In the recent judgment of Gorbunova v The Estate of Boris Berezovsky (deceased) and others1 the High Court has provided useful guidance as to when summary judgment is appropriate in deciding whether a trust was established.

The success of the summary judgment application turned on the question of whether the hearing of that application was a suitable forum to decide whether two documents created a trust. The court held that it was, and the existence of a complex set of facts around the execution of the documents did not mean a full trial was required.

On a separate but equally important issue, the judgment also provides guidance on when, as in this case, the court will refuse permission to amend pleadings due to inconsistencies with evidence previously filed.

Background

HFW are acting for three insolvency practitioners from Grant Thornton UK LLP as the trustees of the insolvent estate of Boris Berezovsky (deceased) (the Trustees). The Trustees applied for reverse summary judgment against the proprietary elements of a claim brought by Mr Berezovsky’s long time partner, Helena Gorbunova, with whom he had two children.

Ms Gorbunova claimed that two documents created during Mr Berezovsky’s lifetime created a trust over certain funds currently held by the Trustees. One document was signed by Mr Berezovsky as a deed, the other was an agreement signed by Mr Berezovsky and countersigned by Ms Gorbunova. Both concerned monies payable to Mr Berezovsky pursuant to a settlement with the family of his deceased business partner, Arkady Patarkatsishvili (the AP Settlement). The majority of those monies fell due for payment after Mr Berezovsky’s death, and so were paid to the Trustees, then acting as Receivers.

During the summary judgment hearing, Ms Gorbunova also made an impromptu application to amend her particulars of claim to include further grounds for her proprietary claim. She attempted to introduce claims for equitable assignment, rectification, proprietary estoppel and other estoppels.

Key points from Arnold J’s judgment

Summary judgment

  1. When interpreting a contract, the court should have regard to the “background knowledge which would reasonably have been available to the parties... at the time of the contract. This does not include evidence as to the subjective intentions of one or both of the parties or the pre-contractual negotiations.” Arnold J held that the wording of the two documents did not amount to a declaration of trust and Ms Gorbunova could not rely on contextual evidence in an attempt to re-write the documents.
  2. The AP Settlement was entered into by Mr Berezovsky during his lifetime, but the relevant payments were not due until after his death. As such, a trust could only have been established after Mr Berezovsky’s death. Section 284 of the Insolvency Act 1986 (as modified to apply to insolvent estates) states that any disposition of a deceased insolvent’s property after the date of his death is void. Therefore, even if a trust over the AP Settlement monies was established, such a trust would be void.

Arnold J concluded that Ms Gorbunova had no real prospect of success in establishing that either document created a trust.

The application to amend

  1. There was no real prospect of success of Ms Gorbunova’s argument that there was an equitable assignment. In addition, any assignment would be void by virtue of section 284 (as discussed above).
  2. The amendments to the pleadings which sought to introduce arguments as to rectification, proprietary estoppels and constructive trust were inconsistent with Ms Gorbunova’s evidence as previously filed.

Ms Gorbunova’s application to amend was not allowed, save for minor amendments as agreed between the parties.

Lessons

When a trust is allegedly created by way of a written document, the court will give very limited weight to evidence concerning the context into which the document was entered. This allows a decision to be made on the basis of the actual wording of the document.

When faced with an application to amend pleadings, the court will look at amendments in the context of the evidence already filed and will not allow obvious inconsistencies.

HFW perspective

This judgment is particularly interesting in the context of insolvency proceedings as it opens a route for insolvency practitioners to have proprietary claims struck out and/or disposed of summarily without the need for a full trial. Despite the complex circumstances surrounding the execution of the documents, the court focussed on the strict principles applicable to the interpretation of written documents. This illustrates the court’s willingness to “grasp the nettle” and decide a proprietary claim on a summary basis.

Ms Gorbunova’s application to Arnold J for leave to appeal was denied. She has now made an application to the Court of Appeal.