Admit nothing!

Published on
2 min read

In 1999 the Respondent (Mr Ezair) had entered into a contract of sale of his business, including a number of Properties, to a company that he controlled (“N”). The Properties were not in fact transferred to N to avoid paying stamp duty, but N could call for a transfer on 7 days’ notice.

In 2003 N contracted to sell the Properties to a company belonging to an off-shore family trust (“CSPL”).  Again, the titles to the Properties were not in fact transferred but the Properties were treated as an asset of CSPL in its accounts.

The administrators of the CSPL (who were also the liquidators of N) sought an order pursuant to Section 234 IA 1986 requiring Mr Ezair to transfer the title of the Properties to them.

In his evidence in response, Mr Ezair admitted that he held the properties on trust for CSPL, but alleged that he had entered into an agreement with the directors of CSPL in 2016 to acquire the beneficial interest in the Properties. Mr Ezair abandoned this defence shortly before trial, and sought to withdraw his admission that he held the Properties on trust for CSPL. 

Instead he argued that N had not acquired any proprietary rights under the 1999 contract and so had not been able to grant any such rights to CSPL. He argued that no trust could therefore arise in favour of CSPL, and there was no privity of contract between Mr Ezair and CSPL. 

Decision

The court applied the criteria in CPR PD 14 and held that it would not be right to allow Mr Ezair to withdraw his admissions that he held the Properties on trust for CSPL. Mr Ezair was an experienced businessperson and could be taken to understand the concept of beneficial ownership and trusts. The administrators’ approach had been influenced by Mr Ezair’s admissions and they would suffer prejudice if they were withdrawn.

It didn’t matter that the 1999 contract had not conferred any proprietary rights on N; a sub-purchaser would be entitled to seek specific performance as against the original seller, essentially stepping into the shoes of the original buyer where both the original contract and the sub-contract were specifically enforceable. N's rights had passed to CSPL by constructive trust so as to give effect to the common intentions of N, CSPL and Mr Ezair, or by virtue of the equitable doctrine of conversion.

Further, Mr Ezair had intentionally arranged matters such that the Properties were treated as assets belonging beneficially to CPSL and not himself or N, which was to his benefit (not least for tax reasons). He was now estopped from denying that he held the properties for CPSL beneficially.

Properties Limited) v Jacob Azouri Ezair [2019] EWHC 1722 (Ch)

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