England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(Mr Robert Englehart QC,
sitting as a Deputy High Court Judge)

		Royal Courts of Justice Strand London WC2 Wednesday 25 April 2001

Wednesday 25 April 2001

1. LORD JUSTICE CHADWICK: This is a renewed application for permission to appeal against an order made on 5 March 2001 by Mr Robert Englehart QC, sitting as a Deputy High Court Judge in the Chancery Division, on the trial of an issue between a Liberian Corporation Continental Petroleum Corporation ("the Corporation") and a Singaporean bank, United Overseas Bank Ltd ("the Bank") which had arisen in proceedings brought by the Bank against Chief Emmanuel Iwuanyanwu for the recovery of monies lent.
2. Default judgment against Chief Iwuanyanwu (to whom I shall refer for convenience as "the Chief") was entered in those proceedings on 25 August 1992 in the sum of £2.5m or thereabouts. Part of that judgment debt was paid and satisfied out of the proceeds of security, but a substantial sum remains unpaid. On 12 May 1999 the Bank obtained what used to be called a charging order nisi (but is now described as a "Charging Order: Notice to Show Cause") against property known as 45 Dollis Avenue, London N3 to secure the balance of the judgment debt - a sum then amounting to £938,995 odd. That property, 45 Dollis Avenue, is registered in the name of the Corporation. The charging order was made on the basis of evidence which satisfied the Master, on the papers, that the Chief was the beneficial owner of, or had some beneficial interest in, 45 Dollis Avenue. The Corporation, as the registered owner, was given liberty to intervene in the proceedings.
3. The matter came back before Master Trench, in chambers, on 14 June 1999. He directed that an issue be tried between the Bank and the Corporation as to the beneficial ownership of the property, and he further directed that the Corporation be the claimants in that issue. He transferred the proceedings to the Chancery Division.
4. There was an appeal against that order. The appeal came before Hallett J. There is no record of the proceedings on that appeal in the bundle of papers before me; but it is common ground that Hallett J dismissed the appeal. For my part, I am unable to understand upon what basis any appeal was launched against the order of Master Trench; unless it were to challenge his direction that the Corporation be claimants in the issue. It seems to me that the necessary inference is that the understanding of the parties, and the intention of the Master, was that that direction had the effect that the Corporation would be fixed with the burden of showing that it was the beneficial owner of the property: thus reversing what might be thought to be the ordinary position, under which the bank, seeking a charging order over the property to secure a judgment debt obtained against the Chief, would need to show that the Chief was beneficially entitled to the property to be charged. If that were not the purpose of the appeal, then, as I have indicated, I can see nothing else in the order of Master Trench which could have given rise to a need to appeal. But, if that were the purpose of the appeal, then it is significant that the appeal failed.
5. The issue which the Master had directed on 14 June 1999 came before Mr Englehart QC earlier in this year. He delivered a full and careful judgment in writing on 5 March 2001. He found as fact (indeed, it was not in dispute) that 45 Dollis Avenue - which is a large residential house - had been purchased by the Chief in his own name in 1980 as the London residence for himself and his family. The Chief was registered as proprietor of the property at HM Land Registry until 13 July 1981. On that date the registered title was transferred into the name of Lamsol Properties Ltd, a company registered in Jersey. Some ten years later, on 10 May 1991, the registered title was transferred from Lamsol to the Corporation. As the judge said, in paragraph 7 of his judgment, the critical question for him was whether either transfer was intended to affect the beneficial interest in the property which, prior to 13 July 1981, had been vested in the Chief.
6. The judge found as fact that both Lamsol and the Corporation were controlled by the Chief. There was no evidence that Lamsol had made any payment in respect of the transfer in July 1981; or, indeed, that Lamsol had ever had any funds of its own. At paragraph 30 of his judgment, the judge said this:

"The transfer of Dollis Avenue from the Chief to Lamsol in 1981 was a purely paper transaction. Chief Iwuanyanwu had originally bought and paid for the house, but on the transfer to Lamsol no money changed hands at all. Lamsol never had any funds. It was suggested that Chief Iwuanyanwu was credited in the books of Lamsol with the value of the house by a credit to him by way of 'director's loan account'. Not only was there no evidence of Chief Iwuanyanwu ever having been appointed a director of Lamsol but no books, records or accounts of Lamsol were ever disclosed. It is doubtful if there ever were any."

7. In relation to the transfer of the property from Lamsol to the Corporation in 1991, the matter was rather more complicated. There was a purported sale of the property at a price of £400,000 by Lamsol to another Liberian company, Petrochim. The purpose of that purported sale was to persuade the Bank to release an existing charge which it had over 45 Dollis Avenue on payment of £400,000. But the judge took the view that the purported sale was really a charade. He said this at paragraph 17 of his judgment:

"The bank agreed to the proposed sale at £400,000 and to release its charge on payment to it of the net proceeds of sale. In fact, this was a charade. There was no sale to Petrochim Ltd. There was no deposit paid or genuine exchange of contracts. The letters of dated 11 February, 12 March and 19 April 1991 [to which the judge had referred] (if in truth they were ever sent) bore no relation at all to reality, as Mr Nicholas [who was the solicitor acting in the transactions] had to accept in evidence. They were merely, as he said, `for my records'. There was simply a transfer to, and registration in the name of, CPC, with sufficient finance to procure the bank to release its charge (389,900) being raised by Mr Nicholas."

