La Micro Group (UK) Ltd v La Micro Group, Inc.
| Jurisdiction | England & Wales |
| Judge | Lord Justice Nugee,Lord Justice Arnold,Lord Justice Males |
| Judgment Date | 28 February 2023 |
| Neutral Citation | [2023] EWCA Civ 214 |
| Docket Number | Case Nos: CA-2022-001212 |
| Court | Court of Appeal (Civil Division) |
[2023] EWCA Civ 214
Lord Justice Males
Lord Justice Arnold
and
Lord Justice Nugee
Case Nos: CA-2022-001212
CA-2022-001213
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
His Honour Judge Jarman QC (sitting as a Judge of the High Court)
Royal Courts of Justice
Strand, London, WC2A 2LL
William Buck and William Hooper (instructed by Fladgate LLP) for LA Micro Group, Inc
Alex Barden (instructed by Schofield Sweeney LLP) for Mr Frenkel
Andrew Twigger KC, Paul Strelitz and Oliver Hyams (instructed by IBB Law LPP trading as IBB Owen White) for LA Micro Group (UK) Ltd and Mr Bell
Hearing dates: 19 and 20 January 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on 28 February 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives
Introduction
This appeal concerns the ownership of an English company, LA Micro Group (UK) Ltd ( “UK”). There are two issued shares, one in the name of Mr David Bell (issued in 2004) and the other in the name of Mr Arkadiy Lyampert (issued in 2008 or 2009), and it is not disputed that they are the legal owners of the shares. What is in issue is the beneficial ownership of the shares.
There are three individuals concerned. Two of them, Mr Lyampert and Mr Roman Frenkel, are Californians, of Russian and Ukrainian background respectively. They jointly owned and ran a Californian company called LA Micro Group, Inc ( “Inc”). The third is Mr Bell, who is English and who has run UK since 2004 when it was acquired as a vehicle for a joint venture between him and the Californians. In 2010 however Mr Frenkel and Mr Lyampert fell out. Mr Frenkel told Mr Bell he was not interested in UK, and Mr Bell and Mr Lyampert then reached agreement on new arrangements.
The current proceedings are the second set of English proceedings concerning the ownership of UK. The first ( “the 2015 proceedings”) was brought in 2015 by Mr Frenkel against Mr Lyampert, Mr Bell and UK. Mr Frenkel claimed that what had been agreed in 2004 was that he and Mr Lyampert personally should have a 25.5% interest each in UK (with the other 49% owned by Mr Bell). That claim was tried by Ms Amanda Tipples QC (as she then was) in 2017 and she handed down judgment on 13 September 2017 at [2017] EWHC 2223 (Ch). She dismissed Mr Frenkel's claim, finding that it had been agreed in 2004 that UK should be owned 49% by Mr Bell and 51% by Inc.
The current proceedings were brought in 2020 by UK and Mr Bell against Inc, Mr Frenkel and Mr Lyampert. They took as their starting point Ms Tipples' finding that it was agreed in 2004 that UK should be owned 49% by Mr Bell and 51% by Inc, but sought a declaration that as a result of what had happened in 2010, it had come to be owned equally by Mr Bell and Mr Lyampert.
The claim was initially tried by HHJ Jarman QC (sitting as a Judge of the High Court) in January 2021. He gave judgment on 29 January 2021 at [2021] EWHC 140 (Ch) in favour of UK and Mr Bell, finding that Mr Frenkel (acting on behalf of Inc) had disclaimed Inc's interest in UK in 2010. I will refer to this judgment as his “first judgment” or “J/1”.
Inc and Mr Frenkel appealed to this Court, which on 5 October 2021 allowed an appeal for the reasons given by Sir Christopher Floyd (with whom Lewison and Newey LJJ agreed) at [2021] EWCA Civ 1429. I will refer to his judgment as “CA”. In summary the appeal was allowed because it was too late in 2010 for Inc to have disclaimed an interest that it had accepted in 2004: CA at [39]. Sir Christopher Floyd went on to consider a number of alternative grounds put forward by UK and Mr Bell for upholding HHJ Jarman's judgment, but concluded that there were insufficient factual findings to decide them. He therefore remitted the case to HHJ Jarman to consider these issues.
The hearing of the remitted issues took place before HHJ Jarman in March 2022. He did not hear any further evidence, but he did hear extensive submissions. He handed down his judgment on 27 May 2022 at [2022] EWHC 1304 (Ch). This is the judgment currently under appeal. I will refer to it as his “second judgment” or “J/2”.
Issues on appeal
The three issues remitted to HHJ Jarman were: (1) whether Inc had contractually surrendered its interest; (2) whether Inc was precluded by proprietary estoppel from asserting its claim; and (3) whether Inc was precluded by laches from asserting its claim.
