This judgment was handed down remotely at 10.30am on 2 May 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
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Andrew Twigger K.C. :
- On 1 and 2 April 2025 I heard five applications made by the Claimant ("Stimm"):
i) First, an application by notice dated 25 July 2024 (pursuant to paragraph 14.2 of PD 57AD) challenging the Defendants' duty to withhold production of certain documents on the grounds of privilege. The basis of the challenge to privilege is that the documents in question were brought into existence as part of, or in furtherance of, iniquity ("the Iniquity Application").
ii) Second, by the same application notice, an application in the alternative for a direction (pursuant to CPR 3.1(2)(i)) for a trial of a preliminary issue as to whether Stimm was a client of the Defendants ("the Preliminary Issue Application").
iii) Third, an application by a separate notice dated 25 July 2024 (pursuant to CPR 31.17) seeking disclosure and production of documents against a Non-Party, Mr Trimmatis ("the Non-Party Disclosure Application"). The documents of which disclosure is sought are the same documents as those sought by the Iniquity Application, and the same issues in relation to privilege arise. Mr Trimmatis did not appear and was not represented at the hearing, although he sent an email the day before the hearing (considered further below) in which he said that he did not "consent to the waiving of privilege."
iv) Fourth, an application by notice dated 14 March 2025 (pursuant to CPR 3.1(2)(a)) for an extension of the time permitted for Extended Disclosure until 25 April 2025 ("the Extension of Time Application").
v) Finally, an application by notice dated 25 March 2025 (pursuant to CPR 17.1(2)(b)) for permission to amend the Claim Form and Particulars of Claim ("the Amendment Application").
- By the conclusion of the hearing, most of the issues arising from the Extension of Time Application and the Amendment Application had been resolved by agreement between the parties and I dealt with the remaining issues at the hearing. This is, therefore, my judgment in relation to the first three applications referred to above.
- An issue arose at the start of the hearing as to whether it should proceed wholly, or for part of the time, in private. I ruled that the hearing should be heard wholly in public for reasons which I outlined at the time, but which I said would be provided in more detail in this judgment. It is convenient to do so after explaining the background to these applications.
- The remainder of this judgment is organised under the following headings:
i) Factual Background
ii) Procedural Background
iii) The Law
iv) Stimm's Position - the Six Alleged "Strands" of Iniquity
v) The Defendants' Position
vi) Mr Trimmatis's Position - the Privacy Issue
vii) Analysis of the Evidence Concerning each "Strand" of Iniquity
viii) Outcome of the Applications
ix) Conclusions
i) Factual Background
- There is much common ground as to what happened in this case. The facts are mostly the subject of contemporaneous documents derived from the Defendants' files. I have been provided with (amongst other material) a bundle of over 5,600 pages. The documents do not appear in chronological order (for reasons I shall explain), so in case it is needed I will refer below to the page numbers of the bundle for the key documents to which I refer. As I shall explain below, the Iniquity Application and the Non-Party Disclosure Application require me to make findings of fact on the balance of probabilities. Nevertheless, for the avoidance of doubt, this is an interim application and so the parties cannot be bound by any of my factual findings at trial.
- The issues for decision turn principally on the extent to which Mr Trimmatis was engaged in iniquity and, if he was, whether the Defendants colluded with him, or were otherwise aware of his wrongdoing. It is necessary to explain the facts in some detail, so that the allegations of iniquity can be understood.
- At the heart of the story is the sale of a property at 41-43 Beaufort Gardens, Knightsbridge, London SW3, known as the Parkes Hotel ("the Parkes Hotel"). Contracts were exchanged on 18 September 2012 and completion occurred on 8 March 2013. The vendor was a Hungarian company called Vannes Hungary Consulting and Services LLC ("Vannes"), and the purchaser was a BVI company called Harbinger Asset Holdings Limited ("Harbinger"). The price paid was £33.5 million. I shall refer to this transaction as the "Sale".
- A significant feature of this case is that Mr Trimmatis was interested on both sides of the transaction. As explained in more detail below, by the time the Sale completed, Mr Trimmatis had become the ultimate beneficial owner of 5% of the shares in Harbinger. The remaining 95% of the shares were ultimately owned by a third-party funder, Aerium Group Limited ("Aerium").
- So far as Vannes is concerned, the evidence of Mr Edwin Arippol on behalf of the Stimm is that he (Mr Arippol) and Mr Trimmatis were long-standing business partners, and they were the ultimate beneficial owners of Vannes in equal shares. They originally bought the Parkes Hotel in 2007 through a different company and subsequently transferred it to Vannes, with a view to turning it from a hotel into nine luxury residential apartments and selling them. Mr Arippol held his interest in Vannes through a company incorporated in Panama called Vennbridge International Inc ("Vennbridge"). Vannes' director was Mr Trimmatis' father, Mr Konstantinos Trimmatis ("Mr Trimmatis Snr").
- Mr Arippol's evidence is that Vennbridge paid £1 million towards the purchase price of the Parkes Hotel, £500,000 for the agent's commission, and a further £3,088,400 towards the costs of the development project. Vannes' purchase and development project was principally financed, however, by a facility for up to £43 million from the Irish Nationwide Building Society ("INBS"), which had a first charge over the Parkes Hotel. It is not known how much of the facility was drawn down, but it was at least £29.2 million, which was used for the purchase. In 2009 INBS collapsed as a result of bad debts and it was taken over by the Irish government. Its loan to Vannes was dealt with by the Irish Bank Resolution Corporation ("IBRC") and the National Asset Management Agency, an organisation created to deal with its loan business ("NAMA").
- Mr Arippol's evidence is that Mr Trimmatis had told him that he (Mr Trimmatis) had been negotiating with NAMA for funding to complete the development project, but that NAMA kept refusing. Mr Trimmatis, therefore, suggested selling the Parkes Hotel to another entity, which he told Mr Arippol would be unconnected with him, in order to obtain funding from a new lender. Mr Arippol did not question this and was content to allow Mr Trimmatis to make all the arrangements. Mr Arippol says that he was fond of Mr Trimmatis and treated him much like a son.
- Ms Marie-Garrard Newton of LSG Solicitors ("LSG") acted for Vannes in connection with the Sale. The evidence suggests that Mr Trimmatis Snr might have been the individual formally providing instructions to LSG as director of Vannes (p. 3960). The First Defendant ("K&S") is the firm of solicitors which acted for the purchaser, Harbinger. The Second Defendant, Mr Heilpern, was the partner of K&S with conduct of the matter. He joined K&S as a partner at the end of July 2012, having previously been at Fried, Frank, Harris, Shriver & Jacobson (London) LLP.
- Mr Heilpern had been introduced to Mr Trimmatis shortly before he joined K&S. The source of the introduction was Mr Michael Fingleton, with whom Mr Heilpern had worked on a previous deal. Mr Fingleton happened to be the son of the CEO of INBS, although there is no evidence to suggest that he was representing INBS at this time. Mr Fingleton had a desk in an office at 41 Whitehall, London, which was occupied by one of Mr Trimmatis's companies called Concept Business Group Limited ("Concept"). Concept had been appointed by Vannes as the manager of the Parkes Hotel.
- Mr Trimmatis's double life is well illustrated by an email from Ms Newton to Mr Heilpern on 10 July 2012, in which she wrote: "I am instructed that it may assist your client in regard to satisfying planning conditions in respect of the development of the building pursuant to the current planning consent if your client contacts my client's agent in this country Concept Business Group Limited of 41 Whitehall… telephone… reference Mr N Trimmatis" (p. 1339). Mr Trimmatis was, of course, not only the agent of Ms Newton's client; he was also instructing Mr Heilpern. This was, in effect, an invitation for Mr Trimmatis to contact himself, although Ms Newton evidently did not realise that.
- It was Mr Fingleton who instructed Mr Heilpern to reply to Ms Newton's email referred to in the previous paragraph, by asking various questions about which conditions of planning had been satisfied and other matters (p. 1364). Mr Trimmatis was copied into Mr Fingleton's email to Mr Heilpern. Mr Atkins pointed out that Mr Fingleton could simply have asked Mr Trimmatis these questions. He submitted that this was all part of a pretence carried on by Mr Trimmatis, so that Ms Newton remained unaware that he had anything to do with Harbinger.
- Mr Heilpern met both Mr Trimmatis and Mr Fingleton at Concept's office on two occasions in July 2012, when they discussed the purchase of the Parkes Hotel. At the meeting on 11 July 2012, Mr Heilpern made a manuscript note (p. 1558). Mr Heilpern's handwriting is hard to read but the manuscript note includes, amongst other matters: "New loan to repay old loan" and "New loan? … Buy loan at discount?".
- It appears originally to have been envisaged that Mr Fingleton would obtain an interest of some kind in the Parkes Hotel, but he disappeared from the scene in late August 2012. Mr Heilpern's evidence is that he regarded himself from the outset as acting for Mr Trimmatis, through whatever vehicle he chose to use for the purchase. Indeed, he says that Mr Trimmatis expressly told him at one of the meetings in July 2012 that he was acting for Mr Trimmatis.
- There are also indications in the evidence that, when Mr Heilpern was first instructed, Mr Trimmatis was working with a company called AW Investments Ltd ("AWI"), with a view to that company being involved in some way with the purchase of the Parkes Hotel. On or around 28 May 2012 Mr Trimmatis applied to NAMA / IBRC on behalf of Vannes for approval for the sale of the Parkes Hotel to AWI (p. 1795). By a letter dated 6 June 2012, NAMA / IBRC approved acceptance of the offer of £33.5 million, less various deductions, on various conditions including: (1) "to ensure compliance with Section 172 of the NAMA Act, in particular that the sale is to an unconnected 3rd party"; (2) the net sale proceeds of £32,768,736 were to be remitted immediately on closing to "debt reduction"; and (3) Colliers were to undertake a desktop appraisal supporting the sale and confirming that the sale proceeds were a minimum of 90% of the current appraised valuation (p. 1797).
- AWI was a party to a deed dated 18 July 2012, the other party being a company described as "Harbinger (Guernsey) Ltd (in formation)" ("Harbinger Guernsey"). In fact, as explained below, Harbinger Guernsey was not incorporated until December 2012. Although the copy of the deed which is in evidence is so faint as to be barely legible (p. 1602), it appears to have entitled AWI to an introduction fee of £1.5 million in connection with a contemplated purchase of the Parkes Hotel by Harbinger Guernsey.
- By early September 2012, Mr Trimmatis was looking to exchange contracts for the purchase, apparently without the involvement of either Mr Fingleton or AWI, and it had become clear that a deposit of £1.675 million would need to be paid by the purchaser on exchange of contracts. Mr Trimmatis obtained that money from Stimm. Stimm is a foundation established in Panama in March 2011. At the time of the sale, the ultimate beneficial owner of Stimm was Ms Ottilie Schon Arippol. Mr Arippol, who is her nephew, was its president. Mrs Arippol died in 2016, and Mr Arippol then became the ultimate beneficial owner of Stimm.
- Mr Arippol says that Mr Trimmatis had told him in around June 2012 that £2.5 million was required for the deposit and expenses relating to the proposed sale. Mr Trimmatis asked Mr Arippol for a loan, which he said would be repaid once the refinancing transaction had completed. Mr Arippol did not have sufficient funds himself, so he asked his aunt, who agreed that Stimm would provide some of the money.
- Mr Heilpern says in his witness statement that he recalls speaking on the telephone to a representative of Stimm in early September 2012. It appears that Mr Heilpern spoke to Mr Christian Fischele (who has provided a witness statement), although at that time Mr Heilpern thought he was speaking to Mr Arippol. Mr Fischele was a member of Stimm's foundation council, which has similar functions to the board of an English company.
- Following that call, Mr Heilpern prepared an undertaking which was provided to Stimm in the form of a letter from K&S dated 5 September 2012 ("the Undertaking"). The Undertaking was in the following terms (p. 1196):
"Subject to our first clearing our know your customer checks satisfactorily, if you transfer to us the sum of £2 million into our client account, subject thereto, we confirm and undertake to you the that upon receipt of such monies, we will hold all such monies strictly to your order, we will not make any transfers or payments therefrom, except under your specific written instructions to do so and we will account to you for all interest earned on the monies we hold on your account in our client account from time to time.
Subject as aforesaid, we will also return such monies to you on your written demand, less any monies you have previously or then authorised to be spent out of such monies."
- Mr Arippol says that, although he did not turn his mind to whether Stimm was K&S's "client", he considered that K&S were being instructed to protect Stimm's interests. He considered that it was K&S's "job to look out for Stimm and the document [i.e. the Undertaking] appeared … to be part of that." The references in the Undertaking to "our know your customer checks" and "our client account" reflected Mr Arippol's understanding that K&S were acting for Stimm.
- On 11 September 2012 Stimm transferred £1.7 million to K&S's client account, and the payment seems to have had the reference: "FONDATION STIMM…" (p. 1016). After receipt of the funds from Stimm, on 12 September 2012 an internal K&S form required to open a client file relating to the Sale was completed, which identified Mr Heilpern as the "Originating Attorney" (p. 1105). That form identified Stimm as the client, and the file was subsequently opened in Stimm's name. In paragraph 38 of his statement Mr Heilpern points to internal K&S documents which indicate that he believed at this time that Stimm was the vehicle intended by Mr Trimmatis to be the purchaser (p. 1016, 1017). That contrasts with what Mr Heilpern says in paragraph 32 of his statement, which is that there would have been no need for the Undertaking (provided just a week earlier) if he had regarded K&S as acting for Stimm.
- In any event, on 12 September 2012, the day after Stimm sent the £1.7 million to K&S, Harbinger was incorporated in the BVI (p. 4144). The incorporation of Harbinger was arranged on Mr Trimmatis's instructions by Totalserve, a professional corporate services provider principally based in Cyprus (although the incorporation of Harbinger seems to have been handled by Totalserve's BVI affiliate – p. 3920). The director of Harbinger was Osbar Management Ltd ("Osbar"), a company controlled by Totalserve, and the officers of Osbar were Totalserve employees.
- Over the next few days, Mr Trimmatis informed Mr Heilpern by email that Harbinger was to be the entity which would exchange contracts and that it was K&S's client (p. 1145, 1018). According to Mr Heilpern, as a result of administrative error, he failed to amend K&S' internal records to show Harbinger as the client, rather than Stimm. Nevertheless, he did ask Totalserve for details of any shareholders of Harbinger with an interest of 25% or more and was told (p. 1143) that the shareholder of Harbinger was Limesi Holdings Ltd ("Limesi"), a company incorporated in the BVI. He noted in manuscript on a copy of an email dated 14 September 2012 that the ultimate beneficial owner of Limesi was "Mrs Aikaterini Trimmatis", Mr Trimmatis's mother. It appears from other documents (e.g. p. 4152, 4193) that her surname is, in fact, spelled "Trimati" and I shall refer to her as "Mrs Trimati".
- Pursuant to the Undertaking, Mr Heilpern required specific written instructions from Stimm to enable the funds to be used to pay the deposit. Mr Arippol's emails are frequently written in capital letters, but I will use lower case lettering when quoting them. Over the course of 13 and 14 September 2012, there was an exchange of emails between Mr Arippol and Mr Trimmatis concerning the provision of these instructions. It appears from an email he sent on 13 September 2012 (p. 5375) that Mr Arippol had originally understood that the money transferred to K&S by Stimm was to be used merely as proof of funds, rather than used for the deposit. Amongst other matters, Mr Arippol said:
"As for the loan agreement for the Foundation [i.e. Stimm], I am attaching a draft which should be OK. Let us just do it with Harbinger so at least we have something in writing and then we will finalize it after completion with the right entity. Just to be clear, though, at refinancing the foundation is to be repaid the "extra funds" after repaying the first charge holder. If these funds are not enough to pay all the Foundation loan, then at time of sale and after the first and second charges are repaid, the Foundation will be the first to be repaid."
- A little later on the same day Mr Arippol sent a further email summarising his understanding from a telephone call. One of the matters covered was, "…sometime in mid October, either a little bit before or after completion, we will meet in London and sign a loan agreement between the Foundation Stimm and the company which will be part of the final ownership structure" (p. 5376).
- In the early hours of the next day (14 September 2012) Mr Trimmatis replied, saying amongst other things, that "…The agreement with the foundation will be reached on our meeting in London and will be finalised when the final ownership structure will be completed prior to completion" (p. 5377).
- Mr Arippol provided written instructions pursuant to the Undertaking on 14 September 2012, in the form of a document signed by him on behalf of Stimm, which was forwarded to Mr Heilpern by Mr Trimmatis (p. 1186, 1187). This stated, amongst other things, that Mr Heilpern was holding "our funds" of which he was authorised to release £1.675 million towards payment of a 5% deposit "in the name of Harbinger … the Buyer."
- In the email on 14 September 2012 to Mr Trimmatis attaching the written instructions (but which was not forwarded to Mr Heilpern with the instructions), Mr Arippol wrote that, "it is understood that we will sign a loan agreement between the foundation and the final company that will be used to complete on the property sometime in October 2012" (p. 5379).
- It appears from the exchanges in paragraphs 28 to 30 and 32 above (to which I will refer below as the "September Loan Emails") that Mr Trimmatis and Mr Arippol understood and agreed that the money which Stimm had transferred to K&S would be a loan from Stimm to the company which ultimately purchased the Parkes Hotel. They intended there to be a formal written loan agreement between those parties in due course.
- Mr Heilpern had not seen the communications between Mr Arippol and Mr Trimmatis, but says in paragraphs 29 and 71 of his statement that he understood that Mr Trimmatis had a deal with Stimm, the details of which he did not know, to fund the deposit for the purchase of the Parkes Hotel. He says that he did not know which of Mr Trimmatis's entities was to be treated as having received those monies from Stimm.
- Later on 14 September 2012, Mr Heilpern asked Mr Trimmatis for a copy of Mr Arippol's photo ID card showing his signature, so that he could verify the signature on the written instructions, and Mr Trimmatis emailed a copy around 20 minutes later (p. 1186, 1022).
- In addition to the £1.7 million transferred by Stimm to K&S, Mr Arippol explains that he arranged for a further £200,000 to be sent to the K&S client account on 17 September 2012 (although it appears that the money did not reach K&S's account until 19 September 2012 – p. 1074). In fact, there had already been an email exchange between Mr Arippol and Mr Trimmatis on 13 September 2012 about "another GBP 200K" being sent to K&S as an addition to the £1.7 million already sent (p. 5374). This money, however, did not come from Stimm, which seems not to have had the funds readily available. Instead, the money was sent to the K&S client account by Opim Trading Ltd ("Opim"). Opim is a company incorporated in Wyoming and controlled by Mr Fischele, who agreed to lend the money to Stimm.
- The evidence of both Mr Arippol and Mr Fischele is that £200,000 was repaid to Opim by Stimm in December 2014 but, as I shall explain, Stimm has not itself been repaid. Stimm says that this £200,000 was subject to the Undertaking, but the Defendants deny that was the case. They say they did not make the connection between Opim and Stimm, and they believed they were entitled to apply the money in accordance with Mr Trimmatis' instructions.
- In addition, it appears that Vennbridge also loaned £600,000 for the Parkes Hotel to Concept at around the same time (p. 5381). When added to the £1.7 million sent to K&S by Stimm and the £200,000 sent to K&S by Opim, this totals £2.5 million, which was the sum Mr Trimmatis had originally asked to borrow from Mr Arippol in connection with the Sale.
- As I have said, contracts were exchanged between Vannes and Harbinger on 18 September 2012 (p 1158, 1171). Mr Trimmatis Snr signed on behalf of Vannes and Mr Heilpern signed on behalf of Harbinger (pursuant to a power of attorney). The date initially set for completion was 30 November 2012. The completion date was, however, postponed by agreement on several occasions, for reasons which do not matter for present purposes.
- On 20 September 2012 Ms Newton (acting for Vannes) sent an email to Mr Heilpern saying her client's lenders and NAMA required Harbinger to provide a letter confirming, amongst other things, that it was not a "person connected to Vannes" (p. 4288). The phrase "connected to" was defined in considerable detail in the draft of the letter attached to Ms Newton's email, but I do not need to set it out. I will consider later the reasons why this confirmation was required. It was addressed to Colliers, real estate agents who were instructed by Vannes. It was signed by Osbar and a copy was emailed to Mr Heilpern by Totalserve on 16 October 2012 ("the NAMA Confirmation") (p.3358, 4287).
- In an email to Mr Trimmatis on 17 October 2012 headed "Equity Funds" Mr Arippol wrote as follows (p. 5381):
"For good order's sake, the following sums were sent in September and received by your solicitors and your Concept Business Group as follows:
GBP 1,700,000.00 from Fondation Stimm to your solicitor
GBP 200,000.00 from a Wyoming company belonging to C. Fischele to your solicitor
GBP 600,000 from Vennbridge International Ltd to Concept Business Group.
Totaling GBP 2.5 milion.
As agreed, these funds are to be used as equity for the purchase of the Parkes property and are to be returned to the respective senders if the deal does not go through."
