LA Micro Group (UK) Ltd & Anor v LA Micro Group Inc & Ors.

This appeal concerns the ownership of an English company, LA Micro Group (UK) Ltd (“UK”). There are two issued shares, one in the name of Mr David Bell (issued in 2004) and the other in the name of Mr Arkadiy Lyampert (issued in 2008 or 2009), and it is not disputed that they are the legal owners of the shares. What is in issue is the beneficial ownership of the shares.

There are three individuals concerned. Two of them, Mr Lyampert and Mr Roman Frenkel, are Californians, of Russian and Ukrainian background respectively. They jointly owned and ran a Californian company called LA Micro Group, Inc (“Inc”). The third is Mr Bell, who is English and who has run UK since 2004 when it was acquired as a vehicle for a joint venture between him and the Californians. In 2010 however Mr Frenkel and Mr Lyampert fell out. Mr Frenkel told Mr Bell he was not interested in UK, and Mr Bell and Mr Lyampert then reached agreement on new arrangements.

The current proceedings are the second set of English proceedings concerning the ownership of UK. The first (“the 2015 proceedings”) was brought in 2015 by Mr Frenkel against Mr Lyampert, Mr Bell and UK. Mr Frenkel claimed that what had been agreed in 2004 was that he and Mr Lyampert personally should have a 25.5% interest each in UK (with the other 49% owned by Mr Bell). That claim was tried by Ms Amanda Tipples QC (as she then was) in 2017 and she handed down judgment on 13 September 2017 at [2017] EWHC 2223 (Ch). She dismissed Mr Frenkel’s claim, finding that it had been agreed in 2004 that UK should be owned 49% by Mr Bell and 51% by Inc.

The current proceedings were brought in 2020 by UK and Mr Bell against Inc, Mr Frenkel and Mr Lyampert. They took as their starting point Ms Tipples’ finding that it was agreed in 2004 that UK should be owned 49% by Mr Bell and 51% by Inc, but sought a declaration that as a result of what had happened in 2010, it had come to be owned equally by Mr Bell and Mr Lyampert.

The claim was initially tried by HHJ Jarman QC (sitting as a Judge of the High Court) in January 2021. He gave judgment on 29 January 2021 at [2021] EWHC 140 (Ch) in favour of UK and Mr Bell, finding that Mr Frenkel (acting on behalf of Inc) had disclaimed Inc’s interest in UK in 2010. I will refer to this judgment as his “first judgment” or “J/1”.

Inc and Mr Frenkel appealed to this Court, which on 5 October 2021 allowed an appeal for the reasons given by Sir Christopher Floyd (with whom Lewison and Newey LJJ agreed) at [2021] EWCA Civ 1429. I will refer to his judgment as “CA”. In summary the appeal was allowed because it was too late in 2010 for Inc to have disclaimed an interest that it had accepted in 2004: CA at [39]. Sir Christopher Floyd went on to consider a number of alternative grounds put forward by UK and Mr Bell for upholding HHJ Jarman’s judgment, but concluded that there were insufficient factual findings to decide them. He therefore remitted the case to HHJ Jarman to consider these issues.

The hearing of the remitted issues took place before HHJ Jarman in March 2022. He did not hear any further evidence, but he did hear extensive submissions. He handed down his judgment on 27 May 2022 at [2022] EWHC 1304 (Ch). This is the judgment currently under appeal. I will refer to it as his “second judgment” or “J/2”.

The three issues remitted to HHJ Jarman were: (1) whether Inc had contractually surrendered its interest; (2) whether Inc was precluded by proprietary estoppel from asserting its claim; and (3) whether Inc was precluded by laches from asserting its claim.

On (1) contractual surrender, HHJ Jarman found that it was impliedly agreed in 2010 that the shares in UK would thereafter be held 50/50 for Mr Bell and Mr Lyampert: J/2 at [48]. But he held that the issued shares, both that issued to Mr Bell in 2004, and that issued to Mr Lyampert in 2008 or 2009, were held on express trust for Mr Bell and Inc in the proportions agreed in 2004: J/2 at [57]-[58]. It followed, he said, that any disposition of Inc’s beneficial interest in the shares would need to be in writing to comply with s. 53(1)(c) of the Law of Property Act 1925 (“LPA 1925”): J/2 at [59]. The lack of writing meant that such disposition was not valid and the claim to relief on the basis of contractual surrender therefore failed: J/2 at [59], [61].

On the present appeal UK and Mr Bell contend by way of Respondent’s notice that HHJ Jarman should have held that the agreement reached in 2010 was specifically enforceable, and hence gave rise to a constructive trust such that the case came within s. 53(2) LPA 1925 instead of s. 53(1)(c). In response Inc and Mr Frenkel contend that he was wrong to find that there was an implied term in relation to the ownership at all.

On (2) proprietary estoppel, HHJ Jarman held that UK and Mr Bell’s claim succeeded. He accepted Mr Bell’s evidence that Mr Frenkel in 2010 told him that UK was his to do what he liked with, and that if he had thought that UK would still be owned by two warring partners via Inc he would have resigned from UK and widened or restarted his other business operations. Instead he entered into the 2010 agreement with Mr Lyampert: J/2 at [73]. He and Mr Lyampert did so in reliance on what Mr Frenkel had said: J/2 at [75]. It was unconscionable of Inc now to assert a 51% beneficial ownership in UK, and the claim in proprietary estoppel was made out: J/2 at [77].

Inc and Mr Frenkel each appeal this decision. They challenge his conclusions (i) that Mr Bell and Mr Lyampert entered into the 2010 agreement in reliance on what Mr Frenkel said and (ii) that it would be unconscionable for Inc to assert a 51% beneficial interest.

On (3) laches, HHJ Jarman held that there were several difficulties in the submission that Inc should have acted in 2010 or within a reasonable time thereafter, and that the claim of UK and Mr Bell based on laches was not made out: J/2 at [83], [86]. There is no appeal against that conclusion.

The issues before us can therefore be summarised as follows:

It is easiest to take the facts from the account given by Sir Christopher Floyd in his judgment: CA [3]ff. No-one took any issue with this, and I reproduce it below with some added reference to the factual findings of HHJ Jarman in his two judgments:

In the present proceedings there was no dispute that this was the effect of the 2004 agreement. It was the pleaded position of UK and Mr Bell that it was agreed that Inc would own 51% and Mr Bell 49% of the share capital of UK. Inc was not bound by Ms Tipples’ judgment, but unsurprisingly admitted that this was the case. Mr Frenkel’s evidence to HHJ Jarman was that he had always believed that the shareholding was split 49% to Mr Bell, 25.5% to himself and 25.5% to Mr Lyampert personally, but he accepted that he was bound by Ms Tipples’ judgment: J/1 at [25]. Mr Lyampert was also of course bound by it. In his second judgment HHJ Jarman proceeded on the basis that it was agreed orally between Mr Lyampert on behalf of Inc and Mr Bell in 2004 that Inc would own 51% of the shares in UK and Mr Bell the remainder (J/2 at [19]), and found that although it was common ground that no-one gave any thought to the practicalities of the shareholding, the 2004 agreement was clearly intended to give control of UK to Inc: J/2 at [20].

Reverting to Sir Christopher Floyd’s narrative at CA [6]:

I add that it was also agreed as part of the 2004 agreement that UK would trade in Europe (including the United Kingdom), and Inc elsewhere, the reason why UK was formed being to promote Inc’s access to the European and United Kingdom markets: J/1 at [5], J/2 at [46]. That explains the profit-sharing element of the 2004 agreement (which again was not disputed in the present proceedings). In effect Inc was using UK to sell its products in Europe and the UK, on terms that the profits would be divided equally between Inc, which was responsible for supplying the goods, and Mr Bell, who was responsible for selling them and running UK’s operations. Ms Tipples had also found that it was agreed that when Inc purchased goods at cost from UK the profits, after deduction of local commissions on sales by Inc’s staff, were to be transferred by Inc to UK; although this was supposed to happen it was rare for the repatriation of profit in fact to take place: see her judgment at [81a.].

Sir Christopher Floyd continues at CA [7]:

Sir Christopher Floyd reverted to this question at CA [69]-[84] where he considered the argument of Mr Andrew Twigger QC, who appeared for Mr Bell and UK, that there had been a contractual surrender by Inc of its beneficial interest in the shares. As he there explains, that gave rise to argument as to how the requirements of s. 53 LPA 1925 would affect any such surrender. The analysis in that respect would or might be affected by whether there was a constructive or express trust of the shares; and that was one of the issues remitted to HHJ Jarman.

