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Gaspar v Zaleski & Ors [2017] EWHC 1770 (Ch)

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Wife was seeking a declaration that she was part owner of a property and an order for sale pursuant to the Trusts of Land and Appointment of Trustees Act 1996 so that she could realise her interest.

  • Case No: HC-2015-003002

    Neutral Citation Number: [2017] EWHC 1770 (Ch)

    IN THE HIGH COURT OF JUSTICE

    CHANCERY DIVISION

    Royal Courts of Justice

    Strand, London, WC2A 2LL

    Date: 12/07/2017

    Before :

    JUDGE ELIZABETH COOKE

    Sitting as a Deputy High Court Judge in the Chancery Division

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    Between :

    Isabelle Josephine Erika Gaspar (Claimant)

    - and -

    (1) Mark Xavier Zaleski

    (2) Mido Kabbani

    (3) Antonina Dominique Kabbani (Defendants)

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    - - - - - - - - - - - - - - - - - - - - -

    Michael Glaser (instructed by Charles Russell Speechlys LLP) for the Claimant

    Richard Wilson QC (instructed by Macfarlanes LLP) for the First Defendant

    Hearing dates: 8 – 11 May 2017

    - - - - - - - - - - - - - - - - - - - - -

    Judgment

    Judge Elizabeth Cooke :

    1. The Claimant in this action, Ms Isabelle Gaspar, seeks a declaration that she is a part owner, in equity, of 28 Stanley Road, London SW19 8RF ("the Property") and an order for sale pursuant to the Trusts of Land and Appointment of Trustees Act 1996 so that she can realise her interest. The First Defendant Mr Mark Zaleski is her former husband. He says that she has no interest in the Property. I shall refer to the Claimant and the First Defendant as Mark and Isabelle.

    2. The Second and Third Defendants – to whom I refer as Mido and Nina - are Mark's brother-in-law and sister; they hold the legal title to the Property and they have said in their respective acknowledgements of service that Isabelle has a 25% interest in the Property. Beyond that they have taken no part in the action although Nina was called as a witness by Mark.

    3. The action was heard before me in the Rolls Building on 8 – 11 May 2017. Mr Michael Glaser of counsel appeared for Isabelle and Mr Richard Wilson QC for Mark; I am grateful to both for their helpful arguments.

    4. In the paragraphs that follow I set out first the factual background, insofar as it is uncontroversial and essential for understanding the three issues between the Claimant and the First Defendant. The first issue is the meaning and effect of the 2008 Trust Deed, defined below. The second is what they agreed, before the 2008 Trust Deed was executed, although in the light of my answer to the construction of the 2008 Trust Deed the content of the agreement is irrelevant to the outcome of Isabelle's claim. I decide it only in case I am wrong about the first issue. The third is whether the beneficial ownership of the Property changed in 2009. My decisions on the first and third issues mean that Isabelle is successful; in the conclusion to my judgment I consider briefly the matter of equitable accounting – which Mark seeks - and of an order for sale, which Isabelle seeks.

    The factual background

    5. Isabelle is Belgian, and Mark has British nationality; they were married in Belgium in 1996 under the Belgian matrimonial regime of "séparation des biens", or separation of property. Had they married in community of property (a concept unknown in English law) they would have owned property jointly by virtue of their marriage; instead, under the separation regime, any property bought in the name of an individual belonged wholly to that individual and anything in joint names belonged to both. There is no system of discretionary property adjustment on divorce of the kind provided for by the Matrimonial Causes Act 1973. The effect of the regime of séparation des biens is not relevant to the ownership of the Property, which falls to be determined under English law; but it is relevant to the parties' understanding and expectations and has some bearing on the plausibility of some of their arguments.

    6. Mark has held senior positions in business; he worked for FedEx in the early 1990s, was CEO of QXL Ricardo PLC ("QXL") until 2007 and then chairman and CEO of Dailymotion until 2009. He is now a partner in a consulting firm. Isabelle qualified as a languages teacher. She worked for FedEx as an accounts manager and then for Times Mirror, a training company. She had her own business for a while, and then worked for TNT as a global accounts manager. The parties have three children, the eldest born in 1997; Isabelle gave up her career to look after the children.

    7. On 4 January 2008 the Property was bought for £1,050,000. The legal title was transferred to Mido and Nina, who obtained a mortgage advance of £840,000. Mark contributed £450,000, to be spent partly on the balance of the purchase price, partly on refurbishment, and partly on the making of mortgage repayments. On 4 January 2008 a declaration of trust was executed by Mido, Nina, Mark and Isabelle, to which I refer as "the 2008 Trust Deed". The effect of the 2008 Trust Deed is the first issue I have to decide; Isabelle says that it gave her an interest in the property, Mark says that it did not. Before the Property was purchased Mark and Isabelle made an agreement about its beneficial ownership; what that agreement was is the second issue I have to decide.

    8. The intention was to sell the Property swiftly and make a quick profit. But a sale fell through in July 2008, and the property market was collapsing. It was decided that the Property would be let, and so it was; a tenancy agreement dated 13 August 2009 was made between Mark as landlord and Kingdom of the Netherlands as tenant, and Mark's signature on the agreement was witnessed by Isabelle.

    9. On 25 April 2009 another declaration of trust was made ("the 2009 Declaration"), executed by Mido, Nina and Mark. Mark had bought out the interests of Mido and Nina, and in the 2009 Declaration Mido and Nina stated that they held the Property (as legal owners) upon trust for Mark "solely and exclusively" while Mark took on liability (as between the three of them) for the mortgage repayments and for the upkeep of the Property. It is agreed that the 2009 Declaration had no effect upon any interest that Isabelle already held in the Property. The third issue I have to decide was whether, if the 2008 Trust Deed did give Isabelle an interest, that interest was changed, or should be changed, as a result both of statements that Mark says she made and of his entering into the 2009 declaration.

