Khan v Mohammed & Anor [2009] EWHC 3916 (Ch)

[2009] EWHC 3916 (Ch)

Case No 6BM30314

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue BIRMINGHAM DISTRICT REGISTRY, Birmingham Civil Justice Centre, Bull Street, Birmingham B4 6DS

Date 04/03/2009

Before

HHJ DAVID COOKE

Between

Sahibzad KhanClaimant

Gulab Mohammed (1) and Pir Mohammed (2)Defendants

Sandra Bristoll (instructed by Higgs & Sons) for Claimant

Timothy Bowe (instructed by Canty & Co) for First Defendant

Paul J. Dean (instructed by Anthony Collins) for Second Defendant

Hearing Hearing dates: 1-5,8 December 2008

Judgment

HHJ David Cooke :

[1]This case revolves around a business called Express Auto Spares and the property it occupies. The business was initially concerned with buying second-hand cars and breaking them up for spares, but it appears that it increasingly moved into buying and selling cars. The property is at units 1 and 2 Armoury Rd Small Heath Birmingham. It was formerly the factory of BSA Guns Ltd, a descendant of the very famous Birmingham Small Arms company, and is sometimes referred to in the documents as the "old BSA" building.

[2]The claimant and the two defendants are related to each other and have known each other for many years. Their families come from the same small area in Pakistan and they all retain close links through their Pashtun community. It appears that there have been several attempts by senior figures in the community to resolve these disputes, without success and the matter therefore falls to be determined by the court.

[3]The claimant's case is that he and the first defendant were long-term friends. They set up the business of Express Auto Spares as partners in 1996. Initially there was a third partner, Mr Saidu Rehman (with whom the claimant had previously engaged on a fairly casual basis in the business of buying and selling cars) but he had other business interests and after about a year sold his share to Mr Haq Nawaz Khan. Mr Khan himself withdrew from the business after about a year, leaving the claimant and the first defendant as equal partners from 1998 onwards. The claimant was concerned with the day-to-day operation of the business and all the banking financial and accountancy matters, he says, were managed by the first defendant. The two partners fell out in 2003, when the first defendant began to assert that the business was incurring substantial losses which the claimant says he could not understand as it appeared to be trading at just as high a level and on an equally profitable basis as it had in the past. The partnership came to an end, on the claimant's case, either when he gave oral notice to determine it in mid-2004, or alternatively when his solicitors gave written notice on his behalf to determine it in April 2006. Since then the first defendant has carried on the business himself without accounting to the claimant for his share of the profits or assets.

[4]In relation to the property, the claimant's case is that the business was originally renting the property from Mr Bashir Ahmed, but the partners were offered the opportunity to buy the freehold on a number of occasions and agreed to do so in 2002. He and the first defendant agreed that they would buy it for the partnership, but they required mortgage finance. They consulted Mr Mohammed Shereen, a relative and senior figure in the community who had acted as a business adviser to both of them, and with his help an application in the claimant's name was made to his bank, which was unsuccessful because of his credit history and because he could not produce accounts for the business. As a result of that he was persuaded by the first defendant, a mortgage broker (Mr Ajaz Ahmed to whom they had been introduced by Mr Shereen) and the first defendant's accountant Mr M. K. Samuels that the property should be bought in the name of the first defendant alone but on behalf of the partnership. A deposit of £70,000 was paid, which he understood to have come from partnership monies, and £160,000 was borrowed on mortgage in the name of the first defendant to make up the total price of £230,000. The purchase of the property was completed at the beginning of July 2002.

[5]The claimant seeks an order declaring that the property is a partnership asset, and directing that the affairs of the partnership be wound up and all necessary accounts and inquiries be taken.

[6]The first defendant's case is that he was never a partner in the business with the claimant. He lent the claimant an initial sum of £5,000 in cash to start the business, which was subsequently repaid. In the period up to 2002 he occasionally worked on a casual basis in the business, which he describes as being a "general dogsbody" for which he was paid in cash at about £20 or £25 a day. The business however was owned by the claimant as the sole principal. It is not in doubt that in so far as documentation exists in relation to the business for this period it appears to show the claimant is the sole proprietor. Utility bills for instance are in the sole name of the claimant. Accounts have been produced and tax returns filed with the Revenue showing the claimant as sole proprietor and, of course, solely liable for what appears to have been a substantial tax debt run up but not paid. The claimant's explanation for this is that he is an unsophisticated person and was persuaded by the first defendant that he should remain in the background, and that the accounts and tax returns were compiled by Mr Samuels and were never seen, approved or signed by the claimant.

[7]When the opportunity to buy the freehold arose the first defendant's case is that he spoke to the claimant about it but the claimant said he could not afford to buy. Accordingly the first and second defendants made an arrangement that they would buy the property jointly between themselves as partners. On his case (with which the second defendant agrees in all material respects), the deposit was provided as to £40,000 by the second defendant and as to £30,000 by the first defendant borrowing from friends and family. The two defendants were advised that the second defendant could not be named on the title as he had a poor credit history and so the first defendant entered into the mortgage and took the conveyance in his sole name, but on behalf of both of them.

[8]Shortly thereafter the first defendant agreed to buy the business from the claimant for £11,000, which he paid him in cash. An agreement was drawn up by a solicitor, Mr Auran Khattak (another member of the Pashtun community and well-known to all the parties) recording their agreement to sell and buy the fixtures and fittings of the business. It was dated 1 August 2002 and from that date onwards the first defendant has carried on the business himself as sole principal, although he has from time to time paid commission of £100 to the claimant for any vehicles that the claimant has sourced for the business. The claimant denies the authenticity of this document, which was referred to as "the deed".

[9]Since the purchase of the property the second defendant asserts that he has made monthly contributions towards the mortgage payments and occupied one of the two units at the property. In relation to this, the claimant says that the first defendant introduced the second defendant as a tenant of that unit and any payments he has made have been by way of rent and not mortgage contribution.

[10]After the dispute arose between the parties, the claimant sought to enter a restriction at the Land Registry in relation to the property on the basis of his assertion that it was a partnership asset. The first defendant objected to this restriction, initially on the (patently untrue) basis that he had no knowledge whatever of the claimant, but after protracted correspondence from the Land Registry in which the first defendant was unable to maintain that objection it was dismissed as groundless and the restriction was entered. That decision was communicated to the first defendant's solicitors by the Land Registry by letter dated 20 March 2006. Three days later on 23 March 2006 the first and second defendants entered into a declaration of trust recording the contributions that the second defendant is said to have made to the purchase of the property and declaring that it is held by the first defendant on trust for himself and the second defendant in equal shares. The interpretation and effect of this document are in issue.

[11]From this brief summary of the matters in contention between the parties it can be seen that they fall into two main categories namely: i) was there ever a partnership between the claimant and the first defendant and if so for what period, and ii) was the property purchased as an asset of a partnership between the claimant and the first defendant or as part of a separate arrangement between the two defendants, with no involvement on the claimant's part.

[12]There are many areas of factual disagreement going to make up these two main categories. Each party presented its case and made its submissions to me on the basis that it was very common and accepted within the community that business dealings were conducted on an informal basis, particularly in that it was common for unsecured loans to be made between members of the community, and for arrangements such as loans to be undocumented. Further, many payments even of substantial amounts are made in cash, and bank accounts may contain money belonging to the owner of the account but also money that is being looked after for another. It was accepted on all sides that it was common for properties to be purchased in one name but for the true owners to be, or to include, other persons whose names did not appear.

[13]In this environment, it is evidently not only possible but common that documents such as documents of title may be created for the purpose of showing a position which seems convenient at the time but does not disclose any arrangements in the background and does not necessarily represent the truth or the whole truth of the situation. Cash payments may of course be completely untraceable and can be plausibly asserted and denied at will.

[14]Conducting arrangements on such a basis may no doubt be convenient to the parties as long as they do not disagree amongst themselves about the underlying and usually undocumented arrangements that they have made. It is obvious however that once disagreement does arise the situation lends itself to a dispute which cannot easily be resolved by an outside agency such as the court. Such is the situation here. Completely polarised positions are taken in the witness evidence presented to the court. In so far as documents exist, they can be denied on the basis that they are forged, created for some other purpose or do not mean what they appear to by reason of some undocumented background arrangement. Payments from a particular bank account may be alleged to be made on behalf of the holder of the account or on behalf of another person who has (for example) provided funds by way of undocumented cash transactions.

[15]Courts will normally seek to identify which of conflicting testimony is reliable by testing it against such facts as can be agreed or independently established to be true. The task is made much more difficult if there are no such points of reference or very few of them. Some guidance may be found as to the true nature of dealings between parties or their true intentions by reference to day-to-day transactions entered into and day-to-day documents produced which are more consistent with one party's explanation of the circumstances than another's. It was no doubt for this reason that the claimant over a considerable period of time has pursued the production of banking and business records relating to the business of Express Auto Spares and the payments alleged to have been made by the first and second defendants. It is not surprising that the claimant is intensely suspicious of the fact that very few such documents were produced before the trial, and key documents were only available in photocopied form. It is not surprising that the claimant was suspicious of the explanations given that many relevant documents had been lost in burglaries at the home of the second defendant and of the accountants to the business, and still more suspicious of the fact that some documents were produced at the beginning of the trial falling into the categories previously said to have been lost. In considering the evidence, I will have to form a view as to whether these suspicions appear to be justified.

Partnership issues

[16]I will begin with the evidence of the witnesses other than the parties themselves, and looking first at matters which are in themselves relatively peripheral but which may shed light the overall arrangements and particularly the credibility of the main witnesses. I start with the evidence relating to the disputed deed dated 1 August 2002, which is relied on by the first defendant as showing that he purchased the business on that date from the claimant, who prior to that had been the sole proprietor of it.

[17]In his witness statement, the first defendant says this at paragraph 25 " after I completed the purchase [of the property, in late June 2002],[the claimant] approached me and proposed that I buy Express Auto Spares from him. We agreed a price of £11,000 and on 1 August 2002 we signed an agreement to that effect. The agreement was signed at the offices of Express Auto Spares. The agreement was prepared by Mr Khattak. He is a solicitor. Mr Khattak is also known to me as he was from the same village in Pakistan. I met [the claimant] and Mr Khattak at the offices of Express Auto Spares. There was only three of us present. We signed the agreement dated 1 August 2002. [the claimant] told me that Mr Khattak's fee was £400 and I paid him one half of that fee being £200 in cash. I paid this to [the claimant]. In buying the business this included everything in the building as there were so many engines and parts it was agreed that he would walk away taking nothing and leaving everything."

[18]In relation to this document, the claimant's evidence in his witness statement is as follows, at paragraph 40:

" the document of 1 August 2002… does not bear my signature. I have never seen this prior to these proceedings. Put simply, I was actively involved in the business until around June 2005, as a partner, buying and selling vehicles."

Witness evidence: Mr Khattak

[19]Mr Auran Khattak was called to give evidence. He had initially spoken on the telephone to the claimant's solicitor, and indicated that he was unwilling to become involved because of his close personal relationship with all parties. The claimant served a witness summons upon him and provided a witness summary in respect of his anticipated evidence.