Taking his two judgments together, HHJ Jarman’s findings on this issue were as follows. It was accepted by the parties that the initial share held by Mr Bell was held on trust as to 49% for himself and 51% for Inc: J/1 at [46]. The issue of the second share to Mr Lyampert in 2008 or 2009 did not affect Inc’s 51% beneficial ownership: J/1 at [48]. It was not a term of the 2004 agreement that further shares would be issued: no thought was given to the issue of more shares, the agreement was intended to deal with the ownership at the time, and an implied term for the issue of more shares was not necessary to make the agreement work: J/2 at [34]. In those circumstances, although the word “trust” was not used, the 2004 agreement was a sufficient declaration of trust in respect of the then only issued share, and an express trust arose from the words spoken as to ownership: J/2 at [55]-[57]. It was common ground that when the second share was issued to Mr Lyampert, he held it in trust for Inc (and Mr Bell) in the same proportions; and the parties were to be taken as intending that it should be held on the same basis as the first share, namely on express trust: J/2 at [58]. HHJ Jarman’s conclusion therefore was that Mr Bell and Mr Lyampert each held their shares on express trust as to 49% for Mr Bell and 51% for Inc. That conclusion has not been challenged on this appeal.

Continuing with the narrative at CA [9]:

It is worth noting precisely what factual findings HHJ Jarman made in his two judgments on what Mr Frenkel said to Mr Bell. In his first judgment, he said that there was no dispute that there was a telephone conversation between Mr Frenkel and Mr Bell in February 2010, and that there was another conversation between the two men in March 2010 when Mr Bell visited Mr Frenkel at his home in California: J/1 at [8]. Nor was it disputed that Mr Bell was trying to find a way in which Mr Frenkel could work with Mr Lyampert, but Mr Frenkel made it clear he wanted nothing to do with the latter. He accepted that at the time he was on friendly terms with Mr Bell and apologised to him for the falling out: J/1 at [8]. HHJ Jarman then set out the two rival versions of what was said. Mr Bell’s was that Mr Frenkel made clear to him that he was dissolving Inc and wanted nothing to do with UK and that the latter was his to do with what he liked. The shareholding was not specifically mentioned but Mr Frenkel made it clear that he was walking away from UK. Mr Frenkel on the other hand denied saying these words, although he accepted that he made it clear to Mr Bell that he didn’t want to work with Mr Lyampert ever again: J/1 at [9]. Mr Bell’s account was supported by Mr Lyampert who said that when Mr Bell came back from speaking with Mr Frenkel in March 2010, Mr Bell told him that Mr Frenkel had said that he was terminating their relationships, closing Inc’s business, that he had no interest in UK and that Mr Bell could have that business: J/1 at [10].

HHJ Jarman then set out his assessment of the witnesses and some of the other factual background before turning to the inherent likelihoods regarding the disputed conversations in February and March 2010. At J/1 [55] he set out the factors in favour of accepting Mr Frenkel’s account; at J/1 [56] those in favour of accepting Mr Bell’s and Mr Lyampert’s accounts. He gave his conclusion at J/1 [57], which was that the balance of likelihood tipped in favour of Mr Bell’s account: it was clear that Mr Frenkel wanted to dissolve Inc, and had set up a new company to compete with UK; the trading relationship between Inc and UK was at an end; Mr Frenkel was still friendly with Mr Bell and felt he needed to apologise to him for the situation between himself and Mr Lyampert. By disclaiming what he thought was his interest in UK, he would be handing the majority shareholding in it to Mr Bell; it was clear he wanted nothing further to do with Mr Lyampert. Although it did not necessarily follow that he was willing to give up his interest (direct or indirect) in UK or a share of the profits, having regard to its relatively modest financial position and Mr Frenkel’s clear bitterness towards Mr Lyampert at the time, it was likely that he wanted to walk away from it all: J/1 at [58]. He then considered whether Mr Frenkel was only speaking in his personal capacity or on behalf of Inc, concluding that, objectively considered, he must have been speaking on behalf of Inc as he had no personal interest in UK, whatever he might have believed; he had authority, apparent if not actual, to speak on behalf of Inc: J/1 at [63].

In his second judgment, HHJ Jarman summarised the position as follows. In February 2010 Mr Frenkel told Mr Bell that he was dissolving Inc and wanted nothing to do with UK and that the business was his to do with what he liked. The following month he repeated that position and told Mr Bell the company was his. Mr Frenkel made clear that he was walking away from UK: J/2 at [3]. That was a clear enough assurance to Mr Bell that Mr Frenkel wanted nothing to do with UK and the company and business were his to with what he liked: J/2 at [69].

I will come back below to what HHJ Jarman found as to Mr Bell’s understanding of what Mr Frenkel said, and his reliance on it, as this is at the heart of Inc’s and Mr Frenkel’s appeal.

Reverting to Sir Christopher Floyd’s judgment at CA [10]:

HHJ Jarman made some findings about the 2010 arrangements (or 2010 agreement as he called it) as follows. In his first judgment, he found that in the aftermath of Mr Frenkel’s statements Mr Bell and Mr Lyampert agreed to work together to carry on UK’s business, and that as part of that agreement Mr Lyampert agreed to assume responsibility for what Inc owed UK: J/1 at [50]. A reconciliation of what was owed was carried out later by Mr Frenkel and this showed the amount to be £284,000: J/2 [49]. (In fact the relevant e-mails show that Mr Frenkel calculated the sum, made up of the profit made by Inc on goods supplied by UK to Inc, as $284,000).

In his second judgment, HHJ Jarman recorded that Mr Bell and Mr Lyampert said that they agreed to carry on the business of UK equally between them, and that UK would trade on ordinary commercial terms (and so be able to compete with Inc); Mr Lyampert also agreed to assume responsibility for a six figure debt which Inc owed to UK and Inc was released from the debt: J/2 at [37]. That evidence was not challenged before him: J/2 at [39]. He went on to consider whether it was expressly or impliedly agreed as part of the 2010 agreement that the shares in UK would thereafter be owned 50/50 by Mr Bell and Mr Lyampert. Having referred to various inconsistencies in what Mr Bell later said (as to which see below), he concluded that these inconsistencies caused him to doubt that, as part of the 2010 agreement, Mr Bell and Mr Lyampert discussed expressly the share ownership of UK. It was more likely that what they focussed on was the business of UK going forward and how the profits would be divided: J/2 at [45]. He then identified the next issue as being whether by agreeing to divide profits equally, it was implicit that they would also own UK equally: J/2 [46]. He concluded that it was a necessary implication of the 2010 agreement that the shares in UK would thenceforth be held in the same way as the profits were to be split, namely that each of the issued shares would be held beneficially for the person in whose name it was issued: J/2 at [48]. I come back below to his reasons for this conclusion, as the question whether there was such an implied term is one of the issues raised in this appeal.

Sir Christopher Floyd continued at CA [12]:

HHJ Jarman came to a similar conclusion on this last point as Ms Tipples. He did not deal with it in his first judgment but in his second judgment he referred to Mr Bell’s evidence in cross-examination that the impression he had was that UK was his; and to his confirmation that if he thought UK would still be owned between himself and “the two warring parties … via Inc” he would have resigned from UK and would have widened or restarted his other business operations “in order to avoid getting caught up”: J/2 at [73]. He said that that evidence had the ring of truth about it, and that he accepted it: J/2 at [74].

Those are the underlying facts relevant to the issues on appeal. But Inc’s and Mr Frenkel’s appeals are based to a significant extent on a number of acts and statements that have taken place since 2010 as shedding light on Mr Bell’s understanding of, and reliance on, what Mr Frenkel had said to him, and it is helpful to set out this material in detail.

