England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION (FERRIS, J.)

		Royal Courts of Justice Strand, London, WC2A 2LL
		8th November 2002

Lord Justice Mance:

1. This is an appeal from such part of a judgment of Ferris J dated 31^st July 2001 as declared that three disputed properties fell within a joint venture agreement made between the appellant (the first defendant) and the respondent (the claimant). The three properties were 126/7 Shoreditch High Street, 135/9 Curtain Road and 1-5 Chapel Place.
2. The joint venture was not set out in writing. Both parties ran their affairs in a manner which involved neither paper nor, so far as appears, compensating email traffic. The appellant's 'office' is apparently his car. Nonetheless, the parties' affairs were substantial. The appellant has particular expertise in the development of urban residences in the Shoreditch area, and the respondent, who with his sons accumulated considerable funds in the textile business, has developed a substantial property portfolio.
3. Before the judge, a joint statement was prepared and agreed, which set out the common ground and the issues between the parties. It reads:

"Agreement

1. In 1995 [AN and ZS] agreed ("the agreement") that [AN and [ZS] would cause to be acquired property known as 341/345 Old Street, 3-7 Drysdale Street and 2 Virginia Road/5 Calvert Avenue, 126/127 Shoreditch High Street and 135/139 Curtain Road, "the Melcro properties", in the Shoreditch area of London, which property was to be exploited including by means of development and/letting and/or sale.

2. The following were terms of the agreement:

2.1 that the property might be acquired by corporate entities controlled by or associated with [AN];

2.2 that principally [ZS] would deal with the arrangements relating to the properties and the refurbishment and administration of the same and [AN] would provide necessary finance, predominantly the payments for which loans could not be arranged;

2.3 that the amount of profits from the property (being the proceeds of sale and rental income from the property less the costs of acquisition, development, management, maintenance and selling) would be shared equally by [AN] and [ZS].

3. There are disputes between the parties about whether or not:

3.1 It was agreed at the time of the proposed acquisition of the Melcro properties (as opposed to a later date) that property acquired for the purpose of the agreement might be acquired by corporate entities controlled by or associated with [ZS];

3.2 It was agreed that the corporate entities which acquired the property for the purposes of the agreement would hold the property for the benefit of [AN] and [ZS];

3.3 It was agreed that 126/127 Shoreditch High Street would cease to be part of the agreement (and if not whether [ZS] has to account for the whole of the profits of 126/127 Shoreditch High Street or only the share of the property held for his benefit);

3.4 135/139 Curtain Road ceased to be part of the agreement because it was acquired by Murex Limited (and if not whether [ZS] has to account for the whole of the profits of 135/139 Curtain Road (if any) or only a proportion of those profits and if a proportion what proportion);

3.5 it was agreed in 1998 that for the purposes of accounting between [AN] and [ZS] any payment of profits would be net of tax, with agreement to provide for a deduction of 40 per cent tax from properties held by corporate entities controlled by or associated with [AN] substantially in the manner explained by [AN] in evidence;

3.6 it was agreed that a party who procured direct finance towards the purchase of a property would be entitled to recover fixed interest at the rate of 15 per cent per annum on monies advanced for such purchase from the date of advance until the date of repayment of that loan;

3.7 the obligation to account arose on the receipt of rental income, the disposal of each property or at some later (and if so what) date.

4. Further agreements were made between the parties, on the same terms as the terms of the original agreement providing for the acquisition of the properties at 97-113 Curtain Road, 47/49 Charlotte Road and the freehold of 1-12 Chapel Place, 3 long headleases of 9, 10 and 12 Chapel Place, long lease of a wine bar at 7 Chapel Place and leases of 11 car parking spaces and 50 per cent of the property at 315 Kingsland Road (save that the corporate entities referred to in paragraph 2.1 above which acquired 47/49 Charlotte Road and 50 per cent of 315 Kingsland Road would be controlled by [ZS].

5. There is a dispute between the parties about whether or not 50 per cent of 74 Rivington Street, 50 per cent of Suna House and the headleases of 1-5 Chapel Place were acquired on the same terms of the original agreement (with the corporate entities referred to in paragraph 2.1 above which acquired control of these properties being controlled or associated with [ZS]."

4. The appeal therefore arises on the basis that 126/7 Shoreditch High Street and 135/9 Curtain Road were originally agreed to be within the joint venture, but that they ceased to be so, either by agreement or otherwise. In those circumstances, Mr Dingemans QC for the appellant accepted that the onus lay upon his client to establish that these properties had ceased to be within the joint venture. As to the acquisition of the headleases of 1-5 Chapel Place, although the issue as formulated was whether it was agreed that this would be undertaken within the joint venture, it was common ground that at one point it was to be within that venture. Mr Dingemans accepted that, in those circumstances, there was at least a factual onus on his client to establish that it had ceased to be so.
5. The background and surrounding facts are complicated, but need only be shortly stated. The appellant had formed an association with a company engaged in the importation and sale of shoes called Melcro Shoes ("old Melcro"), which involved the acquisition of a number of properties (including 126/7 Shoreditch High Street and 135/9 Curtain Road). Old Melcro and others, including the appellant himself and a Swiss company called Murex Limited ("Murex") and Murex's apparent principal Mr Bordogna, had incurred significant bank indebtedness. This led the bank, Bank Leumi, in early 1995 to appoint receivers in respect of both old Melcro and 126/7 Shoreditch High Street. The respondent became involved, on the introduction of Bank Leumi, in a proposed rescue operation. This was effected by the purchase of the shoe business of old Melcro by a newly formed company, new Melcro. This was financed by inter alios the respondents' three sons ("the Nathan brothers") and the appellant became chief executive of new Melcro. The joint venture was formed in order to acquire the properties held by old Melcro, which Bank Leumi was now entitled to sell as mortgagee in possession, so further reducing old Melcro's bank indebtedness.
6. Originally, it was envisaged that the joint venture would be conducted through a company called Woodfall Properties Limited ("Woodfall") incorporated for that purpose on 12^th September 1995 and that the parties interested would all hold shares in Woodfall; the respondent even prepared a draft agreement to that effect. But the judge found that, although Woodfall was used for certain purposes in the transactions which followed, it never became a joint venture company in the sense envisaged by the draft or at all. Its shares remained owned at all times by the respondent's sons. Thus arose an informally constituted joint venture, on the lines set out in the agreed statement, but giving rise to the disputes as to the further terms of the parties' agreement which the court had to resolve.
7. To resolve the disputes, the judge heard evidence on eleven days, on six of which the parties themselves gave evidence. But he gained little assistance from the parties' oral evidence. He said:

