Jacob Azouri Ezair v Stephen Leonard Conn
| Jurisdiction | England & Wales |
| Judge | Lord Justice Henderson,Lord Justice Patten,Lady Justice Rose |
| Judgment Date | 01 June 2020 |
| Neutral Citation | [2020] EWCA Civ 687 |
| Date | 01 June 2020 |
| Docket Number | Case No: A3/2019/1944 |
| Court | Court of Appeal (Civil Division) |
[2020] EWCA Civ 687
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
COMPANIES AND INSOLVENCY LIST (ChD)
HH JUDGE HALLIWELL
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Patten
Lord Justice Henderson
and
Lady Justice Rose
Case No: A3/2019/1944
and
Mr Richard Lander (instructed by Chandler Harris LLP) for the Appellant
Mr Mark Cawson QC (instructed by DrydensFairfax) for the Respondents
Hearing dates: 5 and 6 May 2020
Approved Judgment
This judgment was handed down remotely by circulation to the parties' representatives by email, released to BAILII and publication on the Courts and Tribunal Judiciary website (press.enquiries@judiciary.uk). The date and time for hand-down is deemed to be 10:30am on Monday 1 June 2020.
This appeal concerns six properties in Greater Manchester (“the Properties”) which are registered at HM Land Registry in the name of the appellant, Mr Jacob Ezair. The Properties are houses, some or all of which are in multiple occupation. They were acquired by Mr Ezair between 1973 and 1984 as investments and were let and managed as part of a business which he carried on as a sole trader under the name of Northern Estates.
In 1999 Mr Ezair decided to incorporate his business using a newly-formed company called Northern Estates Limited (“NEL”). This is a private company which had an authorised share capital of £100 divided into 100 shares of £1 each. On 5 April 1999 Mr Ezair entered into an agreement in writing (“the 1999 Agreement”) to sell to NEL the goodwill and assets of the business including the Properties in consideration for the allotment to him of 98 of the shares. Clause 2.1 of the 1999 Agreement stated that NEL was to purchase the “Business” as a going concern “with effect from the Transfer Date” which was defined as 5 March 1999. But the clause then contains a list of the assets comprised and used “in the conduct of the Business” which include (at clause 2.1.2) “the freehold and leasehold property as detailed in the Third Schedule”. This is a schedule of all the properties owned and let by Mr Ezair as part of his business and includes, as I have said, the Properties which feature in this case.
Under clause 3 of the 1999 Agreement NEL accepted the vendor (Mr Ezair's) title and by clause 4 agreed to purchase the Business subject to all of its existing debts and other liabilities. Completion of the contract is dealt with by clause 6 which provides as follows:
“6. Completion
6.1 Completion of the sale of assets of the Business other than the Properties shall take place on the Transfer Date when the Purchaser shall deliver to the Vendor the certificates for the Consideration Shares and the Vendor shall execute and do all such deeds and things as may be necessary to vest those assets in the Purchaser
6.2 Completion of the sale of the Properties (or any one or more of them) shall take place seven days after either party gives notice in writing to the other party to complete the transfer of the Properties (or of that one or more of the Properties specified in the notice)”
Paragraph 1 of the Fourth Schedule to the 1999 Agreement incorporates the Standard Conditions of Sale (Third Edition) but subject to the usual proviso that where there is a conflict between the Standard Conditions and the terms of the contract, the latter are to prevail. For the moment I need only observe that paragraphs 4–6 of the Standard Conditions contain detailed provisions about the timetable to be followed leading up to completion in terms of raising requisitions about title, proving title and giving possession on completion. Many if not most of these conditions are inapplicable to the 1999 Agreement given what is provided for in clause 6 and the fact that the consideration took the form of the allotment of shares which took place either immediately before or soon after the 1999 Agreement. But it is, I think, common ground that completion of the sale of the Properties would at least involve the execution by Mr Ezair of appropriate forms of transfer so as to enable the transferee to become the registered proprietor of the Properties and their legal owner.
