Malkins Nominees Ltd and Societe Financiere Mirelis Sa and Julian Holy and Maycrown Developments Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Laddie: |
| Judgment Date | 22 November 2004 |
| Neutral Citation | [2004] EWHC 2631 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC 98 02736 |
| Date | 22 November 2004 |
[2004] EWHC 2631 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Honourable Mr Justice Laddie
Case No: HC 98 02736
Mr James Thom QC (instructed by Howard Kennedy for the Claimant)
Mr Christopher Stoner (instructed by Radcliffes Le Brasseur for the First and Third Defendants)
Hearing date: Thursday 11 November, 2004
Judgment Approved by the court for handing down
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.
In these proceedings, the claimant is Malkins Nominees Limited ("NML"). It is a nominee company created by a firm of solicitors to hold property for its clients. One such client is a company, Circle Trade Inc ("Circle"). Circle is owned by Mr David Akerob.
There are three defendants. The first is Societe Financiere Mirelis SA ("Mirelis"). The second is a firm of solicitors, Julian Holy, which plays no part in the dispute before me. The third is another company, Maycrown Developments Limited ("Maycrown"). Maycrown has one asset, namely a large leasehold property in London. The current action arises out of a project to develop that property. The project turned sour. Behind the parties to this litigation are Mr David Akerob and his brother, Alfred. They have fallen out. That may well be the reason why a dispute valued in the region of £50,000 has already generated legal costs totalling about £100,000 with, probably, much more to come.
Before me, MNL is represented by Mr James Thom QC. Mirelis and Maycrown are represented by Mr Christopher Stoner.
The current application arises out of an Order of Deputy Master Rhys dated 15 December 2003 for the determination of certain preliminary issues. Those issues were revised by Order of Deputy Master Nurse on 5 May 200In fact, Mr Thom and Mr Stoner have revised them again in a manner which will be explained below.
The trial on liability came before Etherton J in 2002. His judgment is dated 17 May of that year. In substance he found for MNL. The preliminary issues before me arise in relation to the Enquiry as to Damages ordered by the judge. The relevant background to, and history of, the dispute between the parties is summarised in Mr Thom's skeleton argument. What is set out below is based on that summary.
There were a number of shareholders in Maycrown. Mirelis held 20%. It had also lent money to finance the development. Alfred Akerob held 50% via, most recently, Grand Manor Estates Limited. MNL held 30%. 20% of that was as nominee for a Mr Ram Caspi. The remaining 10% it held as nominee for David Akerob, and later Circle.
By 1995 the development was late and running over budget. Alfred and Grand Manor reached terms with Mirelis for a disengagement. All the shares in Maycrown were to be transferred to Mirelis; and Mirelis was to receive from Grand Manor, either directly or indirectly, £400,000. This was to include sale by Mirelis of the head lease of the London property for £100,000. Alfred and Grand Manor intended to transfer the head lease on to David Akerob or one of his companies. He wanted it because the head lease would give him access to the roof (in fact this was to build a roof terrace), would resolve problems over garages and would give title to the porter's flat.
In due course Mirelis expressed agreement to the sale of the head lease to Circle for £59,999 (but only on the basis that Grand Manor increased its cash payment to £140,000 to make up the difference). David Akerob's instructions to Mr Bluston (a partner in Malkins, solicitors, and a director of MNL) were that the 100 shares were to be transferred to Mirelis in exchange for the sale of the head lease to Circle for £59,999. In due course Grand Manor did pay the £140,000 referred to above. £40,000 of this was to make up for the lower price (of £59,999) for the sale of the head lease to Circle;
The dispute with which this action is concerned arose in a nutshell because the First and Third Defendants got their hands on the 10% shareholding and sought to retain it while at the same time refusing to assign the head lease. The result was that these defendants had the shares and the head lease (and the extra £40,000).
