12 05 00 Counsel Opinion Michael Jefferies

8/10/2019 12 05 00 Counsel Opinion Michael Jefferies

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ASTON LLOYD & PARTNERS INTERNATIONAL LIMITED

OPINION

1. In this matter I am asked to advise the joint Liquidators ( the Liquidators ) of Aston Lloyd

& Partners International Limited ( ALPIL ) in relation to questions which hav e arisen

within the liquidation of ALPIL and its related companies.

The Facts

2. The facts of this matter are somewh at complex. It has been a difficult, and time

consuming exercise, for the Liquidators to unravel the facts from a large volume of

documentation and

with some assistance from the former

officers of

ALPIL. As one would

expect in the real world, the paperwork was not always in the form i t should have been

So far as the Liquidators have been able to ascertain the facts, they are set out, in detail,

in the draft Witness Statement of Mr Bijal Shah, which I have before me.

3. The questions wh ich arise in this case concern eight parcels of land which are situated in

four different countries, Turkey, Northern Cyprus, B ulgaria and Slovakia, ( the sites ). The

sites are presently listed in the ninth Schedule to the draft Claim Form. Some of these are

bare sites and some have some buildings and/or infrastructure on them. The sites are ail

held in the names of nominees and not in the name of ALPIL itseff. A large number of

individuals have paid money, with the intention of acquiring directly, or through a


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downward trend, with the economic crisis particularly affecting Greece, Spain, Portugal

and Italy.

The fundamental questions

6. In my opinion, the fundamental questions, which arise for consideration, are these:-

1) To what extent is each of the sites held as a company asset, available for the

general body of creditors,

2) and to wh at extent is each site subje ct to trusts or liens in favou r of individual

investors?

3 ) Like questions arise in relation to the balance of the net proceeds o f sale of the sites

which have been sold.

4) How to me et the burden of the cost of the great dea l of work that has been

prope rly car ried out so far and how to meet the costs of an orde rly realisation of

the assets, for the benefit o f all con cern ed.

5) Should any of the sites be sold, in whic h case how sho uld the proceeds of sa le be

applied and/or shou ld any plots be trans ferre d to investors?

English or foreign law?

7. In my opinion, the starting point should be to consider what law should be applied to the

issues in this case. We are dealing with the liquidation of an English com pan y in England.

Accordingly there can be no doubt that English law should apply to the liquidation of

ALPIL. As regards claim s by ordinary cre ditors of ALPIL, they fa ll within that liquidation. As


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regards claims by investors, these involve real properties abroad, where the principles of

trust, arising under English law, may well not exist. (I believe that advice may have been

taken on the position in, at least, one of the relevant countries and, f so, this can be

included in the evidence before it is finalised). That said, the investors rights stem, in

part, from their contracts with ALPIL These contracts all provide for any disputes arising

from the contracts to be subject to the law of England and Wales and to be subject to the

exclusive jurisdiction

of the courts

of England and Wales.

To the extent that the investors rights stem, not from contract, but from English trust law

- such as the principle of resulting trusts - there is a long line of authority that English law

should be applied. The law was conveniently reviewed, by the Court of Appeal, n the case

of Lightning Another v LiRhtning Electrical Contractors Limited Others (23 April 1998)

1998 W L 1044250. This was a claim brought in England concerning a property in Scotland.

It was alleged that a resulting trust arose in relation to land in Scotland, although Scots

law, as the lex situs does no t recognise a n equitable interest. M r Lightning provided the

purchase price for the defendant company to buy a property in Scotland which w as

registered in the c omp any's name. The company was an English company and Mr

i htnin lived in England. The company went into receivership and when the receivers

commenced proceedings seeking possession of the property, Mr Lightning alleged that he

was entitled to the Scottish property beneficially, under English aw and the principle of

resulting trust. M r Lightning successfully sought a declaration against the company and

the receivers that the property, or its proceeds of sale, were held on trust for him. To show


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action was an action in personam.

Mr Lord said that these authorities go only to the question of jurisdiction and do not goto the question of the applicable law. But, for my part, whilst that may be correct, itseems to me implicit that the English court not unnaturally regarded English law asapplicable to the relationship between the parties before it in the absence of any eventgoverned by the lex situs destructive of the equitable interest bein g asserted.As is pointed by Millett LJ when sitting at first instance at Macrnillan Inc v BishopsgateTrust (No 3) [1995] 1 WLR 978 at page 989 (commenting on Norris vChambres 0891)29 Beavan. 246-, affirmed 3 De Gex Fisher and Jones 583 ), where a plaintiff invokes thein personam jurisdiction of the English court against a defendant amenable to thejurisdiction and there is an equity between the parties which the court can enforce, theEnglish court will accept jurisdiction and apply English law as the applicable law, eventhoug h the su it relates to foreig n land . In contrast if the equity which is asserted does notexist between the parties to the English litigation, for example where there has been atransfer of the property to a third party with notice of an equity but by the lex situsgoverning the transfer, the transfer extinguished the plaintiffs equity, the English courtcould no t th en give relief against the third party even though he is within the jurisdiction.

