Phillips & Ors v Symes & ors

On 4th July 2006 I heard five applications issued on behalf of Mr Symes. Apart from the application for the return of his passport (which was not opposed) I dismissed all of his applications. I gave reasons for so dismissing them at the time.

The other application before me was an application by the Administrators (i.e. the 1st and 2nd Claimants) that the proceedings in relation to the Accounts and Enquiries be stayed for the time being.

This was primarily an application as between the Administrators and the 6th Defendants Geoff Rowley and Kevin Hellard the Trustees in bankruptcy of Mr Symes (“The Trustees”). Mr Symes is discharged from his bankruptcy now but he is still under duties to co-operate with his trustees in realisation of assets. The major part of Mr Symes’ role is in relation to his explanations as to the affairs in the partnership. His co-partner Christo Michailidis has of course died and the only person who can provide the information is Mr Symes. The Administrators and Trustees are handicapped because they are one stage removed from the events.

At the end of argument I indicated that I was going to make an order more than a simple stay of the Accounts and Enquiries. I determined that it was appropriate not merely to stay the Accounts and Enquiries but to stay the entirety of this action and the associated actions save the proceedings brought by the Administrators arising out of the sale of the Akhenaten statue. In addition I felt it appropriate to restrict any applications that the Trustees might make in respect of the same subject matter of the disputes that have been raised in the Accounts and Enquiries to date. I also made an order to the like effect against the Liquidators of RSL but gave them liberty to apply to vary or discharge that order because the order was made in their absence.

The Trustees did not oppose the application for a stay sought by the Administrators.

Given the breadth of my order both parties quite properly required me to give a reasoned judgment and I set out my reasons for making that order in this judgment.

This dispute has generated an unbelievable amount of litigation. I will not set it out in this judgment but the background can be found from the several earlier judgments that I and others of my brother Judges have made. In addition to the first instance judgments there have been two visits to the Court of Appeal and there is a prospect of a petition to the House of Lords.

The Administrators and the 3rd Claimant Despina Papadimitrou (Christo’s sister) commenced wide ranging proceedings initially against Mr Symes and RSL in 2001. That was in response to proceedings Mr Symes and RSL had commenced in Greece challenging by way of negative declaration the ownership of significant amounts of personal property at the property 1/3 Seymour Walk which had been lived in by Christo and Mr Symes since 1970. Title to that property was vested in a Panamanian company and its shares are held by an Isle of Man trust. There have been proceedings in the Isle of Man also.

On 18th July 2001 in response to Mr Symes and RSL’s application to stay the proceedings on the grounds that all the issues ought to be litigated in Greece Hart J stayed all proceedings apart from the partnership action brought by the Administrators.

Accordingly since 18th July 2001 the only matter this court was seized of was the dispute as to whether or not a partnership existed as between Christo and Mr Symes.

Initially Mr Symes denied there was any commercial partnership between Christo and him. However in his Amended Defence served in February 2003 he admitted for the first time that there was a partnership between Christo and himself but unusually asserted that it was a term of the partnership that the normal principles of severance of partners’ interest did not arise and that the partnership was a partnership whereby the beneficial interests were joint so that he obtained all of the partnership assets by the operation of the law of survivorship upon Christo’s death. This was such an unusual commercial partnership that I directed that there should be a trial of an issue as to the terms of the partnership. In that direction I required Mr Symes to set out the positive case for the terms of the partnership. This has been described by him at varying stages as being “the reversal of the burden of proof”. It is nothing of the sort. The normal rule of a partnership is that the partners’ beneficial interests are held in common not jointly. It was incumbent upon him once he admitted the existence of a partnership for the first time to prove what the terms were. The Administrators could hardly prove the terms as they were not partners. This arose from his reversed stance which prior to that was that Christo was merely an employee of RSL.

Directions were set for a trial of that issue in June 2003. That trial never took place (although a radically different one did take place in April/May 2003).

The trial did not take place for 2 reasons. First, Mr Symes was made bankrupt in March 2003 upon a petition presented by Lovells his former solicitors for unpaid work done for him in the litigation. Second, on 4th April 2003 I struck out Mr Symes and RSL’s Amended Defences signed 1st and 5th February 2003 on account of his failure to provide disclosure in the action.

As a result of that striking out I granted declaratory relief that Mr Symes and Christo carry on a business in partnership trading antiquities as a partnership at will from 1970 until Christo’s death and that the partnership was dissolved by reason of his death.

I also ordered the usual consequential Accounts and Enquiries for a partnership dissolution account. I ordered the interlocutory regime set in place by Hart J’s order of 24th July 2001 to continue until further order but discharged the Administrators’ undertaking damages. I also made an interim payment order of £1,100,000 on account of the Administrators costs which I ordered Mr Symes to pay on an indemnity basis. That payment has not been paid at all.