- On 11 December 2012 Mr Fischele also wrote to Mr Trimmatis, copying Mr Arippol, saying "I really need to finalize BEFORE CHRISTMAS a contract between Fondation Stimm, Opim and yourself, or any of your companies, regarding the funds sent to you…" (p. 5351).
- In the first half of December 2012 AWI, represented by Stephenson Harwood LLP, seems to have asked K&S to give a solicitor's undertaking to the effect that the £1.5 million introduction fee payable by Harbinger Guernsey pursuant to the deed dated 18 July 2012 would be paid at the same time as completion. Between around 13 and 17 December 2012, Mr Heilpern took a number of steps in connection with Stephenson Harwood's request. First, he arranged to have Harbinger Guernsey incorporated, with him as the nominee shareholder. Secondly, he negotiated the terms of the solicitor's undertaking with Stephenson Harwood. Thirdly, he sought written instructions from Mr Trimmatis.
- In the course of the negotiations with Stephenson Harwood concerning the undertaking, Mr Heilpern removed wording sought by Stephenson Harwood aimed at ensuring that the undertaking would be honoured, even if the purchaser was not Harbinger Guernsey. Indeed, the draft undertaking at one stage expressly named Harbinger as the intended purchaser of the Parkes Hotel (with Harbinger Guernsey as the proposed purchaser of the shares in Harbinger), which suggests that AWI might have been aware that Harbinger (not Harbinger Guernsey) was the party which had exchanged contracts with Vannes (p. 2205, 4292). Mr Heilpern also declined to include wording in the undertaking to the effect that K&S would notify AWI if circumstances arose in which K&S would no longer be required to make the payment to AWI and that they would not complete the purchase for at least 48 hours after such notification (p. 4290).
- An undertaking, signed by Mr Heilpern, that AWI would be paid £1.5 million on completion of a purchase by Harbinger Guernsey was ultimately provided, although it is not clear when (p. 2215). The undertaking is dated 4 December 2012, which cannot have been when it was signed, given that its terms were still being negotiated on 17 December 2012. The undertaking is expressed to be subject to various pre-conditions, the sixth of which was that "if completion of the purchase of the Property by [Harbinger Guernsey] does not occur, then this undertaking shall have no effect nor shall it be enforceable in any way whatever." Thus, if (as happened) Harbinger Guernsey did not acquire the Parkes Hotel, the undertaking had no effect and the fee would not be paid.
- It is not clear to me precisely when Mr Trimmatis first identified Aerium as a potential source of external funding, although Mr Atkins mentioned in the course of his submissions that it was August 2012. In any event, as already mentioned, Aerium was ultimately an equity investor in Harbinger, and Aerium's "in-house" Aeriance Fund ("Aeriance") was the debt investor. Aerium was represented by Burges Salmon LLP and Aeriance by Salans LLP. The first reference I have seen to Burges Salmon in the evidence is in an email from Mr Paul Clark, a solicitor at Burges Salmon, dated 17 December 2012 which asks a number of questions about title, leases, planning and tax (p. 2197). The solicitors at Burges Salmon involved in the deal also included a Mr Richard Clark, so with no disrespect to either of them, it is less confusing simply to refer below to Burges Salmon. From 17 December 2012 onwards there was regular contact between Mr Heilpern and Burges Salmon in relation to tax issues, and numerous other aspects of the deal which are not material to the application before me.
- So far as tax is concerned, Burges Salmon asked about both VAT and Stamp Duty Land Tax ("SDLT"). SDLT was payable by Harbinger as the purchaser. If the Sale was a "high value residential transaction" it was payable at a rate of 15%, but this would fall to 4% if the transaction did not involve residential property. On a purchase price of £33.5 million, that was a difference of £3.685 million, so it was in Harbinger's interests to show that the transaction was not residential. A hotel would not be residential, but the Parkes Hotel had been bought with a view to development into residential units. Thus, the issue was whether, for the purposes of the relevant provisions in Schedule 4A of the Finance Act 2003, the Parkes Hotel was in the "process of being constructed or adapted" into residential dwellings. If not, the lower rate of SDLT would be payable.
- VAT would have been payable by Vannes as the vendor, since Vannes was registered for VAT. Vannes was, however, proposing to cancel its VAT registration. As I understand it, that was permissible if no VAT was payable on the Sale. VAT would be payable at the rate of 20% if the Parkes Hotel continued to be used as a hotel, but the Sale would be zero-rated if it was in the course of conversion to residential use. The essential issue was whether, within the meaning of paragraph 5.7.3 of HM Revenue & Customs Notice 708 (Buildings and Construction), a "real and meaningful start on the conversion has been made. This means that the work must have been more than securing or maintaining the existing structure." If that was the case, Vannes had "person converting" status and was entitled to sell the building without charging VAT.
- It follows from these considerations that it was in Harbinger's interests to show that the Parkes Hotel was not in the "process of being constructed or adapted" into residential dwellings. It was, by contrast, in Vannes's interests to show that a "real and meaningful start on the conversion" of the Parkes Hotel to residential use had been made.
- Mr Trimmatis instructed Shipleys LLP, a firm of accountants, to advise Vannes in relation to its VAT de-registration. On 3 January 2013 he asked Ms Nancy Cruickshanks of Shipleys to brief Mr Heilpern on the process (p. 4644). She sent Mr Heilpern an email the same day (p. 4643). In the context of the privacy issue, which I explain below, Mr Atkins suggested that this email might arguably be privileged. I am not convinced by that, since Ms Cruickshanks was an accountant acting for Vannes, the vendor, whilst Mr Heilpern was acting for Harbinger, the purchaser. Nevertheless, in case I am wrong, I shall restrict my quotation from it to a single sentence, which reads as follows: "Having consulted with Nicholas [i.e. Mr Trimmatis] it is my understanding that the conversion of the building is in progress and I have seen photographs and correspondence with Regional Building Control which confirms that the building is indeed in the course of being converted from commercial to residential use."
- On 17 January 2013 Mr Kevin Conway of K&S produced a draft memorandum containing SDLT advice for Harbinger (p. 2542). So far as I am aware, the final version of this memorandum (if there was one) is not in evidence. This does seem likely to be a privileged document, so I shall not recite its contents. It is not necessary to do so, because Stimm relies on it primarily for what it reveals about the instructions given to Mr Conway by Mr Trimmatis, and Mr Trimmatis subsequently produced a statutory declaration to record his account of the factual position for SDLT purposes ("the Declaration"), which was shared with Burges Salmon and is not privileged.
- Mr Heilpern assisted with the preparation of the Declaration from around 31 January 2013 and one of the drafts was sent to Burges Salmon and so is also unlikely to be privileged (p. 2480). The final version is dated 5 February 2013 (p. 2969) and was sent to Burges Salmon so that Aerium could take its own SDLT advice (p. 2138, 2378). Amongst other matters:
i) The Declaration is made by Mr Trimmatis in his capacity as managing director of Concept. He says that he has "been appointed by the owner to manage the property formerly known as the Parkes Hotel." He does not say that he is an ultimate beneficial owner of Vannes, or of Harbinger, so it was not obvious that he stood to gain from a determination that no SDLT was payable.
ii) Mr Trimmatis states in the third paragraph that, "In order to protect the nature of the planning permission certain works noted below have been carried out at the Property but no work (other than bare maintenance) is currently progressing at the Property and the Property is not in the process of being constructed or adapted for use as one or a number of single private dwelling houses."
iii) In the fifth paragraph, Mr Trimmatis says, "I am advised that any current use as a dwelling house would be prohibited under planning law unless or until major construction and conversion works have been completed in accordance with the planning permission. Those construction and conversion works have not even commenced."
iv) In the seventh paragraph he says, "the Property has been marketed for sale under the auspices of NAMA/IBRC as a hotel with the potential for residential conversion" (emphasis in original).
- In the meantime, IBRC's query about whether Vannes had any connection with Harbinger had re-emerged during January 2013. There is a print-out of a long email from Mr Heilpern to Ms Newton in evidence which is undated and without meta-data (p. 4417). It is possible to deduce from a reference to events which are said in the email to have happened "yesterday" that it is likely to have been composed on 16 January 2013. The thrust of the email is a complaint that IBRC might not be willing to proceed with the redemption of its charge at the contractually agreed price of £33.5 million, and a threat that Harbinger would take action to enforce the contract if necessary. It appears from the third and fourth paragraphs of the email that IBRC's position might have had something to do with communications between Colliers and AWI. Mr Heilpern said, amongst other things, that "AW Investments were involved up until the end of last year when a dispute arose, which explains their sour grapes and their apparent desire to see the current agreement frustrated, which of course it cannot be."
- The fifth paragraph of Mr Heilpern's email reads:
"Furthermore, and even though the same is not a contractual obligation, the buyer has signed the NAMA Act declaration (the original of which I will have in my hands tomorrow) to confirm that the buyer is not connected to the seller exactly in the terms the seller, and presumably IBRC, have required, so I do not understand what else the seller or IBRC actually requires or needs. Provided IBRC expressly confirms that it is now prepared to allow the sale to proceed, and, if required, buyer would then be prepared to provide further disclosure to IBRC against the provision of a binding NDA being first signed by IBRC."
- It appears, therefore, that IBRC had sought further confirmation that Vannes and Harbinger were unconnected at this time, possibly in the context of a concern about the price Harbinger was paying. The reference to the "NAMA Act declaration" is a reference to the NAMA Confirmation. There is another signed version of the NAMA Confirmation which appears to be identical to the version dated 16 October 2012 referred to above, except that it is dated 11 January 2013 (p. 3919). It appears from Mr Heilpern's comment (that he would soon have the original in his hands) that this version of the NAMA Confirmation may have been produced in order to allay IBRC's concerns.
- Mr Heilpern sent a draft non-disclosure agreement to Ms Newton on 21 January 2013 (p.1939), saying "we do want matters kept entirely confidential to you, the seller and IBRC only." There is a copy of what appears to be the draft NDA between IBRC and Harbinger in evidence (p. 2539), clause 5 of which expressly obliges IBRC not to disclose the defined "Confidential Information" to "Colliers and AW Investments to whom such information must not be provided under any circumstances…"
- He also attached the NAMA Confirmation, saying he now had the original. She replied the same day as follows (p. 1939):
"It is also appreciated that the declaration required previously by the Bank/NAMA was signed by [Harbinger] but I understand that the Bank/NAMA require specific written confirmation from the beneficial owner that neither the director(s) nor shareholder(s) not [sic] beneficial owner(s) and therefore [Harbinger] is not in any way connected to or associated with the Seller or the directors/shareholders/beneficial owners of the Seller nor with Mr Nicholas Trimmatis. Thank you for confirming that you now hold the original of the form previously signed by [Harbinger]. Do I assume that by sending a draft NDA, as requested, your client is unwilling to provide the requested information without this being in place?"
- Mr Heilpern replied, "We would like the NDA first." (p. 1939)
- On 23 January 2013 Ms Christofidou of Totalserve confirmed to Mr Heilpern that the ultimate beneficial owner of Harbinger was Mr Arippol (p. 1026). Mr Heilpern replied (p. 1025) asking for a copy of the share register and asking, "please do advise me if that ownership changes at all, as I will be relying upon it for a confirmation of the same, which I have been asked to give to the seller, once the seller in turn confirms that the information will be treated in strict confidence."
- Ms Christofidou replied the same day (p. 1025) attaching a copy of a Trust Deed dated 12 September 2012, purportedly made between Mr Arippol as Grantor and Limesi as Trustee, effectively appointing Limesi to act as Mr Arripol's nominee ("the Arippol Trust Deed") (p.1029). The document bears a signature on behalf of Limesi and a purported signature by Mr Arippol. Mr Arippol denies it is his signature. Whilst it is difficult to be sure, the signature does appear somewhat different from those on Mr Arippol's ID card and his witness statement. In particular, the distinctive shape of the "E" (for Edwin) and the curl on the "l" at the end of the name on the ID card and witness statement do not appear to be the same as those on the Arippol Trust Deed.
- The signatures of Limesi and Mr Arippol on the Arippol Trust Deed appear to have been witnessed by the same person. The name of the witness cannot be discerned, but the two signatures are the same and reasonably distinctive. A point made by Mr Atkins is that Mr Arippol was at this time living in Italy, whilst the officers of Limesi are likely to have been based in Cyprus, or possibly in the BVI. It does, therefore, appear unlikely that the same person can have witnessed both signatures on the same day.
- The case advanced by Mr Atkins is that Mr Arippol's signature on the Arippol Trust Deed is forged, but that it was properly executed on behalf of Limesi so that it had the legal effect of bestowing the beneficial interest in the shares on Mr Arippol. That is a matter for trial, and I will express no view on it. Nothing I say elsewhere in this judgment is intended to prejudge that issue, one way or the other.
- An obvious query arising from the Trust Deed is how Limesi could have been holding the shares of Harbinger on trust for Mr Arippol since 12 September 2012, when Mr Heilpern had apparently been told on about 14 September 2012 that the ultimate beneficial owner of Limesi was Mrs Trimati. I will return to that query later.
- On 25 January 2013 Ms Newton responded to Mr Heilpern's email about the non-disclosure agreement (p. 1800), saying:
"…we are still waiting to learn if IBRC/NAMA will enter into the NDA that you have requested. It is my understanding that they would not usually expect to be asked to do so, nor actually do so. Bearing that in mind, would you please ask your client to permit you to disclose the information requested by IBRC/NAMA to this firm for onward transmission to IBRC/NAMA…"
- Over the course of 28 and 29 January 2013 Mr Heilpern sent Mr Trimmatis two versions of a draft response to Ms Newton's email, and it appears that they must have discussed the draft (p. 1798). The final version this email was sent by Mr Heilpern to Ms Newton on 29 January 2013 (p. 1031). It read as follows:
"Further to your request for further disclosure, which we have considered carefully, and in strictest confidence, we are able to confirm that Edwin Arippol, who is an experienced investor and developer holding family real estate assets in Central Europe, London and the USA, is the owner of 100% of [Harbinger].
[Harbinger] is and remains capable of completing the deal immediately as per the original confirmation about the buyer provided to NAMA. However, [Harbinger] works in conjunction with large real estate funds as co investors and for this deal this is also the case but [Harbinger] will remain a substantial stake holder. Upon completion we can also disclose the co investor name but pending completion confidentiality should govern this joint venture currently for obvious reasons. Confidentiality is required because of the desire to maintain a low profile operation at times, for general market confidentiality and for tax planning purposes.
Furthermore, as you know, [Harbinger] has already certified specifically and directly in exactly the form required by NAMA that [Harbinger] has no connection whatsoever with the Seller…" (emphasis added)
- I understand from Mr Atkins' submissions that, following this email, Ms Newton does not appear to have raised the issue of a connection between Harbinger and Vannes again.
- During January 2013 the terms on which Aerium was to finance the Sale had begun to take shape. (For present purposes, it is unnecessary to complicate matters by distinguishing between Aerium and Aeriance and I shall simply refer to Aerium unless it is necessary to differentiate between them.) It had become clear that Harbinger would complete the Sale and that a company called Beaufort 43 Ltd ("Beaufort"), ultimately owned by Aerium, would simultaneously acquire 95% of the shares in Harbinger from Limesi (p. 2186). A number of different agreements were under negotiation and there were numerous moving parts. One aspect of the contemplated transaction was that, since Aerium's vehicle, Beaufort, was to acquire shares in Harbinger, Aerium wanted to be satisfied that Harbinger did not have outstanding liabilities to third parties. With that in mind, Burges Salmon recorded in an email of 24 January 2013 to Mr Heilpern dealing with a range of matters (p. 2190), that Mr Heilpern had agreed to "provide copies of the loan documentation between Harbinger and the company that provided the loan for the deposit…"
- Shortly thereafter on the same day (24 January 2013), Mr Trimmatis sent an email to Mr Heilpern (p. 2014) saying, "We now need to structure a professional financing agreement between ICMOFIL Limited – a Cypriot financing company and HARBINGER for the amount of £1.7m in GBP used for exchanging in September." Mr Heilpern wrote in manuscript on this email "Frankel BG Ltd is the 5% shareholder for £1m…" I will come back to Frankel BG Limited ("Frankel BG") in a moment.
- The next day Mr Trimmatis sent Mr Heilpern a template for a financing agreement (p. 2012) and said, "We need to make a change and /or addition that may relax any concern that Aerium may have on the financing of the £1,7m and any potential liability by [Harbinger] – on the form that when completion occurs on [the Parkes Hotel] the liability of the amount of £1m GBP from [Harbinger] goes to Frankel BG Limited which is the BVI company that will enter into the shareholder's agreement owning the 5% - with no further liabilities from [Harbinger]. That means that the balance of £700,000 will be paid back to the financing company."
- What Mr Trimmatis was referring to in this email was a deal he had reached with Aerium in relation to the £1.675 million which had been used to pay the deposit on exchange of contracts. That money had, of course, originally come out of the £1.7 million paid to K&S by Stimm, but it seems that Aerium did not know the source and regarded it as money coming from Mr Trimmatis.
- Aerium had agreed that, on completion, £1 million of the deposit would be treated as equity, entitling Mr Trimmatis (or one of his companies) to 5% of the shares of Harbinger. The shares of Harbinger were registered in the name of Limesi, which was the party initially named in the draft agreements as the seller of 95% of the shares to Beaufort. Mr Trimmatis seems to have had in mind at around this time that his 5% shareholding would ultimately be owned by Frankel BG, which was registered in the BVI, although (as explained below) that was not ultimately the company which came to hold 5% of the shares.
- Aerium had agreed that the remaining £650,000 of the deposit was to be repaid to the original lender, which Mr Trimmatis had summarised in his email as the balance of £700,000 being paid back to the "financing company." Aerium was concerned to ensure that the loan was extinguished as a result of these transactions and Mr Trimmatis appears to have wanted Mr Heilpern to document that by drafting a loan agreement between a company called Icmofil Investments Ltd ("Icmofil") as the lender and Harbinger as the borrower. Icmofil was incorporated in Cyprus and was another company owned by Mr Trimmatis. (Burges Salmon's understanding of these arrangements was subsequently reflected in Burges Salmon's emails of 14 February 2013 and 19 February 2013 at p. 1062, 2112.) Stimm was not mentioned.
- On 28 January 2013 Mr Heilpern sent a draft loan agreement between Icmofil and Harbinger to Mr Trimmatis with some amendments in manuscript. The date was left blank, other than the year "2013" (p. 1986). On 5 February 2013 Mr Heilpern sent a draft of the loan agreement to Burges Salmon, saying that it "will be entered into" (i.e. in the future) before the Sale. Again, the date was left blank, other than the year "2013" (p. 1049). On 6 February 2013 Burges Salmon sent an email listing a number of matters to be dealt with, including the deposit loan, in relation to which they said, "The loan agreement is to be entered into and marked as repaid on completion…." (p. 2134).
- On 7 February 2013 Mr Trimmatis sent an email to Totalserve (p. 2132) referring to what I assume must have been a previous draft of the loan agreement and saying that the structure needed to be changed so that there were two agreements:
"1- Agreement no. 1 – as initially provided – between the above parties commencing the 30th August 2012 for one year at 4% interest.
2- Agreement no.2 – between [Harbinger] – ICMOFIL Investments Limited – that on completion of the property that [Harbinger] acquires £675k will be repaid and the liability of £1m plus interest of the outstanding loan will be transferred to Frankel Limited. Please date this agreement at today's date."
- So far as "Agreement no.1" described by Mr Trimmatis is concerned:
i) On 14 February 2013, Mr Heilpern sent Burges Salmon an executed version of the loan agreement between Harbinger and Icmofil, which was dated 30 August 2012 (p. 1057, 1058, 3359) ("Loan Agreement"). This provided, amongst other matters, for Icmofil to lend £1,675,000 to Harbinger with interest charged at 4% above the annual Barclays Bank base rate. Partial repayment was expressly permitted. In particular, clause 1(e) expressly required repayment of £675,000 by a date in February 2013 which was left blank. It is obvious from the negotiations to which I have referred above that the Loan Agreement was not executed on 30 August 2012. Indeed, it could not have been, since Harbinger was not yet incorporated at that time. Moreover the provision for repayment of £675,000 was obviously included to fit with the deal which Mr Trimmatis had done with Aerium sometime after 30 August 2012.
ii) The evidence also includes a written resolution of Ms Maria Lazari Eracleous, representing Osbar as the director of Harbinger, dated 11 February 2013 (p. 3397). This records "That the Company [i.e. Harbinger] entered into the Loan Agreement dated 30th August 2012, as the "Borrower", and [Icmofil] as the "Lender" subject to the terms and conditions of the above mentioned agreement. The Director of the Company hereby approves, accepts, confirms and ratifies the execution of the above mentioned agreement by Evgenia Kyprianou on the 30th August 2012." Again, the Loan Agreement cannot have been entered into on 30 August 2012.