It would have been a complete answer to the plaintiff in Webb v Webb, if Mr Lord'ssubmission was correct, to say that English law relating to a resulting trust had noapplication to the relationship between the parties in respect of the property in Francewith its civil law system. The point was not taken, in my view rightly, because it is to myrnind obvious that in that case the applicable law gove rning the relations hip between thefather and the son arising out of what had occurred was English law and not French law.So, in my judgm ent, here too. Apart from the fact that the property to be purchased wassituated in Scotland , there is nothing to con nect Scottish law with the relationshipbetween the persons concerned, Mr Lightning and LEG who are both resident inEngland. No event governed by Scottish law occurred whereby any equity arising underEnglish law was destroyed.

9. In the Lightning case both Henry and illett UJ agreed with Lord Justice Peter Gibson

and in a brief judgmen t illett U added:

If A provides money to B, both being resident in England, to purchase landed property inhis own name but for an d on A's behalf, and B does so, the consequences of thattransaction are gov erned by English law. It w oul d be absurd if they were governed by thelaw of the place where the property in question happened to be located. Such a rule wouldlead to bizarre results if, for exam ple, A's instructions were to buy properties in more thanone jurisdiction, for the consequences of the same arrangement might then be differ ent inrelation to the different properties acquired. I t wo uld also lead to bizarre results if A left itto B's discretion to choose the property to be acquired, since that would give B theunilateral power to decide on the legal consequences of the transaction which he hadentered into with A.


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10. In the recent case of Luxe Holding limited v Midland Resources Holding Limited [2010]

EWHC 1908 (Ch), at para. 38 et seq., Mr justice Roth quoted at length from the

Lightning case and said:

I do not consider that the reasoning in ightning is confined to the particular c se of aresulting trust. On the contrary, it seems to me of general application .

English Legal principles

11. In my opinion it is helpful to have an overview of how trusts might arise in this case,

before one goes into the factual details of each site to see whether they do arise and, if

so, to wha t extent. There are a number o f factual circumstances, which may arise here,

that could give rise to a trust namely:-

Vendor Purchaser

(1} If an investor paid ALPIL a sum of money, under an enforceable contra ct for the sale

of an iden tified plot o f land owned by ALPIL, then pending completion of the

purchase, the plot would be held on trust for the investor (see e.g. Lysaght v

Edwards {1876} 2 ChD 499, at 506, et seq. and the review of the auth orities by

Lawrence Collins J in Englewood Properties Ltd v Patel [2005] 1WLR 1961 at paras.

40-43). This is the application of the equitable maxim that equity regards that as

done that which ought to be done. The authorities show, however, th at the trust

only arises where there is an agreeme nt which is capable o f being subject to specific

performance, (see e.g. Holroyd v Marshall (1862) 10 HLC 191 and Cornw all v Henson


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[1899] 2 Ch 710 per Cozens-Hardy J, as he then was, at page 714). The actual

decision in Cornwall was reversed in the C ourt of Appeal but on factual grounds,

leaving the legal principle undisturbed.

Resulting or constructive trust

(2) In my opinion, if an investor paid ALPIL money, which was used to purchase a site

in which it was intended the investor was to have an interest, then the investor

would have an interest in the site, under a resulting or construc tive trust. In

ordinary circumstances, the interest arising under a resulting trust would be

proportionate to his or her contribution to the total purchase price. When

ascertaining the extent of the interest under a constructive trust the court would

go wider and take the overall picture into account, when seeking to ascertain the

parties actual intentions, (see e.g. Drake vW hipp [1996] 2 OR 296).

(3} The resulting trust is different to the trust arising in the vendor and purchaser

situation in two resp ects. One respect is helpful to a claim by an investor an d one

which is unhelpful The interest in the site may arise under a resulting trust even if

no plot ha s been identified if the investor provided money which w as actually used

by ALPIL as part of the purchase price of the site. On the other hand in my opinion

a payment made to ALPIL, afte r ALPIL purchased the site would not normally give

rise to an interest or larger interest under a resulting trust (see e.g. Dra ke v Whipp

(supra.)-

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A Pallantv Morgan trust

(4) The classic case where a trust a rises under the principle enunciated in Pallant v

Morgan, is where there is an arrangement or understanding between two

competing parties that one will purchase a property a nd the other will have an

interest in the property, a nd the arrangement or understanding causes the latter to

stay out of the bidding for the property, {see Pallant v Morgan [1953] Ch 43). More

recently, the Court of Appeal has widene d the principle. The Court of Appe al has

held that the non acquiring party's agreement to stay out of the market was not a

necessary feature, nor did the arr ang eme nt have to be contractually enfo rceab le

but it is essential that the circumstances make it inequitable for the acquiring party

to retain the property for himself in a manner inconsistent with the arrangement or

understanding on which the non acquiring party acted, (see Banner Homes Ltd v

Luff Developments L td [2000] Ch 372). Whilst the investors were not compe ting

with ALP L for an y of the sites, the wider principle could apply whe re they paid

money under an arrangement to acquire a plot on a site and ALPIL (or rather its

nominee) purchased that site.

