England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
MR JUSTICE PETER SMITH
HC03CO4498

		Royal Courts of Justice Strand, London, WC2A 2LL
		21/12/2005

Lord Justice May:

Introduction

1. The claimant, Lennox Lewis, is the former world heavyweight boxing champion. The first defendant, Panos Eliades, was his business manager and promoter. They have since fallen out. The second and third defendants are the administrators in this jurisdiction of the estate of Aristos Kaissides, who died on 11^th April 2000. Mr Kaissides was a bank manager in Cyprus with the Popular Bank of Cyprus and known to Mr Eliades.
2. Under the terms of a promotion agreement dated 19^th February 1991, the claimant was entitled to be provided with living accommodation in England free of charge. From some time in 1993, the claimant lived in England at 39 Beech Hill, Enfield. This was a property which the claimant believed belonged to Mr Eliades. The claimant lived there, not free of charge, but at a rent of £1500 per month. This was a rent which was less than the market rent, although there is some controversy in these proceedings about whether that is indeed so. There are pending proceedings before a Rent Assessment Committee about the proper amount of rent for the Enfield property. The claimant owes an amount, yet to be ascertained, for that rent.
3. After they fell out in about 2000, the claimant and Mr Eliades participated in acrimonious litigation in New York. Mr Eliades or his company sued the claimant for loss of some US$100m. The claimant counterclaimed for damages for fraud and other causes of action. The claimant was successful in these proceedings in February 2002 before a judge and jury. He recovered judgments for some US$8m. He subsequently obtained a judgment after set off in this jurisdiction for US$6,273,641. An appeal by Mr Eliades to a High Court Judge was dismissed, but the Court of Appeal reduced the amount of the English judgment to US$5,877,559.
4. The outcome of the New York proceedings showed that the jury disbelieved Mr Eliades' evidence. In particular, he was shown to have lied comprehensively in evidence about things he said that Mr Kaissides said and did at a time when Mr Kaissides was dead.

