ASTON LLOYD & PARTNERS INTERNATIONAL LIMITED

OPINION

1.

In this matter I am asked to advise the joint Liquidators ("the Liquidators") of Aston Lloyd
& Partners International Limited ("ALPIL") in relation to questions which have arisen
within the liquidation of ALPIL and its related companies.

The Facts
2.

The facts of this matter are somewhat complex. It has been a difficult, and time
consuming exercise, for the Liquidators to unravel the facts from a large volume of
documentation and with some assistance from the former officers of ALPIL. As one would
expect in the real world, the paperwork was not always in the form it should have been I
So far as the Liquidators have been able to ascertain the facts, they are set out, in detail,
in the draft Witness Statement of Mr Bijal Shah, which I have before me.

3.

The questions which arise in this case concern eight parcels of land which are situated in
four different countries, Turkey, Northern Cyprus, Bulgaria and Slovakia, ("the sites"). The
sites are presently listed in the ninth Schedule to the draft Claim Form. Some of these are
bare sites and some have some buildings and/or infrastructure on them. The sites are ail
held in the names of nominees and not in the name of ALPIL itseff. A large number of
individuals have paid money, with the intention of acquiring directly, or through a

nominee company they would direct, ownership of a plot of land abroad for a holiday
home or, in the case of two sites, what is called a "unit" on a development.

4.

I will adopt the expression "investor", which is used in the draft witness statement, but it
should be understood that the investors were intending to invest in real property, or
rights relating to real property, rather than investing in ALPIL itself e.g. as shareholders or
funders of ALPIL. The payments were made pursuant to written contracts, which go to the
heart of the matter. The sites were acquired by nominees for ALPIL but very few plots
have been transferred to investors or "their" nominee companies. The circumstances of
each site appear to be different, though some can be conveniently grouped together for
consideration. Whilst there were investments by ladies and companies and joint
investments, and without intending any disrespect, I will refer to an investor simply as
"he", to save having to say "he, she, it or they" every time.

Urgency
5.

There is some urgency in this matter, as explained in the draft witness statement. In
essence, this is because local creditors (or alleged creditors) or liquidators of the offshore
nominee companies may force the sale of the sites. Since there is no prospect of those
debts being discharged in any other way, local creditors will inevitably seek to recover
their debts by selling the sites as a whole. The consideration on such sales is likely to be a
fraction of their market value. That said, some of the sites may be very difficult to sell, in
any event. There is also the problem that the sites are most likely to be sold in Euros,
most of the investors live in the sterling area and the value of the Euro is presently in a

downward trend, with the economic crisis particularly affecting Greece, Spain, Portugal
and Italy.

The fundamental questions

6.

In my opinion, the fundamental questions, which arise for consideration, are these:(1)

To what extent is each of the sites held as a company asset, available for the
general body of creditors,

(2)

and to what extent is each site subject to trusts or liens in favour of individual
investors?

(3)

Like questions arise in relation to the balance of the net proceeds of sale of the sites
which have been sold.

(4)

How to meet the burden of the cost of the great deal of work that has been
properly carried out so far and how to meet the costs of an orderly realisation of
the assets, for the benefit of all concerned.

(5)

Should any of the sites be sold, in which case how should the proceeds of sale be
applied and/or should any plots be transferred to investors?

English or foreign law?

7.

In my opinion, the starting point should be to consider what law should be applied to the
issues in this case. We are dealing with the liquidation of an English company in England.
Accordingly there can be no doubt that English law should apply to the liquidation of
ALPIL. As regards claims by ordinary creditors of ALPIL, they fall within that liquidation. As

regards claims by investors, these involve real properties abroad, where the principles of
trust, arising under English law, may well not exist. (I believe that advice may have been
taken on the position in, at least, one of the relevant countries and, if so, this can be
included in the evidence before it is finalised). That said, the investors' rights stem, in
part, from their contracts with ALPIL These contracts all provide for any disputes arising
from the contracts to be subject to the law of England and Wales and to be subject to the
exclusive jurisdiction of the courts of England and Wales.

To the extent that the investors' rights stem, not from contract, but from English trust law
- such as the principle of resulting trusts - there is a long line of authority that English law
should be applied. The law was conveniently reviewed, by the Court of Appeal, in the case
of Lightning & Another v LiRhtning Electrical Contractors Limited & Others (23 April 1998)
1998 WL 1044250. This was a claim brought in England concerning a property in Scotland.
It was alleged that a resulting trust arose in relation to land in Scotland, although Scots
law, as the lex situs, does not recognise an equitable interest. Mr Lightning provided the
purchase price for the defendant company to buy a property in Scotland which was
registered in the company's name. The company was an English company and Mr
Lightning lived in England. The company went into receivership and when the receivers
commenced proceedings seeking possession of the property, Mr Lightning alleged that he
was entitled to the Scottish property beneficially, under English law and the principle of
resulting trust. Mr Lightning successfully sought a declaration against the company and
the receivers that the property, or its proceeds of sale, were held on trust for him. To show

the width of the principle, which is important in this case, I shall quote in full the relevant
passage from the reasoning of Lord Justice Peter Gibson:-

