(1) John Anthony Popely v (1) Ronald Albert Popely
| Jurisdiction | England & Wales |
| Judge | David Stone |
| Judgment Date | 21 February 2018 |
| Neutral Citation | [2018] EWHC 276 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CH-2017-000120 |
| Date | 21 February 2018 |
[2018] EWHC 276 (Ch)
IN THE HIGH COURT OF JUSTICE
HIGH COURT APPEAL CENTRE ROYAL COURTS OF JUSTICE
ORDER OF DEPUTY MASTER LLOYD DATED 24 APRIL 2017
CASE NUMBERS: HC-2017-000808 / HC-2017-000904
7 Rolls Buildings
Fetter Lane
London, EC4A 1NL
David Stone
(sitting as a Deputy High Court Judge)
Case No: CH-2017-000120
Mr Timothy Evans (instructed by Drukker Solicitors) for the Applicants
Mr Christopher Boardman (instructed by Charles Russell Speechlys LLP) for the Respondents
Hearing date: 23 January 2018
Further written submissions on 2 February 2018
Judgment Approved
David Stone (sitting as Deputy High Court Judge):
This is the latest salvo in what has been described in this court as an “orgy of litigation” between two brothers, concerning (among other things) some time share properties in Northern Cyprus.
Having been commenced in 2001, nearly 17 years ago, the proceedings have made little progress: the present dispute once again relates to who are the proper parties to the proceedings.
The matter comes before me on appeal from a decision of Deputy Master Lloyd of 24 April 2017 by which the current claimants, John Anthony Popely and Andrew Popely (the Claimants) were given permission to continue this claim as a derivative action against the First Defendant, Ronald Albert Popely, for the benefit of the Third Defendant, Casterbridge Properties Limited ( Casterbridge).
Also before me was an application dated 15 January 2018, listed before me by order of Roth J of 19 January 2018. In the event, the parties did not wish to have that application dealt with, albeit had I decided that application one way, this appeal would have been rendered otiose. Rather, the parties asked me to hear only the appeal from Deputy Master Lloyd's decision. This is my judgment on that appeal.
Background Facts
To understand the five grounds of appeal advanced, it is necessary to set out in some detail the initial dispute, and some of the various proceedings over the past 16 years. Unfortunately, this by no means represents the full extent of the various disputes between the brothers, nor those between members of the Popely family and third parties.
These proceedings were initially filed by the elder of the two brothers, John Henry Popely, against his younger brother Ronald Albert Popely on 10 August 2001. For the sake of clarity, and meaning no disrespect, I will refer to the various family members by their first names. As there are two people called John Popely, I will refer to the father as John Snr and to his son as John Jnr. The original claim included an allegation that Ronald acted in breach of an oral agreement made with John Snr during 1997. The agreement related to ownership, among other things, of a time share resort in Northern Cyprus. For the purpose of these proceedings, at all relevant times, the time share rights had vested in Casterbridge. The shares in Casterbridge were owned 30% by a trust called the Blue Ridge Trust (the beneficiaries of which were John Snr's family) and 70% by a trust called the Mars Trust (the beneficiaries of which were Ronald's family). Both trusts were established in St Vincent and the Grenadines (which, for brevity, and, again meaning no disrespect, I will refer to as St Vincent). The trustee of both trusts was St Vincent Trust Service Limited ( SVTS). In short, John Snr's position was that Ronald conducted the affairs of Casterbridge so that all the profits of the business ended up in the Mars Trust to benefit Ronald's family and none ended up in the Blue Ridge Trust to benefit John Snr's family.
Ronald initially attempted to avoid service of John Snr's claim issued in this court, but it was eventually served, and the court held that it had jurisdiction to determine the claims.
Following the bankruptcy of John Snr in 2005, his trustee in bankruptcy sold the right, title and interest in the claim (including the right to prosecute and continue it and the right to recover and receive any money or property from Ronald) to SVTS as trustee of the Mars Trust for £15,000. SVTS then applied to this court to be joined as a claimant with the intention of discontinuing the proceedings.
