Angel Group Ltd v Davey

A declaration of trust must be interpreted as a whole. Where it declares that properties are held for a company or contributing subsidiary, and requires the trustee to deal with the properties as the beneficiaries direct and account for all monies, it may vest the whole beneficial interest rather than only the amount contributed. Deliberately backdated company documents recording resolutions that were never made do not constitute resolutions on the stated dates or, where not intended to operate then, on the date of signature. A director who knows, or ought to know, that there is a real risk of insolvency must consider creditors’ interests before preferring shareholders or personal interests. A transfer or dividend made in those circumstances may constitute breach of fiduciary duty. Compensation for breach of trust ordinarily starts with value at trial, subject to evidence that the assets would previously have been realised.

The claimant companies, acting through their liquidators, sought recovery of properties in California, Israel and Northern Cyprus, or their proceeds, together with compensation for breach of trust and fiduciary duty. The defendant had been the companies’ sole director and had executed trust deeds in 2007 and 2008. She later relied on company documents purporting to record dividends and transfers of the properties in 2009 and 2010, although those documents were created later and were backdated.

The issues included the construction and effect of the trust deeds, the validity of the bank-account trust, whether the purported resolutions transferred the beneficial interests, the effect of any transfer when the group faced financial difficulty, the valuation date for compensation, and the defendant’s receipt of settlement money due to the first claimant.

1. Trust deeds. The 2007 deed operated in favour of Angel Group Ltd in relation to the Northern Cyprus properties and in favour of Angel (London) Ltd in relation to Plot 39. The 2008 deed placed the Californian properties and Plot 37 on trust for Angel Group Ltd. The references to contributing subsidiaries identified the appropriate beneficiary; they did not confine the trust to the proportion of the purchase price contributed. The trustee’s undertaking to deal with the properties as directed and account for all monies confirmed that construction (paras [37]-[43]).
2. The two identified bank accounts were also within the expression “various properties” in the 2008 deed. The schedule formed part of the declaration and included assets other than land. The £900,000 was therefore held on trust for Angel Group Ltd (para [46]).
3. Backdated documents. No relevant resolutions were made on 30 April 2009 or 4 and 11 May 2010. The documents were deliberately produced later to create the impression that dividends and transfers had occurred earlier. They were false records and did not become effective resolutions merely because they were signed in June 2011. The court found that they had been prepared and signed dishonestly (paras [66]-[74], [85]-[88]).
4. Creditor interests. Even if the 2010 documents had operated as resolutions in June 2011, the company was then subject to a real risk of insolvency. The director therefore had to consider creditors’ interests before declaring the £11 million dividend and transferring the properties. Those transactions would have been a clear breach of fiduciary duty (paras [89]-[93]).
5. Relief. The defendant’s sales of the properties constituted breach of trust, either because the original trusts continued or because any later transfer was itself a breach of fiduciary duty. The Cypriot properties belonged beneficially to Angel Group Ltd if still retained. Compensation for sold properties was assessed by reference to their sale prices, with interest, because the evidence showed that the properties would probably have been realised by administrators or liquidators (paras [94]-[109]). The £550,000 settlement money was also received in breach of fiduciary duty: although it represented repayment of a short-term loan, repayment in February 2012 preferred the defendant when there was a real risk of insolvency (paras [110]-[116]).

First-instance judgment. No appellate history was stated in the judgment.