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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Habib Bank Ltd v Dawood [2002] EWCA Civ 1293 (16 July 2002) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/1293.html Cite as: [2002] EWCA Civ 1293

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
APPLICATION FOR PERMISSION TO APPEAL

		Royal Courts of Justice Strand London WC2 Tuesday, 16th July 2002

1. LORD JUSTICE WALLER: This is a renewed application for permission to appeal.
2. On 22nd November 1994 Habib Bank issued proceedings against Mr Dawood. They claim that he was liable on a guarantee alleged to have been signed by him guaranteeing advances to a Mr McColgan up to a sum of £300,000. The proceedings were not served until March 1995. By a defence served in March 1995 Mr Dawood put in issue whether it was his signature on the guarantee; suggesting in the alternative that if it was his signature that was because he had allowed an employee of the bank, a Mr Butt, to have various documents signed in blank and Mr Butt had dishonestly filled in the document so to produce the form of guarantee. In the further alternative it was asserted that the contract between Mr McColgan and the bank had been incorporated into the guarantee and that there had been a repudiatory breach of that banker/customer contract and a breach on which Mr Dawood could rely so has to be discharged from the guarantee. It is right to say that at this stage in proceedings the bank could not say who had witnessed or who had been there and present when Mr Dawood signed the document. That is clear from certain particulars delivered on 4th September 1995.
3. The case had a very long history and, indeed, so long that when the new CPR regime came in Mr Dawood, on 19th June 2000, made an application to strike out the claim because of the delay. Part and parcel of that application was reliance on the fact that Mr Dawood, at a trial, was going to have to deal with matters which had taken place many, many years previously. That application was dismissed by His Honour Judge Kershaw QC on 18th October 2000.
4. The trial came on in the Mercantile List and was heard over some days by His Honour Judge Heggarty QC. By this stage the bank were saying that the guarantee had been executed in the presence of a witness, Mr Naqvi. The judge handed down a written judgment - I think at the end of January 2002 - and it would seem that his orders were not finally drawn up until after further argument, and that happened again on 21st March 2002. The written judgment runs to 236 paragraphs. The issues identified by the judge were, first, the factual issue - did Mr Dawood sign the guarantee? Second, if so, was he discharged by virtue of the conduct of the bank vis-a-vis their customer, Mr McColgan? Third, should the claim in fact still be dismissed as a result of the bank's delay? The first 216 paragraphs dealt with the factual issue. The judge did not simply say he preferred the evidence of Mr Naqvi to that of Mr Dawood. He went into great detail dealing with every point to assist him in deciding where the probabilities lay in relation to whether Mr Dawood had executed the guarantee. In paragraph 11 of his judgment he said this:

"Now, at the end of the evidence in this case, I was left with the clear impression that Mr Naqvi was an honest and reliable witness but that the same could not be said of Mr Dawood. It might seem ineluctably to follow, therefore, that there is no need to investigate in detail the complex transactions which formed the background to the central issue in the case. But I do not think this approach would be right. Firstly, this is an unusual case, in that it has come on for trial some twelve years after the events which have given rise to the claim. Secondly, my assessment of the witnesses, and in particular Mr Dawood, required something more than an incidental analysis of the background material. Thirdly, the admitted activities of Mr Butt form a most remarkable and major feature of the case. Documents and transactions which would usually be accepted at face value must often be regarded with at least some degree of suspicion if Mr Butt is likely to have had a hand in them. This is an aspect of the case which may well have a bearing on questions of credibility as well as on the substantive question of whether Mr Butt fabricated a guarantee. Conventional assumptions may not provide as safe an anchorage as in the ordinary run of litigation. Accordingly, I take the view that it is necessary to investigate the entire picture in some detail before reaching my final conclusions on the central issue."

5. The judge then analysed all matters over the next paragraphs up to paragraph 216. It is right to say that in that analysis he was prepared to assume certain matters in Mr Dawood's favour or, at the very least, not to assume them to have been established against Mr Dawood. He fully took on board what were the strongest points for Mr Dawood. For example, he took on board the matter stressed by Mr Sterling in argument before us today which related to whether Mr Naqvi had been present at the signing of the guarantee, the proper evaluation and probity of Mr Naqvi's note on the audit notes critical in his evaluation of whether Mr Naqvi's evidence was to be accepted. All that one can see from paragraph 190 and following of the judgment. He took on board the fact that the bank had been unable to say, as I have indicated, at an early stage in the proceedings as to whether Mr Naqvi was present. He took on board what may have been even the strongest point in favour of Mr Dawood that the evidence of the debtor Mr McColgan was that he, Mr McColgan, did not know of any guarantee.
6. Ultimately, the judge set out his conclusions in paragraphs 213 to 216 of the judgment, the essence of them being his acceptance of Mr Naqvi as a convincing witness and the reasons why he so found:

"213. Overall, I found Mr Naqvi to be a good and convincing witness. It did not seem to me that any significant inroads were made into his clear and vivid account of what occurred. I considered that his evidence on the central question was broadly reliable, despite the considerable interval of time which had elapsed since April 1989. On the other hand, for reasons which I need not repeat, I did not find the evidence of Mr Dawood at all convincing.