    10. In June 2011 Mark and Isabelle separated, and they were divorced in Belgium on 24 April 2012.

    11. On 23 June 2012 Mark wrote to Isabelle revoking a number of gifts that he had made to her; Belgian law allows the revocation of gifts in certain circumstances. These included shares in QXL, Isabelle's interest in a timeshare in Gleneagles (as to both of which I say more later), a car and a number of items of jewelry (including some that had been taken some years before when Mark and Isabelle's home was burgled) and the rights in the Property given to her by the 2008 Trust Deed. Isabelle did not accept that revocation and so Mark commenced proceedings in Belgium claiming the restitution of the gifts. He failed; the court found that these were not the sort of gift that can be revoked. Mark appealed to the Belgian appeal court, which on 19 June 2014 delivered a draft judgment to the effect that the appeal failed. Following further written submissions by Mark's Belgian lawyers the Belgian appeal court's final decision dated 24 March 2016 allowed the appeal in respect of the car and some of the jewelry, but not the jewelry that had been stolen, nor the shares nor the timeshare. As to the interest in the Property the appeal court declined to make a ruling pending a determination by an English court as to the beneficial interests in the Property.

    12. Accordingly Isabelle has brought this action to determine the extent of her interest, if any, in the Property.

    13. I turn now to the three issues that I have to decide.

    The effect of the 2008 Trust Deed

    14. I have to begin with the 2008 Trust Deed, because the law is clear: if the 2008 Trust Deed sets out in full the beneficial interests in the Property then that is the end of the matter unless those interests were subsequently varied by deed, or by the operation of a common intention constructive trust or of a proprietary estoppel. The agreement between Mark and Isabelle made before 4 January 2008 – and it is common ground that there was an agreement although its content is not agreed – has no effect upon the beneficial ownership of the Property if the 2008 Trust Deed deals completely with that ownership. It is argued for Isabelle that it does, and for Mark that it does not and that therefore the prior agreement is the basis of a common intention constructive trust that determines Isabelle's interest.

    The legal principles of construction

    15. There is no dispute between Mark and Isabelle as to the legal principles on which I must construe the 2008 Trust Deed. The Supreme Court's decision in Wood v Capita Insurance Services Ltd [2017] UKSC 24 is the culmination of the considerable body of case law on construction, which it is not necessary to recite here. I must consider the objective meaning of the words used. I may have regard to the factual background known to the individuals who executed the deed, but I may not consider either a draft of the deed (there is one in the bundle) nor any prior negotiations. The subjective intentions of the parties are irrelevant – which is why neither the content of the agreement made between Mark and Isabelle about beneficial ownership nor the acknowledgements by Mido and Nina of Isabelle's share are relevant to the construction of the deed.

    The 2008 Trust Deed

    16. The deed begins by setting out the parties as follows:

    (1) MIDO KABBANI and ANTONINA DOMINIQUE KABBANI of [their address] ("Mr & Mrs Kabbani")

    (2) MARK XAVIER ZALESKI and ISABELLE JOSEPHNE ERIKA GASPAR of [their address in Belgium] ("Mr & Mrs Zaleski")

    17. Clause 1(a) reads:

    "Mr & Mrs Kabbani will hold the Property on trust for themselves and Mr & Mrs Zaleski as Tenants in Common in equal shares"

    18. There are then provisions about refurbishment, which "Mr & Mrs Kabbani" are to attend to, and sale at a minimum price, with an agreement that if the desired minimum could not be obtained the property would be rented out. Clause 1(f) set out how "Mr & Mrs Zaleski's investment of up to £450,000 towards the purchase and refurbishment of the Property" was to be used, namely £210,000 towards the purchase, £40,000 for stamp duty, and other amounts for professional fees, for refurbishment, and for up to eight monthly mortgage repayments.

    19. Clause 1(i) reads:

    Upon the future sale of the Property the net proceeds thereof will be distributed within 15 days of receipt from the Buyer in the following order:-

    (i) To repay the said mortgage of £840,000…

    (ii) To repay Mr & Mrs Zaleski's contribution of £450,000

    (iii) Thereafter to each party in equal shares.

    20. The 2008 Trust Deed is executed by the four individuals, Mido, Nina, Mark and Isabelle.

    The arguments about construction

    21. It is argued for Isabelle that clause 1(a) creates four shares in the Property held as tenants in common; the shares are equal after redemption of the mortgage and the repayment of the contribution said to have been made by Mark and Isabelle. Therefore the trustees are to apply the proceeds of sale by first redeeming the mortgage (which I am told by Nina was an interest-only mortgage), then by re-paying the £450,000 to Mark and Isabelle, and then the expected profit in four equal shares.

    22. It is argued for Mark that the 2008 Trust Deed was executed in the context of a joint venture by two married couples, and that its purpose was to regulate the relationship between those two couples, and not between the individual members of each couple. Accordingly, it is argued, the only effect of clause 1(a) is to create a tenancy in common between the two couples. The Zaleskis own 50% and the Kabbanis own 50%, after repayment of the mortgage and of the Zaleskis' contribution. Ownership of each 50% share is left undetermined as between the individual members of each couple. The share is therefore held on a sub-trust by each couple and is governed, in the case of Mark and Isabelle, by their agreement which founds a common intention constructive trust.

    23. In support of his construction Mr Wilson QC points out that the 2008 Trust Deed has two parties, not four. The two parties are carefully defined as "Mr &Mrs Zaleski" and "Mr & Mrs Kabbani". Clause 1 uses those two defined terms separated by the word "and", and accordingly creates two shares for the two parties. It does not say "Mr Zaleski, Mrs Zaleski, Mr Kabbani and Mrs Kabbani". If it is supposed to create four shares then the "and" is ungrammatical, as is the first ampersand.