"42. The result is that I do not feel able, in relation to disputed matters, to rely upon the evidence of either AN or ZS except where that evidence is corroborated by written material or other credible evidence or has a high degree of probability about it. My reasons for mistrusting their evidence are different in each case. It appears to me that AN's evidence was, as Mr Strachan suggested, rambling, evasive and occasionally nonsensical. Even when AN addressed the question which he was asked and he had been personally concerned in a conversation or transaction his evidence lacked particularity. As to ZS, his evidence contained many inconsistencies and it seemed to me that at times he was making things up as he went along. Examples of this were his evidence in respect of 135/139 Curtain Road which I consider later and his evidence about proceedings taken by the Nathan side in 1999 to recover loans of £200,000 and £100,000, which I shall also mention later."

8. As to other witnesses, in particular two solicitors, Mr Fishman of Philip Ross and Mr Bluston of Malkins, solicitors who acted for respectively the respondent and the appellant, the judge said this:

"43. I did not have the same reservations about other witnesses. The main problem in their cases was that they simply did not have direct knowledge of the relevant events. This was particularly so with Michael Nathan whose knowledge was largely dependent upon what he remembered AN telling him.

44. I thought that Mr Fishman was generally a reliable witness and he did have personal knowledge of many relevant matters. Mr Strachan attacked him for being "intentionally unhelpful" in respect of certain dealings with Mr Bordogna concerning 135/139 Curtain Road, but I do not consider this criticism was justified, not did I think that Mr Fishman was affected by the fact that he is related to AN by marriage. I was more concerned at the evidence of Mr Bluston, the solicitor for ZS, particularly in respect of his dealings in relation to Panamanian companies which he formed or acquired for ZS. In respect of most of his dealings, however, the part played by Mr Bluston is reasonably apparent from the correspondence.

45. A number of business associates of ZS gave evidence deposing, amongst other things, to their trust of ZS. Although I do not doubt their expressed contentment with their relationships with ZS, it seemed to me that their evidence indicated a need to possess a particular outlook, far removed from that of an analytical lawyer, in order to enjoy a successful commercial relationship with ZS. I did not find their evidence to provide any real reinforcement for the evidence of ZS.

46. I do not find it necessary to comment at this stage on the evidence of other witnesses. But having regard to the comments which I have made on the evidence of the principal witnesses I propose to proceed, in relation to the dealings with particular properties, by trying to establish a framework of events from the documentary material or other largely undisputed evidence and then to see to what extent the oral evidence of the parties is consistent with them. I think it desirable to discuss the transactions in respect of undisputed properties as well as those where there is a dispute, although I shall try to deal with the former more briefly than the latter."

9. It will be evident that the judge did not face an easy task. Two main criticisms directed at his judgment by the appellant are that he failed correctly to give effect to his own findings about the precise nature of the relationship and to the inherent probabilities.