In the aftermath of Mr Frenkel and Mr Lyampert falling out in early 2010 various proceedings were brought in California. An account of these can be found in a judgment given (as it happens, by me) on a challenge to the jurisdiction at [2020] EWHC 1405 (Ch), but I do not think the details are relevant for present purposes beyond noting (i) that in March 2010 Mr Frenkel brought an action against Inc and Mr Lyampert requesting dissolution of Inc and making claims against Mr Lyampert for breach of fiduciary duty, conversion of corporate assets, fraud and unjust enrichment (“the Fiduciary Duty action”), the essential allegation being that Mr Lyampert had been using the company’s money for his personal expenditure on a grand scale; and (ii) that in separate proceedings requesting judicial supervision of the winding up and dissolution of Inc, a US lawyer, Mr Vahan Yepremyan, was ultimately appointed independent provisional director of Inc. Mr Yepremyan is the individual who gives instructions on behalf of Inc in these proceedings.

After bringing the Fiduciary Duty action Mr Frenkel sent Mr Bell a draft declaration for him to sign and return. He appears to have initially sent it in May 2010 but Mr Bell’s evidence was that he did not receive that e-mail: J/1 at [51]. Mr Frenkel e-mailed it again on 19 January 2011 and Mr Bell did receive this. The declaration, drafted for use in the California proceedings, included a statement that Mr Frenkel owned 25.5% of UK. Mr Bell did not sign it, telling HHJ Jarman that he did not do so as he did not think it was valid: J/1 at [51]. Instead he replied to Mr Frenkel on 26 January 2011 asking him to contact his (Mr Bell’s) lawyer as the latter had a few questions about it. There are no findings as to whether Mr Frenkel did so, or what the lawyer’s questions might have been.

Nevertheless in 2012 Mr Bell went to California and was deposed in Los Angeles on 17 February 2012 on behalf of Mr Frenkel in the Fiduciary Duty action. Among other things he was asked when UK was formed, and said he was pretty sure it was 2005. He then gave this answer:

He was also asked about the distribution of profits since February 2010. He said he had made payments to Mr Lyampert but not to Mr Frenkel, and gave this answer:

Mr Frenkel sent e-mails to Mr Bell asking for payments from UK. In response Mr Bell sent a text in April 2012 asking for Mr Frenkel’s bank details. But he told HHJ Jarman that he did so as a stalling tactic, and no further payments were in fact made to Inc or Mr Frenkel from UK: J/1 at [51]. Mr Bell’s explanation is consistent with an exchange of texts in September 2013 in which Mr Frenkel asked if Mr Bell could send “my portion of the money”, to which Mr Bell replied “Possibly but need to clarify what the situation is. Whats happening between you two”. Mr Frenkel’s response was that the trial was still going on and fixed for December and asked again about payment. Mr Bell said he would speak with his lawyers and get instructions. But nothing further seems to have happened and in April 2014 Mr Frenkel asked Mr Bell if he had had a chance to talk to his lawyer, and then in August 2014 said that he had been patient enough and would see him in court.

The next relevant event was that Mr Frenkel brought the 2015 proceedings against Mr Lyampert, Mr Bell and UK. We have not seen all the pleadings, but we have seen Mr Bell’s Defence, signed by him with a statement of truth on 21 March 2016. This pleaded his case that the 2004 agreement was to the effect that UK was to be owned 49% by him and 51% by Inc (paragraph 7(d)), and then pleaded that it was agreed from time to time that at the behest of Mr Bell payments would be made out of the profits accumulated by UK as to 50% to Mr Bell and 50% to Inc or Inc’s nominees, the latter being defined as “Inc’s Sum” (paragraph 7(e)). It did not plead any change in ownership in 2010, although it did plead that Mr Frenkel telephoned Mr Bell in March 2010 and apologised for the demise of Inc by reason of a falling out between him and Mr Lyampert (paragraph 15). It continued:

Mr Bell and UK were represented by the same solicitors, Owen White. On 31 August 2016 Owen White wrote a letter to Mr Frenkel’s solicitors, Blake Morgan, replying on behalf of UK to demands made by Mr Frenkel for payment of dividends. In the letter Owen White referred to the fact that the three individuals involved in the litigation had set out in their statements of case three different interpretations as to the agreement between the parties, summarising them as follows:

The trial of the 2015 proceedings took place over 6 days in June 2017 before Ms Tipples. We were shown a part of the transcript of the cross-examination of Mr Bell on Day 5 (26 June 2017). Mr Alex Barden, who appeared for Mr Frenkel, referred him to what he had said when he was deposed in 2012, and asked him about it as follows:

At another stage in his cross-examination however Mr Bell referred to Mr Frenkel having disavowed his ownership, as follows:

The final document we were referred to in this run of material was a written speaking note for closing submissions prepared by Mr Paul Strelitz, who appeared in the 2015 proceedings for Mr Bell and UK. In that Mr Strelitz pointed out that the claim that had not been advanced was one that gave rise to the relief of Inc’s registration as a 51% shareholder of UK, adding:

Two grounds of appeal were advanced by Mr William Buck, who appeared with Mr William Hooper for Inc, and by Mr Barden, who appeared for Mr Frenkel, against HHJ Jarman’s decision that Inc was estopped by proprietary estoppel from claiming an interest in UK. The first was that he had erred in finding that Mr Bell relied on what Mr Frenkel said to him. The second was that he had erred in finding that it would be unconscionable for Inc to assert an interest in Inc.

I will take the second of these grounds first. The argument in support of it was developed quite briefly by Mr Buck. He submitted that both laches and proprietary estoppel required a finding that it would be unconscionable for Inc to assert its claim, and relied on what HHJ Jarman said about the laches defence at J/2 [78]-[86]. His overall submission was that since HHJ Jarman had found that it would not be unconscionable, for the purposes of laches, for Inc now to assert a claim, it was inconsistent for him to find that it would be unconscionable, for the purposes of proprietary estoppel, for Inc to assert a claim.

I do not accept this argument. It is true that both laches and proprietary estoppel share the feature that what enables the defence of laches to be made out on the one hand, or a proprietary estoppel to be established on the other, is the conclusion that it would be unconscionable for a claim to be asserted. But this is not a finding of primary fact. It is a conclusion from the relevant circumstances, and the relevant circumstances are different because the context is different. What makes it unconscionable, for the purposes of the defence of laches, for a claim to be brought, is that the claimant has delayed asserting a claim in circumstances such that it would be inequitable for him belatedly to assert it. As explained by Sir Christopher Floyd in his judgment at [85]:

In the present case HHJ Jarman dealt with the question of laches after he had already dealt with proprietary estoppel. He referred to the principle as set out by Lord Neuberger in Fisher v Brooker, and accepted that the element of detrimental reliance was present for similar reasons to those he had given in relation to proprietary estoppel: J/2 at [78], [80]. But he went on to say, correctly, that “the conduct underlying the latter principle [of laches] is delay” and then considered whether Inc could be said to have delayed in asserting a claim.

At J/2 [83]-[85] he gave three reasons why there were difficulties in the submission that Inc should have acted in 2010 or a reasonable time thereafter. First it was deadlocked, and although the appointment of a court appointed administrator could have been sought earlier, that was not a straightforward exercise and not one to be taken lightly unless there was a clear need to do so [83]. Second, Inc was beneficially entitled to a 51% share until 2010 and “UK and Mr Bell did not make it very clear then or for some years afterwards that they regarded that interest [as having] ceased” [84]. Third, in the 2015 proceedings Mr Bell’s position remained confused; even if Inc should have asserted a claim in 2017 or within a reasonable time thereafter, “the delay since then has not in my judgment added to any significant extent to detrimental reliance and should not bar equitable relief” [85]. In those circumstances he was not satisfied that UK and Mr Bell could rely on laches: [86].

It can be seen that what HHJ Jarman is doing in this passage is considering the question whether there was a defence to Inc’s claim on the ground that it had unreasonably delayed in asserting it. He answered that question No: Inc had not unreasonably delayed up to at least 2017, and any delay since then had not significantly changed the position.

I do not see that this conclusion is in any way inconsistent with HHJ Jarman’s conclusion on proprietary estoppel. If there was no relevant delay, the defence of laches was not made out. That conclusion could no doubt be expressed by saying that Inc had not delayed so as to make it unconscionable for it to assert its claim. But there is nothing inconsistent between holding that this was the case, and yet finding that Inc had (through Mr Frenkel) made such an assurance or representation as to be estopped from asserting its claim. There may not have been any such delay as to make it unconscionable for Inc to assert its claim, but this did not mean that the assurance or representation could not do so. Whether it did so or not depends on whether Mr Bell relied on the assurance or representation to his detriment, which is a quite different question, and is the subject of Ground 1 of the appeal.

