Abdulrida & Ors v Al-Najar & Ors

The court determined numerous investor claims against Mr Mahmood Shakir Al-Najar and a number of companies he controlled, finding that the claimants were induced to invest by false representations and that on the balance of probabilities many projects were a sham or were mismanaged so that investor funds were diverted. Key procedural points were determined: the court admitted Mr Al-Najar’s lengthy written witness statement as hearsay with limited weight (applying Polanski v Condé Nast and CPR rules 32.5 and Part 33) and declined to undertake an inquisitorial cross-examination of the claimants’ witnesses despite the defendant’s absence. The judge found specific misrepresentations and/or fraudulent conduct in relation to multiple projects and ordered equitable remedies including rescission and restitution, an award of equitable compensation of £267,670 to the First Claimant in respect of Flats 9 and 11 Albion Place, and an account of rents; and, in respect of Plot 4 (Monkston Park), held that the Second Claimant had an equitable remedy by proprietary estoppel resulting in a personal claim for £400,000 secured by an equitable charge over the plot.

This is a first instance trial brought by three Kuwaiti investor claimants against Mr Mahmmood Shakir Al-Najar and a number of Prestige-related companies and individuals. The claimants invested approximately £14 million between 2012 and 2015 across multiple development projects. They alleged misrepresentation, deceit, breach of fiduciary duty, breaches of trust, unjust enrichment, and sought rescission of investment arrangements, restitution, accounts, equitable compensation and other remedies. Procedurally the trial was conducted remotely; the principal defendant, Mr Al-Najar, did not participate orally but served a lengthy witness statement. The court had to decide whether to admit that statement as hearsay and, if so, what weight to afford it, together with how to treat other hearsay material put forward during the trial.

Issues framed by the court included:

• whether hearsay statements (including the absent defendant’s 102-page witness statement) should be admitted and what weight to give them (issues under CPR r.32.5, Part 33 and the Civil Evidence Act 1995);
• whether the absence of the defendant justified exclusion of his written evidence or other special procedural steps (consideration of CPR r.3.1A, r.39.3 and the judge’s case management powers);
• whether the claimant investments were induced by false representations or fraudulent conduct and what remedies (rescission, restitution, damages, equitable compensation, tracing, or proprietary remedies) should follow;
• the effect of the defendant’s bankruptcy and the possible relevance of Insolvency Act 1986 s.281(3) to any findings of fraud.

The judge admitted the defendant’s witness statement as hearsay but gave it limited weight where it conflicted with oral evidence, explaining reliance on Polanski v Condé Nast and that exclusion would have been appropriate only where justice required it; the judge emphasised the adversarial role and declined to undertake extensive judicial cross-examination of the claimants’ witnesses. The judge found, on the balance of probabilities and by reference to documentary and forensic banking evidence, that Mr Al-Najar supplied forged or untrue documents in a number of projects and that the claimants had been induced to invest by misrepresentations about (inter alia) the promoter’s finances, the existence of agreements to acquire sites, and the use of investors’ funds by SPV companies. The court granted rescission of contracts induced by misrepresentation as appropriate in relation to the projects examined (including Broughton Manor, Seymour Place, Bishops Avenue, Porcelanosa, Brooklands, Campbell Park) and made specific findings:

• First Claimant (Abdulrida) awarded equitable compensation of £267,670 for Flats 9 and 11 Albion Place and an account of net rents;
• Rescission and entitlement to restitution were found to be available to the claimants for the principal projects relied upon;
• in relation to Plot 4 (Monkston Park), the court found that the Second Claimant (Al-Habib) had a proprietary equity arising by reason of his reliance and detriment and ordered that his entitlement to repayment of £400,000 (with interest) be protected by an equitable charge / purchaser’s lien over Plot 4;
• the judge identified and rejected certain evidential defences and noted where further quantification (assessment of damages or orders for restitution) remained to be determined or specified in consequential orders.

The court observed that issues under Insolvency Act 1986 s.281(3) (preservation of debts incurred by fraud from discharge) were important but not determined as part of the main judgment; the claimants were invited to bring a specific application if they wished a formal determination under that provision. The judge directed the claimants’ solicitors to prepare orders giving effect to the findings.

First instance: the claimants succeeded in large part. The court admitted the defendant’s written evidence as hearsay but afforded it limited weight, preferred the claimants’ oral evidence where unchallenged, found that the claimants were induced to invest by false representations and deceptive conduct in relation to numerous projects, ordered rescission and restitution where appropriate, awarded equitable compensation (including £267,670 to the First Claimant for Albion Place) and granted an equitable charge securing the Second Claimant’s claim for £400,000 against Plot 4. The court declined to determine whether liabilities fall within s.281(3) of the Insolvency Act 1986 without a specific application seeking that determination.