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Bloom v Bloom [2017] EWFC B108

Judgment within financial remedy proceedings in respect of a preliminary issue concerning ownership of a villa in the South of France.

This was one of a trio of judgments handed down by Mr Recorder Cusworth QC to conclude the matrimonial litigation between Bela Bloom ("W") and Baron Alex Bloom ("H"). This first judgment came at the conclusion of a four-day preliminary issue hearing in March 2017 to determine the ownership of a Villa in the South of France (the 'French Property'). The determination of the substantive financial remedy proceedings was reported as Bloom v Bloom [2017] EWFC B109, and the judge's decision to publish all the judgments unanonymised and forward them to the relevant public authorities was reported as Bloom v Bloom [2018] EWFC B10.

The parties' relationship began in October 2010 and they separated in August 2015. The French Property was acquired in 2013 for €2.699m in H's sole name, but the purchase was funded entirely by the Intervenor: W's mother. It was purchased with a deposit initially intended to be €1.15m (but ultimately €1,610m including fees payable on purchase), and a mortgage from Societe Generale. The Intervenor made payments to H of €30,000 per quarter until July 2015, which she intended to be put towards the mortgage balance.

The Intervenor's case, supported by her husband Valentin (who gave oral evidence) and W, was that the French Property was purchased as a gift for W's daughter A (the Intervenor's grandchild), who was born shortly after the completion of the purchase. The Intervenor, Valentin and W contended that the entirety of the beneficial interest in the property was held by H on constructive trust for A. H denied this, and contested that the property had always been intended to be an outright gift to himself and W. W and the Intervenor were represented by counsel throughout, H was represented by counsel for the bulk of the hearing, but his counsel withdrew on the final day due to an issue with his fees.

The Intervenor's case was:
• On a holiday in the South of France in 2012 attended by H, W, the Intervenor and her husband Valentin, H held himself out as a successful property dealer, and spoke about property values in that area. The Intervenor mentioned she may consider buying a home in the area as a present for a future Grandchild.
• In November 2012, W was six months pregnant. The Intervenor indicated that she would like to gift a property to her Grandchild at a cost of €1m. H accepted this.
• On the basis of H's acceptance, the Intervenor agreed that given his expertise, H could find an appropriate property in the area, which he did in January 2015, albeit at a higher price of €2.45m.
• The Intervenor was persuaded to pay the higher price, on the understanding that the property was for her grandchild.
•  On 12 March 2013, H sent the Intervenor an email that said the monthly mortgage cost was €4,791.67 (i.e. just over €14k per quarter), paid quarterly.
• On 15 May 2013, H sent the Intervenor an email stating that the mortgage cost was actually €143,750 per year: €35,937.50 payable quarterly: more than twice as much as H had suggested previously.
• The Intervenor provided payments totalling €1,610,365 to cover the deposit and consequential purchase fees.
• When the Intervenor asked H about the sharp increase in cost, H became angry and did not produce supporting documentation.
• The Intervenor then paid €30,000 per quarter to H in respect of the mortgage, on the understanding that this amount was actually less than the mortgage cost and H was meeting the c.€5,900 shortfall. This was of course not the case: the actual mortgage payments were less than half of the monies provided quarterly by the Intervenor.
• In late August/Early 2013, the purchase contract was sent to the Intervenor by H, which set out the true mortgage costs, but because it was not the document she had asked for and had not been translated from French, she did not try to read it in detail, and so remained unaware of the fact that she was making overpayments to H.
• The parties' marriage ran into difficulties in the summer of 2015, the Intervenor travelled to the French Property, but H again refused to disclose confirmatory documents about the arrangements in relation to the property and became angry when the requests were made. At this point, the Intervenor ceased to make mortgage payments to H.

H ran an unusually candid case:
• H said the search for the property commenced before A was conceived.
• H drew explicit attention to his own 'untrustworthiness', and bad character. H contended that because W's parents were aware of all this, it was highly unlikely that they would have reposed any trust in him at all, and insofar as they did make payments to him, they must have been made as outright gifts rather than as payments on trust. H said: "my parents in law had more than adequate reason to mistrust me financially as I had abused their trust multiple times".
• H also pointed out that there was no documentary reference to the property being held for A, and as the Intervenor was a 'financially sophisticated person', it was 'inconceivable that she would not have recorded in writing that the monies were being provided as other than an outright gift, if they were'.
• Finally, H contended that the Intervenor and her husband were actually far wealthier than they had acknowledged in the proceedings, and the payments they had made to him were 'but a tiny proportion of their wealth'.

The Judge made a number of findings, including:
• H had insisted on mortgage interest rate documentation being provided by Societe Generale in word document format, so that he could tamper with the mortgage interest rate figures.
• H had then done exactly this – he had altered the interest rate set out in a Societe General mortgage letter from 2.21% to 4.21% and had done so to "attempt to hide the true deficit between what the Intervenor had been paying him and what the bank had actually required to receive." He sent the doctored letter to the Intervenor in July 2015.
• Shortly after, in August 2015, H sent the Intervenor a similarly doctored purchase contract, that had been altered so that the mortgage interest rates matched those set out in the Societe Generale letter of July 2015. This was despite the fact that he had sent through the original (undoctored) purchase contract previously in 2013, but the Judge found that this did 'not absolve him of responsibility for this further attempt to mislead the Intervenor and hide his mis-use of the funds that she had been providing.'
• Later in 2015, H invited a viewer to the property on the apparent premise of marketing it for sale. The judge could not discern whether this was 'part of a genuine attempt to dispose of the property, or just to cause grief to the applicant'.