126/7 Shoreditch High Street

10. This was one of three of old Melcro's properties agreed to be sold on 22^nd March 1996 under a contract made between Bank Leumi and Hopshire Investments Limited ("Hopshire"), another company incorporated or acquired by Mr Fishman and whose shareholders and directors were the respondents' sons. Completion took place on 19^th April 1996.
11. The appellant's case is that prior to this date the respondent had changed his mind about including 126/7 Shoreditch High Street in the joint venture, that the appellant had therefore found another partner in the shape of a Mr Tobi Cohen, an old associate in property transactions, that they had formed or acquired their own company called Facet Properties Limited ("Facet") for the purpose, and that the reason Hopshire was used to acquire the property was to conceal from Bank Leumi that the respondent, as a person concerned with old Melcro, was interested in the purchase.
12. Facet was in fact formed by Mr Bluston, acting on the appellant's instructions in January 1996. On 15^th January 1996 it obtained a facility of £464,000 from FIBI Bank, guaranteed by the appellant and Mr Cohen, to acquire Nos. 126/7. Mr Fishman knew of all this. His evidence was that it was consistent with his understanding, based on discussions with the respondent in September 1995, that Nos. 126/7 would be purchased by the appellant or by corporate vehicles nominated by him, and included in the joint venture. The respondent would in this case only provide finance if the appellant experienced difficulty. Mr Fishman liaised with Mr Bluston in February 1996, on the basis that the bank borrowing would be limited to originally £150,000 and, later, £235,000, and that the respondent would advance the balance of a price envisaged as being £450,000. On 25^th March 1996, Mr Fishman wrote to Michael Nathan, one of the respondent's sons, reporting the exchange of contracts for the purchase of Nos. 126/7 "as part of the portfolio". Immediately after completion, Hopshire declared that it held the freehold and leasehold interests in Nos. 126/7 in trust for, and pursuant thereto transferred them without expressed consideration to, Facet. Facet paid the entire price, drawing down £450,000 under the FIBI facility to do so. In mid 1997, Facet granted a lease to an apparently unconnected third party, and in August 1998 the freehold (or possibly Facet itself) was sold for £300,000 to MAS Holdings Inc. ("MAS"), a Panamanian company closely associated with the appellant.
13. The judge considered four aspects, before concluding that the respondent never told the appellant that he was no longer interested in the acquisition of Nos. 126/7. First, he examined the appellant's contentions and evidence about his matter, which was, he concluded, "vague and unsatisfactory in a number of respects". Second, he examined certain notes made by Mr Fishman, on which counsel for the appellant placed and still places great reliance. Third, he considered evidence given by Mr Tobi Cohen. In some respects this supported the appellant's account, but it also timed the appellant's first approach to Mr Cohen as being at the end of 1995 or in early 1996, and so some weeks after the respondent had, on the appellant's case, withdrawn his interest in Nos. 126/7. This was a delay that the judge thought unlikely if the approach was motivated by such a withdrawal. Fourth, he identified other factors which he regarded as pointing cogently against the appellant's claim, particularly Mr Fishman's continuing involvement throughout and the respondent's sons continuing willingness to advance monies for the purchase, long after the respondent had, on the appellant's case, withdrawn his interest.
14. The appellant's first attack on the judge's approach is that it is inconsistent with his rejection of what became known as "the parity principle". This was a principle for which the respondent contended unsuccessfully at trial. It was, in summary, that the parties should acquire properties in such a way that the sums invested on each side were approximately equal. It may be asked how the respondent could ever have hoped to establish the parity principle, bearing in mind paragraph 2.2 of the agreed statement. The judge certainly thought any such principle impossible to reconcile with the respondent's oral evidence, during which he said: "I was prepared to pump in as much money as was needed as long as he was happy to continue to deal with the daily management".
15. However, the judge's rejection of the parity principle is not inconsistent with the appellant himself on any particular occasion acquiring a property in his own name or with his own finance, but still within the ambit of the joint venture. Even the appellant accepted this to an extent, since it was common ground that, towards the end of 1996, he agreed with the respondent that a property at 47/49 Charlotte Road should be acquired within the joint venture, and yet that property was acquired by a company incorporated by Mr Bluston for the appellant, which borrowed £350,000 from FIBI Bank, raising a further £100,000 from the respondent's sons, and the balance of some £70,000 from elsewhere. Later, in 1998 the appellant, through a company called Newbrook Limited, bought 50% of 315 Kingsland Road, again it is common ground for the joint venture. The property was before completion agreed to be on-sold at a considerable profit. The respondent's only involvement appears to have been indirect, in that £100,000 of the price of £677,500 which had to be found at the time of completion was, unbeknown to the respondent, covered by a loan of £100,000 which the respondent had made to the appellant.
16. Nevetheless, the appellant contended that, prior to the acquisition of 47/49 Charlotte Place, there was no question of him using one of his companies to acquire a joint venture property, and still less so in circumstances where the respondent's side put up no money. I have already mentioned that one feature of the acquisition of Nos. 126/7, to which the judge (rightly in my view) attached significance, was the respondent's sons' continuing willingness to lend monies for the acquisition, if necessary. As to the suggestion that the joint venture did not contemplate the use by the appellant of a company of his own to acquire any property, the judge expressly said: "I reject the contention of ZS that, until the acquisition of 47/49 Charlotte Road, all joint venture properties were to be acquired by Nathan entities". That rejection was solidly founded. The appellant in his original defence admitted that it was a term of the joint venture agreement from the outset that "the properties might be acquired by corporate entities under the control of the Claimant or the First Defendant but held for the Claimant and First Defendant jointly". The appellant's witness statement mirrored this language, admitting that: "the properties might be acquired by corporate entities which had to be under the control of Aharon and/or me, but the properties would be held … for Aharon and me jointly". In evidence, the appellant suggested that "and/or me" was a mistake for "reporting to me". Not only is such an explanation impossible in relation to the defence, it is inherently lacking in credibility.
17. The fact that the relationship was based not on parity of financial investment, but on the understanding that the appellant's principal role would be to deal with the arrangements relating to and management of properties, while the respondent would provide finance where necessary (the "finance for legwork" principle) was also relied upon in other ways. The evidence of Mr Tobi Cohen was that, when the appellant approached him, he gave him to understand that the original intention had been to purchase in a joint venture with the respondent, but that the respondent had not wanted to do so, as it was too expensive; and that in these circumstances Mr Cohen and the appellant agreed that the property should be bought and they would share profits. Facet was a vehicle set up to achieve this sharing. The judge, as I have said, attached some weight to Mr Cohen's dating of the appellant's approach as, on the face of it, some weeks at least after the respondent had, on the appellant's case, ceased to have any interest in Nos. 126/7. I see force in Mr Dingemans' submission that this point was not as strong as the judge thought, particularly when Mr Cohen's evidence was generally vague. The judgment also recites that Mr Cohen also said that he injected £200,000 into Facet for the purchase (which would be difficult to reconcile with the judge's finding that the entire price of £450,000 was provided by the FIBI Bank facility). However, Mr Cohen's witness statement talks merely of putting up £200,000 towards the purchase by way of guarantee, which probably resolves that difficulty. It also records Mr Cohen's receipt of half the profits made, after discharge of the FIBI loan, on the sale to MAS in August 1998.
18. The appellant submits on this basis that the judge erred in not accepting as a fact what Mr Cohen said that the appellant said to him about the respondent having ceased to have any interest, and in reaching a conclusion which made the appellant liable to account for his 50% share of any profits twice over, once to Mr Cohen and once to the respondent; the appellant says that not only does this offend common sense, it fails to give him any reward for all the "legwork" that he was to undertake, whereas it gives the respondent his 50% without his side having supplied any finance. The potential force of that argument is clear. The difficulty in accepting it in the present circumstances is that it assumes that the whole picture was before the court, when the one matter that seems clear is that it was not. The appellant and Mr Cohen were involved in a number of different properties, and they were accustomed to account "globally", rather than a deal by deal basis. The judge said at paragraph 11:

"ZS appears to operate in conjunction with a variety of associates ….. Each of them appears to have provided finance for some of ZS's activities in the property world and to have, or at least to claim, some entitlement to property vested in companies connected with ZS. The arrangements between these associates and ZS are in most cases highly unclear. In only one case is there anything in writing. These are matters to which I shall return."

It is also relevant to remember at this point the judge's comment, quoted above, that it seemed to him, from what he had heard, that to enjoy a successful relationship with the appellant it was necessary "to possess a particular outlook, far removed from that of an analytical lawyer".