[20]Reflecting his reluctance to become involved, Mr Khattak was very cautious in giving his evidence. He was particularly keen to emphasise that he had not acted for either party, and certainly not for both of them, in connection with any transfer of business. He said that he had been to the premises at Armoury Road "a thousand times" over periods up to the present day, for social visits and in order that small jobs could be done on his or his wife's car. These had been done as favours to him as a family friend without payment. Asked about the business relationship between the claimant and defendant he said that they worked together and he had dealt with both of them but he had not asked whether there was a limited company, whether one was the sole proprietor or whether there was a partnership between them. In this respect he appeared to retreat from what had been noted by the claimant's solicitor during an initial telephone conversation. At that time, asked if the claimant and first defendant were partners Mr Khattak is recorded as saying "of course they were".

[21]In relation to the disputed document, he said that this was not a document he had prepared. He had on various occasions provided what he referred to as "template documents" to the claimant and first defendant, being documents such as a lease or an immigration sponsorship form, and in particular he had provided a draft business sale agreement to them from his firm's computer precedents. That however was a more substantial document of five to nine pages, with a schedule attached into which details of the assets sold would have been inserted. The document he provided was blank in the sense that it had no names in it and no information in the schedule other than possibly headings. It contained normal provisions for a business sale agreement such as recitals, definitions and operative clauses dealing with the transfer of the various assets of the business. The disputed document now produced is only a photocopy, but assuming that an original document exists which corresponds to that copy, Mr Khattak said that it could not be the template document that he provided, because (among other reasons) it has names inserted and appears to be only a single page document containing the names of the parties, one recital, a reference to consideration but no operative clauses, and a provision for signatures. It was suggested to him that lay people might have extracted words from the template he provided in order to produce a short form document of their own, and he agreed that might be possible. It is certainly not in a form one would expect to be part of a solicitor's precedent bank.

[22]Asked whether he had signed this document himself, Mr Khattak seemed somewhat defensive, anxious to refute any implication that he might have acted, formally or informally, in connection with preparing it. He said that he would not have signed such a document, even as a witness, without ascertaining that both parties understood what the transaction was. He did however say clearly that "I did not witness the claimant selling a business or the first defendant buying a business. That never happened in front of me… I cannot remember the claimant and the first defendant signing a document in front of me." He accepted however that they might possibly have signed some documents when he had been there. Although he was unable to say firmly whether he had or had not signed an original document corresponding to this copy, he cast considerable doubt on whether he would have done so, because although the signature appeared to be his, it is considerably smaller than his normal signature. Another example of his signature appears on the declaration of trust between the first and second defendants, which is much larger, and he said that his typical signature was in fact larger than that one.

[23]I asked Mr Khattak some questions about the circumstances in which he had given a template document for a business sale to the parties, or to one of them. He could not recall which of them had asked for this document. Asked why they had wanted it, he said that you would assume that someone was interested in selling a business, and that "there was a discussion between the two of them about if, say, they could not pay the creditors, they might wind the business down and continue it in a different format, but I didn't want to get involved in that."

[24]Mr Khattak was adamant that he had not been paid £400 or any other amount. He had provided the template document without payment, as he had done in respect of other documents on other occasions.

[25]Mr Khattak confirmed that his firm had prepared the declaration of trust dated 23 March 2006 after the first defendant had come to his office and told him that he owned title to the building but that half of it was held on behalf of the second defendant and he wanted to record something on the Land Registry title. It did not appear from this evidence that the second defendant also attended, or that there had been any mention of the claimant or the restriction he had entered which prompted the desire to make this declaration.

[26]My overall impression of Mr Khattak's evidence was that he was reluctant to take sides between the parties, and very keen that his professional position should not be compromised. This led him to avoid answering a number of questions directly, but nevertheless in my judgment the thrust of his evidence was clear, that he had no knowledge of any transaction in which the claimant had sold his business to the first defendant, had not prepared the disputed document or another document to that effect, had not received a payment of £400 or any other amount and probably had not signed any document which could be the original of the disputed document. In all of these substantive matters therefore his account contradicted that of the first defendant. His description of the discussion about transferring the business in an apparent attempt to avoid creditors could be consistent with the claimant's case that he had in effect been put up as a front for the business but that once substantial creditors, particularly tax debts, had been incurred Mr Samuels advised that a fresh face should be given to the business, being the first defendant's.

Mr Saidu Rehman

[27]Mr Saidu Rehman gave evidence in response to a witness summons served on behalf of the claimant. He had known the claimant and the first defendant for 42 years, and the second defendant for a shorter time but probably 30 years. He agreed that he had been very good friends and had served in the army with the claimant and the first defendant. He agreed that he and the claimant had jointly bought a number of cars to do up, which he described as more of a hobby than a business, working from his drive. He said there was no agreement between them (clearly referring to a lack of any formal agreement) but that "we were just friends and partners. Everything we got we used to share". This had gone on for between five to eight years. There had been a period in about 1991 or 1992 when the claimant had gone to Pakistan for some months. In that time Mr Rehman and the first defendant bought three cars to do up and sell, both contributing to the purchase price. This was on the basis that they were going to share whatever they made from reselling those cars. On his return, the claimant was initially upset that Mr Rehman had brought a third party in to the business they had previously been running together, but they had later on all agreed to rent the premises at Armoury Road and set up business together. This had been discussed between all three of them at a meeting at either his house or the first defendant's, again there was no formal agreement but they were all just going to carry on the business sharing the money they made between the three of them. Each of them had put in £11,000 to set up the business.

[28]Mr Rehman at the time was a full-time employee at British Telecom and so was unable to devote as much time to the business as the other two. He had nevertheless worked in the evenings and weekends. After a few months however he told the other two that he could not carry on because it was affecting his health. He had told them that he wanted to leave and said that he had agreed with them that they could repay him his investment over two to three months. He denied that he had been responsible for finding a replacement partner although he said that he was aware that they had brought someone in themselves. He did not know who this was and had had nothing to do with the business after that, which was no later than the end of 1996. He thought he had probably been repaid half of his cash by each of the other two.

[29]At a later stage, he could not be sure when, but about four to five years ago, he had attended two community meetings attempting to resolve disagreements between the claimant and the first defendant. Both of them had been at both meetings. The second defendant was not at the first meeting, but he was at the second meeting. The issue between the claimant and the first defendant was how much money the business had made, and how many cars they had bought or sold. He said the building was not discussed, and he was not sure if the meetings were before or after the building had been bought. Both parties had produced records relating to the business, but he and the other community members present had not looked at those. It had not been specifically discussed whether or not they were partners.

[30]I formed a generally favourable impression of Mr Rehman as a witness. He spoke freely of matters of which he was aware, and was careful not to commit himself on matters of which he was not. In my judgment his evidence, so far as it went, was honest and reliable. I was surprised at his apparent lack of knowledge of matters after he left the business, given his close social connection with all the parties, but it was not a matter he was pressed on. His evidence substantially supports the claimant in that there was a relationship of partnership between himself, the claimant and the first defendant at the commencement of the new business, although he disagrees with the claimant as to which of them was responsible for introducing the person who succeeded him. He confirms that all three of them introduced capital of £11,000 into the business, which contradicts the first defendant's account that he only lent a smaller sum of £5,000 to the claimant. In my judgment, the only realistic inference from the nature of the discussions between the claimant and the first defendant at the community meetings Mr Rehman attended was that both of them were interested in the turnover and profits of the business as partners in it. This must have been apparent to all present, including the second defendant.

Mr Mohammed Shereen

[31]Mr Mohammed Shereen gave evidence for the claimant. His witness statement said that he is a cousin of both the claimant and first defendant and has been a good friend of both since childhood. He was aware that the claimant and first defendant had entered into a business relationship in or about 1996 and had rented premises at Armoury Road. He had been there whilst the two of them and Mr Rehman were cleaning the place up. On numerous occasions over the years both the claimant and first defendant had told him that they were in partnership. He confirmed that his understanding was that the claimant worked more on the manual side of the business buying cars and repairing them and the first defendant was responsible for paperwork and financial matters including handling the cash. In cross-examination he referred to the claimant as "a very lay person". He had become aware of a dispute between the two partners in about 2003 in respect of monies that the claimant believed were going missing from the partnership. The first defendant maintained that the business was making no money but the claimant thought it was doing well. The Claimant had asked the first defendant for details of income and outgoings, and also discussed the tax demand that he, the claimant, had received. Mr Shereen had been brought in with a view to mediating the issues between them in relation to this tax demand and the financial affairs of the business.

[32]Mr Shereen confirmed that there were a number of meetings, three of which were at his home address, all attended by the claimant and first defendant and also Mr Rehman. He also confirmed a meeting at Dr Hussain's surgery (see below). The meetings were held to discuss the partnership business. At an early meeting the first defendant had agreed to keep records of vehicle purchases and sales and other business incomings and outgoings, but he had later gone back on this. This evidence is in accordance with that of Mr Rehman.

[33]At the first defendant's request he had accompanied both of them to a meeting at the offices of the accountant Mr Samuels. This was in early 2002, when the property purchase was under discussion, and Mr Samuels had advised that since the claimant had a CCJ against his name the property should be purchased in the first defendant's name only. In addition, Mr Samuels had advised that this would assist in negotiations with the Inland Revenue, since it would appear to them that the claimant had no assets and they might not pursue him for the tax liability. "Mr Samuels suggested that, with the premises being in Gulab's sole name, it would look as though there was a "fresh face" to the business."

[34]In all of these matters I formed the view that Mr Shereen was giving his evidence carefully and honestly. It was consistent with the accounts of the claimant and other witnesses, particularly Mr Rehman and Dr Hussain. He was not shaken on any of these matters in cross-examination in any material respect. It was put to him that he was motivated against the second defendant because his brother had divorced Mr Shereen's sister. Although his responses when asked about that divorce were somewhat incomplete, in my judgment that cross-examination went nowhere near establishing that Mr Shereen had given false evidence out of malice. Some evidence emerged in cross-examination of Mr Ahmed (see below) suggesting that Mr Shereen may have played a greater role in negotiations for the purchase of the property than appeared from his witness statement, but this was after the conclusion of Mr Shereen's evidence and had not been put to him. It did not cause me to change my view that in general Mr Shereen's evidence was reliable.

Dr Hussain

[35]Dr Abid Hussain was called by the claimant. He is a respected member of the Pashtun community and has known the claimant and first defendant for many years. In his witness statement he said that he had on several occasions purchased vehicles from the business and that both of them had worked together in that business since around 1996. He confirmed that the first defendant dealt more with the administrative part of the business and that both the claimant and the first defendant had told him many times over the years in social conversations that they were partners in the business. In particular, at some time in or about 2004 or 2005, he had met the claimant and the first defendant at a meeting specially arranged on a Sunday afternoon at his surgery with other members of the community with a view to resolving the dispute. He said that during that meeting they had never disputed that they were partners in the business, what was in dispute was the shares they had in the building. The claimant was saying that the building had been bought 50-50 between them and the first defendant was saying that the second defendant was a partner in it. The claimant's position had been that he was entitled to half the building, and that the first defendant could give the second defendant half of his share if he wished. I observe that this has echoes of Mr Ajmal Khan's reference (see below) to "a dispute going on about a couple of people or three people".