The proceedings

5. The present proceedings are part of the claimant's attempt to enforce his judgment, no payment having been received. By his claim form dated 23^rd December 2003, he claimed a declaration that Mr Eliades is the true beneficial owner of 39 Beech Hill, Enfield ("the Enfield property") and that the second and third defendants as administrators of the estate of Aristos Kaissides hold the property on trust for Mr Eliades. The claim was heard in the Chancery Division by Peter Smith J. On 23rd March 2005, the judge held [2005] EWHC 488 (Ch) that Mr Eliades was indeed the beneficial owner of the Enfield property.
6. The second and third defendants appeal against Peter Smith J's decision by permission of Carnwath and Neuberger LJJ. Neuberger LJ had originally refused permission on paper, giving what to my mind are compelling reasons for doing so. There is a cross appeal by the claimant against part of a later order of Peter Smith J, to which I shall come later in this judgment.
7. The defendants' case was that the Enfield property was owned both legally and beneficially by Mr Kaissides and that it is now held by his administrators as trustees of his estate.
8. The Enfield property was acquired by Mrs Eliades (Mr Panos Eliades' wife) by a transfer dated 1^st November 1983. She was registered as proprietor on 6^th February 1984. The price then was £300,000. This was entirely provided by Mr Eliades as a gift to her. He also gave her £50,000 to carry out work to the property. However, Mrs Eliades did not like travelling to and from Enfield and changed her mind about moving out of London. So in May 1987 she found and in August 1987 bought a property, Compton House, Compton Avenue, Highgate for £1,552,000. She put the Enfield property on the market, but it did not initially sell. So it was necessary to obtain bridging finance for the Highgate property, which Mr Eliades did, obtaining £950,000 from the Cyprus Popular Bank. Mr Eliades gave his wife the balance of £600,000 or so to buy the Highgate property.
9. Mrs Eliades gave evidence in these proceedings. The judge found her honest, straightforward and truthful. But the judge did not think that she knew anything of substance about her husband's business dealings or the arrangement of his affairs.
10. After the failure to sell the Enfield property, there were various tenants of it. Mr Chatwell occupied the property in 1988 for about a year paying a rent of £15,000 a year. Then Mr and Mrs Bassett occupied it for about a year from August 1990 paying £1,000 per week. Their rent was paid through a company called Victory Church Limited. No documents relating to the leases had survived, but there were some bank statements of an account with Barclays in the name of Mr Kaissides.
11. The claimant's rent for the Enfield property of £1500 per month was substantially less than Mr and Mrs Bassett had paid, though somewhat more than Mr Chatwell had paid. The judge heard Mr Eliades' explanations for the amount of the claimant's rent. He found them unconvincing. The judge said that Mr Eliades was obliged to provide the claimant accommodation rent free and negotiated a figure of £1500 per month which was the most that the claimant was prepared to pay as his contribution to a larger property to alleviate the obligation to pay the full cost. This supported the claimant's case that Mr Eliades was the beneficial owner, since there was no advantage to Mr Kaissides, who by this stage was the registered owner, in receiving a reduced rent.
12. The rent payment from Victory Church Limited went into a Barclay's account in the name of Mr Kaissides. There were no cheque payments out of this account to Mr Kaissides, and no evidence, other than that of Mr Eliades, that the cash withdrawals went to Mr Kaissides or to his children while they were receiving education in England. The only evidence of what happened to the claimant's rent was a running account prepared by Mr Eliades to show to the claimant's brother. This showed expenditure by Mr Eliades on behalf of the claimant.
13. The Enfield property was not sold in 1987. The judge considered that Mr Eliades came under pressure after that from his wife to remove the charge over Compton House by discharging the bridging loan. The Enfield property was transferred to Mr Kaissides by transfer dated 25^th July 1989. The amount paid according to the transfer was £1,150,000. The application to register the transfer, signed by Mr Eliades, was not lodged until December 1989. The conveyancing documents, such as they were, were prepared by Mr Christos Eliades, Mr Panos Eliades' brother. He had been a solicitor, but was struck off, having been convicted of theft.
14. Mr Kaissides was manager of the Larnaca branch of the Popular Bank of Cyprus. Mrs Eliades gave evidence that she was disappointed that the property did not sell for more. Her evidence was that money was paid by Mr Kaissides in two transfers, one of £800,000 on 28^th June 1989 and the other of £350,000 on 25^th July 1989. This enabled the bridging loan to be repaid. No document was produced to the judge by the second or third defendants showing that any money came from Mr Kaissides. The judge suspected that Mrs Eliades did not know precisely where the money came from. The judge was satisfied that Mrs Eliades genuinely believed that she was selling the property to Mr Kaissides. But it did not follow that it was a genuine transaction.
15. There were some documents relating to the money – bank statements for the bridging loan produced by Mr Eliades, having been found by Mrs Eliades in a drawer at Compton House when she was clearing things out. On 5^th August 1987 a sum of £950,000 was debited to the account. In the succeeding two years, interest was rolled over and certain payments to reduce the debit balance were made. On 28^th June 1989, £800,000 was paid into the account. On 26^th July 1989, a further £198,031.69 was paid in to clear the account. The bank statements give no indication as to the source of these payments. The second of them does not equate to the second amount which Mrs Eliades said Mr Kaissides paid. But the total amounts paid into the account over the years were within £3,000 the same as the amount for which the Enfield property was recorded as having been transferred.
16. As I have said, there was no document before the judge showing that any of this money came from Mr Kaissides. Mr Kaissides did not sign the transfer which was before the court. The judge gave an account of the evidence relating to Mr Kaissides in paragraph 36 of his judgment. He was manager of the Larnaca branch of the Popular Bank of Cyprus in 1989. In 1990 he became manager in Nicosia until his retirement in 1994. In 1987, he was earning the equivalent of £18,000 sterling a year. Mr Karis, one of the administrators of Mr Kaissides' estate, was the only family member to give direct evidence. He did not know how Mr Kaissides could have amassed such a large amount of money. There was a witness statement from Mr Kaissides' widow. She did not give oral evidence. All she did in her witness statement was to verify what Mr Karis said she had said. Mr Kaissides' estate in Cyprus was worth £75,048. This omitted the property in which he and his wife lived in Nicosia. This was valued at CY£50,000, but it was subject to a charge in favour of the Popular Bank of Cyprus of CY£54,772.21. The loan was settled outside the estate and the property transferred in equal shares to Mrs Kaissides and one of their daughters. The judge said that it followed that the estate in Cyprus was barely solvent and the house was only preserved by third party funds. There was evidence from Mr Karis that Mrs Kaissides had told him that the family had assets worth CY£4,670,000. But no information was provided to enable that assertion to be tested, let alone verified. There is a bare list of properties with round figure sums against them.
17. As the judge said, "None of these show the trappings of someone who had £1,150,000 in cash in 1987." No documents were produced by any of the defendants showing that the money came from Mr Kaissides, and no information was disclosed to show how he had access to so much money. As the judge said, "I have had no explanation as to why no documentation is available nor have I had any explanation as to why this significant body of witnesses could not in some way or other have come to court to explain the financial affairs of Mr Kaissides." The evidence that Mr Eliades was managing the property on behalf of Mr Kaissides was scanty. There were some utility bills in Mr Kaissides' name, but these appeared to have been generated by Mr Eliades.
18. There was nothing produced which emanated from Mr Kaissides. "In short," said the judge, "there is nothing of any credible nature beyond the testimony of Mr Panos Eliades which links Mr Kaissides as being the genuine owner of the property." The judge discounted Mr Eliades' evidence for reasons which he subsequently gave.
19. The judge found the claimant a calm, measured and credible witness. He and Mr Patrick English, a US attorney, gave evidence which suggested that Mr Eliades had on occasions represented to them that he owned the Enfield property. That evidence alone was not particular strong and would not by itself have been determinative.
20. In paragraph 44 of his judgment, the judge gave an account of the lies Mr Eliades had told in the New York proceedings. They concerned, among other things, what he said that Mr Kaissides had said about rent for the Enfield property at a time when Mr Kaissides was dead. He was also giving instructions in 2002 to solicitors for the second and third defendants which perpetuated the myth that Mr Kaissides was still alive. Mr Eliades gave unconvincing explanations for these lies saying that he was concerned that relations and friends were being harried by people employed by the claimant. But the judge said in paragraph 47 of his judgment:

