Stephen Leonard Conn v Jacob Azouri Ezair
| Jurisdiction | England & Wales |
| Judge | Halliwell |
| Judgment Date | 04 July 2019 |
| Neutral Citation | [2019] EWHC 1722 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No:2984 of 2017 |
| Date | 04 July 2019 |
In the Matter of Charlotte Street Properties Limited in Administration
And in the Matter of the Insolvency Act 1986
[2019] EWHC 1722 (Ch)
His Honour Judge Halliwell sitting as a Judge of the High Court
Case No:2984 of 2017
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
COMPANIES AND INSOLVENCY LIST (ChD)
Mr Mark Cawson QC (instructed by DrydensFairfax) for the Applicants
Mr Richard Lander (instructed by Chandler Harris LLP) for the Respondent
Hearing dates: 17 th, 18 th and 19 th June 2019
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.
His Honour Judge Halliwell
(1) Introduction
The Applicants, Stephen Conn and Jonathan Avery-Gee (“the Administrators”) are the joint administrators of Charlotte Street Properties Limited (“the Company”) and the liquidators of an associated company, Northern Estates Limited (“NEL”). As administrators of the Company, they seek an order under Section 234(2) of the Insolvency Act 1986 requiring the Respondent (“Mr Ezair”) to transfer to them the registered title to six properties (“the Properties”). The Properties are at 16 Mayfield Road, Whalley Range, 22 Zetland Road, 12 Maple Avenue and 15, 17 and 19 Warwick Road, Chorlton.
The Application raises issues in relation to the nature of a sub-purchaser's rights in respect of registered land and the operation of the equitable doctrine of conversion and proprietary estoppel following the decision of the Supreme Court in Southern Pacific Mortgages v Scott [2015] AC 395.
At the trial before me, Mr Mark Cawson QC appeared on behalf of the Administrators and Mr Richard Lander, of counsel, appeared on behalf of Mr Ezair.
(2) Factual sequence
Mr Ezair is registered as freehold owner of each of the Properties. He acquired them, as investment properties, between 1973 and 1984 as part of a significantly larger portfolio (“the Original Properties”) which he managed and let out in the name of “Northern Estates” (“the Business”).
NEL was formed with the object of acquiring the Business and, from the outset, Mr Ezair was appointed as a director. By a written agreement dated 5 th April 1999 (“the 1999 Agreement”), Mr Ezair agreed to sell the Business to NEL in consideration of the allotment of some 98 ordinary £1 shares.
By clause 6.2 of the 1999 Agreement it was provided that “completion of the sale of the [Original] Properties (or any one or more of them) shall take place seven days after either party gives notice in writing to the other party to complete the transfer of the [Original] Properties (or of that one or more of the [Original] Properties specified in the notice)”. Subject to the special conditions, the Standard Conditions of Sale (Third Edition) applied.
The shares were allotted to Mr Ezair who thus received the contractual consideration in full.
On 2 nd September 2002, Mr Ezair set up a family trust known as the Jacob Ezair Settlement (“the Family Trust”). He appointed a company based in Jersey, Rathbone Trustees Jersey Limited (later Hawksford Trustees Jersey Limited (“Hawksford”)) as trustee of the Settlement. On the same day, the Company was incorporated in Jersey. The Family Trust and the Company were established with a view to the avoidance of UK tax liability on property assets held in England.
At all times, the share capital of the Company has been held on behalf of the Family Trust. Until 2015, the registered directors were employees of Hawksford and, later, corporate directors under Hawksford's control. However, at all times, the day to day business and affairs of the Company were under the management and control of Mr Ezair himself.
By a written agreement dated 28 th November 2003 (“the 2003 Agreement”) between NEL and the Company, NEL agreed to sell the Company eight of the Original Properties. This included the Properties. The total purchase price of £1,300,000 was broken down into specific amounts for each of the constituent properties. The contractual completion date was defined so as to mean “28 days after the Seller or the Buyer has given to the other written notice to this effect.” Subject to the special conditions, the Standard Conditions of Sale (Third Edition) applied.
The contractual consideration of £1,300.000 was apparently funded from a Northern Rock loan of £800,000 and an inter-company loan from NEL. The Company furnished consideration by assuming liability for repayment of the loans.
