Joanna Lemos v Church Bay Trust Company Ltd
| Jurisdiction | England & Wales |
| Judge | Joanne Wicks |
| Judgment Date | 27 September 2023 |
| Neutral Citation | [2023] EWHC 2384 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CR-2016-008560 |
[2023] EWHC 2384 (Ch)
Joanne Wicks KC
sitting as a Deputy Judge of the High Court
Case No: CR-2016-008560
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Tony Beswetherick KC (instructed by Gowling WLG LLP) for the Claimants
Thomas Elias and Andrew Gurr (instructed by Withers LLP) for the Third Defendant
Hearing dates: 22 June – 4 July 2023
Approved Judgment
Remote hand-down: This judgment was handed down remotely at 10:30am on 27 th September 2023 by circulation to the parties or their representatives by email and by release to The National Archives.
Joanne Wicks KC sitting as a Deputy Judge of the High Court:
Introduction
This is a claim under section 423 of the Insolvency Act 1986, which gives the court the power to grant relief in respect of transactions entered into for the purpose of putting assets out of the reach of, or otherwise prejudicing, creditors. It relates to transactions carried out in 1994 by Christos Pandelis Lemos and his wife, Kalliopi, relating to a Liberian company which then owned their matrimonial home, 27 and 27A Bracknell Gardens, London, NW3 7EE (“ the Property”). Christos was made bankrupt on 11 March 2015 on his own petition, following judgment having been obtained against him in Jersey for approximately US $18 million by Joanna Lemos, his sister. In this judgment I shall generally refer to family members by their first names, without intending to be disrespectful.
This claim was commenced on 21 December 2016. Originally, Joanna was the only claimant, but by an order dated 10 March 2021, Mr Lemos' joint trustees in bankruptcy, then Michael Thomas Leeds and Kevin John Hellard (both of Grant Thornton UK LLP – “ Grant Thornton”), were joined as Second and Third Claimants. Miriam Nichols of Grant Thornton was substituted for Mr Leeds as Second Claimant upon becoming a joint trustee in bankruptcy in his place.
The original defendants to the claim were Church Bay Trust Company Limited, a Bermudan company, and Roderick Forrest (“ the Trustees”), who are trustees of the Kalliopi Lemos 1994 Settlement (“ the KL 1994 Trust”). The Trustees remain First and Second Defendants but by an order made on 9 March 2017, Kalliopi, as the principal beneficiary of the KL 1994 Trust, was joined as a Third Defendant. She is now the active defendant to the claim, the Trustees taking a neutral position and not having appeared or been represented at the trial.
The Property is a large and valuable property in Hampstead, London. On 14 July 1981, 27 Bracknell Gardens was purchased by a Liberian corporation, Panagia Diafylatousa Corporation (“ Panagia”), which had been incorporated shortly before. On 16 December 1992, the neighbouring property, 27A Bracknell Gardens, was purchased by Panagia from another Liberian company associated with the Lemos family, Nandina S.A. (“ Nandina”). The two properties were combined and underwent a refurbishment project, including the creation of an art studio for Kalliopi on 27A. I shall refer to the Property as “27 Bracknell Gardens” (or 27) before 1992 and “the Property” following the acquisition of 27A.
A central issue in these proceedings is whether, in 1994, Christos had a beneficial interest in Panagia. The Claimants contend that he was the sole beneficial owner of the share or shares in Panagia, or at least a joint (or 50%) beneficial owner with Kalliopi. Kalliopi contends that she was the sole beneficial owner of Panagia, or at least that Christos had no beneficial interest in the corporation. One of the matters in dispute is how many shares in Panagia had been issued by 1994, but it is common ground (a) that Panagia's Articles of Incorporation authorised the issue of 500 bearer shares without par value and (b) that on 24 June 1981 the original subscriber, S.B. Goweh, assigned to Christos all his right, title and interest in Panagia resulting from his subscription to the extent of one share (“ the Transfer of Subscription”).