"The fact that a dispute relates to foreign land or involves interests in foreign land, which
a court of equity in this country recognises, but the courts of the foreign land would not,
has never been a bar to the English court exercising jurisdiction over a person amenable
to the jurisdiction, for example by being present in England. As was stated by the Earl of
Selborne L.C in Ewing v Orr Ewing (1883) L.R. 9 H.L. 34 at page 40:
"The Courts of Equity in England are, and have always been, courts of
conscience, operating in personam and not in rem; and in the exercise of this
personal jurisdiction they have always been accustomed to compel the
performance of contracts and trusts as to subjects which were not either locally
or ratione domicili within their jurisdiction. They have done so as to land, in
Scotland, in Ireland, in the Colonies, in foreign countries: Penn -v- Baltimore 1
Ves Sen 444 ".
In Deschamps -v- Miller f 19081 1 Ch 856 at page 863, Parker J described the obligation
which the Court will enforce as depending:
"... on the existence between the parties to the suit of some personal obligation
arising out of contract or implied contract, fiduciary relationship or fraud, or
other conduct which, in a view of the Court of Equity in this country, would be
unconscionable, and do not depend for their existence on the law of the locus
of the immovable property."
See also Dicey & Morris on the Conflict of Law, 12th edition Rule 116 (3) (a) at pages
952-955.
To these authorities can be added the more recent decision in Webb v Webb [19911 1
WLR 1410. In that case a father had purchased a property in France in his son's name.
The father brought proceedings in England against the son for a declaration that the son
held the property as trustee and for an order to execute the documents necessary for
vesting the legal title in the father. Thus, that is a case, like the present case, where there
was an alleged resulting trust. The son applied for a stay, relying on Article 16 (1) of the
Brussels Convention. That application was refused by His Honour Judge Paul Baker
Q.C., sitting as a High Court judge. After a review of cases from Penn v Baltimore to
Chelleram v Chelleram [19851 Ch 409, the judge said at page 1419 of the English
proceedings:
"They have as their object the establishment of the defendant's accountability
as a trustee for the plaintiff."
On appeal, there was a reference by this court to the European Court of Justice which
held that the jurisdiction of the English court was not ousted by Article 16 (1) as the

action was an action in personam.

Mr Lord said that these authorities go only to the question of jurisdiction and do not go
to the question of the applicable law. But, for my part, whilst that may be correct, it
seems to me implicit that the English court not unnaturally regarded English law as
applicable to the relationship between the parties before it in the absence of any event
governed by the lex situs destructive of the equitable interest being asserted.
As is pointed by Millett LJ when sitting at first instance at Macrnillan Inc v Bishopsgate
Trust (No 3) [1995] 1 WLR 978 at page 989 (commenting on Norris vChambres 0891)
29 Beavan. 246-, affirmed 3 De Gex Fisher and Jones 583 ), where a plaintiff invokes the
in personam jurisdiction of the English court against a defendant amenable to the
jurisdiction and there is an equity between the parties which the court can enforce, the
English court will accept jurisdiction and apply English law as the applicable law, even
though the suit relates to foreign land. In contrast if the equity which is asserted does not
exist between the parties to the English litigation, for example where there has been a
transfer of the property to a third party with notice of an equity but by the lex situs
governing the transfer, the transfer extinguished the plaintiffs equity, the English court
could not then give relief against the third party even though he is within the jurisdiction.
It would have been a complete answer to the plaintiff in Webb v Webb, if Mr Lord's
submission was correct, to say that English law relating to a resulting trust had no
application to the relationship between the parties in respect of the property in France
with its civil law system. The point was not taken, in my view rightly, because it is to my
rnind obvious that in that case the applicable law governing the relationship between the
father and the son arising out of what had occurred was English law and not French law.
So, in my judgment, here too. Apart from the fact that the property to be purchased was
situated in Scotland, there is nothing to connect Scottish law with the relationship
between the persons concerned, Mr Lightning and LEG who are both resident in
England. No event governed by Scottish law occurred whereby any equity arising under
English law was destroyed."

9.

In the Lightning case, both Henry and Millett UJ agreed with Lord Justice Peter Gibson,
and in a brief judgment Millett U added:

"If A provides money to B, both being resident in England, to purchase landed property in
his own name but for and on A's behalf, and B does so, the consequences of that
transaction are governed by English law. It would be absurd if they were governed by the
law of the place where the property in question happened to be located. Such a rule would
lead to bizarre results if, for example, A's instructions were to buy properties in more than
one jurisdiction, for the consequences of the same arrangement might then be different in
relation to the different properties acquired. It would also lead to bizarre results if A left it
to B's discretion to choose the property to be acquired, since that would give B the
unilateral power to decide on the legal consequences of the transaction which he had
entered into with A."

10.

In the recent case of Luxe Holding limited v Midland Resources Holding Limited [2010]
EWHC 1908 (Ch), at para. 38 et seq., Mr justice Roth quoted at length from the
Lightning case and said:
"I do not consider that the reasoning in Lightning is confined to the particular case of a
resulting trust. On the contrary, it seems to me of general application".

English Legal principles

11.

In my opinion, it is helpful to have an overview of how trusts might arise in this case,
before one goes into the factual details of each site, to see whether they do arise and, if
so, to what extent. There are a number of factual circumstances, which may arise here,
that could give rise to a trust, namely:-

Vendor & Purchaser

(1}

If an investor paid ALPIL a sum of money, under an enforceable contract for the sale
of an identified plot of land owned by ALPIL, then pending completion of the
purchase, the plot would be held on trust for the investor, (see e.g. Lysaght v
Edwards {1876} 2 ChD 499, at 506, et seq. and the review of the authorities by
Lawrence Collins J in Englewood Properties Ltd v Patel [2005] 1WLR 1961 at paras.
40-43). This is the application of the equitable maxim that equity regards that as
done that which ought to be done. The authorities show, however, that the trust
only arises where there is an agreement which is capable of being subject to specific
performance, (see e.g. Holroyd v Marshall (1862) 10 HLC 191 and Cornwall v Henson

[1899] 2 Ch 710 per Cozens-Hardy J, as he then was, at page 714). The actual
decision in Cornwall was reversed in the Court of Appeal but on factual grounds,
leaving the legal principle undisturbed.

Resulting or constructive trust

(2)

In my opinion, if an investor paid ALPIL money, which was used to purchase a site,
in which it was intended the investor was to have an interest, then the investor
would have an interest in the site, under a resulting or constructive trust. In
ordinary circumstances, the interest arising under a resulting trust would be
proportionate to his or her contribution to the total purchase price. When
ascertaining the extent of the interest under a constructive trust, the court would
go wider, and take the overall picture into account, when seeking to ascertain the
parties' actual intentions, (see e.g. Drake vWhipp [1996] 2 FOR 296).