There were three stages to this. First, on 2 June 1995 Mr Bluston, on behalf of MNL, sent an executed blank transfer of 100 shares in Maycrown to Mr Simon Edwards of Julian Holy (acting for Mirelis) to be "held to my order pending completion of the sale of the head lease to my clients". Julian Holy agreed to do so. Subsequently, Mr Bluston sent the share certificate also to be held to his order, receipt of which was acknowledged without dissent. So Julian Holy had documents which would enable it, or any subsequent holder of those documents, to effect a transfer of the 10% shareholding to whomsoever it wished, but subject to an agreement that they were to be held to Mr Bluston's Order. Etherton J analysed this correspondence as creating an agreement ("the conditionality agreement") that the 100 shares would only be transferred at the same time as the transfer of the head lease to Circle.
Second, on 3 July 1995 Mr Bluston wrote to Julian Holy to ask for an indemnity agreement relating to the 200 shares already transferred, but the agreement which was eventually executed by Mr Bluston (and another) on behalf of MNL ("the Share Agreement") purported to oblige MNL to transfer its entire 30% shareholding (consisting of the 200 already transferred, and the 100 relevant to this action) on execution of the agreement.
Third, relying on the Share Agreement, and without consent of or further reference to Mr Bluston, the blank transfer held to his order was completed in the name of Mirelis by its accountants, and Mirelis was registered as the owner of the shares. The First and Third Defendants thereafter withdrew from the head lease transaction and Mirelis claimed to be the owners of the 10% shareholding.
The Judge held that the correspondence summarised above created the legally binding conditionality agreement to the effect that the 100 shares would only be transferred at the same time as the transfer of the head lease to Circle. He further held that the conditionality agreement remained in force notwithstanding the existence of the Share Agreement, and that in consequence MNL was at all times entitled to be registered as the owner of the shares, and the beneficial interest in the shares never passed to Mirelis.
The Defendants had alleged that Circle, by Mr David Akerob, had refused to proceed with the purchase of the head lease unless the price was reduced further. The Judge was satisfied that this was not the case. They had also alleged that in 1989 Mr David Akerob had made an agreement to transfer the 100 shares to Grand Manor, but this also was rejected.
In addition, the Judge said that if the Share Agreement had not been qualified by the conditionality agreement, he would have ordered rectification of the Share Agreement to confine it to the 200 shares already transferred on the grounds of unilateral mistake.
Pursuant to Etherton J's judgment, MNL has now recovered 100 shares. However, it is said on behalf of Circle that the sale of the head lease to it at £59,999 cannot now proceed. This is because in 1995 some of the flats were vacant, so that the head lease could have been assigned to Circle at that stage without triggering the tenants' right of first refusal under the Landlord and Tenant Act 1987. It is said that that was no longer the case at the time of the trial. Whether those propositions are true and, if so, what flows from them are dependent on issues of fact which are not before me to resolve on this application.
One other point should be mentioned. Mirelis, when in control of Maycrown, caused an issue and allotment of shares so that the 100 shares now amount to no more than 1% of the share capital of Maycrown. Thus MNL has recovered only about one tenth of the shareholding it had in Maycrown. Mr Stoner informs me that, after Etherton J's judgment, the Defendants offered to sell further shares to MNL so as to bring its shareholding back to 10%. That would have involved a further payment from MNL of nearly £10,000. It declined the offer.
MNL argues that in the Enquiry it can recover the loss represented by its inability to acquire the head lease which it should have obtained if, as intended, the back to back transactions had gone through. The Defendants' position is simple. In this action, MNL brought a claim in conversion. This was inevitable because it was the legal owner of the 10% shareholding. For this reason only it could have and did bring a claim in conversion. On the other hand it can only recover nominal damages because it has suffered no loss. It is Circle which, on the factual assumptions made for the purpose of this application, has suffered loss. But it has not and could not have brought a claim against the Defendants. The loss MNL is trying to recover is not its loss but the loss of a third party, Circle. Thus MNL has a cause of action but no damage, while Circle has damage but no cause of action. The fact that MNL acted throughout as a nominee for Circle is of no significance. As I understand Mr Stoner's argument, on the Defendants' case even if the 10% shareholding had been spirited away so that there was no possibility of MNL recovering it or any part of it, MNL could not recover more than nominal damages because it would have suffered no loss, the shares themselves being valueless to MNL. Of course, this line of defence would not have been open to the Defendants...
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