On 22 June 1994, Christos made a Declaration of Trust (“ the Declaration of Trust”). This recited:
“(1) By virtue of a Transfer of Subscription (“the Transfer”) dated 24 June 1981 S.B. Goweh sold assigned and transferred to [Christos] all his right title and interest as individual subscriber in and to one share of the common stock of [Panagia]
(2) [Christos] wishes to declare that he holds and has since 24 June 1981 held all his interest in [Panagia] as follows”
The deed continued:
“NOW THIS DEED WITNESSES AND [Christos] HEREBY DECLARES and CONFIRMS that he has at all times since 24 June 1981 held all his right title and interest in and to the share transferred by the Transfer and in and to all (if any) other shares in the common stock of [Panagia] UPON TRUST for [Kalliopi] absolutely and has exercised and will at all times in the future exercise at her direction all powers in connection with all such stock”.
On the same day as the Declaration of Trust, a minute of Panagia's board records that Kalliopi, as Panagia's President/Director, reported:
“that she herself had subscribed and paid for all the 500 shares in the Corporation's Capital Stock and that the relative Bearer Share Certificate or Certificates had either been lost or had never been issued and requested that the Corporation issue a fresh Bearer Share Certificate for the whole amount of the 500 shares in the Capital Stock of the Corporation.”
It was resolved to issue a fresh bearer share certificate for 500 shares. That certificate was duly issued. By a memorandum dated 18 August 1994, the then trustee of the KL 1994 Trust recorded acceptance from Christos, as nominee for Kalliopi, of the 500 shares in Panagia as an addition to the trust fund.
It is not in dispute that following these events (“ the 1994 Transactions”), Christos had no legal or beneficial interest in Panagia. Upon issue of the fresh bearer share certificate and its transfer to the trustees of the KL 1994 Trust, he ceased to have any legal interest in any of the shares in Panagia. To the extent that he had any beneficial interest prior to the 1994 Transactions, it is agreed that the Declaration of Trust was effective to create him a trustee of that interest for Kalliopi.
It is also common ground that Christos received no consideration for the Declaration of Trust.
The Claimants' case is that, by making the Declaration of Trust, Christos made a gift of his interest in Panagia to Kalliopi. They say that the purpose of making that gift was to put Christos' interest in Panagia out of the reach of his future creditors.
Kalliopi's case is that the Declaration of Trust correctly declared that any interest Christos may have had in Panagia had been held in trust for her since 1981. She says that the purpose of the 1994 Transactions was to create clear lines of demarcation between her assets and those of Christos.
It is an unfortunate feature of this dispute that it has taken a long time to come to trial. As I have said, Joanna obtained a judgment against Christos in Jersey on 16 January 2015. It was a default judgment. The essence of the claim was that Joanna had given Christos money to invest on her behalf which, unbeknownst to her, he had in fact put into his own shipping business and which had been lost. On 19 December 2014, in proceedings brought by Joanna in support of the Jersey proceedings, Popplewell J granted a worldwide freezing order against Christos and an asset restraint order against the Trustees over the Property, on the basis that the Trustees arguably held the Property for the benefit of Christos and a judgment in favour of Joanna might be enforced against it. The freezing injunction and asset restraint order were subsequently continued by King J, without prejudice to the Trustees' right to apply to discharge the latter. The Trustees successfully applied to discharge the asset restraint order, Cooke J finding that there was insufficient reason to suppose that Christos had an interest in the Property. However, that decision was appealed to the Court of Appeal, with the discharge of the injunction suspended pending the appeal: Lemos v Lemos [2016] EWCA Civ 1181; [2017] 1 P & CR 12. The Court of Appeal agreed that there was insufficient evidence that Christos had any beneficial interest in the Property after the 1994 Transactions. However, it held that it was well arguable that Christos did have an asset in 1994 which he then disposed of and that he did so for the purpose of putting the asset beyond reach of a future creditor, so as to engage s.423. Consequently, the Court of Appeal maintained the injunction for a short period to allow these proceedings, claiming relief under s.423, to be commenced. Since these proceedings were commenced in December 2016 progress has been slowed by various contested applications and a lengthy stay for settlement discussions. The consequence is that the family members involved have lived with the stress, uncertainty and costs of litigation for some considerable time. Christos is now 76 years old and suffers from Parkinson's disease. Kalliopi and Joanna are both 71.
Christos was discharged from bankruptcy on 12 March 2017, his automatic discharge having been suspended by Registrar Derrett on 2 March 2016 on the basis that he had failed to co-operate with his trustees in bankruptcy.
Section 423 relevantly provides:
“(1) This section relates to transactions entered into at an undervalue; and a person enters into such a transaction with another person if—
(a) he makes a gift to the other person or he otherwise enters into a transaction with the other on terms that provide for him to...
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