(3}

The resulting trust is different to the trust arising in the vendor and purchaser
situation in two respects. One respect is helpful to a claim by an investor and one
which is unhelpful, The interest in the site may arise under a resulting trust even if
no plot has been identified, if the investor provided money which was actually used
by ALPIL as part of the purchase price of the site. On the other hand, in my opinion,
a payment made to ALPIL, after ALPIL purchased the site would not normally give
rise to an interest or larger interest under a resulting trust, (see e.g. Drake v Whipp
(supra.)-

A "Pallantv Morgan" trust

(4)

The classic case where a trust arises under the principle enunciated in Pallant v
Morgan, is where there is an arrangement or understanding between two
competing parties that one will purchase a property and the other will have an
interest in the property, and the arrangement or understanding causes the latter to
stay out of the bidding for the property, {see Pallant v Morgan [1953] Ch 43). More
recently, the Court of Appeal has widened the principle. The Court of Appeal has
held that the non acquiring party's agreement to stay out of the market was not a
necessary feature, nor did the arrangement have to be contractually enforceable
but it is essential that the circumstances make it inequitable for the acquiring party
to retain the property for himself in a manner inconsistent with the arrangement or
understanding on which the non acquiring party acted, (see Banner Homes Ltd v
Luff Developments Ltd [2000] Ch 372). Whilst the investors were not competing
with ALP1L for any of the sites, the wider principle could apply where they paid
money under an arrangement to acquire a plot on a site and ALPIL (or rather its
nominee) purchased that site.

Express Trust
(5)

In order to create an enforceable trust of land, one would need, at least, something
in writing signed on behalf of ALPIL, to comply with section 53(l)(b) of the Law of
Property Act 1925. If an investor paid money to ALPIL and ALPIL declared that it
held the money, or declared that it would hold an asset representing the money, on

trust for the investor, then, in my opinion, a trust would arise. This situation that
arises in this case is, alas, not quite as simple as that. There are no forma!
declarations of trust. In relation to some sites, ALPIL takes on a contractual
obligation to procure that its subsidiary will hold the relevant plot on trust.

Proprietary estoppel
{6}

The three requirements for an interest to arise under the doctrine of proprietary
estoppel are (1) a promise or assurance by ALPIL, (2} reliance by the investor and (3)
detriment to the investor, {see Thornerv Major (HL) [2009] UKHL 18). In some sites,
ALPIL could be said to have represented to investors that the investors would
acquire a plot, if the investors paid the purchase price and, in reliance thereon, the
investors acted to their detriment and paid the purchase price. The appropriate
remedy, where an estoppel arises, is in the discretion of the court but the court will
satisfy the equity by awarding the minimum necessary to do justice. In a case such
as this, the award could be a declaration that the plot is held on trust for the
investor or an award of a sum of money equal to the sum paid by the investor or
the value of the relevant plot of land, (if lower).

(7)

There is authority that, when distributing the statutory estate in a liquidation,

estoppels do not run against a liquidator for two reasons (1) the representation
must be made by the person sought to be bound (here the representation would
have been made by ALPIL and not by the Liquidators) and (2) to allow estoppels to

10
10

inflate proofs of debt would distort the obligations under the statutory scheme for
the distribution of the assets of the company in liquidation, {see In re Exchange
Securities & Commodities Ltd in Liquidation [1988] 1 Ch 46 at p. 55 et seq.}. It
should be noted, however, that in re Exchange Securities, the investors were to be
allowed to prove for the sums which they invested. They were not allowed to
recover for the fictitious profits, which the company represented they had made.

Quistclose Trust
(8)

A Quistclose trust arises where money is advanced to be used for a particular

purpose and no other purpose. If it cannot be used for that stated purpose, then it
is held on trust for the person or company that advanced the money, (see e.g.
Barclays Bank v Quistclose investments Limited [1970] AC 567 & Twinsectra v
Yardley [2002] 2 AC 164 at p. 186 et seq.). Looking at the contracts in this case, I
cannot see any term requiring purchase monies to be used for one purpose and one
purpose only. In my opinion, such a term is not required to give business efficacy to
any purchase contract and such a term should not be implied into any of the
contracts. The fact that ALPIL was making a profit on the sale of each plot militates
strongly against a Quistclose trust arising in relation to the purchase price paid.
Furthermore, ALPIL appear to have applied any money it received towards any
project or administration costs, just as it pleased, so ALPIL did not consider it was
duty bound to apply any funds in any particular way.

11
11

12.

I shall now turn to consider the different sites in more detail and I will consider them in
the order they are addressed in the draft Witness Statement.

Site l:Cipura Villas

13.

The terms of the contract here included a provision for ALPIL to procure that its Turkish
subsidiary should transfer the plot to the investor and ALPIL would register the name of
the investor in the Evlilas Land Registry. In my opinion, once a contract in these terms was
executed, the relevant plot was held on trust for the investor, under the vendor and
purchaser principle. It is true to say that it was the Turkish nominee company that owned
the site and not ALPIL, but, in my opinion, that would not prevent a court of equity
holding a trust arose. ALPIL was, (and is, subject to any charges being cleared and
payment of all the fees and duties) in a position to procure the transfer of the site to itself
or the plot to the investor, (as the parent company and/or the company for whom the
site is held by a nominee) and ALPIL was bound transfer the site to the investor in equity.
In my opinion, it is akin to the simple situation where a trustee invests money in a bank,
or with a broker. The fact that the investment is in the hands of another does not prevent
the underlying trust arising or continuing.

14.

