Provincial Equity Finance Ltd v Helen Dines (Née Breda)
| Jurisdiction | England & Wales |
| Judge | Andrew Lenon |
| Judgment Date | 25 January 2023 |
| Neutral Citation | [2023] EWHC 103 (Ch) |
| Docket Number | Claim no. PT-2018-000705 |
| Court | Chancery Division |
[2023] EWHC 103 (Ch)
Andrew Lenon KC
(sitting as a Deputy High Court Judge)
Claim no. PT-2018-000705
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES PROPERTY, TRUSTS AND PROBATE LIST (ChD)
Royal Courts of Justice
Strand, London WC2A 2LL
Simon McLoughlin instructed by Edwin Coe LLP appeared for the Claimant
Edward Hewitt instructed by Kingsley Napley appeared for the Defendant
Hearing dates: 1 – 4, 7 and 8 November 2022
INTRODUCTION
This case is essentially an inheritance dispute between, on the one hand, the two children of the late Graham Dines (“ Graham”) by his first marriage, Louise Henry (“ Louise”) and Elliott Dines (“ Elliott”), and on the other, Graham Dines' second wife, the Defendant (“ Helen”). I will refer to the family members by their first name. No disrespect is intended.
The Claimant (“ PEF”) is a company that was controlled by Graham from 2002 until his death in June 2016. Under the terms of Graham's Will dated 21 April 2008, the controlling shareholding in PEF now vests in Louise and Elliott.
PEF claims a declaration that eleven properties (all flats in Bournemouth), the legal titles to which are registered in Helen's name, are held on trust for PEF as beneficial owner and seeks orders requiring Helen to transfer to it the legal titles and to account for the income she has received from those properties. PEF also requires Helen to account to it and/or claims equitable compensation in respect of a twelfth flat which was registered in Helen's name and which Helen sold. Finally, PEF claims an account and/or equitable compensation in respect of the sum of £130,000 which Helen transferred to herself from a bank account held by Graham shortly before Graham's death and which PEF claims was its money.
Helen's defence to the claim is, in summary, that PEF has or had no beneficial interest in any of the twelve properties which are or was, in the case of the twelfth flat, beneficially owned by her. As to the £130,000, her case is that the money was not PEF's and that she was entitled to it as it represented her agreed share of the proceeds of sale of her and Graham's former matrimonial home.
THE WITNESSES
I heard evidence on behalf of PEF from Elliot and Louise, David Arad who was a friend of Graham and PEF's accountant, Matthew James who was Mr Arad's assistant and Ronald Sweet an old friend of Graham. Helen gave evidence herself but did not call any other witnesses.
The rival accounts given by the witnesses gave rise to many factual issues, most of which were peripheral and of no real assistance in resolving the central issues as to the ownership of the disputed properties and funds.
I consider that Elliott and Louise were honest witnesses who gave evidence about Graham and their relationships with him although it was unfortunate that much of their witness statements appeared to have no forensic function other than to cast Helen in a bad light.
Mr Arad had clearly “thrown in his lot” with Elliott and Louise in their dispute with Helen and was not purporting to give evidence as an independent professional. Although I did not accept all his evidence concerning Graham's banking arrangements, I consider that Mr Arad was an honest witness who was seeking to assist the court as was Mr James. Mr Sweet was also a patently honest witness who gave evidence about conversations he had had with Graham.
Helen was not a satisfactory witness. She frequently gave the impression during her cross-examination that she was keener to advance her case than to answer the questions put to her or provide the court with a reliable account of the facts. Much of her evidence concerning the properties was implausible. The assertion in her witness statement that from 2007 onwards Graham and she decided to purchase or retain properties for themselves in order to generate long-term rental income was inconsistent with the contemporaneous documentation and the pattern of property transactions that took place. During her cross-examination she claimed that she had agreed with Graham that properties previously owned by PEF would be “taken out” of PEF but this agreement was not mentioned in her Defence or her witness statement. I consider that her explanation for the transfer of the £130,000 was untruthful.