It is also common ground that the reason for delaying completion and allowing the Properties to “rest in contract” (as it is put) in the name of Mr Ezair was simply to avoid payment of stamp duty on the transfers of title. The result therefore of the 1999 Agreement was that although NEL undoubtedly acquired legal title to most of the assets of the Business, it did not become the registered proprietor and therefore the legal owner of the Properties. The legal estate remained vested in Mr Ezair on the terms of the 1999 Agreement. The case for the respondent administrators (“the Administrators”) is that the effect of the 1999 Agreement, at least following the allotment of the shares, was to make Mr Ezair a bare trustee of the Properties for NEL so as to give NEL a right to an immediate transfer of the Properties unrestricted by the requirement to serve a notice under clause 6.2. But before I come to examine what were the consequences in equity of these matters and how any rights under the 1999 Agreement are said now to be enforceable by the Administrators, it is necessary to complete the transactional history.
In September 2002 Mr Ezair established a family trust in Jersey for the benefit of himself and his children. One of the objectives was to avoid capital gains tax on the disposal of the assets which were to include the Properties. As part of these arrangements, Charlotte Street Properties Limited (“CSP”) was incorporated as a private company in Jersey. Its shares were registered in the name of two Jersey nominee companies (G & S Nominees and G & S Nominees No 2 Limited) which were owned and controlled by Rathbone Nominees Jersey Limited (later Hawksford Trustees Jersey Limited) who acted as the trustees of the Jersey settlement. They also provided the directors of CSP.
On 28 November 2003 NEL entered into a written contract with CSP to sell to it eight properties (including the Properties) for a consideration of £1.3m (“the 2003 Agreement”). The agreement took the form of a standard contract of sale also incorporating the Standard Conditions of Sale (Third Edition). The eight properties were sold subject to any existing tenancies and were identified in a schedule to the 2003 Agreement. Clause 6 of the special conditions provided:
“The Seller or Buyer may request completion of any one or more of the Properties at any time.”
In the body of the 2003 Agreement the completion date was stated to be:
“28 days after either the Seller or the Buyer has given to the other written notice to this effect”
The purchase price of £1.3m was financed as to £800,000 by a loan from Northern Rock plc and as to the balance of £500,000 by an inter-company loan from NEL. CSP borrowed a total of £2.5m from Northern Rock secured by a charge over the Properties and a personal guarantee from Mr Ezair. There is no documentation before the Court relating to the inter-company loan or even the receipt by NEL of the £800,000 as part payment of the purchase price. But in the Directors' Reports and Financial Statements of CSP in the years following its incorporation the Properties were shown as assets of the company and the indebtedness to Northern Rock and NEL is recorded.
A change in the financing arrangements occurred in 2011 after CSP had failed to service the Northern Rock loan and LPA receivers were appointed over the Properties. Mr Ezair was called on his guarantee and was forced to arrange to re-finance the borrowings of CSP in order to preserve the Properties for the benefit of the company. According to his third witness statement in these proceedings which he made on 11 May 2018 Mr Ezair was able to reach an agreement with the receivers for the release of the security in return for payment of the sum of £903,000. This was provided by means of a personal loan to Mr Ezair from Barclays Bank in the sum of £800,000 and the sale of two properties which produced the remaining £103,000. The loan from Barclays Bank was secured by a charge over the remaining Properties.
On 25 May 2011 Mr Ezair entered into a loan agreement with NEL and CSP (“the 2011 Agreement”) which recites much of the transactional history and records the loan of £906,931 by NEL to CSP to finance the redemption of the charges (plus costs) held over the Properties by Northern Rock. According to the recitals this money was provided to NEL out of the Barclays' loan and then lent on by NEL to CSP. Under clause 2 of the agreement the loan was repayable with interest on demand and in any event within 24 months. Clause 5 of the 2011 Agreement states:
“The parties acknowledge that for the time being the Chorlton Properties shall remain resting on contract in the name of the Guarantor (Mr Ezair) and charged to Barclays Bank as security.”
CSP is now in administration and NEL is in liquidation. The underlying dispute which is said by Mr Ezair to have given rise ultimately to these proceedings is his divorce in 2011 and a subsequent falling out between him and his four children. But none of that is relevant to what we have to consider. The Administrators were appointed by the Court on 16 October 2017 on the application of NEL. On 15 November 2017 they made an application to the Court for an order pursuant to s.234 of the Insolvency Act 1986 requiring Mr Ezair to immediately deliver up to them validly executed Land Registry TR1 (transfer) forms in respect of the Properties and for an order under s.39 of the Senior Courts Act...
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