Liora Shami v Meir Shami and Another
| Jurisdiction | England & Wales |
| Judgment Date | 22 February 2012 |
| Neutral Citation | [2012] EWHC 664 (Ch) |
| Docket Number | Claim No: HC07C01848 |
| Court | Chancery Division |
| Date | 22 February 2012 |
[2011] EWHC 664 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
David Donaldson Q.C. Sitting as a Deputy High Court Judge
Claim No: HC07C01848
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.
Essential facts and nature of action
In June 1986 the Claimant and the First Defendant were married in Israel. Both were Israel nationals and resident in Israel. The First Defendant, one of three brothers, was a member of a close-knit family headed by his father, a builder and property developer in Tel Aviv. His parents were not welcoming to the Claimant, a divorcee with a child. The First Defendant in consequence ceased to work with his father in the property business and began an import-export business in textiles. For this purpose a company was set up in Israel, with the First Defendant and his wife as the sole shareholders, buying garments from Israeli designers and manufacturers and reselling in markets in Europe. Sales in London were made from a show-room called A Visible Assets@, run by Mrs June Smith, where the First Defendant took a stand, selling under the trade name AMeir Shami Designer Collection@.
In Tel Aviv the couple lived in a flat in the suburb of Petach-Tikva, bought in 1986 in joint names, and worked in the company. From 1986 the First Defendant came to London seven or eight times a year, staying for a few weeks at a time, and accompanied on some of these visits by his wife. On such occasions, he or they would attend the stand to deal with purchasers, staying in hotels or service apartments. Between such visits, sales from the stand would be dealt with by June Smith alone.
The Second Defendant is the younger brother of the First Defendant. Despite his comparative youth—he was born in September 1954—he was running a successful aerobic dance school or studio in Israel, for which purpose he came frequently to London to audition and recruit dancers. Some time in the late 1980s, when June Smith was visiting Israel, she was brought by the First Defendant to the studio and introduced to the Second Defendant. They became close friends, and he began to stay with her sometimes on his trips to London, when not staying in hotels.
In December 1989 the First Defendant purchased the lease of a four bed-roomed flat at 3 Douglas Court, Quex Road, London NW6 4PT (Athe London property@, Athe property@ or Athe flat@) for, 110,000, entering for this purpose into a mortgage 1 with the Halifax Building Society for a loan of, 83,000. Completion appears to have taken place almost immediately (though registration of the transfer was delayed until July 1991 for reasons to do with the First Defendant=s solicitors). According to the Defendants the remaining, 27,000 (and legal costs) was paid by the Second Defendant.
The flat was contemplated as potentially neutral in ongoing costs. The rooms
would be rented out for short periods as bed-sits, with the income covering outgoings including mortgage interest, though this did not prove in practice to be always the case. At the same time, the First Defendant and the Claimant could save accommodation costs on trips to London by staying in one of the rooms when vacant.However, from the autumn of 1990 these trips effectively ceased. The London venture was becoming unprofitable and the First Defendant abandoned it. In doing so, he left two substantial debts—one to a London supplier named David Oliver, who later obtained a judgment and sought to enforce it against the flat, and the other an overdraft with National Westminster Bank.
Thereafter, the administration of the property was carried out substantially by June Smith with the collaboration of the Second Defendant, who appears to have visited London quite frequently, staying sometimes with June Smith, and sometimes in the flat.
On 26 June 1995 the First Defendant issued proceedings for divorce in Israel in the rabbinical courts on the ground of C=s adultery. In the meantime, the First Defendant had ceased to live at the matrimonial home in Petach-Tikva. No decree was pronounced until January 2003: such delays are apparently not unusual in Israeli divorce proceedings.
On 15 August 1995 the First Defendant executed in favour of the Second Defendant a legal charge, registered on 21 August 1995, of the leasehold interest in the flat to secure the payment of, 77,000 plus interest (Athe 1995 charge@). The Defendants= case is that this sum represented, 27,000 paid as the balance of the purchase price, additional costs, and other payments made subsequently on behalf of the First Defendant, including payments of the First Defendant's debts to David Oliver and NatWest, the occasional shortfall in payment of mortgage instalments, and outgoings on the property.