I would therefore reject this ground of appeal.

Two arguments were advanced in support of the contention that HHJ Jarman had erred in finding that Mr Bell had relied on what Mr Frenkel had said to him. One, argued by Mr Buck, was a further inconsistency argument, based on what was said to be an inconsistency between HHJ Jarman’s findings of fact when considering the question of contractual surrender and his findings of fact when considering the question of reliance for the purposes of proprietary estoppel. The other, developed by Mr Barden, was that Mr Bell’s conduct and statements after 2010 made it impossible to find that he believed the effect of what Mr Frenkel said to have been that Inc was giving up its ownership interest in UK.

Both arguments are concerned with what Mr Bell understood the position to be in 2010 and subsequently. It is therefore helpful to start with HHJ Jarman’s findings on this question. These are found in both his judgments and they need to be read together.

In his first judgment HHJ Jarman began his consideration of the facts by noting that nothing was reduced to writing in 2004 or 2010, that no lawyers were involved and that each of the main witnesses (Messrs Frenkel, Bell and Lyampert) were at pains to emphasise that they were businessmen and not lawyers: J/1 at [19]. He then considered the credibility of the witnesses, noting that in each case there were a number of inconsistencies between the evidence they gave before him and what they had said in the hearing in 2017 or earlier hearings or documents: J/1 at [26]. Some were explicable by the lapse of time, the absence of documents, the complexity of their dealings and the number of previous hearings, but others were such as to cause him to be more cautious: J/1 at [26]-[27].

So far as Mr Bell in particular was concerned, he referred to the deposition he made in 2012 (see paragraph 35 above), the answers he gave to Mr Barden in cross-examination in the trial in 2017 (see paragraph 40 above), and to answers that he gave in cross-examination in the hearing before himself to the effect that from 2010 he understood that Mr Frenkel had left Inc, wanted nothing further to do with Inc and was doing his best to shut it down, and his agreement that he was dealing with Mr Lyampert on behalf of Inc and regarded the two as interchangeable: J/1 at [28]-[30].

He continued:

HHJ Jarman reverted to this description of Mr Bell being confused in a later passage when considering the submission that he (and UK) were barred from bringing the claim because it was inconsistent with the position adopted by them in the 2015 proceedings. He said:

In his second judgment, HHJ Jarman dealt with the remitted issues by first considering the question of contractual surrender. Mr Bell’s case was that as part of the 2010 arrangements it was expressly or impliedly agreed that the 49% / 51% split between himself and Inc was replaced by an equal split between him and Mr Lyampert, and he gave evidence that the issued shareholding would be the “new relationship”: J/2 at [40].

HHJ Jarman pointed out however that Mr Bell had not indicated in the previous proceedings or in his solicitor’s letter in 2016 (see paragraph 39 above) that there had been a change in beneficial ownership in 2010; he also referred to the text messages in which Mr Frenkel asked for payment and Mr Bell replied asking for payment details (paragraph 37 above); to Mr Bell’s deposition in 2012 where he said that the owners of UK were himself, Mr Frenkel and Mr Lyampert (paragraph 35 above); to his statement in the 2015 proceedings clarifying that he meant that Mr Frenkel and Mr Lyampert were owners “via Inc” (paragraph 40 above); and to the closing submissions for Mr Bell in the 2015 proceedings to the effect that it was arguably correct that the three men were the owners of UK albeit in the case of Mr Frenkel and Mr Lyampert through the corporate vehicle of Inc (paragraph 42 above): J/2 at [40], [42]-[43]. He then referred to Mr Bell’s position on dividends in the 2015 proceedings, namely that in his solicitor’s letter it was said that he believed Inc was entitled to 50% of the dividends, which he had paid to Mr Lyampert at his direction on behalf of Inc, noting that it was the case of Inc and Mr Frenkel that this could only be on the basis that Inc continued to have a beneficial interest in the ownership of UK.

He continued:

As already referred to, he then went on to consider the question of whether such a term should be implied, finding that it should be, but that the agreement failed as a contractual surrender for want of writing to satisfy s. 53 LPA 1925.

He next considered the question of proprietary estoppel. There was no substantial dispute as to the principles in relation to proprietary estoppel, which had been summarised by Sir Christopher Floyd in his judgment at CA [102], by reference to what Lord Walker said in Thorner v Major [2009] UKHL 18 at [29], as consisting of three main elements: (1) a representation or assurance made to the claimant; (2) reliance on it by the claimant; and (3) detriment to the claimant in consequence of his reasonable reliance: J/2 at [63].

HHJ Jarman then summarised the rival contentions. UK and Mr Bell contended that the Frenkel disavowal was a representation or assurance that Inc was giving up its beneficial interest in UK; that it was reasonable for Mr Bell to understand that as a promise that he could rely on; that he did so understand it; that in reliance on it he decided not to wind up UK and conduct its business through another vehicle; and that if Inc were allowed to go back on the Frenkel disavowal Mr Bell would suffer a detriment because Inc would become the controlling shareholder: J/2 at [66]. Inc and Mr Frenkel contended that the assurance was not sufficiently clear, Mr Bell could not have thought that Mr Frenkel was disavowing all of Inc’s interest in UK, and Mr Bell could not have relied on the disavowal, as he saw Inc and Mr Lyampert as interchangeable: J/2 at [68].

Although it is quite a lengthy passage I think it is helpful to set out his reasoning and conclusions on these issues in full:

It is now possible to consider the arguments advanced on this issue by Mr Buck and Mr Barden respectively. Mr Buck’s argument was that HHJ Jarman had acted inconsistently. When considering the question whether there had been any express discussion as part of the 2010 agreement, he relied on the various statements and acts on the part of Mr Bell after 2010 (his “subsequent conduct”) to conclude that there had not been: J/2 at [45]. But when considering the question whether Mr Bell had relied on the Frenkel disavowal he had ignored his subsequent conduct.

Viewed as a narrow point by itself I do not think there is the necessary inconsistency that Mr Buck suggested. At J/2 [45] the point that HHJ Jarman was making was that he thought it unlikely that Mr Bell and Mr Lyampert had in 2010 had express discussions, and reached express agreement, on the beneficial ownership of UK going forward, as if they had it is likely that he would have understood, and remembered, the legal position. A finding that Mr Bell and Mr Lyampert did not have express discussions in 2010 about changing the beneficial ownership is not necessarily inconsistent with a finding as to what Mr Bell understood by what Mr Frenkel said, which is a different question.

But there is a broader point. This is whether HHJ Jarman’s conclusion that Mr Bell understood, from what Mr Frenkel said, that UK was his can stand with HHJ Jarman’s other findings and with Mr Bell’s subsequent conduct. This was the point on which Mr Barden concentrated his submissions. He said that Mr Bell’s case (and that of UK) that Inc was estopped by proprietary estoppel required Mr Bell to have understood the Frenkel disavowal as meaning that Inc was giving up its interest in UK, and that this could not be squared with Mr Bell’s subsequent conduct, all of which indicated that Mr Bell believed Inc to have remained a co-owner of UK with him in 2010.

Mr Barden said that HHJ Jarman correctly identified in his first judgment that he should be cautious about placing reliance on any of the oral evidence. That meant that the documentary record was more relevant in identifying what Mr Bell actually thought in 2010. Particularly telling were the statements made, by him or on his behalf, in the course of the 2015 proceedings, namely his Defence, which referred to the 50% of profits as “Inc’s sum” and which pleaded that this was paid to Mr Lyampert after 2010 following the latter’s indication “on behalf of Inc” that it should be (paragraph 38 above); and the letter from his solicitors which repeated his case as being that he believed that Inc “is the correct legal and beneficial owner” of 51% of UK (paragraph 39 above). These were formal legal documents written with the benefit of legal advice, and flatly inconsistent with his having believed in 2010 that Inc had given up its interest in UK. In the light of them it would require cogent evidence that he did believe that in 2010, or a cogent explanation as to how he could have changed his mind. But there was no such evidence or explanation. In truth, he said, HHJ Jarman had concluded that Mr Bell believed one thing in 2010, had forgotten it and come to believe something else between 2012 and 2017, and had then reverted to his original understanding in 2020. That was not sustainable.