On 28th September 2004 I made an order in respect of the Accounts and Enquiries and I directed Mr Symes by 4pm Friday 26th November 2004 to serve on the Administrators and the Trustees an affidavit or affidavits setting out with full particulars and exhibiting all documents his case on the Accounts and Enquiries directed by paragraph 3-10 of my order of 4th April 2003. Mr Symes did not comply with that order.

On 6th February 2006 the Administrators issued an application for what can only be described as bold relief. The draft minute of order annexed to the application recited numerous orders and incorporated a proposed recital that the Court was satisfied that Mr Symes had repeatedly lied about assets, had secret assets, failed to comply with the order to serve an affidavit set out above and to account for the property on at least equal to his share so that the Court could properly infer that he had concealed and taken for himself and retained assets of the partnership and that by reason of all of those matters it ought to be properly inferred that all assets so far recoverable should be attributable to Christo’s share of the ultimate surplus.

It then sought a declaration that as between the Administrators and the Trustees and in full determination of the respective interests of the Deceased and Mr Symes that all assets whatsoever attributable to the partnership which have been discovered and located by the Administrators as at the date of the order are to be regarded as attributable and forming Christo’s share and accordingly belong to the Administrators as his personal representatives. The evidence in support was Mr de Walden’s 15th affidavit of 3rd February 2006. It was made clear that the order was only to operate as between the Administrators and Trustees and should not affect any creditor.

Not surprisingly the Trustees did not agree to this application. I made an order on 22nd February 2006 on the Administrators’ application. I required the Administrators to serve a Points of Claim setting out fully their case in respect of the assets said to exist and that they should serve any further evidence by 22nd March 2006. The Trustees and Mr Symes were given permission to serve evidence and pleadings in reply and the application was directed to be listed before me on the first available date in July 2006 with an estimate of 5 days.

The Points of Claim served by the Administrators did not make any clear case. Further paragraph 2 carefully avoided asserting that assets were partnership assets but were merely described as “potential” assets. That was in breach of my order. The whole purpose of setting out these Accounts and Enquires was in order to identify if possible what assets were being argued about and what each party’s stance was in respect of those assets.

The Trustees sought clarification of the pleading and the Administrators’ response provided no clearer answers in my view.

On 22nd May 2006 the Trustees served a detailed Defence. On the same day Mr Symes served a detailed witness statement with a comprehensive bundle of exhibits in support.

The important point emerging out of both of those documents is that it is asserted (see paragraph 12 of the Points of Defence of the Trustees for example) that a larger number of properties and assets throughout the world are partnership assets. This claim is aimed at Despina who is in control of the assets in the main. Some of the disputed matters have already been the subject matter of hearings. For example there have as I have said been proceedings in the Isle of Man before Deemster Cain. He delivered judgment on 18th September 2002. The claim was in respect of the Seymour Settlement which was created by Deed of Settlement dated 3rd April 1987 between Christo (1) Ledger (IOM) Trustee Company Ltd (2). The share capital (after a nominal £1 to constitute the trust) of Seymour Walk Properties Inc (a Panamanian company) was transferred to the Settlement to be held upon a trust for Settlement. In addition the share capital of Nonna Investments Inc (another Panamanian company) was also transferred to the Settlement. Seymour owned the Chelsea property. Paragraph 5 of the judgment recited that the property was purchased by Christo with funds provided by his father. It also recites that an adjoining property number 1 was purchased by Christo through Nonna and had been substantially redeveloped into one house. That combined property is the only asset of the Settlement and during the course of the hearing paragraph 5 of the judgment recited that the purchase price of both houses was provided by Christo or his family and that was conceded by Mr Blayney Counsel who appeared for Mr Symes. The Property was used as security for borrowings made to fund the business.

Mr Symes in a cross petition, petitioned that the Settlement was a sham and that the true beneficial ownership of the assets held by it was vested in Christo and him on trust for them for their lives and on the death or the later of them for the benefit of their heirs on a 50-50 split. Alternatively rectification relief was sought to reflect that.

On 6th February 2002 Mr Symes withdrew those allegations and concentrated on challenges to the appointment of Trustees and that Despina be removed as Protector of a Settlement.

The Deemster in a judgment harshly critical of Mr Symes dismissed that claim and declared that the Trustee appointments made by her were valid.

Nonetheless the Trustees and Mr Symes (see for example paragraph 12.7 the Trustees points of defence) make claims as to the ownership of all or some of the proceeds of sale of the Property. That paragraph also challenges the concession made by Mr Symes as set out above that the funds were provided by Christo and his family.

Similarly the Trustees and Mr Symes challenge the claim of Despina to the ownership of the contents of the Property.