[36]It was put to Dr Hussain in cross-examination that the first defendant had been saying that he owned the building equally with the second defendant, to which Dr Hussain said that was not correct and the first defendant's argument had been that the three of them were equal partners with one third each. Pressed on the point, he said that his recollection was clear. It was suggested that, as is the first defendant's case, any meetings were purely social and not to discuss the dispute, but Dr Hussain denied that and said that the purpose of meeting was to lubricate matters between the claimant and first defendant so that the dispute would not end up in court. He was questioned by Mr Dean on behalf of the second defendant about the purchase of the building and said that he was aware from social conversations that they (meaning the claimant and first defendant) had been to RBS and had seen their accountant. He was not aware that the second defendant was any part of the deal, but did not have any direct information about that. He was further asked whether there had been any mention of a transfer of business from the claimant to the first defendant and he said there had not, and the two of them had been partners all along.

[37]When the first defendant was asked about this meeting, he said that they had visited the surgery, but just had tea and were shown the surgery by the doctor. Asked if the doctor was lying in his description of the meeting, the first defendant said that he was not saying the doctor was lying, but there had been nothing discussed about the property at all.

[38]I have no hesitation in saying that I am satisfied Dr Hussain was an honest reliable and impartial witness and I accept his evidence entirely.

Documentary evidence

[39]All of the above evidence is of assistance in determining whether there was a partnership between the parties, and if so over what period. There is a certain amount of documentary evidence; that principally relied upon by the defendant is the accounts and tax returns disclosed by the claimant himself showing the claimant as the sole proprietor. In relation to these, however, I accept the claimant's evidence that they were obtained by enquiry from the Revenue. No signature appears on the accounts, which the claimant says he has never seen. The tax returns are signed, but the signatures are considerably varied and none of them bears much relation to admitted examples of the claimant's signature. There is no obvious reason why if the claimant had signed them he would disguise his signature in doing so. The defendants abandoned an attempt to suggest that the claimant used different signatures at different times. The accountants appear to accept that, recently at least, they have been acting as the accountants for the first defendant. I do not regard the explanation put forward that relevant records have been lost in burglaries from their premises as credible, bearing in mind in particular that it appears from the correspondence that no such burglary has ever been reported to the police, and the accountants at one stage said that "records for the business for the year ending April 04/05 are missing" (this on a letterhead on which the name of the firm itself was misspelt as "MK Samules") but a few days later appeared to change their position when they responded to an inquiry pointing out that the request had been for the records from all years, and not just 2004/05, by a manuscript note on the letter to them that "all records were destroyed as we informed you in our previous correspondence".

[40]The claimant also relies on documentation, particularly various documents relating to the business after 2002 which he said showed that he was still a partner after that date. These include various mobile telephone bills which the first defendant responds to by saying that he agreed as a matter of friendliness that the claimant could have a mobile phone on the business account even after the sale of the business, and that he was reimbursed for the cost in full by the claimant. Almost inevitably, the reimbursements were said to have been in cash of which there is no record. There was also a letter dated 23 March 2001 signed by the first defendant confirming that he was an owner of business -but this related to a car being driven by the claimant and was evidently produced for the purpose of showing to some third party that he had bought it from Express Auto Spares and could not credibly have been signed by the claimant himself. It might very well have been produced as a matter of convenience whether true or not. There were a number of documents relating to the purchase of vehicles by the claimant on behalf of Express Auto Spares after 2002, but these in principle might have been consistent with the first defendant's explanation that he was buying cars on a commission basis. Other documents might in principle have been produced by parties who knew that the claimant had been the proprietor of the business before 2002 and had not been advised of any change.

[41]On the other hand, the first defendant had no convincing explanation of an insurance document dated 8 March 2005 naming the claimant and the first defendant as the persons insured in respect of the business of Express Auto Spares. Either the first defendant made a proposal on that basis, or the claimant must have done so, but it would not have been consistent with the first defendant's position that the claimant was a mere casual commission agent for the purchase of cars for him to have any role in placing insurance for the business.

[42]The claimant also produced some manuscript notes made by him listing vehicles sold by the business and his estimate of the turnover and profit generated. His account was that these were made for the purposes of the community meetings at which he and the first defendant tried to resolve what they were entitled to from the business, as a result of the first defendant failing to keep the records that (as referred to in the evidence of Mr Shereen) he had agreed to. These documents did not appear to me to be credibly explained as self-serving concoctions.

[43]The claimant and the first defendant also gave evidence in relation to the partnership issue. My impression of the claimant's evidence was that in general he appeared to answer questions to the best of his knowledge and was consistent in what he said. He steadfastly refused to accept that payments towards the purchase of property had been made from the second defendant's accounts although, as will appear below, I am satisfied that in some cases they were. I do not regard this however as impacting significantly on the claimant's credibility since it was clear that what he was objecting to was not the immediate source of the money but the implication that the funds belonged to the second defendant. Some point was made of the fact that on the claimant's evidence the property was not divided into two units until sometime after it was initially rented, but this was contradicted by the defendants and the landlord Mr Ahmed. The claimant may have been wrong on this point, but if so it is in relation to a minor matter on which nothing turns.

[44]The first defendant on the other hand did not give me the impression that he was answering truthfully in all cases. He plainly was not telling the truth when he told the Land Registry that he had no knowledge of the claimant. His denial of the community meetings to discuss problems in the partnership, and his assertion that they were mere social gatherings I did not find convincing at all. His assertion that he acted as a general dogsbody up to 2002 and that thereafter he was the owner and the claimant a mere casual employee was inherently improbable and did not accord with the description of the business by any of the other witnesses. He made a late attempt to suggest that if the claimant was producing documents after 2002 on behalf of a business called "Express Auto Spares" it was because the claimant was separately and simultaneously running his own business with that name from the same property. I found this incredible.

[45]In general, therefore, in my judgment, the evidence of the claimant was more credible than that of the first defendant.

Conclusion: Partnership issues

[46]Taking all this evidence into account, I am in no doubt that the account given by the claimant as to the creation and conduct of the business as a partnership is the more credible and fits much better with the external and circumstantial evidence than that of the first defendant. I find that they were in business as equal partners before 2002, and they remained in business as equal partners after that date. I am in no doubt that this was generally known among members of the community, that it was the basis upon which the community meetings referred to by the claimant, Mr Shereen, Mr Rehman and Dr Hussain took place. I am in no doubt also that the second defendant, who was closely involved in the community, went to at least one of the community meetings and had close connections with the first defendant at least, was aware of the existence of the partnership business.

[47]As to the date of dissolution of the partnership, Miss Bristoll in closing indicated that she did not seek to pursue the oral notice of dissolution said to have been given in June 2005, and would be content with a finding that the partnership was dissolved by the written notice sent on 20 April 2006. I accordingly find that the partnership was dissolved by the service of that notice.

[48]I also accept the claimant's evidence that as between the two of them the first defendant was responsible for looking after the finances of the business and had principal responsibility for financial and administrative matters such as having control of the money and dealing with the accounts and tax authorities, and that it was the first defendant who introduced Mr Samuels and dealt with him for this purpose. I accept that the claimant did not sign the tax returns that were submitted on his behalf, nor did he approve them or the accounts of the business that were drawn up in his name. I also accept that it was at the first defendant's instigation that the business was set up so as to appear to be solely owned by the claimant so that all liabilities, for example for business rates and tax, would appear to be his alone. There would be obvious advantages to the first defendant in this situation and not much disadvantage given that there were no substantial assets other than cash, and he had de facto control of that.

[49]I accept further that both partners and Mr Shereen met Mr Samuels at some stage early in 2002 and that Mr Samuels advised that the purchase of the property should proceed in the first defendant's name and that this would have the advantage of presenting a "fresh face" to the business, partly with a view to divorcing its future assets from its past liabilities, particularly the tax liability. Again, the advantages to the first defendant in this reversal of the previous presentation are obvious and I infer that Mr Samuels was acting predominantly in his interest.

[50]As to the alleged "deed" purportedly recording the transfer of the assets of the business from the claimant to the defendant, I think it most likely that this document was, as the claimant said, not signed by him. If it was, however, in my view it is consistent with the approach advised by Mr Samuels of presenting a "fresh face" to the business to distance it from creditors, an approach also hinted at by the evidence of Mr Khattak. I am satisfied that it does not evidence a genuine transaction in which the claimant's share in the business was sold to the defendant, or in which £11,000 or any other amount was paid by the first defendant to the claimant.

[51]These conclusions, of course, are severely averse to the first defendant. His denial of the fundamental nature of the underlying business relationship between himself and he claimant was clearly untruthful. He was prepared to take advantage of the claimant to procure that matters were structured so that to the outside world the claimant appeared to be responsible for the debts and liabilities of the business and, it would appear, to leave him to deal alone with the Inland Revenue when a claim was made. It does not of course follow that I assume that his evidence in all other respects is false, but it is certainly something I have to take account of in evaluating the rival accounts insofar as they cannot be tested by reference to externally verifiable facts.

