Privy Council explains proper approach to determining beneficial ownership of company shares – Pleshakov v Sky Stream [2021] UKPC 15

The Judicial Committee of the Privy Council has handed down judgment in Pleshakov v Sky Stream [2021] UKPC 15 (on appeal from the British Virgin Islands).

The case concerned the beneficial ownership of the shares in a BVI company (Sky Stream) which was incorporated for the purpose of receiving a 19.9% stake in Transaero, a Russian airline.

Mr Pleshakov’s case was that the respondents, Mr Linkov (a Russian lawyer and longstanding trusted associate of Mr Pleshakov) and Ms Kazantseva (a partner in Mr Linkov’s law firm and subsequently Mr Linkov’s wife) had incorporated Sky Stream at his direction and for his benefit as a vehicle for holding the 19.9% stake in Transaero.

At first instance, Justice Bannister held that the respondents had indeed incorporated Sky Stream for Mr Pleshakov’s benefit and that they held the Sky Stream shares on bare trust for Mr Pleshakov.  Justice Bannister reached this conclusion by drawing inferences from the conduct of the respondents both at the time of the incorporation of Sky Stream and in the years that followed.

The Eastern Caribbean Court of Appeal reversed Justice Bannister’s decision on the basis that, inter alia, Justice Bannister had not made any finding that Mr Pleshakov had entered into an oral contractual agreement with the respondents for them to hold the Sky Stream shares on trust but the Court of Appeal’s decision has now been set aside and Justice Bannister’s decision restored.

Although the case largely turned on its own facts, it provides a useful example of the principles concerning the creation of a trust by informal means in a commercial context with Lord Sales (delivering the advice of the Board) endorsing at (paragraphs 47 to 49) what he described as the “basic principles” that:

• The creation of an express trust, whether a bare trust or otherwise, does not require any form of contractual agreement between the settlor and the beneficiaries (see paragraph 47).
• Trusts can be created (and often are created) by the unilateral act of the settlor without any involvement on the part of the beneficiaries. All that is required for the valid creation of a trust is the three certainties (intention, subject matter, and object) (see paragraph 47).
• In relation to establishing certainty of intention to create a trust neither a written trust instrument nor any formal language is required. Informal language can be sufficient and the necessary intention can be inferred from conduct (see paragraph 48).

Robert Levy QC and Daniel Warents appeared with Oliver Clifton (Walkers BVI) for the successful appellant, Mr Pleshakov.