    My conclusion on the construction of the 2008 Trust Deed.

    24. The 2008 Trust Deed was initially drafted by Jonathon Edwards, the Kabbanis' solicitor, with two parties and three names: the first party was Mark and Nina and the second was Mark alone. Nina sent it to Mark in an email of 17 November 2007; Mark returned it to her with amendments, adding Isabelle's name, and more detailed provisions about the use of the £450,000 and the intentions as to sale and letting. That version was returned to the solicitors who produced the version that was executed.

    25. The 2008 Trust Deed is not well drafted. Whether clause 1 produces two shares or four, it is supplemented by clause 1(i) which demonstrates that those "equal" shares were not equal shares in the equity in the property. They were equal shares in the profit made after the mortgage and the £450,000 were repaid. So clause 1(a) is at best imprecise.

    26. As to whether clause 1 creates two shares or four, the wording is ambiguous. I bear in mind that in general the purpose of a declaration of trust like the 2008 Trust Deed is to tell the trustees how they held the property; it is far less likely to have been intended only to do a partial job. For it to create two sub-trusts is needlessly complicated and it would be surprising indeed if that had been anyone's intention. I bear in mind that Mark and Isabelle were married under a property regime that would have led them to expect that any property held jointly would belong to them both in equal shares; I bear that in mind as a matter of background fact, and it leads me to suppose that if they had not intended that effect they would have said so explicitly in the 2008 Trust Deed which bore both their names and was executed by them both.

    27. Accordingly I find that the 2008 Trust Deed directed the trustees of the legal estate to hold the property for themselves and for Mark and Isabelle, and to apply the proceeds of sale in repaying the mortgage, in repaying the £450,000 to Mark and Isabelle, and in paying any balance to the four individuals in equal shares. As between themselves the individuals were tenants in common; Isabelle's share was therefore £225,000 and one quarter of the profit on sale, and so was Mark's, whereas Mido and Nina's interest was each in one quarter of the profits only.

    28. Accordingly that determines Isabelle's interest in the Property unless there has has been a subsequent common intention constructive trust or proprietary estoppel that changes it. Mark says that there has been a subsequent proprietary estoppel, and that is the third issue I must decide.

    The second issue: the prior agreement

    29. In case I am wrong about the construction of the 2008 Trust Deed, I go on to decide what was the agreement between Mark and Isabelle prior to the purchase of the Property and what its legal effect was. The purpose of doing so is to decide – in the hypothetical context where the 2008 Trust Deed did not determine the beneficial interests of all four individuals – what was the agreement upon which Mark relied to his detriment in contributing the £450,000, so as to create a common intention constructive trust.

    30. There are two reasons why I put it that way and why I put it so simply. The first is that it is agreed between Mr Glaser, for Isabelle, and Mr Wilson QC for Mark, that since this was an investment purchase and not a family home the starting point is not – as it was in Stack v Dowden [2007] UKHL 17 – that equity follows the law and the parties are beneficial joint tenants unless that presumption can be displaced. As in Laskar v Laskar [2008] EWCA Civ 347 there is no presumption of equality. The second reason is that it is common ground that there was an express agreement about the beneficial interest; I simply have to determine what that agreement was, out of the two possibilities. I do not have to look at the "whole course of dealings between the parties" (to quote Oxley v Hiscox [2004] EWCA Civ 546) nor at the multiple factors including the nature of the parties' relationship set out in Stack v Dowden at paragraph 69. That sort of analysis does not arise, nor is there any question of imputing an intention to Mark and Isabelle, because it is common ground between them that they had an express intention. Nor is there any question of a resulting trust or of the presumption of advancement; both concepts are presumptions, readily displaced by evidence of actual intentions. It is common ground that there were actual, expressed, agreed intentions; the difficulty is just that of Mark and Isabelle, one is telling the truth about the content of the agreement and one is lying and I have to decide which is which.

    What was the agreement?

    31. Both Mark and Isabelle made witness statements and both were cross-examined. Both came across, if I may say so, as intelligent, astute and articulate people; both have held responsible business positions, and each gave the impression that he or she would take financial decisions carefully, and would make up their own mind independently of the other, although in happier times there would certainly have been discussion and respect for each other's views. Where the evidence of the two conflicts, as it does fundamentally on this issue, I prefer the evidence given by Isabelle (save for one small and immaterial point where I take the view that Isabelle was genuinely mistaken; see paragraph 57 below). Mark's evidence about his own behaviour at key points is internally inconsistent, or inconsistent with known facts, whereas Isabelle's is neither.

    32. In the paragraphs that follow I summarise Isabelle's evidence, then Mark's, and the evidence of Nina who was called as a witness by Mark. I then say why I do not accept Mark's evidence and find that Isabelle is telling the truth.

    Isabelle's evidence

    33. Isabelle, as the Claimant in this action, set out her evidence in witness statements dated 15 July 2016 and 22 December 2016. She explains that she and Mark were married under a separation of property regime in Belgium, and that this was a positive decision to reject the default regime of community of property. She points out that the implications of this were clear to both (a point that Mark accepted too). She gave up her job in order to look after the couple's growing family. That meant that she had no income of her own. She explained that when Mark bought assets he placed some in both of their names, so that both had an interest, and some in his name alone. So the family home in Belgium, a timeshare in Gleneagles, and, on her account, the beneficial interest in the Property were purchased in joint names, and Mark also purchased shares in QXL in 2002 (the date is from Mark's evidence but it is not disputed), some of which he gave to her so that they each held QXL shares. It will be recalled that the QXL shares and Isabelle's interest in the timeshare were among the gifts Mark later sought to revoke (paragraph 11 above). The objective was to give her financial security and to recognise that while he made the money she was contributing in a different way. Some acquisitions were in Mark's name alone, for example a penthouse in Putney bought in late 2005 or early 2006.