However, the judge noted that whilst it was 'clear that the respondent was apparently deliberately misleading them, withholding information which they had legitimately sought from him, and receiving money from them for one purpose and using it for another', none of these findings established the Intervenor's case that there was a common understanding between all parties before the monies were transferred to H that the property was to be held on trust for A.

The judge referred to the applicable constructive trust principles in Paragon Finance v DB Thakerar [1999] 1 All ER 400 and Gissing v Gissing [1971] AC 886. The judge found in favour of the Intervenor and W. His conclusion was underpinned by the following determinations:

• He rejected H's contention that W took decisions in relation to the parties' finance, and thus found that she was not complicit in H's 'apparently admitted' plan to dupe her parents into paying more than twice the actual mortgage requirement.
• He accepted the Intervenor's account of the series of events and discussions that led to the acquisition of the French property, which was corroborated by the other witnesses, including her husband Valentin.
• He rejected H's 'central tenet' that because he is untrustworthy, it was unlikely that the Intervenor would have trusted him to hold property for his daughter. The judge found that H's contention actually militated in favour of the opposite conclusion: 'I find that knowing about the sort of person that the Respondent himself asserts himself to be would make it more likely that they would want to ensure that some of what they were providing was secured for their granddaughter rather than less.'
• He found that H had bragged about his history as a successful property entrepreneur and had held himself out to banks in a similar way, which would have 'justified the Intervenor leaving the purchase details in his hands.'
• He found the evidence of the Intervenor, Valentin and W to be 'complimentary, cohesive and compelling'.
• He found that the Intervenor's refusal to continue to make mortgage payments after the summer of 2015 was entirely reasonable in the face of H's refusal to provide documents in support of the true property cost and basis on which it was held.
• He rejected H's case that the Intervenor and her husband were attempting to purchase the property from him at full cost in the summer of 2015.
• He found that the issue of the additional liability from H to the Intervenor in respect of the inflated mortgage over-payments was to be dealt with in the substance of the financial remedy application.

Summary by Joseph Rainerbarrister, Queen Elizabeth Building
_______________

Case No: ZC15D04042

IN THE FAMILY COURT
SITTING IN THE CENTRAL FAMILY COURT
Central Family Court
First Avenue House, 42-49 High Holborn
London WC1 6NP

Date: 2/5/2017

Before:
MR RECORDER CUSWORTH QC

- - - - - - - - - - - - - - - - - - - - -
Between:

 BELA BLOOM Applicant
 - and - 
 BARON ALEX BLOOM Respondent
 - and - 
 IRINA KONTIPAYLOVA  Intervenor

- - - - - - - - - - - - - - - - - - - - -

LUCIANA CRIMP (instructed by FARRER & Co) for the Applicant
TIMOTHY BECKER (Direct Access) for the Respondent from 22 – 24 March 2017; thereafter the Respondent appeared in person
ANDREW MOLD (instructed by CHARLES RUSSELL SPEECHLYS) for the Intervenor

Hearing dates: 22nd - 24th March & 20th April 2017
- - - - - - - - - - - - - - - - - - - - -
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
.............................

MR RECORDER CUSWORTH QC

This judgment was handed down in private on 2nd May 2017. It consists of 45 paragraphs and has been signed and dated by the judge.

The judge hereby gives leave for it to be reported.

Mr CUSWORTH QC:
1. This is a preliminary hearing in financial remedy proceedings, the issues to be determined being defined by an order of 5th September 2016 made by DJ Duddridge as follows: 'all issues relating to the beneficial ownership of the French Property or bank deposits held in French bank accounts by the respondent and other claims relating to monies paid to the respondent for the purchase of the French Property or for mortgage payments (which, together shall be the 'preliminary issue')'.

2. The 'French Property' is a villa situated at 80 Chemin de l'Ermitage, 06160 Antibes, Juan Les Pins, France. It was purchased in 2013. It was acquired in the sole name of the Respondent in divorce proceedings, Baron Bloom; but the purchase was funded entirely by the Intervenor, Irina Kontipaylova, whose daughter Bela is the Petitioner in the divorce, and the Applicant in these financial proceedings.

3. It is the Intervenor's case, supported by her husband Valentin and the Applicant, that the French Property was purchased in order to provide a gift for her grandchild, A, who was born a few months before the completion of the purchase. The Respondent does not accept this; he says that the property was intended to be an outright gift to himself and Bela. He says that the search for the property started before A's conception, and also that, by reason of his own bad character and untrustworthiness, it is inherently unlikely that the Intervenor or her husband would have trusted him to hold any property on behalf of their granddaughter. The only explanation, he says, for the fact that the property is held in his sole name despite his bad character, is that it was intended as nothing less than an outright gift to him, and Bela, the Intervenor's only child.