- In relation to the document described by Mr Trimmatis as "Agreement no.2" in his email of 7 February 2013:
i) On 8 February 2013, Mr Heilpern sent an email to Mr Trimmatis setting out a draft letter from Icmofil, to be countersigned by Harbinger and Frankel BG, which explains that £1 million of the loan from Icmofil was to be transferred to Frankel BG, with a view to that loan then being converted into equity, in the form of 5% of the shares in Harbinger (p. 2130). This draft does not appear to have been taken further.
ii) Instead, the evidence includes various drafts, some dated 8 February 2013 (p. 1881, 1888, 2643, 2644, 2968), of an agreement between Icmofil & Harbinger entitled "Addendum No.1 to the Loan Agreement dated 30th August 2012".
iii) Mr Heilpern sent a draft of this addendum to Burges Salmon on 14 February 2013, saying that it may already have been signed, or else that it would be signed in the course of the day (p. 1057).
iv) Burges Salmon replied saying that their concern was to ensure that Harbinger was released from liability under the Loan Agreement and suggesting that the draft addendum might not achieve that because it was arguably expressed to be conditional on the transfer of liability to Frankel BG (p. 1062). Burges Salmon gave some suggestions as to how to resolve that issue, one of which was to provide a full deed of release from Icmofil, deliverable on completion.
v) A Cypriot legal opinion was obtained from E Economides & Partners LLC relating to the enforceability of the addendum. Both Burges Salmon and Salans commented on a draft of the opinion on 22 February 2013 and, although the opinion referred to the loan agreement being dated 30 August 2012, they did not raise any concerns about that (p. 1067 - 1073).
vi) A document with the title "Addendum No.1 to the Loan Agreement dated 30th August 2012" was ultimately executed and dated 26 February 2013 ("Addendum") (p. 4370). It recorded that the Loan Agreement between Harbinger and Icmofil had been executed on 30 August 2012 (which was incorrect) and provided, amongst other matters, that:
"The Borrower [i.e. Harbinger] shall be free of any Liabilities (as defined below) on completion of the acquisition of the property at 41 to 43 Beaufort Gardens London Sw3 [i.e. the Parkes Hotel] for which the Borrower has borrowed the amount of £1,675,000 GBP from the Lender [i.e. Icmofil] since on completion £675,000 will be repaid to Lender by the Borrower and the balance of the Liabilities plus the accrued interest is to be transferred to Frankel BG Limited.
In consideration of the above with effect from the date of this Deed, the Lender hereby absolutely and unconditionally releases and frees the Borrower from all covenants, liabilities, obligations, debts, demands or costs ('Liabilities') hereby owed by the Borrower to the Lender (past present or future, actual or contingent) by or pursuant to the Loan Agreement…"
vii) There is also a resolution dated 26 February 2013 signed by an officer of Osbar as director of Harbinger, resolving that Harbinger should enter into the Addendum, and referring to the date of the Loan Agreement as 30 August 2012 (p. 3395).
- By around 18 February 2013, there appears to have been a change of plan, involving a transfer of the shares of Harbinger from Limesi to a BVI-registered company called Frankel Estates Ltd ("Frankel Estates"), which would then become the entity selling 95% of those shares to Beaufort and would retain 5% of the shares on behalf of Mr Trimmatis. Burges Salmon asked Mr Heilpern about this change in an email on 18 February 2013 (p. 2783). There is a suggestion in an email exchange between Mr Heilpern and Burges Salmon on 19 February 2013 (p. 2126) that this change came about because Salans (for Aeriance) had required a debenture to be given by the entity ultimately holding 5% of the Harbinger shares, although it is not clear precisely why this necessitated the transfer from Limesi to Frankel Estates. On 19 February 2013 Mr Heilpern prepared a "Funds Flow Statement" which listed the sum of £675,000 as being used to "Repay Limesi/Frankel Estates" (p. 2121). Stimm says that there was nothing to "repay" to Limesi or Frankel Estates. In the light of the change of shareholder to Frankel Estates, it is curious that the subsequent Addendum (considered above) referred to the debt owed to Icmofil being transferred to Frankel BG, rather than to Frankel Estates, which was (of course) a different company.
- Be that as it may, it will be recalled that the Arippol Trust Deed (dated 12 September 2012) sent to Mr Heilpern on 23 January 2013 purportedly established Mr Arippol as the beneficial owner of the shares in Harbinger. The change of plan referred to above involved Frankel Estates owning the Harbinger shares absolutely, which required Mr Arippol to surrender whatever beneficial interest he had.
- On 19 February 2013 Ms Kyprianou of Totalserve sent Mr Heilpern copies of documents in connection with the transfer of the Harbinger shares from Limesi to Frankel Estates. Mr Heilpern forwarded the email and the attachments on to Burges Salmon (p. 1034). The attached copy documents included an instrument of transfer dated 18 February 2013 (p. 1035) and associated share certificates, register of members and a written resolution of Osbar as director of Harbinger. Importantly, the documents included a Deed of Termination of Trust dated 18 February 2013, signed by Ms Kyprianou of Totalserve on behalf of Limesi as trustee, but not signed by Mr Arippol as beneficiary (p 1037). The recital incorrectly recorded Harbinger as incorporated in Cyprus (rather than the BVI) and the nominal value of the shares as C£1 each (rather than US$1). The principal provision of the deed was a direction by Mr Arippol authorising Limesi to transfer all 1,000 shares in Harbinger to Frankel Estates.
- Burges Salmon evidently forwarded the documents to Salans, who spotted the defects in the Deed of Termination of Trust, so Burges Salmon emailed Mr Heilpern on 22 February 2013 asking for these issues to be addressed (p. 1042). On 25 February 2013 Mr Trimmatis sent Mr Heilpern a corrected version of the Deed of Termination of Trust, which Mr Heilpern forwarded to Burges Salmon (p. 1044). That version of the Deed of Termination of Trust ("Arippol Deed of Termination of Trust") was now purportedly signed by Mr Arippol as beneficiary, although still dated 18 February 2013 (p. 1045). Mr Arippol denies signing the Arippol Deed of Termination of Trust. Again, whilst it is difficult to be sure, the signature does not clearly match with the examples of Mr Arippol's signature on his ID card or his witness statement.
- On 1 March 2013 Ms Christofidou of Totalserve sent Mr Trimmatis and Mr Heilpern a series of three emails attaching a number of documents relating to Harbinger, each of which Mr Heilpern then forwarded to Burges Salmon (p. 4138, 4158, 4189). The documents attached included:
i) A Trust Deed dated 12 September 2012 whereby Limesi agreed to hold the Harbinger shares on trust for Mrs Trimati ("Trimati Trust Deed") (p. 4194). This document was unsigned by Mrs Trimati, although it was signed on behalf of Limesi.
ii) A Deed of Termination of Trust dated 12 September 2012 between Mrs Trimati and Limesi, whereby Mrs Trimati directed Limesi to hold the shares on trust for Mr Arippol ("the Trimati Deed of Termination") (p. 4151). The signature of the individual who witnessed Mrs Trimati's signature appears to match that of the individual who witnessed the Arippol Trust Deed.
iii) A copy of the Arippol Trust Deed dated 12 September 2012, referred to above, whereby Limesi agreed to hold the Harbinger shares on trust for Mr Arippol (p. 4197).
iv) A copy of the Arippol Deed of Termination of Trust, referred to above, whereby Mr Arippol directed Limesi to transfer the shares to Frankel Estates (p. 4153).
- These documents go some way to answering the question I posed earlier, as to how Limesi could have been holding the shares of Harbinger on trust for Mr Arippol since 12 September 2012, when Mr Heilpern had apparently been told on about 14 September 2012 that the ultimate beneficial owner of Limesi was Mrs Trimati. The documents purport to show that Mrs Trimati had originally been the beneficial owner of the shares, but on 12 September 2012, the same day Limesi declared themselves trustee for Mrs Trimati, she had transferred her interest in the shares to Mr Arippol. That would still mean, however, that what Mr Heilpern was told on 14 September 2012 was wrong, since although Mrs Trimati had been the beneficial owner, she was no longer the beneficial owner at that date.
- On 5 March 2013 Ms Christofidou sent further documents to Mr Heilpern, which he passed on to Burges Salmon. These included:
i) The executed Loan Agreement dated 30 August 2012 referred to above, between Harbinger and Icmofil (p. 3359).
ii) The executed version of the Addendum dated 26 February 2013 referred to above, between Harbinger and Icmofil (p. 3337).
iii) Resolutions by Osbar as director of Harbinger to enter into the Loan Agreement and the Addendum (p. 3397, 3395).
iv) An Instrument of Transfer of Beneficial Ownership dated 12 September 2012, pursuant to which Mrs Trimati transferred her beneficial interest in the Harbinger shares to Mr Arippol "for good consideration" ("Instrument of Transfer") (p. 3375). This was signed by Mrs Trimati and purports to be signed by Mr Arippol, but again he denies signing it. Again, the signature does not appear a good match for those on Mr Arippol's ID card or witness statement. The signature of the witness appears to be the same as those on the Arippol Trust Deed and the Trimati Deed of Termination (both purportedly also signed on 12 September 2012). Mrs Trimati was either in Greece or London, whilst Mr Arippol was in Italy. The individual who signed the Arippol Trust Deed on behalf of Limesi is most likely to have been in Cyprus.
- Completion occurred on 8 March 2013 and involved the following (amongst many other matters):
i) The Parkes Hotel was conveyed by Vannes to Harbinger.
ii) 950 shares in Harbinger were conveyed by Frankel Estates to Beaufort.
iii) The remaining 50 shares in Harbinger were retained by Frankel Estates.
iv) The price payable by Harbinger to Vannes was £33.5 million. LSG already held the deposit of £1.675 million (which had been paid using the money from Stimm), so the balance due on completion was £31.825 million. That latter sum was funded by Aerium, although (as I understand it) it was paid directly to IBRC/NAMA in partial discharge of its charge.
v) The full redemption sum which needed to be paid to IBRC/NAMA was £32,764,634.90. That was funded by using the £31.825 million from Aerium together with £939,634.90 out of the deposit held by LSG. The remainder of the deposit (£735,365.10) was released to Vannes.
vi) No VAT was paid by Vannes.
vii) SDLT was paid by Harbinger at a rate of 4%, amounting to the sum of £1.34 million, which was funded by Aerium.
viii) In addition to the sum paid to IBRC/NAMA, Beaufort / Aerium funded a payment by Harbinger of £675,000 to K&S for the benefit of Icmofil, in partial discharge of the loan purportedly recorded in the Loan Agreement. In my judgment, this payment had the same effect as if Beaufort / Aerium had paid £675,000 more to Vannes, and Vannes had returned that amount to Harbinger out of the deposit which it was holding. Everyone seems to have understood that the £675,000 paid to K&S was to be regarded as a return of part of the original deposit. It is common ground on the pleadings that that sum was paid into K&S's client account on 11 March 2013 with the narrative "Deposit: Re Stimm Foundation/Beaufort Gardens."
ix) The remaining £1 million of the purported loan from Icmofil was the subject of a deed of release whereby Icmofil released Harbinger from all liability under the Loan Agreement ("Deed of Release"). So far as I am aware, there is no copy of the executed Deed of Release in evidence, but there are documents from which it can be inferred that it was provided (p. 1778, 3702) and the Defendants admit as much.
x) Beaufort, Harbinger and Concept entered into a development consultancy agreement ("the Development Consultancy Agreement"). Mr Heilpern had been involved in negotiations concerning this agreement since around mid-January 2013. I understand the final version of the agreement to be the one at p. 3273, since that is signed by Mr Trimmatis, although it appears to be incomplete. I think a complete (but unsigned) version appears at p. 4002. The agreement required Concept to provide advisory and monitoring services for two years in return for a fixed fee of £400,000, payable in quarterly instalments throughout that period.
xi) Beaufort, Harbinger and Frankel BG entered into a profit share agreement ("the Profit Share Agreement"). Negotiations concerning this agreement had also been ongoing since around mid-January 2013. I understand the final version to be the one at p. 3288, although it has not been executed by all the parties. The provisions of this agreement are fairly complex, but in simple terms, if Harbinger sold all the residential units, or the whole property, or if Beaufort sold its shares in Harbinger, Frankel BG was entitled to a defined percentage of any profit (depending on the internal rate of return achieved), less £150,000. The £150,000 deduction was a proportion of the fee payable pursuant to the Development Consultancy Agreement which the parties had agreed would be treated as an advance of the profit share.
- On 7 June 2013 K&S transferred £702,370.68 to Concept. This payment was recorded in K&S's ledger as "Return of Funds" and the Defendants admit that it included the £675,000 received from Beaufort / Aerium in partial discharge of the deposit and (as I read the Defence) the £25,000 left over from the original £1.7 million received by K&S from Stimm.
- The Defendants' solicitors (Kingsley Napley) have also confirmed, in a letter dated 24 June 2024 (p. 134), that the £200,000 received by K&S from Opim was also paid to Concept. It appears from the witness statements of Mr Arippol and Mr Heilpern that this money (and possibly the other money paid to Concept) was subsequently used by Mr Trimmatis in the purchase of another property, without Mr Arippol's knowledge. Mr Heilpern left K&S in May 2018, and thereafter used Concept's offices to conduct his practice for a short period.
- Mr Arippol says that he began to discover what had happened in January 2020, as a result of speaking to Mr Franck Ruimy, who is one of the partners who control Aerium. Mr Trimmatis was adjudged bankrupt on 2 February 2021 and it appears that in late 2021 the Trustee in Bankruptcy, Mr Nicholas Simmonds of Quantuma Advisory Ltd, made enquiries about K&S's files for matters in which K&S acted for Mr Trimmatis or Concept. Amongst the files provided was the file relating to the Parkes Hotel which Mr Heilpern had opened in Stimm's name. This appears to have led to Stimm requesting a copy of that file in February 2022, which was then provided by the Trustee to Mr Fischele in around June 2022 ("the Stimm File"). Mr Heilpern had left K&S in May 2018 and Mr Marcus Young, the partner in K&S who dealt with the request to release the file, has provided a statement explaining how he checked the file opening materials which showed Stimm as the client and, on that basis, consented to the Trustee releasing the Stimm File to Stimm. The Defendants say this was an error. They accept that any privilege in relation to documents in the file has been lost against Stimm, although (as discussed below) they say that privilege endures against the rest of the world.
- The Stimm File contained hard copy documents only, and so the Defendants have in their possession other relevant documents. In so far as those documents are not privileged, inspection will be provided in the usual way. Stimm's applications before me are aimed at obtaining the relevant documents which are arguably privileged.
- The Stimm File contains over 4,000 pages and was exhibited in its entirety to Mr Elliot's fifth witness statement, in the order in which it was provided. It has been included in the hearing bundle in that order, apparently so that submissions could be made based on the order in which the documents appear, although so far as I recall no one made submissions on that basis. It might have been more helpful for the bundle to have included a proportionate selection of the documents on which Stimm wished to rely, in chronological order. Instead, Stimm provided a Chronology of 122 pages, which I was invited to work through. The Chronology was not, however, agreed with the Defendants and it did not deal with all the important documents, in particular because it omits reference to the documents exhibited to Mr Heilpern's statement, many of which are significant. I have done my best to review all the key documents to which I was referred, but it was neither appropriate nor proportionate for me to conduct my own review of all the documents in the bundle and I have not attempted to do so.
- Concept entered creditors' voluntary liquidation ("CVL") on 24 March 2023. Harbinger was dissolved on 2 May 2023. Frankel Estates and Frankel BG were dissolved on 4 July 2023. It has not been possible conclusively to confirm the current status of Icmofil, but Mr Atkins says on instructions that it too has been dissolved.
- I understand that Mr Trimmatis has not cooperated with his Trustee in Bankruptcy, that a bench warrant has been issued for his arrest, and that an order was made on 27 January 2023 continuing his bankruptcy until he complies with his obligations.
ii) Procedural Background
- Stimm sent a letter before action on 6 September 2022. The Defendants say that this was when they became aware that £25,000 ought to have been returned to Stimm pursuant to the Undertaking (that being the difference between the £1.7 million Stimm paid to K&S and the £1.675 million paid towards the deposit). On 3 March 2023, K&S made an open offer to pay that sum, plus interest, to Stimm and I understand that this money has now been paid to Stimm's solicitors.
- The original Particulars of Claim were dated 21 September 2023 ("the PoC"). Following Stimm's response to a request for further information, the Defence was filed on 4 December 2023. The Reply was filed on 29 January 2024, following the Defendants' response to a request for further information in respect of the Defence. A Case and Costs Management Conference took place on 2 May 2024 before Master McQuail. Paragraph 8 of her Order of that date recorded an acknowledgment by both parties that the Iniquity Application would best be made and determined prior to commencement of disclosure. Accordingly, Stimm was directed to issue the Iniquity Application by 30 June 2024 and disclosure was ordered to be given by 24 October 2024.
- The procedural history thereafter is somewhat convoluted, but I shall summarise it because it is relevant to the Defendants' objection to the court determining allegations of iniquity made against them. On 3 June 2024 the trial was listed to commence in a window beginning on 6 October 2025. Master Brightwell's order of 27 June 2024 extended to 26 July 2024 the date by which Stimm was required to issue the Iniquity Application.
- The Iniquity Application and the Non-Party Disclosure Application were finally issued one day before the deadline, on 25 July 2024. That was initially supported by the second witness statement of Mr Timothy Elliott of Gunnercooke LLP, Stimm's solicitors, which was served two days later, on 27 July 2024. That is a narrative witness statement which summarises Stimm's case by reference to the pleaded issues, but it indicated that Stimm intended to file further statements in support of the applications in due course.
- On 11 September 2024 Master Brightwell gave permission for the Non-Party Disclosure Application to be served on Mr Trimmatis out of the jurisdiction by various methods. As I explain further below, I am satisfied that it was deemed served on him on 16 October 2024 and that he had actually received it by 30 October 2024, at the latest.
- On 23 September 2024 the Defendants wrote to Stimm proposing that disclosure should no longer await the hearing of the Iniquity Application and that lists of documents should be exchanged on 14 February 2025. Stimm rejected that proposal, so the Defendants filed an application for further directions, including for disclosure to take place on 14 February 2025.
- On 9 October 2024, after some friction between the parties, the hearing of the Iniquity Application and Non-Party Disclosure Application was finally listed. That is the hearing which took place before me on 2 and 3 April 2025.
- After two dates had passed on which the further statements in support of the Iniquity Application had been ordered to be served, five supporting statements were finally provided on 31 October 2024. Two of these were statements of Mr Arippol and Mr Fischele, which were produced in compliance with PD 57AC so that they were suitable for use at trial. There were also two short statements from Mr Fraser Elliott (a paralegal) and Mr David Arundel (the solicitor for the liquidators of Concept). The fifth statement was Mr Elliott's fifth witness statement, which exhibits the Stimm File (amongst other documents). Mr Elliott indicated that Stimm intended voluntarily to file a written submission setting out its case on iniquity based on the documents in the Stimm File ("the Iniquity Submission") "before Christmas" 2024. That was expressed to be for the purpose of giving the Defendants adequate notice of Stimm's case in advance of exchange of skeleton arguments for the hearing before me.
- On 26 November 2024 Kingsley Napley (for the Defendants) said in correspondence that they intended to address the evidence served in support of the Iniquity Application in their witness statements without waiting for the Iniquity Submission, since that could be dealt with in the Defendants' skeleton argument. As matters turned out, the Defendants filed their evidence in response to the Iniquity Application on 9 January 2025, including the statements of Mr Heilpern and Mr Young, which were PD 57AC-compliant. The promised Iniquity Submission still had not, however, been produced by that stage.
- The Defendants' application for further directions came before Deputy Master Linwood on 14 January 2025. He noted that Mr Atkins had submitted that Stimm was considering whether to amend the PoC and said that it was very late in the day for such amendments. So far as the Iniquity Submission was concerned, the Deputy Master commented, "Delay whilst the claimant considers at its leisure what else it may allege is not permissible at this late stage." As to disclosure, Stimm said at the hearing that it had not yet started its disclosure exercise. That approach was criticised by the Deputy Master, who directed that disclosure should not await the outcome of the Iniquity Application but should take place by 14 March 2025 (allowing Stimm a month beyond the date sought by the Defendants).
- Stimm was not ready to give disclosure by 14 March 2025, however, which led to its Extension Application before me. To compound matters, on 19 March 2025, Stimm sent the Defendants a draft Amended Particulars of Claim which materially expands the scope of the allegations against the Defendants and potentially affected the width of the disclosure exercise ("the Draft APoC"). The Defendants have consented to the amendments and, as I have mentioned, the issues relating to disclosure were dealt with by consent at the hearing. Nevertheless, the Draft APoC contains 15 new pages of text and advances several new allegations in relation to the alleged fraud on Stimm, including a case that Mr Heilpern was aware that Mr Arippol's signature on various documents was forged.
- The Iniquity Submission was finally provided on 20 March 2025. It is 30 pages long and relies heavily on the documents in the Stimm File. It alleges several new and unpleaded "strands" of iniquity in which the Defendants are alleged to be complicit.
