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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Aurora Developments Ltd & Ors v Delta Holdings Ltd & Ors [2018] EWHC 1047 (Ch) (10 May 2018) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2018/1047.html Cite as: [2018] EWHC 1047 (Ch) |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALESCHANCERY
DIVISION
Fetter Lane, London EC4A 1NL |
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B e f o r e :
(sitting as a Deputy Judge of the High Court)
____________________
(1) ![]() ![]() ![]() ![]() (2) AMK ESTATES LIMITED (3) ALEXEY SAKUN (4) PSP-FARMAN ![]() ![]() (5) GELANECO ![]() ![]() (6) LEXAFIN BUSINESS S.A. (7) BLOOMING MARKET INVESTMENTS LIMITED |
Claimants |
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- and – |
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(1) ![]() ![]() ![]() ![]() (2) MR ELI COHEN (3) MR LIONEL COHEN (4) MR ![]() ![]() (5) MR MARK GREAVES (6) THE ![]() ![]() (7) INTERNATIONAL PROPERTY SOLUTIONS LIMITED |
Defendants |
____________________
Chew
(instructed by Sherrards Solicitors) for the Claimants
Michalis Pelekanos (Advocate at the Cyprus Bar) for the First, Fourth, Sixth and Seventh Defendants
The Second Defendant appeared in person
The Third and Fifth Defendants were not represented and did not appear
Hearing dates: 26–28 March 2018
____________________
VERSION
OF HANDED DOWN JUDGMENT
Crown Copyright ©
Kelyn Bacon QC (sitting as a Deputy Judge of the High Court):
Introduction
i) The First, Second, Fourth, Sixth and Seventh Defendants have served defences to the claim and oppose the Claimants' application.
ii) The Third Defendant, Mr Lionel Cohen, served avery
brief defence but has made no response to the Claimants' application.
iii) The Fifth Defendant, Mr Greaves, has not served a defence to the claim or responded in any way to the Claimants' application.
Factual background
Preliminary comments
Events leading up to the exchange of contracts
"3.2Aurora
is a property
developer
and is seeking (subject to contract) to acquire not only the Properties but other sites in the
vicinity
of the Properties from third parties.
3.3 Given particular commercial sensitivities forAurora:
3.3.1Aurora
does not wish to make all the acquisitions in its own name, but in certain cases it intended (subject to contract) that those acquisitions be made through nominees; and
3.3.2Aurora
is seeking to avoid price sensitive information in respect of its acquisitions, and especially the price of each acquisition, becoming public knowledge.
3.4 The aggregate sale price for the Properties is £12,500,002 (excludingVAT).
3.5 The Parties each acknowledge that there is a single overall commercial transaction in respect of both the Properties notwithstanding that more than one contract has been … used to effect the overall transaction. The sale and purchase of the First Property is inextricably linked to the sale and purchase of the Second Property in that neither the First Contract nor the Second Contract shall be completed unless both the First Contract and the Second Contract shall be completed simultaneously.
3.6 In initial discussions between the Parties, the figure for a possible sale price for the First Property was around £9.5 million and the figure for a possible sale price for the Second Property was around £3 million.
3.7 Due to the particular commercial sensitivities forAurora
mentioned above,
Aurora
required the overall transaction be structure in a particular way and
Aurora
was unwilling to enter into any contract at all unless its requirements were met.
Aurora's
requirements were and are that:
3.7.1 there be two separate contracts, namely, the First Contract and the Second Contract;
3.7.2 the First Contract and the Second Contract be entered into on the same date;
3.7.3 neither the first Contract nor the Second Contract be completed unless both the First Contract and the Second Contract are completed simultaneously;
3.7.4 any purchase of the Second Property be made byDelta
as nominee for
Aurora;
3.7.5 the sale price of the Second Property be reduced to £2, with a corresponding increase in the sale price of the First Property.
3.8Aurora
confirms that there was and is no other reason for these
changes
to the overall transaction other than the particular commercial sensitivities mentioned above.
3.9 In respect of the sale and purchase of the Second Property,Delta
acknowledges and confirms that it acts solely as nominee for
Aurora
and
Delta
will not acquire any beneficial interest in the Second Property."
Events between exchange and completion
"DearChris
I have been considering the position of Alex [Sakun] and his security over the loan he has provided and have taken theview
that we should be completing on the purchase of 93–97a and 99–101 Scrubs Lane
via
a different company to
Aurora
![]()
Developments
Limited. The reasons for this are as follows:
1.Aurora
![]()
Developments
Limited is currently completing on the purchase of both 93–97a, 99–101 and 115–129a Scrubs Lane. However, we now have different shareholders for each site and therefore each site should be owned in its own company.
