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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Slutsker v Haron Investments Ltd & Anor  EWCA Civ 430 (01 May 2013)
Cite as:  EWCA Civ 430
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
MR JUSTICE UNDERHILL
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE PATTEN
LADY JUSTICE BLACK
| VLADIMIR IOSIFOVICH SLUTSKER
|- and -
|(1) HARON INVESTMENTS LTD
(2) SUMMIT TRUSTEES (CAYMAN) LTD
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
(instructed by Taylor Wessing LLP) for the Appellant
Gilead Cooper Q.C. and Richard Wilson
(instructed by Berwin Leighton Paisner LLP) for the Respondents
Hearing dates: 20 and 21 March 2013
Crown Copyright ©
Lord Justice Lloyd:
Introduction and summary
The rival contentions
The facts in detail
"Throughout the various contacts summarised above, Macfarlanes' primary and most frequent contacts were with Mrs Slutsker rather than her husband. As already noted, at an early stage it was decided to treat her as their sole client, because they understood that most of the purchase money for [the Property] was to come from her. Accordingly both in Mr Rhodes's note dated 23 November and in the note of the meeting of 29 November it was explicitly assumed that Mrs Slutsker would be the settlor and first life tenant: see paragraphs 20 and 26 above. But it is equally clear that Macfarlanes regarded Mr and Mrs Slutsker as acting together, with no question of any conflict between them. They understood themselves to be advising both of them as regards the tax implications of the purchase and referred to the possibility that Mr Slutsker would also have in due course to become their client. From time to time they described themselves to third parties as acting for both."
"… he must, and in any event should, have appreciated that Mrs Slutsker, who was with his full agreement taking the lead in dealing with the purchase, would proceed on the basis of the recommendation; and accordingly he must have appreciated that in due course the trust proposal had been implemented."
"Mr Slutsker's unsustainable protestations that he was ignorant of matters of which he was in fact perfectly well aware mask a more legitimate point, namely that he did not know, still less agree to, the terms in which the Trust was eventually set up: more specifically, he did not understand, still less agree, that he would have a different and lesser interest under those arrangements than his wife, and an interest that could be extinguished altogether if the Trustee, who would take into account the wishes of his wife as settlor, so decided."
"The most important point to emerge from that evidence (despite some equivocations) is that Mr Slutsker accepted that his wife told him that she was establishing a trust, the Misha Trust, in order to safeguard the position of the children. … It was, as I have found, always part of Mrs Slutsker's conception that [the Property] would be in one way or another safeguarded as an asset for the children. I see no reason why she should not have shared that thinking with her husband (indeed, as we have seen, it underlay some of the discussion at the meeting of 29 November 2000); and I am sure that it will have been clear to him that title to [the Property] was in one form or another vested in the Misha Trust. Although on a literal reading Mr Slutsker appears to deny knowing that the trust was "offshore", I understand him in fact to be accepting that whatever service was being provided was being provided from Switzerland; but in any event I am confident that he will have well understood, both as a matter of common knowledge as a sophisticated businessman and more particularly from his contacts with Macfarlanes, that the contemplated trust fell outside the scope of Russian law. It follows that he knew that a structure had been created which was necessarily inconsistent with straightforward joint family property under the Russian Family Code. I accept that he may well not have understood the details of the structure; but, as he acknowledges, that was because he did not ask. I do not find his lack of involvement particularly surprising. The London project was Mrs Slutsker's project: it was she who would be mainly living in [the Property] and it was she who was particularly concerned to make it a safe asset for the long-term future of the children."
Choice of law
"In the absence of a contract or settlement, the rights obtained by the husband and wife in each other's movable property as a result of the marriage, whether that property is possessed at the time of the marriage or acquired afterwards, are determined by the law of the matrimonial domicile. Where, at the time of the marriage, both parties are domiciled in the same country, the matrimonial domicile is (in the absence of special circumstances) that country."
The Russian law as to family property
"Article 34. Joint Ownership of Spouses
1. The property acquired by spouses during marriage shall be their joint ownership.
2. To property acquired by spouses during marriage (common property of spouses) shall be relegated the revenues of each of the spouses from labor activity, entrepreneurial activity and the results of intellectual activity, pensions and benefits received by them, and also other monetary payments not having a special special-purpose designation (amounts of material assistance, amounts paid in compensation of damage in connection with the loss of labor capacity as a consequence of mutilation or other impairment of health, and others). Moveable and immoveable things, securities, shares, contributions, participatory shares in capital deposited in credit institutions, or in other commercial organisations also acquired at the expense of common revenues of the spouses, and any other property acquired by spouses in the period of the marriage, irrespective of in the name of which spouse it is acquired or in the name of which of the spouses monetary means have been deposited, also shall be the common property of spouses.
3. The right to common property of spouses shall also belong to the spouse who in the period of the marriage who effectuated the conducting of the household, care for the children or for other justifiable reasons had no autonomous revenue."
"Article 35. Possession, Use, and Disposition of the Joint Property of Spouses
1. Possession, use, and disposition of joint property of spouses is performed on the basis of mutual consent of the spouses.