- It is pertinent to note that 19 and 20 March 2025 were less than two weeks in advance of the hearing before me. That is to be contrasted with Mr Elliott's acceptance in his fifth statement that the Defendants would need time before the hearing to address the allegations based on the Stimm File and his proposal that the Iniquity Submission would be provided by Christmas 2024 to allow for that.
iii) The Law
- There can be no privilege in relation to documents or communications which come into existence as part of or in furtherance of an iniquity. For convenience, I shall refer to this as the "iniquity principle." It was common ground that the law concerning the iniquity principle has recently been definitively stated by Popplewell LJ in the Court of Appeal in Al Sadeq v Dechert LLP [2024] EWCA Civ 28. Since there was no material dispute about the law, I will simply summarise the key propositions relevant to the application before me, based on the applicable paragraphs of Popplewell LJ's judgment:
i) Where legal professional privilege exists, it is inviolate: there is no balancing exercise to be undertaken between the interest in maintaining privilege and competing interests in disclosure of the communications, but privilege does not exist if the document comes into existence in relation to a fraud, crime or other iniquity (paragraphs 52-53).
ii) Such "iniquity" is not confined to fraudulent or criminal purposes; it also extends to equivalent underhand conduct which is in breach of a duty of good faith or contrary to public policy or the interests of justice (paragraph 55).
iii) The principle is not confined to cases in which the legal adviser is party to, or aware of, the iniquity. The relevant iniquitous purpose is that of the client, or if the client is being used as a tool for the iniquity by a third party, that of the third party (paragraph 56).
iv) The iniquity exception does not apply to the "ordinary run of cases". Privilege is not prevented merely because the solicitor is engaged to conduct litigation by putting forward an account of events which the client knows to be untrue, and which therefore involves a deliberate strategy to mislead the other party and the court, and to commit perjury. The touchstone in distinguishing such cases from those where the exception applies is whether the iniquity puts the conduct outside the normal scope of a lawyer's professional engagement or is an abuse of the relationship which falls within the ordinary course of that engagement (paragraph 58).
v) One distinction between the "ordinary run of cases" and an abuse of the lawyer/client relationship may be whether the accused person has consulted their legal adviser (i) after the commission of the iniquity for the legitimate purpose of being defended, or (ii) before the commission of it for the purpose of being guided or helped (wittingly or unwittingly) in committing it (paragraphs 82, 158-164, 168).
vi) The abuse of the lawyer/client relationship is a prerequisite to the exception applying at all, and it may be important to distinguish on a document-by-document basis whether the exception applies in the first place (paragraph 168).
vii) There is no distinction in principle between cases in which the iniquity is in issue in the proceedings and those where it is not. Consideration of whether the iniquity exception applies will usually have to take place without the decision-maker being able to assess all the evidence which will subsequently be available on the issue. The party or legal adviser or court is therefore usually required to decide the issue on a provisional basis which may turn out to be wrong. Where the iniquity is an issue in the proceedings, its existence or otherwise will only be determined at trial, often with the benefit of oral evidence. The Court determining a disclosure exercise may have evidence of each party's case, but it will rarely be feasible or appropriate to conduct a mini-trial on the issue for the purposes of disclosure (paragraphs 63, 70-71).
viii) Save in exceptional cases (and no one suggested the case before me falls within that category), the merits threshold for the iniquity exception is a balance of probabilities test: the existence of the iniquity must be more likely than not on the material available to the decision-maker, whether that be the party or legal adviser determining whether to give or withhold disclosure, or the Court on any application in which the issue arises. This is what was meant in the earlier jurisprudence by a prima facie case (paragraphs 63, 108).
ix) Where there is a prima facie case of iniquity which engages the exception, there is no privilege in documents and communications brought into existence "as part of or in furtherance of" the iniquity. These are two categories, either of which is sufficient. "In furtherance of" means documents which are iniquitous in themselves, including communications for the purposes of carrying out a fraud. "Part of" includes documents which report on or reveal the iniquitous conduct in question, including documents brought into existence in preparation for the iniquity and documents which reveal the iniquity, but which come into existence after it is complete. Documents are not "part of" the iniquity simply because they would not exist but for the iniquity (paragraphs 156-169).
x) The Court may fashion an order following an iniquity application to give as much practical guidance as possible to the document reviewers by reference to the individual circumstances of the case (paragraph 155).
iv) The Claimant's Position - the Alleged "Strands" of Iniquity
- Stimm's pleaded case in essence amounts to a claim that the £1.9 million received by K&S from Stimm and Opim was misappropriated by Mr Trimmatis, rather than being repaid. Several alternative causes of action are advanced. First, it is alleged that Stimm was K&S's client, so that there was a breach of retainer, or negligence at common law. Secondly, there is said to have been a breach of the Undertaking. Thirdly, there is said to have been a breach of trust, the terms of the trust being those contained in the Undertaking. Fourthly, there is alleged to have been a breach of fiduciary duty, based on K&S being solicitors acting for Stimm. Fifthly, and introduced for the first time by the Draft APoC, there is an allegation of causing loss by unlawful means, based upon Mr Heilpern making dishonest representations to Beaufort or Aerium. Sixthly, the Defendants are alleged to have been involved in an unlawful means conspiracy with Mr Trimmatis to injure Stimm.
- The "iniquities" on which the current applications are based, however, are not confined to the pleaded allegations, but range more widely. There are said to be at least six strands of iniquity, which in various ways overlap with one another, which I have re-ordered for convenience, as follows:
i) Mortgage fraud. The iniquity alleged in relation to this strand is that Mr Trimmatis dishonestly represented to IBRC/ NAMA that there was no connection between Vannes and Harbinger in order to induce IBRC/NAMA to release its charge over the Parkes Hotel, without investigating whether the Sale was at an undervalue. Stimm alleges that Mr Heilpern actively concealed the connection between Vannes and Harbinger from, or made untrue or misleading statements about it to, LSG, IBRC/NAMA, Burges Salmon and HMRC.
ii) Fraud on Beaufort / Aerium. The central element of this strand of alleged iniquity is founded upon K&S having sent to Burges Salmon the Instrument of Transfer, Arippol Trust Deed, Arippol Deed of Termination of Trust, the Loan Agreement, the Addendum and the Deed of Release. It is to be inferred that these documents were materially relied upon by Beaufort / Aerium when providing finance and purchasing 95% of the shares of Harbinger. Stimm says, however, that they were either forged (in the case of the first three), or backdated (in the case of the Loan Agreement), or fictitious. Stimm also relies on a variety of other documents or representations provided to Burges Salmon which are said to be misleading, including a warranty about the accuracy of the Declaration, a warranty about payment of tax, representations about the beneficiary for whom Limesi held the Harbinger shares on trust, the NAMA Confirmation and resolutions by Osbar alleged to have been backdated. Stimm alleges that the Defendants were co-conspirators with Mr Trimmatis in relation to these matters.
iii) Fraud on Stimm. This strand of alleged iniquity relates to the pleaded allegations which underpin the substantive claim against the Defendants. It has three elements, which are: (i) forgery of the Instrument of Transfer, Arippol Trust Deed and Arippol Deed of Termination of Trust; (ii) creation of the Loan Agreement, Addendum and Deed of Release, which are alleged to be fictitious and (in the case of the Loan Agreement) back-dated; and (iii) payment to Concept of the £200,000 which had come from Opim. Stimm alleged in the original PoC that the Defendants were complicit in (ii) and (iii), and have recently alleged in the Draft APoC that they were complicit in (i) as well.
iv) Fraud on Mr Arippol / Vennbridge. This alleged strand of iniquity concerns the following funding which had apparently been provided by Vennbridge: (i) £2,235,810 to a previous joint venture with Mr Trimmatis which had failed; (ii) £650,000 to Mr Trimmatis to avoid him being made bankrupt pursuant to a personal guarantee; and (iii) £4,588,400 paid towards the purchase price of the Parkes Hotel, agent's commission and costs of the project (amounting in total to around £7.5 million). Mr Arippol's evidence is that he had agreed with Mr Trimmatis that Vennbridge would be repaid the amounts in (i) and (ii) out of the profits of the Parkes Hotel development. The effect of the Profit Share Agreement, however, was that any profits from the development would be distributed to Beaufort and Frankel BG. Moreover, Mr Arippol had been beneficially entitled to 50% of the equity in Vannes, whereas he ended up with no equity in Harbinger (subject to the argument that the Arippol Trust Deed had the effect of giving him an interest in the shares). Stimm does not allege that the Defendants knew about this alleged fraud.
v) Fraud on HMRC. This strand of alleged iniquity relies on the apparent inconsistency between the positions taken by Harbinger and Vannes as to whether the Parkes Hotel was a residential property for tax purposes. It is said that Mr Trimmatis was giving instructions to the tax advisors instructed by both parties and, it is to be inferred, caused inconsistent representations to be made to HMRC about the progress of the development, so as to avoid both VAT and the higher rate of SDLT on the Sale. Moreover, Stimm says the Declaration sworn by Mr Trimmatis was misleading in various respects. Stimm alleges that Mr Heilpern knew that the two inconsistent approaches could not both be correct (but does not contend that Mr Conway was aware of the inconsistency).
vi) Other iniquity. The final strand of alleged iniquity, addressed in Stimm's written submissions but skimmed over by Mr Atkins in his oral submissions, relates to AWI. The essence of the allegation is that the undertaking dated 4 December 2012 and signed by Mr Heilpern was misleading because (i) it was backdated, (ii) Harbinger Guernsey did not exist at the date of the undertaking, and (iii) the undertaking was worthless because it was expressed to be of no effect unless Harbinger Guernsey purchased the Parkes Hotel, which (it is said) Mr Trimmatis and Mr Heilpern knew would not happen.
- Mr Atkins submitted that the effect of these various strands of iniquity is to render the transaction "iniquitous from top to bottom, through and through," such that all the documents which the Defendants hold in respect of the transaction came into existence as part of or in furtherance of iniquity. On that basis, none of them are privileged.
- So far as the Non-Party Disclosure Application is concerned, Stimm says this is necessary in addition to the Iniquity Application for three reasons. First, the subject matter of the Iniquity Application closely concerns Mr Trimmatis and he needed to be given the opportunity to participate. Secondly, it is appropriate to take into account Mr Trimmatis's response to the application, which is that he belatedly objected to it by email, but has not actively engaged with it. Thirdly, Mr Trimmatis needs to be a party to the Court's order to avoid any difficulties which might arise from Mr Trimmatis instructing the Defendants not to disclose documents which the Court has ordered them to disclose.
- If the Iniquity Application and the Non-Party Disclosure Application fail, Stimm seeks an order for a trial of a preliminary issue as to whether Stimm was a client of K&S. Stimm says it would undermine the justice of the whole proceedings for there to be a finding at trial that it was a client of K&S, and so entitled as a joint holder of the privilege to disclosure of the documents it needs to prove its claim, by which stage it would be too late to obtain them for use at the trial.
- Stimm says the issue whether it was a client of K&S is a discrete issue which would narrow the issues in dispute and potentially reduce the time required for the main trial. It estimates that two days would be sufficient. Stimm nevertheless accepts that an order for a preliminary issue at this stage would require the listing of the trial of the whole claim (which is currently in a floating five-day window from 6 October 2025 with a time estimate of ten days) to be repurposed for the trial of the preliminary issue, but says that the prejudice it would suffer if it does not have the documents it seeks outweighs any inconvenience that would cause.
v) The Defendants' Position
- The Defendants' pleaded case is that Stimm was not their client, but that they acted for Mr Trimmatis, Harbinger, Icmofil, Frankel Estates, Frankel BG and Concept. They say their only legal relationship with Stimm arose by virtue of the Undertaking, which was inherently inconsistent with Stimm being a client. They had written authority from Mr Arippol to pay £1.675 million to LSG. The balance of £25,000 was transferred to a third party without authority, but no claim to it was made for almost ten years and they have recently agreed to reimburse it with interest. All allegations of dishonesty and collusive conspiracy are denied. The £200,000 from Opim was never subject to the Undertaking and K&S owed no obligations to Stimm in respect of it. Moreover, the claims are all time barred.
- Since the Defendants deny that Stimm was their client, they are currently unable to advance their defence based on the full set of documents in existence because a proportion are (arguably) privileged, and that (arguable) privilege belongs to Harbinger, Mr Trimmatis and/or the various corporate entities he used. I was told that, in broad terms, around 40% of the documents in the Defendants' possession which are relevant to the issues are actually or arguably privileged.
- Mr Pourghadiri stresses that the Defendants are not seeking to hide behind privilege. He referred me to the judgment of Lewison LJ in Addlesee v Dentons Europe LLP [2019] EWCA Civ 1600 at paragraphs 59 and 60, where authorities are cited which establish that it is a lawyer's duty to claim privilege on behalf of a former client, if it is at least arguable that privilege exists. In my judgment, Mr Pourghadiri is right to say that it is not open to the Defendants to waive their former clients' privilege, or to agree to give disclosure of potentially privileged documents.
- The Defendants' solicitors, Kingsley Napley, wrote around a year ago to Mr Trimmatis and the relevant Minister in the British Virgin Islands in respect of Harbinger (as it is a dissolved BVI company and privilege in a dissolved company vests in the Crown), asking if they would be willing to waive privilege. No response was received from the Minister. So far as I am aware, nothing was heard from Mr Trimmatis until, as mentioned above, he wrote on 31 March 2025 (the day before the hearing) in which to say that he did not "consent to the waiving of privilege" in documents held by K&S relating to matters in which they acted for him or any companies of which he was director or shareholder.
- All the other potential holders of the privilege are understood to be struck off or dissolved, except Concept. Concept was placed into a CVL on 24 March 2023. It has been notified of the Iniquity Application and Non-Party Disclosure Application, and the solicitor for the joint liquidators of Concept has made a witness statement in support of Stimm's application for disclosure. Although he does not expressly say so, it seems clear that the joint liquidators do not assert any privilege on behalf of Concept.
- It was, therefore, always likely to be necessary for Stimm to make an application for specific disclosure. The Defendants say they have sought to co-operate with Stimm in relation to the application and have adopted a neutral stance as to whether the evidence demonstrates, on the balance of probabilities, that Mr Trimmatis's conduct engages the iniquity principle. The Defendants' position, for the avoidance of doubt, is that their neutral stance on this application is not an admission for the purposes of the substantive claim, and they still require Stimm to prove its case at trial as to Mr Trimmatis's conduct.
- The Defendants do, however, object to Stimm inviting the court to find that they were involved in any of the alleged iniquities and they invite me to exclude the issue as to whether they were involved from consideration, pursuant to CPR 3.1(2)(l). Mr Pourghadiri gives four reasons for this objection. First, he says it is unnecessary for the court to make any findings about the Defendants' conduct, because there is no further relief to which Stimm would be entitled as a result of findings against the Defendants to which it would not be entitled as a result of findings against Mr Trimmatis alone. There is no difficulty about Stimm advancing its application solely on the basis of Mr Trimmatis' iniquity, since the iniquity principle applies even where the legal adviser acts in good faith and is unaware of the iniquity.
- Secondly, Mr Pourghadiri submits that it would not be fair to make findings against the Defendants in the circumstances of this case. Mr Heilpern is able to state his genuine beliefs at the relevant times but is unable to refer to his instructions which gave rise to those beliefs, because they are privileged. The Defendants have tried to obtain a waiver of privilege from Mr Trimmatis and Harbinger, without success. Moreover, this is an interim application, determined without the benefit of the full range of evidence which will be available at the trial to be held in due course. Mr Pourghadiri cites paragraph 23 of Lord Bingham's speech in Medcalf v Mardell [2003] 1 AC 120, in which he emphasised, amongst other matters, that the court should not make an order against a practitioner precluded by legal professional privilege from advancing his full answer to a complaint made against him without satisfying itself that it is in all the circumstances fair to do so. Those words were, as is well-known, spoken in the context of an application for a wasted costs order, but I agree with Mr Pourghadiri that there are relevant similarities between that jurisdiction and the one I am exercising. In particular, the court is, in both cases, being invited to make findings which are potentially very damaging to a practitioner without a full trial.
- Thirdly, Mr Pourghadiri submits that it is especially unfair to make determinations about the Defendants' misconduct on an interim basis when, if the Iniquity Application relating to Mr Trimmatis succeeds, more of the relevant materials will be available to inform the court's decision. Mr Trimmatis's position is different because he is not a party to the action and because he could, if he had wished, have chosen to waive privilege, but has not done so.
- Fourthly, Mr Pourghadiri says the potential for unfairness is particularly acute in respect of those allegations advanced for the first time in the Draft APoC and the Iniquity Submission. As I have already explained, the Iniquity Submission and the new parts of the Draft APoC are substantial and make new allegations of dishonesty in which the Defendants are alleged to be complicit. They do not rely on material recently obtained by Stimm, but on documents which Stimm has had in its possession for more than two and a half years. Mr Pourghadiri says the Defendants were entitled to have the allegations of dishonesty made against them properly particularised in good time, so they could consider how they wished to defend them. Indeed, Stimm had promised that the Iniquity Submission would be provided before Christmas 2024, but it was not produced until shortly before the hearing. No explanation has been provided for this lateness.
- I agree with Mr Pourghadiri, essentially for the reasons he gives. Stimm's written submissions say on (by my count) six occasions that the court does not need to make a finding about whether the Defendants were involved in the alleged iniquities for the Iniquity Application and the Non-Party Disclosure Application to succeed (paragraphs 2, 22.2, 24, 41, 48 and 53). I, therefore, asked Mr Atkins at the hearing why he was inviting me to consider the allegations of iniquity against the Defendants at all.
- Mr Atkins explained that his primary submission was that, if any one of the alleged iniquities were established against Mr Trimmatis, that would mean the whole transaction was iniquitous so that there would be no privilege in any of the documents held by the Defendants. But, if I were against him on that, so that only the documents relevant to an established strand of iniquity would be produced, it would be important to establish as many strands of iniquity as possible. Whilst that may explain why Stimm has taken a scattergun approach to the allegations of iniquity against Mr Trimmatis, it does not explain why it is inviting me also to make findings against the Defendants. As Mr Atkins accepted, if a particular strand of iniquity were not established against Mr Trimmatis, it would be impossible for it to be established independently against the Defendants.
- When pressed further, the transcript records Mr Atkins as saying:
"…we have not implicated Mr Heilpern in order to get documents we couldn't get if we established the iniquity only against Mr Trimmatis. That is true, but we have implicated him simply because that is our pleaded case and where the evidence makes that inference frankly unavoidable. But, yes, in terms of the scope of what we are after it makes no difference, I accept that."
- Stimm is not, therefore, contending that a finding of iniquity against both Mr Trimmatis and the Defendants would result in the disclosure of more documents than would result from a finding of iniquity against Mr Trimmatis alone. Stimm's position seems simply to be that it is somehow impractical, or artificial, to consider the allegations against Mr Trimmatis in isolation from those against the Defendants.
- In my judgment, when the allegations of iniquity against the Defendants and the honesty of Mr Heilpern are the very matters which will be in issue at the trial of this action, it would not be appropriate for me to make findings about them on the balance of probabilities (even on a "provisional" basis), unless those findings were strictly necessary for Stimm to obtain disclosure. Since Stimm accepts that it can obtain all the documents it seeks by establishing iniquity on the part of Mr Trimmatis, I agree with Mr Pourghadiri that it would not be fair for me to go beyond the allegations against Mr Trimmatis. Findings against the Defendants should await trial, after Mr Heilpern has given evidence and been cross-examined, and the Defendants have deployed all the evidence which they can legitimately deploy to defend themselves, including any documents ordered to be disclosed pursuant to Stimm's Iniquity Application. That was the approach adopted by the applicants in the Al-Sadeq case, in which the application was carefully framed to focus on the iniquity of the privilege holder, without considering the defendants' knowledge, so that the court would not be asked to take a preliminary view on issues of liability which would arise at trial (see paragraph 47 of Popplewell LJ's judgment).
- I do not consider that this approach presents any practical problems. I shall simply assume that Mr Heilpern did not realise what (according to Stimm) was going on, even if Stimm may say that is implausible. As Mr Pourghadiri put it, it is possible to make findings about what was in Mr Trimmatis's head, without having to get into what was in Mr Heilpern's head. For the avoidance of doubt, I am not to be taken as making findings about Mr Heilpern or K&S either way: I am neither finding that they were complicit in iniquity, or innocent of it.
- Given that approach, the lateness of the Draft APoC and Iniquity Submission makes no difference to the outcome, but I agree with Mr Pourghadiri that it would be especially unfair on the Defendants to permit Stimm to pursue allegations made for the first time against them in those documents. I asked Mr Atkins why the Iniquity Submission had come so late, but he was unable to say. He valiantly sought to persuade me that the Defendants had suffered no disadvantage as a result of the late documents because the Defendants had already uploaded all the relevant documents onto their disclosure platform, so they are easily searchable, and Mr Heilpern's witness statement had already anticipated some of the points so that it was reasonable to infer that he had been proofed on all the relevant documents, including the privileged ones. Whilst there might have been some force in the points based on the witness statement if the new allegations had been made even only a couple of weeks earlier, it would be inappropriate to require the Defendants to address lengthy and detailed allegations of iniquity on less than two weeks' notice, especially when Stimm's applications were made as long ago as July last year.
- Stimm's Iniquity Application must, therefore, succeed or fail on the basis of the allegations against Mr Trimmatis alone.
vi) Mr Trimmatis's Position - the Privacy Issue
- As I have already mentioned, Mr Trimmatis sent an email to Stimm's solicitors on 31 March 2025, which he asked to be brought to the court's attention. This reads:
"I have received four emails from you in relation to a hearing for which you have sent a Notice of Hearing stating it will be heard in a three-day window from 31 March 2025.
