Vladimir Iosifovich Slutsker v Haron Investments Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Underhill |
| Judgment Date | 17 September 2012 |
| Neutral Citation | [2012] EWHC 2539 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC10C03159 |
| Date | 17 September 2012 |
[2012] EWHC 2539 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Underhill
Case No: HC10C03159
MR. David Brownbill QC and MR. Adam Cloherty (instructed by Taylor Wessing LLP) for the Claimant
MR. Gilead Cooper QC and MR. Richard Wilson (instructed by Berwin Leighton Paisner LLP) for the Defendants
Hearing dates: 13 – 22 March 2012
Written submissions: 23 April 2012
INTRODUCTION
These proceedings concern the ownership of a house at 3, The Boltons, in London SW10 ("3TB"). The interests principally involved are those of the Claimant, Mr Vladimir Slutsker, and of his former wife, Mrs Olga Slutsker, though Mrs Slutsker is not a party. Mr and Mrs Slutsker are both Russian. They were married in Moscow in 1990. Mr Slutsker is a very wealthy businessman, having owned a successful investment company in Russia called Finvest. He was also from January 2002 to September 2010 a Senator in the Duma. Mrs Slutsker was initially a sportswoman, but following her marriage she set up a successful chain of fitness clubs in Russia called World Class Fitness Clubs ("WCFC"), which she eventually sold in 2006. Mr and Mrs Slutsker have two children, Mikhail (Misha), born in 1999, and Anna, born in 2003. They were divorced in Moscow in 2009. Regrettably, the divorce has been extremely acrimonious.
For the purpose of identifying the issues I will give a bare outline of the facts. I will return later to matters with which I need to deal in more detail.
(1) The Contract. On 28 November 2000 Mrs Slutsker entered into a contract, in her own name, to buy 3TB for £6m. The solicitors acting for her were Messrs Macfarlanes. Mr Slutsker was involved in the decision to purchase, and at least to some extent in the dealings with Macfarlanes, though the degree of his engagement is in issue.
(2) Completion. There was discussion about whether following completion the property should be registered in the names of Mrs and/or Mr Slutsker or of some other entity. Because that question had not been resolved when the purchase price was paid on 20 December 2000, title remained registered with the vendors: Mrs Slutsker preserved her position by the appropriate cautions.
(3) Haron. Eventually, on 15 May 2001 registration was effected in the name of a company called Haron Investments Limited ("Haron"), which is the First Defendant. Haron was a company incorporated for the purpose by Macfarlanes. Two shares were issued to solicitors in Macfarlanes.
(4) The Trust. In the meantime Mrs Slutsker had executed a deed establishing a trust called "the Misha Trust" (named after her son). The Trustee was a company in the Close Brothers group incorporated in the Cayman Islands, Close Trustee Cayman Ltd: Close Brothers had been introduced to Mrs Slutsker by Macfarlanes. The Trust is a discretionary trust, with the original beneficiaries being Mr and Mrs Slutsker, any child of Mrs Slutsker, Mr and Mrs Slutsker's respective parents and "charity". Subject to the Trustee's general power of appointment, Mrs Slutsker was the first life tenant and Mr Slutsker the second life tenant. The initial sum settled was $1,000 but the Trust was intended as the vehicle to hold the interest in 3TB. The shares in Haron were transferred to the Trustee.
(5) Declaration of trust in respect of 3TB. On 17 August 2001 Mrs Slutsker instructed Haron to execute a formal nominee declaration of trust recording that it held the freehold of 3TB as her nominee. It duly did so on 29 August. The following day Haron and the Trustee of the Misha Trust executed a deed by which Haron declared that it held 3TB as nominee for the Trustee.
(6) Summit. In 2009 Close Brothers sold the part of its business which included the Trustee. The Trustee of the Misha Trust is now the Second Defendant, Summit Trustees (Cayman) Ltd. ("Summit"). However, the same management team has been involved throughout. The principal manager responsible has been Mrs Stella Mitchell-Voisin.
(7) Exclusion of Mr Slutsker. On 20 March 2009, following the break-down of the marriage, the Trustee executed a deed purporting to exclude Mr Slutsker as a beneficiary of the Misha Trust in accordance with the powers in the Trust Deed. Mr Slutsker has brought proceedings in the Cayman Islands challenging the validity of the deed and raising other issues.