19. Mr Cohen's witness statement recorded that he was a silent partner with the appellant in respect of three other old Melcro properties admitted to have been by the joint venture, namely 341/5 Old Street, 5 Calvert Avenue and 3/7 Drysdale Street. He had, he said, a 50% share in the appellant's 50% share. He did not do any work or put up any finance in connection with them. So, in this connection, the appellant was willing to do the legwork, but part with a share for no apparent consideration directly related to those properties. Similarly in relation to Charlotte House Mr Cohen said in oral evidence that, prior to its acquisition at the end of 1996, the appellant agreed to share his 50% interest with Mr Cohen, and did so although in the event Mr Cohen did not have to put up any finance. Mr Dingemans informed us that there was documentation showing that £35,000 of the price for Charlotte House came from a company called Calverpoint Limited, in which the appellant's and Mr Cohen's wives were shareholders, but, even if this is treated as qualifying the account given in Mr Cohen's oral evidence, the point remains that a 50% share in the appellant's share of any profits made was on its face disproportionate to any financial contribution made by Mr Cohen in respect of this property.
20. It is in these circumstances not possible by looking at any particular transaction to say by reference to it alone that it is unlikely that the appellant would have agreed to part with the whole of his 50% share of any profits made in respect of it. Nor is it possible to rely with confidence upon the terms in which, according to Mr Cohen, the appellant approached him, even if these are taken as accepted. The respondent's case was that the appellant's business was such that he may well have agreed or had to part with the whole of his share in profits relating to a particular property. I add only that it is also possible, as Mr Edelman submitted in his skeleton, that the appellant intended to confine any 50% sharing arrangement with Mr Cohen to a half share of his own 50% share, even if Mr Cohen did not understand any other partner to remain involved. If any further assistance as to the likelihood of any of this occurring was to be derived from the relationship between the appellant and Mr Cohen, the analysis would have to embrace all aspects of that relationship and of the appellant's thinking and motivation at the time. The information available does not allow this. In summary, the judge's assessment of the appellant does not allow confident reliance to be placed on anything that he may have thought it appropriate to say, when approaching a potential partner, and such information as is available with regard to the appellant's relationship with Mr Cohen is at least consistent with a conclusion that the overall relationship was such that the appellant would in respect of one property have been prepared to forgo all his interest, in return for other assistance elsewhere.
21. Mr Dingemans next turned attention to Mr Fishman's notes which the judge interpreted as consistent with the continuing existence of a joint venture. Mr Fishman's file for Nos. 126/7 itself was missing, but these notes relate also to other properties, on the files for which they were found. They were made on 30^th August, 11^th October and 29^th November 1995, and read as follows:

30^th August 1995:

"1. I take Calvert and Drysdale 330 and I pay for the time being.

2. Z takes Shoreditch and Curtain and pay 450 and I mortgage the bal of 320 1^st charge for time being."

11^th October 1995:

"Attendance with Aaron Nathan who told me that in general terms he had agreed with Zvi the following:

1. AN will buy 3/7 Drysdale Street and 5 Culvert Avenue (purchased by Woodfall Properties Limited). Drysdale price is £105,000.00 Culvert Avenue is £225,000. The properties will be charged immediately to Nathan Brothers with a 15% interest charge as previously designated.

2. The other properties at Shoreditch High Street and Curtain Road will be bought by Zvi (in some vehicle) for the price of £770,000.00.

3. The contract to buy any of the properties will only be signed by AN if Zvi provides £450,000.00 cash (which sum includes £100,000.00 he owes on Old Street). The balance of £320,000.00 will be advanced on a First Charge by AN/Nathan Brothers on the usual terms."

29^th November 1995 (handwritten):

"1. Woodfall will buy (a) Calvert Ave

(b) Drysdale

2. Zvi or his coy. Shoreditch High St £450k

(his money or as he wants)

3. Curtain Road £350 to Zvi or Zvi + others

Nathan Bros will lend"

29^th November 1995 (typed):

"Telephone attendance on Aaron Nathan who explained to me what would happen in relation to these various properties as follows:

1. Woodfall Properties Limited would buy:

(a) Calvert Avenue for £220,000

(b) Land and buildings at Drysdale Avenue for £80,000

Look at Drysdale – there should be some railway arches included. This lump of property is to be charged to Nathan brothers.

2. Zvi or his company will buy Shoreditch High Street for £450,000. This is entirely his own project and will have nothing to do with Aaron.

3. Curtain Road will be purchased by Zvi or Zvi and others for £350,000 [altered at some point in handwriting to £370,000] but Nathan brothers will lend the money for that to be effected. There will be a loan of £300,000 advanced by first charge repayable on demand at the rate of 12% or 5% over base whichever is the higher. Zvi and any co-owners are to give personal guarantees."

22. Certain other correspondence relating to Nos. 126/7 was before the court. A letter dated 28^th February 1996 written by Mr Fishman to Mr Michael Nathan (to which the judge did not specifically refer) began:

"In relation to this transaction you are of course purely concerned as mortgagee and taking a second charge. My current instructions are that there is to be a second charge in the sum of £300,000 …..".

In a further letter dated 25^th March 1996 (to which I have already referred) Mr Fishman wrote to Mr Michael Nathan:

"I merely write to formally confirm that contracts were duly exchanged last Friday for the purchase of the above property as part of the portfolio. The sum allocated to this building as you know is £450,000. I am going to organise this week the documents to have signed in anticipation of completion and will also be preparing various costs etc. I am of course very clear as to your precise requirements in connection with the loan of £300,000 being made by you and your brothers on the security of this property."