Although Mr Ezair and NEL were thus provided with the consideration to which they were entitled under the 1999 and 2003 Agreements, no transfers of the legal title to the Properties have been executed. The legal title thus remains vested in Mr Ezair. Mr Ezair accepts that this was to avoid Stamp Duty. Nevertheless, in the annual accounts for the Company, the Properties were treated as assets at the market values shown in the 2003 Agreement.
The Company fell into arrears of repayment under the Northern Rock loan and, on 23 rd December 2010, LPA receivers were appointed. In these circumstances, Mr Ezair approached Barclays Bank plc for an alternative facility, funds were advanced and the Properties were re-mortgaged to the bank under a registered charge dated 2 nd June 2011.
During 2011–2012, Mr Ezair apparently signed a document headed “Loan Agreement” and drawn up in obscure terms. Mr Ezair, NEL and the Company were each joined as parties and Mr Ezair signed the document, as a deed, on behalf of NEL and himself. The document was dated 25 th May 2011. However, below the signature for the Company, another date had been added in manuscript, namely “17 th December 2012”. The document referred to “a portfolio of six properties”-presumably the Properties-and recorded that these had been “acquired on commercial terms by [NEL] but remained ‘resting in contract’ in the name of Jacob Ezair as security”. Later it was recorded that the relevant properties had been sold to the Company and Mr Ezair had “secured a personal loan from Barclays Bank the proceeds of which he provided [NEL] who in turn lent the entire sum to [the Company]….to meet the redemption sum plus costs” amounting to £906,931. It was provided this amount was repayable on demand but, in any case, it must be repaid within 24 months and that “for the time being the…Properties shall remain resting on contract in the name of the Guarantor and charged to Barclays Bank as security”. Mr Cawson relies on this document as an acknowledgment that, by then, the Company had paid for the Properties in full and assumed liability to repay the loan from NEL.
In the Company's annual accounts for the year ending on 31 st March 2014, the Properties were recorded on the balance sheet as assets of the Company. Until 2016, tenancies for the Properties were granted in the name of the Company but Mr Ezair continued to collect the rents in bank accounts held in his own name but designated as the Company's client accounts.
On 12 th November 2015, an order was made winding up NEL and, on 16 th October 2017, the Company went into administration. Mr Ezair continues to collect the rents. Since the Company went into administration, he hasn't accounted to the Administrators for the rents but maintains he has personally incurred expense in connection with the management of the Properties.
Following the winding up of NEL but prior to the administration, Mr Ezair's solicitors, BPS Law LLP, explained his case, in a letter dated 4 th February 2016, to Occasio Legal LLP on behalf of the liquidators.
“Our client's position is as follows:
1. At all material times he was the owner of these properties.
2. He accepts that pursuant to the original contract in 1999 he held these properties in trust to [NEL].
3. Thereafter a deal was done between [the Company] and [NEL] whereby the properties were sold to [the Company]. It was agreed that the properties would remain in the name of our client but he would now hold them in trust for [the Company]…
4. Subsequently there was an intervening receivership of the properties. The properties were subject to the appointment of an LPA Receiver. Our client thereafter bought the properties back from the Receiver (and in effect back from [the Company]) and they now belong to him in their entirety”.
There is no reason to doubt the propositions in the first three paragraphs of this letter. However, there is no substantial evidence that the LPA receivers purported to sell the Properties to Mr Ezair and he no longer advances such a case. During the course of these proceedings, he has sought to maintain that during 2013 or 2014 he entered into an agreement (“the Alleged 2014 Agreement”) with a director of the Company, Mr Robinson, to transfer the beneficial interest back to him. This case was advanced in Paragraphs 36 and 37 of his third witness statement dated 11 th May 2018 and remained Mr Ezair's case until shortly before trial.
By letter dated 17 th October 2017 (“the October 2017 Letter”), the Administrators' solicitors, Drydensfairfax, enclosed part completed TR1s in respect of each of the Properties, and requested Mr Ezair to execute and return the TR1 forms immediately and, in any event, within 7 days to enable them to deal with the realisation of the assets for the benefit of the Company's creditors. However, Mr Ezair has declined to do so.
On 15 th November 2017, the Administrators thus commenced proceedings for an order requiring Mr Ezair to deliver up validly executed TR1 forms in respect of the Properties. In substance, this is essentially a claim for an order directing him to transfer...
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