Haskell Elias v David Mamistvalov
| Jurisdiction | England & Wales |
| Judge | Mr Justice Fancourt |
| Judgment Date | 28 July 2022 |
| Neutral Citation | [2022] EWHC 1930 (Ch) |
| Docket Number | Case No: BL-2020-001110 |
| Court | Chancery Division |
[2022] EWHC 1930 (Ch)
Mr Justice Fancourt
Case No: BL-2020-001110
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Rolls Building
7 Rolls Buildings
Fetter Lane
London, EC4A 1NL
Ms Anna Scharnetzky (instructed by Ellisons Solicitors) for the Claimant
Mr Richard Eschwege (instructed by Enyo Law LLP) for the First Defendant
Hearing dates: 20, 22, 23, 24 June 2022
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.
THE HON. Mr Justice Fancourt
This judgment has been handed down by the court remotely, by circulation to the parties' legal representatives by email, and to The National Archives.
Contents
| Introduction | 2 |
| The Main Issues | 4 |
| Undisputed Factual Context | 4 |
| The Main Disputed Issues | 13 |
| The meaning and effect of the SPA | 14 |
| The witnesses | 21 |
| Disclosure failings | 24 |
| Resolving the factual disputes | 25 |
| The Origin of the SPA | 25 |
| The alleged increase in WCL's share | 26 |
| The early discussions about taking the Property out of Royley | 28 |
| Discussions with Summit in February and March 2019 | 30 |
| The alleged SPA variation | 33 |
| Steps leading to the creation of Soda | 35 |
| The transfer of the share in Soda to Mr Mamistvalov and the re-transfer | 36 |
| Negotiations for a joint venture | 39 |
| Conclusions on factual issues | 42 |
Introduction
The dispute in this claim is about who beneficially owns the only issued share in the Second Defendant company, Soda Holdings Limited (“Soda”).
Soda was incorporated in England and Wales on 31 May 2019 by the Claimant, Mr Elias, with one issued share registered in his name. The First Defendant, Mr Mamistvalov, contends that, as a result of agreements made with Mr Elias, he owns the share beneficially and that the share, if legally vested in Mr Elias, is held on resulting trust for him.
Mr Elias is an English businessman. He is a director and chairman of Elias Group, a family-owned dry cleaning business based in North and West London. Mr Mamistvalov is an Israeli businessman who lives in Tel Aviv. The two men met in a synagogue in Israel in about 2008 and became close friends.
In short, Mr Elias's case is that he caused Soda to be incorporated as a means of transferring apparent ownership of 51 acres of undeveloped land near Barnet, Greater London (“the Property”) to Mr Mamistvalov, but with the intention that Mr Mamistvalov would hold the share in Soda as his nominee. This was done to enable Mr Elias to benefit from the appearance that the Property was not owned or controlled by him but beneficially owned by Mr Mamistvalov.
Mr Mamistvalov's case, in bare outline, is that he and Mr Elias entered into a sale and purchase agreement (“SPA”) in November 2018 relating to an arbitration award in favour of Mr Mamistvalov, and that the agreement was then varied in April 2019, when Mr Elias agreed to transfer ownership of the Property to Mr Mamistvalov in return for extended rights to seek to enforce the award. After the transfer of the Property by means of ownership of Soda, Mr Mamistvalov says that he discovered the unhappy history of the Property and wanted to ‘unwind’ his dealings with Mr Elias. He contends that this was first agreed and acted upon, but that the parties then changed their minds and reaffirmed the agreement as varied, but Mr Elias then wrongfully took steps to transfer the share in Soda back to himself.
Mr Elias denies that the SPA had any legal effect. He claims that it was a sham to enable Mr Mamistvalov to be in a better position to enforce the arbitration award in Georgia. He contends that there was no agreement to vary the SPA, as contended by Mr Mamistvalov, and that the Property was put into Soda's name and the share transferred to Mr Mamistvalov to put it beyond his wife's reach and improve the prospects of obtaining planning permission, but intending that Mr Mamistvalov would hold the share on behalf of Mr Elias.
Soda does not play any active part in this claim in its own right and will be bound by the Court's decision on beneficial ownership of its only issued share.
The accounts given by the two protagonists of the reasons for the SPA, the restructuring of the ownership of the Property, and what happened in their discussions thereafter, are quite different. Mr Elias effectively contends that the SPA and the Property transfer were unconnected matters, whereas Mr Mamistvalov, by his account of the alleged variation of the SPA, contends that they became closely connected.