In my opinion, the contracts were once specifically enforceable despite, the property
being abroad, as equity works in personam. There must, however, be real doubt whether
they still are enforceable, by way of an order for specific performance. There has been a
considerable delay. There may be local charges on the land, which would have to be

12

12

cleared before a plot could be transferred. There would be legal costs and fees involved in
any transfer. The Liquidators have no funds to clear the charges or pay the legal costs and
fees. In my opinion, the court will not make an order in vain, for example, when it will be
impossible for the relevant party to comply with the order. In my opinion, impossibility
here includes it being financially impossible for the Defendant to comply, (see North East
Lincolnshire BC v Millenium Park (Grimsbv) Ltd [20021 EWCA Civ 1719, where the Court of
Appeal set aside an order for specific performance against a company which had no
ability to raise the funds to comply with the order to build a roundabout). In my opinion,
in the present circumstances, in order to obtain an order for specific performance an
investor would have to secure the payment of whatever was necessary to clear the
charges and effect the transfer his plot. So, in my opinion, the availability of specific
performance is, at least, doubtful and it would be unattractive for investors. Thus there is
doubt about whether a vendor and purchaser type trust still exists in relation to this site.

Resulting or constructive Trust

15.

It appears that this site was purchased with money paid to ALPIL by investors and those
investors were intended to end up owning their plots. In my opinion, this would give rise
to a resulting trust, once ALPIL, or its nominee, acquired the site. Whilst ALPIL did not
segregate its funds on a site by site basis (or at all), one can say from Coleman's ledger
that sufficient sums to purchase the whole site came from investors wishing to buy plots
on this site. This is sufficient, in my opinion, to hold that a resulting or constructive trust

13

13

arose (and remains in existence) in relation to the plots of this site, without going into the
other ways a trust could have arisen.

Extent of interests
16.

The next question is: what is the extent of the investors' interest in the site? in my
opinion, each investor's interest extends to the equity in the plot, which he contracted to
buy. It may be argued that the investors on this site should, together, be treated as being
entitled to the whole site because they provided all the funds to purchase it. !n my
opinion, this argument is not the correct analysis of the position. At most, under the
contracts, what each investor has is a right to specific performance of the agreement to
transfer his plot.

17.

As regards a resulting trust, it was inevitable that there was an element of profit in the
sale of the plots by ALPIL. ALPIL did, in fact make substantial profits on the sales of plots.
Why else would ALPIL have been finding sites and selling plots? In my opinion, the
principle of resulting trust is based on a presumption as to the intention of the parties,
which can be overridden by the court's view as to their actual or implied intention (see
e.g. Lord Walker and Baroness Hale in Jones v Kernott [2011] 3 WLR 1121, at paragraphs
25 and 53). When the court comes to ascertain the intention of the parties in this case,
the court will have to look at the contemporary documents. The key documents are the
contracts. These show that each investor was only to have an interest in his own plot, not
the whole site. In my opinion, one can look at the position in this way. Only part of each

14

14

purchase price paid by an investor for a plot went into the purchase of the plot by ALPIL's
nominee and the balance was the profit for ALPIL.

18.

This site remains bare undeveloped land. The current position is that 51 plots remain
assigned to investors, out of a total of 64 plots. In my opinion, ALPIL will still own
beneficially all the land within the site that does not form part of any of the 51 assigned
plots. This will include unsold plots and the areas shown on the plans for roads, amenity
areas and any land set aside for ALPIL's staff for the provision of services, (for which there
was to be a service charge). There has been an offer for this site at only 305,000 Euros,
which the local agents, BNP Paribas, recommend accepting. Out of that, there will have to
be paid the agents and legal fees on the sale and, in my opinion, it should also meet a
share of the costs of the Liquidators in getting where we are today. If one assigned the
value of only 6 plots to the roads/amenity land held for ALPIL, to give a round figure of 70
"units" for the purposes of a rough estimate, then each investor would only have a share
worth 4,350 euros and that before the deduction of a share of costs. Accordingly, it would
not be proportionate to expend very much by way of costs to fight over the investors'
respective shares. The best way to resolve the any dispute would be to ask BN P Paribas to
provide an apportionment of the value of the site between the assigned plots (to be
divided by 51, to give an individual value) and the balance of the land held for ALPIL. That
apportionment can then be applied to whatever represents the net proceeds of sale, after
provision for costs.

15

15

Investors as Ordinary Creditors

19.

Before leaving this site, I should mention that the investors in this (and other sites) may
have claims for their money back for breach of and/or failure to complete the contracts
for the sale of the plots. In my opinion, these are claims in the nature of damages or for
the return of a sum equal to what they paid for the plot because there has been a total
failure of consideration. The investors could prove for these sums, as ordinary creditors.
In my opinion, there are no express terms in the contracts to the effect that the money
paid over by the investors to ALP1L was to be held for a specific purpose or held on trust
and I can see no ground for implying such a term into the contracts.

Purchaser's lien
20.

There is, however, yet another legal principle which needs to be considered in this
context. A vendor's lien, for the unpaid balance of the purchase price, is well known but
less well known is the concept of a purchaser's lien. It has long been held that, where a
purchaser, under a contract for the purchase of land, pays a deposit or other sum towards
the purchase price, then he will have a lien over the property to secure his payment, (see
Rose v Watson 10 HLC 7672 and Whitbread v Watt [1902] Ch 835). In Rose v Watson
Vaughan Williams U at page 838 described this lien in the following terms:-

"The lien which a purchaser has for his deposit is not the result of any express contract: it
is a right which may be said to have been invented for the purpose of doing justice. It is
fiction of a kind which is sometimes resorted to at law as well as in equity".

16

16

21.

The purchaser's lien was considered in more detail by the Court of Appeal in the case of
Chattey v Farndale Holdings Inc (1998) 75 P & CR 298. Here, the Court of Appeal held that
the lien arises because the purchaser has the right to call for the title to be transferred,
{see Morritt U at page 307). The purchaser does not need to have a present right to
specific performance. So a purchaser's delay is not fatal to his lien and a conditional
contract was held to be capable of giving rise to a lien in that case. That case also
established that the lien is over the property to be purchased, not over the vendor's
entire property or interest, (see Morritt U at pages 317 & 318).