    34. Isabelle explained that when Mark resigned from QXL (see paragraph 6 above) he was given some options to buy shares, and in late 2006 or early 2007 he made a lot of money from those options; but in summer 2007 some had still not been exercised. So at that stage they both held shares in QXL and Mark had the option to buy more.

    35. Isabelle added that when Mark exercised the first tranche of stock options in QXL he placed the money in an account with the Dexia bank. She says that she wanted the account to be in joint names but that Mark refused and made fun of her at the meeting with the bank manager (saying "she doesn't trust me"). Mark did not accept that he said anything of the sort. In line with my general findings on credibility (paragraph 31 above) I accept what Isabelle says.

    36. Isabelle's evidence was that Mido suggested in spring 2007 that she and Mark might want to invest in a property with him and Nina. She says that when the Property was identified as a possible purchase she and Mark visited it during the children's summer holidays in 2007; in cross-examination she said they just drove past it. According to Isabelle, she and Mark discussed and agreed that this would be an asset that he would put in her name. Emails in the bundle from September 2007 indicate that the two couples were in discussion at that stage about how the Property would be held. An email from Nina to Mark and Isabelle dated 12 September 2007 enquires whether the property would be held in joint names, and an email from Mark dated 20 November 2007 refers to a webpage explaining the nature of a tenancy in common. Mido and Nina took the legal title because their contribution was the mortgage advance; Isabelle understood that after repayment of the mortgage she would get £225,000 (being half the £450,000 contribution, which Mark paid, her half being a gift to her from him) and then 25% of the profits on sale. So her account of the agreement between them is consistent with my construction of the 2008 Trust Deed.

    37. The £100,000 deposit on the Property was paid from a Dexia bank account (not the one referred to in paragraph 35 above); an email from Isabelle to Mark on 10 December 2007 asks Mark to transfer the £100,000 back to the account, which she called "our account in Belgium".

    38. Isabelle's evidence is that she was involved in discussions about the potential sale in summer 2008, and points to an email from Mark to Nina on 19 June 2008 where he says "Isabelle and I thought 1.5M too low".

    39. Isabelle accepted that she witnessed the tenancy agreement that summer. She said that she did not attach any significance to the fact that Mark was named as landlord and she was not.

    40. Another email in the bundle is from Isabelle to Mark dated 14 August 2008 in which she asks if a copy of the 2008 Trust Deed can be obtained from the lawyer who drafted it.

    41. Isabelle was adamant that she knew nothing of the 2009 Declaration, and that Mark's supplementary statement to the Belgian Court of Appeal in October 2013 was the first she had heard either of the 2009 Declaration or of the idea that she agreed to contribute to the Property.

    Mark's evidence

    42. Mark made two witness statements dated 13 November 2015 and 23 December 2016. He says that prior to 2008 he and Isabelle (as he put it: "Isabelle and I") made a number of investments and that he paid for all of them because Isabelle did not have her own funds. Thus far his evidence agrees with Isabelle's, but it diverges in his evidence that towards the end of 2007 they received an offer for the QXL shares and agreed that from then on they would invest independently; Isabelle says there was no such agreement. One such investment, according to Mark, was the Property.

    43. Mark's account of the purchase is that in late 2007 Mido proposed that he join Mido and Nina in buying the Property; contrast Isabelle's evidence that there was a more general conversation early in 2007 and an inspection of the Property in the summer, and Nina's evidence to the same effect (paragraph 54 below). Mark says that he mentioned the Property to Isabelle and that she said she would like to contribute half of the £450,000 and that if he paid initially she would reimburse him from the proceeds of her QXL shares. Mark's evidence is that that was their agreement. The plan, he says, was to refurbish the house and make a quick profit on sale; and he points out that this was a minor matter compared with the £3m that he and Isabelle each stood to gain from the QXL shares.

    44. Speaking of his amendments to the draft of the 2008 Trust Deed Mark's statement says "I believed that they clearly reflected the agreement I had reached with Isabelle: that she would pay £225,000 and, in return, on the sale of the Property, she would be repaid her "225,000 and receive a share of the profits". In the email to Nina returning the draft deed on 18 November 2007 he said he had added "maybe a little more detail than required"; writing to Jonathon Edwards on 20 November 2007 with his amendments he expressed the wish to be "completely transparent throughout the whole process" and notes that with his amendments "there may now be a little more detail than required".

    45. The QXL shares were in fact sold in March 2008 following an offer to purchase made in November 2007. Mark's evidence was that nevertheless they were marketable in summer 2007 and so Isabelle had access to liquid funds at the time when he says they made their agreement in September; however, he explained that because he had been a director of QXL he and Isabelle could not sell their shares once the possibility of a bid had been reported in The Financial Times on 8 November 2007 – lest they be suspected of insider dealing. Accordingly the plan was to wait until the sale went through and then Isabelle would pay him for her share of the Property. His case, clearly stated by Mr Wilson QC, is that the agreement was that she would receive a proprietary interest in the Property if she contributed, not that she would lose one if she did not.

    46. Mark's evidence was that the reason why there is no trace of an agreement in the email correspondence disclosed from this period was because he and Isabelle talked about it in person, on Sunday evenings when he was at home.

