Yoram Yossifoff v Shmuel Donnerstein
| Jurisdiction | England & Wales |
| Judge | Mr Justice Snowden |
| Judgment Date | 20 November 2015 |
| Neutral Citation | [2015] EWHC 3357 (Ch) |
| Docket Number | Case No: HC-2015-003399 |
| Court | Chancery Division |
| Date | 20 November 2015 |
[2015] EWHC 3357 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Rolls Building, Fetter Lane
London, EC4A 2NL
Mr Justice Snowden
Case No: HC-2015-003399
Oliver White (instructed by AAG Legal Services Limited) for the Applicant
Jamie Riley (instructed by Ingram Winter Green LLP) for the Respondent
Hearing dates: 10–11 November 2015
This Application seeks interim injunctions pursuant to section 25 of the Civil Jurisdiction and Judgments Act 1982 (as extended by the CJJA (Interim Relief) Order 1997 SI 1997/302) (the "CJJA") in support of foreign proceedings being conducted between two Israeli citizens in Israel.
The Applicant and the Respondent are respectively the claimant and defendant in litigation commenced in March 2015 before the District Court of Tel Aviv (Civil File No. 41771–03–15) (the "Israeli Proceedings"). In the Israeli Proceedings, the Applicant contends that the Respondent holds on trust — for himself and the Applicant as beneficial owners in equal measure – the two issued shares in a British Virgin Islands company named Perston Ltd ("Perston"). The Applicant seeks the provision of an account and information relating to the Respondent's dealings with the shares in Perston, together with the business and affairs of Perston and its wholly owned subsidiary, a Cayman Islands company called West 2 Ltd ("West 2"). The Respondent denies the existence of any trust and denies the Applicant's entitlement to any account or the requested information.
The only material connection of this dispute with England is that West 2 is the sole registered owner of a substantial property at Hyde Park Executive Apartments, 8–18 Inverness Terrace, London, W2 (the "Property"). As its name suggests, the Property is operated as an apartment hotel. At the instigation of the Respondent, contracts have recently been exchanged between West 2 and a company called Inverness Property Limited for the sale of the Property. The sale contract is subject to a confidentiality clause and has not been disclosed. It is, however, known that it is for a substantial sum of money in excess of £30 million. The precise date for completion of the sale in accordance with the contract has also not been disclosed, but the Respondent's evidence is that completion is not due to take place until after 25 November 2015.
In essence, the Application seeks a freezing injunction against the Respondent together with an injunction to restrain dealings with the shares in Perston and West 2, and the Property.
Background
The Applicant is a lawyer and businessman who divides his time between Israel and London. The Respondent is resident and domiciled in Israel, where he is the ultimate beneficial owner and Chief Executive Officer of Rav-Bariach (08) Ltd ("Rav-Bariach"). Rav-Bariach is a substantial company that trades as RB-Doors and is engaged in the development, manufacture and international distribution of high security products.
For a period of time before the litigation between them, the Respondent instructed the Applicant as his lawyer and over time the two became friends and business partners. They engaged together in various property deals in London. In about 2007 the Applicant and the Respondent agreed to set up Perston as an offshore company to acquire the shares in West 2 which owned the Property. Perston acquired the shares in West 2 for £1.575 million and West 2 refinanced its debt with a new loan from the Britannia Building Society in the sum of £31 million, secured on the Property. The Britannia Building Society later merged with the Co-operative Bank plc ("the Bank").
At the time of the acquisition, Perston had one share and it was agreed that the Applicant would hold the share for both himself and the Respondent. In March 2009 an additional share was issued to the Respondent to equalise their shareholdings.
It soon became apparent that the Property had low occupancy rates and there was a shortfall between the rental income and the interest instalments payable to the Bank. By 2009 West 2 was in serious financial difficulty and it suspended interest payments to the Bank. Negotiations then took place with the Bank which concluded with a restatement agreement in relation to the loan from the Bank in 2012.