On (1) contractual surrender, HHJ Jarman found that it was impliedly agreed in 2010 that the shares in UK would thereafter be held 50/50 for Mr Bell and Mr Lyampert: J/2 at [48]. But he held that the issued shares, both that issued to Mr Bell in 2004, and that issued to Mr Lyampert in 2008 or 2009, were held on express trust for Mr Bell and Inc in the proportions agreed in 2004: J/2 at [57]–[58]. It followed, he said, that any disposition of Inc's beneficial interest in the shares would need to be in writing to comply with s. 53(1)(c) of the Law of Property Act 1925 ( “ LPA 1925”): J/2 at [59]. The lack of writing meant that such disposition was not valid and the claim to relief on the basis of contractual surrender therefore failed: J/2 at [59], [61].
On the present appeal UK and Mr Bell contend by way of Respondent's notice that HHJ Jarman should have held that the agreement reached in 2010 was specifically enforceable, and hence gave rise to a constructive trust such that the case came within s. 53(2) LPA 1925 instead of s. 53(1)(c). In response Inc and Mr Frenkel contend that he was wrong to find that there was an implied term in relation to the ownership at all.
On (2) proprietary estoppel, HHJ Jarman held that UK and Mr Bell's claim succeeded. He accepted Mr Bell's evidence that Mr Frenkel in 2010 told him that UK was his to do what he liked with, and that if he had thought that UK would still be owned by two warring partners via Inc he would have resigned from UK and widened or restarted his other business operations. Instead he entered into the 2010 agreement with Mr Lyampert: J/2 at [73]. He and Mr Lyampert did so in reliance on what Mr Frenkel had said: J/2 at [75]. It was unconscionable of Inc now to assert a 51% beneficial ownership in UK, and the claim in proprietary estoppel was made out: J/2 at [77].
Inc and Mr Frenkel each appeal this decision. They challenge his conclusions (i) that Mr Bell and Mr Lyampert entered into the 2010 agreement in reliance on what Mr Frenkel said and (ii) that it would be unconscionable for Inc to assert a 51% beneficial interest.
On (3) laches, HHJ Jarman held that there were several difficulties in the submission that Inc should have acted in 2010 or within a reasonable time thereafter, and that the claim of UK and Mr Bell based on laches was not made out: J/2 at [83], [86]. There is no appeal against that conclusion.
The issues before us can therefore be summarised as follows:
(1) Was HHJ Jarman wrong to find that Inc was estopped by proprietary estoppel from claiming a beneficial interest in the shares of UK?
(2) Was HHJ Jarman wrong to find that it was a term of the 2010 agreement that the shares would be held both legally and beneficially by Mr Bell and Mr Lyampert?
(3) If he was right to find such a term, was he wrong to hold that it was ineffective to operate as a contractual surrender by Inc because of non-compliance with s. 53(1)(c) LPA 1925?
Facts — (1) down to 2010
It is easiest to take the facts from the account given by Sir Christopher Floyd in his judgment: CA [3]ff. No-one took any issue with this, and I reproduce it below with some added reference to the factual findings of HHJ Jarman in his two judgments:
“3. Mr Lyampert and Mr Frenkel met in California in 1998 and together ran a small business buying and selling computer equipment. That did not last, but in 2001 Mr Lyampert established a new company, namely Inc, got back in touch with Mr Frenkel, and agreed to go into business with him again through Inc. Mr Frenkel and Mr Lyampert each owned 50% of the shares in Inc. Inc's business was the purchase and resale of high-end computer parts.
4. Shortly after Inc was set up in 2001, it started trading with an English company called Bstock, owned by Mr Bell. That led to discussions about a joint venture between Mr Bell on the one hand, and Mr Frenkel and Mr Lyampert (and also Mr Alex Gorban, a senior employee of Inc) on the other hand. By July 2004 there was an agreement in principle for the setting up of a new UK company, and on 1 July 2004 Mr Bell's accountants acquired an off-the-shelf company for this purpose, which changed its name to LA Micro Group (UK) Ltd on 11 August 2004. This was UK. Mr Bell was appointed director and secretary and became the sole shareholder, holding the one issued share. On 3 August 2004 Mr Lyampert was appointed as a second director.
5. In August 2004 Mr Lyampert, accompanied by Mr Gorban (but not by Mr Frenkel), came to the UK to finalise matters. In the course of those discussions it was orally agreed that the company should be owned 49% by Mr Bell. The dispute in the 2015 proceedings was about who was to own the other 51%. Mr Frenkel's case was that he and Mr Lyampert were each to own 25.5% personally; Mr Lyampert's case was that the 51% was to be owned by him alone. Mr Bell's case was that Inc was to hold 51% of the shares. Miss Tipples decided in the 2017 judgment that the agreement was that 51% of the share capital of UK was to be owned by Inc.”
In the present proceedings there was no dispute that this was...
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