    47. Mark went on to say that soon after the Property was purchased Isabelle got "cold feet" about the investment because the economy was not looking good; she told Mark that she did not have funds to repay him and did not want to be involved. He therefore proceeded on the basis that the investment was his alone. However, in March after the QXL shares were sold she became interested again, because it looked as if a quick profit might be possible. But after a sale fell through in June 2008 it became clear that the London property market was cooling. Mark and the Kabbanis agreed to let the Property out and wait until the market picked up. According to Mark, Isabelle again told him that she did not want any part in the investment, that she did not see why she should help Mark's sister, that it was his project and that she did not want to be involved. Isabelle denies that she said any of this. The Property was let, and the tenancy agreement (which Isabelle witnessed) named Mark alone as the landlord. No explanation was given as to why the tenancy was set up that way rather than naming the legal owners, Mido and Nina, as landlord.

    48. In early 2009 Mark agreed to buy out the Kabbanis' interest for £75,000, which he paid himself, and they made the 2009 Declaration. Mark's evidence was that they made the agreement between themselves because Isabelle had not expressed any interest in the Property since the previous conversation when she said she did not want anything to do with it. Mark said that he told Isabelle about the purchase and the 2009 Declaration at the time. Mark and the Kabbanis continued to rent out the Property to help with the mortgage payments and upkeep costs. Mark has produced evidence of mortgage payments that he made and contributions towards upkeep; he made the latter contributions by paying Nina, who paid for things up front, but in August 2012 Mido and Nina moved in and still live there as their home.

    49. Later, as I observed above, Mark and Isabelle separated. Having agreed, on his account, that Isabelle was not to have a share in the Property until she made her contribution, and having therefore executed the 2009 Declaration on the basis that Isabelle had no interest in the Property – Mark says that he took advice from his Belgian lawyers and was told that since Isabelle's name was on the 2008 Trust Deed she had an interest in the Property. He therefore felt that he had no choice but to go through the Belgian procedure to revoke the gift. He wrote to Isabelle revoking his gift to her of her share in the Property, and subsequently made his claim to the court in Belgium.

    50. The Belgian court gave judgment on 16 May 2013; the gifts were not to be revoked. Of the QXL shares and the interests in the Property and the timeshare the court found that the transfers to Isabelle were not moved by "feelings of goodwill and affection" but were a fair distribution of Mr Zaleski's savings in recognition of the equal contribution made by Isabelle to the family's welfare and their shared life. It seems that customary gifts – for birthdays and Christmas – are not allowed to be revoked, nor gifts given in this way in recognition of a spouse's non-financial contribution to the family; only gifts given purely as gifts can be revoked. Accordingly the Belgian court's finding was not that Isabelle's share in the Property was not a gift, but that it was not the sort of gift that could be revoked.

    51. Mark appealed that decision. His written submissions to the Belgian appeal court state (in translation) that the acquisition of 28 Stanley Road "in joint ownership with Ms Gaspar" was "gratuitous, in terms of animo donandi" (page 6 of the grounds of appeal) and were given "without any future consideration, or payment of past debts, which were non-existent" (page 12 of the grounds of appeal).

    52. In its draft decision dated 19 June 2014 the Belgian appeal court upheld the decision of the court of first instance.

    53. Mark's evidence is that at that stage the Kabbanis took legal advice from the lawyers, Muscatt Walker Hayim, who had acted for them in connection with the 2009 Declaration. The lawyer, Bruce Hayim, confirmed to Mido by email that the 2009 Declaration was prepared without knowledge, on Muscatt Walker Hayim's part, of the 2008 Trust Deed. Mark then met with Mr Hayim, who confirmed in a letter to Mark dated 23 August 2013 that the 2008 Trust Deed did not confer an interest on Isabelle. His reasons for saying so, namely that she gave no consideration, was incorrect (since this was a deed). Mark's evidence was that it was on the strength of that advice that on 22 July 2014 Mark's Belgian lawyers wrote to the Court of Appeal saying that he had been advised by an English lawyer that the 2008 Deed of Trust did not confer on Isabelle an interest in the Property. As noted above (paragraph 11) on 24 March 2016 the Belgian Court of Appeal issued its judgment but made no decision about the Property.

    54. Nina also gave evidence, in a witness statement dated 20 December 2016 and at the trial. She has no financial interest in these proceedings. She gave evidence carefully, clearly not wishing to take sides between Mark and Isabelle and without any indication of bias towards either. I accept her evidence that she knew nothing of an agreement between Mark and Isabelle about beneficial ownership. I also accept her evidence that the purchase of a property as an investment was discussed at a family dinner party early in summer 2007 and before the Property itself had been settled on. She was clear that there had been a discussion between Mido and Isabelle; she was not able to say whether Mark was a party to the conversation because it was a family dinner party and people were not all sat together at the same time. I also accept Nina's evidence that she was not party to the obtaining of advice from Bruce Hayim in 2013.

    Why I reject Mark's evidence

    55. Mark and Isabelle each say there was a specific agreement about the ownership of the Property; this is not a case where anyone says that the details were not thought through or that no-one mentioned it or even that there was ambiguity. Each says there was a clear agreement. One of them is not telling the truth.

    56. Mr Wilson QC, for Mark, pointed out features of Isabelle's evidence that he says cast doubt on her credibility.

    57. First he draws attention to Isabelle's reaction to an email shown to her in cross-examination, dated 7 November 2007, sent by her to Mark and expressing some perfectly understandable glee about the sale price of the QXL shares – the point of the cross-examination being to put to her that she was able at that time to contribute to the purchase of the Property. She said she did not write it, and I find without hesitation that she did; it is from her address, and is expressed colloquially in terms that would have come naturally to her in happier times. There would be no point in fabricating it because it really does not prove anything. This is the one point on which I do not accept her evidence, but I do not accept that there was any attempt to deceive the court. Quite simply she did not recognise the email; it seemed to me that her surprise was genuine.