23. Mr Dingemans submitted that the notes showed that Nos. 126/7 were to be acquired for the appellant's account, outside the joint venture. However, he accepted that the judge was entitled to conclude and to proceed on the basis that at the date of the first of the notes (30^th August 1995), the joint venture still embraced Nos. 126/7. (Until cross-examination, it was also the appellant's own case that 135/9 Curtain Road, referred to in the notes, fell within the joint venture until early 1996 when Murex reached a direct deal with old Melcro's administrative receiver or with Bank Leumi, which made it impossible for Nos. 135/9 to be purchased as part of the joint venture.) That being so, the question is whether the later notes and correspondence evidence an entirely different situation. Mr Fishman, on whose evidence the judge felt that he could generally rely, was, in the judge's words "quite clear that what he was concerned to record was that neither AN [the respondent] nor the Nathan brothers were at that stage intended to finance the purchase of 126/127 High Street". In other words what is said in the notes with regard to Nos. 126/7 and 135/9 went simply to financing and did not mean that these properties were to fall outside the joint venture. On the respondent's case the letter of 28^th February 1996 is to be interpreted in the same way. I do not accept Mr Dingemans' submission that this is an impossible construction of these documents. It seems to me quite possible. Further, on that basis, the notes make clear that Nos. 126/7 Shoreditch High Street and 135/9 Curtain Road might be bought either by the appellant or by his company or with others.
24. Mr Dingemans submits that the terms of the financing are inconsistent with the continuation of any joint venture. But he accepted that the taking of a charge (contemplated even in the August note) was not inconsistent. And I do not think that there is any basis for regarding the further terms, mentioned in the November note, whereby such charge was to be repayable on demand and secured by a guarantee, as so obviously inconsistent with a continuing joint venture as to throw any doubt on the judge's conclusion regarding Nos. 126/7. Any loan was to be made, not by the respondent (who alone was party to any joint venture), but by his sons or one of their companies. Mr Michael Nathan gave general evidence referring his duties as a director in respect of such charges, and these would include stipulating for proper legal and commercial protection.
25. Mr Dingemans underlined the distinction between the portfolio of properties that old Melcro, or Bank Leumi, was selling, and any portfolio of properties that might be included within the joint venture, and criticised the judgment for not taking it into account. Accepting that such a distinction might be drawn, it seems to me "the purchase of the above property as part of the portfolio", in the letter dated 25^th March 1996, refers most naturally to the acquisition of properties within the joint venture portfolio.
26. Mr Dingemans asks rhetorically why in that case the property was acquired in the name of Hopshire and then passed to Facet. The point has some force, but it was clearly always envisaged that the appellant would take or buy these properties, yet he did not wish the sellers to know he was involved (see paragraph 11 above). In these circumstances, once the judge concluded, as he did, that the joint venture embraced properties taken by the appellant or his nominated companies, there seems to me nothing inconceivable about the passing of this particular property through Hopshire to Facet. Further, the judge was able to point, on the other side, not merely to Mr Fishman's continuing belief, as Mr Fishman attested, in the continuing role of the joint venture, but also to the Nathan brothers' continuing willingness to lend money to Facet, if required; he was clearly justified in concluding that they would have been "most unlikely" to provide this, unless they regarded the joint venture as embracing the property after it reached Facet.
27. Summarising the position in respect of Nos. 126/7, there was much that could be, and clearly was, said on each side on the issues of credibility and probability which the judge had to confront. On credibility, however, the respondent has the very considerable advantage of Mr Fishman's generally reliable evidence, while Mr Cohen's evidence for the appellant was, in some respects, a mixed blessing. None of the points to which Mr Dingemans drew our attention in his careful submissions persuades me that the judge's conclusions were necessarily wrong, whether one looks at them individually or cumulatively. The relationships between the various parties departed sufficiently from conventional norms for it to be difficult to apply ordinary concepts of likelihood. The judge's analysis of the probabilities has not in my view been shown to be wrong. The onus was on the appellant to show some change of the original intention to include Nos. 126/7 in the joint venture. Thus far, I would conclude that he was right to hold that this was not shown. I would add that I have only reached my conclusions in relation to this issue after considering the appellant's challenges to the judge's decision in respect of all three properties in the round. In the event, however, I find nothing in the appellant's case viewed overall to affect my conclusion in respect of the present property.

135/9 Curtain Road

28. The appellant's case, when the trial started, was that the joint venture had been prevented from acquiring this property by the intervention of a Swiss company, Murex, with old Melcro's receiver or with Bank Leumi. That was what the appellant indicated in his witness statement. However, the evidence showed a different picture (leading the judge to reject the original claim by the appellant as "manifestly absurd"). The evidence showed Mr Fishman to have been acting for Woodfall and on 30^th November 1995 confirming to Bank Leumi an offer to purchase for £370,000. (The increase on the price mentioned in the note of 29^th November was, Mr Fishman explained, agreed with the appellant by telephone.) By 21^st December 1995 there was in existence a draft contract for sale to Woodfall. On 15^th January 1996, Mr Fishman submitted preliminary enquiries to Wilde Sapte, the receiver's and bank's solicitors, and also wrote to the appellant, saying that this was "so that we have some full file in relation to your ongoing acquisition". He added:

"I do need to be made aware of the identity of the vehicle that you will be using for this purchase and no doubt you will let me have some instructions on the subject at your convenience".

Then on 22^nd January 1996, Mr Fishman wrote, reporting the replies to the enquiries and saying:

"I will obviously therefore ensure that the matter is brought up to date so as to coincide with the purchase of the units being acquired within the portfolio. I am assuming that you will want to seek to deal with all of them at the same time …."

Mr Fishman's evidence, accepted by the judge, was that this note was to be read as if the word "other" qualified the reference to "units". By the end of January 1996, Mr Fishman was told by the appellant that the purchase would be made by Murex, for whom Kaufman Kramer Shebson ("KKS") would be acting. He wrote to them referring to the fact that Woodfall had made "an offer which was the only one, and which has been accepted", and that "It was on that basis that the papers had been supplied to me". He went on to say that he understood that it would not be sensible to ask the vendors to insert Murex's name, as purchaser, "notwithstanding that all parties intend that Murex is the ultimate purchaser and that the facility letter from FIBI Bank is to Murex". On 13th March 1996 he wrote again seeking KKS's confirmation that the matter was to proceed, and saying: "I think that you know that this is an integral part of a portfolio acquisition and it will be necessary for matters to proceed without further delay". Matters proceeded very slowly. In early May 1996 at KKS's request Mr Fishman sought and obtained confirmation from Wilde Sapte that Murex and Mr Bordogna would be released from the guarantees they had given in respect of old Melcro's indebtedness. Mr Fishman accepted in evidence that he knew that KKS were taking instructions from, or "having their strings pulled" by, someone other than the appellant. On or about 8/9^th May, 1996, after experiencing difficulties in contacting the relevant solicitor at KKS, Mr Fishman contacted and received instructions direct from Mr Bordogna, which authorised an exchange of contracts which took place on 9^th May 1996. Mr Fishman's explanation in evidence was that he thought that Murex was the company which the appellant was using for the purposes of the joint venture. The judge found that the appellant "was quite content to leave AN and Mr Fishman with the impression that [Murex] was a company chosen by [the appellant] to hold property for the benefit of the joint venture".

