Hotel Portfolio II UK Ltd ((in Liquidation)) v Andrew Joseph Ruhan
| Jurisdiction | England & Wales |
| Judge | Mr Justice Foxton |
| Judgment Date | 23 February 2022 |
| Neutral Citation | [2022] EWHC 383 (Comm) |
| Docket Number | Case No: CL-2018-000226 |
| Court | Queen's Bench Division (Commercial Court) |
and
[2022] EWHC 383 (Comm)
Mr Justice Foxton
Case No: CL-2018-000226
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
James Pickering QC and Samuel Hodge (instructed by Spring Law Limited) for the Claimants
George Spalton QC and Carola Binney (instructed by Provenio Litigation) for the First Defendant
Sebastian Kokelaar and Stephen Ryan (instructed by Richard Slade & Company) for the Second Defendant
Hearing dates: 22 to 26 November, 29 November to 2 December 2021 and 17 to 19 January 2022
Further submissions: 20 January 2022
Approved Judgment
I direct that 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 HONOURABLE Mr Justice Foxton
A INTRODUCTION
In the decades following the Second World War, there were many owners of grand private houses who found their financial salvation in selling them for conversion into luxury hotels. The properties which have given rise to this trial followed a reverse trajectory, the disputes arising from the very significant profit realised through transactions involving the sale of luxury hotels for their subsequent conversion to and use as private residences.
The hotels in question were the Kensington Park, Kensington Palace and Lancaster Gate hotels in London (collectively “ the Hyde Park Hotels”):
i) They formed part of a portfolio of hotels which the First Claimant (“ HPII”), then owned by the First Defendant (“ Mr Ruhan”), acquired from Orb a.r.l. (“ Orb”) in May 2003 for a consideration of between £42 and £47m.
ii) The Hyde Park Hotels were on-sold by HPII pursuant to a Business Sale Agreement dated 1 March 2005 (“ the BSA”) to a company ostensibly owned and controlled by Mr Stevens called Cambulo Comercio e Serviços Sociedade Unipessol LDA (“ Cambulo Madeira”) for a price which, by the time of completion, was £125 million (“ the Cambulo Madeira Transaction”).
iii) On 4 April 2006, companies owned by Cambulo Madeira entered into a joint venture agreement with CPC Group Ltd (“ the CPC Group”), a company owned by the Candy brothers (Mr Nicholas or Nick Candy and Mr Christian or Chris Candy), to re-develop the Kensington Park and Kensington Palace hotels (“ the Kensington Hotels”) on a 50:50 basis.
iv) After planning permission had been granted, on 30 August 2006 the Lancaster Gate Hotel was sold for £67.5m.
v) On 29 November 2007, the companies owning the Kensington Hotels were transferred to the joint venture company, Cambulo Property Holdings Ltd (“ CPHL”).
vi) On 22 February 2008, CPHL agreed to sell the Kensington Hotels to De Vere Estates Ltd (“ De Vere”), a company connected to the Abu Dhabi royal family, for £320m.
HPII contends that in the acquisition of the Hyde Park Hotels from HPII, and the subsequent on-sales, Mr Stevens was acting as Mr Ruhan's nominee, with the result being that Mr Ruhan was acting in breach of fiduciary and similar duties he owed to HPII. In addition to seeking personal and proprietary relief so far as Mr Ruhan is concerned, HPII seeks an account of profits, equitable compensation and damages from Mr Stevens, on the basis that he dishonestly assisted in breaches of fiduciary duty by Mr Ruhan and was a participant in an unlawful means conspiracy with Mr Ruhan.
The issues raised in this case constitute, to a very significant extent, the jumping off point for issues which have already been determined by me (subject to appeal) in Serious Fraud Office and ors v Litigation Capital Limited and ors [2021] EWHC 1272 (Comm) (“ the Directed Trial Judgment”). At the PTR in this action, I ordered that certain of the findings made in this action would also bind other parties who are involved in litigation in which the same issues arise and remain live: Ms Tania Richardson (formerly Mr Ruhan's wife) and Phoenix Group Foundation (“ Phoenix”) and Minardi Investments Limited (“ Minardi”), companies in which Mr Stevens claims to be interested.
