Gorbunova v Estate of Boris Berezovsky & ors [2016] EWHC 1829 (Ch)

Analysis

B had been involved in litigation against A and the AP family (the litigation) from which he potentially stood to recover large sums of money. The claimant, G, was B’s long-term partner. In March 2012 the litigation deed was drawn up to reflect agreement between B and G regarding G’s entitlement to B’s assets (including the litigation). B subsequently lost his case against A and entered into settlement discussions with the AP family. The litigation agreement was a further document signed in September 2012 to reflect an agreement between B and G concerning her entitlement to any sums from any such settlement. In September 2012 B signed a settlement agreement with the AP family (the settlement agreement). Upon it subsequently becoming apparent that B may not honour the terms of his agreement with G, she issued proceedings against him. In March 2013 B died and the trustees were ultimately appointed as trustees of his insolvent estate. In March 2014 the AP Family made payments to B’s estate pursuant to the settlement agreement. From these, a sum of £34m remained in the estate. This was the only substantial asset. G asserted proprietary claims and claims for damages against the estate based upon the litigation deed and the litigation agreement.

Two applications were before the court. The first, made by the trustees, was to strike-out, or alternatively for summary judgment dismissing, the proprietary claims made by G. The second was an application by G to re-amend her particulars of claim to introduce claims of equitable assignment, rectification, proprietary estoppel and constructive trust and other estoppels.

Held, granting summary judgment dismissing certain proprietary claims made by the claimant and refusing permission to amend the particulars of claim to introduce claims for equitable assignment, rectification, proprietary estoppel and constructive trust:

