Pleshakov v Sky Stream Corporation and Others
| Jurisdiction | UK Non-devolved |
| Judge | Lord Sales |
| Judgment Date | 14 June 2021 |
| Neutral Citation | [2021] UKPC 15 |
| Docket Number | Privy Council Appeal No 0084 of 2019 |
| Court | Privy Council |
[2021] UKPC 15
Privy Council
Trinity Term
From the Court of Appeal of the Eastern Caribbean Supreme Court (British Virgin Islands)
Lord Briggs
Lady Arden
Lord Sales
Lord Hamblen
Lord Stephens
Privy Council Appeal No 0084 of 2019
Appellant
Robert Levy QC
Daniel Warents
Oliver Clifton
(Instructed by Blake Morgan LLP (Oxford))
Respondents
Barbara Dohmann QC
Ajay Ratan
Barnaby Lowe
(Instructed by GSC Solicitors LLP)
Heard on 28 January 2021
This case is concerned with questions of trust law in respect of the beneficial ownership of the shares in the first respondent (“SSC”) and the proper approach for an appellate court in deciding whether to overturn findings by a judge at first instance.
This is an appeal from the decision of the Eastern Caribbean Court of Appeal which allowed an appeal against the decision of Bannister J (“the judge”). The judge had found that the appellant (“Mr Pleshakov”) was the beneficial owner of the shares in SSC, which were registered as to 50% in the name of the second respondent (“Mr Linkov”) and as to 50% in the name of the third respondent (“Ms Kazantseva”). SSC played no part in the appeal, so I will refer to Mr Linkov and Ms Kazantseva together as “the respondents”. Mr Pleshakov submits that the Court of Appeal was wrong to overturn the decision of the judge and to dismiss Mr Pleshakov's case as to the beneficial ownership of the shares.
Mr Pleshakov is a prominent Russian businessman. In 1990 he was behind the foundation of a Russian company, Transaero Airlines OJSC (“Transaero”), which carried on business providing air travel from the Russian Federation. Mr Pleshakov was the Chairman and Chief Executive Officer of Transaero and, together with members of his family, held a significant shareholding in it.
The judge found that since at least 2005 Mr Pleshakov has had as one of his aims the achievement of direct or indirect shareholder control of Transaero. In 2005 he held, directly or indirectly, about 32% of Transaero's shares and members of his family held about a further 11%. At that time, a group of companies under the control of another prominent Russian businessman, the late Boris Berezovsky, and his associates (“the Berezovsky Group”) held about 43% of Transaero's shares.
Mr Linkov is a Russian advocate, now resident in Germany. At the material time he was practising as senior partner in the Russian law firm Linkov and Partners. From about 1998, Mr Linkov had been a friend and business associate of Mr Pleshakov.
Ms Kazantseva is also a lawyer and partner in Linkov and Partners. She started work with the firm in 2002 and became a partner in 2004. In 2012 she married Mr Linkov.
According to Mr Pleshakov, in late 2005 or early 2006 he caused arrangements to be entered into for the purchase of the Berezovsky Group's shareholding in Transaero. The precise details of this transaction were not clarified at trial, but the judge found that Mr Pleshakov did arrange for the transfer of 19.99% of the shares in Transaero to SSC on 31 March 2006.
The respondents arranged for SSC to be incorporated in the British Virgin Islands on 14 December 2005. It has an authorised share capital of 50,000 shares of US$1 each. Upon its formation, half those shares were allotted to Mr Linkov and the other half to Ms Kazantseva. They were also appointed as SSC's directors. They remained its only directors until 27 December 2010, when Mr Pleshakov and his daughter Tatiana were appointed in addition. But the Pleshakovs were removed by members' resolution on 30 March 2013, leaving Mr Linkov and Ms Kazantseva as the only directors.
The present dispute concerns the circumstances in which SSC was incorporated and the beneficial ownership of the shares in SSC at the time they were first allotted to Mr Linkov and Ms Kazantseva. The respondents raise an issue regarding the nature of Mr Pleshakov's case about this, so it is necessary to say something about the pleadings. Mr Pleshakov's case is that SSC was set up on his instructions and for his benefit and that the shares in it are beneficially owned by him. In his claim form issued in August 2013 he claimed declarations against the respondents that the shares in SSC registered in their names “are held on trust for [Mr Pleshakov] absolutely”. Such declarations were also set out in the relief sought in Mr Pleshakov's Statement of Claim.