2. When one of the spouses executes a transaction concerning disposition of the joint property of the spouses it should be presumed that he [or she] acts on the basis of consent of the other spouse.
A transaction concerning disposition of the joint property of the spouses executed by one of the spouses may be declared invalid by court for the reason of absence of consent of the other spouse only as per that spouse's claim and only if it can be proven that the other party to the transaction knew or certainly ought to have known about the other spouse's disagreement with execution of the particular transaction.
3. For execution by one of the spouses a transaction concerning the disposition of immovable property and a transaction which requires a notarial certification and/or registration in accordance with a procedure established by law, it is necessary to obtain the consent of the other spouse certified by a notary.
A spouse whose consent certified by a notary, for execution of this transaction was not obtained is entitled to claim a declaration of invalidity of this transaction by court within a year from the date when he [or she] knew or ought to have known about execution of the particular transaction."
"Start of the Running of the Time Period of Limitation of Actions
1. The running of the time period of limitation of actions starts from the day when a person knew or should have known of the violation of his right. Exceptions from this rule are established by the present Code and other statutes.
2. On obligations with a defined period for performance, the running of limitation of actions starts at the end of the time period for performance.
For obligations for which the time period of performance is not defined or is defined as the time of demand, the running of the limitation of actions starts from the time when the right to make a demand for performance of the obligation arises for the creditor and, if the debtor is given a grace time period for the performance of such."
"Q. Is it the case that Russian law essentially views both partners, both spouses, as collectively owning the whole, as opposed to each of them owning half – a half share?
A. That would, I believe, be correct, yes.
A. I think I would put it this way, that the two spouses own the property jointly and they may, upon divorce or by contract, marriage contract, they may force a partition, in which case it is on a 50% basis, unless there are extenuating circumstances.
Q. But neither of them has, at that stage, any specific shares. They both equally own the whole?
"140. Mr Brownbill contended that once that point was reached he was home and dry: Mr Slutsker enjoyed a beneficial interest in the intended purchase moneys and that interest could, on ordinary principles, be traced into the property acquired with those moneys. That is temptingly simple, but I think it is wrong. The putative tenancy in common is not a substantive right under English law: it would be declared, if at all, only as a means of vindicating Mr Slutsker's rights under Russian law as they stood at that point. I do not believe that it can be used to create rights at a later stage, in different property, except to the extent that Russian law would do so. Mr Cooper described that as a "hybrid" approach and as illegitimate. I agree. It is in my view necessary to ask afresh at each stage what rights under Russian law Mr Slutsker would enjoy in [the Property] at that point. I proceed with the analysis on that basis."
Mr Slutsker's knowledge: what did he know and what did he need to know?
"156. It is in my judgment clear that certainly Mrs Slutsker, but in fact Mr Slutsker too, intended that the interests in [the Property] would be held in a way which differed from the effect of the Family Code not only in form but in substance. Even if both may have intended that, so far as their own interests were concerned, those should be equal (though that is in fact debatable), the crucial point is that under the intended trust, the broad nature of which was known to Mr Slutsker as well as Mrs Slutsker as far back as November 2000, they would not be the only persons with an interest in the property: most obviously, Misha and any other children were intended to be beneficiaries (though so also were Mr and Mrs Slutsker's respective parents). That being so, the position was fundamentally different from that obtaining under the Code: they could not dispose of [the Property] for their own benefit, even by agreement or in equal shares. It is also the case that if [the Property] was not joint family property covered by the Code neither could invoke the powers of the Russian court to sever in anything other than equal shares. The fact is that they had chosen, for reasons that seemed good to them, to employ structures which took them outside the regime of the Family Code, and it is unsurprising that the effect of that regime cannot now be replicated in the manner for which Mr Slutsker contends."
"166. From whichever angle I approach it, the underlying question is whether prior to October 2009 Mr Slutsker knew enough, on my assessment of the circumstances of the case, to make a decision about whether to object to the vesting of [the Property] in a trust. In my judgment he did. My essential reasoning is similar to that in paragraph 156 above. Mr Slutsker knew from 2001 that [the Property] was being held under arrangements which afforded him different rights than he would have enjoyed if it had been held as joint family property. I do not believe that it was necessary that he should know more than that. He may not have understood the details or worked through the implications, but in my view it should have been clear to him at that stage that he could not expect his rights to be the same, even in substance, as they were under the Family Code. In Professor Butler's words … he was aware that Mrs Slutsker "had purported to conclude a transaction in breach of the Code"; and he had to decide whether to accept it or not, making such further enquiries as to the implications as he saw fit."
"Once Mr Slutsker knew that [the Property] was to be held under arrangements governed by a foreign system of law, he was entitled to make no assumptions."
Did Mr Slutsker consent to the transaction?
"I would apply substantially the same approach to the question of whether he had sufficient knowledge to give an effective consent to the transaction as I have to the question of what knowledge is sufficient to start time running for the purpose of article 35.3. On that basis, for the reasons already given I would hold that Mr Slutsker could not show that he did not consent to the disposition in favour of the Trust."
Lord Justice Patten
Lady Justice Black