29. So far as the actual position regarding Murex is concerned, the judge said this:

"…. It was suggested to ZS that he himself had some interest in Murex, together with Mr Bordogna and perhaps others. ZS denied this and said that latterly he has not been on good terms with Mr Bordogna. I think that there may well be much that I was not told concerning a collaboration between ZS and Mr Bordogna in the early months of 1996, but I am unable to reach the conclusion that ZS himself has any interest in Murex."

30. Mr Dingemans drew to our attention passages in the evidence, including answers by the respondent, which showed that both the respondent and FIBI Bank knew that Murex was Mr Bordogna's company, and underlined Mr Fishman's awareness that Mr Bordogna was making decisions for Murex (although in his evidence Mr Fishman only accepted that he knew that Mr Bordogna was "associated" with Murex). In these circumstances, Mr Dingemans submits that the judge's conclusion that Nos. 135/9 fall within the joint venture is manifestly unsound. Mr Fishman knew of Mr Bordogna's involvement in Murex, which was acquiring the property, and this, in his submission, was inconsistent with any conclusion that the property was to remain within the joint venture after its acquisition by Murex. The contrary would mean that the appellant was answerable for a share of profits made by Murex after he had ceased to have any interest in the property himself. This point was addressed in a further judgment given by the judge on 31^st July 2002, in which he re-stated the appellant's obligation to "account" as arising on the basis that the appellant was in breach of contract in selling to a company (Murex) outside the joint venture, and as including (i) the difference if any between the purchase price and market value of Nos. 135/9 at the time they were sold to Murex and (ii) "the value as at that date of the expected fruits of ownership and exploitation of the property on behalf of the joint venture". Mr Dingemans submits that this highlights the improbability of the appellant parting with the property to Murex in circumstances where he would have to account for potential profits that he could not himself make after parting with the property.
31. The judge had however to look at the whole course of events, starting from the position, accepted by the appellant, that Nos. 135/9 were originally intended to be part of the joint venture. The appellant's original explanation as to how it ceased to be part of that venture was shown to be "manifestly absurd". In cross-examination, the appellant sought to develop an alternative explanation to the effect that this occurred in about October 1995, when (according to him) the respondent ceased to be interested in 126/7 Shoreditch High Street. However, in contrast with the position in relation to that property, he did not suggest that the respondent had ever expressly told him that he did not want to proceed with 135/9 Curtain Road. He tried however to interpret the notes of 11^th October and 29^th November 1995, as showing that both properties were viewed similarly, so that both properties were, by then and from then onwards, being treated as outside the joint venture. The judge gave this evidence no credence at all, accepting the submission by Mr Edelman QC for the respondent that the appellant was in effect making it up as he went along. Mr Dingemans did not feel able to place any reliance on it either. It seems clear that the judge also felt unable to place any real reliance on evidence given by a Mr Cross (a former director of old Melcro) about direct negotiations between Mr Bordogna and Bank Leumi; this proved to be no more than a hearsay account derived from Mr Bordogna, who gave no evidence.
32. In these circumstances, there was no credible explanation as to when and how Nos. 135/9 ever ceased to be included in the joint venture, and Mr Fishman's account was accepted that, so far as he was concerned, there was nothing to take it outside the joint venture, and that he understood that Murex was being used by the appellant for this purpose. Although Mr Fishman knew that Murex was Mr Bordogna's company, that does not mean that the appellant could not use or was not using it to hold the property, under some arrangement with Mr Bordogna, which would preserve and protect the joint venture's interest. In the event the judge was not able to find that there was such an arrangement, but he said that

"there may well be much that I was not told concerning a collaboration between ZS and Mr Bordogna in the early months of 1996".

Assuming that the appellant did part with all his and the joint venture's interest in the property to Murex, it cannot be assumed, in the absence of a full understanding of the relationship between the appellant and Mr Bordogna, that there was not some reason that compelled or moved him to do so, despite the risk that this might give the respondent a justifiable grievance.

33. In these circumstances, I do not consider that the appellant has shown that the judge was wrong in the conclusion he reached in respect of Nos. 135/9. Again, I find nothing in the cumulative weight of the criticisms directed at the judge in relation to all three properties to affect that conclusion.

5 Chapel Place

34. The freehold and certain leaseholds (Nos. 7, 9, 10 and 12) and parking spaces at Chapel Place were acquired, from Aldgate Warehouses (Wholesale) Limited ("Aldgate"), a company with which Mr Tobi Cohen was involved, for the joint venture in late 1997. The purchase was made in the name of Hopshire, with funds provided by the Nathan brothers, later partly substituted by bank lending. Negotiations for the purchase of the leaseholds of Nos. 1-5 Chapel Place began in July 1997, but became more active in April 1998, when Mr Radley of Warner Cranston, who had acted for Aldgate but by now appear to have been acting for Hopshire, wrote to the respondent at Hopshire (whose offices were now in No. 12 Chapel Street). On 6^th May 1998 a bank facility was however offered by Mizrahi Bank to a company called Queenscroft Investments Inc. for the purchase of Nos. 1-5. Then on 8^th June 1998 Mr Radley was told by the appellant's solicitor, Mr Bluston, that the purchase was to be by a Panamanian company called Timbercroft Holdings Inc ("Timbercroft"), which Mr Bluston described as "a company incorporated/puchased by me on behalf of Mr Smilovitch". In an application for bank finance in July 1998, Timbercroft was however said to be beneficially owned by Mr Jeffrey Green, a US citizen. In an affidavit sworn by the appellant and in his witness statement, it was described as a company of which the appellant and Mr Green were beneficial owners, each owning 50% of its shares. On 3^rd August 1998 Mizrahi Bank informed Mr Bluston of its willingness to lend Timbercroft £600,000 to purchase the properties. On 21^st August 1998 Mr Radley approved a draft contract naming Timbercroft as purchaser. By 2^nd September 1998 their price had however increased to £750,000. On 21^st October 1998 Mr Radley wrote referring to the terms of Timbercroft's proposed purchase for £750,000 and sought the respondent's instructions whether he still wished to proceed on those terms. The respondent could not recall the letter, and there was no evidence about the response, but exchange of contracts did take place on 23^rd October 1998. The entire price of £750,000 was funded by bank loan from Mizrahi Bank.
35. The leases of Nos 1-5 contained clauses (clause 3(0)(b)) not to assign without first delivering to the landlord (now Hopshire, as owner of the freehold) a direct covenant with the assignee. Mr Radley wrote to Mr Bluston as Timbercroft's solicitor, confirming that Hopshire did not require that clause to be complied with, and that

"in addition the obligation to provide formal notice of transfer and charge has also been waived on the basis that we would only be giving notice to ourselves".