In paragraph 5 of the Statement of Claim, Mr Pleshakov pleaded that at meetings between Mr Linkov and himself in Moscow in late 2005 Mr Linkov advised him that if the effect of acquisition of the Berezovsky Group shares in Transaero were that he held more than 50% of the shares in that company he would be required to make a bid to acquire all of its shares held by other shareholders as well; that this could be avoided if part of the Berezovsky Group shares in Transaero were held on Mr Pleshakov's behalf by a newly formed investment company, the shares in which were held on Mr Pleshakov's behalf but were not registered in his name; and that Mr Linkov was willing, if instructed by Mr Pleshakov, to take the steps necessary to put this arrangement in place and, together with Ms Kazantseva, to hold the shares in the investment company on behalf of Mr Pleshakov and to act as its directors. At paragraph 7, Mr Pleshakov pleaded that on his instructions Mr Linkov caused SSC to be incorporated for this purpose, with the shares held in the names of the respondents.
In paragraph 6 of his Statement of Claim, Mr Pleshakov also pleaded an agreement between himself and Mr Linkov and Ms Kazantseva according to which, in consideration for them agreeing to act as nominee shareholders and directors of SSC, he agreed to pay each of them a monthly salary of €4,000.
The respondents denied that SSC was incorporated on Mr Pleshakov's instructions or for the purpose pleaded by him. Their case is that they set up SSC to be beneficially owned by themselves. They say that Mr Pleshakov negotiated the acquisition of the 19.99% shareholding in Transaero on behalf of SSC, pursuant to a power of attorney from SSC and a board resolution of SSC dated 3 January 2006.
In support of his case, Mr Pleshakov relies on a Deed of Trust of the shares in SSC dated 28 December 2005 signed by the respondents as settlors, naming Mr Pleshakov as trustee, which they gave him in blank form with space for the name of the beneficiary or beneficiaries to be filled in (“the Deed of Trust”). Mr Pleshakov maintains that the Deed of Trust and the share certificates issued by SSC in the names of the respondents were provided to him as evidence of, and assurance for, the fact that the respondents held the SSC shares on trust for him. The respondents admit signing the Deed of Trust but say that it was not effective to create a trust of the SSC shares and that its purpose was to enable Mr Pleshakov to continue to act for SSC should the power of attorney not be renewed after the expiry of its three year term. The respondents admitted that they provided the SSC share certificates to Mr Pleshakov, but only for the same purpose and in order for them to be translated into Russian and notarised. They point out that the shares are not bearer shares so possession of them does not carry any rights in relation to them.
The respondents' case at trial was that Mr Pleshakov provided them with an opportunity to acquire the shareholding in Transaero at a favourable price by way of belated remuneration for their having acted unpaid for Transaero in litigation in 2003/4 which threatened its existence. They set up SSC as the vehicle for them to acquire this shareholding and they themselves paid the costs of incorporation in the sum of US$1,000, provided by Ms Kazantseva. The Transaero shareholding was acquired by SSC from a company called Housecroft Holdings Ltd (“Housecroft”) at a price of US$55,000 using funds provided by Mr Linkov. The respondents did not admit that Housecroft was associated with the Berezovsky Group. They said that the money for the purchase price and the costs of incorporation had not been reimbursed by Mr Pleshakov.
Against this, Mr Pleshakov said that the respondents had been reimbursed these costs out of large sums in cash given by him to Mr Linkov from time to time and out of a monthly salary paid to them by SSC using the proceeds from sales of parcels of Transaero shares carried out at his direction from time to time. Mr Pleshakov also relied on the fact that all sales of the Transaero shares owned by SSC had taken place on his instructions, including on one occasion at a heavily discounted price to an associate of his which he agreed as a favour to that associate. These points were disputed by the respondents.
By early 2013 Mr Pleshakov had fallen out with the respondents. On 27 May 2013 Mr Pleshakov demanded that they transfer their shares in SSC to him, but they refused. They also denied that Mr Pleshakov was entitled to have SSC's register of members rectified to show him as their owner. Therefore, Mr Pleshakov commenced this claim against them.
The trial before the judge took place between 27 and 31 October 2014. The judge heard evidence from Mr Pleshakov and the respondents and from Ms Olga Simonova, secretary to the board of Transaero, who worked closely with Mr Pleshakov at the relevant time.
In a careful and balanced judgment handed down on 12 November 2014, the judge rejected parts of Mr Pleshakov's account of events. In particular, the judge found that Mr Pleshakov and Mr Linkov did not meet in Moscow in late 2005. However, he made critical findings of fact in Mr Pleshakov's favour and disbelieved the respondents' evidence about what had happened and why. The principal findings...
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