4. At the outset of the hearing, on 22nd – 24th March 2017, the Respondent was represented by Mr Becker of counsel, on a direct access basis. The matter was not then concluded, and when the hearing resumed on 20th April Mr Becker had felt it necessary to withdraw from the case due to an issue with his fees. By that time, the Respondent was in the middle of his cross-examination by Mr Mold, who has appeared throughout for the Intervenor. The Respondent had also prepared very full submissions in advance of the resumed hearing, which he read out and then provided a copy to the court. The presentation of his case was therefore hardly materially affected by counsel's absence on that last day. Miss Crimp has appeared throughout for the Applicant.

5. In the course of the 4 days of evidence that I have received, I have in addition to the Respondent, heard from the Intervenor, her husband Valentin, both of whom gave evidence through a Russian Interpreter, and from the Applicant. All three were cross examined by Mr Becker for the Respondent. I have also been provided with a full transcript of the evidence given over the first 3 days. In addition I have read statements from 3 witnesses on behalf of the Intervenor; Marianna Bogdanenko, Sun Yue and Fu Wen Hui, although none of these witnesses have been available for cross-examination. The Respondent called no other witnesses. I refused an application to allow his father to act as a McKenzie Friend on 20th April, in circumstances where he has had a substantial involvement in the historic events which form the factual background to this marriage.

6. That background, insofar as it is agreed, may be briefly stated as follows:

a. The Applicant is Russian, and was born on 10th February 1989. She is now therefore 28. At the time of the parties' marriage on 14th March 2011, she was just 22. She is the only child of the Intervenor and her husband Valentin.

b. The Respondent is English, and was born on 19th February 1974, and is therefore 43. At the time of the marriage, he was 37.

c. The parties' relationship had begun in October 2010. They separated in August 2015, and the Applicant's divorce petition was issued on 10th September 2015. Decree Absolute of divorce was obtained on 26th September 2016.

d. Shortly after the marriage, in May 2011, the couple's matrimonial home at Flat 10, 54-56 Stanhope Gardens, London SW7 was acquired, for £1,325,000. The purchase was funded entirely by the Applicant's parents. The Intervenor sent just over $2m to the Respondent between January and May 2011, to fund the purchase. Mortgages have subsequently been taken out in respect of this property, of just over £500,000. The property is now held in the names of both parties.

e. The Applicant and the Respondent's only child is A, who was born on 18th February 2013, and is therefore just 4 years of age. She lives with the Applicant.

f. The French Property was purchased on 14th June 2013, for €2.5m, in the Respondent's sole name. The purchase was secured by a 100% mortgage from Societe General (Soc. Gen.), backed by a deposit of €1.15m. Thereafter, the Intervenor made payments to the respondent at the rate of €30,000 per quarter which she intended would be put to the mortgage liability, until June 2015.

g. The total amount paid by the Intervenor towards that property and its mortgage has been €1,963,742.

7. The proceedings which have followed the separation of the Applicant and the Respondent have proceeded, insofar as relevant, as follows:

a. The Applicant's Form A was dated 18th September 2015. Her Form E was sworn on 14th December 2015. In that document she said, in Box 2.2 in relation to the French Property, that 'My parents provided funds of around €2m to purchase the property on behalf of [A]. I have included the property in my Form E to reflect my view that I should hold the property beneficially on behalf of my daughter'.

b. The Respondent's Form E was dated 13th December 2015. In it he asserted his sole ownership of the French Property. He acknowledged in Box 2.2: 'My parents in law gifted approximately €2m towards the purchase price of the Antibes Villa. The transaction was structured for tax advantage as a 100% mortgage...'

c. On 16th May 2016, DJ Alderson joined the Intervenor into these proceedings, and made an asset preservation order against the French Property.

d. On 5th September 2016, DJ Duddridge dismissed the Respondent's application to strike out the Intervenor's case as to the beneficial ownership of the French Property, provided for the filing of points of claim and defence, and directed that each party should file and serve any witness statements on which they proposed to rely in relation to the preliminary issue on 10th March 2017; this hearing was also listed.

e. The Intervenor's points of claim are dated 31st October 2016. The Respondent's defence is dated 1st December 2016; and the Intervenor's reply 23rd December 2016. The 6 witness statements filed on behalf of the Intervenor all predate 10th March 2017, and were served on the Respondent on that date, after he indicated that he did not intend calling any witnesses. In fact, on 15th March 2017, the Respondent did produce a witness statement for himself that was in part responsive to those produced for the Intervenor, and had also been in circulation to his counsel prior to the given date for exchange. He was at the time acting in person, although he had been consulting Mr Becker for some weeks. Notwithstanding concerns expressed about this on the Intervenor's behalf, I have allowed the statement in.