8. In substance, therefore, there was no sale from Lamsol to the Corporation. What happened was that there was a refinancing of the debt secured by the existing Bank charge and, in the course of that refinancing operation, the registered title was transferred to the Corporation. There is no suggestion that the Corporation ever paid anything for it.
9. The judge returned to this transaction at paragraph 31 of his judgment; when he said this:

"When in 1991 Dollis Avenue came to be transferred out of Lamsol's name and into the name of CPC, there were practical objectives to be met as I have already described. In particular, Mr Nicholas wanted it shielded from the Bank. At the same time it had to be kept as the Chief's London house. I shall not repeat what I have previously said about the way the transaction was conducted and the finance raised by Mr Nicholas. I am satisfied that neither Mr Nicholas or Chief Iwuanyanwu himself ever intended to transfer the Chief's beneficial interest in Dollis Avenue to CPC. It was a matter of indifference which company's name, other than Lamsol's, was to be used for the registration of ownership. There had to be an apparent sale by Lamsol in order that the bank should release its charge. But in truth there was no sale at all. CPC was just a convenient nominee company into the name of which Dollis Avenue could be transferred."

10. His conclusion, therefore, was that the beneficial ownership in the property, which had vested in the Chief on his purchase in 1980, had remained in the Chief throughout. Lamsol and the Corporation were mere nominees holding a bare legal title.
11. The judge made an order accordingly. He declared that the Chief was the beneficial owner of the property known as 45 Dollis Avenue, and he ordered that the beneficial interest of the Chief in that property be charged with the payment to the Bank of an amount which had by then increased to £1,034,181 odd, being the amount due under the judgment of 25 August 1992. He refused permission to appeal.
12. The grounds of appeal, as they appear in the application notice, are four. First, it is said that the judge failed to appreciate properly, or to bear in mind, the corporate status of the Corporation. In my view, there is nothing in that point. The judge had that matter well in mind, as appears from paragraph 28 of his judgment. He said this:

"In my approach to the present facts I have very much in mind that ordinarily companies, even 'one man offshore' companies, are very definitely not to be treated as nominees or agents for their shareholders or those who control them. The whole point of incorporation is often to take advantage of the limited liability which attaches to a company and, in Salamon the House of Lords soundly rejected the agency theory in the case of a one man company. I also have in mind that where an individual in fact controls a company it is not easy to talk in terms of the company acting separately from the individual."

13. The judge reminded himself that his approach should be one of great caution before concluding that the facts justified a conclusion that the company held an asset as the mere nominee or agent of an individual who happened to control it. Nevertheless, he reminded himself that, on a given set of facts, it is perfectly possible for such a company to be a mere nominee or agent in respect of assets which it held. In each case it is a question of fact. In this case, the question of fact was whether, on the acquisition of the registered title by Lamsol in 1981, the beneficial ownership had passed; and, if it had not passed to Lamsol in 1981, then whether anything which occurred in 1991 had the effect of vesting the beneficial ownership, which (on that hypothesis) had remained in the Chief, in the Corporation.
14. The second of the proposed grounds of appeal is that the judge erred in finding that the legal burden of proof rested and remained on the Corporation. The judge referred to that point, briefly, in paragraphs 25 and 26 of his judgment. In particular, he reminded himself of the decision of this court in Rosseel NV v Oriental Commercial and Shipping (UK) Limited (unreported; 8 October 1991). This Court had held that, in a case where an intervener sought to assert that it was the beneficial owner of property over which a charging order nisi had been made, it was for the intervening party to establish the facts on which its claim was based. But the judge took the view that the key to the problem lay in an appreciation that the issue which he had to resolve arose in circumstances where the Bank already had a charging order nisi over the beneficial ownership of Dollis Avenue: so that, unless someone could show to the contrary, then the charging order would become absolute. He thought that the real question in the matter before him was not so much where the legal burden of proof lay, but whether or not he was satisfied on the evidence that the Corporation had acquired a beneficial ownership.
15. Given the terms of Master Trench's order, and the fact that the appeal from that order had been dismissed, it seems to me that there could have been no doubt in anyone's mind that, at the trial of the issue, the Corporation would have to do more than simply rely upon its registered title. The court was going to inquire into the circumstances in which the Corporation had become a registered owner; and in the course of that inquiry was going to inquire into the circumstances in which its predecessor, Lamsol, had become registered owner. There was no appeal against Hallett J's dismissal of the appeal against Master Trench's order.
16. The point was raised (rather indirectly) in the pleadings; in that the points of claim at paragraph 12, in setting out a chronology, had asserted that Dollis Avenue was sold to Lamsol properties in 1981 and no admission was made as to that assertion. So that the position, on the pleadings, was that the Corporation was asserting that there had been a sale of the property from the Chief to Lamsol, and that was not admitted. In those circumstances, the burden of adducing evidence on the pleadings - arising from the fact that the Corporation was the claimant in the issue - was on the Corporation.
17. Then it is said that the judge erred in his approach to the facts, in that he recounted them before considering the legal framework or where the burden of proof lay. I can find no substance in that criticism. A judge is bound to set out the facts which he has found; and he may well find it convenient to refer to the legal consequences of those facts after he has set them out. It is not to be assumed that he did not have the legal principles in mind when he found the facts.
18. Ground 4 of the proposed grounds of appeal is that the judge erred in not reminding himself of "the cross-cultural difficulties in the assessment of the evidence"; and in not giving reasons for rejecting the evidence of the intervener (by its shareholders and by Mr Nicholas, its solicitor) and of the Chief. It is not at all clear what is meant by "cross-cultural difficulties" in the assessment of the evidence. Clearly, as the judge said in his judgment, he did not believe the evidence which was given to him either by the Chief or by the Chief's wife, or, in large part, by Mr Nicholas. The passage to which I have already referred is a recognition that Mr Nicholas, a solicitor, was creating documents which bore no relation to reality. In the light of that it can come as no surprise that the judge did not think much of his credibility.
19. Finally, it is said that the judge erred in failing to consider, or to appreciate, what is said to be the illogicality in his finding (at paragraph 32 of his judgment) that, if he had concluded that the Corporation was not the mere nominee for the Chief but was a genuine purchaser of Dollis Avenue, albeit with funds provided by the Chief:

". . . I doubt I would have found there was a resulting trust."

20. I see nothing in that criticism. If the Corporation was a genuine purchaser of Dollis Avenue it would have been a purchaser from Lamsol, and there would have been no resulting trust for the Chief. Further, even if the purchase had been made with funds provided by the Chief by way of loan, no question of resulting trust for the Chief would have arisen.
21. In arguing the application today Mr Mann QC did not rely on any of the five grounds to which I have referred. His thrust was that the judge ought to have appreciated that there was evidence that Lamsol had paid for the property, or had agreed to pay for the property, at the time of the transfer in 1981. The foundation of that contention is a ledger sheet produced by Mr Nicholas' firm in respect of the Chief (as his client) in a matter described as "Actionlake Ltd". That ledger sheet shows a cheque to the Inland Revenue on 8 July 1981 in the amount of £2,000. Mr Mann says that that cheque was in respect of stamp duty payable on the registration of the transfer of the property into the name of Lamsol in 1981. That assertion stands on shaky ground; in that the entry is not, of course, an entry in relation to Lamsol at all. Secondly, it is not an entry made by Mr Nicholas, who gave evidence about it. Thirdly, it depends upon Mr Nicholas' recollection of an event, now some twenty years ago, that stamp duty was paid on a transfer. That is hardly a reliable basis for making any conclusion of fact. Nevertheless, Mr Mann contends that the judge ought to have concluded that there was a basis for finding that the transfer from the Chief to Lamsol in July 1981 was stamped ad valorum. There could be only one of two explanations for that. Either the transfer was by way of gift, or it was a transfer for value. The value at which the transfer was stamped was £100,000; being the price at which the Chief had acquired the property (or is said to have acquired the property) about a year earlier.
22. Assuming, in favour of the applicant, that the transfer from the Chief to Lamsol in 1981 was stamped ad valorum on the basis that it recorded a purchase price of £100,000, the question still remains: was that evidence of any genuine transaction? In particular, was that evidence of any transaction under which Lamsol ever agreed to pay £100,000 for this property? The answer to that is plainly no. The documents provided do not record any connection between this transaction and any decision by Lamsol to purchase. The documents relate to a decision by the Chief. Lamsol, on the evidence found by the judge, was a company with no assets. There was no reason why it should have agreed to pay £100,000, or any other sum, for a property in respect of which, so far as can be seen, it was to obtain no use or benefit whatever. The property was to continue to be used by the Chief. There is nothing in the books of Lamsol - or nothing that has been disclosed (because the books have not been disclosed) - which indicates any corporate decision by Lamsol to incur an obligation to pay for this property. The transfer and the stamp duty are no indication that Lamsol had any corporate knowledge of the transaction.
23. I am satisfied, therefore, that this is a case in which the judge was entitled to reach the conclusion that the beneficial interest never passed from the Chief to Lamsol in 1981. If the beneficial interest never passed from the Chief to Lamsol in 1981, then there was nothing in the transaction in 1991 - described by the judge as a `charade' - which could have had the effect of transferring the beneficial interest to the Corporation when it became the registered owner.
24. This would be an appeal with no prospect of success. In those circumstances, this application is dismissed.
ORDER: Application refused.