This submission was persuasively advanced by Mr Barden. We are however hearing an appeal on a question of fact. Numerous recent authorities of the Supreme Court and this Court have emphasised how difficult it is for an appellate court to reverse a trial judge on a question of fact. There was no dispute before us as to the appropriate approach which is “a well-trodden path”: Volpi v Volpi [2022] EWCA Civ 464 at [2] per Lewison LJ (not cited to us but a convenient summary of the relevant principles). An appellate court must ask itself whether the decision of the judge was wrong by reason of some identifiable flaw, such as a gap in logic, a lack of consistency or a failure to take account of some material factor which undermines the cogency of the conclusion: re Sprintroom Ltd [2019] EWCA Civ 932 at [26] per McCombe LJ. It does not matter, with whatever degree of certainty, that the appellate court considers that it would have reached a different conclusion; what matters is whether the decision of the judge was rationally insupportable, one that no reasonable judge could have reached: Volpi v Volpi at [2]. The need for appellate caution is based on much more solid grounds than professional courtesy: Biogen Inc v Medeva plc [1997] RPC 1 at 45 per Lord Hoffmann. And it is trite law that reasons for judgment could always be better expressed, and that judgments should be read on the assumption that judges have all the evidence in mind, and that they know what they are doing unless they have demonstrated the contrary.

These principles require an appellate court to exercise considerable caution before concluding that a trial judge has reached a conclusion that is rationally insupportable or one that no reasonable judge could have reached. Before assuming therefore that HHJ Jarman has made the error attributed to him by Mr Barden, we should look with care at his precise findings. These can I think be broken down as follows:

Several of these findings seem to me eminently reasonable conclusions that cannot be faulted. I have no difficulty with (1) and (2), neither of which was challenged on appeal. Nor do I have any difficulty with his conclusion at (7), which HHJ Jarman said had the ring of truth about it. Taking these together, what they amount to is a finding that Mr Bell thought that Mr Frenkel was to be “out of” UK, leaving him free just to continue with Mr Lyampert, and that he relied on that belief in agreeing the way forward with Mr Lyampert. So far, so good.

I also have no difficulty with the finding at (3). It was entirely consistent with evidence given by Mr Bell in cross-examination before HHJ Jarman, which was to the effect that from 2010 he understood that Mr Frenkel had left Inc, wanted nothing further to do with Inc and was doing his best to shut it down; and that he was then dealing with Mr Lyampert on behalf of Inc and that these were, in effect, interchangeable: J/1 at [30]. Mr Twigger submitted that in this evidence Mr Bell was only referring to Mr Lyampert and Inc as interchangeable in the sense that he was going to be trading with Inc, which was now going to be run by Mr Lyampert alone, and that he was not saying anything about the ownership of UK, which he thought was shared between him and Mr Lyampert personally. That is a possible view, although I find it difficult to reconcile with his later statements about Inc still being the owner.

Nor do I have any difficulty with HHJ Jarman’s finding at (4), which is in effect that Mr Bell did not understand the legal effect of what Mr Frenkel had said. This is consistent with what he had said in his first judgment, namely that Mr Bell was confused “in respect of the legal consequences rather than what Mr Frenkel told him” (J/1 at [33]), and that he was confused as to “the legal position relating to the ownership and profit distribution of UK and the control of Inc after his conversations with Mr Frenkel in 2010” (J/1 at [34]). All of this suggests that he thought Mr Bell did not have a clear understanding, either in 2010 or later, as to what the legal effect of what Mr Frenkel had said was, something that, as he commented in both judgments, was not clear even to lawyers: see J/1 at [33], J/2 at [76].

The difficulty I have however is squaring the findings at (5) and (6), which together amount to a finding that Mr Bell understood that Inc would not seek to claim a beneficial interest in UK, and that UK was his, with either HHJ Jarman’s other findings or with Mr Bell’s subsequent conduct. I have not understood how Mr Bell could at one and the same time fail to understand “the legal effect of the Frenkel disavowal in terms of corporate identity”, and yet understand the Frenkel disavowal as meaning that Inc “would not seek to rely upon the 2004 agreement as to the beneficial interest of Inc in UK”; or believe that UK was his.

The position can be simply stated: did Mr Bell think in 2010, as a result of Mr Frenkel’s assurances, that UK was his, that is that Inc did not have, or would not pursue, any claim to the 51% beneficial interest agreed in 2004, or not? At (5) and (6) HHJ Jarman finds that Mr Bell did think this; but at (4) he finds that Mr Bell did not understand the legal position.

I am very conscious that judgments are not to be subjected to a minute textual analysis, or picked over as if they were statutes or contracts. But even giving the judgment the most generous interpretation, I have not found it possible to reconcile these findings with each other. This is even without taking into account Mr Bell’s subsequent conduct, all of which is consistent with Mr Bell having thought that Inc continued to have an interest in UK, and none of which is easy to reconcile with an understanding that it did not. Mr Twigger submitted that HHJ Jarman had the advantage of seeing Mr Bell in the witness box, and that there was other evidence which went the other way, for example assertions in correspondence in the course of the 2015 proceedings suggesting that Mr Bell and Mr Lyampert were the beneficial shareholders of UK (J/1 at [52]). But this is not simply a question of whether a trial judge had material which he could accept. It is a question of whether his findings make sense when read together. For the reasons I have sought to give I do not think they do.

Where does this leave us? I would accept HHJ Jarman’s findings that Mr Bell thought that Mr Frenkel was “out of UK”, and that he was therefore free just to reach agreement with Mr Lyampert; that he was not therefore stuck with two warring partners; and that if he had thought he was, he would have folded UK and started another venture. But I would not accept his finding that Mr Bell thought that Inc would not seek to rely on the 2004 agreement to claim its beneficial interest in UK; or that he thought UK was owned solely by him. The evidence supported a finding that Mr Bell thought that with Mr Frenkel disavowing any interest, it would be just him and Mr Lyampert going forward. It no doubt also supported a finding that Mr Bell did not quite understand how this worked legally; but I do not think it supported a finding that he regarded Inc as having given up its beneficial interest in UK. On the contrary, what the evidence tends to suggest is that Mr Bell believed that with Mr Frenkel gone, Mr Lyampert was in effect Inc for these purposes. That would explain not only his acceptance that Inc and Mr Lyampert were interchangeable, but also his statements in the 2015 proceedings that Inc was (and remained) the owner, and his description of the 50% of profits as Inc’s sum, payable to Mr Lyampert at his direction on behalf of Inc.

I have considered whether the claim in proprietary estoppel can nevertheless be upheld. I have accepted HHJ Jarman’s findings that Mr Bell did rely on Mr Frenkel’s assurances in the sense that he believed that he would not have two warring partners, and would not have carried on with UK if he had thought he would have. To this extent I accept that he relied on what Mr Frenkel said to his detriment. But the difficulty with that is that the case was presented below, and maintained before us by Mr Twigger, on the basis that the Frenkel disavowal was an assurance by Inc that it was giving up its interest in UK, and that this was the assurance relied on by Mr Bell. I agree with Mr Barden that this case required Mr Bell to establish that he did understand what Mr Frenkel said in that sense. In those circumstances if, as in my view is the case, the crucial finding that Mr Bell thought that Inc was giving up its interest cannot stand, then I think that it does indeed follow that the claim is not made out.

I would therefore uphold this ground of appeal and set aside the finding that Inc was estopped by proprietary estoppel from claiming a beneficial interest.

That means that it is necessary to consider the Respondent’s notice served by UK and Mr Bell. This contends that the judgment should be upheld on the alternative ground that HHJ Jarman was wrong to hold that the implied term he found could not be given effect because of s. 53 LPA 1925. It is also necessary to consider the response by Inc and Mr Frenkel that HHJ Jarman erred in finding that there was such an implied term. Logically the latter question falls to be considered first.

HHJ Jarman considered this question in his second judgment. Having rejected the argument that as part of the 2010 agreement, Mr Bell and Mr Lyampert expressly discussed the share ownership of UK (J/2 at [45]), he identified the next issue as being whether by agreeing to divide profits equally, it was implicit that they would also own UK equally (J/2 at [46]) and concluded that it was, as follows (J/2 at [48]):

There was no dispute as to the principles by which a term is to be implied into a contract. They are summarised in Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72 (“M&S”) at [16]-[21] per Lord Neuberger PSC. I would however accept Mr Twigger’s submission that the implication of a term into an oral agreement may be somewhat easier in practice than the implication of a term into a detailed and formal written contract such as the lease of some 70 pages in issue in that case.

