UK: Re Muhammed Munir (Murphy & Anor vs. Munir & Ors)
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The Re Muhammed Munir case (Murphy & Anor v. Munir & Ors)  EWHC 278 (Ch) deals with a scenario familiar to bankruptcy trustees: a claim for recovery of property for the benefit of the bankruptcy estate that is contested on the basis that it is held in trust.
Mr. Munir’s trustees requested declaratory measures of various kinds regarding the ownership of a number of assets, possession and sale orders and remedies against the effect of a trust deed as a undervalued transaction and / or as a transaction defrauding creditors. The facts were trivial: title to the property in question appeared to belong to the bankrupt, but trust deeds were produced by the defendants in an attempt to show that they were in fact held for various beneficiaries. There was, however, an unusual complication in that we relied on three acts, a fact in 2007, but the two main ones were concluded in 2008 and 2010. The thesis of the trustees was that it was about deception, and it is in his examination of the authorities on this point that lies the interest of the judgment of Judge Mullen of the ICC.
The judge began with Diplock LJ’s statement of law in
Snook vs. London and West Riding Investments Limited:
“[I]It is, I think, necessary to examine what legal concept, if any, is involved in the use of this popular and derogatory word. I am apprehensive that, if it has any meaning in law, they are acts performed or documents executed by the parties to the “sham” which are intended by them to give to third parties or to the court the appearance of create between the parties legal rights and obligations that are different from the actual legal rights and obligations (if any) that the parties intend to create. But one thing, I think, is clear in legal principle, morality and authorities. that for acts or documents to be a “sham”, regardless of the legal consequences that flow from them, all parties must have a common intention that the acts or documents must not create the legal rights and obligations they give the impression of creating. No unspoken intention of a “hammer” affects the rights of a party he has deceived. “
He went from there to the principles set out by Arden LJ in
Team against stone:
- The court did not limit itself to examining the four corners of the document. It can examine external evidence, including the parties’ explanations and evidence of their conduct.
- After Snook, the intention test was subjective. The parties must have intended to create rights and obligations different from those appearing in the document and to give a false impression of these rights and obligations to third parties.
- The fact that the act or document was not commercial, even contrived, did not necessarily mean that it was a sham.
- The fact that the parties then walked away from an agreement did not necessarily mean that they never wanted the agreement to be effective and binding: they may simply have decided to change their agreement.
- The intention must be a common intention.
The judge also considered Painter against Hutchinson on unilateral intention and Minwalla vs. Minwalla in which Singer J said:
“. Some of the earlier cases, including in particular certain observations by Diplock LJ in
Snook vs. London & West Riding Investments Ltd suggest that in order for the court to conclude that a document or transaction is a sham, it is necessary that all parties to it must have a common intention that “the documents are not intended to create legal rights and obligations that they give the appearance of creating. However, in Midland Bank PLC v Wyatt DEM Young QC concluded, with respect to this principle, “I do not understand Diplock LJ’s comments regarding the requirement that all parties to a sham must have a common interest in order to be a necessary requirement in all cases. fictitious transactions. I consider that a fictitious transaction will always remain a fictitious transaction even if one of the parties to it simply accepted the shammer without knowing or caring what he or she was signing. Such a person would always be a party to the imposture and could not avail himself of any principle of estoppel as was the case in Snook, the defendant not being at all a party to the transaction ‘. “
Singer J supported this view both Team against stone and a 2004 article on the subject by Stuart Pryke:
“In order for a trust to be considered a sham, both parties to the establishment of the trust (i.e. the settlor and the trustees in the usual case) must have the intention not to act according to the terms of the trust Alternatively, in the event that one party intends not to act under the terms of the trust deed, the other party should at least be prepared to accept the shammer’s intentions without knowing or caring of what they sign or of the transactions they perform. “
Judge Mullen contented himself with adopting Singer J’s approach, although he reached his conclusions in Provide largely on the basis of his assessment of the testimony and the facts. Although, in this case, Mr. Munir chose not to participate in the proceedings; the judge concluded that the acts were a sham without any evidence from the bankrupt, relying instead on third parties as to its intention and the lack of contemporary written documentation.
As is often the case in these cases, the expert testimony does not appear to have helped the tribunal as much as the internal contradictions of the respondents’ case:
“Although I note the forensic document examiner’s report as to the authenticity of the documents in the earlier claims in this bankruptcy, there has been no finding that these documents were in fact forged and, if so, by whom. It is however evident that Mr. Munir has repeatedly made inconsistent statements about the ownership of the properties registered in his name and produced inconsistent documents. The three acts which I must consider cannot all of them designed to have an effect, they cannot coexist with each other.
The judge also alluded to the well-worn proposition in Properties of Re Mumtaz:
“In my opinion, contemporary written documentation is of the utmost importance in assessing credibility. Moreover, it can be important not only where it is present and oral evidence can then be checked against it. It may also be important if the written documentation is For example, if the judge is convinced that some contemporary documents probably existed if the oral evidence was correct, and the party providing the oral evidence is responsible for their non-production, then documentation may be conspicuous by its absence and the judge may be able to draw conclusions from its absence.
The trustees were successful in obtaining the relief they sought. An action by certain respondents seeking an opposition remedy was dismissed.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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