Alexander Gorbachev v Andrey Grigoryevich Guriev

A claimant asserting an oral declaration of trust bears the legal burden of proving the facts said to create the trust. Where the claim depends on uncorroborated recollections of conversations many years earlier, the evidence must be tested against contemporary documents, admitted or established facts, inherent probabilities and subsequent conduct. Inconsistencies in pleadings, witness statements and contemporaneous dealings may materially undermine credibility. Continued financial support, without accounting by reference to shares or dividends, does not itself establish a beneficial interest. A court may decline to determine alternative legal issues where the factual foundation of the claim has not been proved.

The claimant sought declarations and other relief concerning an alleged entitlement to 24.75 per cent of the defendant’s interests in the PhosAgro fertiliser business. The claim relied principally on alleged oral declarations made in London in 2005 and 2008, said to confirm earlier arrangements and to constitute or evidence an English-law trust. The defendant denied making the declarations and contended that the claimant’s only relevant entitlement was a 5 per cent option, which had probably been exercised and sold.

The trial concerned extensive historical factual evidence, corporate documents, offshore arrangements, the parties’ subsequent conduct, and the disclosures made in connection with the 2011 public offering. The central issue was whether the claimant had proved the alleged declarations and the beneficial interest said to arise from them.

1. Burden and assessment of evidence. The claimant bore the legal burden of proving his pleaded factual case on the balance of probabilities. The court applied the principles that serious allegations require cogent evidence and that oral evidence should, where possible, be tested against contemporary documents, established facts, inherent probabilities and subsequent conduct. The court also applied the recognised indicators for assessing whether a witness was lying, while recognising that dishonesty on one issue does not automatically require rejection of all the witness’s evidence.
2. Historical arrangements and options. The alleged 1996 arrangement giving the claimant a substantial beneficial interest was rejected. The First Option Agreement was found to be genuine and entered into in 2001. The subsequent B&C arrangements and Second Option Agreement were consistent with conditional 5 per cent options for the claimant and Mr Antoshin, and inconsistent with the alleged earlier 24.75 per cent entitlement. The claimant’s case that the option documentation was a sham was also rejected.
3. Alleged declarations. The claimant failed to prove that any of the alleged 2005 or 2008 declarations was made. His changing accounts of dates and wording, conflicts with contemporaneous documents, omissions from asylum and tax materials, inconsistent positions in Cypriot proceedings, and failure to raise the alleged interest during the PhosAgro IPO materially undermined his evidence. The continuing payments made by the defendant were ad hoc support and were not accounted for as dividends or payments referable to a beneficial shareholding.
4. Disposition. Since the factual foundation of the claim was not proved, it was unnecessary to determine the alternative legal issues concerning express trust, constructive trust or proprietary estoppel. The claim was dismissed.