8. The Intervenor's case has been put as follows, both in the pleadings and in the various witness statements, and in the oral evidence that I have heard. I have to say that all of that evidence has been entirely consistent with the witness statements filed, and with the pleadings.

a. Firstly, that on a holiday in the South of France in May 2012 attended by the Applicant, the Respondent, the Intervenor and her husband Valentin, the Respondent held himself out as a successful property dealer, and talked about properties in that region and their values. At the time, the Intervenor did mention that she might consider buying a home in the area as a present for any future grandchild.

b. In November 2012, the same group of people holidayed together in Mexico. By that time, the Applicant was around 6 months pregnant. The Intervenor indicated that she wished to make a gift of a property for her grandchild, at a cost of around €1m. It is her case that she made it clear that the property was to be for her grandchild, and that the Respondent accepted this.

c. On the basis of that acceptance, the Intervenor says that she agreed that the Respondent would be in charge of finding the appropriate property and arranging for its purchase – given his expressed expertise in the area. He identified the French Property in January 2013, at the higher price of €2.45m, and the intervenor was persuaded to pay €270,000 as a deposit for the property, she says on the basis of her understanding that the property was for her grandchild.

9. The exact sequence of information passed to the Intervenor during this period is of significance.

a. On 6th January, in an email from the Applicant to the Intervenor, she was told that the cost would in fact be €2.620m (including fees), which would require a cash sum from her 10 weeks after contracts were signed, reduced by a mortgage of €1.225m, at the annual cost of €75,000 (€6,250pcm). Again this was agreed by the Intervenor, she says on the basis that the property was for her grandchild. Although the Respondent claims no responsibility for the contents of this email, for the reasons I will identify later I find that he was responsible for its provision.

b. On 18th January 2013, Soc.Gen provided to the Respondent the detailed cost of a mortgage in the sum of €2.5m, at an interest rate of 2.3% (Euribor 3 months + 2.1%), on the basis of a pledged figure of €1.25m.

c. A was born as I have said, on 18th February 2013.

d. On 1st March 2013, the Respondent confirmed to the Applicant that he had by then received from the Intervenor payments totalling €257,735 towards the deposit on the property. Soon after on that day he sent her details of the 'Villa Final Amounts'. These indicated that after deducting a mortgage of €1.225m, and the cash already received, the total amount for the Intervenor still to pay was €1.217m. The total purchase cost was said to be €2.699m

e. 5 days later on 6th March, the Respondent sent confirmation that the mortgage had been approved to the Applicant, and provided 'bank details to send money to'. It is clear, as I find, that this was to be translated by the Applicant for onward transmission to the Intervenor, as had been the previous emails.

f. On 12th March 2013, the Respondent told the Applicant that the monthly mortgage cost was €4,791.67, paid quarterly, and he later again sent the joint bank account details.

g. On 8th April 2013, he sent through 'new bank details', that is of an account in his sole name. His later complaint that the Intervenor unilaterally decided to pay the funds to him, rather than into a joint account, is therefore entirely unjustified. The Applicant on the same day sent these to Mr Sun Yue, who was facilitating the payments for the Intervenor.

h. On 6th May 2013, the Applicant sent an email to the Intervenor detailing the additional fees payable consequent on the purchase. This increased the Intervenor's total liability from €1.474m to €1.612m. The Respondent in oral evidence denied all knowledge of the content of this email, but for the reasons which I shall explain I do not accept this.

i. On 15th May, he did send to the Applicant an email in which he stated that the mortgage details were: 'interest based on €2.5m. The current interest rate is 6% which is €150,000 per year… the net amount of interest is €143,750 per year which works out to be €35,937.50 payable every 3 months.'

j. Between March and June 2013, the Intervenor made payments totalling €1,610,365, initially into the joint account of the Applicant and the Respondent as notified, and latterly after 8th April, as I find at the Respondent's request, into an account in his sole name. The property purchase completed on 14th June 2013.

k. There is nothing in the documentation which specifies the basis upon which the monies were provided or the purchase made.

10. The Intervenor's evidence, both orally and in her statement, was that when she asked about this sharp increase in cost, the Respondent became very upset, and did not produce any documentation. At the time, her husband Valentin did not support her, because of the upset that he could see her requests causing in the Applicant and Respondent's marriage, and because at that stage he still trusted the Respondent. Valentin acknowledged this. So, it is accepted that no documentation had been provided to the Intervenor by the time that completion on the purchase of the property took place.

11. Further, thereafter, the Intervenor paid €30,000 per quarter to the Respondent, who himself had 'agreed' with her that he would pay the balance of funds due. In fact, he was now receiving far more than the actual mortgage costs, which were as he had set them out in his email of 12th March.

12. Eventually, in late August or early September 2013, after completion had taken place, the purchase contract was forwarded to the Intervenor by the Respondent, but although at that stage it was a copy of the original document, and the rate of borrowing for the mortgage had not been tampered with in the copy, the Intervenor says, and I accept, that as it was not the clear original document that she had been asking for, containing simply set out figures, and it had not been translated from the French, she did not try to read it in detail.

13. Instead, she continued to pay €30,000 per quarter to the Respondent, although the actual mortgage rate was less than half of that, through to the payment due in June 2015. Even so, it is clear that through this period, the Respondent was still often late in making the payments due in respect of the Villa.