What was clear from the evidence given at trial is that both Mr Elias and Mr Mamistvalov were untroubled by the idea that documents could be created with the intention of misleading others, and that the truth was a matter to be concealed from others when it was helpful to do so, to further their interests. The result is that the contemporaneous documents in this case cannot always be taken at face value. Further, what is said in the many transcripts of recorded conversations between the protagonists, and between them and third parties, include untruths and attempts to conceal the truth. Although the existence of the transcripts are of considerable benefit in trying to understand what was happening in 2019 and what each was seeking to achieve, they too have to be considered in the light of the surrounding circumstances and the parties' apparent motives and interests. It is rarely possible to extract a sentence or two out of context and identify what was really happening.
There are also concerns about the integrity of some of the documents relied on (though neither party served notice challenging the authenticity of a document disclosed) and the reliability of the disclosure exercise that has been conducted, in particular by Mr Elias.
I am satisfied that this is a case in which Mr Elias and Mr Mamistvalov have each acted dishonestly in certain respects and given evidence that is not the full and honest truth about what happened. I must therefore attempt to reach factual conclusions on the many disputed issues without being able confidently to rely on the evidence given by either of them or on some of the documents. I shall return to the quality of the evidence in due course.
The Main Issues
The main issues relating to the question of who is the beneficial owner of Soda's share seem to me to be the following:
i) Was the SPA a sham or did it take effect according to the objective meaning of its terms?
ii) Was an agreement made to vary the SPA by transferring beneficial ownership of the Property to Mr Mamistvalov or his appointee in return for an extension of the time under the SPA for Mr Elias's company, Weightspace Company Ltd (“WCL”), to enforce and recover the full value of the arbitration award (“SPA variation”)?
iii) If not, on what basis was ownership of the share in Soda transferred by Mr Elias to Mr Mamistvalov on 25 June 2019?
iv) Was an agreement made by Mr Elias and Mr Mamistvalov on 18 July 2019 to re-transfer the share in Soda to Mr Elias in return for the shares in WCL being transferred to Mr Mamistvalov (“the swap agreement”)?
v) If so, did Mr Elias and Mr Mamistvalov then subsequently agree to unwind the swap agreement, leaving in place the previous arrangement, whatever it was, or subsequently agree different terms?
Although these are the main issues to be resolved, there is a multiplicity of other issues and factual disputes, some of which have a bearing on the determination of the main issues.
There is however a broad factual context that is not in dispute, either because the parties' evidence demonstrates that it is agreed or because documents that are not disputed, such as the transcripts of telephone conversations and email communications between them, establish the facts. It is necessary to set out the context that is not in dispute in some detail in the next part of this judgment. I will indicate where the important disputes of fact arise.
Undisputed Factual Context
The Property was acquired in the name of Royley Holdings Corporation (“Royley”), a BVI company, in February 2002 for £265,000, with the aid of a bank loan of £150,000 secured on the Property. It was purchased from the trust of the Ohel David Eastern Jewry Congregation, of which Mr Elias and his father were trustees. Royley had an off-shore corporate director and shareholder, who nominally held the share on trust for Mrs Cissy Levi, Mr Elias's mother-in-law.
The other trustees were unhappy that Property had been sold to Royley. A local Rabbi, Abraham Levy, was also opposed to the purchase by Royley.
The matter was investigated between 2004 and 2006 by the Charity Commission. By a letter dated 3 March 2006, Mrs Victoria Crandon reported that the Commission had received written confirmation from Mr Elias's solicitor that he was not a connected person in relation to the sale nor were he or his family connected to Royley.
On 11 November 2011, Mrs Cissy Levi instructed the nominee shareholder to hold the share for the benefit of her daughter, Hadassa Shmuel (“Mrs Shmuel”), an Israeli resident. Mrs Shmuel had declared on 24 October 2011 that she held the share in Royley in trust for Mr and Mrs Elias, the ultimate beneficial owners. So by the end of 2011, if not from 2002, Mr and Mrs Elias were indirectly the beneficial owners of the Property.
In 2012, Mr Mamistvalov obtained in Israel an arbitration award in his favour against a Georgian citizen, Mr George Tchanturia (“the Award”). The value of the debt awarded was US$5,053,418 as at March 2010, but it bore...
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