Without any explanation I have been bombarded sporadically with emails on these Applications since around October 2024, in many cases without attachments/documents.
I cannot see that you have ever sent me a Bundle nor is there any way of knowing that I have received everything. I am surprised that you have not chosen to put the documents in one place which I can easily access, i.e. a data room.
I have had no opportunity whatsoever to consider your various communications, let alone take advice either in Greece or in England. From what little information I can gather, it seems that you are seeking an order that certain privileged documents held by King and Spalding should be released to your client. If these documents relate to matters where that firm was acting for me or one or more of a number of companies of which I was director/shareholder-representative, I do not consent to the waiving of privilege."
- I was provided at the hearing with a further witness statement from Mr Elliott (his eighth), on the basis of which I am satisfied that Mr Trimmatis was notified of the Iniquity Application and served with the Non-Party Disclosure Application. These were served on 8 October 2024 in accordance with the alternative methods of service provided for in Master Brightwell's order of 11 September 2024 (with a deemed date of service on 16 October 2024). One of those methods involved service on Mr Trimmatis's then Trustee in Bankruptcy, whose solicitors have confirmed that the documents were sent on to Mr Trimmatis by email on 30 October 2024 and that the attachments were downloaded on the same day.
- The fifth witness statement of Mr Elliott, together with witness statements of Mr Arippol and Mr Fischele (amongst others), were served by the same methods on 31 October 2024. The Trustee's solicitors have confirmed that these documents were forwarded to Mr Trimmatis on 21 November 2024, by means of an email containing a link to download the documents, including the exhibit to Mr Elliott's fifth witness statement. This contains the entirety of the Stimm File, including the documents which were arguably privileged.
- On 26 March 2025 Mr Trimmatis was sent a link to the hearing bundle. Various further documents, including the Draft APoC, the Iniquity Submission and the skeleton arguments, were sent on 28 March 2025.
- Mr Trimmatis's email itself indicates that he had received emails sending him these documents from October 2024 onwards. Although he says there were no attachments to some of the emails, the evidence satisfied me either that there were attachments, or that a link was provided to enable the documents to be downloaded. I do not accept the suggestion that Mr Trimmatis had no opportunity to consider the documents or to take advice. He has had ample opportunity to do so since October last year (over five months).
- In these circumstances, it was obviously appropriate for the hearing to proceed in his absence. I have, however, been sensitive throughout to the fact that there has been no one to argue against Mr Atkins's submissions about Mr Trimmatis's alleged involvement in iniquity, given that the Defendants are neutral about that. Since I am asked to make findings of dishonesty, and since the purpose of those findings is to determine whether privilege can be claimed, it would be inappropriate to accept the submissions made to me without question. I have, accordingly, approached the allegations of iniquity with caution, bearing in mind that, even though the standard of proof is the balance of probabilities, it is not generally likely that people will engage in fraud, so that cogent evidence is required to support such allegations.
- There are two further issues in relation to Mr Trimmatis which I should address.
- The first is whether, given what I have said about the lateness of the Draft APoC and the Iniquity Submission as regards the Defendants, I should entertain the new allegations of iniquity against Mr Trimmatis. Since Mr Trimmatis has failed to engage with the application against him from the outset, it seems to me fanciful to suggest that he would have engaged if he had been provided with the Draft APoC and the Iniquity Submission earlier. The allegations in the original PoC and in the witness statements served on him in October/November last year were detailed and serious. Since that was not enough to prompt Mr Trimmatis to take steps to protect his position, I infer that it would not have made any difference if he had received the Draft APoC and the Iniquity Submission earlier. It seems likely that his very late email was prompted by the imminence of the hearing, rather than by the substance of the new allegations. I, therefore, consider that it is appropriate to address the new allegations insofar as they relate to Mr Trimmatis.
- The second issue relates to whether it was appropriate for some, or all, of the hearing to take place in private. This was an issue to which Mr Pourghadiri drew my attention at the start of the hearing.
- The reason why the question of privacy potentially arose is that the Stimm File contained some documents in relation to which privilege could have been claimed (for example, notes of calls between Mr Heilpern and Mr Trimmatis). These are not the documents of which Stimm is seeking disclosure in its current applications, because Stimm already has these documents and the Defendants accept that Stimm can use them, both for the purposes of this application and at trial. No one has applied to the court to restrain their use. Nevertheless, Mr Pourghadiri said that it is legally possible for privileged documents to be disclosed to a particular party, without the documents losing their privileged character as against the rest of the world. He said that is the case here, because the Stimm File was disclosed inadvertently. Some of the documents may already have lost their privileged character because they have been referred to in the statements of case (and some of those pleaded references have been referred to in previous hearings), but it is not necessarily the case that privilege will have been lost as a result of their being referred to in that way, and not all of the documents in question have been referred to.
- Mr Pourghadiri submitted, however, that if those documents are now referred to in open court, any privilege which remains against the rest of the world is likely to be lost, once and for all. As the Court of Appeal explained in ENRC v Dechert LLP [2016] 1 WLR 5027, the court is empowered to sit in private where that is necessary to secure the proper administration of justice, and privilege is fundamental to the administration of justice, so it may be appropriate to sit in private to prevent the privilege being lost against the rest of the world, at least at this stage.
- Mr Pourghadiri made clear that he was not positively making an application for the court to sit in private pursuant to CPR 39.2, although he pointed out that Mr Trimmatis had said in his email quoted above that he did not consent to the waiving of privilege. He referred to the lawyer's duty to claim privilege on behalf of a former client, as explained in the Addlesee v Dentons case to which I have already referred. On the basis of that duty, Mr Pourghadiri said that the Defendants could not "consent to publicity." He said that "the court should consider if it is necessary to sit in private (or take some other measures) to protect privilege" in the relevant documents. He submitted that CPR 39.2(3) (a), (c) and (g) are engaged.
- Mr Atkins challenged Mr Pourghadiri's starting point. He said that there is no question of the documents in issue having retained their privileged character against the rest of the world, because the principle of limited waiver applies to documents voluntarily disclosed in litigation, which is not the case here. He relied on the principle that, if a litigant has copies of the other side's privileged documents, it may adduce such copies as secondary evidence in the litigation, unless an application to restrain the use of the privileged information is made before it is deployed in evidence. In that regard, he relies on the summary of the law in paragraphs 7-664 to 7-716 in Passmore, on Privilege, 5th edition (2024). Moreover, he said that there was no application before the court and no evidence to support what would be a derogation from the fundamental principle of open justice. Without evidence, it was impossible for the court to reach conclusions about the importance of the material which it is said should be kept confidential or the harm that would result if the hearing were in open court. In any event, none of CPR 39.2(3) (a), (c) and (g) applies to the facts of this case.
- As I have already mentioned, I ruled at the start of the hearing that it should not be heard in private. I gave some brief reasons at the time but indicated that I would record them more fully in this judgment.
- I considered Mr Atkins was right to say that Stimm is entitled to deploy the documents in evidence unless and until someone successfully applies to restrain their use. As I have said, Mr Trimmatis has known about this application, and in particular that the documents in the exhibit to Mr Elliott's fifth statement were to be deployed in evidence, since October last year. Given the elapse of time, Mr Trimmatis may well have had some difficulty obtaining an order restraining the use of the documents now, even if he had applied. But the fact is that he did not apply before the hearing.
- This is not, however, a complete answer to the question of whether the court should sit in private (and, to be fair to Mr Atkins, he did not suggest that it was). No one is contending that Stimm should be unable to use the documents on this application. The court could nevertheless sit in private in order to protect against wider dissemination of the documents, if it were satisfied that the conditions in CPR 39.2 were met. It is, therefore, necessary to consider those conditions. So far as material, the rule provides as follows:
39.2— (1) The general rule is that a hearing is to be in public. A hearing may not be held in private, irrespective of the parties' consent, unless and to the extent that the court decides that it must be held in private, applying the provisions of paragraph (3).
…
(3) A hearing, or any part of it, must be held in private if, and only to the extent that, the court is satisfied of one or more of the matters set out in sub-paragraphs (a) to (g) and that it is necessary to sit in private to secure the proper administration of justice—
(a) publicity would defeat the object of the hearing;
…
(c) it involves confidential information (including information relating to personal financial matters) and publicity would damage that confidentiality;
…
(g) the court for any other reason considers this to be necessary to secure the proper administration of justice.
- Like Nicklin J in the recent case of PMC v A Local Health Board [2024] EWHC 2969 (KB), it seems to me that, for present purposes, the applicable principles are those which were summarised in the Master of the Rolls' Practice Guidance (Interim Non-Disclosure Orders) [2012] 1 WLR 1003. I note the following parts of that guidance, in particular:
"[10] Derogations from the general principle can only be justified in exceptional circumstances, when they are strictly necessary as measures to secure the proper administration of justice. They are wholly exceptional … Derogations should, where justified, be no more than strictly necessary to achieve their purpose.
[11] The grant of derogations is not a question of discretion. It is a matter of obligation and the court is under a duty to either grant the derogation or refuse it when it has applied the relevant test…
[12] There is no general exception to open justice where privacy or confidentiality is in issue. Applications will only be heard in private if and to the extent that the court is satisfied that by nothing short of the exclusion of the public can justice be done. Exclusions must be no more than the minimum strictly necessary to ensure justice is done and parties are expected to consider before applying for such an exclusion whether something short of exclusion can meet their concerns, as will normally be the case…
[13] The burden of establishing any derogation from the general principle lies on the person seeking it. It must be established by clear and cogent evidence…
[14] When considering the imposition of any derogation from open justice, the court will have regard to the respective and sometimes competing Convention rights of the parties as well as the general public interest in open justice and in the public reporting of court proceedings…"
- The peculiarity in this case was that no one had actually made an application pursuant to CPR 39.2. Mr Atkins aptly said that the Defendants had raised a concern and then thrown it in the court's lap. Whilst Mr Pourghadiri may be right to say that the Defendants cannot "consent to publicity", it does not seem to me that their consent is required. Stimm does not have to make an application for the hearing to be in public, to which the Defendants are unable to consent. The general rule under CPR 39.2 is that a hearing will be in public, unless and until the court orders otherwise. Whilst I make no criticism of Mr Pourghadiri for drawing the point to my attention in the circumstances of this case, it would, in my judgment, only be in very exceptional circumstances (if ever) that the court would order a hearing to be in private without anyone making an application.
- The short answer to the point was, therefore, that there was no application for the hearing to be in private, and that was that. But, in any event, I did not consider that the test in CPR 39.2 was satisfied.
- Sub-paragraph (a) requires that publicity would defeat the object of the hearing. This provision is generally referred to in the context of freezing injunctions or similar relief, where there is a risk that a defendant might be alerted to an application and take steps to move his assets before an order is made. That is a world away from the applications before me. The argument was that, if I were to decide that there was no iniquity, so that Mr Trimmatis and his companies can claim privilege, that conclusion would have been undermined by documents having been referred to in open court and thereby losing privilege. This argument does not work, however, because the documents which might be referred to in open court are not the documents of which disclosure is sought by Stimm in these applications. The documents which might be referred to in open court are those which Stimm already has. If I were to decide that there was no iniquity, Stimm would not be entitled to disclosure of further otherwise arguably privileged documents, but none of those documents would have been referred to in open court, so the object of the hearing would not be defeated.
- Sub-paragraph (c) applies where publicity would damage the confidentiality of information. Privileged documents are necessarily confidential, so referring to the documents in open court could, in principle, result in damage to the confidentiality of the information contained in them. Merely referring to the documents cannot be enough, however, because, if it were, the court would have to sit in private every time a confidential document is referred to and that has never been the court's practice. I agreed with Mr Atkins that the court was unable to assess whether any damage to the confidentiality of the documents would be caused by their being referred to in open court without the benefit of clear and cogent evidence. In any event, the documents in this case were created around twelve years ago, so it is inherently unlikely that they could contain material which would be of interest to anyone other than the parties to this case.
- Sub paragraph (g) is a "sweep up" provision, which applies when the court considers privacy to be necessary to secure the proper administration of justice "for any other reason". It seems to me that this is the only sub-paragraph which might plausibly be said to apply. The issue was whether it was necessary to secure the proper administration of justice to hold the hearing in private with a view to preventing any privilege in the documents which remains being lost against the rest of the world.
- It is not necessary in this case to decide whether the circumstances in which the relevant documents came to be provided to Stimm resulted in a limited waiver, such that any privileged documents have retained their privileged character against the rest of the world, despite their disclosure to Stimm. That is not a straightforward issue, but I was content to assume, for the sake of argument, that the privileged documents in the file retain their privileged character. I also note that, as the extract from Passmore's book cited above indicates (at paragraphs 7-709 to 7-716), it is at least arguable that privilege is not lost when documents are deployed at an interim hearing by someone other than the beneficiary of the privilege, particularly if the use of the documents is de minimis. I nevertheless assumed, for the sake of argument, that the documents would cease to be privileged if referred to during the hearing before me.
- I also bore fully in mind the fundamental importance of legal professional privilege and the passages in the ENRC case to which Mr Pourghadiri referred me, including in particular the observation (at paragraph 53) that the law strives to ensure "that a loss of legal professional privilege (given its fundamental importance) is limited to that which is necessary to protect other interests."
- Nevertheless, as the Master of the Rolls' Practice Guidance indicates, derogations from the principle of open justice are exceptional. The critical issue was whether a hearing in private was "necessary" in the sense that nothing short of the exclusion of the public would do. In my judgment, the fact that privilege will be lost in a document is not enough, in itself, to make a hearing in private necessary. Gloster LJ said as much (albeit obiter) in paragraph 57 of the ENRC case, in a passage to which Mr Pourghadiri helpfully drew my attention:
"In my judgment we do not need to decide in this case whether the absolute nature of LPP predicates that in every case involving a detailed assessment of solicitor and own client costs the client would be entitled to insist that any reference to privileged material would have to be heard in private. In my judgment that would not necessarily be the case since the wording of CPR r 39.2 clearly involves the exercise of an appropriate discretion by the court if the general rule is to be departed from. One can imagine many situations where there would be no necessity whatsoever for a solicitor and own client costs assessment to be heard in private, notwithstanding the deployment of legally privileged materials."
- I would respectfully suggest that the reference in this passage to a discretion may be open to criticism, since the Master of the Rolls' Practice Guidance (amongst other authority) makes clear that the grant of derogations is not a question of discretion. In my judgment, what Gloster LJ was referring to by that term was the balancing exercise which the court needs to undertake in assessing whether a hearing in private is "necessary to secure the proper administration of justice."
- The factors which, in my judgment, point to there being no such necessity on the facts of this case are as follows. First, the number of documents which might lose their privileged status as a result of being referred to in the hearing is likely to be small. Most of the documents were either never privileged in the first place, or have already been referred to (without objection being made) in the statements of case or in previous hearings. Secondly, the documents were created around twelve years ago and concerned a single property transaction. They are unlikely now to be of interest to anyone other than the parties to this case. This case is not like ENRC, in which ENRC was the subject of an ongoing criminal investigation by the Serious Fraud Office, so that the loss of privilege resulting from holding the hearing in public might cause it real harm. Thirdly, with the exception of Mr Trimmatis, the entities which were the beneficiaries of the privilege have either been dissolved or are in CVL (and Concept, which is in CVL, had not objected to the hearing being in public). Fourthly, as I have already explained, Mr Trimmatis made no application to restrain Stimm's use of the privileged documents, despite having known since October last year that they were going to be in evidence at the hearing and would potentially be deployed. Fifthly, in so far as I find, on the basis of the documents, that there was an iniquity, those documents would not be privileged in any event. In the light of those factors, any harm to Mr Trimmatis or his companies resulting from the hearing being held in public was unlikely to be significant, if there was any, and certainly insufficient to justify an exceptional derogation from the principle of open justice.
- As against those factors, I had well in mind Mr Trimmatis's email in which he objected to the use of privileged documents, and the fact that serious allegations are being made against him. If he is ever required to defend himself against any such allegations, it is possible that the loss of privilege may prejudice him. He has not, however, engaged with these applications in any meaningful way (even by way of a bare denial of the iniquity), and the allegations against him do not rest only on the privileged documents. In my judgment, it is important that hearings concerning those allegations are open to public scrutiny, rather than being conducted behind closed doors.
- For those reasons, I was not satisfied that it was necessary to secure the proper administration of justice for any part of the hearing to take place in private. Nor did it seem to me practicable to direct that parts of the hearing would take place in private, whenever the parties wished to refer me to a potentially privileged document. Not only would that have been disruptive, but it may also have resulted in arguments about whether particular documents had been referred to on previous occasions (and it may have been difficult to show whether they had or not).
- Nevertheless, it seemed to me that, in accordance with the guidance that something short of a hearing in private can sometimes meet any concerns, I directed that Mr Atkins should, so far as possible, avoid reading out potentially privileged documents by, for example, inviting me to read them to myself. Whether that procedure avoided the consequence of privilege being lost is an issue which will need to be determined if and when it arises, but it appeared to me to be a reasonable and proportionate step which might provide Mr Trimmatis with an argument, should he ever wish to take it.
- Mr Atkins helpfully followed that procedure throughout the hearing. I have also sought, so far as reasonably possible, to avoid referring to the content of any arguably privileged documents in this judgment, if they relate to strands of iniquity which I have not found to be established.
vii) Analysis of the Evidence Concerning each "Strand" of Iniquity
- Stimm's case in relation to the alleged iniquities is broad. There are six alleged strands of iniquity, and copious documents are relied on in support of each. There is a real risk of such a broad application slipping into a mini-trial of the kind which Popplewell LJ said, in the Al-Sadeq case, was normally neither feasible nor appropriate. The documentary material expressly relied on by Stimm, all of which I have considered, is necessarily incomplete (otherwise further disclosure would be unnecessary) and the witnesses have not been cross-examined. Despite the threshold being the balance of probability, it is not the purpose of this application to pre-judge the issues for trial.
- In the circumstances, whilst I have dealt with all the strands of iniquity alleged, I have sought to focus on the essential allegations and have not attempted to deal with every point. I am not to be taken as in any way anticipating the findings which might be made following a trial.
Strand 1: Mortgage Fraud
- There is evidence from which it can be inferred that it is more likely than not that the sum of £32,764,634.90 paid to IBRC/NAMA out of the Sale proceeds was insufficient to repay IBRC/NAMA in full. First, even if Vannes only drew down the £29.2 million required to purchase the Parkes Hotel in October 2007 (which is a conservative assumption), the difference between that sum and the sum paid to IBRC/NAMA out of the Sale proceeds is only a little over £3.5 million. Stimm has calculated that this equates to around 2.44% p.a. (simple interest) between October 2007 and June 2012. That is a surprisingly low rate of interest, which is unlikely to represent the full amount of interest due to IBRC/NAMA.
- Secondly, in its letter of 6 June 2012 approving a sale to AWI, IBRC required a sum (of, at that stage, a slightly higher figure than the one ultimately paid) to be paid as "debt reduction," rather than in full satisfaction of the debt. It also sought a desktop appraisal from Colliers that the sale proceeds were a minimum of 90% of the current appraised valuation, which seems unlikely to have been necessary if the debt was to be repaid in full.
- Thirdly, Mr Heilpern's manuscript note of the meeting on 11 July 2012 suggested that a loan was going to be bought at a "discount." Fourthly, the NAMA Confirmation included a warranty that the price paid comprised the entire consideration passing from Harbinger in respect of the Parkes Hotel. Again, this seems unlikely to have been necessary if the debt was being paid in full. Finally, Mr Heilpern's evidence is that he understood the Vannes loan was in default and that "NAMA also wanted to make sure that a bad borrower (Vannes in this case) was not selling Beaufort Gardens to a connected party".
- It is not clear to me that IBRC/NAMA's requirement for the sale to be to an unconnected third party necessarily indicates that the debt was not going to be paid in full, since the requirement appears to have been imposed by the Republic of Ireland's National Asset Management Agency Act 2009, but I was not shown the relevant legislation or addressed on its effect.
- Nevertheless, there is no doubt that IBRC/NAMA required the sale of the Parkes Hotel to be to an unconnected third party, for whatever reason. Mr Atkins did not contend that Harbinger was a "person connected to Vannes" within the precise definition given in the NAMA Confirmation, because he relied on the "specific written conformation" requested by Ms Newton on 21 January 2013, which went wider. She said IBRC/NAMA wanted to know that "neither the director(s) nor shareholder(s) not [sic] beneficial owner(s) and therefore [Harbinger] is not in any way connected to or associated with the Seller or the directors/ shareholders/ beneficial owners of the Seller nor with Mr Nicholas Trimmatis." It is obvious from this email and the overall context that Ms Newton was asking this question on behalf of IBRC/NAMA, so that representations made to her in response would be repeated by her to IBRC/NAMA.