Express Trust

(5) In order to create an enforceable trust of land, one would need, at least, something

in writing signed on behalf of ALPIL, to comply with section 53(l)(b) of the Law of

Property Act 1925. If an investor paid money to ALPIL and ALPIL declared that it

held th e money, or declared that it would hold an asset representing t he money, on


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trust for the investor, then, in my opinion, a trust would arise. This situation that

arises in this case is, alas, not quite as simple as that. There are no forma

declarations o f trust. In relation to some sites, ALPIL takes on a contractual

obligation to procure that its subsidiary will hold the relevant plot on trust.

Proprietary estoppel

{6 } The three requirements for an interest to arise under the doctrine of proprietary

estoppel are 1) a promise or assurance by ALPIL, 2} reliance by the investor and 3)

detriment to the investor, {see Thornerv Major (HL) [2009] UKHL 18). In some sites,

ALPIL could b e said to have represented to investors that th e investors would

acquire a plot, if the investors paid the purcha se price and, in reliance thereon, the

investors ac ted to their detriment and paid the purcha se price. The app ropria te

remedy, where an estoppel arises, is in the discretion of the court but the court will

satisfy the equity by aw arding the minimum necessary to do justice. In a case such

as this, the aw ard could b e a de claration that the plot is held on trust for the

investor or an award of a sum of money equal to the sum paid by the investor or

the value

of the relevant plot

of land, if lower).

(7) There is authority that, when distributing the statutory estate in a liquidation,

estoppels do not run against a liquidator for two reasons (1) the representation

must be made by the person sought to be bound (here the representation would

have been made b y ALPIL and not by the Liquidators) and (2) to allow estoppels to


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12. I shall now turn to consider the different sites in more detail and I will consider them in

the order they are addressed in the draft Witness Statement.

Site l:Cipura Villas

13. The terms of the contract here included a provision for ALPIL to procure that its Turkish

subsidiary s hould transfer the plot to the investor and ALPIL would register the name o f

the investor in the Evlilas Land R egistry. In my opinion once a contract in these terms was

executed, the relevant plot was held on trust for the investor, under the vendor and

purchaser principle. It is true to say that it was the Turkish nominee company that ow ned

the site and not ALPIL, but, in my opinion that would not prevent a court of equity

holding a trust arose. ALPIL was, and is, subject to any charges being cleared an d

payment of all the fees and duties) in a position to procu re the tran sfer of the s ite to itself

or the plot to the investor as the parent co mpany and/or the company for whom the

site is held by a nominee) and ALPIL was bound transfer the site to the investor in equity.

In my opinion it is akin to the simple situa tion where a trustee invests money in a bank,

or with a broker. The fact that the investment is in the hands of another does not prevent

the underlying trust arising or continuing.

14. In my opinion the contracts were once specifically enforc eable despite, the property

being abroad, as equity works in personam There must however, be real doubt whether

they still ar e enforceable, by way of an order fo r specific performance. There h as been a

considerable delay. There may be local charges on the land, which would have to be


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cleared before a plot could be transferred . There would be legal costs and fees involved in

any transfer. The Liquidators have n o funds to clear the charges or pay the legal costs an d

fees. In my opinion the court will no t make an order in vain for example, when it will be

impossible for the relevant party to comply with th e order. In my opinion impossibility

here includes it being financially impossible for the Defendant to comply, (see North East

Lincolnshire BC v Millenium Park (Grimsbv) Ltd [20021 EWCA Civ 1719, whe re the Court of

Appeal set aside a n order for specific performance against a compa ny which had no

ability to raise the funds to comply with th e order to build a roundabout). In my opinion

in the present circumstances, in order to obtain an order for specific performance an

investor would have to secure the payment of whate ver was necessary to clea r the

charges and effect the tran sfer his plot. So, in my opinion, the availability of spec ific

performance is, at least, doubtful and it would be unattractive for investors. Thus there is

doubt about whether a vendor and purchaser type trust still ex ists in relation to this site.