2. Both sets of shareholders will want security over the shares of the company which owns the land and if we complete usingAurora
![]()
Developments
solely, Alex and AMK will not be provided with any security as we have already agreed to a deed of pledge with [Boris Shemyakin and PSP] over these shares.
3. From a tax perspective, I would prefer both sets of land to be in their own companies.
4. From an asset protection perspective, if something unexpected happened on the site of 115–129a Alex and AMK do not want their site affected which would be the case if both sites were owned byAurora
![]()
Developments.
For this reason, I would recommend we complete on the purchase of 93–97a and 99–101 Scrubs Lanevia
a different Guernsey resident company. I have such a company ready to go for this purpose called
Delta
![]()
Holdings
Limited. The current shareholder of
Delta
![]()
Holdings
is The
Aurora
Property Group and I am the sole director. It is a clean company. The Guernsey Company Number is 59057.
Alex and AMK can be granted options over 50% and 17% of the shares inDelta
![]()
Holdings
Limited respectively as security for this loan provided.
Furthermore, the loan in place betweenAurora
![]()
Developments
and Alex will be assigned to
Delta
![]()
Holdings
so that
Delta
![]()
Holdings
is responsible for repayment of the loan to Alex.
At the time of exchange of contracts, we did not know how the equity investment would pan out hence why we are completing under the name ofAurora
![]()
Developments
solely. However, in light of the different shareholders the land has to be owned by different companies. … I have already spoken with our conveyancing lawyer and the above will not cause any issues or delay the transaction.
To this effect, please find attached the signed option agreements for both Alex and AMK Estates.
Kind Regards
Mark"
"Hi Eli
Further to your telephone calls today, I am really sorry to only be getting this completion statement for 93–97a and 99–101 Scrubs Lane to you now. As you know, I have been incredibly busy preparing for completion tomorrow but I do acknowledge this should have been sent earlier.
Please extend my apologies to Boris [Shemyakin] and Alex [Sakun].
Kind Regards
Mark"
One minute later, Mr Cohen forwarded Mr Greaves' email to Mr Shemyakin, saying "Attached as requested. Eli."
Events after completion
The applications for summary judgment/strike out
i) Liability only in respect of the claims that the prices of the two sites were fraudulently misrepresented to the two sets of investors, that the surplus funds provided for the North Site as a result of those misrepresentations were then used to complete on the South Site, and that the North Site was represented as being available to purchase at a time when contracts had already been exchanged on it.
ii) The claim that the Deed executed on 2 October 2014 wasvalid
and binding.
iii) The claim that the purported IPS loan was a sham.
"I am conscious that at first sight there is a paradox when the hearing of a summary judgment application takes some nine days in court, and requires detailed analysis of the documents and written evidence. One might have been tempted simply tohold
that there were too many documents and issues to enable the court to avoid an inappropriate 'mini trial' on the papers. However, in my
view
this is one of the cases where it would have been wrong to shrink from looking carefully into whether there existed any substance in the defences and other objections raised by [the Defendant]. Save possibly in relation to one issue …, I have been able to conclude that the defences are entirely without merit, and a trial of this case (which would have taken many months of court time and huge financial resources) is wholly unwarranted in respect of any of the issues raised by [the Defendant] in opposition to the claim."
The alleged misrepresentations
i) that the Defendants fraudulently misrepresented that the North Site was available to purchase, when in fact DHL had already exchanged contracts on it;
ii) that the Defendants fraudulently misrepresented the price of the North Site as being £4 million whereas in fact the price originally sought by thevendors
was £3 million and the eventual contractual price was only £2;
iii) that the Defendants fraudulently misrepresented that the North Site funds would be used to complete on the North Site, when in fact they were recycled and used to complete on the South Site; and
iv) that the Defendants fraudulently misrepresented the price of the South Site as being £12.5 million whereas in fact the price originally sought by thevendors
was £9.5 million, and the eventual contractual price of £12.5 million was only agreed in circumstances where, in a related transaction, the South Site was being sold for a nominal sum.
Legal principles
The North Site representations
The South Site representations
Validity
of the Deed
The sham IPS loan
i) The court is not restricted to examining the "four corners" of the document that is said to be a sham, but may examine external evidence, including the parties' explanations and circumstantial evidence such as evidence of the subsequent conduct of the parties.
ii) The parties must have subjectively intended to create different rights and obligations from those appearing from the relevant act or document, and must have intended to give a false impression of those rights and obligations to third parties.
iii) There is a distinction between an agreement that is unfavourable to one party, or artificial, and a situation where the parties do not intend the agreement to bind their relationship, but intend some other arrangement to bind them.
iv) The fact that parties subsequently depart from an agreement does not necessarily mean that they never intended it to be effective and binding, but could instead mean that they agreed tovary
the agreement.
v)
The intention must be a common intention.
Consequential matters