214. It is true that neither Mr McColgan nor his legal advisers seem to have been aware of the guarantee at the time. At first sight that seems surprising. But it is much less surprising when one considers the way in which Mr Butt handled Mr McColgan's account and the nature of the relationship which he appears to have had with Mr Dawood. Mr Butt seems to have committed himself to granting a loan of £329,000 to Mr McColgan without prior head office approval. The proposed guarantee from Mr Dawood was only mentioned when it seemed that there might be difficulties in obtaining approval. Even after head office had required such a personal guarantee as a condition of the advance, Mr Butt appears to have prevaricated in obtaining the necessary document. Only when its absence was picked up by Mr Naqvi in his audit visit in April 1989 would it have become essential for Mr Butt to obtain the necessary guarantee in order to cover himself. From Mr Butt's standpoint, therefore, there would have been no particular reason why any of this should have been made known to Mr McColgan or his solicitors.

215. Furthermore, the relationship between Mr Butt and Mr Dawood seems to have been highly unusual and irregular and I do not think that I have received a full and frank account about their dealings. I do not know precisely what may have passed between the two men in relation to this matter. There are various reasons why, as it seems to me, Mr Dawood might well have been prepared to give his personal guarantee at Mr Butt's request. He may well have wished to exercise a degree of influence and patronage in favour of his former accountant. He may have felt that the favours which he was receiving from Mr Butt deserved a favour in return. In either case, he may well have assumed that there was little, if any, risk, since the advance was fully secured on Mr McColgan's London property. I do not know. But these are the sort of possibilities which must be borne in mind in deciding what weight, if any, is to be given to the suggestion that Mr Dawood could have had no reason to guarantee Mr McColgan's liabilities.

216. In all the circumstances, I conclude that I should accept Mr Naqvi's evidence that his guarantee was duly executed by Mr Dawood in his presence on or about 25th April 1989 and that I should reject Mr Dawood's evidence to the contrary. I think that it is highly likely that, as Mr Naqvi stated, the necessary details had been inserted on the form before Mr Dawood signed the guarantee and that he received at least a brief explanation of what it was for. In the circumstances, therefore, whatever may have happened on other occasions, I reject the contention that Mr Dawood may have signed this document in blank and that Mr Butt may subsequently have filled in the necessary details without any authority to do so. It follows, therefore, that, in my judgment, the factual basis of the Bank's claim against Mr Dawood is made out."

7. In my view, there is simply no reasonable prospect of success so far as Mr Dawood is concerned in seeking to persuade a court of appeal that those findings of fact should be reversed.
8. The judge then dealt with the other two points. On delay he referred to the previous decision of His Honour Judge Kershaw QC. He held that he had a residual discretion, and he held that he would exercise it against striking out the claim. It is right to say, as appeared from paragraph 11 of the judgment to which I referred earlier, that he clearly took great care in relation to this case having regard to the delay and that, as it seems to me, was the proper approach. In my judgment, there is no reasonable prospect of success in persuading the Court of Appeal that he should have struck out this case at the trial on the grounds of delay.
9. On the discharge aspect he dealt with all the arguments presented at the trial. At the trial the main point being taken, as already indicated, related to the suggestion pleaded in the defence that the terms of the customer and bank contract had been embodied in the guarantee, and if a repudiatory breach of the customer/banker contract could be established then the argument was that the guarantor should be entitled to be discharged. The judge - citing Lord Justice Scott, as he then was, at paragraph 233 - identified the principle as being that a discharge would only be effected by the conduct of the bank if, in some way, the extent or nature of the risk being guaranteed had been varied without the consent of the guarantor in a way that prejudices the guarantor. The judge held that in this case monies had been lent to Mr McColgan and were still owed by him, and since nothing had been done by the bank to vary that obligation or prejudice the position of the guarantor it was not a case where the guarantor would be discharged.
10. In this court Mr Sterling has sought to put the matter just a little differently, as I would apprehend. He has suggested that the conduct of Mr Butt internally within the bank - producing false documents so far as the bank, his employer, is concerned - was a dishonest operation of the account which did affect the nature of the risk that Mr Dawood had undertaken by the guarantee. If Mr Sterling had been able to submit that the security given by Mr McColgan had been unenforceable by the bank because of that dishonesty then he would be on strong ground for gaining permission to appeal, because that would have needed some investigation as to the factual circumstances which had led to that result. The position however was that the security was enforced by the bank, so that is not the way in which Mr Sterling can put his case. He has put it in a more limited way. He has submitted that having regard to the way in which Mr Butt was behaving, that allowed Mr McColgan to take a point while the enforcement proceedings were being pursued which enabled Mr McColgan to delay the bank in obtaining a judgment and its security. Thus, says Mr Sterling, that prejudices Mr Dawood because further interest would run on the £300,000 during that period of delay. That is not the way the matter was pleaded. It is not a way in which the bank have had any opportunity to deal with the matter. One might think, in fact, that if there was this delay the value of the property would be likely to have increased so as to obliterate any disadvantage to Mr Dawood. One might also think the bank would have a complete answer to any suggestion that some increase in the amount of interest should be payable by virtue of the conditions of the guarantee.
11. In my view, in any event, the type of risk to which Mr Sterling is there pointing, i.e., some increase in the interest being payable, would not be the type of risk the increase in which would lead to the discharge of the guarantor. This is not thus a point which Mr Dawood should be entitled to pursue before the Court of Appeal.
12. In my view, there is no reasonable prospect of him demonstrating to the Court of Appeal that he should succeed in saying that in some way this guarantee was discharged. For all those reasons I would refuse permission to appeal.
13. LORD JUSTICE KENNEDY: I agree.
Order: Application refused