Property issues

[52]Having found that the claimant and the first defendant were in business in partnership together, I move on to the issues in relation to the property. The documents available relating to the purchase, principally those from the files of the vendor's solicitor (Butler Hall & Co) and Mr Keith Thompson, who acted on the purchase, show as follows: i) the vendor of the property was Mr Bashir Ahmed. The claimant referred to him as "Mr Tariq Mushtaq". Mr Ahmed said in evidence that his full name is Bashir Ahmed Tariq but that he is quite often known as "Mushtaq" because that was his father's name, and in succession to his father he runs a number of businesses with the name "Mushtaq". ii) contact was initiated by the vendor's solicitor writing on 10 August 2001 to Albion & Co "for the attention of Keith Thompson" as follows "Premises at Armoury Road Small Heath Ahmed to Khan Subject to contract We understand that you act on behalf of Mr S. Khan in connection with his proposed purchase of the above premises [from] our client Mr Bashir Ahmed in the sum of £200,000 [the figure was amended in manuscript to £230,000]… We understand that your client is already in occupation of the premises under an informal tenancy arrangement and will therefore be fully aware of the property and its state and condition" iii) I observe from this letter that at the date it was written Mr Bashir Ahmed must have instructed his solicitor that: a) the purchaser was called " Mr S. Khan" b) the purchaser's solicitor would be Mr Keith Thompson. Since it is not in dispute that Mr Thompson was introduced by Mr Shereen, Mr Shereen must have been involved in some capacity by this date c) the purchaser was already in occupation of the property. Since there is no suggestion that Mr Shereen was in occupation, it is highly unlikely that "Mr S. Khan" refers to Mr Shereen. and, further, that Mr Ahmed had apparently made no mention of either defendant being involved as purchaser. iv) Both sets of solicitors continued to head their correspondence "Ahmed to Khan" throughout. There is no mention of either Gulab Mohammed or Pir Mohammed in correspondence between solicitors until the vendor's solicitors returned their replies to requisitions on title to Mr Thompson on 27 June 2002, the day before completion. Those replies are headed "Ahmed to Mohammed" and I infer that the requisitions on title must have had the same heading when sent the previous day. v) Contracts were exchanged and completed by telephone on 28 June 2002. The form of contract had been sent by the vendor's solicitors with the space for the purchaser's name left blank, and the first defendant's name was inserted in manuscript, apparently at the time of exchange. vi) It is clear that the matter was rather slow-moving; 10 months passed from start to finish of the solicitors files much of which was taken up with chasing letters from the vendor's solicitors. The correspondence mentions a number of payments by way of deposit paid direct to the vendor: a) £5,000 acknowledged by the vendor's solicitors on 29 August 2001 b) a further £10,000 noted on 4 October 2001 c) a further £10,000 noted on 15 February 2002 d) a further £5,000 noted on 12 April 2002 e) a further £10,000 apparently paid between that date and 24 April 2002, making a total of £40,000. Each of these payments must have been made at the latest by the dates mentioned. vii) The balance of £190,000 to complete was drawn from an account at Royal Bank of Scotland in the first defendant's name (account No. 10219340 titled Express Auto Spares Business Current Account, statements being sent to Gulab Mohammed at his home address), and comprised an advance from the bank of £161,000 on a separate business loan account and £29,000 from other moneys paid into the account at various dates since it was opened on 25 April 2002 (E1198). viii) The first active steps taken by Mr Thompson would appear to have been on 20 September 2001, by which time he had received the initial letter of 10 August and two chasing letters of 29 August and 11 September (all three are on his file although for some reason he only acknowledged the last two). On that date he completed his file requisition form (naming the client as Mr S. Khan) and wrote to the vendor's solicitors stating "our clients are proceeding by way of a mortgage with Royal Bank of Scotland and before taking the matter much further we would like to have sight of our clients mortgage offer". On his file copy of that letter, Mr Thompson has made a manuscript note of the telephone number of RBS followed by "re Khan Express Auto Spares" and the name and mobile telephone number of the person dealing with it at the bank, Angela Clements. ix) The first documentation from the bank apparently comes in the form of a fax dated 31 January 2002 from Ms Clements as follows “Dear Keith, Mr Mohammed t/a Express Auto Spares I write further to our mutual client who is purchasing Express Auto Spares at unit 2 Armoury Road. I confirm that we have agreed the loan of £190,000 and now only await the satisfaction certificate for the CCJ which I understand Mr Mohammed is obtaining. However there is some confusion from the valuation that Mr Mohammed currently rents the property. Accordingly I would be grateful for confirmation of the vendor's details. Please also confirm the basis for the transaction and that there are no transaction at an undervalue implications given that it would seem no goodwill is being purchased.” Mr Mohammed t/a Express Auto Spares x) It would appear from the content of this letter that is not the first contact between Ms Clements and Mr Thompson in relation to the matter, but no notes or earlier letters appear on the file. Given the evidence (below) that Miss Clements met the first defendant with Mr Ajmal Khan to complete a loan application form, I infer that that meeting must have taken place before 31 January 2002, and that by that date the bank's valuers had already visited the property and gained the impression that the first defendant was in occupation. It is not clear how the bank came to head its letter "Mr Mohammed t/a Express Auto Spares", but that heading was used throughout on correspondence between Mr Thompson and the bank. Mr Thompson's evidence was that if a matter started with correspondence from another party, his secretary would simply copy the heading used by that party. xi) It would seem therefore that by 31 January 2002 someone had told the bank that the first defendant either was in business trading as Express Auto Spares, or was purchasing that business. This information can only realistically have come from the first defendant in the process of making the loan application. xii) Mr Thompson responded to this fax the next day saying "Mr Mohammed doesn't currently rent the property. I think he may have been seen at the property working there but that's as far as it goes. So far as I am aware this transaction is not at undervalue but there is no goodwill involved." it would appear therefore that Mr Thompson already knew that this was the first defendant's position although he subsequently wrote seeking confirmation having been pressed by the bank for answers to specific questions, saying "I should be obliged if you would let me have specific written instructions in connection with all aspects of this letter [referring to a letter from the vendor's solicitor]. Now that I have been put on notice regarding these facts, I will have to report them to Royal Bank of Scotland. I need to know that the information that you have given on your application is the same as the contents of this copy letter." xiii) Mr Thompson received a letter signed by the first defendant dated 15th February 2002 as follows "I would like to confirm that I am currently working at the above premises not renting it. Further more the purchasing price is £270,000 but further discussion with the vendor I have managed to reduce the price to £230,000". On receiving that letter he wrote to the bank saying "Mr G. Mohammed is buying the business solely and he will be entitled to the full profits of the business. We are advised that the purchase money is £270,000". I observe that this makes no reference to the second defendant (or indeed the claimant), and goes beyond the letter received from the first defendant in that it confirms that there is to be a purchase of the business, and overstates the consideration. xiv) It seems that the bank's agreement in principle to lend £190,000 must have been based on being told that the purchase price was £270,000. That figure, however, had been nowhere mentioned in the correspondence from the vendor and presumably therefore came from the first defendant's loan application. When Mr Thompson wrote on 28 February 2002 to the bank saying "having spoken to Mr Mohammed he tells me that the purchase price shown in the mortgage offer is in fact incorrect. He believes that this figure should be £230,000" (a matter which it would appear Mr Thompson had known all along) the bank replied indicating that in view of the purchase price having been "reduced to £230,000" the loan available would be only £161,000, which of course is what was eventually advanced. xv) I cannot help but suspect from this chain of correspondence that an attempt was made to maximise the amount available from the bank by overstating the purchase price in the loan application, which ultimately had to be abandoned, most likely because Mr Thompson was, as he put it, "on notice of" the true facts, leaving the purchaser to make up the difference between £161,000 and £190,000 from other resources. If so, whilst it is not directly relevant to the issues before me, it would be another example of the transaction being presented in such a way as to produce a desired effect, reinforcing the need for caution on the court's part when dealing with any documentation which might loosely be termed "official". xvi) The formal loan agreement was signed by the bank on 1 March 2002 and by Mr Gulab Mohammed two days later. xvii) The claimant opened an account in his name "trading as Express Auto Spares" at Lloyds TSB bank, apparently on 6 March 2002. In contrast to the current account in the first defendant's name (opened in April), the statements were sent to the trading address. Mr Shereen's evidence was that this was for the purpose of a loan application that was made to Lloyds TSB, and that it was because this application was turned down that RBS were approached. I am bound to say that I find this difficult to reconcile with the overall timetable, since there had been mention of RBS as far back as September 2001 and, by the time this account was opened, a loan agreement had already been signed with RBS. If there was an application to Lloyds TSB it would seem that it was being made in parallel with the application to RBS. This was not explored in the evidence and remains unexplained. xviii) I record that the documents disclosed did not include any papers from the files of Royal Bank of Scotland or Lloyds TSB. These would have included the loan application forms and perhaps notes of what information was given to the bank in connection with the applications. On the face of it, these documents may have been of assistance but I am not in a position to criticise any party for the fact that they were not obtained.

Witness evidence: Mr Shereen

[53]Mr Shereen also gave evidence in relation to the purchase of the property, saying that it was he who had introduced Mr Ajmal Khan with a view to obtaining finance, and that he had gone to a meeting at Mr Khan's offices with the first defendant. The claimant was not present but Mr Shereen was acting on his behalf and with his authority. Further, Mr Shereen had introduced both the claimant and the first defendant to Mr Thompson at the solicitors firm of Albion & Co, and had attended a meeting there with both of them. He had told Mr Thompson the property was to be purchased by both of them as partners, but in the name of the first defendant only because of the judgment registered against the claimant. The second defendant had not been involved. Mr Thompson was a person who had acted for him on many occasions previously, and in his oral evidence Mr Shereen confirmed that he was always known as "Mohammed Shereen" and not as "Shereen Khan" and that Mr Thompson was wrong to say that he was known to him as "Shereen Khan". Mr Thompson had always referred to him as "Shereen" or "Mohammed".

Mr Ajmal Khan

[54]Mr Ajmal Khan gave evidence. He is not a Pashtun. He is an estate agent who provided a market appraisal with a view to selling the property in 2004. A witness statement had been served in relation to that episode, but it did not deal with the involvement he is said to have had at the time of purchase of the property in 2001/2002. I gave leave for him to be examined in chief about that. He confirmed that he knew Mr Shereen and had acted on a number of occasions for clients introduced by him. He said that Mr Shereen helped his friends and family and would bring clients who required finance to buy properties. Mr Khan would help them to obtain that finance. Asked whether he knew the claimant he said "I met him through Shereen when he asked me to help him with a mortgage at the time of the purchase. He phoned me and booked an appointment. There was Mr Shereen, [the claimant] and Mr Gulab came to see me." However he was later less clear about who had attended, going on to say "Mr Shereen and one person came. I introduced them to the bank manager". He could not recall whether any names had been mentioned in the initial telephone call from Mr Shereen, but said that at his first meeting he had asked normal questions about the property and the price, been given the address and told it was an industrial unit and that the purchasers were occupying the business selling second-hand car parts. This information was necessary for the bank who would not lend unless they knew what the purchasers were going to do. Following that he had spoken to Angela Clements at Royal Bank of Scotland and booked an appointment to her to come and look at the proposition. Asked who Miss Clements had seen he said "Gulab Khan [meaning the First Defendant] was buying at that time". Miss Clements had filled in the loan application paperwork on behalf of the bank. Mr Khan could not recall whether Mr Shereen had been present at that meeting, but the first defendant had been.

[55]It was put to him that the second defendant had been involved in the purchase. Mr Khan seemed surprised at that, and said "Mr Pir Mohammed? I met Pir Mohammed afterwards, he came to my office. First Mr Shereen brought Gulab Mohammed, Pir Mohammed came a week after." He also confirmed that when he had gone to see the premises for the potential sale, Pir Mohammed was in the unit next door to the claimant and the first defendant. It was put to him that if Mr Pir Mohammed had been to see him that must be because he was involved in the purchase and Mr Khan said "it must be", appearing rather doubtful. It was suggested that although the customer named on the bank documentation was Gulab Mohammed he knew that he was arranging the purchase for Gulab Mohammed and Pir Mohammed, to which he said "Pir Mohammed I can't remember, but if the bank said it's Gulab Mohammed it is Gulab Mohammed". Pressed about this by Mr Bowe he repeated that Pir Mohammed had come afterwards and insisted that he did know the claimant.

[56]He was pressed by Mr Dean about who had been at various meetings, and confirmed that there had been one meeting with Gulab Mohammed and Mr Shereen, followed by a further meeting with the bank. He could not recall if Mr Shereen had been present at the second meeting. He remembered Mr Shereen and Gulab Mohammed at the first meeting, but could not remember anyone else. He was asked a number of times whether he recalled that Pir Mohammed wanted to be a purchaser but could not be because he had a CCJ registered against him. He said he remembered that someone had a CCJ but could not remember who that was. This may not be surprising given that the evidence of the parties is that the claimant and both defendants all had CCJs, but that the first defendant was in the best position to remove or satisfy his.