Mr Symes separately asserts that he was entitled (and thus the Trustees) to the entirety of the Eileen Gray furniture. This has loomed large in ancillary parts of this litigation. Mr Symes disposed of the furniture and dishonestly concealed the true value (by some $15,000,000) of the amount of disposal. This featured in the contempt application which Mr Symes admitted.

However ownership of the Eileen Gray furniture was part of the proceedings brought by Mr Symes in Greece shortly before the Administrators and Despina commenced their action in this jurisdiction. The Greek first instance civil court of Athens on 30th June 2004 delivered a judgment determining that the Eileen Gray furniture had been acquired by Christo’s parents in 1971-1972 and then transferred to him in 1974-1975 so that he became “in a derivative manner the owner of said…..” (There is part of the judgment missing). The Trustees were a party to that action and are appealing the decision. Despina and her mother asserted that the furniture belonged to them not Christo. They are not appealing that decision however.

On the state of the present information the partnership is wholly insolvent. This appears to be on the basis that Mr Symes in 2003 confessed to the Inland Revenue that he and Christo had been defrauding the Revenue for many years in hiding partnership transactions through a number of offshore companies when they ought to be regarded as partnership transactions correspondingly liable to UK income tax. The Revenue had issued assessments in late 2004 I believe for sums in excess of £30,000,000. The recoveries if any are likely to be a lot less than that.

However the owner of the Eileen Gray furniture proceeds may well be able to prove in the insolvency in either of RSL or in the bankruptcy and may be able to prove as a secured creditor because the proceeds of sale were ultimately utilised to discharge secured debts in favour of Credit Agricole or other bankers.

Similarly if there is anything in the claims asserted by the Trustees and Mr Symes if successful will swell the partnership assets. It is by no means clear that even if those claims are successful that they will put the partnership into a solvent position. Indeed that will also have a consequence that in addition to the partnership being insolvent and Mr Symes being bankrupt Chriso’s estate is insolvent. Mr Steinfeld QC who appears for the Administrators frankly acknowledged that serious consideration was being given by the Administrators to have the estate administered as an insolvent estate under the Insolvency Act 1986.

The main target of these claims is Despina who is not a party to the proceedings absent the lifting of the stay. It is true that Mr Steinfeld QC and Mr Stephens appeared on her behalf but that was only in a limited way namely responding to the unsuccessful applications issued by Mr Symes.

Another fundamental difficulty in respect of the assets is the status of RSL and whether the assets belong to it or whether they belong to the partnership. The Liquidators were not a party to the present application by the Administrators (a point raised by the Trustees). Finally there is a separate set of proceedings which I apparently stayed on 29th January 2003 between Despina and Mr Symes concerning the ownership of the bearer shares of a company Xoilan Trader Inc (“Xoilan”). I stayed that because it was a satellite piece of litigation that at that stage did not seem to advance the overall position. It was so important to the parties that the order was never drawn up.

Mr Bompas QC who appears for the Trustees suggests that in the light of the Points of Defence and the evidence Xoilan and RSL are necessary parties because it could be suggested that some of these assets belong to Xoilan or RSL. As I have said such an issue (on behalf of Xoilan) is not before the court in any proceedings at all.

Mr Symes has served a detailed amount of evidence and raises numerous issues. In my view it can be said that he raises issues over whether or not there are other assets controlled by Despina which ought to be regarded as partnership assets. That is technically outwith the enquiry but it is something which the Trustees and the Administrators have to consider. Both of them in their own way have duties to realise assets for the benefit for their respective estates namely owe duties to the creditors of the estate of Mr Symes and Christo to realise to the best of their abilities all the assets to make them available for discharge of those debts. It would of course be otherwise as regard Christo’s estate if it was solvent. If that were the case then it would devolve according to the intestacy which is in favour of Despina and her mother.

Mr Steinfeld QC readily acknowledges that if there is such a genuine claim the Administrators will be placed in some difficulty in bringing it given the fact that the likely defendant is Despina and she has been funding their litigation costs up until now. Equally Lane and Partners have represented all of those parties. I rejected an application by Mr Symes for Lane and Partners removal on the grounds of conflict in February. It did not arise at that time but it might arise if there is a claim to be brought in the future against Despina.

In that context I should point out that it is not accepted by Mr Steinfeld QC that even if there is a claim which can be brought either in the partnership proceedings or under the exercise of statutory powers by the Trustees under an application under the Insolvency Act 1986 by them or in the liquidation of RSL by the Liquidator of that company under like powers that Despina ought to be sued in this country. All her rights are reserved including her right to deny that she has submitted to the jurisdiction for the purpose of any such claims. Finally in this context of course there is the fact that her action in this country has been stayed. She is not a party to the partnership dispute.

Mr Symes in his evidence has repeated what he has said many times before namely that he has fully complied and there are no assets to be revealed. The Administrators as is shown by the draft order were initially seeking a determination that the court should infer that he had not complied by reason of his earlier lies and other matters.