In order to prevent this, the Claimants, John Snr's two children, John Jnr and Andrew and four of their children (all then minors) applied to be joined as parties to the claim and for permission to continue the claim as a derivative action on behalf of Casterbridge. This claim was based on an alleged breach of fiduciary duty that Ronald owed to Casterbridge. The Claimants wish to recover the share of the profits that they say should have found their way to the Blue Ridge Trust, rather than to the Mars Trust. The claim is currently for over £4 million. Whilst Ronald denies the claim, and has filed a defence, it was submitted before me that Ronald is not suggesting that there is no case to answer. Nor was there a submission that the claim is hopeless.
Casterbridge was originally incorporated in the British Virgin Islands ( BVI) in November 1997 but was “migrated” to St Vincent in April 1998. In 1999 the Secretary of State in the UK sought, and in 2000 obtained, a winding up order against Casterbridge. More recently, there has been an attempt by Ronald to “migrate” Casterbridge again, this time to Nevis (on 18 December 2015). That “migration” is in dispute.
On 18 January 2007, Master Moncaster gave judgment on the Claimants' application ( Popely v Popely, Master Moncaster, 18 January 2007) in which he commented (at paragraph 15):
“Therefore, the unfortunate result, as it seems to me, if these proceedings are not allowed to continue will be that the underlying dispute between the brothers is simply not going to be litigated at all, and that seems to me an unfortunate result. No doubt it is true that John [Snr] has made his bed in the shape of conducting his affairs in the very untransparent way that he has done and through St Vincent companies which has led to grave difficulties … but nonetheless it does seem to me that it should be the case that this, as it seems to me, genuine and real dispute between the two brothers should be adjudicated upon, and the only available way of doing that seems to me to be in the current proceedings.”
Further, Master Moncaster said this at paragraph 19:
“In those circumstances, where what is being asked to be done is to substitute parties who, on the defendant's view, are the proper claimants for the wrong claimant, I do not see how they can now complain that applying to substitute the proper claimants for the wrong claimant is an abuse of the process: quite the reverse, it is correcting existing faults and joining the proper parties to the claim so that the dispute can be adjudicated upon.”
Master Moncaster discussed Casterbridge at paragraph 34:
“There is then the other claim brought on behalf of Casterbridge. That is even more complicated … The claim is perhaps an unprecedented one in that it is a double derivative action, so to speak, in that [SVTS] will not bring the claim, so that the beneficiaries of the Blue Ridge Trust have to bring the proceedings joining the trustee and the proceedings which they are seeking to bring as beneficiaries with the trustee as a necessary defendant are proceedings for a derivative claim on behalf of Casterbridge which is a company owned by the trust. It is submitted by [SVTS] that the derivative claim can only be brought by a registered shareholder and that therefore it can only be brought by [SVTS].”
Further, Master Moncaster said this at paragraphs 35 and 36:
“35. I am not convinced that the authority to which I was referred, which is really dealing with a different point, is authority for a hard and fast rule that a derivative claim cannot be brought by beneficiaries under a trust in the way in which they seek to do so here. A derivative action is supposed to be a flexible means of preventing the company's constitution being used in order to shield wrongdoers from accounting to the company for company property they have misappropriated. I am not at all sure that the court would hold that in a case where the shareholder is a trustee who is refusing for, so far as appears, bad reasons to lend its name to the [claim] (or at any rate it has not established it is good reasons) it can prevent its beneficiaries from having the claim adjudicated. The trustee of course may well wish not to bring the claim in its own name because of the risk as to costs it would face, and it seems strange that the reason for refusing to lend its name, which would be a very proper reason in cases such as this, should make it impossible for the beneficiaries to have the issue decided.”
“36. Again, I come back to what seems to me the fundamental point, that if, as here, there is a genuine dispute as to whether Ron Popely has defrauded Casterbridge then it should be justiciable and not to be able to be made non-justiciable by the fact that the shareholder, St. Vincent, is, as it appears to be now, for whatever reason that may be, implacably hostile to John [Snr] and John [Snr's] family who are the beneficiaries (or were, I will come back to this point) under the Blue Ridge Trust. Therefore, if that were the only objection to the joinder of the beneficiaries I would think it not appropriate to rule upon that on this application. The application should be allowed and then, when the question arises under the rules, as to whether the derivative action should continue or not, that question will be one of the questions for decision and, given the novelty of the position and the difficult position, it seems to me to be better if that...
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