Valerio Mancini v Amar Hami

A contractual obligation to account for dividends or principal repayments is construed according to the agreement’s language and commercial context. A tax charge incurred by a borrower’s own election is not a withholding tax or levy attached to pledged assets unless the contract clearly provides otherwise. Payments made under a continuing running account may restart limitation time under section 29(5) of the Limitation Act 1980. A constructive trust based on specific enforceability may cease when specific performance is no longer available, particularly where the claimant delayed while the property existed. The court may therefore award the unpaid balance as a debt or, alternatively, damages for breach of contract.

The claimant lent money to the defendant to finance the defendant’s acquisition of 800 preference shares in Sardo Ltd. The written Loan Agreement required the defendant to pay over distributions relating to 750 pledged shares and to transfer those shares to the claimant by March 2010. The shares were not transferred and were later redeemed.

The defendant disputed the accounting, relied on an alleged offshore restructuring and tax-indemnity agreement, pleaded limitation, and claimed a set-off for remittance basis charges paid to HMRC. The court had to determine the parties’ contractual obligations, the effect of the payments and tax charges, whether any trust arose, and the sum recoverable.

1. Judgment for the claimant. The claimant was entitled to €596,853.44 as a debt under the Loan Agreement, alternatively as damages for breach of contract. Interest and costs were reserved for further determination.
2. The defendant received all relevant distributions from Sardo. The contractual reference to payment of gross dividends or principal repayments, less withholding taxes and levies, concerned amounts withheld by Sardo when making those payments. It did not extend to the defendant’s personal remittance basis charges. Those charges were not withholding taxes or levies attached to the shares.
3. The alleged general Offshoring Agreement was not established. The parties’ conduct showed that they privately investigated offshore structures and that the defendant retained the shares, but this did not remove his obligation to account for distributions. A written tax indemnity did, however, justify credit for the first relevant payment of €35,776.
4. The limitation defence failed. The claimant had appropriated payments to the oldest outstanding sums. Alternatively, the parties operated a running account, under which later payments constituted part payments of the overall balance and restarted time under section 29(5) of the Limitation Act 1980, applying the reasoning in Re Footman Bower & Co Ltd [1961] Ch 443.
5. No express trust arose because the references to receiving ownership as damages meant transfer of the shares, not the creation of trust duties. A constructive trust was possible while specific performance remained available, but any such trust had ceased once the shares were redeemed and specific performance was no longer available, particularly given the claimant’s delay. The claim in trust was therefore rejected.