[57]Mr Dean also cross-examined Mr Khan about the occasion in 2004 when he went to visit the property with a view to being instructed for its sale. He said that he had met the claimant and the first defendant in their unit and spoken to them about it and measured up inside that unit. He confirmed that Pir Mohammed was not in the unit with them at that time. It was suggested that he had simply assumed that the claimant and first defendant were joint owners but he said that was not the case; they had been talking to each other for instance discussing the fee he had requested, and "trying to agree this is what we must do and what we must not do" in relation to the sale. He then went next door to try measure up in that unit, and met Pir Mohammed there. Pir Mohammed had not allowed him in, saying he was the owner of the property and he had not been consulted. He went back outside and told the claimant and first defendant this. He was asked whether he became aware from that that there was a dispute about ownership and said "there was a dispute going on about a couple of people or three people. I said we'd sort it out later".

[58]I accept that Mr Khan was doing his best to give honest evidence as far as he could given the lapse of time. It is clear that he was under the impression at the time that the claimant was involved in the purchase, and I infer that this must have been mentioned to him by Mr Shereen, although it is not clear whether the claimant came to see Mr Khan on the first meeting at which Mr Shereen and the first defendant were present. From then on, Mr Khan dealt with the matter, no doubt in accordance with his instructions, on the basis that the purchaser was to be the first defendant. He was aware of some involvement of Mr Pir Mohammed but did not know what it was. All of that is consistent with the claimant's case that the purchase was for the partnership, but in the name of the first defendant only. It is less consistent with the defendants' case that the claimant was not involved and the first defendant was buying jointly with the second defendant, and it was the second defendant's name that had to be kept off the title. It does not support the evidence of the second defendant in his witness statement that "we jointly applied for a mortgage, but I was not acceptable to the proposed mortgagee as I had at least one county court judgment against me."

[59]Furthermore, Mr Khan's account of his visit to the property in 2004 at which the claimant and first defendant discussed the amount of his fee amongst themselves and what they should or should not do in relation to this sale of the property suggests strongly that they both had an interest in the property. The first defendant gave evidence that although he had called Mr Khan by telephone to ask him to come and value the property, only the claimant had been at the property when Mr Khan arrived. He accused Mr Khan of lying when he said he had spoken to both the claimant and the first defendant. I do not believe Mr Khan was lying, and accept his evidence about the circumstances of the visit and the conversations he had and heard with the claimant and first defendant.

Mr Keith Thompson

[60]Mr Keith Thompson gave evidence, called by the first defendant. At the time, his firm was called Albion & Co, but it is now called Canty & Co and is the firm acting for the first defendant in these proceedings. His conveyancing file was produced in evidence, copies having been disclosed shortly before the trial and the original produced, I understand, for the first time on the first day of the trial.

[61]Mr Thompson's evidence is that the matter was introduced to him by Mr Shereen and that he held an initial meeting with Mr Shereen and the two defendants. He was instructed that the transaction was to proceed with the purchase being in the name of the first defendant, because the second defendant was unable to obtain finance as he had judgments registered against him. He had no recollection of ever having met the claimant, or of any instructions that the property was to be purchased on behalf of a partnership between the claimant and the first defendant. He said that his instructions had not involved the transfer of any business. He said that he had always understood that the property was being purchased on behalf of both defendants.

[62]Mr Thompson was subjected to quite close cross-examination on a number of matters. Mr Shereen's evidence had been that he made the introduction to Mr Thompson, but went to the first meeting with the claimant and the first defendant, and that the initial instructions had been that the purchase was intended to be in the name of the claimant, but this was later changed when it appeared that the claimant could not obtain mortgage finance. It was suggested to Mr Thompson that this fitted with the fact that both solicitors firms had referred to the transaction as being "Ahmed to Khan" until shortly before completion, and Mr Thompson's own file was opened naming the client as "Mr S. Khan". Mr Thompson said that he referred to Mr Shereen as "Shereen Khan" and that the file had been opened in his name as the introducer of the business. He accepted that several other files had been opened by the firm on transactions where he had acted for Mr Shereen on which the client was named as "Mr Mohammed Shereen" (no other examples of files in the name of Mr S Khan or Shereen Khan were produced) and said that it had been a "database error" to use a different name in this case. He pointed out that one of the entries in the financial records shows a payment in respect of search fees by "Mr Shereen Khan". That appears to derive from an accounts slip signed by a secretary recording a cheque received from "Shereen Khan". Mr Shereen himself denied having made any payment for search fees. Mr Thompson did not, however, have an explanation which seemed to me to be convincing as to why the vendor should have thought the sale would be to Mr Shereen.

[63]There were a number of things which struck me as odd about Mr Thompson's file and his memory of the transaction. Firstly, there is no note on the file of his initial instructions, and no engagement or client care letter. As referred to above, correspondence with Royal Bank of Scotland appears to start part way through the transaction with no notes of any telephone calls between 20 September 2001 when Mr Thompson was given Miss Clements' name and number, and the letter from her on 31 January 2002.

[64]There is scarcely any mention of Mr Pir Mohammed in any of the documents on the file. Insofar as there is any correspondence to the client, it is addressed to the first defendant only and makes no reference to the second defendant. There is one fax sheet, dated 19 March 2002 on which the addressee is named as 'Pir'. The fax gives details of a bank account, which seems to have been the firm's account, as appears from a letter of 13 June 2002 to "Mr G Mohammed" calling for funds of £39044 to be paid to that account for completion. He is referred to twice in the accounting records, which show a payment of £423 from "Mr P Mohammed" on 26 June 2002, about the time of completion. The cheque bounced and was followed by a letter to "Mr G Mohammed" chasing payment on 17 July and a telephone note of a call to "Mr Mohammed" on 1 August, with the note that "He said he would bring in". There is a further entry showing a cheque for £550 from "Pir Mohammed" on 16 August 2002. These are of course at the very end of the transaction and may show no more than that when the first defendant was required to pay funds to the solicitors, he obtained cheques from the second defendant.

[65]The file packet has the name of the client in large manuscript written in felt tip pen as "Mr S. Khan". "S Khan" has been crossed through, evidently at a later date, and replaced by the single word "Mohammed", so that it now reads "Mr Mohammed", suggesting one client rather than two. Beneath that, in similar felt tip pen (but evidently on a different occasion because the ink is much darker) someone has written "conveyancing files re Gulab Mohammed". There is a much smaller manuscript note on the file cover written in ball point pen which reads "50/50 Gulab Mo Pir Mohammed" and by the side of it "1st" and an arrow pointing to "Gulab Mo". Mr Thompson said that this represented his initial instructions, to the effect that the property was to be owned equally between the two defendants, but the first defendant's name was to be shown first on the title. If so, this seems an odd place to make the only record of such significant instructions: a note on the file (at least) would seem much more likely. If he was familiar with both of them, why would he contract the name "Mohammed" in one case but not the other?

[66]I observe that this note in fact coincides exactly with the position sought to be established by the declaration of beneficial interest made in March 2006, which was admitted to have been made in response to the restriction entered by the claimant. Mr Thompson was not asked whether this might be the explanation. The attempt to remove that restriction had of course been dealt with at that time by Mr Thompson's firm on behalf of the first defendant. It seems odd therefore that when that failed and the first defendant felt the need to record the arrangement as to beneficial ownership, of which he maintains Mr Thompson's firm was at all times aware (and which Mr Thompson says was the basis of his instructions), he preferred to switch to Mr Khattak's firm to prepare the necessary deed. These matters were not put to Mr Thompson either however so I do not have the benefit of his explanation.

[67]Mr Thompson's memory of Pir Mohammed was rather vague. Asked how he recalled that he had been at the first meeting, Mr Thompson said he recalled it because he had seen him (Pir Mohammed) since, and that when he saw someone the second time that made him remember the first. This in itself suggests that whoever was present at the first meeting with Mr Shereen and the first defendant did not make much impression on Mr Thompson at that time. This is not easy to reconcile with that person being the second defendant, because judging from the way he gave his evidence to me, and also the impression he appears to have made on Mr Ajmal Khan, Pir Mohammed is an extremely forceful, indeed somewhat dominating, character.

[68]Mr Thompson did not recall meeting the claimant until the day before the trial when he said he confused him with Mr Shereen because they looked alike. This I am bound to say did not seem likely; Mr Shereen was a longstanding client with whom Mr Thompson would have been very familiar, and the claimant does not, from my observation, bear any strong resemblance to him.

[69]The second defendant's evidence was that Mr Thompson had advised both defendants that the agreement between them ought to be reduced to writing "but we never got around to doing that". Mr Thompson said that he could not recall saying that, but it was advice he would have given. If he did, it is in my view inexplicable that he would not have recorded that advice, if only to protect his own position. Given that the second defendant would appear to have been his client, Mr Thompson would have been very vulnerable to an action in negligence if his interest had not been protected and, for instance, the first defendant as the legal owner had entered into some dealing with the property.

[70]It appears that the transaction was being represented to the Royal Bank of Scotland as being the purchase of the business of Express Auto Spares together with the premises at which it was carried on. It is not clear from the file or his evidence how Mr Thompson can have given the assurance referred to above that the first defendant would be solely entitled to the profits since he was not himself acting in relation to a purchase of the business and does not appear to have obtained any instructions about any transaction pursuant to which the first defendant would move from a position of merely working at the premises to one in which he was solely entitled to the profits of that business.

[71]The vendor's solicitors made clear that their client was selling to the existing tenants of the premises, and sought to treat part of the payments made before completion as on account of arrears of rent, rather than the purchase price, putting their client of course in a position to demand an additional payment on completion. It appears that in the event the vendor backed down when it came to completion in that he did not demand that the full purchase price be paid in addition to the alleged arrears of rent, but prior to that Mr Thompson had made no objection to the assertion, either on the basis that the first defendant was not a tenant (as Mr Thompson had stressed to the bank) or on the basis of the second defendant's involvement. Why not, if the purchaser was a mere worker at the site but the seller was attempting to saddle him with several thousand pounds of rent arrears?

[72]In June 2006, the claimant's solicitors discovered that the second defendant had registered a restriction against the title to the property on the basis of his claim to a beneficial interest. On 30 June 2006 they wrote to the first defendant's solicitors asking "what steps your client took to object to that registration" and stating that upon the claimant's instructions the second defendant had no interest, legal or equitable, in the property but was merely a tenant. On 24 July 2006 Canty & Co wrote back, in a letter headed "without prejudice" but for which no claim to privilege is made, stating "we have now been able to meet with our client ... at the outset however we must make it clear that prior to meeting with our client we had absolutely no knowledge of Mr Pir Mohammed's involvement in this matter. We have been informed that Mr Pir Mohammed assisted our client in the purchase of the property on Armoury Road. Apparently Mr Pir Mohammed not only assisted in the purchase of the property but has also contributed to mortgage payments since the property was purchased. We have instructed our client that he must provide us with evidence to substantiate this".

[73]Mr Thompson's evidence in relation to this letter was that it was not written by him but by Mr Ian Shephard, who was a partner in the firm at the time but had since left. He could not explain why Mr Shephard said that the firm had no knowledge of Pir Mohammed's involvement, since that statement was "patently untrue" and said that he had not been consulted before the letter was written.