That of course is a formidable application itself and evidentially faced formidable hurdles.

Given the nature of the response and the insolvency of the partnership the Administrators have abandoned their application. They acknowledge that in dismissing their application that they should pay the Trustees and the other party’s costs of that application to be assessed on a standard basis if not agreed.

Over and above that however as I have said they sought a stay of the Accounts and Enquiries. As I have said above the Trustees concurred in that application.

It seems to me that I should introduce an attempt to finality in this long standing dispute. There have been numerous hearings before the court and at least 60 applications during the course of the litigation. There have been significant issue trials and significant interlocutory hearings. This has taken up a considerable amount of the court’s time.

I would have thought common sense would dictate that a Settlement could be achieved. However I appreciate there are a number of fundamental obstacles to any Settlement. Any monetary Settlement must be as between the Administrators and the Trustees and give effect to the liabilities of the partnership. A Settlement which involves disputed assets must encompass all the potential claimants to such disputed assets. That will bring in to play RSL and possibly Xoilan. The ownership of Xoilan is disputed.

Mr Symes cannot achieve a financial Settlement but he could be a facilitator if contrary to his repeated assertions there are assets available. I do not want to be misunderstood. I am not saying that there are such assets but I am simply pointing out that the Claimants believe that he has assets and his denial that he has any means that unless they both put aside that they will not become reconciled in respect of that fundamental dispute.

Mr Symes is now free to recommence business as he is discharged from bankruptcy, he has his expired passport back and the interlocutory regime only bites on defined assets. I have no doubt however that the Claimants will watch his activities very carefully. That is a consequence of their suspicion.

I did not think it appropriate that the court should in effect be left holding this unfinished litigation indefinitely for one or other of the parties to pick it up in an uncertain date in the future when it suited them. The time has come in my view for the court to impose deadlines for the bringing of claims.

I can well appreciate the desire of the professionals (and there are a great many of them in this case) to avoid spending costs unnecessarily. The stay is a useful moratorium in that regard provided it is global. I do not extend it to the proceedings involving the Akhenaten. The reason for that is that the Trustees are the Defendants in those proceedings. Their conduct (about which I made observations in earlier hearings) in respect of the sale of the Akhenaten seriously soured the attitude the Claimants’ had to them and for obvious reasons. I do not know whether the Administrators and the Trustees can work together. In reality they must do so in order to save costs they must also work together to attempt to achieve a position in respect to the partnership at the very least.

It seemed to me that a moratorium for 2 years ought in normal circumstances to be sufficient time for anyone who has a claim to be in a position to formulate it. I will therefore provide in the order that the proceedings should be stayed for 2 years and if no application is made to commence any proceedings in respect of any of the subject matter of the present dispute in the partnership action they should be debarred from bringing any further claims. It seems to me appropriate that such a restriction should apply to all parties i.e. the Administrators, the Trustees and the Liquidators. I say nothing of course about existing proceedings in foreign jurisdictions (namely the Athens proceedings and the other proceedings taking place in Naxos). I have no jurisdiction nor any desire to interfere in the jurisdictions of courts of other countries.

I bear in mind also that the Trustees and Liquidators are officers of the court and owe statutory duties to their creditors. Those duties are not absolute and are subject to the power of this court under my supervisory powers to limit how they formulate their claims.

I will therefore put a number of protections in the order. First I will give anybody liberty to apply for an extension of the 2 year period in the event that they have credible evidence which shows that they cannot yet within the 2 year limit proceed with a profitable train of enquiry. Given the potential nature of such an application I give them liberty to apply ex parte if appropriate but reserve the right of course to draw it to the attention of the other parties if it is appropriate in that case.

I also give the parties liberty to apply after the 2 year period has expired provided such application is made with evidence which shows that it is based on evidence or material which could not reasonably have been obtained before the expiry of the 2 year period.

Finally I give all the professional parties i.e. the Administrators, the Trustees and the Liquidators liberty to apply either ex parte or on notice (as they deem appropriate) to seek directions as to what further steps or actions they might take in the discharge of various functions. That is a supervisory role which the court has in all three areas.

I also extend the limit to Despina although at the moment it is difficult to see whether she would commence any proceedings as she seems a more likely Defendant.

I have stayed the Xoilan proceedings for the same period. I cannot however declare that there should be no further action at the end of the 2 years because that leaves unresolved the ownership of the shares which may for reasons which I have set out in this judgment be significant. I will direct that if the 2 years has elapsed the Xoilan proceedings should be listed before me for further consideration as to what to do in respect of them. By that time I would hope the position in respect of the assets if any and ownership over it has become clearer.

For all of those reasons I have determined that the stay should operate generally and not in the limited way that the parties sought to persuade me to apply.