High Court Case Clarifies Beneficial Ownership in London Property Dispute

Citation: [2023] EWHC 2979 (KB)
Judgment on

Introduction

In the High Court of Justice King’s Bench Division case of Lenkor Energy Trading DMCC v Irfan Iqbal Puri, a complex dispute concerning the beneficial interests in two London properties was assessed. Central to this case was the determination of whether the properties in question were beneficially owned by the defendant, Irfan Iqbal Puri, and whether they could be subject to final charging orders. This analysis explores the legal principles applied within this case, interpreting how the courts weighed the evidence to arrive at their decision.

Key Facts

Lenkor Energy Trading DMCC (the Claimant) asserted that Irfan Iqbal Puri (the Defendant) held beneficial interests in two properties registered under Energy Plus Limited. The case hinged on whether these properties were held on trust for Puri, making them liable for charging orders to satisfy a debt owed to Lenkor. Energy Plus Limited contended that they were the rightful beneficial owner or, alternatively, that Puri’s beneficial interest was limited and had been partially settled through payments.

The properties had been purchased by Energy Plus Limited with funds provided either by Puri or by his father, Mazhar Iqbal Puri. There was no dispute about the authenticity of the 1996 Document, which declared Mazhar as providing GBP 1.2 million for the purchases and appointing Puri as his “authorized attorney to purchase and manage [the Properties] for the benefit of the [Puri] family.”

Several legal principles were scrutinized during the proceedings:

  1. The presumption of resulting trust: The court applied the principle that when property is acquired by a company funded by a third party, a resulting trust presuming beneficial ownership by the funder may apply. This presumption follows longstanding equity principles unless rebutted by clear evidence of an alternative mutual intention (Gany v Khan, Rochefoucauld v Boustead, Stockholm v Garden, Nightingale v Mehta, Prest v Petrodel Resources Ltd, and others).

  2. Section 53 of the Law of Property Act 1925: This section outlines the legal requirements that a disposition of an equitable interest or trust must be made in writing, signed by the person disposing of the same, or by their agent. However, subsection (2) of Section 53 exempts resulting, implied, or constructive trusts from this requirement.

  3. The burden of proof: Lenkor, seeking the charging order, was deemed to carry the burden of proving Puri’s beneficial ownership. This burden necessitates showing that, on the balance of probabilities, Puri’s beneficial interest warranted the charging orders.

  4. The corporate veil: The case emphasized the distinction between a company and its shareholders, as established in Prest v Petrodel Resources Ltd. This distinction reinforces that arrangements using companies require careful legal scrutiny to determine true beneficial ownership.

  5. The role of contemporaneous documents: The court placed significant weight on documents like the 1996 Document and the 2017 Affidavit as strong indicators of the intended beneficial ownership structure that prevailed historically.

Outcomes

The court found that Mazhar Iqbal Puri initially provided the purchase monies for the properties. As there was no evidence of Mazhar passing on a beneficial interest to the defendant via written declaration, it was concluded that on the balance of probabilities, Mazhar intended to retain beneficial interest, subsequently resulting in a trust in his favor.

Following Mazhar’s death, it was held that the defendant, Irfan Iqbal Puri, possessed a beneficial interest of 25%, derived from family agreements or inheritance principles. The court rejected claims of a full transfer of the beneficial interest to Mohammad Puri based on the alleged 2014 Agreement, due to a lack of supportive documentary evidence and contradicting statements within the 2017 Affidavit.

Final charging orders were granted concerning Puri’s 25% beneficial interest in the properties, subject to a limited opportunity for Puri to assert a claim for a higher percentage.

Conclusion

The court’s meticulous application of established legal principles to the complex facts presented in Lenkor Energy Trading DMCC v Irfan Iqbal Puri has clarified the beneficial ownership of the properties at contention. By dissecting the evidence and upholding the presumption of a resulting trust, the High Court has rendered a decision that illustrates the crucial role of documentary evidence and legal precedent in property disputes. This outcome not only resolves the immediate issue of charging orders but underscores the importance of clear beneficial ownership structures to prevent future legal ambiguities.