(8) Refurbishment of 3TB. Substantial refurbishment works were needed on 3TB, which was divided into four flats at the time of purchase. The cost was initially estimated at some £1 1/2 m. Some at least of the work has been done, with the Trust being put in funds for the purpose. The property is no doubt worth a great deal more than it was in 2000: although there is no direct evidence of its value, there is an indication in the papers that it may now be worth as much as £40m.
It is the position of the Trustee that, in accordance with the formal documentation identified above, the entirety of the beneficial interest in 3TB is held by the Trustee on the terms of the Misha Trust as varied in 2009 — i.e. on terms under which Mr Slutsker now has no interest.
Mr Slutsker disputes that. His case is that 50% of the beneficial interest in 3TB belongs to him. The pleaded case, as amplified by Mr David Brownbill QC in closing submissions, can be summarised as follows:
(1) During the currency of their marriage all the property of Mr and Mrs Slutsker was subject to the regime which under the law of the Russian Federation applies, in default of contrary agreement, in the case of married couples. Under that regime all property acquired during the marriage by either spouse becomes the property of both (subject to immaterial exceptions), held in equal shares. (I will use the shorthand "joint family property", though that is not intended to connote any exact equivalence to the concept of joint property in English law.)
(2) The purchase moneys to buy 3TB were paid to Macfarlanes out of joint family property. In order to give effect, as a matter of English law, to the respective interests under Russian law of Mr and Mrs Slutsker, those moneys fell to be treated in the hands of Macfarlanes as being held for the two of them as tenants in common in equal shares.
(3) That interest is traceable into the proceeds of those moneys, namely the beneficial title to 3TB in the successive stages following contract, payment of the purchase price, and the eventual registration in the name of Haron; or, to put it another way, the beneficial interest held initially by Mrs Slutsker and subsequently by Haron was held by her on trust for herself and Mr Slutsker in equal shares.
(4) The purported transfer of a 100% beneficial interest in 3TB to the Trustee was accordingly ineffective as regards Mr Slutsker's share, which continues to be held by Haron as a bare trustee. (Mr Slutsker is neutral as to whether Mrs Slutsker's share transferred.)
(5) Alternatively, if, contrary to Mr Slutsker's primary case, Russian law does not fall to be applied, it was in any event the common intention of himself and Mrs Slutsker that the beneficial interest in 3TB should be held by the two of them in equal shares; and the property is held by Haron on trust accordingly, applying English law as now definitively established following Stack v Dowden [2007] 2 AC 432. Accordingly, the purported transfer of Mr Slutsker's share to the Trustee was, again, of no effect.
Against that background, Mr Slutsker seeks a declaration that Haron holds 3TB on trust as to 50% for him.
The Defendants' case in response, as developed by Mr Gilead Cooper QC (who appeared for both Haron and Summit), can be summarised as follows:
(1) Russian law does not fall to be applied in deciding the question of who owns the beneficial interest in 3TB.
(2) Even if Russian law does apply:
(a) The joint family property regime ceased to apply at the point when 3TB was registered in the name of Haron, or in any event when Haron conveyed the beneficial title to the Trust; and Russian law would regard Haron or, as the case may be, the Trust as the sole owner from that point onwards. Further and in any event:
(b) Although in principle Mr Slutsker could as a matter of Russian law have had any disposal of joint family property annulled if it occurred without his consent:
(i) he had in fact consented, and in any event
(ii) he knew or should have known all relevant matters at the time of the disposal and under the relevant Russian limitation rules he is now out of time to raise any claim.
As regards this aspect, it is part of Mr Slutsker's case – albeit unpleaded – that Mrs Slutsker intended from the start to deprive him of any interest in 3TB and concealed from him the detailed terms of the Trust for that purpose.
(3) Mr Slutsker has no Stack v Dowden claim.
The present proceedings were formally issued on 6 October 2010. Initially Haron was the only defendant, Mr Slutsker being apparently unaware of the identity of the trustee of the Misha Trust. Indeed it is his case that he had not at that stage seen the Trust Deed, and it is not referred to in the original Particulars of Claim. Prior to the issue of proceedings an application was made for interim relief. This was heard before Roth J on 12 October, when Haron gave undertakings not to dispose of 3TB until the determination of the proceedings or further order. Summit was joined as a defendant in January 2011. Haron has made it plain that it has no position in the proceedings distinct from that of Summit.
THE FACTS
INTRODUCTION
The primary facts about the purchase of 3TB and the establishment of the Misha Trust are largely uncontentious, though there are differences about some points of detail. The...
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