I would also draw attention to the point that Lord Neuberger made in M&S at [21]:

Mr Barden, who argued this point for the appellants, said that it was not necessary for the 2010 agreement to contain any agreement about the beneficial ownership of UK. The terms that HHJ Jarman found to have been agreed in 2010 between Mr Bell and Mr Lyampert (on behalf of themselves, UK and Inc) were (i) that Mr Bell and Mr Lyampert agreed to work together to carry on the business of UK equally between them; (ii) that the special trading arrangements agreed in 2004 between UK and Inc were replaced with normal trading terms (so that they were free to charge each other a normal mark-up and to compete with each other instead of having mutually exclusive territories); (iii) that Mr Lyampert agreed to take on Inc’s debt to UK; and (iv) that profits were to be split equally between Mr Bell and Mr Lyampert. None of these terms, Mr Barden said, required there to be a change in the ownership of UK. The commercial relationship between UK and Inc was something distinct from the ownership of UK; and there was also no necessary correlation between the entitlement to share in profits and ownership (as indeed was shown by the 2004 agreement under which ownership was split 51% / 49% but profits split 50% / 50%).

In my judgment however HHJ Jarman was entitled to come to the conclusion that he did. The statement by Lord Neuberger in M&S that the question of necessity for business efficacy involves a value judgment is a valuable reminder that questions of implication are not pure questions of law, but involve an assessment of the factual situation.

In the present case, the relevant facts included the fact that Mr Bell and Mr Lyampert were reaching new arrangements precisely because Mr Frenkel and Mr Lyampert had fallen out, and against the background of Mr Frenkel telling Mr Bell that he was free to deal with Mr Lyampert alone going forward. UK had originally been set up in 2004 to enable Inc to exploit the European and UK market: that explained the special trading arrangements then agreed under which Inc would supply UK at cost, Inc would not compete with UK in that market, and profits would be shared (see paragraph 18 above). When, against the background of Mr Frenkel disavowing any ongoing interest, Mr Lyampert agreed (necessarily on behalf of Inc) that these special trading arrangements would come to an end and the two companies would be free to compete normally with each other (or, in Mr Bell’s phrase, that “the gloves were off”) that undoubtedly weakened the rationale for Inc to own and control UK.

When one adds to that the agreement that Mr Bell and Mr Lyampert would carry on the business of UK equally together, and would share the profits equally as the two shareholders, and, significantly, that Mr Lyampert would personally take on the outstanding 6-figure debt owed by Inc to UK, I think it was open to HHJ Jarman to conclude that it was implicit in these arrangements – in the sense that the contract would “lack commercial or practical coherence” without such a term – that Inc’s place in UK was being assumed by Mr Lyampert personally and that he and Mr Bell would thereafter own, run and profit from UK equally. It is no doubt true that there is nothing impossible in the profits of a company being split differently from its ownership, but it is at least very odd for a small private company with two directors, two shareholders, and an equal division of profits between them, to be owned and ultimately controlled by someone else. For Inc to have retained its controlling 51% interest after the 2010 agreement came into effect, with the ability that gave it to step in and claim the majority of the value of the company that Mr Bell and Mr Lyampert were to take forward between them, would I think mean that the arrangement would indeed lack commercial or practical coherence – or at any rate that HHJ Jarman, who was immersed in the facts in a way we cannot be, was entitled so to conclude.

Mr Barden said that Mr Lyampert owed fiduciary duties to Inc and should not lightly be assumed to have agreed on behalf of Inc that he personally could take Inc’s interest. But that seems to me to ignore the fact that the only other shareholder in Inc had told Mr Bell that as far as he was concerned he had no further interest in UK. This was the view taken by HHJ Jarman (J/2 at [53]) and there has been no separate appeal against that part of his judgment.

Mr Barden said the proof of the pudding was in the eating: it could scarcely be said to have been obvious that the beneficial ownership was going to be equally shared between Mr Bell and Mr Lyampert when Mr Bell’s subsequent conduct demonstrated that he did not understand that to be the case. But obviousness and necessity are alternative requirements for an implied term, and even though this may only happen rarely, only one of them needs to be satisfied: see Lord Neuberger’s fourth point in M&S at [21]. Moreover, whether a term is so obvious that it ought to be implied has to be determined objectively and does not depend on the subjective belief or understanding of one of the parties. In any event Mr Bell told Ms Tipples that he thought it was fine just to continue with the existing shareholders, which is in effect what HHJ Jarman found to have been implicitly agreed.

I would therefore dismiss the contention of Inc and Mr Frenkel that HHJ Jarman erred in finding that it was implicitly agreed as part of the 2010 agreement that the ownership of UK was to be shared equally between Mr Bell and Mr Lyampert.

The remaining question therefore is whether the agreement that UK should be beneficially owned by Mr Bell and Mr Lyampert after 2010 is ineffective for want of formalities, specifically the requirement in s. 53(1)(c) LPA 1925. This, and s. 53(2), provide as follows:

On this appeal it is not disputed that before the 2010 agreement each of the two issued shares, one in the name of Mr Bell and the other in the name of Mr Lyampert, was held on express trust as to 49% for Mr Bell and 51% for Inc (see paragraph 21 above). On the basis of the implied term found by HHJ Jarman, it was agreed that each share should be held beneficially by its legal owner. That means that what was agreed was (i) that in the case of Mr Bell’s share, the 51% beneficial interest formerly held by Inc should be transferred to Mr Bell so that he became the 100% legal and beneficial owner; and (ii) that in the case of Mr Lyampert’s share, the 51% interest held by Inc and the 49% interest held by Mr Bell should both be transferred to Mr Lyampert. The argument accepted by HHJ Jarman was that these would be dispositions of equitable interests subsisting at the time of disposition and hence were required to be in writing, and that the lack of such writing meant that the dispositions were invalid: J/2 at [59].

The argument put forward by Mr Twigger for UK and Mr Bell that this is wrong can I think be summarised as follows:

Two points were in effect taken by Inc and Mr Frenkel in opposition to it. The first was that no constructive trust could arise (that is, challenging step (4)). The other was that there was no sufficient consideration for this element of the 2010 agreement to be specifically enforceable (that is, challenging step (2)).

I will take the latter first, which was primarily argued by Mr Buck. Having identified that there were three potential dispositions involved, one by Inc to Mr Bell, one by Inc to Mr Lyampert and one by Mr Bell to Mr Lyampert, he submitted that in each case consideration was needed, and that there was no consideration moving from Mr Bell to Inc.

Mr Twigger had a number of answers to this. The first, and most straightforward, was that this was a quadripartite agreement to which UK was a party as well as Mr Bell; UK undoubtedly gave valuable consideration to Inc by releasing it from the debt that it owed to UK; and UK was therefore able to enforce the agreement (made with UK as well as with Mr Bell) that Inc give up its interest to Mr Bell. I accept this submission which seems to me well founded. It is an illustration of the principle that where A agrees with B that B will confer a benefit on C, A can enforce that agreement for the benefit of C even if C cannot do so himself. This is the ratio of the well-known case of Beswick v Beswick [1968] AC 58 where Mr Peter Beswick (A) agreed with his nephew Mr John Beswick (B) that in consideration of the assignment of his business, Mr John Beswick would after his death pay his widow Mrs Ruth Beswick (C) an annuity. She was not a party to the contract at all and not able to enforce it in her own right, but she could, and did, obtain payment to herself by bringing a claim for specific performance in her capacity as administratrix of her deceased husband’s estate. None of the members of the House of Lords had any doubt that she was entitled to specific performance in that capacity. As I understood it, Mr Buck accepted the principle. It seems to me to provide a complete answer to the objection based on lack of consideration: even if Mr Bell could not obtain specific performance, UK could, and that is enough.