14. During the summer of 2015, the marriage between the Applicant and the Respondent ran into difficulties. His father and her parents all travelled to the French property in late July, and their relationship was discussed. The Intervenor says, and I accept, that when she repeated then her request to be shown confirmatory documents about the arrangements in relation to the property the Respondent again became angry, and only spoke to her through his father. Whilst he confirmed that the property was not held in A's name, he did not explain who owned it or how much it was worth. He did agree to hand over details of his French lawyer, Jean-Luc Truffet.
1
5. On 26 July 2015 the Respondent wrote to M. Truffet, saying that he was 'in discussions about selling my villa to my father in law'. He asked him to contact him for further instructions when contacted by their notaire. M. Truffet, whose English is clearly not perfect, replied on 30th July that he had been phoned by 'the solicitor of your father in law', and that 'your parents in law with to acquire (to buy back) the house of Antibes. He indicated to me that the loan had paid off until today by your parents in law'. The Respondent's reply (at 5.03 pm on 30th) included:

'I am concerned regarding the security of all documents so please do not send ANY documents without my express permission. It is totally incorrect that they have paid the mortgage off.'

16. The sequence of correspondence with Soc. Gen. at this time is also revealing, its disclosure having been compelled during these proceedings and not offered by the Respondent.

a. On 27th July 2015, the Respondent asked his French banker, Laurent Castelli, of Soc. Gen. to send through his mortgage interest rate details, no doubt in response to the Intervenor's renewed questions. He added that he wanted the information sent in a word document.

b. On 30th July, the Respondent chased, and repeated his request for the information to be sent in a word document – ie. one that could be altered by the recipient. A document was sent later that day by M. Castelli, containing the total amount of interest paid on the loan. I have seen that document from the bank which sets out both the interest rate (Euribor 3 months +2.21%), and the total amount paid (€121,583.35), but is unsigned.

c. The Respondent's response was to ask for the document again, but this time with Soc. Gen.'s letterhead. It came that same day (at 1.44 pm) as a PDF document – signed. He thus had an electronically signed document with the bank's letterhead, and an amendable word document with the same information.

d. 2 hours later at 4.15 pm on 30th July, he emailed another PDF document to the Intervenor. It was identical to that which he had been sent by Soc. Gen., with letterhead and signature, but the interest rate had been altered from 2.21% to 4.21%, and the total amount paid had been increased from €121,583.35 to €221,583.35. I am satisfied that these changes had been deliberately perpetrated by the Respondent, to attempt to hide the true deficit between what the Intervenor had been paying him and what the bank had actually required to receive.

17. There was also produced a chain of email correspondence between the Applicant and her father in law, Desmond Bloom, which covers the period between 23rd and 27th August 2015. In it the Applicant confirms the other evidence given by the Intervenor and Valentin about the subject of the family arguments at the villa in July – aside from the Respondent's drug-taking. He was asked to produce the documents relating to the villa and whether 'the money they had been sending had been used in the right way.' She also clearly indicated that her parents had intended the property as a present for A and not for her or for the Respondent. Desmond Bloom, despite a full response on other issues raised, did not respond to this, although it is clear that in July he had taken his son's position. Mr Bloom senior made it very clear to me, when applying to act as a McKenzie Friend for his son, that he would not be giving evidence on his behalf at any stage in these proceedings.

18. Also on 27th August 2015, the Respondent sent a copy of the purchase contract through to the Intervenor. The document had been altered so that the figures matched those in the letter sent from Soc. Gen. in July. The Respondent in his evidence did make the point that the original (accurate) contract had been sent through in August 2013 – but that does not absolve him of responsibility for this further attempt to mislead the Intervenor and hide his mis-use of the funds that she had been providing.

19. Finally, on 31st August 2015, someone attended at the French property for a viewing, supposedly on the basis that it was being marketed for sale, without the Applicant having any advance notice of the appointment; a fact which the Applicant later reported in her divorce petition. Whether or not this was part of a genuine attempt to dispose of the property, or just to cause grief to the Applicant, it illustrates the course of action which I find that the Respondent had chosen to indulge in at this time.

20. None of the above events, however, necessarily establish the Intervenor's case. Whilst it is clear that the Respondent was apparently deliberately misleading them, withholding information which they had legitimately sought from him, and receiving money from them for one purpose and using it for another, none of those things on their own would necessarily be sufficient to establish her case about the common understanding which she says was reached before she agreed to hand over any money. I have to carefully consider the Respondent's contrary case on this issue.

21. First, the Respondent points to his own, inherent, untrustworthiness. He highlights, at paragraph 32 of his statement dated 15th March 2017 and elsewhere, a number of circumstances which he says make it highly unlikely that the Applicant's parents would have reposed any trust in him at all, including the fact of his criminal record for an indecent assault on a 15 year old girl – a fact which he says was readily discoverable about him from a google search; his getting drunk and offering cocaine to the Applicant's uncle at their wedding ceremony in Monaco; what he describes as his physical and mental abuse of the Applicant – in terms he said: 'From the very day of my wedding to their daughter, they had been aware and were constantly updated by Bela that I was a regular user of drugs, an alcoholic, that I had physically and mentally abused their daughter and had punched her even when she was pregnant…and that I could have damaged the unborn child…'; or the fact that, although their London flat was purchased for them mortgage free by the Intervenor and Valentin, the Respondent took out a £500,000 mortgage on the property to fund the marital lifestyle, and that, when he was gifted the money to buy himself a Mercedes, he spent the money and took the car on a lease arrangement. In his closing submissions he stated that, 'My parents in law had more than adequate reason to mistrust me financially as I had abused their trust multiple times.' Nowhere in his statements or orally did he deny that any of these events had occurred.