Resulting or c onstructive Trust

15. It appears that this site was purchased with money paid to ALPIL b y investors and those

investors were intended to end up owning their plots. In my opinion this would give rise

to a resulting trust once ALPIL, or its nominee, acquired the site. Whilst ALPIL did not

segregate its funds on a site by site basis (or at all), one can say from Colema n s ledger

that sufficient sums to purchase the whole site came from investors wishing to buy plots

on this site. This is sufficient, in my opinion to hold that a resulting or constructive trust


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arose (and remains in existence) in relation to the plots of this site, without going into the

other ways a trust could have arisen.

Extent of interests

16. The next question is: what is the extent of the investors' interest in the site? in my

opinion, each investor's interest extends to the equity in the plot, which he contracted to

buy. It may be argued that the investors on this site should, together, be treated as being

entitled to the who le site because they provided all the funds to purchase it. n my

opinion, this argume nt is not the correct analysis of the position. At most, under the

contracts, what each investor has is a right to specific performance of the agreement to

transfer his plot.

17. As regards a resulting trust, it was inevitable that there was an element of profit in the

sale of the plots by ALPIL. ALPIL did, in fact make substantial profits on the sales of plots.

Why else would ALPIL have been finding sites a nd selling plots? In my opinion, the

principle of resu lting trust is based on a presumption as to the intention of the parties,

which can be overridden by the court s view as to their actual or implied intention (see

e.g. Lord Walker and Baroness Hale in Jones v Kernott [2011] 3 WLR 1121, at paragraphs

25 and 53). When the court comes to ascertain the intention of the parties in this case,

the court w ll have to look at the contemporary documents. The key documents are the

contracts. These show that each investor was only to have an interest in his own plot, not

the whole site. In my opinion, one can look at the position in this way. Only part of each


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purchase price paid by an investor for a plot went into the purchase of the plot by ALPIL s

nominee and the balance was the profit for ALPIL.

18. This site rem ains bare undeve loped land. The current position is that 51 plots remain

assigned to investors, out of a total of 64 plots. In my opinion, ALPIL will still own

beneficially all the land within the site that does not form part of any of the 51 assigned

plots. This will include unsold plots and the areas shown on the plans for roads, amenity

areas and any land set aside for ALPIL s staff for the provision of services, (for which there

was to be a service charg e). There has been an offer for this site at only 305,000 Euros,

which the local agents, BNP Paribas, recom mend accepting. Out of that, there will have to

be paid the agents and legal fees on the sale and, in my opinion, it should also meet a

share of the costs of the Liquidators in getting where we are today. If one assigned the

value of only 6 plots to the roads/amenity land held for ALPIL, to give a round figure of 70

units for the purposes of a rough estimate, then each investor would only have a share

worth 4,350 euros and that before the deduction of a share of costs. Acco rdingly, it would

not be proportionate to expend very much by way of costs to fight over the investors'

respective shares. The best way to resolve the any dispute wou ld be to ask BN P Paribas to

provide an apportionment of the value of the site between the assigned plots (to be

divided by 51, to give an individual value) and the balance of the land held for ALPIL. That

apportionment can then be applied to whatever represents the net proceeds of sale, after

provision for costs.


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Investors a s Ordinary Creditors

19 . Befo re leaving this site I should mention that the investors in this (and other sites) m ay

have claims fo r their money back fo r breach of and/or failure to complete the contracts

for the sale of the plots. In my opinion these are claims in the nature of damages or for

the return of a sum equal to w hat they paid for the plot because the re has been a total

failure of co nsideration. The investors could prove for th es e sums, as ord ina ry cred itors.

In my opinion, there are no express terms in the contracts to the effect that th e money

paid over by the in vesto rs to ALP L was to be held for a specific purpose or held on trust

and I can see no ground fo r implying such a term into th e contracts.

Purchaser s lien

20 . There is, however, yet another legal principle which needs to be considered in this

context. A vendor s lien for the unpaid balance of the purcha se price, is well kno wn but

less well kn own is the con cep t of a purchaser s lien. It has long been held that where a

purchaser, under a contract for the purchase of land, pays a deposit or other su m towards

the purcha se price, then he will have a lien over the pro per ty to secure his payment, (see

Rose v Watson 10 HLC 7672 and Whitbread v Watt [1902] Ch 835) . In Rose v Watson

Vaughan Williams U at page 8 38 desc ribed this lien in the following terms:-

The lien which a purchaser has for his deposit is not the result of any express contract: itis a right which may be said to have been invented for the purp ose of d oing justice. It isfiction of a kin d which is sometimes resorted to at law as well as in equity .


