Joanna Lemos v 1) Christos Lemos and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lord Justice Kitchin |
| Judgment Date | 30 November 2016 |
| Neutral Citation | [2016] EWCA Civ 1181 |
| Docket Number | Case No: A2/2015/1800, A2/2015/1800(A) & A2/2015/1800(B) |
| Court | Court of Appeal (Civil Division) |
| Date | 30 November 2016 |
[2016] EWCA Civ 1181
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HONOURABLE MR JUSTICE COOKE
Royal Courts of Justice
Strand, London, WC2A 2LL
The Right Honourable Lord Justice Longmore
and
The Right Honourable Lord Justice Kitchin
Case No: A2/2015/1800, A2/2015/1800(A) & A2/2015/1800(B)
Mr Charles Dougherty QC (instructed by Holman Fenwick Willan LLP) for the Appellant
Mr Stephen Smith QC & Mr James Brightwell (instructed by TLT LLP) for the Respondents
Hearing date: 10 th November 2016
Approved Judgment
Introduction
In this family dispute between the claimant and appellant, Joanna Lemos, and her brother Christos Lemos ("Mr Lemos") the first defendant, the claimant has obtained a judgment against her brother in Jersey and registered it in this country. On 19 th December 2014, Popplewell J granted her a freezing injunction in respect of the house at 27 and 27A Bracknell Gardens, of which the second respondent Church Bay Trust Co Ltd ("Church Bay") is the registered owner, on the basis that Church Bay arguably holds the property for the benefit of Mr Lemos and that, accordingly, the judgment can be enforced against the property. On 13 th January 2015 that injunction was continued by King J without prejudice to the respondents' entitlement to apply to discharge it. Cooke J has set aside the injunction on the basis that there is no reason to suppose that the judgment can be enforced against the property. There is now an appeal with the permission of Lewison LJ.
Facts
Church Bay derives its title from a Liberian company ("Panagia") incorporated on 22 nd June 1981. On 24 th June 1981 the stock of Panagia, consisting of one bearer share, was "sold, assigned and transferred" by the subscriber to Mr Lemos. Mr Lemos in 1972 had married Kalliopi, the daughter of Captain Nikolos and on 26 th June 1981 Panagia approved the acquisition in its name of 27 Bracknell Gardens as a matrimonial home. The purchase price is said to have been provided by Captain Nikolos.
Minutes of the first meeting of the company had been held at 1500 hours on 24 th June 1981 and record Mrs Kalliopi Lemos ("Mrs Lemos") as the sole attendee. They refer to her as "Assignee of Incorporation and Subscriber to stock". Mrs Lemos then appoints the first directors of the company namely herself, Captain Nikolos and Mr Lemos. Thus on the same date as that on which the stock of Panagia was assigned to Mr Lemos, Mrs Lemos was being treated as the sole shareholder of the company entitled to make the appointment.
At 1530 hours on the same day a board meeting was held at which Mrs Lemos was chosen to be chairman; she was appointed as president, her father as vice president and Mr Lemos as secretary and treasurer of Panagia. The purchase of 27 Bracknell Gardens for £392,085 then went ahead.
A subsequent letter bearing the date of 25 th March 1982 from Mrs Lemos and Mr Lemos to Captain Nikolos expresses their gratitude to Captain Nikolos for producing the purchase price and providing accommodation for the whole family. This letter which refers to Mrs Lemos as the owner is the subject of dispute both as to its provenance and, to a less important extent, its translation into English. Church Bay has declined to produce the original for inspection.
Ten years later in 1992, Panagia bought the property next door. This became known as 27A and was refurbished the following year, 1993, with the benefit of a loan from Royal Bank of Scotland ("RBS") to Panagia. That loan was secured by way of a legal charge over the property granted by Panagia; it was a term of the loan that Mr Lemos should give a personal guarantee for it and an assignment of a life insurance policy as security. That loan was ultimately repaid in November 2001 without recourse to the guarantee or the insurance policy. It seems that the payments under the mortgage were made from funds alleged to derive from Mr Lemos.
In the context of obtaining the loan from RBS there is a record of minutes of a special meeting of the shareholders of Panagia held on 23 rd March 1993. These minutes refer to the holders of all the issued and outstanding shares of the company having a right to vote and two persons then appear, namely, Mr Christos Lemos and Mrs Kalliopi Lemos. There is reference to certificates representing all of the issued and outstanding shares of the company being tabled and voted. At that meeting the resolution passed at the meeting of the directors held the same day was approved, ratified and adopted as a resolution of the shareholders of the company.
