Everclear Ltd (BVI) v Agrest & Anor

The Court of Appeal dismissed the appellant's challenge to Mostyn J's order setting aside transfers of the single share in Everclear Ltd and thereby subjecting the company's sole asset (the property) to the jurisdiction of the English courts under Part III of the Matrimonial and Family Proceedings Act 1984. The court accepted the judge's finding that the purported sale was conditional upon the purchaser obtaining mortgage finance and that the effective date of acquisition was the date the mortgage completed (3 March 2009). Because that date post‑dated an interim order of the court and notice of proceedings, the purchaser could not claim to be a bona fide purchaser for value without notice under section 23(7) of the 1984 Act and the subsequent transfer was capable of being set aside. The Court also upheld the judge's discretionary decision to set aside the transfer after balancing the parties' interests, including the likelihood of restoring value to the matrimonial claim and the practical prospects of the purchaser recovering his funds from his associates.

Background and parties:

• The appellant is Everclear Ltd, a British Virgin Islands company holding a single asset: a Surrey property. The dispute arose in proceedings brought under Part III of the Matrimonial and Family Proceedings Act 1984 by Mrs Janna Kremen seeking financial relief against her former husband, Mr Boris Agrest.
• Mostyn J declared that an earlier transfer of the company's share from Mr Agrest to Mr Edward Kinigopolou was a sham and that Agrest retained beneficial ownership. The judge set aside a later transfer to Mr George Chesnokov pursuant to section 23 of the 1984 Act.

Procedural posture:

• The present appeal was from the Family Division (Mostyn J, EWHC 3091 (Fam) [2010]) and concerns primarily paragraph 4 of the judge's order setting aside the transfer to Mr Chesnokov. Permission to appeal had been granted by the judge below.

Nature of the claim and issues:

• Mrs Kremen sought orders to avoid transactions intended to defeat her claim for financial relief, relying on the court's powers under Part III of the 1984 Act and the principle analogous to section 37 of the Matrimonial Causes Act 1973.
• The primary issues before the Court of Appeal were (i) whether Mr Chesnokov acquired beneficial ownership of Everclear (and thus the property) prior to February/March 2009 so as to be a bona fide purchaser for value without notice under section 23(7), and (ii) if the transfer was capable of being set aside, whether the judge should exercise his discretion to do so.

Court's reasoning and conclusion:

• The Court accepted Mostyn J's factual finding that the share sale agreement was conditional and subject to an unwritten collateral term that the purchaser could withdraw if he failed to obtain mortgage finance. The purchaser's own testimony supported that the purchase depended on securing mortgage finance, making the completion date the date the mortgage funds were provided.
• Because the effective date of acquisition fell after an interim order made by Deputy Judge Cohen on 12 February 2009 (restraining dealing with the property) and after notice could be imputed, the purchaser could not rely on the protection afforded to a bona fide purchaser without notice under section 23(7). The transfer was therefore capable of being set aside.
• On the exercise of discretion, the Court endorsed the judge's approach of weighing competing interests. It agreed that setting aside the transfer would materially benefit Mrs Kremen's claim by restoring substantial equity to the matrimonial 'pot' and that practical considerations (including prospects of restitution and indemnities) supported the judge's decision.

Result: appeal dismissed; the judge's order setting aside the transfer was upheld.

Appeal dismissed. The Court upheld Mostyn J's findings that the share sale was conditional on obtaining mortgage finance, making the effective date of acquisition the date the mortgage completed (3 March 2009). That date post‑dated an interim order and notice such that the purchaser could not be treated as a bona fide purchaser without notice under section 23(7) of the Matrimonial and Family Proceedings Act 1984. The court also affirmed the judge's discretionary decision to set aside the transfer after balancing the parties' interests and practical prospects of restitution and indemnity.

Appeal from the Family Division (Mostyn J): EWHC 3091 (Fam) [2010] (judgment dated 3 December 2010). Permission to appeal was granted by the judge below. An interim order by Deputy Judge Jonathan Cohen QC dated 12 February 2009 restrained dealing with the property.