That makes it unnecessary to consider whether Mr Bell himself provided any valuable consideration. Consideration, as Mr Twigger correctly pointed out, does not need to move to the promisor, only move from the promisee (see Chitty on Contracts (34^th edn, 2021) §6-040, §6-041), and here Mr Bell agreed to give up his 49% interest in the share held by Mr Lyampert to Mr Lyampert. I think that was enough: it is trite law that if valuable consideration is provided, the adequacy of it is irrelevant, so the fact that Mr Bell gave up his 49% in that share in return for Inc’s 51% in his own share does not seem to me to matter. Mr Twigger also submitted that Mr Bell personally agreed to procure UK to do various things (to release Inc from its debt, to agree to trade with Inc and the like). I have my doubts about that, as a director of a company would not normally be regarded as undertaking any personal obligation when he agrees that his company will do certain things – one would normally regard him as acting solely as director – and Mr Twigger does not have any relevant findings of fact on the point. But I do not think it is necessary to consider that point further in the light of what I have already said.

So far as the agreement of Inc to give up its 51% interest in Mr Lyampert’s share is concerned, I did not understand Mr Buck to dispute that adequate consideration was given by Mr Lyampert in that he agreed to take on Inc’s debt. Mr Barden had a point in his written argument, not developed orally, that Mr Lyampert had not in fact discharged that debt to UK, but that seems to me irrelevant. If A (here UK) is owed money by B (here Inc), and C (here Mr Lyampert) agrees to be liable for the debt in place of B, C to my mind plainly provides valuable consideration to B whether or not C ever pays the debt to A. And quite apart from that, just as UK could enforce Inc’s agreement to give up its interest in Mr Bell’s share to Mr Bell, I do not see why it could not equally enforce Inc’s agreement to give up its interest in Mr Lyampert’s share to Mr Lyampert.

In my judgment therefore the objection based on want of consideration fails.

The other objection advanced by Mr Buck and Mr Barden was that no constructive trust arose in the circumstances. They advanced slightly different arguments. I will take Mr Barden’s first. This was that the precise term found by HHJ Jarman was that the shares “would thenceforth be held” in the same shares as profits (see J/2 at [48], cited at paragraph 80 above). That was not, he said, an agreement for a future transfer. It was not therefore analogous to a contract for the sale of land or the like where the contract was to effect a conveyance in the future. There was a difference, he suggested, between a contract which contained an obligation to dispose of an interest in the future (in which a constructive trust might arise), and a purported immediate disposition. If the latter failed for want of formality, it could not be validated by treating it as a contract to convey, such as to give rise to a constructive trust.

I do not think this is right. I agree that there is in principle a difference between a purported immediate disposition and a contract to dispose. The difference can be seen for example in the doctrine that equity will not perfect an imperfect gift, with the result that a purely voluntary disposition that fails for want of formalities will not be saved by the doctrine of constructive trust. But it is different where the disposition is not purely voluntary but is given for valuable consideration. My understanding of the law is that in such a case equity will readily treat a purported disposition that is ineffective for want of formality as a contract to dispose, and if the contract is specifically enforceable, that will give rise to an equitable interest in the intended disponee on the principle that equity looks on that as done that ought to be done.

We were not referred to any authority on the point but two familiar examples come readily to mind. The first is the case of a purported grant of a lease that fails to comply with the formalities prescribed by statute. The law here is well established and can be found set out, for example, in Megarry & Wade on the Law of Real Property (9^th edn, 2019) at §16-045ff. As there explained, save for certain leases taking effect in possession for a term of three years or less (as to which see s. 54(2) LPA 1925), a deed is required for the grant of a lease. This has been the law since the Real Property Act 1845. A purported grant of a lease that fails for want of formality is clearly not in form a contract to grant a lease in the future, but equity would nevertheless treat such an imperfect lease as a contract to grant a lease. That was decided in Parker v Taswell (1858) 2 De G and J 559. There it was argued that a purported lease, void for want of complying with the 1845 Act, could not be regarded as an agreement for a lease: see Mr Dart’s submission at 567 that “This is not an agreement for a lease; it was intended to be a present demise, and it is either that or nothing.” But this was rejected by Lord Chelmsford LC who said (at 570f):

The other example is the former method of creating an equitable mortgage by deposit of title deeds. For some two centuries before the passing of the Law of Property (Miscellaneous Provisions) Act 1989 it had been common to create security over land by the deposit of title deeds. Such a deposit was not in form a contract to grant a future mortgage but was intended to operate as the immediate grant of security. It could not of course take effect as a legal mortgage for want of formalities, but was regarded in equity as giving rise to a contract to grant a mortgage. Because such a contract was specifically enforceable, the effect was again to create an equitable interest, in this case an equitable mortgage, in the intended disponee. Again this is all well established law: see Megarry and Wade at §23-041.

In my judgment therefore the fact that the implied term found by HHJ Jarman was not in form an agreement to dispose in the future of Inc’s and Mr Bell’s beneficial interests in the shares but an agreement that the beneficial interests in the shares should “thenceforth be held” for Mr Lyampert and Mr Bell provides no answer to Mr Twigger’s argument.

That leaves the argument advanced by Mr Buck. He accepted that if Inc had contracted to sell its 51% interest to a third party X, then (assuming the contract were specifically enforceable) Inc would indeed hold the 51% interest on constructive trust for X and hence X would be the owner in equity of the interest. But he said that it made all the difference that Inc was agreeing to give up its interest to Mr Bell and Mr Lyampert who were respectively trustees for Inc. This was because a person could not be a trustee for himself.

I do not accept this argument. I will simplify the facts to explain the point. Suppose A is the legal owner of shares in a private company. A holds the shares on express trust for B. B agrees with A for valuable consideration that he will transfer his beneficial interest in the shares to A. I agree (and Mr Twigger did not dispute) that A cannot be a trustee for himself, so the effect of B’s transfer to A would be to surrender or give up his beneficial interest to A, leaving A as both legal and beneficial owner of the shares. I agree (and again Mr Twigger did not dispute) that once the surrender has been effected, there is no trust involved at all. So if one assumes B executes a signed written disposition surrendering his beneficial interest to A, thereby complying with s. 53(1)(c) LPA 1925, B’s erstwhile beneficial interest at that point disappears. That all seems to me entirely straightforward and to give rise to no difficulty.

But what we are concerned with is the rights of the parties at an earlier stage, at which B has contracted to surrender or give up his beneficial interest in the shares to A but has not yet done so. Can A enforce that obligation? I do not see why not, provided that it is specifically enforceable. And the contract for the sale of shares in a private company (or the beneficial interest in them) is a contract which will normally be specifically enforceable. So the question is what are the rights of the vendor and a purchaser under a specifically enforceable contract for the sale of specific property where the contract has not yet been completed? That has been worked out in particular in relation to the sale of land, but it was not suggested that the principles are any different in relation to other types of unique property. The vendor under such a contract becomes a constructive trustee for the purchaser. It is a modified form of constructive trusteeship as the vendor has his own rights under the contract: see Oughtred v IRC [1960] AC 206 at 227 where Lord Radcliffe referred to the vendor as having become a trustee for the purchaser “sub modo”.

What this means can be seen from Megarry & Wade §14-051ff. As there explained, while the vendor remains unpaid, the trusteeship arising from a specifically enforceable contract is of a peculiar kind, because although a trustee, the vendor has a personal and substantial interest in the property and usually a right to possession and rents and profits until the day fixed for completion: ibid §14-054. The vendor is therefore, at least so long as unpaid, not a bare trustee. Once however the purchaser has paid the whole price (and done anything else he is obliged to do before completion) the vendor does become a bare trustee for the purchaser: ibid §14-055. See for example Shaw v Foster (1872) LR 5 HL 321 at 349 per Lord O’Hagan, citing with approval the statement of Sir Thomas Plumer MR in Wall v Bright (1820) 1 Jac & W 494 that “The vendor is not a mere trustee; he is in progress towards it, and finally becomes such when the money is paid, and when he is bound to convey.” In a case like the present however where there is no price to be paid, and nothing else for the disponee to do, the effect is that the disponor holds his interest for the disponee from the date of the contract.

Does s. 53(1)(c) prevent this? If one leaves aside for the moment the fact that A is himself the legal owner of the shares, then the position is determined, at any rate at this level, by the decision of this Court in Neville v Wilson [1997] Ch 144. Here 120 shares in a company referred to as UEC were held as to 60 each by two individuals, referred to as “the widow” and “Mr Wilson”, as nominees for a company referred to as JEN. The shareholders of JEN agreed to an informal liquidation of JEN whereby it was agreed that all its assets should be distributed to themselves rateably. They overlooked the 120 shares held by the widow and Mr Wilson for JEN, but the Court held that the effect of the agreement was that each shareholder agreed to assign his interest in the other shares of JEN’s equitable interest in exchange for the assignment by the other shareholders of their interests in his own aliquot share: see at 155A-B per Nourse LJ giving the judgment of the Court. This is quite a dense passage but it seems clear enough that what Nourse LJ is referring to is an agreement by each shareholder to dispose of an existing equitable interest in favour of the other shareholders. Since there was no writing that raised the question whether each such agreement was rendered ineffective by s. 53(1)(c) LPA 1925.