The Respondent alleges that during this time he was forced to make funds available to West 2 to support its business, but that the Applicant was unable to do so as a result of the losses that he had suffered following the economic crisis in 2008. The Respondent alleges that one of the conditions set out by the Bank when it agreed to permit West 2 to suspend payments of interest was that funds should be invested by the ultimate owners of the group. He also says that the Bank demanded that the Applicant, who was not able to make monies available and with whom the Bank had fallen out over some other property ventures, should cease to have any further interest or involvement in West 2. It is said by the Respondent that the Applicant agreed to give up his interest in the venture, and transferred his share in Perston to the Respondent on 14 October 2010.
For his part, the Applicant accepts that the Bank required him no longer to be a registered shareholder of Perston. However, he contends that he transferred his share to the Respondent in response to a suggestion by the Respondent so that he would appear to the Bank as having disposed of his interest. He contends that in spite of the financial problems of West 2, he would not have given up his share in Perston for no consideration, but transferred legal title to the Respondent in the expectation that the Respondent would hold the share upon trust for him.
The Applicant contends that the Respondent has wrongly since denied the existence of the trust and has refused to provide him with information about Perston and the business of West 2 conducted at the Property, which the Respondent controls. The Applicant says that this denial of the existence of the trust led to him issuing the Israeli Proceedings on 19 March 2015.
The Israeli Proceedings
The essential basis and scope of the Applicant's claim in the Israeli Proceedings appears from the following paragraphs extracted from the Statement of Claim:
" Introduction
A1. This suit is concerned with serious violations of the Defendant's duty as the trustee of a share belonging to the Plaintiff, which is held and controlled by the Defendant by virtue of a trust for the benefit of the Plaintiff (the beneficiary) and which represents 50% of the issued and paid-up share capital of Perston … a company registered in the British Virgin Islands (hereinafter: the "Trust Assets" or the "Trust", as applicable).
The Trust
D12. In view of the demand of the … Bank and the Company's financial need to restructure the Loan, and since … relations of trust and friendship prevailed between the parties, the Plaintiff agreed to the Defendant's proposal that the Plaintiff's share be transferred to the Defendant in trust so that the Plaintiff would not be registered as a shareholder of Perston vis-à-vis the … Bank.
D13. According to what had been agreed between them, the Plaintiff transferred the share owned by him to the Defendant and/or his designee, in trust, in accordance with the Trust Agreement that was concluded between them and the share was registered in the Defendant's name.
D16. …the Defendant is grossly violating his most basic duties as a trustee and refusing to provide the Plaintiff with any information in connection with the Trust Assets, and is even performing actions with them without receiving the Plaintiff's consent…
Grounds for the Suit
E22. As detailed above, an oral trust agreement was concluded between the parties. Therefore, the Defendant, in his capacity as trustee of the Plaintiff, has a legal duty to render an accounting to the Plaintiff, periodically and/or upon request, in connection with Trust Assets."
The relief sought by the Applicant is for the District Court of Tel Aviv to order the Respondent to provide various documents to the Applicant that demonstrate how the "Trust Assets" have been managed including, in particular, reports as to the revenues and expenses of the Respondent, Perston and West 2 in connection with the Property. The Israeli Proceedings do not contain any express claim for a declaration to be made that a trust exists in favour of the Applicant over one of the shares that the Respondent holds in Perston, though it is clear that this is the underlying substance of what is alleged.
More importantly for present purposes, it should also be noted that the Israeli Proceedings do not contain any specific allegations of breach of trust beyond a failure to provide information or an account of dealings with the Trust Assets. Nor do they make any claim (still less any quantified claim) for compensation or damages for breach of trust.
In evidence in support of his application to this court, however, the Applicant has indicated that he believes, on the basis of information that he has obtained from a potential purchaser of the loan from the Bank, that the net income of West 2's business at the Property between 2010 and 2015 could have been in the region of £3.85 million. He contends that this could have been distributed by West 2 and paid out by way of dividends on the shares in Perston. On that basis the Applicant indicated, through his counsel, Mr. Oliver White, that he might have a monetary claim against the Respondent in relation to past breaches of trust, amounting to about £1.925 million.
Since the filing of the Statement of Claim in the Israeli Proceedings, the situation has developed. On 6 May 2015 the Respondent, who denies the existence of any trust, issued...
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