22.

Whilst the circumstances of this case may give rise to some doubt, in my opinion, as
against the Liquidators, these investors each have a lien over their plot for what they have
paid. That lien is, however, worth no more than the net proceeds of sale of the plot after
the deduction of proper costs. 1 say this because the only remedy of a purchaser with a
lien would be to cause the land to be sold, or to make a claim when it is sold, and recoup
what he can out of the net proceeds of sale.

Site 2: Tuzla Lake

23.

The position is different here in that the contract was not a classic contract for sale. The
contract refers to the seller entering the buyer on a list of parties having and interest in
the site and ensuring that its subsidiary holds the plot on trust until the equivalent to a
land certificate is issued to the buyer. In my opinion, the vendor and purchaser principles
would not clearly apply here to create a trust.

17

17

24.

Whilst there is a lack of certainty as to the source of the deposit for this site, the balance
of the purchase price came from the relevant investors and, over all, the investors paid
more than the acquisition cost of the site. The position could be seen as ALPIL advancing
the deposit money and being repaid by the investors. In my opinion, the plots which were
the subject matter of contracts are held on resulting trust for those who paid for them
and have retained their interest in the plots. This is a site where the development
described as 80% complete. So there is real value in the infrastructure and buildings, as
well as the land. The investors made payments, which were used for infrastructure and
building works. In my opinion, such payments would have increased the value of the
investors' plots and should be taken into account.

25.

There is also an argument for a Pallantv Morgan trust here, given the nature of the
arrangement and what happened. As for whether there are express trusts, there is a
contractual provision that the Turkish subsidiary was to hold the relevant plot on trust but
there was no formal declaration of trust by either ALPIL or its subsidiary. The land was
held by the subsidiary rather than ALPIL and it was ALPIL that owed the contractual duty.
In my opinion, the legal position arising from these facts is not straightforward but they
add further argument in favour of a trust obligation arising on ALPIL.

18

18

Sale of the site

26.

It appears that only 75 investors remained interested in this site, after some 39 refunds
and repossessions. The site was to be built with 114 apartments comprising "studio, 1 bed and 2-bed". The site has now been sold. The sale took place following steps by a
chargee to sell the land, to meet construction costs. There are still sums due overseas,
before any further money can be repatriated, but 400,000 Euros are held by my
Instructing Solicitors out of the proceeds of sale of this site. In my opinion, if there is a
trust or a lien the Investors can trace their claims into the proceeds of sale held by the
Liquidators.

27.

In my opinion, provision will need to be made for the global, as well as the specific costs,
expended in getting that money in. Again there will need to be an apportionment
between the value of the 75 apartments which are still notionally the subject matter of
contracts on the one hand and unsold apartments and the road/amenity land held for
ALPIL on the other. There could be a further apportionment because the flats were of
different sizes (and therefore} value. That said, one does not know which flats were
actually completed in this development, which was "about 80% complete". It may well be
that some investors had paid ALPIL for their share of the infrastructure and development
costs, in full, and others had not. In my opinion, in these circumstances, given the
strongest claim to a trust is based on the principle of resulting trust, the equity of any
individual investor could best be ascertained by taking the part of the net proceeds, which
was fairly attributable to the 75 apartments, deducting a proper provision for costs, and

19

19

giving each investor a share of the balance proportional to his total payments to ALPIL, as
against the total payments made by the 75 investors.

Site 3: The Colony

28.

The Colony is a site in Northern Cyprus. There is a doubt as to the source of the 63,000
deposit used on the relevant purchase but the balance of the purchase price came from
investors funds. Again, by the date of the purchase investors had paid more than the total
purchase price to ALPIL In my opinion, this means that the relevant plots were subject to
a resulting trust in favour of the investors, who paid for their plots and an element of
prof it for ALPIL. There is also an argument for a Pallant v Morgan trust here. In this case
there were contractual provisions for a trust obligation but there were no express
declarations of trust and the contractual obligations were taken by ALPIL, not its
subsidiary which owned the land. Curiously, the comments on the relevant clause refer to
both ALPIL and its subsidiary holding the site on trust. In my opinion, these latter
provisions are not conclusive and the situation is better seen as one of resulting trust.
There is a question mark over the ownership of Sealine properties Ltd but Mr Virk has
said he holds the shares in Sealine for ALPIL.

29.

Some of the investors paid their share of the infrastructure and building costs and some
did not. A construction contract for this site was entered into. If works were done which
materially enhance the value of the site, then the approach adopted in relation to Tuzla
Lake would seem appropriate here as well, (sharing their part of the net proceeds of sale

20

20

after costs in proportion to what they paid, rather than equally). Given the pooling or
mixing of resources by ALPIL, no one investor can say his money was used for a particular
piece of work, rather they all shared in the pool of funds used towards the total cost. If no
works were done to enhance the value of the site, then an equal division between the
investors of their share of the net value of the site, after costs, would, in my opinion, be
appropriate.

Site 4: Caretta Villas

30.

The situation in relation to this site in Turkey is different again. The site has been partially
developed and some 22 plots have been registered in the names of investors, (out if a
total of 87 which were the subject of contracts for sale). Ten of the villas have been
completed and the title to nine out of those ten plots has been transferred to the relevant
investors. The purchase contracts were not with ALPIL. The purchase contracts were with
a wholly owned subsidiary of ALPIL called Aston Lloyd and Partners Ltd ("ALP"). In my
opinion, the contracts were of a nature to give rise to a vendor and purchaser type trust,
albeit that ALP was the seller, not ALPIL. There is, however, real doubt about the
availability of specific performance for the reasons given above, in relation to Cipura Villas
and so the vendor and purchaser type trust may well longer exist.

31.