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21. The purchaser's lien was considered in more detail by the Court of Appeal in the case of

Chattey v Farndale Holdings Inc (1998) 75 P CR 298. Here, the Court of Appeal held that

the lien arises because the purchaser has the right to call for the title to be transferred,

{see Morritt U at page 307). The purchaser does not need to have a present right to

specific performance. So a purchaser's delay is not fatal to his lien and a conditional

contract was held to be capable of giving rise t o a lien in that case. That case also

established that the lien is over the property to be purchased, not over the vendor's

entire property or interest, (see Morritt U at pages 317 318).

22. Whilst the circumstances of this case may give rise to some doubt, in my opinion, as

against the Liquidators, these investors each have a lien over their plot f or what they have

paid. That lien is , however, worth no more than the net proceeds of sale of the plot after

the deduction of proper costs. 1 say this because the only remedy of a purchaser with a

lien would be to cause the land to be sold, or to make a claim when it is sold, and recoup

what he can out of the net proceeds of sale.

Site 2: Tuzla Lake

23. The position is different here in that the contract was not a classic contract for sale. The

contract refers to the seller entering the buyer on a list of parties having and interest in

the site and ensuring that its subsidiary holds the plot on trust until the equivalent to a

land certificate is issued to the buyer. In my opinion, the vendor and purchaser principles

would not clearly apply here to c reat e a trust.


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24. Whilst there is a lack o f certainty as to the source of the deposit for this site the balance

of the purchase price came from th e relevant investors and, over all, the investors paid

more than the acqu isition cost of the site. The position could be seen a s ALPIL advancing

the deposit money and being repaid by the investors. In my opinion the plots which were

the subject matter of contracts a re held on resulting trust for those who paid fo r them

and have retained their interest in the plots. This is a site wh ere the deve lopment

described a s 80 complete. So there is real value in the infrastructure and buildings, as

well as the land. The investors mad e payments, which w ere used for infrastructure and

building works. In m y opinion such payments would have increased the value of the

investors' plots and should be taken into account.

25 . There is also a n argument for a Pallantv Morgan trust here, given the nature of the

arrangement and what happened. As for whether there are express trusts, there is a

contractual provision that th e Turkish subsidiary was to hold t he relevant plot on trust but

there was no forma l declaration of trust by either ALPIL or its subsidiary. The land was

held by the subsidiary rather than ALPIL and it was ALPIL that owed the contractual duty.

In my opinion the legal position arising from these fac ts is not straightforward but they

add further argu ment in favour of a trust obligation aris ing on ALPIL.


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Sale of the site

26. It appears that only 75 investors remained interested in this site, after some 39 refunds

and repossessions. The site was to be built with 114 apartme nts comprising studio, 1 -

bed and 2-bed . The site has now been sold. The sale took place following steps by a

chargee to sell the land, to meet construction costs. There are still sums due oversea s,

before any further money can be repatriated, but 400,000 Euros are held by my

Instructing Solicitors out of the proceeds of sale of this s ite. In my opinion, if there is a

trust or a lien the Investors ca n trace their claims into th e proceeds of sale held by the

Liquidators.

27. In my opinion, provision will need to be made for the global, as well as the specific costs,

expended in getting tha t money in. Again there will need to be an apportionm ent

between the value of the 75 apa rtm ents which are still notionally the subject matter of

contracts on the one hand and unsold apartmen ts and the road/am enity land held for

ALPIL on the other. There could be a further apportionment because the flats were of

different sizes (and therefore} value. That said, one does not know which flats were

actually com pleted in this development, which w as about 80 % complete . It may well be

that some investors had paid ALPIL for their share of the infrastructure and development

costs, in full, and others had not. In my opinion, in these circumstances, given the

strongest claim to a trust is based on the principle o f resulting trust, the equity of any

individual investor co uld best be ascertained by taking the part of the net proceeds, which

was fairly attributable to the 75 apartme nts, deducting a proper prov ision for costs, and


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88 % on resulting trust for the relevant investors, in any event. There is also an argument

for a Pallant v Morgan trust here. There are two unusual features in the contracts. The

contracts name the wrong Turkish company, as the company that will own and transfer

the land and they refer to that com pany being a subsidiary of ALP. T he Turkish comp any

that was to, and did, purchase the site is a wholly o wned subsidiary of ALP1L, (a nd has

been since, a t least, 2008). Thus this is another site w hich falls into the responsibilities of

the Liquidators to deal with.

32. The site has not been sold. There has been an offer of US 265,000, which BNP Paribas

recommend accepting. Again this suggests the potential amount held for any individual

investor, after provision for costs, will be a few thousand pounds at most; namely

US 265,000, less ALPIL's share of the value of the site, less provision for costs, all to be

divided between the 65 remaining investors. In my opinion, however, given that works

have been done on this site, one should ascertain their respective shares, in the total net

value of all their plots after provision for costs, by reference to total sums they ea ch paid

to ALP1L, compared to the total paid by all 65. This caters for investors who have paid for

larger properties, for those who paid more for works and those who have not met their

contractual liabilities.

