The High Court has ruled that two Bahrain-based investors had been induced into the purchase of a Clapham hotel.
Etherton J has held that businessman Hashim Ibrahim Kalil Al-Saraj misled Aesha Mohammed Murad and Layla Mohammed Murad as to the value of the Parkside Hotel, Clapham Common Northside, London SW4.
The judge maintained that the Murads had been informed that the purchase price of the hotel was £4.1m, with £2.6m to be raised by mortgage finance and the remainder divided between the three parties. However, the actual sum was £3.6m
He rejected evidence that Al-Saraj had disclosed to the claimants that his contribution of £500,000 would be made by setting off a debt owed to him by the vendor of the hotel against the purchase price.
The Murads brought proceedings after becoming aware that the purchase agreement and the transfer had recorded the price as being £3.6m, with the difference of £500,000 purportedly being the sum that Al-Saraj had agreed to contribute.
They sought an account of profits, and a declaration that, because Al-Saraj had not contributed towards the purchase price, he was not entitled to share in the profits following the resale of the hotel.
The court has held that, although an agreement had existed between Al-Saraj and Abdul Rasool Al-Arbash, the beneficial owner of the hotel vendor, Halfway House Ltd, as to a £500,000 set-off, Al-Saraj had misrepresented to the Murads that he would contribute £500,000 in cash towards the purchase price.
The court stated that, because the “deliberate deceit” by Al-Saraj had enabled him to procure a contractual right to a greater part of the capital profit from the resale of the hotel than if he had fully disclosed the set-off arrangement, Al-Saraj should account to the Murads for his profits.
Etherington J said: “The result would be a just one in that, rather than casting upon the claimants the obligation to establish precisely what proportion would have been agreed to be paid to the defendants, the defendants are merely obliged to give up such profit as they have made.
“That is a particularly appropriate remedy in the case of a deliberate and dishonest conduct designed to achieve a commercial advantage for the fiduciary over those to whom he owes his fiduciary duty.”
Murad and another v Al-Saraj and another Chancery Division (Etherton J) 21 April 2004.
Ajmalul Hossain QC and Tom Fyfe (instructed by Baker & McKenzie) appeared for the claimants; Stephen Cogley (instructed by Tarlo Lyons) appeared for the defendants.
References: EGi Legal News 28/05/04