It appears that, in round figures, investors provided ALPIL with 750,000 Euros out of the
total of 850,000 Euros paid to purchase the site, (which is about 88%). So, in my opinion,
even if there was not a vendor and purchaser trust, the 87 plots sold would be held as to

21

21

88% on resulting trust for the relevant investors, in any event. There is also an argument
for a Pallant v Morgan trust here. There are two unusual features in the contracts. The
contracts name the wrong Turkish company, as the company that will own and transfer
the land and they refer to that company being a subsidiary of ALP. The Turkish company
that was to, and did, purchase the site is a wholly owned subsidiary of ALP1L, (and has
been since, at least, 2008). Thus this is another site which falls into the responsibilities of
the Liquidators to deal with.

32.

The site has not been sold. There has been an offer of US$ 265,000, which BNP Paribas
recommend accepting. Again this suggests the potential amount held for any individual
investor, after provision for costs, will be a few thousand pounds at most; namely
US$265,000, less ALPIL's share of the value of the site, less provision for costs, all to be
divided between the 65 remaining investors. In my opinion, however, given that works
have been done on this site, one should ascertain their respective shares, in the total net
value of all their plots after provision for costs, by reference to total sums they each paid
to ALP1L, compared to the total paid by all 65. This caters for investors who have paid for
larger properties, for those who paid more for works and those who have not met their
contractual liabilities.

Site 5: Jagoda
33.

This site is situated in Bulgaria. Foreign nationals were not allowed to own land in
Bulgaria, so the plan was for a Bulgarian SPV to be incorporated for each purchaser and

22

22

for the plots to be vested in the Bulgarian SPVs. There may be some doubt as to the
original source of the deposit but it appears that, again, the investors provided the bulk of
the money used to purchase the site. It may be argued by these investors that the plots
which they helped pay for, that were to be held by "their" Bulgarian SPVs, should be
treated as held on resulting trust for them. The serious snags about this argument is as
follows. There has been considerable delay, which would, of itself, make specific
performance doubtful. The contractual documentation shows that it was intended by the
parties that the titles were to be vested in the Bulgarian SPVs. The Bulgarian SPVs were
never incorporated and the SPVs do not exist. There was no suggestion that there was to
be a trust deed for each Bulgarian SPV to hold a plot for an investor, (if that was possible
and permissible under Bulgarian law). In my opinion, one cannot infer an intention of
resulting trust in favour of the individual investors, when you know it was intended by the
parties that the legal and beneficial title was actually intended to be transferred to a
Bulgarian SPV.

34.

Alternatively, the investors may claim that some interest somehow arises in their favour,
which is of the nature of a trust, because they have a potential right to specific
performance to have a Bulgarian SPV incorporated and to have the plot vested in the
Bulgarian SPV. The snag about this is that there are no funds to create the SPV, clear any
charges on the whole site and transfer plot and pay the taxes and fees. Further, rights
would have to be granted over the roads and for water, electricity and other services.
Specific performance is an equitable remedy and, in the absence of available funds in the

23

23

hands of the Liquidators, in my opinion, specific performance would only be ordered if

the investor(s) paid for ail these to happen. If specific performance is not possible, the
usual remedy would lie in damages.

35.

In niy opinion, in these circumstances there is no company with the standing to claim
there is a trust in its favour. In my opinion, unless the investors have a lien (see below),
what the investors have is a claim, for which they can prove in the liquidation, which is in
the nature of a claim for breach of contract or for the return of the amount they paid, as
there has been a total failure of consideration. That said, there is sufficient doubt about
the possibility of trusts affecting this site that 1 cannot advise the Liquidators to proceed
on this part of my advice, without the court considering the question of whether there is
are trusts for investors. The court may want to hear further argument on the matter and
to see if any investor actually wants "his" undeveloped plot sufficiently to volunteer to
fund the incorporation of an SPV and the taking of the steps necessary to transfer the
plot. It is unlikely to be cost effective. It is also unlikely that enough of the investors on
this site would be prepared to join in the cost of a joint effort to acquire plots in SPVs.

Purchaser's lien
36.

These investors could, however, have a purchaser's lien on their piots to secure the sums
which they have paid. Here the investors would be seeking to establish a lien to protect
the money which they paid ALPIL. Whilst the purchase was to be in the name of an SPV, if
the purchase is not to go ahead, there is some justice in a purchaser (who paid the money

24

24

and wants some of his money back) having a lien over his proposed plot The lien would
only be worth an amount equal to the share of the net proceeds of sale of the relevant
plot, after taking account of proper costs. Whilst there is doubt here, as there is no
precedent covering these unusual circumstances, in my opinion, on balance, these
investors are likely to be held by the court to have a purchaser's lien, which would be
traceable into the appropriate share of the sale proceeds, after deduction of costs.

37.

The site has not been developed but different payments were made for different sized
plots and it would appear equitable to divide the sums available in proportion to the
relevant investor's individual payments, as against their total payments to ALPIL.

6. The Poynte
38.

This is another site in Bulgaria, where Bulgarian SPVs were to take the title. The relevant
investors appear to have provided the purchase price and may claim that the plots, that
were to be held by their Bulgarian SPVs, should be treated as held on trust for them. For
the reasons given above in relation to Jagoda, I consider this argument would not be
correct and they have claims in the liquidation for the sums which they paid. In my
opinion, however, on balance, it is likely that the court will hold that these investors do
have purchaser's liens. Again the position is sufficiently in doubt that, in my opinion, the
court should be asked to rule on the questions of whether there are any trusts or liens
affecting plots on this site.

25

25

7. Capital 68
39.

This is another Bulgarian development In this case, the investors were to purchase a
"unit" rather than a defined plot of land. The units were apartments in blocks intended to
be built, which were never built So one is talking about, at best, an interest in an
unmarked parcel of airspace above the ground, (if such can exist under Bulgarian law or
would have any value). Furthermore, completion was tied to the completion of the
buildings, so the completion date never arose. In my opinion, there are no "units" to be
held on trust for the investors. In my opinion, the investors do not have a claim for
specific performance for the transfer of plots, nor are they entitled to call for a transfer of
any plots. So, in my opinion, these investors do not have a claim under a trust or a lien. In
my opinion, the investors' rights here are in the nature of money claims for damages or
for the sum they paid on a total failure of consideration. These are claims for which they
can prove in the liquidation but not trust claims.

