Jasmine Trustees Ltd and Others v Wells & Hind (A Firm)

JurisdictionEngland & Wales
JudgeMR JUSTICE MANN,Mr Justice Mann
Judgment Date19 January 2007
Neutral Citation[2007] EWHC 38 (Ch)
Docket NumberCase No: HC02C03591
CourtChancery Division
Date19 January 2007
Between
(1) Jasmine Trustees Limited
(2) Lutea Trustees Limited
(3) Edward Mervyn Wingfield
(4) Venetia Sophie Wingfield
(5) Sarah Jane Wingfield
(6) Camilla Faith Douglas-Pennant
(7) Sarah Frances Jane Douglas Pennant
Claimants
and
(1) Wells & Hind (a firm)
(2) Eversheds (a firm
Defendants

[2007] EWHC 38 (Ch)

Before

Mr Justice Mann

Case No: HC02C03591

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

MISSS. S. PROUDMAN Q.C. (instructed by Messrs. Wilsons) for the Claimants.

MR. K. ROWLEY Q.C. (instructed by Messrs. Fishburns) for the Defendants.

Hearing dates: 23 rd, 24 th November 2006

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 JUSTICE MANN Mr Justice Mann

Introduction

1

This is the determination of certain preliminary issues ordered by Master Bragge on 14 th June 2006. At the heart of the issues is the question whether the word “individuals” in s.37(1)(c) of the Trustee Act 1925 is capable of extending to corporations as well as human individuals. Once that is decided, certain capital gains tax consequences have to be dealt with.

The factual background and legal context

2

The facts in this section of this judgment appear from a joint statement of facts which I am invited by both parties to take as being true. Where precise dates do not matter I identify events merely by years.

3

The settlement in this case was constituted in 1968. Major-General and Mrs Coaker were made trustees of that settlement. The trusts were discretionary trusts in favour of their children and remoter issue. The trustees were given a power of appointment over the trust assets. Clause 18 of the trust deed incorporated the statutory power of appointing new trustees. The following events then occurred in relation to the trust:

i) 1982 – by a deed of appointment, Major-General and Mrs Coaker appointed The Investment Bank of Ireland (IOM) Ltd (“IBI”) and a Mr Thornton to be trustees and purported to resign. Their intention was to leave IBI and Mr Thornton as the sole trustees. The effect of this appointment is crucial to the debate in this case. It is at the heart of the claimants' case that, while this document was effective to appoint IBI and Mr Thornton to be new trustees, it was not capable of discharging Major-General and Mrs Coaker because any such discharge would have left two trustees who are not both “individuals” within s.37(1)(c).

ii) 1983 – Major-General Coaker died.

iii) 1985 – IBI and Mr Thornton purported to appoint a Mr Gisborne in place of Mr Thornton as trustee of the settlement.

iv) March 1987 – IBI and Mr Gisborne purported to appoint Mr Seeldrayers in place of Mr Gisborne as trustee of the settlement.

v) December 1987 – IBI and Mr Seeldrayers purported to appoint Island Nominees Ltd (IML), a Mr Burton and a Mr Vanderpump as trustees of the settlement and to discharge themselves, thereby leaving those last three identified people as (ostensible) trustees.

vi) December 1987 – a deed was executed purporting to discharge Mrs Coaker as trustee, doubts apparently having been raised as to the effectiveness of the 1982 document.

vii) 1988 – Mr Burton purported to retire and the (ostensible) trustees purported to appoint Mr Winearls as trustee in his place.

viii) 20 th December 1989 – Mr Thornton died.

ix) 1994 – INL, Mr Winearls and Mr Vanderpump as trustees executed a deed of appointment which postponed the vesting of an interest in possession in favour of the third claimant (Edward) (“the 1994 Resolution”).

x) 14 th February 1994 – Edward attained the age of 21 (the age at which he attained a vested interest under the trusts unless the 1994 deed of appointment was valid to postpone it).

xi) 1996 – the (ostensible) trustees purported to appoint Mr Taylor in place of Mr Winearls.

xii) 1996 – the (ostensible) trustees executed a deed of appointment purporting to postpone the vesting of an interest in possession which would otherwise have vested in the fourth claimant (Venetia).

xiii) 31 st March 1996 – Venetia attained the age of 21, the age at which she would have acquired an interest in possession but for the effect (if any) of the 1996 deed of appointment.

xiv) 15 th December 1996 – Mrs Coaker died.

xv) 1997 to 2002 – further deeds of appointment relating to the interests of various beneficiaries were executed by INL, Mr Vanderpump and Mr Taylor, purportedly as trustees of the settlement. These included appointments identified as “the March 1997 Resolution”, “the April 1997 Resolution” and “the December 1997 Resolution” in the issues that I have to decide.

xvi) 2002 –a remedial appointment of the first and second claimants as trustees of the settlement, made by INL, Mr Vanderpump, Mr Taylor, IBI and the first and second claimants.

