Frenkel v Lyampert & Ors

The claimant sought specific performance of an alleged oral 2004 agreement that he would hold 25.5% of the shares and be a director of LA Micro Group (UK) Limited, together with alternative reliefs including rectification under section 125 of the Companies Act 2006 and a declaration of trust. The court found that the 2004 agreement was made between the Second Defendant (David Bell) and LA Micro Group Inc ("Inc"), represented by Arkadiy Lyampert, not between Bell, Lyampert and the claimant. The judge preferred the evidence of Mr Bell and found the claimant's and other witnesses' accounts unreliable.

On the facts the UK Company was intended to be 49% owned by Mr Bell and 51% by Inc; there was no agreement that the claimant personally should be issued 25.5% of the shares or be appointed a director. The claimant had disavowed interest in the UK Company in 2010 and the court would not grant the relief sought. The claim was therefore dismissed.

The claimant, Mr Roman Frenkel, brought proceedings seeking specific performance of an alleged oral agreement made in 2004 that he would hold 25.5% of the issued share capital of LA Micro Group (UK) Limited (the UK Company) and be appointed a director. He alternatively sought rectification of the register under section 125 of the Companies Act 2006, a declaration that the two issued shares were held on trust for him as to 25.5%, specific performance of appointment as a director, an account of dividends, interest and costs.

The principal issues for the court were (i) who were the parties to the 2004 agreement (whether between Bell, Lyampert and Frenkel; Bell and Lyampert only; or Bell and Inc), and (ii) whether the 51% shareholding was intended to be owned by Frenkel and Lyampert equally, by Lyampert alone, or by Inc.

The court heard contested oral evidence from the claimant, from Mr Lyampert, from Mr Alex Gorban (a close associate of the claimant) and from Mr Bell. The judge addressed the difficulty of reconstructing an oral agreement from events 13 years earlier, emphasised considerations about witness reliability and the need to corroborate self‑serving evidence. The court found Mr Bell to be the most reliable witness and rejected substantial parts of the evidence given by the claimant, Mr Gorban and (in places) Mr Lyampert.

The judge made factual findings that the trip to the United Kingdom in August 2004 was undertaken by Mr Lyampert and Mr Gorban on behalf of Inc, that discussions and arrangements were with Inc (which was then jointly owned by Frenkel and Lyampert), and that the intended commercial structure was that the UK Company be 49% owned by Mr Bell and 51% by Inc. There was no agreement that Frenkel should be a registered shareholder or director. The court noted contemporaneous and later conduct, including how dividends and profit distributions were treated, and that the claimant had told Mr Bell in 2010 that he wanted nothing to do with the UK Company. The judge also considered related United States proceedings and a Revised Statement of Decision in which the Californian court had awarded restitution in favour of the claimant against Mr Lyampert in respect of Inc.

The claimant sought to rely at the end of trial on CPR Part 16.2(5) to obtain relief on behalf of Inc, but the judge held that such a case had not been pleaded and could not properly be introduced as an afterthought. Considering delay, the claimant's earlier disavowal of interest and the conduct of the parties, the court concluded that the claimant was not entitled to the remedies sought and dismissed the claim.

First instance: The claim is dismissed. The court held that the 2004 agreement to establish the UK Company was made between Mr Bell and LA Micro Group Inc (represented by Mr Lyampert), not between Mr Bell, Mr Lyampert and Mr Frenkel; there was no agreement that Frenkel should receive 25.5% of the shares or be appointed a director. The claimant had disavowed interest in the UK Company in 2010 and had not pleaded an alternative case based on Inc; on credibility and factual grounds the claimant's case failed.