That, as the judge observed, showed Mr Radley's understanding that Hopshire and Timbercroft represented effectively the same interests.

36. Mr Michael Newell, a property manager working on properties in which one or other or both of the parties had an interest, said that, shortly after completion of the purchase of Nos. 1-5, he took instructions from both the appellant and the respondent, in relation to a possible exercise of a power under the lease of 5 Chapel Place. He said that the respondent was closely interested in the matter, and insisted on such a notice.
37. Evidence was also given regarding certain advances made from the respondent's side. Payments of £200,000 and £100,000 were made in November 1997 and April 1998 and acknowledged by Mr Bluston's firm, Malkins, as made "by way of loan to [the appellant]". Then in October 1998, according to the respondent, the appellant came to him and asked for more money for the purchase of Nos. 1-5, to which the respondent said that he replied that he had already had £300,000 and that he was reluctant to advance more. According to the respondent, the appellant said that that would mean that the respondent did not want to participate in the purchase of Nos. 1-5, and an argument followed. Nevertheless, when the appellant a few days later asked for £75,000, the respondent said that he provided it. Malkins' client account shows receipt of such a sum from Woodfall, plus a further £4000 on 5^th November 1998.
38. The respondent's case was that he was at all times keen to buy the whole of Chapel Place, including therefore Nos. 1-5, but was content to allow the appellant to use an offshore company on behalf of the joint venture, although the judge regarded the respondent's evidence about his knowledge that the purchase was to be made in the name of Timbercroft as "unsatisfactory". The judge did not find the appellant's account of events "to be free from difficulty". But, as he recounted, the appellant's case was "considerably more complex". According to the appellant, the respondent changed his attitude and withdrew any interest twice, first in October 1998 because of "the delay and the increase in price", and on a second occasion after the acquisition, when he said that he would after all like to be involved and to put up "the £250,000 necessary", and then resiled from that also.
39. The judge contrasted the appellant's account of the first change of mind with the fact that Timbercroft was on the scene as proposed purchaser by July 1998 and was named as purchaser in the draft contract of 21^st August 1998. Mr Dingemans criticises this on the basis that it was not the appellant's case that the change occurred prior to the involvement of Timbercroft. There is, I think, some force in this criticism. It is true that the judge was correctly summarising part of a passage in the appellant's own witness statement when the judge said: "He accepted that the original intention had been for 1-5 Chapel Place to be purchased on behalf of his joint venture with AN, but he said that AN changed his mind about this, with the result that Mr Radley was instructed that the purchase would be thought an offshore company, namely Timbercroft, "of which Mr Jeffrey Green and I are the beneficial owners". However, the passage in the witness statement must be viewed as a whole:

"39. After the freehold of 1-12 Chapel Place had been purchased I discovered that the long leasehold of 1-5 Chapel Place was for sale. I invited Aharon Nathan to become involved. It was originally intended that Hopshire, on behalf of the joint venture between Aharon and me, would purchase the long leasehold of 1-5 Chapel Place for £550,000. However, this was changed and I instructed Lawrence Radley of Warner Cranston solicitors that the purchase would be through an offshore company called Timbercroft Holdings Inc ("Timbercroft") of which Jeffrey Green and I are the beneficial owners. Lawrence Radley telephoned Aharon, I was with Aharon at the time, to check that Aharon was happy for the purchaser to be Timbercroft rather than Hopshire. Aharon confirmed to Lawrence Radley that he was happy with this. The negotiations were lengthy, I believe they took a year, during which period the purchase price increased from £550,000 to £750,000. When I was advised by Lawrence Radley, I think about a month before exchange and completion, that the deal would be finalised towards the end of October 1998 I spoke to Aharon. Aharon was unhappy with the delay and the increase in price, although I still regarded it as a good price to pay, so he told me that he did not want any involvement with the long leasehold of 1-5 Chapel Place and that if I wanted to purchase it I would have to do so without him. As Aharon did not want to participate I invited Jeffrey Green to take his place, which he did."

