation. Beyond the reference to the then recent case, the Commission did not consider the type of situation with which the Court is now confronted. Had the Commission had the present problem in mind, I would have expected it to be dealt with specifically and expressly, together with an explanation as to how the concept of estoppel fitted with the terminology its members selected for the draft bill. Bearing in mind the Court's task, no clear guidance in my view appears in the Report as to whether and, if so to what extent, estoppel can operate. I do however add that the Vice-Chancellor's willingness in TCB Ltd to allow an estoppel, when the then existing requirement to establish that the deed had been sealed was not satisfied, supports the view that neither before nor after the passing of the Act has there been any general social policy requiring the exclusion of estoppel in all circumstances when the validity of a deed is in issue.

[26]Mr Bonney submits that the wording of sections 1(2) and 1(3) is clear and leaves no room for the operation of an estoppel. Section 1 plainly provides that an instrument shall not be a deed unless it is validly executed and it is validly executed only if signed in the presence of a witness who attests the signature. He submits that the wording reflects the demands of public policy that there is compliance with the requirements of the section so that the doctrine of estoppel may not be invoked to render valid a transaction which the legislature has enacted to be invalid. It is formality which distinguishes a deed from other documents. As to the aims of formality, Mr Bonney adopts the criteria set out by the Law Commission in their Working Paper No 93 issued in 1985:(a) Cautionary: that is, trying to ensure that the maker does not enter into a transaction without realising what he is doing;

(b) Evidential: providing evidence that the maker did enter into a transaction and evidence of its terms;

[27]The wording of the section does not permit estoppel to be available in any circumstances, it is submitted. It does not permit a consideration of the facts of the particular case such as would allow estoppel to operate in limited circumstances, as for example in the present case, where the signature on the deed is admitted and only the manner of attestation is defective. Mr Bonney adopts propositions which, for the purposes of argument, Sir Christopher Slade put to him: in many cases the formality of a deed will operate in law to confer privileges or benefits on persons which they would not receive under a mere written instrument. The price to be paid for those privileges or benefits is that compliance with the statutory formalities must be established.

[28]For the claimant, Mr Rayner James accepts that an estoppel could not defeat the absence of a signature, as distinct from a defect in or the absence of its attestation. The signature is fundamental to the validity of the deed. The absence of attestation in the manner required by section 1 does not, he submits, subvert the policy of the Act. That policy seeks to ensure that signatures on deeds are authentic and to limit the possibility of disputes as to authenticity. There may however be cases, such as the present case, where the authenticity of the signatures is not in question and public policy need not and does not go so far as to prevent the raising of an estoppel where there is a defect in the manner of attestation.

[29]I bear in mind the clarity of the language of section 1(2) and (3) and also that the requirement for attestation is integral to the requirement for signature in that the validity of the signature is stipulated to depend on the presence of the attesting witness. I also accept that attestation has a purpose in that it limits the scope for disputes as to whether the document was signed and the circumstances in which it was signed. The beneficial effect of the requirement for attestation of the signature in the manner specified in the statute is not in question. It gives some, but not complete, protection to other parties to the deed who can have more confidence in the genuineness of the signature by reason of the attestation. It gives some, but not complete, protection to a potential signatory who may be under a disability, either permanent or temporary. A person may aver in opposition to his own deed that he was induced to execute it by fraud, misrepresentation or (as was unsuccessfully alleged in the present case) duress and the attestation requirement is a safeguard.

[30]I have however come to the conclusion that there was no statutory intention to exclude the operation of an estoppel in all circumstances or in circumstances such as the present. The perceived need for formality in the case of a deed requires a signature and a document cannot be a deed in the absence of a signature. I can detect no social policy which requires the person attesting the signature to be present when the document is signed. The attestation is at one stage removed from the imperative out of which the need for formality arises. It is not fundamental to the public interest, which is in the requirement for a signature. Failure to comply with the additional formality of attestation should not in itself prevent a party into whose possession an apparently valid deed has come from alleging that the signatory should not be permitted to rely on the absence of attestation in his presence. It should not permit a person to escape the consequences of an apparently valid deed he has signed, representing that he has done so in the presence of an attesting witness, merely by claiming that in fact the attesting witness was not present at the time of signature. The fact that the requirements are partly for the protection of the signatory makes it less likely that Parliament intended that the need for them could in all circumstances be used to defeat the claim of another party.

[31]Having regard to the purposes for which deeds are used and indeed in some cases required, and the long term obligations which deeds will often create, there are policy reasons for not permitting a party to escape his obligations under the deed by reason of a defect, however minor, in the way his signature was attested. The possible adverse consequences if a signatory could, months or years later, disclaim liability upon a purported deed, which he had signed and delivered, on the mere ground that his signature had not been attested in his presence, are obvious. The lack of proper attestation will be peculiarly within the knowledge of the signatory and, as Sir Christopher Slade observed in the course of argument, will often not be within the knowledge of the other parties.

[32]In this case the document was described as a deed and was signed. A witness, to whom the third and fourth defendants were well known, provided a form of attestation shortly afterwards and the only failure was that he did so without being in the presence of the third and fourth defendants when they signed.

[33]Having considered the wording of section 1 in the context of its purpose and the policy consideration which apply to deeds, I am unable to detect a statutory intention totally to exclude the operation of an estoppel in relation to the application of the section or to exclude it in present circumstances. The section does not exclude an approach such as that followed by Sir Nicholas Browne-Wilkinson in TSB . For the reasons I have given, the delivery of the document in my judgment involved a clear representation that it had been signed by the third and fourth defendants in the presence of the witness and had accordingly been validly executed by them as a deed. The defendant signatories well knew that it had not been signed by them in the presence of the witness, but they must be taken also to have known that the claimant would assume that it had been so signed and that the statutory requirements had accordingly been complied with so as to render it a valid deed. They intended it to be relied on as such and it was relied on. In laying down a requirement by way of attestation in section 1 of the 1989 Act, Parliament was not in my judgment excluding the possibility that an estoppel could be raised to prevent the signatory relying upon the need for the formalities required by the section. In my judgment, the judge was correct in permitting the estoppel to be raised in this case and in his conclusion that the claimant could bring an action upon the document as a deed.

[34]I would dismiss this appeal. TUCKEY LJ:

[35]I agree. SIR CHRISTOPHER SLADE:

[36]I also agree.

Order

Appeal dismissed with costs. Leave to appeal to the House of Lords refused. We grant a stay of execution on condition that you present your petition within 21 days, with liberty for the Respondent to apply to this court. (Order does not form part of approved Judgment)

Cited in 16 later judgments

and 7 more of the most senior