22. The Respondent thus says that it is quite impossible to think that his parents in law reposed any trust in him, and insofar as they made payments to him, those payments must have been outright gifts rather than payments on trust of any sort. I however have to bear in mind that despite all of the thoroughly unattractive facets of his character upon which the Respondent himself relies, it remains the case that the Intervenor and her husband did, throughout the marriage, continue to provide very substantial sums to him and to the Applicant, a large amount of which they accept was intended to be treated as an outright gift. It is therefore clear that, despite misgivings, they were nevertheless prepared to continue to provide him with large sums of money, without proper documentation which they had requested having been provided to them, and despite whatever they knew about his past or recent behaviour.

23. This fact demonstrates that, whilst the marriage endured, the Intervenor and Valentin were prepared to suspend the concerns that they must have had, and repose a measure of trust in him as the husband to their only child, the Applicant, and also as the father of their only grandchild, A. If anything, I find that knowing about the sort of person that the Respondent himself asserts himself to be would make it more likely that they would want to ensure that some of what they were providing was secured for their granddaughter rather than less. Knowing that he had taken equity from the London flat (if it is alleged that they did) which they had provided as a gift to the Applicant may well have made them more careful of ensuring that the next time round, the money was not the Respondent's to dispose of at will.

24. I do accept, as the Respondent points out, that there are no references in any document prior to the purchase of the property, to its being held for A. The first mention seems to come in the conversations which the parties' had in July 2015 (and reported by the Applicant in her emails to Desmond Bloom in August 2015). However, equally there is no mention in the available documents that this was a gift to the Applicant and the Respondent, as the Respondent alleges. The documents which do exist between January and May 2013 are simply the brief emails to which I have referred, detailing the money which the Intervenor is being required to pay, both as a principal payment and thereafter under the asserted mortgage rate. It is clear to me that the basis of the purchase can only have been discussed orally between the parties.

25. The Respondent says that, as the Intervenor is a financially sophisticated person, it is inconceivable that she would not have recorded in writing that the monies were being provided as other than an outright gift, if they were. It is clear that she was uneasy about the lack of formal documentation provided to her – hence her requests which went unanswered until later to see the original purchase contract and a clear explanation of the mortgage arrangement. But the fact that she nevertheless made the payments required of her over this period is, I find, testament to the fact that, despite her misgivings, she did at this stage still repose some degree of trust in the Respondent. She was prepared to trust him over the quarterly amount prepared to service the mortgage, even though he was asking for double the amount that he had originally requested. It is therefore equally credible that she did not require written confirmation of an understanding between them that the property was to be held for A. I do not therefore find that the absence of such a document is determinative of the claim.

26. Finally, the Respondent argues that the Intervenor and her husband are actually much richer than they have acknowledged in these proceedings. He says that their Moscow property is worth hundreds of millions of US$, rather than merely several millions, as they acknowledge. He says that they are so rich that all of the payments which they have made are but a tiny proportion of their wealth – and the fact that they were unwilling to fund the whole price of the French property without a mortgage can be seen as evidence of their lack of willingness to make a larger gift to him – not as any sign financial constraint on their part. He points to the fact that in May 2012, after the parties' first holiday in the South of France, and before the applicant had fallen pregnant, that he sought particulars of villas in the area worth in one case over €8m, as evidence of 2 things:

a. Firstly, he says that it shows that the purchase was to be a gift for them, because A was not then conceived; and

b. Secondly, that there was not then any thought of financial constraint in the price of villa which he felt able to consider.

27. Given the evidence of his own poor character which the Respondent himself has advanced, and the fact that there has been no corroboration of his account by anyone, I have found it very hard to accept what he has told me unless it has been independently verified by documentation. However, I have also had to be aware that there is as indicated clear evidence that documents have been falsified before being sent by him to the Intervenor, in circumstances where he has clearly been attempting to cover up the fact that he was receiving from her more than twice what the mortgagees actually required to service the borrowing on the property. I have not, from the evidence that I have heard, been able to form a clear view of the exact value of the net worth of the Intervenor and her husband. They have undoubtedly been very generous during their daughter's short marriage to the Respondent, to both of them. However, I am satisfied by their evidence that their wealth is not boundless, that their original intention was to make a gift for the French Property in the sum of €1m, and that, although they could clearly afford both to pay more initially, and since, towards as they thought the mortgage, that these sums have not been 'insignificant' for them.

28. As to the argument about the timing and import of any conversations held in May 2012, I consider it of significance, as Mr Mold points out, that whilst the Respondent can show that he elicited a few particulars of very expensive properties at that time, the detailed search for a property, and at a significantly lower price, did not commence until after the Mexican holiday in November 2012. This fits entirely with the Intervenor's case that, whist she may have made general remarks about a purchase (she says for a prospective grandchild) in the spring, it was not until later, and after A's conception, that the green light was given for an actual purchase to take place. I do not therefore find that the fact of the Respondent's earlier requests establishes clearly, as he says that the purchase in summer 2013 could not have been intended as a gift by the Intervenor for her grandchild.