[74]I observe that Mr Shephard was clearly aware that his firm had been involved in the purchase, because the file had been passed to him by Mr Thompson at about the beginning of 2006 when dealing with the claimant's restriction. He would have had the opportunity to be told about any involvement of the second defendant at that stage. If he had not been, he would have known that it was Mr Thompson he should ask about any such involvement, and given the surprise expressed in the letter of 24th July it is odd that he should not have done so. It is plain that the matter came as news to Mr Shephard at his meeting with the first defendant, and he must have made that clear to his client. If the position was that Mr Thompson knew all about Pir Mohammed's involvement and interest, it might be expected that the first defendant would have said so to Mr Shephard, to meet his surprise. But it seems that he cannot have done, for it is difficult to believe that Mr Shephard would have written the letter that he did if he had been told by his client that Mr Thompson knew all about it.

[75]Overall, I was not satisfied that Mr Thompson had been able to give me a complete account of the transaction. I concluded that there must be gaps in his recollection, and that it would be unsafe to rely on that recollection where it stood alone.

The defendants

[76]The second defendant made a further witness statement on Friday 28 November 2008, the business day before the trial began on Monday 1 December. That witness statement attached a number of documents which he said had only just become available to him. He said that since the original trial date in March 2008 he had made many efforts to locate further documents from relevant banks and his accountant but that "I have faced a lot of difficulty" which he did not further explain. He went on to say "after the pre-trial review on 7 November 2008 I decided to make contact with my accountant to ask for more documents. This time I told him to give me everything he had. I did this in a phone call around 10 November. I got the documents shortly after that. I glanced at them and formed the impression that they were(a) duplicates of documents I had already given my solicitors

(b) had already been disclosed, and

(c) were for time periods that were not relevant to this case (i.e. 1999)" subsequently, he said that he had looked at the documents again in more detail and found new documents "jumbled up between other documents"

[77]I regret to say that I did not find this explanation at all convincing. The documents disclosed dealt principally with the payments the second defendant said he had made towards the deposit, a matter on which he was being pressed and had previously given no detail at all. There was no explanation why the second defendant had apparently only at this very late stage asked for "everything" the accountant had. Having gone to the trouble of doing so, there was no explanation why the second defendant should only have "glanced" at the documents he received. On his evidence, the second defendant received these documents on or about 10 November, and his solicitors wrote on 21 November saying that all relevant bank statements had been disclosed, any missing ones having been lost in a burglary at the second defendant's house. Days later, relevant statements were apparently discovered among the documents supplied by the accountant.

[78]The burglary was said to have been in January 2007, but the fact of it was not disclosed until a letter from the second defendant's solicitors dated 12 June 2007. It was said to have been reported to police and insurers, but no documents were produced to verify the fact or the date of these reports. It appears the burglary was not mentioned in the second defendant's disclosure list served in April 2007, nor in correspondence during April and May 2007 in which the claimant's solicitors expressed their surprise at the improbably small number of documents disclosed. Indeed it appears that the second defendant disclosed only one document, a letter dated 25 September 2006 to the second defendant from Mr Ahmed's son Mr N. Tariq stating that a company called Mushtaq's Limited had received cheques for £40,000 from the second defendant in 2002. In evidence, the second defendant seemed reluctant to acknowledge that he had asked for this letter to be generated but there could be no business reason to write such a letter four years after the event.

[79]My conclusion is that the second defendant deliberately avoided complying with his obligations to give disclosure of relevant contemporaneous documents, preferring instead to obtain a self-serving letter which in the end did not even accord with his own case as to the timing of payments. I have the gravest doubts whether there was ever any such burglary as he alleged; it seems much more likely that this was an excuse to avoid disclosure of documents, a tactic which he reversed at the last minute when he felt that it might be more beneficial to his case to have supporting documents available.

[80]From the bank statements belatedly produced the second defendant identified a number of cheques which he said had been drawn on accounts controlled by him and paid to Mr Bashir Ahmed to make up the deposit of £40,000. As a result of urgent inquiries at the bank, copies of certain of these cheques were made available during the trial. None of the accounts was in the name of the second defendant. He explained that he was or had been unable to hold a bank account in his own name because he had a CCJ registered against him, and because he had been involved in difficult and contentious divorce proceedings. The first of these explanations does not seem likely but the second rings true, although the implication that he conducted his affairs so as to conceal his assets from his wife reflects no credit on him.

[81]The majority of the cheques were drawn on account in the name "B Ullah t/a Al Shams Traders". The second defendant's evidence was that Mr Ullah was his partner in a business known as Al Shams traders, although it appeared that Mr Ullah was resident in Pakistan and that in reality the second defendant had sole conduct of the account. He referred to himself as being a signatory and authorised user of the account, and later as a "trustee" of the account, although it was clear that what he meant by this was not that he was acting as trustee for the benefit of Mr Ullah but that he was entitled to use the account for his own private purposes.

[82]One cheque came from an account in the name "PMS motor services". The second defendant's evidence was that this was an account in his son's name, and that "PMS motor services" was the trading name of a business run by himself, and not his son. It was clear that the second defendant had sole control of this account, and his son would appear to be merely a convenient front.

[83]Certain of the payments said to be towards the mortgage came from an account in the name "Pir Motor Services Cab Sales & Rent" which the second defendant said was an account in the name of himself and his current partner, although the business was his alone.

[84]It was clear from such statements as were produced that there is a considerable volume of transactions between these accounts. The second defendant advanced no business reason for this, simply saying that it was his business and no one else's. I conclude that he treated it as a matter of convenience which account money was paid into or out of, and switched money between them as it suited him. Certain payments were marked as being repayment of loans from different individuals, which the second defendant said was "my business and my affair".

[85]Coming to the cheques said to have been paid to Mr Bashir Ahmed, the second defendant's evidence was that he had handed over all the cheques to Mr Ahmed (in the presence of the first defendant on most or all occasions), that he had signed the cheques and filled in the amounts but left the payee blank for Mr Ahmed to complete as might suit his convenience: i) the first appears in bundle C1 at page 855 TK and is a cheque for £5,000 dated 3 August 2001. The name of the payee has been filled in different handwriting to the rest of the cheque and is "Z Parveen". The bank statement shows that the cheque was paid on 8 August 2001. A document headed "Al Shams expenses A" said to be a record of payments made on behalf of the Al Shams business records this as being for "Dep[osit] A[r]moury Rd". This would certainly correspond with the acknowledgement by the vendor's solicitors that £5,000 had been paid on a date before 29 August 2001. Unfortunately Mr Ahmed's evidence was that the payee's name has not been completed in his handwriting nor that of anyone he recognised, and that he did not know anyone called "Z Parveen". ii) The second is dated 10 August 2001 and is for £10,000. Again the expenses schedule shows this cheque as being for "Dep Armoury Rd". The payee is named as "Mushtaq's Food Machinery Ltd" and the cheque was apparently paid from the account some weeks later on 29 September 2001. This would correspond with the £10,000 noted to have been paid by 4 October 2001. Mr Ahmed confirmed that the payee was one of his family companies and that this cheque represented part of the deposit money. iii) The third is dated 15th February 2002 and is again for £10,000. This time the payee is "Butler Hall & Co", the vendor's solicitor, and corresponds with the payment noted by them on the same date. The cheque-book stub records this as being for "Armoury Rd unit deposit". Mr Ahmed confirmed that he had received this cheque and counted it towards the deposit. iv) The fourth is dated 23 March 2002 in the sum of £5,000 payable to "B Ahmed t/a Mushtaq's". Again the cheque-book stub records this is being for "Armoury Rd unit" and Mr Mushtaq confirmed that he had received it as part of the deposit. It corresponds with the payment of £5,000 acknowledged on 12 April 2002. v) The final cheque comes from the Pir motor services account and is for £10,000 dated 12 April 2002. The cheque-book stub is marked "Armoury Rd BSA building" and the cheque was paid on 16 April 2002. No copy of the cheque has been obtained, but such a payment corresponds with the acknowledgement of receipt of a further £10,000 on 24 April.

[86]I accept that all these cheques were paid from accounts controlled by the second defendant towards the purchase price of the property. Although the first of them was not recognised by Mr Ahmed I think the most likely explanation is that he has, with the lapse of time, forgotten why it was convenient for him to use that cheque to make a payment to "Z Parveen".

[87]The second defendant also gave evidence that he had paid £550 to Mr Thompson's firm for their fees, and £650 to the bank's surveyor on 18 January 2002. I accept that evidence also.

[88]The other part of the purchase price that was not financed by Royal Bank of Scotland came from monies deposited in the business current account prior to completion. This was referred to throughout as "the £30,000" and it is the case of the defendants in general terms that this was the personal money of the first defendant. In fact the deposits were slightly more than £30,000, part being taken up in fees and £29,000 being applied towards the purchase price.

[89]I came to the conclusion that the evidence of the two defendants as to how the £30,000 was raised was hopelessly confused. The second defendant said, in his second witness statement "Gulab paid this money". He went on to say that of the total £7,000 had come from the Pir motor services account by way of cheque number 100018 credited to the business current account on 7 May and cleared through the Pir motor services account on 9 May. In relation to this, the second defendant said "this cheque represented money that Gulab had given to me for safekeeping because he did not have a bank account of his own at that time. With this cheque I was simply returning his money to him." He did not say that any other part of the £30,000 had come through him. He did not explain when the first defendant had given him that £7,000, nor were any relevant bank statements produced showing the payment in to the Pir motor services account. This admission that he had been holding money on account of the first defendant appeared to contradict the evidence he gave in response to cross-examination that whilst it was true that members of the community lent money to each other it was not necessarily true that one might hold money on behalf of another.

[90]The first defendant was cross-examined about the setting up of the business current account and the various payments into it. That account was opened in April 2002. At this date, of course, it was the first defendant's case that he was not a partner in the business but simply working from time to time on the site, and that there was no agreement or arrangement for him to buy the business. It was put to him that this was an account for the business of Express Auto Spares, but he denied it. Asked again whether he was an owner of the business he avoided the question and said "Mr Khan said I could use his name". The suggestion that setting up this account was something done with the claimant's consent was not put to the claimant and is not consistent with the statements on that account being sent to the first defendant's home address rather than the business address. It appears from the account statements that trading transactions began to be put through the account immediately after the purchase of the property, which is no doubt what the bank would expect to have seen if the transaction included the purchase of the business, but not consistent with the business having been purchased by a separate transaction on 1 August 2002, the date of the deed.

[91]Asked about the second defendant's evidence that £7,000 was money given to him for safekeeping, the first defendant said "that money was for the deposit I gave him all in one", clearly suggesting that the money had not been given for general safekeeping but for the specific purpose of paying the deposit. It was put to the first defendant that he did have a personal account notwithstanding the second defendant's explanation that the safekeeping arrangement had been because the first defendant did not have an account of his own. He denied that he had such an account, saying "no, when I get money from family and friends, whatever I get I gave it to him" referring to the second defendant. It was put to the first defendant that the second defendant made no reference to any other funds for the deposit having flowed through his account and the first defendant "well it did. Of course I did".