- This was the context in which Mr Heilpern responded on around 29 January 2013 that Mr Arippol was the 100% owner of Harbinger and that "[Harbinger] has already certified specifically and directly in exactly the form required by NAMA that [Harbinger] has no connection whatsoever with the Seller…" Whilst the NAMA Confirmation did not, in fact, say that Harbinger had "no connection whatsoever" with Vannes, any reasonable reader of this email would, in my judgment, understand it to be confirming that there was no connection of any kind between them, in response to the request for a "specific written confirmation" in the terms sought by Ms Newton. Mr Heilpern had sent two earlier drafts of this email to Mr Trimmatis and they had plainly appreciated the importance of Ms Newton's request and discussed precisely what the response should say.
- In the absence of any further requests from Ms Newton, it is more likely than not that this response, sent by a solicitor, was relied upon by IBRC/NAMA as satisfying their concerns. It is also more likely than not, in my judgment, that IBRC/NAMA would not have agreed that its charge could be redeemed for the agreed sum, if it had not been so satisfied. Any lender would be highly sceptical about a sale of its security to a party connected with its borrower if the proceeds of sale were not sufficient to repay the loan in full.
- Whether he knew it or not, however, Mr Heilpern's response to Ms Newton was misleading on several levels and Mr Trimmatis must have known that. First, Mr Heilpern had told Ms Christofidou of Totalserve on 23 January 2013 that he was relying on information as to the beneficial owner of the shares held by Limesi for the purpose of informing LSG. In that context, Totalserve had sent him the Arippol Trust Deed on 23 January 2013, purporting to show that Mr Arippol was the ultimate beneficial owner of Harbinger. Even if the Arippol Trust Deed were genuine, and Mr Arippol was the 100% owner of Harbinger, Mr Arippol was in fact connected with Vannes. On the evidence I have seen, there is no reason to doubt that Mr Arippol and Mr Trimmatis were the joint beneficial owners of Vannes, and that Mr Trimmatis knew that (although I do not understand it to be alleged that Mr Heilpern knew it).
- Secondly, for reasons I shall explain when I consider the alleged fraud against Beaufort / Aerium below, on the evidence currently available, it is more likely than not that the Arippol Trust Deed was forged. Stimm now says, of course, that (despite the forgery) it had the effect of giving Mr Arippol a beneficial interest in Harbinger. Whether that is correct or not, however, Mr Heilpern could not properly have relied on the Arippol Trust Deed if he had known it was forged (and I assume, for present purposes, that he did not know that). I explain my conclusions in relation to the forgery below, but it is more likely than not, in my judgment, that Mr Trimmatis had concocted the Arippol Trust Deed to give false support to the representation being made to Ms Newton that there was "no connection whatsoever" between Vannes and Harbinger.
- Thirdly, it was at almost exactly this time that Mr Trimmatis had begun to communicate with Mr Heilpern about Frankel BG becoming the owner of the 5% of Harbinger's shares which were not being sold to Aerium. Mr Heilpern had made a note that Frankel BG was to hold those shares on an email dated 24 January 2013 (p. 2014), and Mr Trimmatis referred to it in his email of 25 January 2013 to Mr Heilpern (p. 2012). On the evidence currently available, it is more likely than not that Mr Trimmatis intended at the time the email was sent to Ms Newton on around 29 January 2013 (saying that Harbinger had "no connection whatsoever" with Vannes), that he would be the ultimate beneficial owner of 5% of Harbinger's shares by the time the Sale occurred. It is more likely than not that Mr Trimmatis realised (because it is obvious) that Ms Newton was concerned about the identity of the beneficial owner of Harbinger at the time of the Sale, not just its current owner at the time of the email.
- In passing, I note that Mr Atkins suggested that Ms Newton, and IBRC/NAMA, may not even have known that Mr Trimmatis was an ultimate beneficial owner of Vannes (as opposed to knowing that he was involved in the management of the Parkes Hotel through Concept). I do not ultimately think this matters, but it seems clear that Ms Newton, and therefore IBRC/NAMA, were aware that Mr Trimmatis Snr was the director of Vannes (since he signed the sale contract on behalf of Vannes), so they must have appreciated that Vannes had some connection (if only a family one) to Mr Trimmatis (junior) which went beyond his management role. Indeed, Ms Newton's email of 21 January 2013 expressly asked about the purchaser's connection "with Mr Nicholas Trimmatis", which again suggests she was concerned that his connection with Vannes went beyond being merely a manager.
- Fourthly, on 1 March 2013 Ms Christofidou of Totalserve provided Mr Trimmatis and Mr Heilpern with the Arippol Deed of Termination of Trust (amongst other documents). This authorised Limesi to transfer all the shares in Harbinger to Frankel Estates. Mr Heilpern confirms in his witness statement that this was provided to Burges Salmon so that they could "be satisfied that the ownership of [Harbinger] had moved to [Mr Trimmatis] and this is what these documents showed."
- It follows that, by the time of the Sale, the purchaser (Harbinger) was connected with the seller (Vannes) and with Mr Trimmatis. Yet despite Mr Heilpern having told Ms Christofidou on 23 January 2013 that he needed to know if the ownership of Harbinger changed, because he was passing the information on to the seller, the representation made to LSG (and through LSG to IBRC/NAMA) that there was "no connection whatsoever" was not corrected. For the reasons I have given, including the possibility that there are relevant communications which are privileged, I make no comment on Mr Heilpern's knowledge or culpability. Nevertheless, it is more likely than not, in my judgment, that Mr Trimmatis ensured that his connection with the purchaser remained concealed from IBRC/NAMA.
- In my judgment, the concealment from IBRC/NAMA of this connection is iniquity of a kind which engages the iniquity principle. It involves an untrue representation, dishonestly made with the intention of inducing IBRC/NAMA to agree to the redemption of their charge, which they would not have done if the representation had not been made.
- It is, in my judgment, enough that IBRC/NAMA had insisted upon there being no connection between Vannes and Harbinger, regardless of whether IBRC/NAMA was paid in full. But (for the reasons I have given) the currently available evidence shows that it is more likely than not that IBRC/NAMA was not paid in full. It follows that IBRC/NAMA were not only deceived, but that they probably suffered material loss as a result.
- Moreover, it is in my judgment more likely than not, on the basis of the currently available evidence, that it was Mr Trimmatis's intention from the outset of his instruction of K&S that IBRC/NAMA should be induced to agree to the redemption of their charge for less than they were owed, despite Mr Trimmatis continuing to have an interest in the Parkes Hotel and its development. That is consistent with Mr Heilpern's manuscript note of the meeting on 11 July 2012 recording the intention to "buy loan at discount." It is also consistent with Ms Newton suggesting to Mr Heilpern at around the same time that his "client" should contact Mr Trimmatis, who was her client's agent. This seems more likely than not to show that, in his dealings with IBRC/NAMA, Mr Trimmatis maintained throughout a pretence (of which Ms Newton was plainly unaware) that he was only on the Vannes side of the transaction. The principal motivation for the Sale seems (on the balance of probabilities) to have been to bring the involvement of IBRC/NAMA to an end, without them realising that they were not dealing with an independent purchaser and an arms' length sale. It follows that, as between Harbinger and IBRC/NAMA, the Sale had an iniquitous purpose from the first moment K&S was instructed until it was completed.
- I consider that (subject to what I say in paragraph 257 below) the iniquity I have identified is likely to fall outside the "ordinary run of cases" and amount to an abuse of the lawyer/client relationship. Mr Trimmatis could not have put the transaction into effect without a solicitor and he needed the Defendants to give the appearance of regularity and authenticity to what he was doing. Moreover, he had evidently discussed with Mr Heilpern what Mr Heilpern's email to Ms Newton should say. Whether or not Mr Heilpern realised what was going on, he was being used as a tool to further an iniquity or, as Mr Atkins put it, he was "instrumental" in the iniquity.
Strand 2: Fraud on Beaufort / Aerium
- In his oral submissions Mr Atkins amalgamated this alleged fraud with the fraud on Stimm, but I shall consider it separately. The starting point in relation to the alleged fraud on Beaufort / Aerium is that it was Harbinger which had the benefit of the contract to purchase the Parkes Hotel from Vannes, and the deal with Aerium contemplated Beaufort acquiring 95% of the shares in Harbinger. As a matter of common sense, therefore, it would have been critical for Aerium to be satisfied that: (i) the entity transferring those shares to Beaufort (which, in the event, was Frankel Estates) had an unimpeachable title to the shares; and (ii) Harbinger did not have unknown liabilities to third parties which might require further funding after Beaufort had acquired the shares. This is consistent with Mr Heilpern's evidence in paragraph 62 of his statement that, "the deal would not have happened unless [Mr Trimmatis] could show he was the party holding the balance of the shares in [Harbinger]", and in paragraph 77 that Aerium required "that the loan providing the deposit needed to be marked as repaid on completion." In my judgment, it is more likely than not that, if Aerium had not been satisfied of these two matters, it would not have proceeded with the transaction.
- In relation to the first of these matters, the Instrument of Transfer, the Arippol Trust Deed and the Arippol Deed of Termination of Trust were important elements in demonstrating to Aerium that title to the shares in Harbinger had passed from their original holder to Frankel Estates. Other documents were involved in demonstrating this to Burges Salmon and Salans, but my understanding is that Stimm has focussed on these three documents principally because Mr Arippol's signature on them is said to have been forged. That is relevant to the alleged fraud on Stimm (addressed below) but is also relevant to the alleged fraud on Beaufort / Aerium.
- Forgery is likely always to be iniquitous as a criminal offence pursuant to section 1 of the Forgery and Counterfeiting Act 1981. Furthermore, when the forger uses the forged document to misrepresent that the individual whose signature has been forged has consented to the passing of title (when that individual was unaware of the transaction) in order to induce someone else to enter into a transaction, there is dishonesty of a kind which engages the iniquity principle.
- Thus, in order to establish that there was iniquity, Stimm needs to demonstrate on the balance of probabilities (on the basis of the currently available evidence) that the Instrument of Transfer, the Arippol Trust Deed and the Arippol Deed of Termination of Trust were forged. In relation to that, I have had regard to the following matters:
i) The Particulars of Claim pleads that Mr Arippol knew nothing of the Instrument of Transfer, the Arippol Trust Deed and the Arippol Deed of Termination of Trust and that they were not signed by him (paragraphs 25 and 39(1)). It also pleads that it was Mr Trimmatis who forged Mr Arippol's signature on those documents (paragraph 54). These pleas are supported by a Statement of Truth, signed by Mr Arippol.
ii) The Defence requires Stimm to prove these allegations, but there is no denial (paragraphs 31 and 44.1).
iii) Mr Arippol says in his witness statement (which is compliant with PD 57AC and signed) that it is not his signature on these documents (paragraphs 40 and 45).
iv) There is, therefore, uncontradicted evidence from Mr Arippol that he did not sign the documents, although (of course) Mr Arippol has not yet given oral evidence under oath and I have, therefore, had no opportunity to assess his credibility.
v) As explained above, the signatures on the Instrument of Transfer, the Arippol Trust Deed and the Arippol Deed of Termination of Trust are not perfect matches for his signature on other documents. There is no evidence from a handwriting expert, however, and I do not consider the discrepancies are obvious indicia of forgery by themselves. They are of some relevance, but I have given them relatively little weight in my assessment of the evidence.
vi) Of more weight, in my judgment, is the fact (explained above) that the same individual appears to have witnessed the signatures of Limesi and Mr Arippol on the Arippol Trust Deed and of Mrs Trimati and Mr Arippol on the Instrument of Transfer. Both documents were purportedly signed on 12 September 2012, yet Mr Arippol was in Italy, the individual signing on behalf of Limesi is likely to have been in Cyprus and Mrs Trimati is likely to have been either in Greece or London. I am not aware of any evidence which could explain this, and it does appear suspicious.
vii) I have considered whether there was a motive for Mr Trimmatis to forge Mr Arippol's signature. I bear in mind that the Instrument of Transfer and Arippol Trust Deed potentially bestowed a valuable benefit on Mr Arippol and that Mr Arippol's evidence is that "Mr Trimmatis once told me that I was the owner of Harbinger, as NAMA wanted the vendor and purchaser on the Sale to be unconnected" (paragraph 41). That evidence raises questions about how Mr Arippol can have thought that he had become an owner of a company without signing anything, and the extent to which he was aware of what was happening. Considered in isolation, therefore, it might be said that there is reason to doubt whether Mr Arippol's signature was forged on those two documents. I have not, of course, had the benefit of hearing Mr Arippol give evidence about this.
viii) It is important, however, to bear in mind the wider picture. For one thing, the same point cannot be made in relation to the Arippol Deed of Termination of Trust, since that brought Mr Arippol's (purported) interest in Harbinger to an end and authorised Limesi to transfer the shares to Frankel Estates. Given the background of the joint ownership of Vannes and the investments apparently made by Vennbridge, it is, in my judgment, unlikely that, if Mr Arippol had been aware that he owned the shares in Harbinger, he would have agreed to part with them to a company owned solely by Mr Trimmatis. Combined with Mr Arippol's uncontradicted evidence that he did not sign it, it is in my judgment more likely than not (on the basis of the evidence currently available) that Mr Arippol's signature on the Arippol Deed of Termination of Trust was forged.
ix) The forgery of that document is consistent with my conclusion above that an important, and iniquitous, purpose of the transactions carried out by Mr Trimmatis, whilst Mr Heilpern was acting for him, was to induce IBRC/NAMA to agree to the redemption of their charge for less than they were owed, whilst Mr Trimmatis would continue to have an interest in the Parkes Hotel and its development. Mr Trimmatis initially needed to be able to show IBRC/NAMA that Harbinger was not connected with him but subsequently needed to be able to show Aerium that Harbinger was connected with him. Mr Heilpern's evidence is that Mr Trimmatis arranged for Harbinger to be incorporated in the BVI by Totalserve and that Totalserve acted at all times on Mr Trimmatis's instructions. In my judgment, it is more likely than not that Mr Trimmatis had a relationship with Totalserve which allowed him to incorporate Harbinger and keep it effectively under his sole control until 95% of its shares were sold to Beaufort, so that he could achieve his iniquitous purposes. It is unlikely, therefore, that he would have involved Mr Arippol in signing documents such as the Instrument of Transfer and the Arippol Trust Deed, which could have resulted in him losing control to Mr Arippol, or at the very least to potential arguments about what should happen. It follows that Mr Trimmatis had an incentive to forge Mr Arippol's signature on those documents, so that he could easily reverse their effect once they had served their purpose.
x) Moreover, it is significant that, according to the Arippol Trust Deed and the Instrument of Transfer, Mrs Trimati transferred her interest to Mr Arippol on 12 September 2012. It is suspicious that anyone would have gone to the trouble of creating a trust for the benefit of Mrs Trimati on 12 September 2012, only for her to transfer her interest to Mr Arippol on the very same day. It is even more troubling that Mr Heilpern seems to have been told on around 14 September 2012 that the ultimate beneficial owner of Harbinger was Mrs Trimati, when the documents relied on later show that she had transferred that interest to Mr Arippol two days earlier.
xi) Moreover, the Arippol Deed of Termination of Trust is dated 18 February 2013, and the first version of it (albeit unsigned by Mr Arippol at that stage) was sent to Mr Heilpern the next day. That is less than a month after the Arippol Trust Deed first emerges in the evidence, when sent to Mr Heilpern by Totalserve on 23 January 2013. These events are all consistent with Mr Trimmatis rapidly producing documents to present whatever picture suited his purposes at the time.
- Although the trial judge will be in a better position than me to assess all the evidence, for the reasons I have given I am satisfied that it is more likely than not (on the basis of the evidence currently available) that Mr Trimmatis forged Mr Arippol's signature on the Instrument of Transfer, the Arippol Trust Deed and the Arippol Deed of Termination of Trust. It follows that Aerium was misled about the chain of title to the shares in Harbinger, because it had no reason to consider that the signatures of Mr Arippol on these documents were not genuine. It is reasonable to infer that, if Aerium had realised that the signatures were forgeries by Mr Trimmatis, it is more likely than not that it would have refused to proceed with the transaction.
- I return to the second matter about which Aerium needed to be satisfied, namely that Harbinger had no unknown liabilities to third parties which might require further funding after Beaufort had acquired 95% of its shares. In that connection, Burges Salmon's email of 24 January 2013 to Mr Heilpern expressly sought documentation relating to the loan of the money which Harbinger had used to pay the deposit. This led to the production of the Loan Agreement, Addendum and Deed of Release.
- Stimm alleges that these documents were "fictitious", by which it means that they purported to show that the £1.675 million used for the deposit had been lent to Harbinger by Icmofil, when the money had, in fact, been lent to Harbinger by Stimm. They also rely on the fact that the Loan Agreement was "backdated", because it bore the date 30 August 2012, whereas Mr Trimmatis had only sent instructions to Mr Heilpern to draft such an agreement on 24 January 2013. Moreover, Harbinger did not exist on 30 August 2012.
- Whilst it is obviously correct that the Loan Agreement was not executed on 30 August 2012, I am not convinced that this backdating has as much significance as Mr Atkins gave it in his submissions. I accept, of course, that the backdating of a document can result in a reader being misled as to when the document was actually executed. It seems clear, however, that Burges Salmon and their client were not misled in this way. As outlined above, Mr Heilpern sent them a draft of the agreement on 5 February 2013 saying that it "will be" entered into before the sale of any shares to Beaufort and Burges Salmon acknowledged the next day that the agreement "is to be entered into". Thus, whether or not they noticed the date on the executed version of the Loan Agreement provided on 14 February 2013, they knew that it was not being said that an agreement documenting the loan had been entered into when the deposit money was lent to Harbinger, and that the Loan Agreement had only been executed very recently. They do not appear to have been concerned about that.
- What they would, in my judgment, have been concerned about, is if they had known that the money had not been lent to Harbinger by Icmofil at all. A deed of release from Icmofil was of no comfort, if Icmofil was not the entity which had loaned the money to Harbinger in the first place. Mr Pourghadiri correctly points out that it does not necessarily follow from a flow of funds directly from X to Y that Y is X's borrower. The fact that Stimm made a payment to K&S on behalf of Harbinger does not, as a matter of logic, preclude Stimm having agreed to lend the money to Icmofil, which then had an agreement to lend the money to Harbinger.
- Whatever Mr Heilpern might or might not have thought about who lent the money, however, it is more likely than not (on the available evidence) that Stimm did not actually agree to make a loan to Icmofil. The September Loan Emails (as well as the written instructions of 14 September 2012 and Mr Arippol's email of 17 October 2012) show (on the balance of probabilities) that Mr Arippol intended a loan to be made by Stimm directly to the company which ultimately acquired the Parkes Hotel. The emails expressly say that a loan agreement was to be entered into between "the foundation" (i.e. Stimm) and "the final company that will be used to complete." That makes commercial sense, since that company would be the one which would be likely to have revenue and assets to enable repayment of the loan.
- Mr Arippol's uncontradicted evidence also confirms that Stimm was providing the funds "as an unsecured loan to Harbinger once incorporated" and that, when he authorised the release of the funds for the deposit, "the understanding was still that the sums advanced by Stimm were a loan to the new entity that would own the Parkes Hotel and that it would be repaid on completion or soon thereafter" (see paragraphs 28 and 35 of his statement).
- Mr Pourghadiri suggested that Mr Fischele's email of 11 December 2012 envisaged a loan to a company of Mr Trimmatis's choice, which might have included Icmofil. Based on the evidence currently available, however, it seems to me that Mr Fischele's vague reference to "any" of Mr Trimmatis's companies in that email arose because the identity of the company which was to acquire the Parkes Hotel was uncertain at the time the money was paid, and Mr Fischele was too remote from the detail to know which company it might be. The September Loan Emails are the best available evidence of what was agreed between Mr Trimmatis and Mr Arippol at the time the loan was made (and whether Mr Heilpern knew about that agreement is, of course, a separate point). In my judgment, it is more likely than not that no intermediate lender, whether Icmofil or any other entity, was contemplated by the agreement between Mr Arippol and Mr Trimmatis.
- On the balance of probabilities, therefore, the Loan Agreement between Icmofil and Harbinger was nothing more than a piece of paper. There was no loan by Icmofil to Harbinger. Mr Trimmatis knew that, because he had promised Mr Arippol a loan agreement between Stimm and the ultimate owner of the Parkes Hotel. It is more likely than not that the Loan Agreement was prepared so that Icmofil could provide the Addendum and the Deed of Release to Aerium, in order to satisfy Aerium that Harbinger had no further liability to anyone in respect of the deposit. It is, in my judgment, reasonable to infer that Aerium would not have accepted these documents, if it had known that the deposit money had been provided by Stimm and that there was no agreement between Stimm and Icmofil.
- It follows that, in my judgment, the provision to Beaufort / Aerium of the Instrument of Transfer, the Arippol Trust Deed, the Arippol Deed of Termination of Trust, the Loan Agreement, the Addendum and the Deed of Release involved iniquity of a kind which engages the iniquity principle. It involved both forgery (in the case of the first three documents) and making untrue representations, with the dishonest intent of inducing Aerium to acquire 95% of Harbinger's shares and funding the acquisition of the Parkes Hotel, which they would not have done if the representations had not been made.