The answer given by the Court was that it was not. At 155E Nourse LJ said that the simple view of the case was that the effect of each individual agreement was to constitute the shareholder an implied or constructive trustee for the other shareholders, so that the requirement for writing in s. 53(1)(c) LPA 1925 was dispensed with by s. 53(2). He then analysed in detail the speeches in Oughtred v IRC where different views on this question had been taken by their Lordships, and concluded at 157G:

That is binding on us, and establishes that an agreement to dispose of an equitable interest in shares will in the ordinary case give rise to a constructive trust in favour of the intended disponee, and that even if there is no signed writing in compliance with s. 53(1)(c) LPA 1925, the agreement will be effective to carry the beneficial interest to the disponee because of s. 53(2).

The question is whether it makes a difference that the intended disponee is himself the registered legal owner of the shares. Mr Twigger said that this was in fact the case in Neville v Wilson, as the widow was herself one of the shareholders and entitled to a distribution of 4 of the 60 shares registered in her name. That is true and if the point had been argued it might have been decided, but there is no trace in the judgment or short report of the argument that the point was ever taken. I do not think we can get much assistance from it beyond the forensic point that it did not occur to counsel or the members of the Court that the position of the widow might be different. I think we have to decide the point for ourselves.

But I do not myself think there is the difficulty Mr Buck suggested. A holds on trust for B. B therefore holds a beneficial interest in the shares. B contracts to dispose of that interest to A. On the principles already discussed that means that B holds his interest on constructive trust for A. We know from Neville v Wilson that the lack of signed writing does not prevent such a constructive trust from being given effect. In the normal case where the intended disponee is not the trustee the effect is that the beneficial interest passes from B to the intended disponee, at any rate once his side of the contract has been performed so that he is entitled to call for it to be completed. In the case where the intended disponee is the trustee, I do not see why the effect is not exactly the same, namely that B holds his beneficial interest for A. The alternative would mean that the beneficial interest remained with B, despite the fact that he has agreed that it should pass to A, and that that agreement is specifically enforceable.

Mr Buck said that that cannot be the case as it would mean that A would hold on trust for B who would in turn hold on trust for A and that is not possible. But I think this is to confuse the question whether B holds his interest for A with the consequences of his doing so. It is easier to see this if one considers the case where A still has to pay money or perform some other obligation under the contract. In such a case the effect of the contract would be, as I have explained above, that B would become a qualified trustee, or trustee sub modo, for A and not a bare trustee. There is no reason why such a constructive trusteeship cannot subsist as there is no objection to A holding on trust for B who in turn holds on a qualified trust for A, as in such a case B has his own interest and does not drop out. Now suppose that in such a case A pays the purchase price and becomes entitled to call for completion. B now does become a bare trustee, so the property is held by A on trust for B who in turn holds on trust for A. The effect it seems to me is that B would drop out, and A would be left holding both the legal and beneficial interest. As already referred to, A cannot hold on trust for himself, so the practical effect is that A would simply hold the whole legal and beneficial interest.

If this is right, and I am satisfied it is, then it cannot make any difference that A does not have to pay any money under the contract or perform any other obligation before being able to call on B to complete. From the date of the contract therefore A holds on trust for B who in turn holds on trust for A, with the consequence already identified that B drops out and A holds the whole legal and beneficial interest.

Mr Buck sought to support his argument by reference to two decisions of the High Court of Australia. The first was DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1981-2] 149 CLR 431. As its name suggests this was a stamp duty case. A company referred to as 29 Macquarie was the owner of a parcel of land. It transferred the land to the appellant company, referred to as DKLR, to hold on trust for it. It argued that all it had transferred was the bare legal estate in the land, leaving itself as owning the entire beneficial interest throughout. Aickin J rejected this argument as being based on a fundamental misconception, saying (at 463):

I see no reason to disagree with any of that, and none of it was disputed. But I do not see that it answers, or even really assists on, the question in the present case which is what the legal effect is if the owner of the equitable interest contracts to transfer it to the legal owner and that contract is specifically enforceable.

The second decision was Corin v Patton [1989-1990] 169 CLR 540. Here Mrs Patton was joint tenant with her husband of registered land. Shortly before she died, she sought to sever the tenancy by transferring her interest to her brother Mr Corin for him to hold on bare trust for her. The transfer was not registered before she died. The Court held that the relevant question was whether Mr Corin had acquired any interest in the property so as to prevent Mr Patton taking the whole by survivorship. Mr Corin had certainly not acquired a legal interest for lack of registration. And the transfer to him was voluntary so he could not claim an equitable interest as a purchaser under a specifically enforceable contract. It was argued among other things that equity should nevertheless give effect to the intention of the parties by constituting Mrs Patton a trustee for Mr Corin as bare trustee for herself. Deane J at 579 rejected this submission for a number of reasons, the third of which was that equity would not go through the charade of intervening to create trusts of property under which the legal owner held as bare trustee for another who in turn held as bare trustee for the legal owner. Equity would simply disregard the interposed beneficiary as having no interest in the property. He continued:

Again I do not disagree with what is said there but I do not think it has any direct relevance to the present case. There A was the legal owner. She tried but failed to transfer it to B to hold on trust for her. That could not be regarded as entitling B to claim an equitable interest in the land when he would simply drop out leaving A as the legal and beneficial owner. Here by contrast, A starts off by holding on trust for B. B tries but fails to transfer his interest to A. I see no objection to equity treating him as holding his interest for A. I agree that that will mean that B will then drop out, leaving A as the legal and beneficial owner, but that seems to me unexceptional.

For these reasons I consider that this objection to Mr Twigger’s argument also fails, and I would allow the cross-appeal of UK and Mr Bell, and uphold HHJ Jarman’s decision for different reasons.

I add that I am not sorry to reach this result. On the findings of HHJ Jarman, unchallenged in this Court, Mr Frenkel as long ago as 2010 told Mr Bell that he wanted nothing more to do with UK; Mr Bell did not want to be stuck with two warring partners and would have taken steps to close down UK if he had thought he would have been. But what has actually happened is that Mr Frenkel, first in his own name, and then, with the appointment of Mr Yepremyan, through Inc, has spent much of the last 7 years or so claiming that directly or indirectly he does have a continuing interest in UK. Whether he and Inc are right requires close analysis of the legal position but the conclusion I have reached on the legal arguments produces what I regard as a just result, not simply a legally correct one.

I agree. The issue that has caused me most difficulty is the question of the implied term. I was attracted by Mr Barden’s argument that it was not necessary for the 2010 agreement to contain any agreement about the beneficial ownership of UK. As Nugee LJ points out, however, the question for this Court is whether the judge was entitled to find that there was such an implied term. Given that the agreement was an oral one, the issue is, as Nugee LJ also points out, one which partly involves a factual assessment and partly involves a judgment as to whether the agreement would lack commercial or practical coherence without the term. In the end I have been persuaded that this Court would not be justified in reversing the judge’s conclusion on this issue.

The only other observation I wish to add to give another example of the principle discussed by Nugee LJ in paragraphs 100-102. In intellectual property law, it is well established that an assignment of an IP right that fails to comply with the applicable statutory formalities is treated by equity as an agreement to assign, and if it is specifically enforceable the result is that the purported assignee becomes the beneficial owner of the right: see, for example, Copinger and Skone James on Copyright (18^th ed) at 5-207 and 5-126 to 5-129 and the authorities cited.

I also agree. The effect of Lord Justice Nugee’s analysis at [111] to [114] above is that the constructive trust in favour of Mr Bell (“A” in Lord Justice Nugee’s example) came into existence and ceased to exist at the same moment. As soon as Inc’s (B’s) beneficial interest in the share held by Mr Bell was held on a constructive trust for Mr Bell, Inc dropped out and the beneficial interest ceased to exist separately from the legal interest which Mr Bell already held. That may be an unusual situation, but does not detract from the analysis.