Site 5: Jagoda

33. This site is situated in B ulgaria. Foreign nation als we re not allowed to own land in

Bulgaria, so the plan was for a Bulgarian SPV to be incorporated for each purchaser and

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for the plots to be vested in the Bulgarian SPVs. There may be some doubt as o the

original source of the deposit but it appears that, again, the investors provided the bulk of

the money used to purchase the site. It may be argued by these investors that the plots

which they helped pay for, that were to be held by their Bulgarian SPVs, should be

treated as held on resulting trust for them. The serious snags about this argument is as

follows. There has been considerable delay, which would, of itself, make specific

performance doubtful. The contractual documentation shows that it was intended by the

parties that the titles were to be vested in the Bulgarian SPVs. The Bulgarian SPVs were

never incorporated and the SPVs do not exist. There was no suggestion that there was to

be a trust deed for each Bulgarian SPV o hold a plot for an investor, if that w as possible

and permissible under Bulgarian aw . In my opinion, one cannot infer an intention of

resulting trust in favour of the individual investors, when you know it was intended by the

parties that the legal and beneficial title was actually intended to be transferred to a

Bulgarian SPV.

34. Alternatively, the investors may claim that some interest somehow arises in their favour,

which is of the nature of a trust, because they have a potential right to specific

performance to have a Bulgarian SPV incorporated and to have the plot vested in the

Bulgarian SPV. The snag about this i s that there are no funds to create the SPV, clear any

charges on the whole site and transfer plot and pay the taxes and fees. Further, rights

would have to be granted over the roads and for water, electricity and other services.

Specific performance is an equitable remedy and, in the absence of available funds in the

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and wants some of his money back) having a lien over his proposed plot The lien would

only be worth an amount equal to the share of the net proceeds of sale of the relevant

plot after taking account of proper costs. Whilst there is doubt here, as there is no

precedent cov ering thes e unusual circumstances, in my opinion on balance, these

investors are likely to be held by the court to have a purchaser s lien which would be

traceable into the appropriate share of the sale proceeds, after deduction of costs.

37. The site has not been developed bu t different payments were made fo r different sized

plots an d it wo uld app ear equitable t o divide th e sums available in proportion to the

relevant inve stor s individual payments, as against their total payments to ALPIL.

6. The Poynte

38 . This is another site in Bulgaria, where Bulgarian SPVs were to take the title. The relevant

investors appear to have provided the p urchas e price and may claim that the plots that

were to be held by their Bulgarian SPVs, should be treated as held on trust for them. For

the reasons given above in relation to Jagoda, I consider this argument would not be

correct and they have claims in the liquidation for the sum s which they paid. In my

opinion however, on balance, it is likely that th e court will hold that these investors do

have purc hase r s liens. Again the position is sufficiently in doubt that in my opinion the

court should be asked to rule on the questions of whether there are any trusts or liens

affecting plots on this site.


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7. Capital 68

39 . This is another Bulgarian development In this case, the investors were to purchase a

unit rather than a defined plot of land. The units were apartments in blocks intended to

be built, which were never built So one is talking about, a t best, an interest in an

unmarked parcel of airspace above th e ground, ( if such can exist under Bulgarian law or

would have any valu e). Furthermore, completion was tied to the completion of the

buildings, so the completion d ate never arose. In my opinion, there are no units to be

held on trust for the investors. In my opinion, the investors do not have a claim for

specific performance for the transfer of plots, nor are they entitled to call for a transfer of

any plots. So, in m y opinion, these investors do not have a claim under a trust or a lien. In

my opinion, the investors rights here are in the nature of m oney claims for d amages or

for the sum they pa id on a tota l failu re of consideratio n. These are claims fo r which they

can prove in the liquidation but not trust claims.

40. In my opinion, the contractual provision were not such a s to give rise to a purchaser s lien

as they had no right to call for a transfer of a plot. In the Chattey case, which is mentioned

above, the two apartments (which were the subject matter of the contracts and deposits)

had been built to a point that one could identify them. Morritt U expressly found that

they did not need to decide what would happen in relation to a purchaser s ien in a case

where the proposed building did not exist. Thus the question whether, and how, a

purchaser s lien could arise in relation to an apartment, in a proposed block which has not

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been built, was not resolved by that case and the Court plainly though that it needed

further consideration.

41. Accordingly, in my opinion this is a site w hich is held for the general body of creditors in

the liquidation.