The directors' resolution of the same day relates to the approval of the loan facility agreement with RBS, to which I have just referred, to assist in the renovation of 27 and 27A Bracknell Gardens; it was a term of the letter, which sets out the basis upon which the loan would be given, that a legal opinion had to be obtained to ensure that the borrowing company was properly constituted and empowered to borrow money.
There is thus something of a conflict between the shareholders' minutes of 23 rd March 1993 which show both Mr and Mrs Lemos as shareholders and the position as shown in the minutes of 24 th June 1981 which treated Mrs Lemos as being the sole shareholder.
In 1994 various important events occurred. On 17 th March 1994 Mrs Lemos executed a deed of settlement, drafted by Withers, with Global Fiduciary (Canada) Inc as trustees whereby the trustees were to hold what was described as the Trust Fund on discretionary trust for Mrs Lemos with power of appointment exercisable with the written consent of Mrs Lemos, ("the KL Trust"). Three months later on 22 nd June 1994 Mr Lemos executed a Declaration of Trust, also drafted by Withers, whereby he declared and confirmed that he had at all times since 24 th June 1981 held all his rights in the share transferred to him on that date on trust for Mrs Lemos absolutely. At the same time a bearer share certificate for 500 shares was issued by Panagia and a document dated 18 th August 1994 records that on 22 nd June the trustees of the KL Trust accepted from Mr Lemos, as nominee for Mrs Lemos, 500 fully paid shares of no par value in the capital stock of Panagia.
Thus, the original subscriber share was replaced by a certificate of 500 bearer shares which were then transferred into the KL Trust and held by the trustees of that trust. In May 1996 Mr Lemos, now calling himself President of Panagia, resigned his position as President and Director; Mrs Lemos, now calling herself Secretary and Treasurer, resigned her position also. On 26 th August 2004 Church Bay was appointed trustee of the KL Trust in place of the original trustee and on 28 th February 2005 the share certificate in Panagia was transferred to Church Bay. On 28 th March 2013 Panagia went into voluntary liquidation and later transferred 27 and 27A Bracknell Gardens to Church Bay which is currently the registered proprietor. On 11 th March 2015, shortly after King J continued the injunction in relation to the property, Mr Lemos petitioned for his own bankruptcy. Michael Leeds and Kevin Hellard of Grant Thornton have been appointed his trustees in bankruptcy.
Mr Dougherty QC for Joanna Lemos accepts that in order to maintain a freezing injunction against property which on its face belongs to someone other than a defendant (what is sometimes called a Chabra injunction, see [1992] 1 WLR 231), he must show arguable prospects of being able to enforce her judgment against that property. He says that he can do that in this case because, on the basis of the facts which I have outlined, it was always the common intention of the relevant parties (Mr and Mrs Lemos and the trustees of the KL settlement) that the property should be held beneficially (at least in part) for Mr Lemos. Alternatively he submits that, when Mr Lemos made the declaration of trust in 1994 in favour of Mrs Lemos that was a disposition of an interest which he then held in Panagia; that disposition can and should be avoided pursuant to section 423 of the Insolvency Act 1986, leaving his interest available for execution.
The Judgment
Cooke J rejected both these arguments holding that any common intention that both Mr and Mrs Lemos were the beneficial owners of the property had to be the common intention not merely of themselves but that of the trustees of the KL Trust. The terms of that settlement negatived any such intention on the part of the trustees unless it was to be said that the trust was itself a sham of which the trustees were dishonestly a part. That was so unlikely as not to be seriously arguable especially since no assertion that the arrangements were a sham was made. As for the section 423 argument, he accepted the submission of counsel for the trustees, Mr James Brightwell, that all the documentation, apart from the "aberration" of the minutes of 23 rd March 1993, made it clear that it was Mrs Lemos who was the beneficial owner of the only share that had been issued in Panagia and that there was never any question of Mr Lemos having any interest in the property. There was therefore no realistic chance of success on a section 423 application. The 1993 minutes could safely be ignored since they "were doubtless put together with a view to obtaining the loan from RBS".
Submissions
In this court Mr Dougherty, perhaps recognising the force of the judge's conclusions about common intention, reversed the order of his submissions and placed most emphasis on the section 423 enforcement route. He submitted that the March 1993 minutes did not stand alone and could not be dismissed as an aberration since other factors, showing that Mr...
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