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 HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Mr Justice Ferris)

		Royal Courts of Justice Strand London WC2 Friday 1st March, 2002

1. LORD JUSTICE ALDOUS: This dispute concerns a joint venture between Mr Aaron Nathan and Mr Zvi Smilovitch ("AN" and "ZS" respectively). As part of that joint venture, they agreed to acquire properties in Shoreditch. As I understand it, it was not disputed before the judge that certain properties were part of the joint venture. The dispute before Ferris J concerned 126/127 Shoreditch High Street, 135/139 Curtain Road and 1-5 Chapel Place. The dispute before the judge concerned the leaseholds of those last mentioned properties.
2. In his judgment dated 31st July 2001, the judge held that 126/127 and 135/139 and the leaseholds at 1-5 Chapel Place were part of the joint venture. It is against that decision that the defendant ZS seeks permission to appeal.
3. His application for permission to appeal was first considered by a single Lord Justice on paper. He refused permission. The reasons that he gave were these:

"The parties engaged in a joint venture without any written agreement to define its terms. The judge found each party's evidence to be untrustworthy. It was not therefore an easy case to try but the judge took the right approach, carefully testing the unsatisfactory and conflicting oral evidence against the contemporary documents and the probabilities. There is no reasonable prospect that the Court of Appeal would get nearer to the truth. It seems unlikely that this very experienced judge misunderstood CPR 52.11."

4. In my view there is considerable force in what the Lord Justice said. However, I have come to the conclusion, with the help of a skeleton argument and oral submissions, that this is a case in which permission should be granted.
5. The judge, who saw the parties give their evidence, concluded that he could not rely upon the evidence of the claimant nor that of the defendant. He said that during closing submissions an extensive array of attacks had been raised against the credibility of the principal witnesses called on behalf of the parties. He did not review the numerous instances cited, but found each attack to be extremely telling. He went on:

"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."

6. He went on to give his reasons for coming to that conclusion and continued:

"I do not have the same reservations about other witnesses."

7. Thus the judge was left to decide the issues of fact, in particular whether the properties concerned were or were not part of the joint venture, relying upon the surrounding circumstances and such evidence as there was from other parties.
8. It was part of AN's case that some of the joint venture properties would be acquired by entities nominated by him and others would be acquired by entities nominated by ZS. It was AN's contention that the properties were selected or allotted between the two sides in such a way that there should be approximate parity between the sums invested by the AN side on the one hand and those invested by the ZS side on the other. It was ZS's case that no such principle was agreed. His case was that he was the "legman" and that the Nathans were the ones who were going to supply the capital.
9. The judge concluded that the parity principle had not been established. AN had wholly failed to satisfy him that there was any agreement that ZS would invest in joint venture property in parity with the Nathan side. Before me it was submitted that that was a crucial finding when the three properties with which the appeal will be concerned are considered.
10. It was not disputed that the properties were potentially to be part of the joint venture, but it was the case of ZS that AN had not pursued the matter. I use the word "pursued" in wide terms, because in at least one case it was the contention of ZS that AN had pulled out before purchase. The result was - and this is agreed - that AN had not provided any of the money towards the purchase price of any of the three properties. What happened was that ZS made successive 50/50 profit-sharing arrangements with third parties, and in that way raised the capital to enable the purchases. That can be seen from the evidence given as recorded by the judge in respect of the property at 126/127 Shoreditch High Street. As the judge pointed out in paragraph 83 of his judgment, Tobi Cohen was called to give evidence on behalf of ZS. He had been involved in profit-sharing deals with ZS for a number of years, on the basis that ZS found the property and Mr Cohen provided the money to purchase it. His evidence was that ZS had approached him about 126/127 Shoreditch High Street. ZS gave him to understand that he had originally intended to purchase the property in a joint venture with AN, but AN did not want to purchase it as it was too expensive. Mr Cohen said that he injected £200,000 into the purchasing vehicle to enable it to purchase the property.
11. There is no reason it seems to me, on the face of the judge's judgment, to disbelieve what Mr Cohen said. Certainly the judge made no comment about his credibility, and it would seem that he must fall within the category of witnesses which the judge said he had no reservations about.
12. ZS on that basis submits that if that was the position, namely that he had entered into a 50/50 profit-sharing agreement with Mr Cohen and in that way raised the capital to make the purchase in respect of the property, it was inherently unlikely that the properties could have formed part of the joint venture with AN, particularly when it was realised the result of the judge's conclusion was that any profit from the properties would have to be split between AN and the third party so that ZS would not get a penny. The result would be that ZS had to account for the whole of the profit derived from the properties, leaving himself nothing even though he had done the legwork and had - I think in one or other of the properties - guaranteed some of the funding.
13. It is not appropriate for me to go into any more detail in respect of the arguments which have been set out in the skeleton argument. I have no doubt that the applicant has an uphill task, because his appeal will seek to reverse findings of fact by the judge. But they are, as the skeleton argument points out, based upon inferences from surrounding circumstances. That task, in my view, is not impossible. I believe that there is a real prospect of success and I therefore grant permission.
ORDER: Application for permission to appeal granted; costs of the application to be costs in the appeal. (Order not part of approved judgment)