    58. Second Mr Wilson QC points to the tenancy agreement which she witnessed (paragraph 39 above), and it is suggested that she must have therefore known and accepted that Mark had an interest in the property and she did not. But that does not follow, because the Kabbanis, who were the legal owners, were not named on the tenancy agreement, and it would appear that Mark was the landlord for administrative convenience. It was not clear to me whether Isabelle read the tenancy agreement or not when she witnessed it, but if she did she had no more reason to be offended by it than had the Kabbanis.

    59. Third, much was made of the fact that in her second witness statement Isabelle said that Mark funded joint investments for the two of them. It was put to her that the only other assets in joint names were the Gleneagles timeshare, which is a wasting asset and hard to describe as an investment, and the family home in Belgium. It was suggested to her that for Mark to have bought an investment, rather than any other type of property, in their joint names whilst funding her share, was untypical. Isabelle said that she regarded the timeshare, the family home, and the Property as joint investment purchases. I do not think the criticism of her wording has substance. Clearly Mark did buy property for her: the QXL shares could be purchased for individual ownership whereas real property, if both were to have an interest in it, could not. Whether any particular item would rightly be described as an investment is immaterial; amongst this small portfolio of assets there was nothing untypical about the purchase of the Property by Mark for them both.

    60. Much was also made of Isabelle's animosity towards Mark and of a reference in her witness statement to his having an affair. There was clearly hostility between the couple; I bear in mind Mark's making fun of Isabelle in the presence of the bank manager, and his purported revocation and court proceedings to claim back from Isabelle gifts of jewelry which she no longer had because they had been stolen. Personal animosity clearly cuts both ways here and does not assist me in deciding which of the two is telling the truth.

    61. Taken together the criticisms of Isabelle's evidence and the attempt to undermine her credibility have no substance and I reject them.

    62. I reject Mark's evidence for the following reasons.

    63. First, it is not plausible that Isabelle would have agreed to fund the purchase of the Property in September when she did not have the funds to do so. Mark's evidence was that he and Isabelle had agreed, by 12 September, that she would contribute £225,000 of her own money. Isabelle says that she could not have made such an agreement at that time because she did not have the money. It is argued on Mark's behalf that she had her QXL shares. QXL was a listed company, she could have sold the shares at any time, and even on the price available in September 2007 her shares were worth about £2m. Mark's explanation as to why she did not actually do so when the time came to buy the Property was that once QXL was in the market for a takeover – from the time of the report in The Financial Times in November 2007 that a bid was possible – the shares were in effect locked down. He still had a position on a QXL board and any dealing by him or his wife would have been "iffy" (Mark's word) as potential insider dealing.

    64. I find Mark's evidence implausible. In September 2007 the QXL shares were not selling well. An email to Mark from his stock-broker dated 12 September 2007 says "liquidity in QXL has been very limited over recent days." This was in answer to an enquiry by Mark who was thinking of exercising his QXL share option and wanted to know if there would be interested buyers. Mark's evidence was that he was not prepared to sell his QXL shares at that time. He did not agree with Isabelle's evidence that she followed his lead in financial matters; he said he would have said to her "I'm not selling but you can do what you want". He agreed that Isabelle was financially very cautious, and that is consistent with her own evidence that she did not regard the QXL shares as a source of ready money; they had a value on paper, as she put it, but she was not confident about that. I do not believe that this financially very astute and careful couple would have made a plan in September which involved Isabelle selling shares that Mark regarded as an investment that should not be sold at the time.

    65. Certainly matters changed in October and November. There was a lot of interest in a possible bid for QXL, and both Mark and Isabelle were interested in the rising price and the possibility of a purchase from E-bay – hence the email from Isabelle referred to in paragraph 57 above indicating her excitement at the rising price. Mark exercised his QXL options in November and the bundle includes the board minute approving the issue of shares to him. It must have been obvious by late November, or even sooner after the article in The Financial Times, that the QXL shares were going to be bought and were going to yield a handsome sum. But Mark's evidence is that the agreement with Isabelle was made in September, and that would have involved a plan for her to sell the QXL shares which would not have been realistic at the time.

    66. Second, the available email correspondence is inconsistent with there being an agreement that Isabelle would contribute. Not only is there no mention of that agreement in correspondence and no request from Mark to Isabelle for the money – that would not be decisive because there might have been discussion in person, although the absence of mention in the emails would still be conspicuous. But the email correspondence is actually inconsistent. In September Mark in an email to Isabelle discussed the funding of the purchase and said "… Of course we don't have the readies now due to Dailymotion" (Isabelle explained that at that time Mark had funds invested in Dailymotion which were therefore unavailable). There was no question of a separate contribution from Isabelle. Moreover on 9 November 2007 Mido's email to the solicitor says "my brother-in-law, Mark Zaleski, is investing £450,000 towards the refurbishment and the purchase of 28 Stanley Road Wimbledon. We have agreed that once the property is finished and sold that he will get back all of his investment back [without] interest but he will get 50 per cent of the profit." That is not consistent with Mark's evidence that Mido and Nina knew that Isabelle was going to contribute, and indeed would be misleading if they had known that was the plan. Mark could not explain that email. On the other hand, the email from Nina to Mark and Isabelle on 12 September 2007 asking whether they wanted the purchase to be in joint names is perfectly consistent with Isabelle not making her own contribution; if Mido and Nina had known about an agreement for her to contribute it is hard to see how Nina could have thought that there was any question of her name not being on the 2008 Trust Deed.