B THE KEY ISSUES
The nominee issue
As will be apparent, the foundation of HPII's case is that Mr Stevens was acting as Mr Ruhan's nominee on the purchaser-side of the BSA, both in concluding the transaction, and in realising and disbursing its benefits. HPII defines that relationship in terms taken from Professor (now His Honour Judge) Matthews' article “All About Bare Trusts: Part 1” (2005), 266, 273: an arrangement in which the nominee “holds on trust for the beneficiary absolutely, but also agrees to do whatever the settlor/principal asks, or at least whatever is asked within a certain range of possibilities”.
In determining whether or not such a relationship existed on the facts, HPII directed me to the following guidance from the authorities:
i) Evidence that A exercises substantial control over assets of which B holds the legal title “may be evidence from which the Court will infer that the assets are held as nominee or trustee for [A] as the ultimate beneficial owner”: PJSC Vseukrainskyi Aktionsernyi Bank v Maksimov [2013] EWHC 422 (Comm), [7(5)].
ii) Evidence that the alleged principal is in a position of superiority to the alleged nominee, giving them instructions or commands which are invariably complied with, may also support a finding of nomineeship: JSC VTB Bank v Skurikhin [2015] EWHC 2131 (Comm), [39] and [45].
I also addressed this issue in the Directed Trial Judgment, [604]–[605], where I summarised the effect of the authorities referred to me in that case as follows:
“There are number of matters which may support the conclusion that the apparent owner of property in fact holds it as a nominee for someone else: whether someone other than the alleged nominee exercises control over the asset ( Phoenix v Cochrane [2017] EWHC (Comm), [17(5)]); whether the apparent owner uses or allows the asset to be used in a manner which advances someone else's interests rather than its own ( Prest, [52]); who paid for the asset, which may support a conclusion that it is held on constructive trust ( Lewin, 10–019) and whether the person alleged to be the ‘real’ owner had a motive to disguise his or her ownership”.
I have had regard to these observations when considering the evidence.
HPII's nominee case in summary
In support of its contention that Mr Stevens was acting as Mr Ruhan's nominee in relation to the acquisition, development and sale of the Hyde Park Hotels, HPII relies on:
i) The circumstances in which Mr Stevens “came on the scene” in 2005 when the Hyde Park Hotels were up-for-sale.
ii) Mr Ruhan's actions and communications both before and after the sale of the Hyde Park Hotels to Cambulo Madeira, including in the events leading up to the sale of the Kensington Hotels to De Vere.
iii) The fact that the company holding what was ostensibly Mr Stevens' interest in the Kensington Hotels provided security for a loan made to fund investments by Mr Ruhan in Qatar and the terms in which that involvement was described contemporaneously, including within the lender.
iv) Mr Ruhan's involvement in various investments made with funds realised through the sale to De Vere or with the proceeds of the repayment of what were said to be loans made by Mr Stevens to Mr Ruhan.
v) The terms of the communications between Mr Ruhan and Mr Stevens.
vi) The events leading up to, and the terms of, the settlement reached between Mr Ruhan and persons associated with Dr Gerald Smith in Geneva in April/May 2016 (“ Geneva Settlement”).
Mr Ruhan's position in summary
Mr Ruhan contends that the nominee case is entirely without merit, and is a construct which was originally dishonestly conceived by Dr Smith as part of his vendetta against Mr Ruhan to which others latched onto thereafter for personal or financial reasons, and to which Dr Smith has been able to impart ongoing momentum by manipulating both the liquidators and other individuals connected to Mr Ruhan.
Mr Ruhan contends that Mr Stevens was a successful businessman who “barely knew him” in 2005/2006. Mr Ruhan points to a number of features which are said to make it inherently unlikely that Mr Ruhan would enter into such an arrangement. These include the following:
i) It is said that, had he wanted to, Mr Ruhan could have purchased the Hyde Park Hotels without the need for any secret arrangement with Mr Stevens.
ii) It is said that if Mr Ruhan had wanted to act through a nominee, he would have used Mr Cooper and Mr McNally, who (at the relevant time) were trusted advisers and fiduciaries who held substantial assets on his behalf.
iii) The transaction postulated by HPII involved Mr Ruhan undertaking very significant risk for what has proved to be limited upside.
Mr Ruhan contends that HPII has misunderstood or misinterpreted the documents which it contends support the nominee case, and has ignored a significant number of documents or events which are inconsistent with that case. Mr Ruhan says that in considering those documents, it is necessary to have regard to the various roles he was performing at different points in time:
i) In the period up to the completion of the sale to Mr Stevens, Mr Ruhan played an active role in seeking to get the...
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