- It does not appear that Beaufort / Aerium has, in fact, suffered any loss as a result of this iniquity, but, in my judgment, that does not matter for the purposes of the iniquity principle. As Lewison LJ said in the Addlesee case (at paragraph 51), privilege attaches to a communication at the time when it is made. By contrast, documents and communications produced as part of, or in furtherance of, iniquity are not confidential, so that no privilege ever arises. The existence of privilege cannot depend on whether someone subsequently suffers a loss, which may be unknown for many years after the documents are produced.
- Unlike with the iniquity arising from the misrepresentations to IBRC/NAMA, I do not consider it is likely, on the basis of the currently available evidence, that it was Mr Trimmatis's intention to deceive Beaufort / Aerium from the outset of his instruction of K&S, or that he intended to deceive Beaufort / Aerium in relation to any other matters. It seems to me more likely that the need to produce the various misleading documents came about on an ad hoc basis, because of queries raised by Burges Salmon.
- I have considered whether it is outside the "ordinary run of cases" for K&S to forward to Beaufort / Aerium forged documents which were received from Totalserve and in relation to which K&S had no input. Is that materially different from a lawyer engaged to conduct litigation by putting forward an account of events which the client knows to be untrue, which is regarded as falling within the ordinary run of cases? In my judgment, there is a material difference. Mr Trimmatis consulted K&S before the commission of the iniquity and for the purpose at least of being helped to commit it, even if Mr Heilpern was unaware of what was happening. Mr Trimmatis could not have put the transaction into effect without a solicitor and he needed the Defendants to pass on the forged documents to give them the appearance of regularity and authenticity.
- Moreover, Mr Heilpern had some involvement in the production of the Loan Agreement, Addendum and Deed of Release. He wrote suggested amendments on a draft of the Loan Agreement and commented on the draft of a letter to be sent by Icmofil, which appears to be a precursor to the Addendum. He liaised with Burges Salmon about the terms of the documents, and the Deed of Release in particular. It is more likely than not on the basis of this evidence that Mr Heilpern was giving at least some advice to Mr Trimmatis about the terms of these documents, even if his involvement was relatively slight and he was unaware of any iniquity. Whether or not Mr Heilpern realised what was going on, he was being used as a tool to further an iniquity and was instrumental in it.
- For all these reasons, I consider that (subject to what I say in paragraph 257 below) the iniquity I have identified is likely to fall outside the "ordinary run of cases" and amount to an abuse of the lawyer/client relationship.
- In addition to the documents I have considered above, Stimm relies on several other documents in support of its allegations of fraud on Beaufort / Aerium. I do not propose to consider these in any detail for the following reasons:
i) First, Mr Atkins did not spend much (if any) time in his oral submissions on these documents and it seems to me that, on an interim application such as this, there is a limit to how far the court can or should go in considering documents with peripheral relevance.
ii) Secondly, some of the documents referred to are drafts of agreements which, because they were only drafts, were not ultimately relied on by Beaufort / Aerium. I include in this category the draft letter of 8 February 2013 concerning the £1 million which was to be converted from a loan into equity. In my judgment, in so far as these documents were preparatory to the iniquity perpetrated on Beaufort / Aerium, any communications concerning them are likely to be disclosable anyway as documents brought into existence as part of or in furtherance of the iniquity which I have identified.
iii) Thirdly, some of the matters relied on are representations and warranties (contained in various agreements, or drafts of agreements) concerning such matters as the accuracy of the Declaration, or Harbinger's payment of all tax due, or whether there had been compliance with the Irish National Asset Management Agency Act 2009, or the identity of the owner of the Harbinger shares being sold. I am not convinced I have sufficient evidence to decide whether any of these representations were inaccurate (let alone iniquitously so) and, in any event, the arguments based on them seem unlikely to add anything material to the allegations of iniquity based on, for example, the alleged fraud on HMRC, the alleged mortgage fraud on IBRC/NAMA and the alleged fraud on Beaufort / Aerium.
iv) Fourthly, a number of resolutions of Osbar as the sole director of Harbinger are relied on as being either backdated or otherwise misleading. Since these resolutions are concerned with Harbinger's execution of agreements and other documents, documents concerning them again seem likely to be disclosable anyway as documents brought into existence as part of or in furtherance of the iniquity. That said, whilst the backdating of documents is certainly open to criticism, I am not persuaded that the backdating of documents by itself necessarily establishes such iniquity as to engage the iniquity exception.
Strand 3: Fraud on Stimm
- As explained above, Mr Atkins submitted that there are three elements to the alleged fraud on Stimm: (i) forgery of the Instrument of Transfer, Arippol Trust Deed and Arippol Deed of Termination of Trust; (ii) creation of the Loan Agreement, Addendum and Deed of Release, which are alleged to be fictitious and (in the case of the Loan Agreement) back-dated; and (iii) payment to Concept of the £200,000 which had come from Opim.
- Although Mr Atkins focussed on the forged and fictitious documents in his oral submissions, it seems to me that Stimm's core complaint is only partly concerned with these documents and is more fundamentally concerned with misappropriation by Mr Trimmatis. It is what Mr Pourghadiri described as "essentially an allegation of outright theft." That is clear from the allegations in relation to the Opim money, which was not used to pay the deposit and has no connection with any of the forged and fictitious documents. The iniquity alleged against Mr Trimmatis is simply that he instructed K&S to transfer the money to Concept (or for its benefit) when he knew that it should be paid to Stimm. If that is sufficient iniquity in relation to the Opim money, it seems to me that it would also amount to iniquity in relation to the £1.7 million transferred to K&S by Stimm.
- The starting point is that (as explained above) the September Loan Emails establish, on the balance of probabilities, that (whatever Mr Heilpern may have thought) Mr Arippol and Mr Trimmatis had agreed that the £1.7 million transferred to K&S by Stimm was a loan from Stimm to the company which ultimately purchased the Parkes Hotel (which ended up being Harbinger) and was to be used in connection with the acquisition of the Parkes Hotel. They expressly agreed that a written loan agreement would be entered into between those entities.
- Mr Arippol's emails of 13 September 2012 and 17 October 2012 (and Mr Fischele's email of 11 December 2012) show that it is more likely than not that Mr Arippol and Mr Trimmatis had also agreed that the £200,000 transferred by Opim would be treated as a loan in the same way.
- Furthermore, the emails indicate that Mr Arippol and Mr Trimmatis agreed that the £1.9 million from Stimm and Opim would be repaid from any surplus funds available on completion of the Sale, or out of any profits realised in due course. Although the emails are vaguer about this, they arguably also suggest that Stimm's money could be used to make an equity investment in the company owning the Parkes Hotel, although there was no indication as to who was to own the equity if that happened.
- Despite these agreements, Mr Trimmatis did not treat the £1.9 million as a loan from Stimm but instead treated it as if the money belonged to him personally. As between Frankel Estates and Beaufort / Aerium, £1 million of that money was treated as an equity investment by Frankel Estates, which retained 5% of the Harbinger shares. Frankel Estates is Mr Trimmatis's company in which Stimm has never had any interest. The £675,000 originally used to pay part of the deposit was effectively returned to K&S by Beaufort / Aerium. Along with the rest of the remaining money originally transferred by Stimm and Opim, it was paid out to Concept, or for Concept's benefit. Concept is also Mr Trimmatis's company in which Stimm has never had any interest. All the money was, therefore, effectively misappropriated by Mr Trimmatis.
- In some contexts, using loaned money for purposes other than those authorised by the lender and failing to repay the loan might amount to a civil wrong of a kind which does not sufficiently involve fraud such as to engage the iniquity principle. A breach of contract is not enough.
- In the context of the iniquity principle, however, "fraud" is used in a relatively wide sense to encompass sharp practice, or something of an underhand nature where the circumstances required good faith, or something which a commercial person would say was a fraud.
- In my judgment, the circumstances of this case (on the current state of the evidence) do involve sharp practice and are such that a commercial person would say that Mr Trimmatis's misappropriation of all the money transferred to K&S by Stimm and Opim is a fraud. Shortly after completion, £675,000 of the money used to pay the deposit was effectively reimbursed by Beaufort / Aerium. It was held by K&S along with the £25,000 from Stimm left over after the deposit was originally paid and the £200,000 received from Opim. It is, in my judgment, unlikely that Mr Trimmatis believed he was entitled to instruct K&S to transfer that money to Concept (or to be used for another deal), as opposed to repaying it to Stimm. Mr Arippol had made clear in the first of the September Loan Emails that any "extra funds" left over after the Sale were to be repaid. It is more likely than not that Mr Arippol trusted Mr Trimmatis to honour their agreement. Whatever Mr Heilpern may have thought, it was dishonest for Mr Trimmatis to instruct him to make the payment to Concept (or for Concept's benefit), without the knowledge and consent of Mr Arippol (on behalf of Stimm).
- The remaining £1 million of Stimm's loan was treated by Aerium as an equity investment by Mr Trimmatis, entitling Frankel Estates to 5% of the shares in Harbinger. As I have noted, Mr Arippol does seem to have envisaged at one stage that the loan from Stimm might be used to acquire shares, although it is not entirely clear who he intended would be the ultimate beneficial owner(s) of those shares. Moreover, Mr Arippol says in paragraph 24 of his statement that he was "not particularly concerned about who the owner of Harbinger was" and that "it did not matter to me very much who owned the company which owned the property" whilst it was being developed.
- Nevertheless, it is unlikely, in my judgment, that Mr Trimmatis believed he was entitled to use Stimm's money to become the ultimate sole owner of 5% of the shares without Stimm's knowledge or consent. In the circumstances, an outcome in which Stimm provided funding for the shares but acquired no interest in them made no commercial sense, and it is more likely than not that Mr Arippol trusted Mr Trimmatis not to use Stimm's money to benefit himself to the exclusion of Stimm (and Mr Trimmatis knew it). It was dishonest of Mr Trimmatis to procure that Frankel Estates should hold those shares, without the knowledge and consent of Mr Arippol (on behalf of Stimm).
- These iniquities are compounded by the iniquities surrounding the forged and fictitious documents. I have already found that it is more likely than not (on the basis of the evidence currently available) that Mr Trimmatis forged Mr Arippol's signature on the Instrument of Transfer, the Arippol Trust Deed and the Arippol Deed of Termination of Trust. In the context of the claim by Stimm, the forgery of the first two of these (the Instrument of Transfer and the Arippol Trust Deed) seems to me of limited significance. On their face, those documents were beneficial to Mr Arippol (although not to Stimm), and they cannot be said to have played any material part in enabling Mr Trimmatis to misappropriate Stimm's money. I will return to the Arippol Deed of Termination of Trust in a moment.
- The Loan Agreement, Addendum and Deed of Release are, in my judgment, closer to the heart of Stimm's complaint. I have already found that it is more likely than not that the Loan Agreement was prepared so that Icmofil could provide the Addendum and the Deed of Release to Aerium, in order to satisfy Aerium that Harbinger had no further liability to anyone in respect of the deposit. That was iniquitous as regards Beaufort / Aerium for the reasons I have explained, but it was, in my judgment, also iniquitous as regards Stimm.
- It is more likely than not that it was the dishonest representation to Aerium that the deposit money had been loaned by Icmofil, and that Icmofil would release Harbinger, which induced Aerium to fund the payment of £675,000 to K&S on completion. That money, which Mr Trimmatis then instructed K&S to pay out to Concept, would not have been available to him at all if Aerium had not believed that Harbinger owed it to Icmofil. Aerium intended to refund money used to pay the deposit, and so it ought to have been repaid to Stimm, as Mr Trimmatis is more likely than not to have realised.
- Furthermore, it is unlikely that Aerium would have agreed to Frankel Estates retaining 5% of the Harbinger shares, if it had known that the £1 million purportedly invested as equity by Mr Trimmatis had, in fact, been loaned to Harbinger by Stimm. Mr Trimmatis was able to pretend to Aerium that he (or his companies) had provided that £1 million in part because of the Loan Agreement and the Addendum, which purported to show that Icmofil was the source of the money.
- In addition, the Arippol Deed of Termination of Trust enabled Mr Trimmatis to convince Aerium that Frankel Estates was the owner of the Harbinger shares. Since Mr Trimmatis owned both Icmofil and Frankel Estates, the purported £1 million loan from Icmofil could be turned into an equity investment by Frankel Estates without attracting further investigation.
- The Loan Agreement, Addendum, Deed of Release and Arippol Deed of Termination of Trust were, therefore, elements of the mechanism by which Mr Trimmatis was able to obtain access to £675,000 which should have been returned to Stimm, and to obtain shares in Harbinger by using Stimm's money. On the balance of probabilities, their creation involved dishonesty on the part of Mr Trimmatis, for the reasons I have already explained. Although the dishonest representations made or supported by the Loan Agreement, Addendum, Deed of Release and Arippol Deed of Termination of Trust were not made to, or relied on by, Stimm, they nevertheless involved iniquitous conduct which caused Stimm loss.
- As explained above, in my judgment the principal iniquity perpetrated by Mr Trimmatis against Stimm was the misappropriation of all the money transferred to K&S by Stimm and Opim. That was, by itself, sufficient to engage the iniquity principle. Mr Trimmatis's dishonesty in relation to the Loan Agreement, Addendum, Deed of Release and Arippol Deed of Termination of Trust amounts to an additional element of iniquity as regards Stimm, which provides a further reason for concluding that the iniquity principle is engaged.
- I have considered whether it might be said that Mr Trimmatis had not always intended to misappropriate Stimm's money, and that he only formed that iniquitous intention part way through the transaction, such as when he decided to create a loan agreement between Harbinger and Icmofil. Are his promises in the September Loan Emails to sign a loan agreement with Stimm to be taken at face value at that stage? Or were they empty promises intended to induce Mr Arippol to authorise the use of the funds for the deposit? There is not much material to go on, but if Mr Trimmatis had initially intended to repay the money, I consider it more likely than not that he would have signed an agreement with Stimm when asked to do so by Mr Arippol in September and October 2012. The reason he gave for not doing so was that it was not yet clear who the purchaser would be, but that is an unconvincing explanation, given that Harbinger was the entity which was exchanging contracts and paying the deposit. The counterparty to the subsequent "fictitious" Loan Agreement with Icmofil was Harbinger, because that was the obvious borrower. In my judgment, therefore, it is more likely than not that Mr Trimmatis made excuses to Mr Arippol in September and October 2012 because he intended to misappropriate Stimm's money from the moment he first persuaded Mr Arippol to pay it to K&S.
- I consider that (subject to what I say in paragraph 257 below) this iniquity is likely to fall outside the "ordinary run of cases" and amount to an abuse of the lawyer/client relationship. Once again, Mr Trimmatis could not have put these elements of the transaction into effect without a solicitor and he needed the Defendants to give the appearance of regularity and authenticity to what he was doing. Moreover, Mr Heilpern was involved in the production of the Loan Agreement, Addendum and Deed of Release, as I have already explained. Whether or not Mr Heilpern realised what was going on, he was being used as a tool to further an iniquity and was instrumental in it.
Strand 4: Fraud on Mr Arippol / Vennbridge
- Mr Arippol's evidence is that he and Mr Trimmatis had been involved in a previous joint venture project to develop a property more or less opposite the Parkes Hotel at 4-5 Beaufort Gardens. This project was undertaken on a 60/40 basis in Mr Arippol's favour, and he was the 60% ultimate beneficial owner of it through Vennbridge. Vennbridge had contributed £2,235,810 towards the purchase price and other costs of the project. The project appears to have been loss-making and Vennbridge lost this money and loaned Mr Trimmatis a further £650,000 to avoid him being made bankrupt on a personal guarantee. Mr Trimmatis and Mr Arippol then agreed that Vennbridge would be repaid from the profits from the Parkes Hotel.
- In addition, Vennbridge paid a further £4,588,400 in relation to Vannes' acquisition and development of the Parkes Hotel: £1 million towards the purchase price, £500,000 in agent's commission, and £3,088,400 towards the costs of the project, including the cost of court proceedings to obtain planning permission. Thus, Vennbridge had paid around £7.5 million in total for the benefit of Mr Trimmatis or towards the costs of their joint ventures.
- Stimm says that Mr Trimmatis arranged matters in relation to the Sale so that Mr Arippol and Vennbridge had no means of recovering any of this £7.5 million. Not only were 5% of the Harbinger shares owned by Frankel Estates, but Mr Trimmatis had also procured agreements with Beaufort and Harbinger which ensured that they would share any profits from the development with companies owned entirely by him. Those were, of course, the Profit Share Agreement and the Development Consultancy Agreement.
- Stimm alleges that it was one of Mr Trimmatis's objectives from the outset to exclude Mr Arippol and Vennbridge from any profits arising from the development. It relies on a document drafted by Mr Conway of K&S in July 2012 the content of which I will not set out, but Stimm submits that it suggests an early plan for the Parkes Hotel to be held on trusts in favour of Mr Trimmatis and Mr Fingleton (p. 1807). Stimm also points to evidence which it says raises questions about whether Mr Trimmatis had lied to Mr Arippol about the extent to which the project at 4-5 Beaufort Gardens had been loss-making.
- There are several difficulties about Stimm's allegations in relation to this alleged strand of iniquity. First, the payments on which Stimm relies all pre-date Mr Trimmatis's instruction of K&S. No doubt for that reason, Stimm does not allege that the Defendants had any knowledge of the alleged fraud on Mr Arippol and Vennbridge. It seems to me unlikely, for these reasons, that the Defendants will have any relevant communications brought into existence as part of, or in furtherance of, this alleged iniquity.
- Mr Atkins submits, of course, that the whole transaction is the iniquity, because it was all devised by Mr Trimmatis to cut Mr Arippol and Vennbridge out of the development of the Parkes Hotel. I deal later in this judgment with the argument that the effect of the iniquities is that none of the documents held by K&S are privileged, but I was not, in any event, persuaded that it is more likely than not that the alleged fraud on Mr Arippol and Vennbridge was Mr Trimmatis's sole, or original, motivation for setting up the whole transaction. It seems to me more likely (on the current evidence) that the transaction initially came about because Mr Trimmatis wanted to extricate the Parkes Hotel from the IBRC/NAMA charge, using new cash obtained from Stimm. Without a separation from IBRC/NAMA, there would be no development at all, and no profits for anyone.
- Secondly, there are no allegations of dishonest misrepresentations, or forged or fictitious documents, which have a bearing on this alleged strand of iniquity. The Development Consultancy Agreement and Profit Share Agreement were genuine and involved no forgery. There is no evidence that the £7.5 million paid by Vennbridge was used for purposes for which it was not intended. In so far as it is said that Mr Trimmatis may have lied about the extent to which the project at 4-5 Beaufort Gardens had been loss-making, the allegations concerning that seem to me speculative. They depend on whether Mr Trimmatis told Mr Arippol the truth about the price for which 4-5 Beaufort Gardens was sold in June 2009, but without any evidence of the actual price for which it was sold, or any expert evidence as to its value. Mr Atkins did not develop these points in his oral submissions, and it would, in my judgment, be inappropriate (especially on an interim application of this kind) to make findings of iniquity based on circumstantial evidence about a transaction which happened nearly 16 years ago, and three years before the Defendants were instructed by Mr Trimmatis.
- Thirdly, and most importantly, Stimm has not, to my mind, sufficiently identified an iniquity of the kind required to engage the iniquity principle. It is obvious that Mr Trimmatis wanted to obtain a personal financial benefit from the transaction, but by itself that is not necessarily iniquitous. Mr Atkins spoke of Mr Trimmatis having arranged the Sale to Harbinger to "defeat … expectations" held by Mr Arippol and Vennbridge, or he described them as cut out of the deal "contrary to [their] understanding." Mr Arippol also says in his statement that he "understood" that "no matter who the purchaser was, this would remain a project by Mr Trimmatis and me" and that he "understood" that he and Mr Trimmatis were "the owners of the buyer, in substance if not in name" (paragraphs 22 and 31). Expectations and understandings do not necessarily generate enforceable rights, however, and it is not necessarily iniquitous if they are not realised.
- Mr Arippol knew that the Parkes Hotel was being sold by Vannes to a new entity, with the benefit of third-party funding. His deal with Mr Trimmatis in relation to (i) the ownership of, (ii) debts owed by, and (iii) profits made by, Vannes, could not simply be assumed to map across to the new circumstances.
- So far as ownership of Harbinger is concerned, I have held that it was iniquitous for Mr Trimmatis to use Stimm's money to obtain shares in Harbinger to the exclusion of Stimm, at least without obtaining Mr Arippol's informed consent. But Frankel Estates' shares in Harbinger were not acquired with any of the £7.5 million previously obtained from Mr Arippol or Vennbridge.
- Mr Arippol says in paragraph 15 of his statement that there was an agreement to do "this project on a 50/50 basis," but that was in relation to Vennbridge's interest in Vannes. I was given references to documents which show that Mr Arippol agreed with Mr Trimmatis in 2008 that Vennbridge was to have a 50% interest in Vannes (p. 5342, 5343, 5354), but I was shown no comparable communications between them concerning Mr Arippol's, or Vennbridge's, entitlements after the sale from Vannes to Harbinger. So far as those entitlements are concerned, everything depends on what was discussed and agreed between Mr Trimmatis and Mr Arippol in 2012, about which there is currently little evidence. Mr Arippol's evidence that he was not concerned about who owned Harbinger makes it unlikely that there was any agreement between him and Mr Trimmatis that he or Vennbridge would be entitled to have a share of the equity in Harbinger.