8. Central 22

42 . This is a site in Slovakia. The site was never developed and was sold in March 2011. The

deposit was paid by ALPIL There is doubt as to w hethe r the balance was paid by

investors. The directors of the company say it was but there is no evidence of this in

Coleman s ledger. The c ontra cts provided for stage paym ents. None of these was

expressed to be the payment of the purchase price of the plot itself. No investor paid a ll

the stage paym ents. In my opinion, the investors did not (a nd do not} have a claim for

specific performance for the transfer of plots, nor were (or are) they entitled to call for a

transfer of any plot. So, in my opinion, these investors do not hav e a claim under a trust

or a lien. In my opinion, the investors rights here are in the nature of money claims for

damages or for the s um they pa id on a total failure of consideration. These are claims fo r

which they can prove in the liquidation but not trust claims or protected by a lien.

Accordingly, in my opinion the proceeds of sale of this site are held for the general body

of creditors in the liquidation.

Caveat

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43. I should provide one general c aveat here. The draft witness statement does not suggest

that there were any breaches by any investors, which might entitle ALP1L to terminate the

contracts. Such breaches could change the nature of investors' rights, from rights under a

trust (which I consider arise in relation to some sites, as advised above) into monetary

claims or otherwise reduce their rights. In my opinion, however, to investigate

compliance by hundreds of individuals with the terms of hundreds of contracts, to find a

handful that might be terminable for a purchaser's breach, would not be cost effective.

Furthermore, the records may not still exist. Accordingly, i would not advise this as an

avenue to pursue. As Morritt J. (as he then was) succinctly put it in the Re Eastern Capital

Futures case referred to below: obviously the court does n ot apply a rule which lead s to

substantial expense but nowhere else . In that case, the records were not available to

show tha t an y particular futures contract was attributable to any client and the court

ordered an equal division of the fund amongst all the investors.

Section 178 of the Insolvency Act 1986

44. I should also add that I have considere d whether the Liquidators shou ld disclaim all or any

of the contracts, or the properties, under section 178 of the 1986 Act. In my opinion, the

effect of a disclaimer would not be to remove the investors' claims to a resulting trust or a

lien. Those claims arose by implication of in law from the circumstances. The contracts

were part of the circumstances and a disclaimer would remove from th e investors any

future rights under the contracts but would not, in my opinion, re mov e those which had

already arisen by implication of law from th e payments of purch ase money. As for the


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disclaimer of the properties, they wouid appear to currently have a value so it would not

appear appropriate to disclaim them. If any site proves to be unsaleable and/or a liability

then this issue can be reconsidered.

The way forward

Where the Liquidators stand

45. I have given

my opinion,

on the evidence before me, that trusts

do arise

in relation

to

certain of the sites an d there are, at least arguments that trusts or liens may arise in

other sites. The facts and their legal consequences are however open to potential

dispute and investors and other creditors appear to have conflicting interest. In these

circumstances in my opinion, th e Liquidators cannot safely proceed without th e

intervention of the court.

Th e court s powers

46. A liquidator may apply to the court to determine any question arising in the liquidation

and, if the court considers the determination of the questions will be just and beneficial,

the court can make such order as it thinks fit, (see section 112 of the Insolvency Act

1986). In my opinion, there is also no doubt that a trustee can also apply to the court for

directions as to a trust, under the court s inherent jurisdiction over trusts, (see e.g. Re

Beddoe [1893] Ch 547). A trustee can always cede his discretion, as to how to proceed in

trust matters, to the court. A good example of a case where liquidators sought the

assistance of the court is Re Eastern Capital Futures Ltd (1989) 5 BCC 223. There were


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issues in the liquidation as to what were an d were no t trust assets, the extent of the

investors beneficial interests in the funds and how trust assets should be distributed and

how the liquidators should be remunerated. The court resolved the questions an d made

provision for the costs of the liquidators to be remunerated ou t of the trust funds and to

retain an amount equal to what they would have received if the trust moneys had been

th e company s own moneys.

The relief which should be sought

47. In my opinion, the Liquidators should apply to the court for the court s assistance on

several m atters, nam ely:

(1) To resolve the issues over whether any trusts or liens exist and, if so, the extent of

each investor s b eneficial interest and/or lien and, in pa rticular, wh at part of the

proceeds of sale each investor should be entitled to receive, if the site is sold.

(2) To decide whether any of the sites should be sold and, if so, which sites shou ld be sold

an d authorise the Liquidators to sell those sites.

(3) To determine how costs incurred to date and future costs should be provided for.

(4) To absolve the Liquidators from any potential liability for the steps a lready taken by

them in the liquidation. As regards the Liquidators acting as trustees, the court has

power to do this under section 61 of the Trustee Act 1925 in the context of a

liquidation, (see e.g. Re Equilift Ltd [2010] BCC 860). It is just and appropriate because

the Liquidators have acted reasonably and on p rofessional advice throughout.

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(5) Such other relief as the court considers necessary or appropriate.