"The reality is that Mr Panos Eliades was being evasive because he had by the time the New York action had been lost no significant assets with which to satisfy a judgment. He well knew that he was likely to be subject to a prolonged and detailed investigation into his affairs and dealings with family and friends as a result. The lies in my view were designed to frustrate any investigation into the financial affairs of Mr Panos Eliades and those associated or related to him. This shows in my view that Mr Panos Eliades is a man who is willing to lie if it suits his purpose."

21. The judge correctly directed himself that he should not discount Mr Eliades' evidence merely because he had lied. But he had lied and his reasons for doing so were unconvincing.
22. There were a number of other features which made Mr Eliades' version of events unconvincing. Mr Mill QC, for the claimant, had listed 30 events in this category. The judge found some more persuasive than others. Those which he found persuasive were:

(1) He found Mr Eliades' justification for the low rent charged to the claimant completely unconvincing. It was bizarre if Mr Kaissides was the true owner.

(2) The evidence of Mr Kaissides' personal wealth showed a man of modest means. The judge gave no weight to Mr Karis' hearsay evidence.

(3) The total lack of documents was unconvincing.

(4) Correspondence between Mr Eliades and the claimant's New York attorney in February 2001, when it was proposed that the claimant might buy the Enfield property, was only consistent with Mr Eliades owning it.

(5) Mr Eliades' attempt to explain why he had lied about Mr Kaissides, when he had died, was pure invention.

(6) Mr Eliades had effected other transactions when people were used as nominees.

(7) There was a total failure of the Kaissides family to record in public documents the existence of the Enfield property as an asset of Mr Kaissides' estate.

(8) The judge accepted the inference that the £1,150,000 as the price of the Enfield property was by reference to the amount of indebtedness secured on Compton House rather than any purchase price. A total failure to retain documents was damaging to the cases of all defendants.