40.

In my opinion, the contractual provision were not such as to give rise to a purchaser's lien
as they had no right to call for a transfer of a plot. In the Chattey case, which is mentioned
above, the two apartments (which were the subject matter of the contracts and deposits)
had been built to a point that one could identify them. Morritt U expressly found that
they did not need to decide what would happen in relation to a purchaser's lien in a case
where the proposed building did not exist. Thus the question whether, and how, a
purchaser's lien could arise in relation to an apartment, in a proposed block which has not

26

26

been built, was not resolved by that case and the Court plainly though that it needed
further consideration.

41.

Accordingly, in my opinion this is a site which is held for the general body of creditors in
the liquidation.

8. Central 22
42.

This is a site in Slovakia. The site was never developed and was sold in March 2011. The
deposit was paid by ALPIL There is doubt as to whether the balance was paid by
investors. The directors of the company say it was but there is no evidence of this in
Coleman's ledger. The contracts provided for stage payments. None of these was
expressed to be the payment of the purchase price of the plot itself. No investor paid all
the stage payments. In my opinion, the investors did not (and do not} have a claim for
specific performance for the transfer of plots, nor were (or are) they entitled to call for a
transfer of any plot. So, in my opinion, these investors do not have a claim under a trust
or a lien. In my opinion, the investors' rights here are in the nature of money claims for
damages or for the sum they paid on a total failure of consideration. These are claims for
which they can prove in the liquidation but not trust claims or protected by a lien.
Accordingly, in my opinion the proceeds of sale of this site are held for the general body
of creditors in the liquidation.

Caveat

27

27

43.

I should provide one general caveat here. The draft witness statement does not suggest
that there were any breaches by any investors, which might entitle ALP1L to terminate the
contracts. Such breaches could change the nature of investors' rights, from rights under a
trust (which I consider arise in relation to some sites, as advised above) into monetary
claims or otherwise reduce their rights. In my opinion, however, to investigate
compliance by hundreds of individuals with the terms of hundreds of contracts, to find a
handful that might be terminable for a purchaser's breach, would not be cost effective.
Furthermore, the records may not still exist. Accordingly, i would not advise this as an
avenue to pursue. As Morritt J. (as he then was) succinctly put it in the Re Eastern Capital
Futures case referred to below: "obviously the court does not apply a rule which leads to
substantial expense but nowhere else". In that case, the records were not available to
show that any particular futures contract was attributable to any client and the court
ordered an equal division of the fund amongst all the investors.

Section 178 of the Insolvency Act 1986

44.

I should also add that I have considered whether the Liquidators should disclaim all or any
of the contracts, or the properties, under section 178 of the 1986 Act. In my opinion, the
effect of a disclaimer would not be to remove the investors' claims to a resulting trust or a
lien. Those claims arose by implication of in law from the circumstances. The contracts
were part of the circumstances and a disclaimer would remove from the investors any
future rights under the contracts but would not, in my opinion, remove those which had
already arisen by implication of law from the payments of purchase money. As for the

28

disclaimer of the properties, they wouid appear to currently have a value, so it would not
appear appropriate to disclaim them. If any site proves to be unsaleable and/or a liability
then this issue can be reconsidered.

The way forward

Where the Liquidators stand
45.

I have given my opinion, on the evidence before me, that trusts do arise in relation to
certain of the sites and there are, at least, arguments that trusts or liens may arise in
other sites. The facts and their legal consequences are, however, open to potential
dispute and investors and other creditors appear to have conflicting interest. In these
circumstances, in my opinion, the Liquidators cannot safely proceed without the
intervention of the court.

The court's powers

46.

A liquidator may apply to the court to determine any question arising in the liquidation
and, if the court considers the determination of the questions will be just and beneficial,
the court can make such order as it thinks fit, (see section 112 of the Insolvency Act
1986). In my opinion, there is also no doubt that a trustee can also apply to the court for
directions as to a trust, under the court's inherent jurisdiction over trusts, (see e.g. Re
Beddoe [1893] Ch 547). A trustee can always cede his discretion, as to how to proceed in
trust matters, to the court. A good example of a case where liquidators sought the
assistance of the court is Re Eastern Capital Futures Ltd (1989) 5 BCC 223. There were

29

29

issues in the liquidation as to what were and were not trust assets, the extent of the
investors' beneficial interests in the funds and how trust assets should be distributed and
how the liquidators should be remunerated. The court resolved the questions and made
provision for the costs of the liquidators to be remunerated out of the trust funds and to
retain an amount equal to what they would have received if the trust moneys had been
the company's own moneys.

The relief which should be sought

47.

In my opinion, the Liquidators should apply to the court for the court's assistance on
several matters, namely:

(1) To resolve the issues over whether any trusts or liens exist and, if so, the extent of
each investor's beneficial interest and/or lien and, in particular, what part of the
proceeds of sale each investor should be entitled to receive, if the site is sold.
(2) To decide whether any of the sites should be sold and, if so, which sites should be sold
and authorise the Liquidators to sell those sites.
(3) To determine how costs incurred to date and future costs should be provided for.
(4) To absolve the Liquidators from any potential liability for the steps already taken by
them in the liquidation. As regards the Liquidators acting as trustees, the court has
power to do this under section 61 of the Trustee Act 1925 in the context of a
liquidation, (see e.g. Re Equilift Ltd [2010] BCC 860). It is just and appropriate because
the Liquidators have acted reasonably and on professional advice throughout.

30

30

(5) Such other relief as the court considers necessary or appropriate.

Parties
48.

