Bonotto v Boccaletti

• Jurisdiction: Cayman Islands
• Judge: (Graham, J.)
• Judgment Date: 23 March 2001
• Court: Grand Court (Cayman Islands)
• Date: 23 March 2001

Grand Court

(Graham, J.)

C. BONOTTO, F.I. BONOTTO, E. BONOTTO and ELBO LIMITED

and

G. BOCCALETTI and FOUR OTHERS

D. MacF. Murray for the plaintiffs;

Ms. C.J. Bridges for the first and fifth defendants and Deal Age Ltd.

Cases cited:

(1) Company, Re aUNK(1985), 1 BCC 99, 421, followed.

(2) Creasey v. Breachwood Motors Ltd., [1993] BCLC 480; [1992] BCC 638, followed.

(3) Jones v. Lipman, [1962] 1 W.L.R. 832; [1962] 1 All E.R. 442, considered.

(4) Law Debenture Trust Corp. PLC v. Ural Caspian Oil Corp. Ltd., [1995] Ch. 152; [1995] 1 All E.R. 157, distinguished.

(5) Merchandise Transp. Ltd. v. British Transp. Commn., [1962] 2 Q.B. 173; [1961] 3 All E.R. 495, considered.

(6) Myles v. Prospect Properties Ltd., 1994–95 CILR 1, dicta of Kerr J.A. applied.

Legislation construed:

Registered Land Law (1995 Revision) (Law 21 of 1971, revised 1995), s.23: The relevant terms of this section are set out at para. 31.

s.164: The relevant terms of this section are set out at para. 31.

Civil Procedure-execution-charging order-may be made against land improperly transferred to company under defendant”s control to defeat judgment creditor, since defendant retains beneficial ownership

Land Law-registration-indefeasibility of title-corporate proprietor not beneficial owner under Registered Land Law (1995 Revision), s.23 if land improperly transferred to company under defendant”s control to defeat judgment creditor-equitable principles prevail under s.164

Trusts-resulting trusts-presumption of advancement-registration of land in spouses” joint names raises no presumption of gift to wife of beneficial share if merely device by husband to defeat judgment creditor

The plaintiffs applied for a declaration that the first defendant was, and had always been, the beneficial owner of certain properties.

The first defendant, a Cayman resident, misappropriated large sums of money paid to him by the first plaintiff, an Italian businessman, for invest-ment in property in the Islands. The plaintiffs obtained judgment (reported at 2000 CILR 147) for sums taken from a Swiss bank account with the third defendant bank in the name of the second defendant company.

The first defendant and his wife (the fifth defendant) had used the plaintiffs” moneys, as well as funds from the first defendant”s own company (the fourth defendant) to purchase two apartments. After the plaintiffs commenced proceedings against them, they incorporated A Co., with themselves as directors and the wife as shareholder, to which they transferred the two properties. A third apartment was acquired by a second similar company, B Co., using funds from the fourth defendant, and later transferred to A Co. The fifth defendant later transferred ownership of A Co. to her sons and the first defendant resigned from his directorship. All transfers were made for no consideration.

Following judgment in the plaintiffs” favour, the sons replaced their mother as directors of A Co. Although the first defendant claimed to have no interest in A Co. or any of the properties, he remained a signatory of A Co.”s bank account, which received rent from and paid outgoings on the apartments, and his own expenses continued to be met from it. The plaintiffs applied for charging orders over the three apartments.

The plaintiffs submitted that (a) as the first defendant was clearly the beneficial owner of the properties despite his attempts to render them judgment-proof, the court should look behind the corporate veil of ownership by A Co. and disregard his wife”s alleged interest in them; and (b) the legal and beneficial ownership prima facie conferred on A Co. under s.23 of the Registered Land Law (1995 Revision) did not apply here, since s.164 of the Law operated so as to prefer equitable claims when fraud had been proved.

The first and fifth defendants submitted in reply that (a) the presumption of advancement had applied to confer shared beneficial ownership of the properties on the wife when they were registered in joint names, and to transfer beneficial ownership of A Co. to their sons when she gave her shares to them; (b) in the absence of any injunction restraining the companies” dealings with their assets at the relevant time, they had committed no wrong; (c) s.23 of the Registered Land Law operated to vest legal and beneficial ownership of the properties in the registered pro-prietor, namely A Co.; and (d) the court could not make charging orders over properties in which the first defendant no longer had any interest.

Held, making charging orders nisi over the properties:

(1) The court was entitled to lift the corporate veil to expose the true beneficial owners of company assets when the device of incorporation had been used for an improper purpose. Since the first defendant had knowingly and repeatedly misappropriated the plaintiffs” moneys over some time, in breach of trust, the court could look behind the corporate façade of A Co., B Co. and the fourth defendant-companies created and used by the first defendant as a means of judgment-proofing him-self-to reveal the truth. The purchase of the properties in joint names had clearly been an attempt to defeat his creditors, and his wife”s involvement had been a sham. The properties were investments and fell into a different category, e.g. from the matrimonial home, in which his wife had a genuine beneficial interest. In these circumstances, the presumption of advancement was rebutted, particularly as the first defendant had previously given evidence that his wife took no part in his business. Similarly, the transfer of A Co. to the sons, who acted under their father”s direction, was a device to conceal his ownership (paras. 14–15; para.18; paras. 22–24; paras. 28–30).

(2) Neither s.23 nor any other provision of the Registered Land Law (1995 Revision) prevented the court from dealing with this case accord-ing to the principles of justice and equity under s.164, since they did not expressly or impliedly relate to fraudulent transactions. The first defen-dant had always owned the three properties beneficially and charging orders nisi would be made over them (paras. 31–35).

1 GRAHAM, J.:

The background

I delivered judgment in this matter on June 2nd, 2000, after an eight-week trial. Notice of appeal was filed shortly thereafter but was, on March 12th, 2001, withdrawn. Accordingly, my findings of fact as set out in that judgment stand. I found that, for the purpose of misleading the court, and of course cheating the plaintiff, Mr. Boccaletti had produced a series of false invoices, altered bank documents and had behaved in a dishonest manner, both in relation to the taking of the plaintiffs” money and in his conduct of the proceedings. Only an ‘unless’ order made on May 20th, 1998, two years after the commencement of litigation, brought about the disclosure of the Sphinx documents, and that after much prevarication and frequent changes of...