23. Taking these features into account, the judge held that Mr Eliades was not to be believed on his evidence as to the ownership of the property. The judge did not accept the evidence of his brother, Christos, either. Mrs Eliades' evidence did not assist in determining whether Mr Kaissides was the true owner.
24. There was also a long list of missing witnesses who could have given relevant evidence. The judge listed them in paragraph 59 of his judgment. They included various relations of Mr Kaissides; Victoria Steer, who worked for architects who were concerned with a planning application; and Stacey Marchant who had been Mr Eliades' administrative assistant for 22 years. In the absence of explanation, the judge said he ought to conclude that they did not give evidence because their evidence would not support Mr Eliades' case. Mr Kaissides' modest income as a Cyprus bank manager cried out for an explanation as how he was able to find £1,150,000 cash in the summer of 1989.
25. The judge then said in paragraph 63 of his judgment:

"Cumulatively, the effect leads me to draw together four areas of evidence, all of which lead to a conclusion that Mr Lewis's case is to be preferred. First, there is the evidence of Mr Lewis and Mr English. Second, there is the inadequacy of Mr Panos Eliades' evidence; third, there is the absence of other live witnesses who could have supported him. Fourth, there is the total absence of documentation to support his case to any significant degree.

Both Mr Holland and Miss McAllister submitted that Mr Lewis had to demonstrate two matters. First, he had to demonstrate that the presumption of the beneficial ownership vesting in the registered proprietor i.e. Mr Kaissides was rebutted and second, and independently of that, he had to prove that the beneficial owner was Mr Panos Eliades. To my mind if there was any other potential candidate then of course Mr Lewis would have to establish Mr Panos Eliades on the balance of probabilities was the best candidate in contrast to the other candidate. However, I do not accept that Mr Lewis has to deal with hypothetical candidates. No other potential candidate is being identified and once again absent any other candidate put up by the defendants (and no one would ever be put up by them in reality), I am entitled to conclude on the material before me as set out in this judgment:

i) that Mr Kaissides is not the beneficial owner of the Property, but that

ii) Mr Panos Eliades is.

I do so determine."

Grounds of appeal

26. The appeal of the second and third defendants raises no point of law. The essential question of fact is who provided the purchase money for the 1989 transfer of the Enfield property. If it was Mr Eliades, Miss McAllister accepts that, on facts which otherwise fall into place, there was a resulting trust of the property, whose beneficiary was and is Mr Eliades himself. Mr Mill, for his part, accepts that it was for the claimant to displace the initial presumption that the beneficial interest went with the legal estate. He also accepts that there is an initial burden on the claimant to raise a case for displacing that presumption, before reliance can be placed on the absence of documents and witnesses or on Mr Eliades' lies. In other words, in the absence of a case for displacing the presumption, there was no obligation on the defendants to produce any documents or witnesses positively supporting the case that Mr Kaissides was the beneficial owner. Miss McAllister accepted that, since the appeal seeks to say that the judge's findings of fact were wrong, the second and third defendants have an uphill task.
27. Miss McAllister's oral submissions in support of the appeal were in summary as follows. Although the appeal challenges findings of fact, most of these findings depended on inferences. The judge should not have drawn these inferences. He should have looked more closely at the facts surrounding the sale by Mrs Eliades to Mr Kaissides in the summer of 1989, and should have been less influenced by events after 2000, when relationships had broken down. The claimant and Mr Eliades did not meet until after the 1989 sale. The claimant did not move into the Enfield property until 1993. There is no direct evidence that the property belonged to Mr Eliades. Where is the evidence to displace the presumption that it was owned beneficially by Mr Kaissides? Mrs Eliades, whom the judge regarded as an honest witness, reckoned that it was a genuine sale. She gave some evidence of the source of the money, and some general evidence of the wealth of the Kaissides family. There was no explanation of why the sale should have taken place at all, if Mr Kaissides was not the true purchaser. If Mr Eliades was able to raise £1,150,000, why not simply use the bulk of this to discharge the Compton House mortgage without transferring the Enfield property. There is, I think, an obvious possible answer to this. It would be along the lines that Mrs Eliades wanted to be the unencumbered owner of Compton House; Mr Eliades was prepared to discharge the Compton House mortgage, but did not want his wife to own both houses; but for some reason he did not want to be the apparent owner of the Enfield property himself. There would be a number of possible reasons for this, bearing in mind that Mr Eliades was an experienced insolvency practitioner.
28. Miss McAllister submits that there was no clear evidence that the rent which the claimant paid was low. Mr Chatwell had paid less. Utility accounts were in Mr Kaissides' name. She accepts that there was no evidence that cash withdrawals from the rent account went back to Cyprus, but there were withdrawals. She submits with reference to the bank statements showing credits of £800,000 and £198,031.69, that all the evidence points to a sale to a third party. The price was broadly correct – enough to pay off the bridging loan and leave a margin. Why should Mr Eliades carry an expensive bridging loan for two years, if he was in truth able to finance the purchase of Compton House without it? Miss McAllister submitted that the points summarised in paragraph 63 of the judgment (which I have quoted) were not persuasive. The claimant and Mr English did not give persuasive evidence. There was some evidence of wealth in the Kaissides family from Mr Eliades and Mr Karis. The judge went too far in saying that no weight should be given to this evidence. There were explanations from Mr Eliades' lies. There was no evidence of deception by Mr Eliades of his wife.
29. Further points of detailed criticism of the judgment were made in the second and third defendants' written submissions. Neuberger LJ dealt with these at some length in his initial paper refusal of permission to appeal. I do not set these out in detail. They may be found in the written submissions and Neuberger LJ's Reasons. For my part, I consider that Neuberger LJ's Reasons are more persuasive than the written submissions.
30. As I have said, Mr Mill accepts that the claimant has first to raise a case that Mr Kaissides was not the beneficial owner of the Enfield property. If he were to do this, the obvious inference would be that Mr Eliades was the beneficial owner, since, as the judge said, there was no other candidate.
31. Mr Mill submits that the following evidence amply sustained the necessary initial case that Mr Kaissides was not the beneficial owner of the Enfield property, but that Mr Eliades was. I give it in summary form.

