The High Court was asked to determine the beneficial ownership of shares in a complex company setting.
Background:
Marco Elser (the claimant) and Andrea Mandel-Mantello (the first defendant) were equal (50/50) shareholders in Advicorp Plc, a company that was established in 2002. Advicorp's senior employee was Mr. Jonathan Chia Croft, who was given a 5% stake in Advicorp, although no one recalls exactly when. However, although he was recognised as having a 5% equity stake, no shares were ever allocated to him, and so he did not have voting rights.
Advicorp initially acquired Advihair shares in late 2011/early 2012, partly funded by Mr. Elser's own money and shareholder value from Advicorp. In December 2012, Mr. Maurice, a tax adviser, suggested that it was undesirable for Advicorp to beneficially own the shares due to regulatory concerns.
Between 2013 and 2015, Advihair faced financial difficulties. Mr. Elser explored the possibility of selling a stake to recover Advicorp's investment. In February 2014, he informed Mr. Mandel-Mantello that Advihair owed Advicorp nearly €500,000 and that Advihair's capital had been wiped out, expressing concern about the impact on Advicorp's balance sheet and FCA compliance.
The demerger agreement in January 2016 saw Mr. Elser and Mr. Croft leave Advicorp, with Mr. Elser taking 50% of Advicorp's value, although it did not explicitly address the ownership of the Advihair shares. However, Mr. Elser and Mr. Mandel-Mantello personally assumed liability for Advicorp's outstanding loans (to Carlisle and Watersfield), which had financed the Advihair acquisition, with Mr. Elser taking the Carlisle loan.
Following the demerger, Mr. Elser continued to engage with Advihair. In February and November 2016, he (40%) and Mr. Mandel-Mantello's wife (40%) personally invested in acquiring Advihair franchises. In July 2016, Mr. Croft reported to Mr. Elser that Mr. Mandel-Mantello had told him that Mr. Elser's shares in Advihair "cannot be in your name but are on trust with him – but he said he had not signed anything to that effect". Mr. Elser then explicitly emailed Mr. Mandel-Mantello requesting his 45% shareholding be registered in his name for tax purposes.
From 2017/2018 onwards, Mr. Mandel-Mantello allegedly began suggesting that he should receive a larger proportion of the shares at Mr. Elser's expense. As late as February 2021, when Mr. Elser discussed selling Advihair with a fund, Mr. Mandel-Mantello did not deny Mr. Elser's ownership. The dispute became explicit in December 2021 when Mr. Elser demanded the transfer of his shares, which Mr. Mandel-Mantello finally denied in February 2022, leading to proceedings being issued in September 2022.
Decision:
The High Court sided with Mr. Elser. The Judge begins by establishing a foundational principle that human memory is fallible, especially over long periods. Both Mr. Elser and Mr. Mandel-Mantello were deemed honest, though unreliable witnesses regarding the crucial early conversations in 2011 and 2012. Their memories were found to be prone to self-persuasion and inconsistency.
The Court finds that an express trust was created in late 2012, in response to the Maurice Advice, whereby Advicorp (controlled by Mr. Mandel-Mantello) held the Advihair shares for Managest B.V. and Mr. Elser in equal shares. This means Mr. Elser is found to be a 50% beneficial owner of the Advihair shares.
The Judge rejected the argument that the absence of explicit mention of Mr. Elser's interest in the demerger agreement meant that he had no interest. He found that Mr. Elser's actions and Mr. Mandel-Mantello's responses after the initial period were strong corroborative evidence of a continued shared beneficial interest
Implications:
This case strongly reaffirms a fundamental principle of equity. Even where formal documentation is lacking (e.g., no signed declaration of trust or updated company registers), the Court will look at the true intentions of the parties as evidenced by their words, conduct, and contemporaneous communications. This is a crucial takeaway for business partners and individuals entering into informal arrangements.
The case serves as a stark warning about the dangers of informal agreements, especially in high-value business ventures. While Mr. Elser won, the dispute was protracted and costly, precisely because the beneficial ownership was not clearly and consistently documented from the outset. Business partners, particularly those using nominee structures or complex corporate arrangements, should regularly review and update their agreements to ensure that they accurately reflect beneficial ownership and intentions.