29. The Respondent has also argued that the Applicant herself was the prime mover behind any attempt to procure payments from her parents for purposes other than those intended. He points to the fact that he does not speak Russian, and the Intervenor and her husband do not speak English, and that the Applicant has therefore been the conduit through which all their communications have had to pass. His case, as put at trial through Mr Becker, rather than as pleaded, is that whilst the Intervenor and her husband knew that the French property had been gifted to the Applicant and Respondent, he and the Applicant had conspired together to obtain higher payments than the mortgage demanded to fund their lifestyle during the marriage.

30. This allegation was denied by the Applicant in her oral evidence. Her alleged complicity in a plot to defraud her own parents, subsequent to the purchase of the property, does not go directly to the issues which I have to decide at this hearing, although clearly the truth of this matter could be highly relevant to her credibility in the context of the wider financial remedy proceedings, insofar as arguments beyond simple needs are advanced by either party. In considering it, I have to bear in mind a number of important factors, including the admittedly abusive nature of the relationship between the Respondent and the Applicant, inspired by his alcohol and substance abuse, the significant differences in age and experience between the parties at the time when these events took place, and the fact that the Applicant's account of incidents involving others are generally corroborated by those others, whereas the Respondent's equivalent accounts are not. There is also evidence that the Respondent was willing to exaggerate or even falsify his financial position in conversations with prospective lenders in 2011/12, in connection with the mortgage on the matrimonial home. He has not as far as I am aware, alleged that the Applicant was complicit in that.

The Law
31. I now turn to the law which I must apply to determine whether the case put by the Intervenor is made out. Mr Mold for the Intervenor puts his client's case primarily upon the basis of constructive trust principles. He says that unless I reject her case that there was an agreement or understanding that the French Property would be purchased for A, and that the money for its purchase was provided by Irina on that basis, then the French Property will be held for A. He relies on the case of Paragon Finance v DB Thakerar [1999] 1 All ER 400, where Millet LJ stated (at 409:

'A constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his own beneficial interest in the property and deny the beneficial interest of another… the constructive trustee really is a trustee. He does not receive the trust property in his own right but by a transaction by which both parties intend to create a trust from the outset and which is not impugned by the plaintiff. His possession of the property is coloured from the first by the trust and confidence by means of which he obtained it, and his subsequent appropriation of the property to his own use is a breach of that trust… In these case the plaintiff does not impugn the transaction by which the defendant obtained control of the property. He alleges that the circumstances in which the defendant obtained control make it unconscionable for him thereafter to assert a beneficial interest in the property'

32. In order to show that there has been a 'transaction by which both parties intend to create a trust from the outset', the court must weigh the parties' conduct objectively. As Lord Diplock said in Gissing v Gissing [1971] AC 886 (at 906):

'As in so many branches of English law in which legal rights and obligations depend upon the intentions of the parties to a transaction, the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party's words or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party. On the other hand, he is not bound by any inference which the other party draws as to his intention unless that inference is one which can reasonably be drawn from his words or conduct. It is in this sense that in the branch of English law relating to constructive, implied or resulting trusts effect is given to the inferences as to the intentions of parties to a transaction which a reasonable man would draw from their words or conduct and not to any subjective intention or absence of intention which was not made manifest at the time of the transaction itself. It is for the court to determine what those inferences are.

In drawing such an inference, what spouses said and did which led up to the acquisition of a matrimonial home and what they said and did while the acquisition was being carried through is on a different footing from what they said and did after the acquisition was completed. Unless it is alleged that there was some subsequent fresh agreement, acted upon by the parties, to vary the original beneficial interests created when the matrimonial home was acquired, what they said and did after the acquisition was completed is relevant if it is explicable only upon the basis of their having manifested to one another at the time of the acquisition some particular common intention as to how the beneficial interests should be held.'

33. I agree with Mr Mold that these are the applicable principles in this case. He also made reference to a number of other principles in his submissions, including those of proprietary estoppel, resulting trusts, Quistclose trusts, and possible unjust enrichment. In the event I have not needed to consider these further for the conclusion of my judgment.

Conclusion
34. In all of the above circumstances, I have to determine whether I am satisfied that there was an 'agreement or understanding' that the French Property was to be purchased for A. I have to weigh the evidence given by the Respondent against that given by the Intervenor and the witnesses on her behalf. I remind myself that, although the Respondent accepts that he (and he says the Applicant) lied to the Intervenor about the real amounts required to meet the mortgage payments due on the property, that does  not necessarily mean that he is lying now in these proceedings about the key question of an understanding in respect of A. I also have to bear in mind the fact that his father, who attended court on his behalf seeking to appear as a McKenzie friend, has not given any evidence to support his case, even though he was at least party to the discussions between the parties in the summer of 2015 when it is acknowledged by all that this issue was raised.