    67. Third, if the agreement was as Mark says it was then the drafting of the 2008 Trust Deed would be startling for two reasons. First, Mark in paragraph 12 of his witness statement of 13 November 2015 says that he drafted it as it was so as to reflect clearly the couple's agreement and to make sure that everything was set down in writing. My construction of the 2008 Trust deed is that it disposed of the whole beneficial interest; even if I am wrong about that and it only set up a tenancy in common between two couples, not by any stretch of the imagination could it be said to set out an agreement between Mark and Isabelle if that agreement was as Mark now says it was. There is no mention of contribution. There is no mention of Isabelle taking a share only when she reimbursed Mark later.

    68. The second reason why the drafting would be startling is that Mark knew, and confirmed at the trial that he knew, that under the Belgian separation of property regime if property was placed in joint names that meant he and Isabelle owned jointly and equally. Obviously that is not the case in English law; but Mark's background and expectations make it inconceivable that he would have entered into a deed drafted as was the 2008 Trust Deed if he had not intended to own in equal shares with Isabelle. If he had not intended Isabelle to take a share immediately he would not have drafted and executed the 2008 Trust Deed as it stands.

    69. Finally there is the matter of Mark's later behaviour. It was argued for him that the 2009 Declaration is consistent with his claim to have understood that Isabelle did not have a share and would not have one unless and until she made her contribution. But if that was his understanding then his behaviour in the Belgian proceedings is incomprehensible, at best, and at worst dishonest. His statement to the Belgian court is clearly that the share in the Property was a gift, made animo donandi – in a spirit of giving - and that no consideration past or future was expected. I do not think that these are, as Mr Wilson QC urged me to find, "just words on paper". Nor can Mark shift responsibility to his lawyers and state that he had no choice. He is a clever man and certainly not one to be pushed around. If his Belgian lawyers' advice that Isabelle had an interest had come as a surprise to him he would not have taken that at face value and would have taken further advice. The advice eventually obtained in 2013 was obtained by Mido (I accept Nina's evidence that she was not involved) and I take the view that the advice came as a surprise, and no doubt as a pleasant surprise, to Mark and he decided to change his story at that point and pursue the "agreement to reimburse" story.

    70. Mark gave evidence that his Belgian lawyers advised him in 2012 that Isabelle had a share in the Property because her name was on the 2008 Trust Deed. Once he told them, in 2013, that that was not the case, the Belgian lawyers drafted their alternative submission to the appeal court. If Mark had told them in 2012 of the agreement that Isabelle would contribute they would surely have taken that approach at that stage. It is implausible for Mark to say that he thought he had no choice in the Belgian proceedings, since it is clearly not the case that Belgian law has no remedy where an agreement to contribute has not been honoured; we see that it has, and that Mark's lawyers sought that remedy as soon as they were introduced to the new story that there had been an agreement to contribute.

    71. It is clear that when the 2009 Declaration was made Mark did not tell Mido and Nina's solicitors, Muscatt Walker Hayim, anything about the 2008 Trust Deed (see paragraph 53 above). Isabelle takes the view that Mark sought to defraud her of her share by making the 2009 Declaration without her. Mark says that he went ahead without her because she had made it clear that she had no interest (the ambiguity there is deliberate on my part) in the Property.

    72. I accept Mr Glaser's submission that I do not have to make a finding as to why the 2009 Declaration did not include Isabelle. It was drafted in a hurry. Mido and Nina were, it is clear from email correspondence, in need of funds. I expect that they gave instructions to the solicitor. What was clear to all of them was that Isabelle was not taking part in buying them out. That is beyond dispute – so much so that it may well be that at this point, and not in 2008, Isabelle did say to Mark that she did not see why she should help his sister. Had the solicitors been told of the 2008 Trust Deed then of course they would have drafted a different document; they followed instructions, which no doubt came from Mido and Nina. I do not suppose for a moment that Mido or Nina sought to defraud Isabelle. Instructions to a solicitor along the lines of "we have the legal title to this property, we have half the beneficial interest, and Nina's brother is buying us out" could easily have produced the 2009 Declaration as drafted. Mark may not have studied it carefully. He may not have applied his mind to the fact that for Mido and Nina to hold for him meant that they were not holding for Isabelle. I find that he knew that Isabelle had an interest in the Property which he had given her; that he helped out Mido and Nina who were in a hurry for money; that the 2009 Declaration was not an attempted fraud – I do not believe that if Mark had planned a fraud he would have done it so ineptly – but was the result of inadequate instructions.

    73. I have to choose between two implausibilities. If the agreement was that Isabelle was given a share in the property, then the 2009 Declaration is very puzzling. If the agreement was that she would only get a share when she contributed then the pleadings to the Belgian courts were not only misleading to those courts but were also pointless, when it is clear from the amendment to the Belgian proceedings at the eleventh hour that Belgian law does provide a remedy if the circumstances were such as Mark now says they were.

    Conclusion

    74. I find therefore that the agreement between Mark and Isabelle prior to the purchase of the Property was that Mark would contribute the £450,000 for both of them and that they would have equal interests in the Property. He was making a gift, as he had done with the QXL shares, so that Isabelle would have an investment with a view, shared by all four participants, to making a quick profit.

    What was the legal effect of the agreement?

    75. The agreement between Mark and Isabelle has no effect on the outcome of this litigation if my construction of the 2008 Trust Deed is correct. But I have examined the agreement for the sake of completeness in case matters go further and I am found to be wrong about the deed. In that event, on the basis that the 2008 Trust Deed does create a sub-trust, on terms unspecified, of the £450,000 + 50% share, then the terms of that sub-trust are that Mark and Isabelle are equally entitled. Again the agreement must entail tenancy in common because the objective was separate shares for individuals who held their property separately and as an investment.

    76. If I am wrong about the substance of the agreement, but right about the construction of the 2008 Trust Deed, then Mr Wilson QC argues that whilst Isabelle – on that reckoning – took a beneficial interest under the 2008 Trust Deed, she held that expressly conferred interest upon a common intention constructive trust, or rather sub-trust, for Mark unless she later made a contribution, in which case her share would become her own.