[92]It was pointed out that in his replies to inquiries (A38) as to the source of funds paid towards the deposit he had responded "payments from defendant's personal account" (which must have referred to himself since the second defendant was not yet a party) and "payment made by Mr Pir Mohammed". This clearly contradicted his denial of having a separate account.

[93]It was pointed out to the first defendant, and he accepted, that he had not at any stage identified any person other than the second defendant who had provided funds towards the deposit, although his amended defence asserted that "the property was financed by means of payments by the defendant, his relatives, including, in particular Mr Pir Mohammed, and a loan from the Royal Bank of Scotland in the sum of £161,000". I interpose to note that at the commencement of the trial I refused permission for the first defendant to call four further witnesses who, it was said, were prepared to make statements that they had advanced funds to the first defendant for this purpose. I did so on the grounds that no explanation had been provided why these statements could not have been obtained and served in accordance with the case management directions or why, if there had been any difficulty in obtaining such statements, the first defendant had himself been under any difficulty in identifying who had provided the money to him.

[94]In particular, the first defendant had not made any suggestion that Mr Shereen had provided any part of the funds used. However, at the start of the trial the first defendant produced a document designed to support an allegation that Mr Shereen had lent him £10,000 "in early 2002" specifically for the purpose of buying the building. This documentation was put to Mr Shereen who accepted that he had made a loan of £10,000 to the first defendant at some point in 2002, but he maintained that there had been no connection with the purchase of the building, it had simply been a request from a friend and relative which he was in a position to comply with and did, without asking what the money was for. He had subsequently chased payment on a number of occasions, going to the extent of instructing solicitors in 2006 who wrote a letter (also produced) dated 31 July 2006 threatening legal action if the money was not repaid. He said that the two of them had been to a community mediation meeting but this had not produced payment. He produced a further letter written by himself on 17 January 2008 referring to that meeting, and an e-mail from his solicitors dated 14 February 2008 in connection with the service of a statutory demand. He said that he had been contacted by a friend of the first defendant who told them that the first defendant would pay provided he refrained from any legal proceedings. A meeting was arranged at a community centre at which the first defendant said that he would pay the £10,000 provided that Mr Shereen signed the document put in front of him. Otherwise, the first defendant would say that the claimant was his partner and Mr Shereen would have to look to him for payment of half the amount.

[95]Mr Shereen confirmed that he had signed the document put in front of him, but said he was not given a copy of it and did not read it. At that stage he said he would have signed anything in order to get his money.

[96]The document itself reads as follows:

“ I Gulab Mohammed of [address] I can confirm that I did borrow the said sum of £10,000 from Mohammed Shereen of [address] in early 2002 for the sole purpose of buying the old BSA building located in the Armoury Road Small Heath Birmingham. The said sum of £10,000 will be paid back to Mohammed Shereen on today's date 18 May 2008 in front of two witnesses named ”

It is signed by the first defendant, Mr Shereen and two witnesses

[97]Mr Shereen pointed out that now that he did read the document it appeared to be expressing a confirmation from the first defendant, and not himself. He did not agree with its contents. It was put to him strongly in cross-examination that by signing the document he was assenting to its contents, but he denied this equally forcefully and repeated that he had only signed it in desperation to recover his money which had been promised within a year but had been outstanding for six years.

[98]Having heard the evidence of both witnesses I have no hesitation in saying that I prefer Mr Shereen's account. I do not find it too difficult to believe that he would have made an unsecured loan on this basis to a relative, given that all parties accepted that such transactions were common among members of the Pashtun community. Against that background, it would be much more unusual that one of the parties would seek to document the repayment of a loan when the making of it had not been documented, and even if a receipt was required there is an oddly jarring note about the insistence on spelling out the purpose of the loan in the receipt. I note that the loan is said to have been made in early 2002 (both parties to it indicating January of that year) but the business account was not established until April. None of the payments into that account is in the sum of £10,000 and there is no indication how, if at all, any of them may have derived from this £10,000. If in fact this £10,000 was used towards the purchase its timing would seem to fit best with the £10,000 that was paid in early February, which is now said to have come from the second defendant's funds and not those of the first defendant.

[99]I conclude that the extraction of this receipt was a self-serving move on the part of the first defendant designed to give him some advantage in these proceedings. In the result, it has an adverse effect on his credibility.

[100]I observe that the business current account shows a cheque of £5,000 paid in on 7 May 2002, noted as "cheque re-presentation" which is debited as unpaid on the same date. This has been marked in manuscript by the first defendant on the statement "this money transferred from Pir Mohammed account". That did not however seem to be confirmed by the second defendant's evidence.

[101]In his witness statement (B467) the first defendant had said that on a date he could no longer recall in 2001 he began to speak with Mr Bashir Ahmed about buying the BSA building. He had approached the claimant as (on the first defendant's case) the claimant was then renting the premises but he had said that he could not afford it. He had approached two other people (unnamed) who were not interested. He then approached the second defendant and asked if he was interested in buying the building in partnership and the second defendant agreed. He went on to say "I had proposed to Pir Mohammed that at this time I could only raise £30,000 from family and friends. As the deposit was £70,000 he agreed to pay £40,000 on the condition that I paid him back the £5,000 shortfall… the deposit was paid in the following manner:-£40000 was paid directly to Mr Ahmed by Mr Pir Mohammed. I understand that he may have paid this in instalments. A further £30,000 was paid by cheque from Mr Pir Mohammed into the bank account at the Royal Bank of Scotland. This £30,000 was paid by me to Mr Pir Mohammed in instalments. I had borrowed the sum of £30,000 from my family. The balance of the purchase price came from a mortgage from the Royal Bank of Scotland."

[102]It is apparent that this is not a full and complete account, and in many respects it cannot be true. Now that the bank statements have been produced it is evident that there was no cheque for £30,000 from Pir Mohammed to the business current account. The defendants differ as to whether all of the £30,000 went through accounts under the control of Pir Mohammed, or whether only £7,000 did so. According to the oral evidence of both defendants they were perfectly well aware that the £40,000 was paid by a series of cheques and they were both present when most or all of them were handed over to Mr Ahmed, contrary to the detached impression given by the first defendant saying that "I understand he may have paid this in instalments".

[103]The supposed discussion between the defendants as to their respective contributions does not make sense against the chronology of the transaction that I have referred to above. The second defendant was brought into the transaction, it would appear, no later than August 2001 since he made a payment to Mr Ahmed at the beginning of that month. At that time, the amount of the "deposit" (by which it is clear the parties meant the amount they had to raise themselves, as distinct from that to be provided by the bank and not any amount to be paid on exchange of contracts) may or may not have been known (since it is not clear when the loan application was made) but if it was known, it was thought to be £40,000 not £70,000, because the bank was initially prepared to lend £190,000. The amount of the loan only reduced (with a consequential increase of the "deposit") almost 7 months later in February 2002. There has been no suggestion by either defendant that they anticipated this, or that they initially agreed to contribute a half each of a deposit of £40,000 and varied this arrangement when the bank finance was not available.

[104]It was pointed out to the first defendant that in his letter of 15 February 2002 to Mr Thompson the first defendant had said "I would also like to confirm that I have paid a 10% deposit to the vendor directly" and it was put to him that 10% would be £23,000. In response the first defendant said "Pir Mohammed has made a deposit. Pir Mohammed was looking after the financial side". Miss Bristoll put to him that it was not true that he had paid a 10% deposit, to which he said "I'd paid Pir Mohammed. Not £23,000, more than that." Asked why he had written a letter stating that he had made payment direct to the vendor he said "because I was responsible". At the date of this letter, a total of £25,000 had been paid to Mr Ahmed, all of it from accounts controlled by the second defendant and now said by him to be part of his total contribution of £40,000. By this evidence however, the first defendant appeared to be saying that this £25,000 had come from funds he had provided to the second defendant. He appeared to have forgotten that it was his case that the money he assembled from friends and relatives was not paid direct to the vendor but was paid later into the business current account from which it went towards the completion monies.

[105]The account given by the first and second defendants in their witness statements of the process of negotiation for the acquisition of the property is extremely bald and highly selective. For instance, neither of them makes mention of Mr Shereen, Mr Ajmal Khan or Mr Thompson. This is particularly surprising in the first defendant's evidence, because he accepts that Mr Shereen was someone whom he and the claimant both trusted and consulted about business matters and that Mr Shereen played a central role in the transaction introducing him to Mr Ajmal Khan for the purposes of obtaining finance and to Mr Thompson to deal with the legal aspects.

[106]My impression of the first defendant's evidence was that, as in connection with the partnership matters, he was inconsistent and, when it suited him, untruthful. The second defendant also did not seem to me to have dealt with matters openly and honestly. He was plainly someone who was accustomed to presenting a false picture to the world by conducting businesses and maintaining bank accounts in the names of others. In relation to these proceedings, he held back from giving his full evidence until the very last moment, giving me the strong impression that he wished to minimise the possibility of it being contradicted. Even so, and although he was evidently acting throughout together with the first defendant, their accounts were not consistent. He gave his evidence in an overconfident, even aggressive manner. I had little confidence that I could rely on the second defendant's testimony any more than that of the first defendant, or on any document produced under the influence of either of them.

Mr Bashir Ahmed

[107]The final witness called was Mr Bashir Ahmed. My impression of him as a witness was that he was doing his best to give truthful testimony, but, as he frankly admitted, his memory of the transaction had faded somewhat. He was shown the cheques said to have been paid by the second defendant making up the £40,000 and confirmed that he recognised all but the first of them (the one made out to "Z Parveen"). Mr Ahmed said that the transaction had dragged out and he had asked for cheques on account of the deposit as evidence of commitment on the part of the purchasers. This is consistent with the solicitors' correspondence which shows Mr Ahmed's solicitors pressing for the transaction to move on and threatening to withdraw on a number of occasions if it did not do so. Mr Ahmed did not put a date on the commencement of negotiations, but he did say that it was the first defendant who had first approached him at his sweet shop business.

[108]Mr Ahmed's evidence about his knowledge of the claimant was somewhat inconsistent. He first of all accepted that the claimant and the first defendant had come to see him together to rent the building in 1995 but then said that the only person he had met at that time was the first defendant. He then accepted that he had known the claimant for a long time. Mr Ahmed did accept that when he had been to the property he had seen the claimant there on many occasions but said that he had dealt mainly with the first defendant. When he came to sell the building he said that the first defendant had come first with Mr Shereen to organise the finances, but for some reason he was not able to get finance. Subsequently the first defendant came with the second defendant and said he had got the funds now. When the deposit cheques were handed over Mr Ahmed had seen the claimant, the first defendant and the second defendant, but he did not know what was the relation between them. The claimant had not given him any money himself.

