Estafnous v London & Leeds Business Centres Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Christopher Nugee QC |
| Judgment Date | 15 June 2009 |
| Neutral Citation | [2009] EWHC 1308 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC08C01045 |
| Date | 15 June 2009 |
[2009] EWHC 1308 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: Mr Christopher Nugee QC sitting as a Deputy Judge of the High Court
Case No: HC08C01045
Miss Stephanie Tozer (instructed By Salfiti Llp) For The Claimant
Mr Ben Shaw (instructed By Magrath Llp) For The Defendant
Hearing dates : 6, 7 and 8 May 2009
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic
Mr Christopher Nugee QC:
Introduction
In this action the Claimant, Mr Estafnous, claims from the Defendant, London & Leeds Business Centres Limited (“LLBC”), the sum of £2m as commission for the introduction of a purchaser of a property.
The claim is based on a written agreement between Mr Estafnous and LLBC dated 30 March 2001 (“the Agreement”) under which LLBC agreed to pay the commission upon the intending buyer “completing a purchase of the Property.” Mr Estafnous says that he was responsible for introducing a Mr Kapoor who in the event did acquire the property and that the commission is due.
LLBC has a number of answers to this claim. First, it denies that Mr Estafnous was as a matter of fact responsible for introducing Mr Kapoor to LLBC.
Second, in any event it says that the obligation to pay the commission was never triggered because there never was a sale of the property as such. Instead there was a corporate transaction under which Mr Kapoor (or to be more accurate a company associated with him) acquired the shares in a company which was the ultimate parent of the company which held the property. Mr Estafnous says that on the true construction of the Agreement, this is sufficient to qualify as “a purchase of the property”; if he is wrong about this however he relies on the Agreement having been varied so as to cover a sale of shares.
Third, LLBC says that if Mr Estafnous has to rely on a variation of the Agreement and that the Agreement as so varied prima facie entitles him to claim the commission from LLBC, it is unlawful as involving the giving of financial assistance by LLBC contrary to s. 151 of the Companies Act 1985.
Finally, LLBC says that if Mr Estafnous can claim the commission from LLBC (either under the Agreement as properly construed, or under the Agreement as varied), it is unlawful as involving the informal return of capital by LLBC to its shareholder contrary to s. 263 of the Companies Act 1985.
There are therefore 5 issues which arise (these were helpfully formulated by Mr Shaw, who appeared for LLBC, and agreed by Miss Tozer, who appeared for Mr Estafnous):
i) Did Mr Estafnous introduce Mr Kapoor to LLBC for the purposes of the Agreement ?
ii) Does the Agreement on its true construction cover the transaction that actually took place ?
iii) If not, was the Agreement varied to cover such a transaction ?
iv) If the Agreement was so varied, is it illegal as involving the giving of unlawful financial assistance by LLBC contrary to s. 151 of the Companies Act 1985 ?
v) Is the Agreement illegal as involving the unlawful return of capital by LLBC to its parent contrary to s. 263 of the Companies Act 1985 ?
The facts
I have taken the facts largely from the documents which were produced in evidence, supplemented by the witness statements and oral evidence. Of those individuals mentioned below I heard from Mr Estafnous himself, and from Mr Kapoor, Mr Kidd and Mr Migariaf, who were called by LLBC. I also heard from a Mr Tengra who was called by Mr Estafnous, but his evidence was solely directed to the circumstances in which Mr Migariaf came to be giving evidence for LLBC, and he had no knowledge of the underlying facts. With some notable exceptions, which I will deal with as necessary later, there was little conflict of evidence between the witnesses.
Mr Estafnous is an estate agent and the director of a company called Swiss Deal Limited (“Swiss Deal”). In 2001 Swiss Deal had its offices in a building known as Regent House Business Centre, 24–25 Nutford Place, London W1 (“Regent House”). The building also had frontages onto Edgware Road (nos 112–130) and George Street (nos 136–138). It consisted of a parade of shops on the ground floor on the Edgware Road frontage (and a couple more on the George Street frontage), with three floors of offices on the 1 st to 3 rd floors. The 4 th floor had formerly consisted of residential flats but in early 2001 was vacant, the flats having been stripped out ready for refurbishment into offices. There was also a basement car park.
