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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> NRC Holding Ltd v Danilitskiy & Anor  EWHC 1431 (Ch) (20 June 2017)
Cite as:  EWHC 1431 (Ch)
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Fetter Lane, London, EC4A 1NL
B e f o r e :
(sitting as a Deputy High Court Judge)
| NRC HOLDING LIMITED
|- and -
|ANATOLY ANTONOVICH DANILITSKIY
ABRO FINANCIAL SERVICES LIMITED
KOLFOR TRADING LIMITED
David Lord QC and Richard Bowles (instructed by Setfords Solicitors) for the Fourth Respondent
Hearing dates: 26th and 27th April 2017
Crown Copyright ©
Robin Dicker QC (sitting as a Deputy High Court Judge):
"Whether assets legally vested in a company are beneficially owned by its controller is a highly fact-specific issue. It is not possible to give general guidance going beyond the ordinary principles and presumptions of equity, especially those relating to gifts and resulting trusts. But I venture to suggest, however tentatively, that in the case of the matrimonial home, the facts are quite likely to justify the inference that the property was held on trust for a spouse who owned and controlled the company. In many, perhaps most cases, the occupation of the company's property as the matrimonial home of its controller will not be easily justified in the company's interest, especially if it is gratuitous. The intention will normally be that the spouse in control of the company intends to retain a degree of control over the matrimonial home which is not consistent with the company's beneficial ownership. Of course, structures can be devised which give a different impression, and some of them will be entirely genuine. But where, say, the terms of acquisition and occupation of the matrimonial home are arranged between the husband in his personal capacity and the husband in his capacity as the sole effective agent of the company (or someone else acting at his direction), judges exercising family jurisdiction are entitled to be sceptical about whether the terms of occupation are really what they are said to be, or are simply a sham to conceal the reality of the husband's beneficial ownership."
The parties' cases
Burden of proof and adverse inferences
"In our legal system generally, the silence of one party in face of the other party's evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence. Thus, depending on the circumstances, a prima facie case may become a strong or even an overwhelming case. But, if the silent party's failure to give evidence (or to give the necessary evidence) can be credibly explained, even if not entirely justified, the effect of his silence in favour of the other party, may be either reduced or nullified."
and also referred, by way of comparison, to Wisniewski v Central Manchester Health Authority  PIQR 324, 340. There is a line of Australian authority to similar effect, see, for example, The Bell Group Ltd (in liquidation) v Westpac Banking Corp (No.9)  WASC 239 at -.
The purchase of the Property in 2006
Analysis of the position on purchase
(1) Opal Stem had only recently been incorporated and was incorporated for the purposes of holding title to the Property. It appears to have had no other assets, no operations and no bank account.
(2) The acquisition of the Property was arranged by and occurred on the instructions of Mr Danilitskiy.
(3) Mr Danilitskiy paid the purchase price of the Property out of his own resources. There is no evidence that the monies were advanced by Mr Danilitskiy to Opal Stem by way of loan or capital subscription.
(4) Whilst the Property may not, it appears, ever have been the main matrimonial home, it was purchased as a home for the family for them to use whilst they were staying in London.
(5) There is no evidence that any rent was in fact paid by Mr Danilitskiy for use of the Property and no evidence that the terms on which he was permitted to use it were otherwise than, in practice, gratuitous.
"The other point that I have to come back to is the significance of the transfer being made to a company whose whole share capital belonged to Princess Madawi. If (as in McGrath v Wallis  2 FLR 114,  3 FCR 661,) a father and son both contribute to the purchase of a house which is transferred to the son alone, the question whether beneficial ownership corresponds to, or differs from, legal ownership — however it is resolved — has serious financial consequences for the parties. If they fall out and the house has to be sold during the father's lifetime, it affects the destination of the proceeds of sale; if they retain the house until the father dies, it affects how much he has to leave by his will.
The position is quite different if the house belongs to a private company. If a private company is sole legal owner of the house, and the occupier of the house is sole legal and beneficial owner of all the company's shares, then (so long as both parties remain solvent) there is no basic economic difference between the company being sole beneficial owner of the house, and being a nominee for the occupying shareholder. There will be incidental differences for instance, the tax implications — and these may be of some practical importance, as has been seen. But at a basic level a wholly-owned company cannot be seen by its shareholder either as a potential rival to him in claims to ownership of property, or as a potential recipient of bounty from him (see, in a different context, IRC v Levy  STC 442 56 Tax Cas 68). What goes out of one economic pocket comes straight into the other.
In these circumstances I can see very little room for the application of the traditional presumptions as between Princess Madawi and Garden. I do not discount them completely but I must look first for evidence of actual intention before having recourse to the judicial last resort."
"… the proper and natural inference from the decision by an individual to purchase a property in the name of a company and to provide it with the funds to do so, especially where the company is controlled by the individual, is that the company should be the beneficial as well as the legal owner of the money and then the property."
" … any inference as to the common intention of the parties must take into account what actually happened in this case which is that the purchase was made in the name of the Cayman Islands company whose shares were held on a discretionary trust. Mr Hiseman knew that the purchase was being made in the name of the company and that the purpose of so making it was to put the company's assets beyond the reach of the creditors. The way in which the discretionary trust was to have this effect was by preventing any of the family beneficiaries from having a vested or identifiable interest in the assets which the company held. Nevertheless, through his ability to give directions to the trustees Mr Hiseman retained control over the company and so, indirectly, over its assets. This, no doubt, enabled him, by virtue of the instructions which he left with the trustees as to what to do in the event of his death or bankruptcy, to protect the interests of his wife and family. It is clearly of the essence of such an arrangement that the company should own its assets beneficially …
… In these circumstances, I think it would be a contradiction to find a common intention of the parties that Mrs Hiseman was to have a beneficial interest. Everything Mr Hiseman was doing was inconsistent with such an intention."
In that case, therefore, there was evidence as to why the property was purchased in the name of the company and that evidence was inconsistent with any trust being inferred in favour of Mrs Hiseman. There is no similar evidence in this case. The decision does not assist Opal Stem.
Subsequent events between 2006 and 2015
The transfer of the share in Opal Stem to Ms Maltseva in late 2015 and early 2016
"During one of our calls I requested that the share in Opal Stem was transferred into my name. It was a natural decision for me to request that the Property was transferred into my name, as I have a real affection for London, and children who would benefit from the Property, and as a result wanted to be in full control of the property."
Analysis of the effect of the transfer of the share to Ms Maltseva
The position since December 2015
(1) Ms Maltseva has paid all service charges, utility bills and management fees in respect of the Property.
(2) They have liaised with the estates management team about the day to day management of the property.
(3) They have arranged for the property to be let on an assured shorthold tenancy dated 31 March 2016 to a Mr Ilia Davidenko and subsequently from 1 August 2016 to a Mr Johnson.
(4) Ms Maltseva received the rental payments from the tenants into her bank account in Russia.