FACTUAL BACKGROUND
PEF
Graham was born on 18 April 1947. Until around 1990, Graham ran a business called Grove Motors, which sold car parts and paint. The business had been set up by Graham's father, and Graham ran it with a business partner called Ian Young. In around 1990/1991, Graham and Mr Young sold the Grove Motors business for around £1.2m–1.3m with the proceeds split 70:30 as between Graham and Mr Young. However, they retained some of the properties which had been owned by the business, including two valuable sites, Unit E Tomo Industrial Estate, Packet Boat Lane, Uxbridge (“ the Tomo Property”) and 19–19a Malham Terrace, Dysons Road, Edmonton (“ the Dysons Property”). These properties were owned 70% by Graham and 30% by Mr Young who rented them out on long leases with the rents paid into a joint account.
On the sale of the Grove Motors business, following Mr Arad's advice and in order to operate an investment business in the most tax efficient way, Graham set up a company called Provincial Equity Finance Limited (“ the Original Company”). The Original Company carried on an investment business, initially investing in a loan provider, B.M. Samuels Finance Group plc, and subsequently trading in properties in the Bournemouth area which were purchased, refurbished and sold on. The Original Company was dissolved and struck off in around October 2002 as it had failed to keep up with its filing requirements at Companies House. PEF, which had been acquired as an off the shelf company some months previously, took over the Original Company's name. The single subscriber share in PEF was transferred to Graham. Helen was appointed company secretary and Elliott, who had started working with Graham, viewing potential properties and overseeing refurbishment works, was appointed as director.
The reason for Elliott's appointment as director was that sometime in the late 1990s Graham had taken out a disability insurance policy (“ the Insurance Policy”), which would make monthly payments to him on various trigger events, including a serious heart attack, until he turned 65. In the event, shortly after the Insurance Policy was incepted, Graham did suffer a serious heart attack and began to receive monthly benefit payments. He did so on condition that he was not receiving income from employment or from a company of which he was a director. This made it necessary for Elliott to be appointed rather than Graham but Graham took all business-related decisions and Elliott had no involvement in the management of the company or its banking arrangements.
In June 2005 further shares were issued in PEF and divided into 2 classes, with the result that PEF's issued share capital comprised 250,000 ordinary A shares with voting rights, held by Graham, and 1 ordinary B share with no voting rights, held by Elliott who received a salary.
In February 2015, Graham instructed Mr Arad to issue 250 B shares to Helen. According to Mr Arad, this was done after Helen had repeatedly asked Graham for shares and was agreed to with reluctance on Graham's part. Graham told Mr Arad at the time that he wanted his children to have the whole company but “for 0.1% anything for a quiet life”. Helen did not receive any dividend but she was paid a nominal salary which was credited against Graham's loan account with PEF. There was a peripheral issue between the parties as to how far Helen was involved in the property investment business. I accept Helen's evidence that she had some involvement in viewing prospective properties and in assisting with secretarial work but that she was not involved in the accounting or record keeping which was handled by Mr Arad and Graham.
With the exception of one property in Bath, all the properties purchased were flats in Bournemouth which were renovated and then let and/or sold with the proceeds of sale frequently re-invested in the acquisition of further properties. The conveyancing solicitors instructed for the purposes of the property transactions were Messrs. Matthew & Matthew (“ Matthew & Matthew”).
PEF's accounting and tax arrangements
Graham appears to have been a shrewd businessman but he was not good with paperwork or with details. Mr Arad's evidence, which was not disputed, was as follows:
“Graham admitted to me regularly over the years that he was very bad with his paperwork and that the way he arranged his affairs was a mess, which it was, with random bits and pieces of paperwork containing his notes and his companies' business conducted through various bank accounts in his own name.
Graham was hopelessly disorganised when dealing with paperwork as was very clear each time I tried to pin him down on the information my firm needed for PEF's accounts and his tax returns.”
Graham did not have an office after he sold Grove Motors and he worked from home. Between 2002 and 2013 Graham instructed Mr Arad and his firm Scodie Deyong LLP (“ Scodie Deyong”) to prepare PEF's accounts each year and to submit these to Companies House and HMRC. Once or twice a year Mr Arad would organise meetings with Graham to obtain his papers and go through them with him.
Mr Arad and Graham would discuss the properties bought and sold each year when preparing the company's accounts. During their meetings, Graham and Mr Arad would go through the accounts together and discuss payments in and out. They would also look at the company stock list which Mr Arad compiled each year and updated it
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