Shortly after the divorce proceedings were issued in 1995 the Claimant began proceedings in the Family Court for Tel Aviv District (2) (Athe Israeli court@) seeking the Abalancing@of the assets held by him and his wife. As I explain in greater detail below, this was based on an Israeli statute requiring the assets and liabilities of each spouse to be ascertained and equalised by a payment or transfer equal to half the difference.
Under the law prior to 2008 such Abalancing@ relief could not be granted by the court until a divorce was pronounced, and even now—some nine years after the divorce—no such order has been made. The Israeli court 2 in the present case considered, however, that it could and should grant interim relief by way of a declaration as to the beneficial interests of the spouses under the general law in the various assets held by them which would be subject to the balancing order. In exercise of this power the court on 23 July 1998 delivered a judgment (Athe
1998 judgment@) which included—under paragraph 7 A—a determination that Aboth sides are equal partners in the rights and debts accumulated from the date of their marriage until 26.6.95", on the basis of which the Claimant registered a caution in the English Land Registry on 21 January 1999. On 21 October 2003 the court issued a further order in the form of a declaration that the London property was held by the First Defendant for himself and the Claimant in equal shares (Athe 2003 judgment@).On 2 March 2005 the Israeli court ordered that steps should be taken towards the sale of the London property by appointing the attorneys on each side as receivers to deal with a reported offer of purchase. In the event nothing came of this, in part or wholly because the offer of purchase did not eventuate. On 30 January 2007 the court entered judgment for the Claimant against the First Defendant in default of defence for NIS 2,484,713 (then equal to approximately, 300,000 3) plus costs and interest (Athe 2007 judgment@). That judgment stipulated that it overlapped and was concurrent with the order of 2 March 2005 regarding the sale of the property so that any amount received from its sale and paid to the Claimant would be set off against the judgment. On 22 March 2007 Master Ungley ordered the registration of the 2007 judgment under the Foreign Judgments (Reciprocal Enforcement) Act, 1933, (Athe 1933 Act@) thus making it enforceable by execution in this country; the First Defendant's application to set aside this order was dismissed by Master Eyre on 11 June 2010.
In May 2005 the First Defendant left Israel and took up residence in the property in London, where he has remained since. Not long afterwards June Smith died. Shortly before her death she passed to the Defendants= then solicitors a substantial bundle of papers, including bank statements, receipts, and tables and calculations, sometimes annotated by her to record or explain events. These represent most of the documentation before the court as to events relating to the property to that date.
On 19 October 2006 the First Defendant executed a further legal charge (Athe 2006 charge@) in favour of the Second Defendant in the sum of, 69,350.87. Alerted by the Registry as required by her caution, the Claimant objected to the registration of that charge. On 4 December 2006 the Second Defendant requested that the caution be warned off.
On 19 April 2007 the Adjudicator to the Land Registry directed that proceedings
should be commenced in which the Court should be asked to determine whether1. the Claimant has a beneficial interest in the property and, if so, the extent thereof;
2. the Second Defendant is entitled to registration of the Second charge;
3. the Claimant=s caution should remain on the register.
In the present action the Claimant seeks declarations on these questions, and also (a) an alternative declaration that the charges should be satisfied out of the First Defendant's share of the property only, (b) an order for the sale of the property, (c) a declaration that the Claimant has an interest in the property overriding any interest of the Second Defendant, and (d) an account of the rental income received by the Defendants from the property.
There are essentially two aspects to the decisions sought from the court, namely the position as between (a) the Claimant and the First Defendant, and (b) the Claimant and the Second Defendant. Though they fall to be determined separately, there will be some inevitable overlap in my consideration of them.
The Claimant and the First Defendant
Beneficial ownership of the property
The Claimant=s primary case is based on the Israeli judgments of 23 July 1998 and 21 October 2003. To understand them and their significance, some degree of background and explanation is required, as to which I have been aided by undisputed expert evidence from Dr Dov. I. Frimer, a highly...
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