35. The Respondent's evidence was in many places, impossible to accept. I reject his characterisation of his relationship as one where the Applicant took decisions in relation to the parties' finances, and information to be passed to her parents, of which he was unaware. It was very clear that all of the emails sent to the Intervenor relating to the acquisition of the French Property had been drafted by him, even if they were then translated and sent by his wife. Having seen them both give evidence, it was very clear that he would have been the principal decision maker; she was in her early 20s, he was 15 years her senior, and himself asserts that the relationship was characterised by his own drinking, drug taking and physical and mental abuse of the Applicant. She had also just given birth to A at the time that the events leading up to the purchase were unfolding.

36. Consequently I am unable to find, on the basis of the evidence before me, that the Applicant was complicit in the Respondent's apparently admitted plan to require his parents in law to pay twice what the mortgage actually required in order to fund their lifestyle during this short marriage. Because the matter was not properly pleaded or directly relevant to the issues before me, it may be that there is available more evidence which might shed different light for the purposes of the financial remedies application, but I must proceed for the purposes of this hearing on the evidence currently before me.

37. I reject unhesitatingly the Respondent' account of the funds being provided by the Intervenor as an unconditional gift to them both. Ultimately, having heard from all of the parties and from Valentin, and read the other evidence relied on for the Intervenor, I have equally no hesitation in accepting the Intervenor's case as to the events which led up to the purchase of the French Property in July 2013. Her evidence and that of her witnesses was, albeit delivered through the medium of an interpreter (save for the Applicant), or, in the case of the 3 overseas witnesses, not susceptible of cross-examination, generally supported by the available documentation, and entirely credible. Where there are any issues of fact between the Respondent's evidence and that for the Intervenor, I prefer that given for the Intervenor.

38. I reject the Respondent's central tenet that, as he is essentially untrustworthy, it is unlikely that the Intervenor would have trusted him to hold property for his daughter. It is, in that circumstance I find, far more likely that any further funds advanced by the Intervenor (who had already provided the funds for the parties' matrimonial home) would have been provided on condition that they would be held ultimately for her grandchild, than that they would be provided as an outright gift to a man who freely acknowledges that he was behaving appallingly both to the Applicant and to her family. I also accept that the Respondent had been bragging about his history as an entrepreneur in the property market – it is clear that he also held himself out to banks in this way, which would have justified the Intervenor leaving the details of the purchase in his hands.

39. However, any inherent probability or improbability is far less important that the complimentary, cohesive and compelling evidence that the Intervenor, Valentin and the Applicant all gave as to the understanding which the Intervenor had at the time when she agreed to and then did advance to funds which enabled the purchase of the French Property, in which I find she was encouraged by the Respondent. I accept her account of the extent of their conversations in France in May 2012, which did not lead to a subsequent extensive property search. I accept entirely the account which she gives between paragraphs 53 and 57, and at 65, of her statement dated 9th March 2017, as to what subsequently happened. Her account is supported by the fact of her continued requests for documentary evidence to support the demands which she was being given by the Respondent for further funds – requests which she would not have felt it necessary to make had the money provided been intended as a gift. I also accept Valentin's evidence at paragraphs 26 - 33 of his statement also of 9th March.

40. I have thought carefully about the fact that since the summer of 2015, the Intervenor had declined to make further payments under the mortgage, which one might have expected that she would do in circumstances where the property was held on trust for A; but in circumstances where the Respondent has absolutely denied that that was the case, and had been demanding money at an exorbitant and, as has now been shown, deliberately inflated, level, I find that it was an entirely reasonable and indeed justified decision of hers to cease to fund the property until its true cost, and the basis upon which it has been held, were determined.

41. I also reject the suggestion made by the Respondent that the Intervenor and her husband were genuinely attempting to purchase the French Property from him for full value in the summer of 2015. The emails relied on by the Respondent in this regard are not probative of anything other than the Respondent's lawyer M. Truffet's slightly tenuous grasp of English, and the fact that the Respondent was keen (1) to give the lawyer the impression that his parents in law wished to effect an arms' length purchase, and (2) that he did not wish them to see any documents that he had not first had the opportunity to thoroughly vet. It was at this very time that he was clearly altering the documents sent him by Soc. Gen. to cover up the fact that the mortgage payments had in fact been much less than the amount that he had required the Intervenor to pay to him.

42. In his final submissions, the Respondent has set great store by the fact that in ongoing French proceedings, there appears to be an assertion that the French Property is jointly owned by him with the Applicant, which is not the case, or that the Intervenor has some surviving interest in the property. The impact that those assertions may have on any applications made in France I do not know, but I do hope that this judgment will help to make matters clearer in those proceedings.

43. I am therefore able to find for the above reasons, that there is a constructive trust by which the Respondent holds the French Property for his daughter A, that having been the clear basis upon which the funds for its acquisition were advanced to him by the Intervenor; the Respondent knew and understood that at all times, and allowed the Intervenor to believe that he accepted it.

44. Further, it is also clear (and I think not disputed) that significant further funds that were advanced to him for the purpose of making mortgage payments on the property were not in fact so used, but rather appear to have been spent during the marriage. There has not been any investigation yet before me as to how those funds have been used, nor whether there are any funds available to either party to the marriage from which they can be repaid without impinging upon their respective needs. Prima facie, there is a further liability to the Intervenor in respect of those funds, which will be a debt to be dealt with during the substance of the financial remedy application.

45. That is my judgment.

Dated 2nd May 2017