1. 1. G had no real prospect of successfully contending that either the litigation deed or the litigation agreement created a trust of monies recovered from the litigation or under the settlement agreement, let alone a trust of B’s rights in respect of the litigation or under the settlement agreement:
2. 2.
3. 2.1. The words used in the litigation deed and litigation agreement did not create a trust. It was not necessary for B to use words such as ‘I declare myself a trustee’ but the words used must show that he intended to dispose of property so that G acquired the beneficial interest to the exclusion of himself. A mere intention to make a gift was insufficient for this purpose.
4. 2.1.1. The wording of the litigation deed did not evidence an intention to create a trust on the part of B of any property recovered through the litigation, let alone of his rights under the settlement agreement. The words did not evidence an intention to make an immediate disposition of the beneficial interest in specified property but on the contrary amounted to a promise to pay. Further the payment promised was of one third of ‘the value of’ property recovered, which was inconsistent with a declaration of trust of the recovered property. Further the wording showed that it was intended that B should receive any property recovered through the litigation beneficially and not as trustee for G.
5. 2.1.2. The wording of the litigation agreement did not evidence an intention to create a trust on the part of B of any monies received under the settlement agreement. The words did not evidence an intention to make an immediate disposition of the beneficial interest in specified property whether the prospective receipts from the settlement agreement or B’s rights under the settlement agreement. On the contrary, they amounted to a conditional agreement on the part of B to transfer any monies received under the settlement agreement which were free of encumbrances or restrictions. Thus it was predicated upon receipt of the monies by B beneficially which was inconsistent with B declaring himself a trustee of such monies. Further, the litigation agreement was a promise to make a gift of monies in the future, if and when monies were received. At the very most, it was a promise to declare a trust in the future once the new agreement had been drawn up following receipt by G of legal advice.
6. 2.2. The subject matter of the supposed trust was too uncertain. In order for a trust to be properly constituted, the property (the subject-matter of the trust) must be identified with sufficient certainty.
7. 2.2.1. As regards the litigation deed, the subject matter of the purported trust was uncertain because it was not specific property but one third of ‘the value of’ whatever property might be recovered through the litigation. The litigation deed should not construed as if those words were not present. It was a formal document which appeared to have been carefully worded. G could not point to anything in the wording itself or the admissible background which suggested that the inclusion of ‘the value of’ was a mistake.
8. 2.2.2. As regards the litigation agreement, the subject-matter of the supposed trust was uncertain because of the words ‘free from encumbrances and restrictions’. Not only was it unclear what ‘encumbrances and restrictions’ there were, but also it was not clear what the amount would be subject to such encumbrances and restrictions. That quantifying the amount subject to encumbrances and restrictions was essentially a mechanical exercise with the trust biting on whatever was left over did not make the subject matter certain.
9. 2.3. The effect of s284 of the Insolvency Act 1986 and Art 3 of the Administration of Insolvent estates of Deceased Persons Order 1986 was that any disposition of B’s property after the date of his death was void. The wording of the litigation deed and litigation agreement was such that any trust created by them could only be established upon receipt of the property by B. Since the monies were received after B’s death, any such trust was void by virtue of s284 of the Insolvency Act 1986. Further, the litigation agreement did not create a trust of B’s rights under the settlement agreement.
10. 3. The interpretation of a unilateral declaration such as the litigation deed was an objective exercise in which the court’s task was to ascertain the meaning that document would convey to a reasonable person having all the background knowledge which would have reasonably been available to B and G in the situation in which they were at the time of the litigation deed, this did not include evidence as to their subjective intentions or the – pre-declaration negotiations. B’s solicitor’s email was not admissible evidence as to the construction of the litigation agreement as it was evidence of B’s subjective intentions and/or part of the pre-contractual negotiations.
11. 4. G had no real prospect of successfully contending that either the litigation deed or the litigation agreement amounted to an equitable assignment as alleged.
12. 4.1. There was nothing in the wording of the litigation deed to support the suggestion that it was intended to amount to an assignment of B’s rights in the litigation to G nor to assign one third of the future proceeds of the litigation. Rather it was merely a promise to pay her one third of the value of the property recovered from the litigation.
13. 4.2. There was nothing in the wording of the litigation agreement to support the suggestion that it was intended to amount to an assignment of B’s rights against the AP Family or under the settlement agreement nor to assign the future proceeds of the settlement agreement.
14. 4.3. Further, insofar as it was alleged that the assignments were of the future proceeds of the litigation or settlement agreement, they were void pursuant to s284.
15. 5. G’s claims for rectification had no real prospect of success.
16. 5.1. A claim for rectification of a contract on the ground of common mistake will succeed only if it is established, first, that there was some prior agreement between the parties; secondly, that this was still effective when the instrument was executed; thirdly, that by mistake the instrument fails to carry out that agreement; and fourthly, that if rectified as claimed, the instrument would carry out the agreement. A claim for rectification of a contract on the ground of unilateral mistake will only succeed if it is established that one party to the transaction knows that the instrument contains a mistake in his favour, but does nothing to correct it and seeks to take advantage of the other’s mistake. Rectification of a voluntary settlement on the ground of unilateral mistake is possible upon sufficient proof of a mistake in carrying into effect the settlor’s intention.
17. 5.2. G did not have a realistic prospect of establishing that the litigation deed did not correctly record B’s intention which G claimed to hold his rights in the litigation irrevocably and absolutely for the benefit of G giving rise to a trust in her favour and therefore that the litigation deed should be rectified to record this intention as this was inconsistent with G’s own evidence. While the court was not entitled to conduct a mini-trial of the issue without the benefit of disclosure and oral evidence, B was dead and it was plain that the principal witness on whose evidence G would rely to establish that B’s intention was not correctly recorded in the litigation deed was herself. G’s evidence was that B’s intention was that G should receive one third of any recovery B received from the litigation, not that she should have one third of his rights in the litigation.
18. 5.3. G did not have a realistic prospect of establishing that B’s intention was that the effect of the litigation agreement would be that G would receive B’s rights against the AP Family and/or under the settlement agreement and therefore that the litigation agreement should be rectified to record this intention as this was inconsistent with G’s own evidence. Whilst the court was not entitled to conduct a mini-trial of the issue, it was not G’s evidence that B and G’s intention was that G would receive B’s rights or for B to give her the proceeds of the settlement agreement.
19. 6. G’s claims for proprietary estoppel and constructive trust had no real prospect of success.
20. 6.1. The three main elements of a claim for proprietary estoppel are a representation or assurance made to the claimant, reliance on that representation or assurance by the claimant and detriment to the claimant as a result of such reliance. The common intention constructive trust claim did not add to the proprietary estoppel claim.
21. 6.2. Whilst the court was not entitled to conduct a mini-trial of the issue, the case sought to be pleaded, that B gave G an assurance that she would receive any beneficial rights in respect of the litigation or its proceeds, was inconsistent with G’s evidence which was that B promised her that she would get a one-third share of any recovery he received from the litigation.
22. 6.3. Further, again whilst the court was not entitled to conduct a mini-trial of the issue, the case sought to be pleaded, that B assured G that the litigation agreement was enforceable and gave rise to beneficial rights in G’s favour in respect of B’s rights against the AP Family and/or under the settlement agreement, was inconsistent with G’s evidence which was that B promised her that would give her the money he received under the settlement agreement.

JUDGMENT MR JUSTICE ARNOLD Introduction [1] There are two applications before the court. The first is an application by notice dated 20 May 2016 by the ninth to eleventh defendants (the trustees), who are the joint trustees of the insolvent estate of the late Boris Berezovsky (the estate) to strike out, alternatively for summary judgment …

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