40. In reality, this passage contains an ambiguity. Was the charge that occurred when Timbercroft was introduced in June/July 1998 a change in those beneficially interested in any purchase or was it simply a change in the nominal purchaser? In the latter case, the joint venture's interest would continue. As I read the passage as a whole, the appellant may well have been suggesting that it was simply a change in the nominal purchaser, since (a) the respondent is said to have been asked simply whether he was "happy for the purchaser to be Timbercroft rather than Hopshire" and (b) the later passage dealing with October 1998 appears to be directed to a change in beneficial interest, as a result of unhappiness with the delay and the increase in price. On that basis, the inconsistency which the judge detected between the date of Timbercroft's involvement and the appellant's evidence would not exist. But equally, on that basis, 1-5 Chapel Place must, at least during the period between June and October 1998, constitute an example of the appellant's willingness to acquire a property for the joint venture in the name of a company put forward and associated with him. Here moreover that company was one in which he and another person, Mr Green, had a 50/50 interest. It would be hardly surprising in these circumstances if Mr Green thought, from June 1998 onwards, that he was to have a 50% interest in the property, although, on the respondent's own case, the respondent was also intended to have a 50% interest until October 1998.
41. The appellant on any view put forward inconsistent accounts of the respondent's supposed loss of interest in October 1998. At one point he even stated, in relation to Mr Radley's letter dated 21^st October 1998, that the respondent "probably was interested at that stage". The judge regarded the appellant's evidence under cross-examination regarding the respondent's first change of mind and the suggested reasons given for it as "highly unimpressive", and his evidence regarding the second change of mind as carrying "no conviction", particularly when the appellant could not explain what was meant by "the £250,000 necessary". Later, he described the appellant's evidence on this aspect of the case as "devoid of all credibility". He regarded the payment of £75,000 as pointing against the appellant's case. That sum was applied by Mr Bluston for the benefit of Timbercroft, and a large part of it went to pay costs and disbursements in connection with the purchase of Nos. 1-5. The appellant's suggestion that he could have used other money was hard to square with his need for a further £4000 shortly afterwards. The judge also commented adversely on the appellant's defence to proceedings brought by the respondent to recover the "loans" totalling £300,000, which proceedings the appellant sought unsuccessfully to defend on the ground that they were payments made on account of profits. Mr Dingemans suggests that the respondent's own case that these payments were in connection with the acquisition of Nos. 1-5 must itself be regarded as inconsistent with the action taken to recover them as simple loans. But, as I think that he accepted in his reply, the two are not necessarily inconsistent, and, even if they were and the judge had regarded the respondent as taking an unfounded position in this regard, I do not think that there is any real prospect that this could have made a difference to his overall conclusion regarding Nos. 1-5.
42. Mr Dingemans pointed out that the judge did not deal in his judgment with Mr Newell's evidence, that, some time before Timbercroft bought Nos. 1-5, the appellant said to him that the respondent "does not want in on it", or that of Mr Bluston, that the appellant had told him, before Nos. 1-5 were purchased, hat the respondent had changed his mind about being involved in the property. But what the appellant may have said to Mr Newell or Mr Bluston (even if it amounted to a positive statement that the respondent had withdrawn, which it did not) is not necessarily to be equated with what had happened. It was, as I have said, the respondent's evidence that the appellant had in October 1998 tried to suggest that the respondent's reluctance to lend him more money amounted to a withdrawal of interest in Nos. 1-5 (paragraph 37 above). As to Mr Bluston, the judge had reservations about his evidence, as appears from paragraph 44 of his judgment, quoted earlier in this judgment, as well as about his attitude (concluding that he was content to certify the beneficial owner of companies to be whoever the appellant told him it was from time to time), so that his evidence cannot be regarded as having any real weight in this context. It would have been preferable if the judge had dealt expressly with the evidence given in these two respects, but I cannot think that it could have made any difference to the outcome, bearing in mind his findings regarding the appellant's evidence, his acceptance of the evidence of Mr Radley (and of Mr Newell) in relation to the respondent's continuing interest in the properties after their acquisition by Timbercroft, and the inherent probabilities.
43. Mr Dingemans also invokes the finance for legwork argument in relation ot Nos. 1-5. But, on the judge's findings, the respondent's side did provide finance, at least to the tune of £75,000 or £79,000, and in any event the agreement was only that the respondent should provide finance if needed. Mr Dingemans drew attention to the position regarding Jeffrey Green, who was, according to the appellant, his partner in Timbercroft, with whom he had agreed to share 50% of any profits made on Nos. 1-5. The judge, he pointed out, had simply said that he was not concerned to consider how, if at all, his conclusions regarding Nos. 1-5 affected the interests of any other partner of the appellant. Mr Dingemans submitted that it was unrealistic to suppose that the appellant would have agreed to give 50% of the profits to Mr Green, if the other 50% was going to the respondent, leaving nothing for all the appellant's "legwork". But Timbercroft, in which Mr Green was 50% interested, was already involved in mid-July 1998, when Nos. 1-5 were on any view going to be bought for the joint venture. The reasons why the appellant wanted Timbercroft (rather than Hopshire) to buy in mid-1998 are unexplained, and might throw light on overall probabilities. What it shows, is, on any view, that Mr Green's involvement as 50% shareholder in Timbercroft is not as such inconsistent with the joint venture embracing Nos. 1-5. And, as I have said, it would be hardly surprising if, as a result of such involvement, he too came to think from mid-1998 onwards that he was to have a 50% interest in any profits on Nos. 1-5, while it was common ground that the respondent had the same interest until at least October 1998.
44. I add that all that was adduced by way of evidence from Mr Green was a written statement. This dated Mr Green's involvement from "approximately early 1999" (which is clearly inaccurate, if such involvement pre-dated the acquisition) and asserted that "as usual …. I would put up the requisite finance and profits would be split between us 50:50". The acquisition on 23^rd October 1998 was on the appellant's case in fact funded by the £750,000 bank facility from FIBI Bank, although it is clear that the respondent's advance of £75,000 (and possibly £4000) also eased payment of the deposit or charges and disbursements.
45. Again, therefore, there could be force in Mr Dingemans' submissions with regard to Mr Green, if one could be sure that the facts were as simple as he suggests. Again, however, they are not, and it is impossible to arrive at any conclusions which throw real light on the overall probabilities. No doubt, it was for this reason that the judge left on one side whatever might be the position between the appellant and Mr Green.
46. In respect of this property also, I consider that the appellant has failed to make good his challenge to the judge's conclusion, and the cumulative weight of the criticisms directed to the judge in relation to all three properties fails to do so either.

Conclusion

47. While this appeal has been presented forcefully and skilfully by Mr Dingemans, on the basis that it presents no real challenge to the judge's primary findings of fact, and while the matter was clearly a troublesome one for the judge to resolve, the onus was either legally or (as Mr Dingemans accepted in the case of 1-5 Chapel Place) factually on the appellant to make good a persuasive case for saying that the relevant three properties were no longer included in the joint venture. The judge came to a clear view that the appellant had not made this good. He was in the best position to evaluate the significance of all the evidence, in the light of his impression of the witnesses and the probabilities and of such documentary material as there was. At the end of the day, despite such points as Mr Dingemans has been able to make on the judgment and on the overall probabilities, the appellant has not in my judgment satisfied the onus of showing that the judge came to a wrong conclusion in relation to any of the three properties. I would dismiss this appeal accordingly.

Lady Justice Hale:

48. I agree.

Lord Justice Peter Gibson:

49. I also agree.
ORDER: Appeal dismissed; The appellant is to pay the respondent's costs of the appeal to be the subject of a detailed assessment on the standard basis if not agreed. (Order does nor form part of the approved judgment)