    77. I pressed Mr Wilson QC on this point at the trial because it seemed to me extraordinary to suppose that a common intention constructive trust could take effect upon the Property at the same moment as the express trust. It cannot be said to take effect later because there is no further detrimental reliance after acquisition. The argument that the constructive trust takes effect simultaneously with the express trust seems to me to drive a heavy goods vehicle through the law set out in Goodman v Gallant [1986] Fam 106, which is that the express trust is determinative unless changed later. Not surprisingly there is no authority in support of that argument, and I reject it. A constructive trust arising from the parties' agreement that Isabelle would contribute – if I am wrong and there was such an agreement – can assist the First Defendant only if the 2008 Trust Deed does not dispose of the entire beneficial interest.

    78. Only if I am wrong about the construction of the 2008 Trust Deed, and wrong about the substance of the agreement, does Mark succeed in establishing that he has held a 50% beneficial interest in the Property (after repayment of the mortgage and in addition to reimbursement of the £450,000). On that basis the analysis would be that the 2008 Trust Deed said nothing about the beneficial ownership of the individual members of each couple; that therefore Mark's and Isabelle's entitlement could be determined by a common intention constructive trust arising from their agreement that Isabelle would contribute, and Mark's detrimental reliance upon that agreement by paying the £450,000 towards acquisition of the property. The terms of the trust would be that Isabelle initially had no interest and would acquire one later when she made her contribution, and the practical effect of that would be that she never acquired an interest. And if I am wrong both about the construction of the 2008 Trust Deed and about the substance of the parties' agreement, then that would seem to be the outcome. However, that is at least two hypotheses away from reality. The implausibility of such an arrangement, purely by virtue of its complexity, reinforces my view that if Mark and Isabelle had really agreed that she would make a contribution, and would have no interest in the Property until she did so, then Mark – who says that he wanted to set things out clearly, and actually felt he had overdone the detail (see paragraph 44 above) - would have set that out when he amended the draft deed.

    A proprietary estoppel arising after purchase?

    79. I turn now to the third issue.

    80. The third issue arises because one further argument is made for Mark in case I am right about the construction of the 2008 trust deed but wrong about the agreement. The argument is that on that basis Isabelle initially held her 25% share (subject to the mortgage but with half of £450,000) as a tenant in common but later represented that she had no interest (meaning property right) in the Property and that Mark relied upon that to his detriment in buying Mido and Nina's share in 2009. That is said to create a proprietary estoppel, and it must – although this was not explored in argument – then be a question for the court's discretion as to how the equity arising by estoppel is to be satisfied. On that basis Isabelle still holds her interest but the court might satisfy the equity by transferring it to Mark.

    81. I take the view that this argument has no possible chance of success. I accept that Mark's purchase of Mido's and Nina's interests in 2009 could amount to a detriment sufficient to found a proprietary estoppel. The purchase was a risk, and he was committed – vis-à-vis Mido and Nina – to servicing the mortgage debt. But there is no evidence of a clear representation by Isabelle that she was renouncing her share in the Property, and such a representation must be found before a proprietary estoppel could arise in this way.

    82. At the trial Mark said that Isabelle told him that she was not going to contribute. That in itself cannot give rise to the proprietary estoppel claimed. It is neither a statement that she had no share, nor a statement that she was going to transfer a share. If it is true that the 2008 Trust deed does, as I find, confer a share on Isabelle but also true – contrary to my findings – that she agreed to contribute and then changed her mind, that might perhaps give rise to a contractual liability but it does not assist the case on estoppel.

    83. Mark also gave evidence that Isabelle told him she had no interest in the Property. I do not believe his evidence, first because of my findings on credibility – where there is a discrepancy I prefer Isabelle's evidence to Mark's – and second because there is positive evidence of her taking an interest. There is Mark's own email expressing his and Isabelle's view on the sale price of the property in summer 2008 (paragraph 38 above). In August 2009 there is an email from Isabelle to Mark seeking a copy of the 2008 Trust Deed from the solicitor (paragraph 40 above). That is not the action of someone who is not interested in – in the sense of "not bothered about" – the Property. And it is certainly not the email of someone who is saying not only that she is not bothered but also that she has renounced, or will renounce, her share. Moreover, statements of the kind reported by Mark do not go anywhere near to the representation he would need to establish, namely a clear statement either that she gave up and renounced the property right she had formerly held. "I'm not interested" – even if it was said – does not begin to be the clear representation that would be needed to found the estoppel claimed.

    84. Accordingly I declare that Isabelle has, and has had since 4 January 2008, a beneficial interest in the Property. The trustees of the legal estate hold it upon trust to redeem the mortgage and then to pay to Isabelle £225,000, together with one quarter of the surplus after £225,000 has been paid to Mark. He then takes three-quarters of the surplus because of the 2009 Declaration.

    85. However, there may have to be equitable accounting between the parties. I make an order for an account to be taken by a Master, which will take into account anything spent by Mark and not by Isabelle on the upkeep of the property, any rent received by Mark and not by Isabelle, and any other use that Mark has had from the Property. The taking of an account will not require Isabelle to make a contribution of £225,000 because I have found as a fact that there was no agreement that she would contribute and that the £450,000 was paid by Mark on behalf of them both. Accordingly any payment for refurbishments made out of that £450,000 is to be treated as having been made by Mark and Isabelle equally.

    86. Finally, an order for sale is sought, and no argument is made against that. Mido and Nina have been living at the Property since 2012 and would like to buy it, and of course are free to offer to do so. Accordingly I make an order for sale.


Published: 16/08/2017

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