Simon Johnson represents successful Claimants in beneficial interest trial concerning Lutfur Rahman, disgraced former Mayor of Tower Hamlets

29th January 2016

Lutfur Rahman was eletected Mayor of Tower Hamlets on 22 May 2014.  Private individuals ("the Claimants") launched an election petition for his removal from office on the grounds of corruption, dishonesty and unlawful spiritual influence.  The petition succeeded.  In April 2015 he was ordered to pay costs with a payment on account of £250,000.  He did not pay.  The Claimants obtained a charging order over properties reigstered in his name and treated as his own.  Mr Rahman's wife, Mrs Farid, applied for a declaration that she was the true beneficial owner as to 74% of one property and 100% of the other.  Shortly before trial Mr Rahman was declared bankrupt on his own petition, which meant that the trial of Mrs Farid's interest only went ahead in relation to one of the properties.  Simon Johnson represented the Claimants and cross-examined Mrs Farid extensively, together with five other witnesses.  Chief Master Marsh's judgment handed down on 29 January 2016 represented a comprehensive victory for the Claimants.  The Chief Master held that there was no evidence that Mrs Farid contributed to the purchase price or that her husband paid net profit to her, and a trust deed purporting to evidence her interest was a "fiction".  Had it been necessary to do so, the Chief Master would have declared the trust deed a sham.  He made extensive criticisms of Mrs Farid and Mr Rahman.

The judgment will interest property and insolvency lawyers because of the Chief Master's detailed consideration of the legal basis for a spouse claiming a beneficial interest in property purchased as a buy to let.  A resulting trust analysis, rather than a common intention constructive trust, may be appropriate in such circumstances, as it was in this case: Laskar v. Laskar [2008] 1 WLR 2695.  The judgment follows several recent cases about sham trusts and provides an interesting example of the analysis required to identify the parties' true motivations.  It also exemplifies the circumstances in which it is appropriate to draw an adverse inference against a party who does not participate in the proceedings, without good cause (in this case Mr Rahman): Prest v. Petrodel Resources Limited & Ors [2013] UKSC 34.

The trial and the underlying election proceedings were widely reported in the national press.  The judgment has attracted immediate media coverage:

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