(1) The evidence of the claimant and Mr English. Mr Mill showed us various paragraphs of the claimant's witness statement which showed clearly that he was told that the Enfield property was Mr Eliades' house.

(2) Positive evidence of the modest means of Mr Kaissides – his salary and the Cyprus assets of his estate.

(3) The fact that Cypriot law required disclosure of foreign assets on death, but the Enfield property was not disclosed as an asset of Mr Kaissides.

(4) The evidence in relation to the rent. The claimant paid rent at less than the market rate. The promotion agreement provided for him to have rent free accommodation, but Mr Kaissides, if he were the true beneficial owner, would have no interest in charging a less than market rent for his supposedly £1m investment. Mr Eliades' explanations here were entirely unconvincing.

(5) The correspondence in February 2001 was only consistent with Mr Eliades being the beneficial owner.

(6) Planning applications in and before 2001 have Mr Eliades as the owner.

32. Mr Mill submits that this evidence put forward a case to be answered. I agree. It suggested that Mr Kaissides did not have the means to buy the property and that Mr Eliades was treating it as his own. The defence was required to deal with this, but comprehensively failed to do so. Mr Eliades was disbelieved. That required the Kaissides family to explain, to call witnesses and to produce documents. For practical purposes, they did none of this. The inference was that their true evidence would not have established the defendants' case. In contrast to Mr Kaissides, Mr Eliades had assets sufficient, for example, to provide the balance of the purchase price of Compton House – some £600,000. It was not his case that he could not have funded the purchase of the Enfield property in 1989. It is not known why he had a bridging loan, nor why he put the Enfield property into a third party name. But he did the same with a property at 84 Green Lane in August 1990, for which he gave no convincing explanation.
33. In my judgment, the second and third defendants' grounds of appeal against the judge's factual findings are entirely unpersuasive. There is no proper basis at all for saying that the judge was plainly wrong. On the contrary, I think he was plainly right. There were clear indications that Mr Eliades treated the property as his own. The clearest is in the February 2001 correspondence. There was clear evidence that Mr Kaissides was a person of modest means, unable to raise £1,150,000 in cash in 1989. In so far as there was evidence to the contrary, it was vague and unpersuasive. The defendants did nothing to displace this case, it being sufficient to require them to do so. So far from displacing it, they supported it by (a) lying, in the case of Mr Eliades, and (b) entirely failing to produce witnesses and documents in support of a case that Mr Kaissides was the beneficial owner, when such witnesses and documents would have been expected. The elements of the judge's factual decision are, in my view, compelling. The arguments that he was wrong are very weak. I would dismiss the second and third defendants' appeal.