[109]Mr Ahmed could not say why his solicitor had written naming the purchaser as "Mr S. Khan". He thought that perhaps his solicitor had obtained this name from the purchaser's solicitor. It does not appear from the solicitors files that this is the case, since the first contact is evidently from Mr Ahmed's solicitor. I have already said above that the conclusion I come to from these documents is that Mr Ahmed must have instructed his solicitor that the purchaser was to be "Mr S. Khan" for whom Mr Thompson was acting as solicitor. Again, Mr Ahmed's memory must be incomplete. It is clear from his evidence that Mr Ahmed's first contacts to discuss the property transaction must have been with the first defendant and Mr Shereen. The claimant may have been present at some meetings but he does not appear to have played a major part. The second defendant came on the scene later, but at least by August 2001 when the first cheque was paid over. It is probably the case therefore that it was the first defendant and Mr Shereen who had told Mr Ahmed that the purchase was to be in the name of the claimant, which accords with the evidence of the claimant and Mr Shereen that this was the initial intention. It was quite clear from Mr Ahmed's evidence that it was a matter of indifference to him in whose name the purchase was to be taken, as long as he was paid. He said that it was very common in the community for a property to be in one name but for two or three people to be the real owners. It is not therefore inconsistent with this conclusion that after the initial discussions he dealt with the first defendant and/or the second defendant, or that no objection was taken by him to the contract being signed and the transfer made in the name of the first defendant.

Subsequent payments

[110]It is not in doubt that since at least the date of completion of the purchase of the property the second defendant has been in occupation of one of the units and that he has paid, on a monthly basis, an amount equivalent to somewhat more than half the payment required to repay the RBS business loan, and the costs of insurance of the property. The amounts have varied, the principal reason being said to be that the cost of insurance was reduced at one point when the original insurer repudiated the policy on the grounds of misrepresentation, refunding all the premiums paid to date, and a cheaper insurance policy was taken out with a different insurer. The evidence of the defendants was that half the amount refunded had been paid back to the second defendant, although not all of this could be traced through the records as part of it was paid in cash. The second defendant's payments were made from a variety of sources and for the most part into the business current account, from which regular payments have been made to the business loan account to pay the monthly instalments on the term loan.

[111]What is in dispute is the basis upon which these payments were made. The defendant's case is that they were the joint owners of the property and contributed equally to the mortgage and other outgoings. The claimant's case is that it was represented to him that the second defendant was being introduced as a tenant of one of the units and that any payments he made were received as funds of the partnership between himself and the first defendant. He was not told about, and did not agree to, any arrangement under which the second defendant would have an interest in the building.

Conclusions: property issues

[112]As between the defendants, it was accepted by counsel in closing that their position is that the second defendant is entitled to one half of the beneficial ownership of the building. It was further accepted that if I find that the claimant has an interest in the building, the first defendant is excluded from any such interest.

[113]In the end, the conclusions of fact that I come to depend upon the credibility of the witness testimony. As between the principal witnesses in the case I have concluded that although the account given by the claimant and Mr Shereen may not be entirely complete it is substantially accurate and to be preferred to that given by the defendants. I have already found in relation to the partnership issues that the claimant was used by the first defendant as a front for the business as long as it suited him not to appear to be an owner or to be liable for any obligations (such as tax obligations) which might be incurred, and that he caused the accounts and tax affairs of the partnership to be conducted without reference to the claimant or explanation of what was being done in his name. In my judgment, the overall position in relation to the property transaction is that the two defendants between them took advantage of the claimant's naivety further to persuade him to reverse the presentation of the business so that it appeared to be owned by the first defendant alone and to acquire the property in the name of the first defendant alone, and that the two defendants then took steps dishonestly to cut him out of any interest that he expected to have in it.

[114]In particular, I make the following findings of fact based on my overall assessment of the evidence: i) I accept the evidence of the claimant and Mr Shereen that the two partners agreed between them that the building should be bought for the partnership, and consulted Mr Shereen as to how this could be done. ii) Mr Shereen was involved in initial discussions with Mr Ahmed. These discussions must have taken place during 2001. Initially, the intention was that the purchase would be in the name of the claimant. This remained the position when agreement in principle was reached with Mr Ahmed, and formed the basis of his instructions to his solicitor. iii) At some point in the second half of 2001 or early in 2002 the intention changed so that the purchase was to be taken in the name of the first defendant. This was based at least in part on the advice of Mr Samuels, was perhaps influenced by the escalating pressure from the Inland Revenue over the tax liability in the name of the claimant, and probably also by the existence of a judgment debt or debts in the claimant's name. It did not mean that the claimant gave up the intention that the property was to be a partnership asset. iv) After the initial introduction of both partners by Mr Shereen, it was the first defendant who dealt principally with Mr Ajmal Khan, and through him Ms Clements at RBS. The first defendant informed the bank that he was buying the business as well as the property. I observe that it would seem likely (as indicated by Mr Khan) that he would have had to provide financial information about the business in order to satisfy the bank that he had a source of revenue from which the loan could be repaid. In the absence of the bank's files it is not possible to say what the information contained, but in so far as it included any payment by the second defendant, it could presumably only have been on the basis that he was to be a tenant in one of the units, since the bank was not told that he was to be an owner. v) I reject the evidence of the defendants that the claimant said he could not afford to participate in the purchase of property and declined to do so. I accept the claimant's evidence that he understood the purchase to be proceeding in the name of the first defendant on behalf of the claimant and the first defendant as partners. I further accept the claimant's evidence that the involvement of the second defendant was presented to him by the first defendant as being as a tenant of the partnership in respect of one of the units. vi) I have already accepted the claimant's evidence that in general the first defendant had control of the finances and particularly of the handling of the cash generated by the partnership business. I further accept his evidence that he left it to the first defendant to arrange the mortgage and to pay the deposit, and that he understood, as a result of what the first defendant told him, that the first defendant was doing this from partnership funds. vii) I reject the evidence of the second defendant that he was not aware of the partnership between the claimant and the first defendant. It was plainly common knowledge in the community and it is not credible that the second defendant would be unaware of it. Further, the second defendant having become involved in the arrangements for the purchase of the property from at least August 2001 must have been aware that what was under discussion at that stage was a proposed purchase on behalf of the claimant and the first defendant as partners. viii) I find that the intention to acquire the property on behalf of the claimant and the first defendant was disclosed to Mr Ajmal Khan and to Mr Thompson. On the other hand, the intention formulated between the two defendants that the second defendant should have an interest in the property was not disclosed to the claimant, Mr Shereen, Ajmal Khan or Royal Bank of Scotland. It amounted to a private arrangement between them, dishonestly concealed by both of them from the claimant. ix) As to the ultimate origin of the money used to pay the deposit, the position is of course difficult for the claimant to unravel when the relevant funds and records were at all times under the control of the defendants who are, as I have found, dishonest. Having found that the first defendant told the claimant that the partnership had funds to pay the deposit, that is sufficient in my judgment as against the first defendant to place the onus on the first defendant to prove the contrary, if that is what he now contends. I am not satisfied that he has discharged that burden. x) Insofar as the deposit was said to have been paid from the first defendant's own money (the £30,000) he has given no credible explanation of the source of funds at all. I reject as incredible his explanation that he raised it by way of loan from friends and family in circumstances where he declined even to name the individuals concerned until the first day of the trial, and in the light of his last-minute, and discredited, attempt to implicate Mr Shereen. Insofar as the payments were said to come from second defendant's personal money (the £40,000) the evidence in that respect is also in my judgment insufficient to enable the first defendant to show, as between himself and his partner, that they were not partnership funds. The mere fact that the immediate source of the funds was an account under the control of the second defendant is not sufficient where the first defendant's own evidence is that he was in the habit of placing funds with the second defendant to be returned as he needed them, and kept no records at all from which the ownership of the mixed funds could be ascertained.

[115]Although there are three parties involved in this claim, each of whom claims a share of the beneficial ownership of the property, in my judgment it is productive of confusion to seek to analyse their interests by looking at the position of all three together. This was not a tripartite transaction; it consisted of two bipartite sets of dealings in which the legal owner (the first defendant) dealt on the one side with his business partner the claimant and on the other side with the second defendant as his would-be copurchaser. It is necessary in my judgment first to analyse the claims to equitable interests said to arise from those two sets of dealings and then to see how they interact and, to the extent that they conflict, what priority is to be given to them.

[116]In my judgment, when considering each of these sets of dealings in turn no difficult or novel questions of law arise. As between the claimant and the first defendant, I have found that they agreed between them that they would acquire the property as an asset of the partnership. It thereupon became the duty of the first defendant to acquire the property on that basis, and once acquired, his interest in the property became an interest held for the benefit of the partnership. The first defendant also owed the claimant the normal fiduciary duty of a partner to act in good faith, aspects of which include a duty to act honestly in partnership dealings, not to seek to benefit himself at the expense of his copartner and to give a true account of all partnership assets and dealings (see Lindley and Banks on Partnership, chapter 16). I am in no doubt that in retaining the funds of the partnership and apparently mingling them with other monies of his own and the second defendant without giving a proper account of the claimant, in formulating a secret plan with the second defendant to acquire the property to the exclusion of the claimant, and in creating any interest in the property in favour of the second defendant without the consent of his partner, the first defendant acted comprehensively in breach of this duty. Those breaches of duty oblige the first defendant to compensate the claimant, if necessary by adjusting the first defendant's own interest in the partnership assets.

[117]As between the two defendants, I heard submissions from counsel for both defendants about the basis upon which the second defendant was entitled to a beneficial interest in the property. These involved their express agreement, at the time of acquisition or as later reflected in the declaration of trust and/or a resulting trust arising from the payments said to have been made by the second defendant. In fact, the position as between the two defendants is not in dispute; it is that the second defendant should be entitled to a 50% beneficial interest in the property. Since they are in agreement that it was their intention from the beginning to confer this interest on the second defendant it is not necessary to have recourse to the principles of a resulting trust; the second defendant's interest would arise under a common intention constructive trust. Such a trust would have been effective from the date of acquisition of the legal title, and the second defendant's interest was therefore not created, or improved, by the execution of the declaration of trust in 2006. It is accordingly not necessary to analyse the construction of that document to determine whether it created an interest from the date of its execution, or simply reflected the existing position in equity.

[118]The first defendant as the holder of the legal estate in the property is bound in equity to give effect to both sets of interests. If that leads to the exhaustion of the entire beneficial interest in the property, so be it. Insofar as there is a question of priority between the respective beneficial interests of the claimant as a partner and the second defendant pursuant to his arrangement with the first defendant, I am in no doubt that the second defendant's interest being acquired pursuant to a dishonest arrangement made with the intention of cheating the claimant ranks subject to the interest of the claimant.

[119]In my judgment these respective equitable claims can be given effect to by an order declaring firstly that the first defendant holds the property in trust for himself and the claimant as partners. There should be a declaration that in winding up the affairs of the partnership as between the two partners, all payments towards the purchase price, and all receipts from the second defendant, should be taken as being made from and to partnership funds. Any resulting obligation to the second defendant is a liability of the first defendant alone, and not the partnership. The private arrangement between the two defendants can be given effect to without affecting the claimant's interest by a declaration that the first defendant holds his beneficial interest in the building as a partner upon further trust for the second defendant.

[120]I will list a hearing at which this judgment can be handed down and, if not agreed between the parties, the form of order can be settled.