Parties

48. There is a real question as to who should be made parties to the proceedings to resolve

these potential disputes. On the one hand, one could join al the investors, as defendants,

as they all have a financial interest. In my opinion, that would not be proportionate. Just

the issue and service of proceedings and the acknowledgments of service would waste a

huge amount of costs. It could lead to a large number of lawyers, each representing a few

clients, all seeking their costs be paid out of the assets in issue. This case needs to be

managed to resolve the issues with the minimum possible cost to leave as much as

possible for the Investors and other creditors. In my opinion, it is probably best that, in

the first instance, no defendant should be joined, although it might be helpful for the

Liquidators could join just one nominal defendant, (for example someone to represent

the Jagoda and The Poynte investors, where there are arguments which the court may

wish to consider more fully). In any event, the court should be invited to consider, at an

early stage, who should be joined a s a party and whether representation order should be

made.

The "walk away option

49. One possible course open to the Liquidators would have been (and still is) to "walk away"

from the trusts and let the investors, with trust claims, fend for themselves. I would not

recommend that course of action for several reasons. First, there are issues as to what


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plots are held on trust. Secondly, even if there were no local creditors and the sites were

to remain free of charges, there is no prospect of ALP L funding the continu ed

administration of the sites as a whole. The pra ctica l costs of administering and dealing

with the plots on an individual basis would be wholly disproportionate. It would be in the

investors interests to have the sites managed as a whole. Thirdly, each investor s plot is

likely to be worth considerably more if it is sold as part of the sale of whole site, as

opposed to its value as an individual plot One can ask rhetorically, wha t is the va lue of

an unmarked plot in the middle of a field, without any roads to get to it? It is likely to be

in each investor s financial interest that each site is sold as a whole {to maximise the

return), whether there he has an interest under a trust or a lien or he is an unsecured

creditor.

Notifying interested parties

50. In my opinion once the Application is issued and a return date is obtained, a circular

should be sent to al l investors an d creditors in the least costly way possible, (i.e. by email

if possible). The circular should explain the position that Liquidators intend to adopt, i.e.

to seek the court s directions and act on those directions. It should inform them of the

return date and attach the Application Notice, Witness Statement and this Opinion. It

should invite full responses from those wishing to challenge the proposed course of

action. It should explain that Liquidators will submit to the court that any such challenges

should be funded by those seeking to advance them rather than from the proceeds of

any sites which are or have been sold or ALPiL s assets. If an email is not possible in

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Costs

53. When it comes to the Liquidators' costs, the most helpful case to consider is Re Berkeley

Applegate (Investment Consultants) Ltd (In Liquida tion) [1989] 1 Ch 32 further

considered in Re Berkeley Applegate (Investment Consultants) Ltd No. 2 at (1988) 4 BCC

279 and No.3 at (1989) 5 BCC 803). Under this line of authority, the L iquidators can apply

for a direction that they may take their costs of administering and dealing with the trusts

from the proceeds of sale of properties held partly on trust (even if not held by them) as

well as properties, or the interests therein, held in the liquidation. In my O pinion, subject

to any directions of the court, th e Liquidators will at some stage have to provide a full

breakdown of the costs that they have incurred, no t just on a time basis an d hourly rate,

but w hat has been done, at what level, why it h as been done and wha t has been

achieved. This will incur some further cost but it is the appropriate approach to the

insolvency costs. In my opinion, the Liquidators are likely to be allowe d the sa me measure

of costs for trusts work, as insolvency work, so the same approach should be adopted fo r

an y trust costs. As for liquidation costs, (see fo r example th e remuneration order made

in Re Eastern Capital Futures Ltd (supra.)).

54. The correct approach to an application for, or challenge to, liquidators' costs was to be

found in the Practice Statement: The Fixing and Approval of the Remuneration of

Appointees [2004] BC C 912. On 23 rd February 2012, this was replaced by the Practice

Direction (Insolvency Proceedings) [2012] BCC 265 [2012} Bus LR 643. The new Practice

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Direction addresses much wider points than just remuneration. The relevant part

concerning remuneration is in Part Five. The key provisions are in almost identical terms

to the 2004 Practice Statement, so there is no change in approach. The 2004 Practice

Statement was spe cifically approved in the recent case of Brook v Reed [2012] 1 W.LR.

419 by David Richards J, sitting in the Court of Appeal.

55. I have nothing further to add at this stage of the matter but, if my Instructing Solicitors

have any questions, then they should not hesitate to contact me.

35

Michael Jefferis,13 Old Square Chambers13 14 Old SquareLincoln's Inn.

y 2 12

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ASTON LLOYD PARTNERS INTERNATIONAL LIMITED

OPINION

Bates Wells and Brarthwaite London LLPSolicitors

6 Cannon StreetLondon

EC4M 6YH

Documents

12 05 00 Counsel Opinion Michael Jefferies