- So far as the sums owed to Mr Arippol or Vennbridge by Vannes are concerned, one might naturally expect them to be repaid out of any proceeds of the Sale in Vannes' hands. I note that paragraph 4.2 of the Iniquity Submission says that Mr Arippol was a creditor of Vannes in the sum of around £4.5 million. If the proceeds of sale were insufficient to repay that amount, it is not obvious why those liabilities would be taken on by Harbinger. If the complaint is that Mr Arippol and Vennbridge received nothing from the proceeds of sale received by Vannes (as suggested in paragraph 12.5 of the Iniquity Submission), that is not something with which the Defendants were involved.
- So far as profits made by Harbinger are concerned, it is not clear whether Stimm says that the Profit Share Agreement should not have been entered into at all, or whether it says that the terms should have been different, or whether it says that Mr Arippol or Vennbridge should have been a party to it (or, in that case, which of them should have been a party). It is not clear whether they are said to have been entitled to all the profits to be paid under the Profit Share Agreement, or only to 50% of them, or to some other proportion.
- Mr Arippol says in paragraph 26 of his statement that it was a "clear breach of the agreement I had made with Mr Trimmatis" that Stimm and Vennbridge were paid none of the profits from the development of the Parkes Hotel. The Profit Share Agreement is not necessarily inconsistent, however, with Mr Trimmatis being obliged to share any profits paid to Frankel BG in accordance with whatever agreement he had with Mr Arippol. Nor is it obvious that, if Mr Arippol and Vennbridge had enforceable contractual rights against Mr Trimmatis and companies owned by him, a breach of those rights is inherently iniquitous. Something amounting to "fraud" is required (in the wide sense of that term used in relation to the iniquity principle). If the complaint is simply that Mr Trimmatis failed to share the sums subsequently paid to Frankel BG with Mr Arippol or Vennbridge, that is not something that the Defendants were involved in. In any case, there is no evidence from which to infer that it is more likely than not that Frankel BG received any profits from the development. No sums were due pursuant to the Profit Share Agreement if the internal rate of return fell below a prescribed level.
- So far as the Development Consultancy Agreement is concerned, if Frankel BG was genuinely providing services, it was entitled to be paid for them. Stimm does not allege that no services were provided, or that the agreed remuneration was in excess of the market rate.
- Finally, I do not think the document drafted by Mr Conway clearly shows what Stimm suggests (since the trusts seem to be concerned with the provision of finance rather than ownership), and in any case Mr Fingleton dropped out of the picture at an early stage, so the plan in the document was never implemented.
- For these reasons, Stimm has not discharged the burden of showing, on the basis of the evidence currently available, that it was more likely than not that Mr Trimmatis engaged in conduct of a kind which engages the iniquity principle in relation to Mr Arippol or Vennbridge, or that there was an abuse of the lawyer/client relationship of the kind required to engage the iniquity principle.
Strand 5: Fraud on HMRC
- Stimm relies on the apparent inconsistency between the positions taken by Harbinger and Vannes as to whether the Parkes Hotel was in the process of adaptation into a residential property for tax purposes. The argument is that one or other position must have been false, and Mr Trimmatis must have known it to be false.
- As I have explained, SDLT was payable by Harbinger at a lower rate if the Parkes Hotel was not in the process of being constructed or adapted into residential dwellings. VAT was payable by Vannes unless a real and meaningful start on the conversion of the Parkes Hotel to residential use had been made, which was more than securing or maintaining the existing structure.
- It is, I think, possible to imagine a factual scenario in which a real and meaningful start had been made on the conversion of a building to residential use (so that no VAT was payable), but that the works had stopped, so that there was no current "process" of adaptation (and SDLT was therefore payable at the lower rate). It is also possible to conceive of circumstances in which two independent parties might each honestly make contradictory submissions to HMRC as to whether work carried out on a building amounted to the start of a process of conversion or adaptation.
- The situation I have to consider, however, involved Mr Trimmatis providing factual input into the deliberations on behalf of both Vannes and Harbinger. It is more likely than not (based on the evidence that I have summarised) that he gave contradictory factual input in each case. In relation to VAT Mr Trimmatis told Ms Cruickshanks that "the conversion of the building is in progress." In relation to SDLT, however, Mr Trimmatis said in the Declaration (which was sworn around a month after Ms Cruickshanks's email) that "no work (other than bare maintenance) is currently progressing" and that "construction and conversion works have not even commenced."
- If conversion was in progress in January, I am unable to see how it can have been correct to say that works had not even commenced in February. I, therefore, agree with Stimm that it is more likely than not that Mr Trimmatis cannot honestly have believed both versions. A dishonest representation potentially amounts to an iniquity.
- The difficulty, however, is that Stimm frankly accepts that it does not know which version of events is correct. I cannot determine which is correct on the evidence available to me. If it was Mr Trimmatis's representations to Ms Cruickshanks which were false, and no meaningful start on the conversion of the Parkes Hotel to residential use had been made, it seems to follow that there was no iniquity in relation to the SDLT position. If that is the case, it would be wrong to order disclosure of documents and communications in K&S's possession relating to the SDLT position, based on an iniquity in relation to VAT which was perpetrated without K&S's involvement. It does not seem to me that the brief email exchange between Mr Heilpern and Ms Cruickshanks concerning the VAT position is a proper basis for saying that no confidentiality arose in communications and documents concerning SDLT.
- It follows that, because I do not know which version of events given by Mr Trimmatis is the true one, Stimm has not discharged the burden of showing, on the basis of the evidence currently available, that it was more likely than not that there has been iniquity which amounts to an abuse of K&S's role as solicitor.
- That is not the end of the matter, because Mr Atkins also submits that, even if the Declaration sworn by Mr Trimmatis accurately represented that there were no conversion works underway, it was nevertheless misleading for two other reasons. First, it presented Mr Trimmatis / Concept as independent professional contractors when, in fact, they were closely connected to both Vannes and Harbinger, and Mr Trimmatis had a personal financial interest in Harbinger paying as little SDLT as possible. Secondly, it downplayed the extent to which the Parkes Hotel was being sold for the purpose of residential development.
- Having read the Declaration carefully, it is not obvious to me that anything stated by Mr Trimmatis is untrue on its face. He was the managing director of Concept and the property had been marketed for sale as a hotel with the potential for residential conversion. Stimm's argument is that this is not the whole truth.
- As to the ownership issue, I agree that, for example, the statement "…I have been appointed by the owner to manage the property…" potentially implies that Mr Trimmatis is not "the owner" despite his interest in Vannes. I also agree that it would not have been apparent to the reader that he potentially stood to benefit personally from a lower rate of SDLT, because he had an interest on the purchaser's side of the transaction. I am not persuaded, however, that the failure to reveal these matters is more likely than not to amount to an iniquity. For one thing, Burges Salmon received both a draft and the final version of the Declaration, and they were at least aware that Mr Trimmatis was on the purchaser's side and would benefit from a lower rate of SDLT. There is no evidence that they expressed any concern about this, and they would have been able to provide the information to HMRC, if they considered it relevant.
- More importantly, the core purpose of the Declaration was to provide information about the work being carried out on the Parkes Hotel and it does not seem to me iniquitous for Mr Trimmatis to have said that he was able to provide that information because he was involved in managing it, through Concept. I cannot conclude from this that he deliberately and dishonestly suppressed of other information.
- So far as the marketing issue is concerned, the Declaration said, amongst other things, that "The Property has been marketed for sale under the auspices of NAMA/IBRC as a hotel with the potential for residential conversion. It was marketed between April and May 2012 on that basis and an advertisement was placed once in The Estates Gazette." The bold type is in the original. Stimm says that this makes it sound like residential conversion is a mere possibility, whereas the Parkes Hotel was actually on the point of being sold to Harbinger with funding which had been obtained for the specific purpose of developing it into a residential property. It is not obvious to me, however, that the purchaser's intentions are relevant to the assessment of the rate of SDLT due at the time of the Sale. The test, as I understand it, is whether, at the date of the transaction, the building "is in the process of being constructed or adapted" for use as one or more dwellings. The fact that such a process might start the day after the transaction does not seem to matter. Even if I am wrong about that, the position is not obvious, and I am in no position to make findings about whether Mr Trimmatis realised that such matters were relevant and deliberately decided to downplay them.
- Ultimately, as I have said, the point of the Declaration was to explain the works carried out at the Parkes Hotel. Stimm accepts that it is not able to say that the Declaration was inaccurate in that regard. For the reasons I have given, I am not satisfied on the balance of probabilities that there was any iniquity in relation to the Declaration.
- I add that, in any event, it seems unlikely that K&S will have documents and communications relating to SDLT and the Declaration which could shed much (if any) light on Stimm's claim against K&S. They would, at most, be relevant only to credibility.
Strand 6: Other Iniquity
- The final iniquity identified relates to AWI. This concerns the undertaking given by K&S to AWI on 4 December 2012 to pay the £1.5 million introduction fee on completion pursuant to the fee agreement with Harbinger Guernsey dated 18 July 2012. Stimm says the undertaking was backdated, Harbinger Guernsey did not exist at the date of the undertaking, and the undertaking was worthless because it was expressed to be of no effect if Harbinger Guernsey was not the purchaser of the Parkes Hotel.
- As I have said, Mr Atkins did not make much of this alleged iniquity in his oral submissions, although he declined to abandon it. It is also addressed much more briefly in Stimm's written submissions than the other strands of iniquity. In my judgment, Mr Atkins's lack of enthusiasm was warranted.
- AWI was not misled by the backdating of the undertaking. AWI knew that it was not signed on 4 December 2012, because Stephenson Harwood were still negotiating its terms until around 17 December 2012. Although the evidence does not disclose precisely when the undertaking was given, AWI must have known when they received it.
- So far as the incorporation of Harbinger Guernsey is concerned, AWI had signed up to the deed of 18 July 2012 knowing that Harbinger Guernsey had not yet been incorporated, since the deed describes the company as "in formation". It is not clear to me precisely when it was finally incorporated, but Mr Heilpern was taking steps to incorporate it on 14 December 2012, so it might have been incorporated by the time the undertaking was actually given, which was no earlier than 17 December 2012.
- Most importantly, as I have explained in the factual narrative above, Stephenson Harwood seem to have been aware that Harbinger Guernsey might not be the eventual purchaser of the Parkes Hotel, so that the undertaking would not take effect. They sought to include wording to capture a purchase by a different purchaser and, at one stage, Harbinger was expressly referred to in the draft. For these reasons, I consider it unlikely that AWI was misled. It seems simply to have been outmanoeuvred and may not have been entitled to anything more than it obtained. Stimm has not discharged the burden of showing, on the basis of the evidence currently available, that it was more likely than not that there was iniquity in relation to AWI.
viii) Outcome of the Applications
The Iniquity Application
- I have found that three of the alleged six strands of iniquity are made out on the balance of probabilities, on the basis of the currently available evidence:
i) In relation to the first strand, it is more likely than not that Mr Trimmatis dishonestly concealed from IBRC/NAMA the connections between Vannes and Harbinger. Moreover, it is more likely than not that it was his intention from the outset of his instruction of K&S to induce IBRC/NAMA to agree to the redemption of their charge for less than they were owed, despite Mr Trimmatis continuing to have an interest in the Parkes Hotel and its development.
ii) In relation to the second strand, it is more likely than not that Mr Trimmatis dishonestly provided Beaufort / Aerium with the Instrument of Transfer, the Arippol Trust Deed, the Arippol Deed of Termination of Trust, the Loan Agreement, the Addendum and the Deed of Release with the intention of inducing Beaufort / Aerium to acquire 95% of Harbinger's shares. However, it is not likely that it was Mr Trimmatis's intention to deceive Beaufort / Aerium from the outset of his instruction of K&S, or in relation to other matters.
iii) In relation to the third strand, it is more likely than not that Mr Trimmatis dishonestly misappropriated of all the money transferred to K&S by Stimm and Opim, and that that was his intention from the outset. It is more likely than not that he knew that the £675,000 reimbursed by Beaufort / Aerium, the £25,000 from Stimm left over after the deposit was originally paid and the £200,000 received from Opim ought to have been repaid to Stimm. It is also more likely than not that he knew that Stimm's money should not have been used to enable him become the ultimate sole owner of the shares to the exclusion of Stimm. Mr Trimmatis's dishonesty in relation to the Loan Agreement, Addendum, Deed of Release and Arippol Deed of Termination of Trust is a further element of this strand of iniquity.
- In relation to each of these findings of iniquity, I have provisionally found that there was an abuse of the lawyer/client relationship. In light of Popplewell LJ's reasoning in paragraph 186 of the Al Sadeq case, however, it is not possible to be certain that any documents involved an abuse of the lawyer/client relationship without reviewing them. In so far as Mr Trimmatis told the Defendants what he was doing, or what he intended to do, and sought advice about whether it was lawful, those communications might be privileged.
- Stimm's Iniquity Application is made pursuant to paragraph 14.2 of PD 57 AD. It is unopposed by the Defendants in so far as it relies on allegations of iniquity against Mr Trimmatis. In the light of my findings, and subject to the caveat in the preceding paragraph, Stimm's challenge to the Defendants' duty to withhold production of any relevant documents created as part of or in furtherance of the above iniquities succeeds. Those documents were never privileged.
- I do not, however, consider that it follows from my findings concerning those iniquities that none of the documents held by the Defendants in connection with the Sale were, or are, privileged. There are likely to be privileged documents containing communications about matters which are unrelated to the strands of iniquity which I have found to be made out. I have, for example, found that Stimm has not established iniquity, on the balance of probabilities, in relation to the alleged fraud on HMRC concerning Harbinger's payment of SDLT. On the basis of my findings, there was no abuse of the lawyer/client relationship in relation to that advice. In those circumstances, it would be wrong in principle for the court nevertheless to hold that privilege did not arise in relation to that advice, on the footing that other aspects of the transaction were iniquitous.
- The starting point is that legal advice privilege is inviolate. It is strictly only when the necessary conditions engaging the iniquity principle are satisfied that privilege does not arise. Those conditions cannot be circumvented by saying that the effect of one iniquity should be extended to all other aspects of a "transaction". The scope of a "transaction" is open to interpretation, and a wide interpretation could result in documents being disclosable which have no connection to the alleged iniquity. Such an approach would come close to saying that the documents were disclosable because they would not exist but for the iniquity, which was said by Popplewell LJ in paragraph 166 of his judgment in Al Sadeq to be too remote a connection to engage the iniquity principle.
- The Defendants' solicitors will, therefore, need to carry out a review in order to determine which documents to produce pursuant to my findings. This makes it important to identify with as much clarity as possible the categories of document which are to be produced. In paragraph 155 of his judgment in the Al Sadeq case, Popplewell LJ approved the approach of fashioning an order to give as much practical guidance as possible by reference to the individual circumstances of the case. Subject to hearing from the parties (if they are unable to reach agreement) as to the appropriate framing of the order, my provisional view is that (subject to the point in paragraph 257 above) no privilege attaches to documents and communications in the following categories:
i) All documents and communications created in connection with negotiations and agreements between the purchaser and IBRC/NAMA as mortgagee of the Parkes Hotel (whether such negotiations or agreements were routed through LSG or otherwise). Such documents include (but are not limited to) those concerned with representations as to whether there was any (or no) connection between Vannes and Harbinger.
ii) All documents and communications created in connection with satisfying Beaufort / Aerium: first, that Frankel Estates had good title to Harbinger's shares; and second, that the loan to Harbinger of the money used to pay the deposit would be discharged on completion of the Sale. These documents and communications include (but are not limited to) those relating to any actual, purported, or contemplated rights or obligations of Mrs Trimati, Mr Arippol, Limesi, Frankel BG and Frankel Estates in relation to the Harbinger Shares, or of Icmofil and Frankel BG in connection with the loan of the deposit money.
iii) All documents and communications created in connection with: (i) the £1.7 million paid to K&S by Stimm, (ii) the £200,000 paid to K&S by Opim, (iii) the £675,000 paid into K&S's client account on 11 March 2013 with the narrative "Deposit: Re Stimm Foundation/Beaufort Gardens"; and (iv) the £1 million treated as entitling Frankel Estates to 5% of the shares of Harbinger on completion of the Sale, including (but not limited to) any documents and communications showing what subsequently happened to those monies.
iv) As part of, or in addition to, the above, all documents and communications concerned with the Instrument of Transfer, the Arippol Trust Deed, the Arippol Deed of Termination of Trust, the Loan Agreement, the Addendum and the Deed of Release, including (but not limited to) the circumstances surrounding the creation and execution of each of those documents.
The Non-Party Disclosure Application
- The Non-Party Disclosure Application is made pursuant to CPR 31.17, which applies to these proceedings by virtue of paragraph 1.8 and Schedule II of PD 57AD. An unusual feature of the application in this case is that Mr Trimmatis can comply with the order sought by doing nothing. By the end of the hearing, the form of order sought (following some suggestions from me) requires Mr Trimmatis to produce only those documents which the Defendants' solicitors are going to produce pursuant to the order against them, and he is able to comply simply "by not impeding them from doing so." In effect, the purpose of the order is to prevent Mr Trimmatis suggesting that the privilege in the documents is his, that he is not bound by the order against the Defendants, and that he can therefore instruct them not to comply.
- Mr Pourghadiri's skeleton contended that the Non-Party Disclosure Application was entirely unnecessary and a waste of time, and that Mr Trimmatis could simply have been given notice of, or added as a respondent to, the Iniquity Application (although he stated his position more neutrally in oral submissions). In my judgment, given that any privilege in the documents of which production was sought was that of Mr Trimmatis (or his companies), and given the fundamental importance of privilege to the administration of justice, he was a necessary and proper party to the application for disclosure of these documents. The court needed to be satisfied that Mr Trimmatis had been given every opportunity to protect whatever privilege he had, and it is important that he is fully bound by any order, rather than just being notified of the application. There should be no room for subsequent debate about whether he can object to the Defendants complying with any order against them.
- Since joining Mr Trimmatis realistically involved seeking disclosure of the relevant documents as against him, the appropriate procedural route seems to me to be CPR 31.17. That is the correct route for engaging the court's power to order disclosure from a non-party under section 34 of the Senior Court Act 1981.
- I am satisfied that each of the documents within the categories referred to above are likely to support Stimm's case or adversely affect the Defendants' case. The Stimm File contains relevant documents and it is reasonable to infer that other documents held by the Defendants will be pertinent. Indeed, the Defendants have (of course) seen the documents which have been withheld on the basis that they are arguably privileged, and they agree that they include relevant documents which would fall to be disclosed, were they not arguably privileged. I cannot, of course, speculate whether all (or any) of these documents will certainly support Stimm's case, but given that the Defendants will not be producing the documents unless they are relevant, I can, and do, conclude that they "may well" support Stimm's case (or adversely affect the Defendants'), and that is sufficient to satisfy CPR 31.17(2)(a) (see Three Rivers DC v Bank of England (No. 4) [2002] EWCA Civ 1182; [2003] 1 WLR 210).
- I am also satisfied that disclosure is necessary in order to dispose fairly of the claim, within the meaning of CPR 31.17(2)(b). In many cases, disclosure from a non-party is unnecessary, if disclosure of the same documents can be obtained against a party to the proceedings. This is an unusual case, however, and I have explained already the importance of ensuring that Mr Trimmatis is bound by an order for production of documents. The documents are to be disclosed by the Defendants in any event, and Mr Trimmatis will not be required to do anything or incur any cost. I am, accordingly, satisfied that, in the unusual circumstances of this case, it is appropriate to exercise my discretion to make an order against Mr Trimmatis pursuant to CPR 31.17.
The Preliminary Issue Application
- Although Stimm's Iniquity Application has not been wholly successful, because I have not found every alleged strand of iniquity to be established, I understood that Stimm would not wish to pursue its application for a preliminary issue in the circumstances which have eventuated. I was not, in any case, persuaded that a preliminary issue concerning whether Stimm was K&S's client would be appropriate. Even if Stimm were held to be a client and disclosure of further documents were ordered, it would not inevitably succeed against the Defendants at trial, although I can see that the Defendants' position would be weaker in those circumstances. Nor, if Stimm were held not to be a client, would it necessarily lose. The issue is not, therefore, dispositive.
- Moreover, Stimm's proposal to use the existing trial window for the preliminary issue, with the consequent increase in costs and substantial delay to the main trial (which is estimated at ten days), would be inappropriate at this stage of the proceedings, which have been ongoing since September 2023. If the determination of this preliminary issue were truly essential to the justice of the proceedings (as Stimm contends), this application could and should have been made much sooner, without being tied to the success of the Iniquity Application.
ix) Conclusion
- I would encourage the parties to seek to agree an order in the light of my judgment. If that is not possible, I will decide any consequential matters in due course, including as to the appropriate framing of the various categories of documents which are to be produced and the timing of production, with an eye to minimising disruption to trial preparation.
- I am grateful to all counsel and solicitors for their assistance in relation to this matter.