There is a real question as to who should be made parties to the proceedings to resolve
these potential disputes. On the one hand, one could join al! the investors, as defendants,
as they all have a financial interest. In my opinion, that would not be proportionate. Just
the issue and service of proceedings and the acknowledgments of service would waste a
huge amount of costs. It could lead to a large number of lawyers, each representing a few
clients, all seeking their costs be paid out of the assets in issue. This case needs to be
managed to resolve the issues with the minimum possible cost to leave as much as
possible for the Investors and other creditors. In my opinion, it is probably best that, in
the first instance, no defendant should be joined, although it might be helpful for the
Liquidators could join just one nominal defendant, (for example someone to represent
the Jagoda and The Poynte investors, where there are arguments which the court may
wish to consider more fully). In any event, the court should be invited to consider, at an
early stage, who should be joined as a party and whether representation order should be
made.

The "walk away" option

49.

One possible course open to the Liquidators would have been (and still is) to "walk away"
from the trusts and let the investors, with trust claims, fend for themselves. I would not
recommend that course of action for several reasons. First, there are issues as to what

31
31

plots are held on trust. Secondly, even if there were no local creditors and the sites were
to remain free of charges, there is no prospect of ALP1L funding the continued
administration of the sites as a whole. The practical costs of administering and dealing
with the plots on an individual basis would be wholly disproportionate. It would be in the
investors' interests to have the sites managed as a whole. Thirdly, each investor's plot is
likely to be worth considerably more if it is sold as part of the sale of whole site, as
opposed to its value as an individual plot One can ask rhetorically, what is the value of
an unmarked plot in the middle of a field, without any roads to get to it? It is likely to be
in each investor's financial interest that each site is sold as a whole, {to maximise the
return), whether there he has an interest under a trust or a lien or he is an unsecured
creditor.

Notifying interested parties

50.

In my opinion, once the Application is'issued and a return date is obtained, a circular
should be sent to all investors and creditors in the least costly way possible, (i.e. by email,
if possible). The circular should explain the position that Liquidators intend to adopt, i.e.
to seek the court's directions and act on those directions. It should inform them of the
return date and attach the Application Notice, Witness Statement and this Opinion. It
should invite full responses from those wishing to challenge the proposed course of
action. It should explain that Liquidators will submit to the court that any such challenges
should be funded by those seeking to advance them, rather than from the proceeds of
any sites which are or have been sold or ALPiL's assets. If an email is not possible in

32

32

particular cases, the same circular letter should be sent by post containing details of a
dedicated web-site page from which relevant documents may be downloaded. If,
however, particular investors request that hard copies should be made available to them,
for any sensible reason, (e.g. the person has no ready access to emails), then this should
be done, free of charge.

51.

The alternative is to join representative parties for each site and group of creditors into
the action from the outset. In my view, this course is not proportionate. There may be no
challenges or only a limited number of challenges. To join nine representative defendants
opens up the likelihood of each representative party instructing separate sets of Solicitors
and Counsel and seeking to be indemnified from ALPIL's assets or the proceeds of the
sites. If there is a challenge, or there are challenges, to the line that the Liquidators intend
to take, the Court will make appropriate directions for the disposal of the issue(s),
including the parties to be joined and the costs consequences.

52.

I have advised above that the Liquidators should provide all the interested parties with a
copy of this Opinion. This would waive privilege over my advice and the Liquidators do
have a choice over whether they should do this. The advantage is that it gives all
interested parties with a "steer" as to the issues and possible decision of the court, so
that they can seek their own advice. It will enable their advisers to have a "springboard",
rather than each of them starting from scratch. I hope this will be of assistance to the
court, shorten the proceedings and save costs.

33

33

Costs
53.

When it comes to the Liquidators' costs, the most helpful case to consider is Re Berkeley
Applegate (Investment Consultants) Ltd (In Liquidation)

[1989] 1 Ch 32, further

considered in Re Berkeley Applegate (Investment Consultants) Ltd No. 2 at (1988) 4 BCC

279 and No.3 at (1989) 5 BCC 803). Under this line of authority, the Liquidators can apply
for a direction that they may take their costs of administering and dealing with the trusts
from the proceeds of sale of properties held partly on trust (even if not held by them) as
well as properties, or the interests therein, held in the liquidation. In my Opinion, subject
to any directions of the court, the Liquidators will at some stage have to provide a full
breakdown of the costs that they have incurred, not just on a time basis and hourly rate,
but what has been done, at what level, why it has been done and what has been
achieved. This will incur some further cost but it is the appropriate approach to the
insolvency costs. In my opinion, the Liquidators are likely to be allowed the same measure
of costs for trusts work, as insolvency work, so the same approach should be adopted for
any "trust" costs. As for liquidation costs, (see for example the remuneration order made
in Re Eastern Capital Futures Ltd (supra.)).

54.

The correct approach to an application for, or challenge to, liquidators' costs was to be
found in the Practice Statement: The Fixing and Approval of the Remuneration of
Appointees [2004] BCC 912. On 23rd February 2012, this was replaced by the Practice
Direction (Insolvency Proceedings) [2012] BCC 265 & [2012} Bus LR 643. The new Practice

34

34

Direction addresses much wider points than just remuneration. The relevant part
concerning remuneration is in Part Five. The key provisions are in almost identical terms
to the 2004 Practice Statement, so there is no change in approach. The 2004 Practice
Statement was specifically approved in the recent case of Brook v Reed [2012] 1 W.LR.
419 by David Richards J, sitting in the Court of Appeal.

55.

I have nothing further to add at this stage of the matter but, if my Instructing Solicitors
have any questions, then they should not hesitate to contact me.

Michael Jefferis,
13, Old Square Chambers,
13 & 14 Old Square,
Lincoln's Inn.

May 2012

35

35

ASTON LLOYD & PARTNERS INTERNATIONAL LIMITED

OPINION

Bates Wells and Brarthwaite London LLP,

Solicitors,
2-6 Cannon Street,
London
EC4M 6YH

36

36