Regent House was held on a long lease from the Portman Estate and a company known as Drillray Properties Limited (“Drillray”) was registered at HM Land Registry as proprietor of the leasehold interest. There appear to have been two concurrent leases granted, one for a period of some 50 years granted in 1960 (the exact length is not clear on the copy of the register) and one dated 21 March 1963 for a term of 99 years from 25 March 1966. In 2001 therefore there were some 64 years unexpired of the latter lease.
Drillray was itself a subsidiary and in 2001 the corporate structure was as follows. Three shareholders, namely Robert Kidd, David Serr and Linda Serr (or Linda Plant as she at some stage became), held the issued shares in Regent Street Estates Limited (“Regent”). Regent in turn held the one issued share in LLBC. LLBC held the issued shares in Drillray. Drillray as already mentioned was the registered proprietor of the leasehold interest in Regent House, but in fact held that interest on trust for LLBC pursuant to a deed of 22 September 2000.
Mr Estafnous approached Mr Kidd and asked if he could sell Regent House to one of his clients; Mr Kidd's reaction was that everything is always for sale at the right price. This approach had taken place by 12 January 2001 as is apparent from a letter of that date from Mr Kidd (as director of LLBC) to Mr Estafnous which gave some brief details of Regent House, indicated that “we would only be prepared to consider a sale of our long leasehold interest at a figure of £22 million”, and said that he would not give further details without heads of agreement and satisfactory evidence of “your client's funds”; and from Mr Estafnous's response of 15 January which thanked Mr Kidd for the letter “regarding my request to sell your building above for one of my Clients.” In oral evidence Mr Estafnous said that the reference in these letters to his client was to Mr Kapoor, but I think he must be wrong about this: the letter of 15 January refers to “Our client” having asked him to submit a rent schedule to the “technical office” and this produced a further letter from Mr Kidd of 9 February 2001 with a schedule of tenancies and rents, which Mr Estafnous forwarded on the same day to the “State of Qatar Technical Office”. Mr Kapoor had no connection with Qatar and I think it is clear that the reference in the January letters to Mr Estafnous's client was not to Mr Kapoor.
On the same day, 9 February 2001, a one-page document on Swiss Deal's headed notepaper was signed by Mr Estafnous and a Mr Migariaf. It is headed “To Whom It May Concern” and the text is as follows:
“We Mr A Youssef Migariaf and Mr M B Estafnous, directors of both Executive Ltd and Swiss Deal Ltd, we offering the investment (REGENT HOUSE BUSINESS CENTRE) at 24/25 Nutford Place, 136–138 George Street and 112–139 Edgware Road – London W1, on very private and confidential basis not to discuss the matter with any other party.
We request in case of buying this investment that we will be retained to manage this investment.”
It is then signed and dated by Mr Migariaf and Mr Estafnous. At the foot of the page is added
“I, [Bobby Kapoor] acknowledge received the information about the investment above, I will confirm your request for the secrecy and retained your companies for management the Investment. [on terms to be discussed]“
The words I have italicised are in manuscript, and this is followed by Mr Kapoor's signature.
Mr Migariaf is a businessman with dual Libyan/British nationality who has business interests in both the UK and Morocco. He describes his business interests as primarily involving acting for property owners and speculators and putting deals together for buyers and sellers in commercial property. Despite what the document of 9 February would naturally suggest, he was not a director of Swiss Deal, but only of Executive Limited, and the document would have been better expressed as “directors of Executive Ltd and Swiss Deal Ltd respectively” but there is no reason to think that the document was drawn up in a deliberately misleading way. Mr Migariaf had known Mr Estafnous for many years. He had also known Mr Kapoor for a long time (more than 10 years) but not as long as he had known Mr Estafnous. He says he regarded them both as his friends.
Mr Charnesh (or Bobby) Kapoor was born in Delhi, India and has spent the majority of his business career in dealing with property, both residential and commercial. In 2001 he was the Managing Director of a group of companies known as the Kapoor Group. Mr Estafnous knew of him, but was not personally acquainted with him. Mr Migariaf thought he might be interested in Regent House. He went to see him at his office in Hammersmith. Mr Shaw submitted (in line with LLBC's pleaded case) that this meeting took place before the one page document of 9 February 2001 was drawn up; but I do not think this is right. Mr Kapoor's evidence was simply to the effect that the meeting took place “some time before mid May 2001” and that once he expressed interest in...
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