The claimants' cross-appeal

34. Peter Smith J held a further hearing on 25^th April 2005, at which he made a number of orders. One of these was a decision that the rent payable in respect of the Enfield property was payable by the claimant to the second and third defendants. It was thus in the light of his earlier decision a determination that, on the facts he had found, the rent was payable to the legal owner of the property, not to the beneficial owner.
35. Neuberger LJ adjourned the claimant's application for permission to appeal against this order to be heard with the second and third defendants' appeal. I would give the claimant permission to appeal.
36. The practical relevance of the question concerns set off. The claimant wants to be able to set off whatever he owes by way of rent against his judgment against Mr Eliades as a mutual debt. The second and third defendants want to set off their costs obligation to the claimant against the rent he owes and, no doubt, to recover their own costs of the proceedings from that fund before accounting to their beneficiary. Peter Smith J did not decide questions of set off.
37. The claimant's case is that the judge's decision was wrong. The rent, says Mr Harry on his behalf, was payable to the beneficiary. Mr Harry may be right about this. But I do not consider that it is necessary to decide either of this interesting point.
38. Upon the judge's main finding, which I would uphold, Mr Eliades is the beneficial owner of the Enfield property. The legal estate is vested in the second and third defendants as bare trustees for Mr Eliades. If they were to receive the rent, they would be obliged to pay it in full to Mr Eliades. Miss McAllister accepts that, if this correct, the claimant would be able to set off the whole of the rent against the debt owed to him by Mr Eliades. But she submits that the second and third defendants are not obliged to pay Mr Eliades the full amount of the rent. They are, she says, entitled to have recourse to it in order to pay such costs as they are required to pay to the claimant in these proceedings and, no doubt, their own legal costs. Trustees who incur costs in their capacity as trustees are so entitled. So runs the argument.
39. But in my judgment the argument in this case is flawed. The second and third defendants are trustees under two separate trusts. They are trustees as administrators of the estate of Mr Kaissides, in which capacity they hold assets on trust for the beneficiaries of that estate. They are also and separately bare trustees of the Enfield property, in which capacity they hold the property and ancillary assets (such as the rent, if they are entitled to it) on trust for Mr Eliades. It was in the first of these capacities, not the second, that they defended the proceedings brought by the claimant. Their whole case was that the Enfield property was held by Mr Kaissides beneficially, and that it is now held beneficially by the beneficiaries of his estate. They accordingly incurred costs liabilities in these proceedings as Kaissides trustees, not as Eliades trustees. They cannot therefore recoup liabilities and expenses incurred in their capacity as Kaissides trustees from money which they hold in their capacity as Eliades trustees, that is, they cannot use Mr Eliades money to discharge liabilities incurred for the estate of Mr Kaissides.
40. So, even if the rent were in the first instance payable to the second and third defendants, they would have to pay it in full to Mr Eliades, so that it would immediately become available for the claimant to set off his debt against.
41. Upon this finding, Miss McAllister accepts that she cannot resist a finding that the claimant is entitled to set off the debt owed to him by Mr Eliades against the rent. I would allow this cross-appeal so as to make a declaration that the claimant is so entitled. Mr Harry confirmed that in that event it was unnecessary to pursue the academic question of who in law was initially entitled to receive the rent.
42. Miss McAllister would wish to preserve the possibility that there may be some incidental expenditure properly incurred by the second and third defendants in their capacity as legal owner of the Enfield property, for example, if expenses were incurred with an application to the Rent Assessment Committee. She accepted that this as yet unformulated possibility would be covered by giving the second and third defendants liberty to apply to Peter Smith J for directions in that respect. Mr Harry agreed that this would suffice. I would so order.