4

Major-General and Mrs Coaker were resident in the UK. All the other persons listed above as having been appointed trustees were non-resident in the UK for capital gains tax purposes, other than the first and second claimants, as to whose residence no issue arises and as to which I make no finding or assumption.

5

The Inland Revenue has raised assessments against the first and second claimants for capital gains tax for each of the years 1989–90 to 1996–97 inclusive. The amounts of those assessments do not matter for present purposes, though the amounts are set out in the joint statement of facts. The amounts for each of the years up to but not including the last of those years were assessed on the basis of gains made by the settlement as a result of dealings in relation to trust property. In relation to the last year the assessment was raised partly in respect of such transactions, but also because it is said that, in the events which have happened, the trustees became non-resident in that year (by virtue of the death of Mrs Coaker), generating a charge to tax under a provision to which I will come. I am to assume that in all relevant years the trusts of the settlement were administered outside the UK.

How the issues arise in these proceedings

6

The issues arise because of concerns over the effectiveness of the 1982 deed by which Major-General and Mrs Coaker purported to resign and IBI and Mr Thornton took over the trusteeship. It is said by the claimants in these proceedings that the closing words of s.37(1)(c) of the Trustee Act 1925 (see paragraph 11 below) mean that, while the appointment was effective, the resignations were not because if they had been effective then there would be one company and one individual, as opposed to two individuals, as trustees of the settlement. Accordingly, they say, Major-General and Mrs Coaker remained trustees at that point (they were not discharged from their trust, in the wording of s.37(1)(c) of the Trustee Act 1925). That is said to have had two unintended effects – it affected the validity of the acts of the ostensible trustees thereafter, and it affected whether the trust was on shore or not for the purposes of the capital gains tax legislation.

7

As to the first, it will be apparent from the short narrative set out above that, following on the 1982 document, there was a whole series of acts done by the ostensible trustees on the footing that in 1982 IBI and Mr Thornton became the sole trustees. If they were not the sole trustees (i.e. if Major-General and Mrs Coaker were not in fact discharged in 1982) then in 1983, following the death of Major-General Coaker, Mrs Coaker remained a trustee. Since she did not participate in the appointment of Mr Gisborne, or indeed in any of the other acts until her death, then any acts which required the participation of all the trustees (ie the various appointments of new trustees and appointments in relation to beneficial interests) were invalid. The claimants say that that applies to all the various appointments.

8

The present proceedings are proceedings for professional negligence against two firms of solicitors who acted in the drawing of various documents during the period described above. They are alleged to have been negligent for not spotting that there was or might have been a problem. The details of the claim do not matter. There is a claim for damages in the amount of capital gains tax and income tax, together with interest and penalties. It was felt that the proceedings could be more expeditiously resolved if certain preliminary questions were tried. In those circumstances Master Bragge ordered the trial of the following questions:

(a) Whether, in any of the tax years 1989/90 to 1996/97 inclusive, a majority of the trustees for the time being of the Settlement were not resident or ordinarily resident in the United Kingdom.

(b) In particular, whether:

(i) On a true construction of Section 37(1)(c) of the Trustee Act (prior to its amendment by the Trusts of Land and Appointment of Trustees Act 1996) the term “individual” in that subsection included a body corporate.

(ii) Island Nominees Limited, Mr Vanderpump, Mr Winearls and Mr Taylor are to be treated as having been trustees of the Settlement for the purposes of the Capital Gains Tax Act 1979 and the Taxation of Chargeable Gains Act 1992.

(c) Whether the 1994 Resolution, the 1996 Resolution, the March 1997 Resolution, the April 1997 Resolution and/or the December 1997 Resolution were valid and effective to declare further trusts in accordance with their terms.

Issue (b)(ii) went through a couple of changes during the course of the hearing before me, principally as a result of my expressed misgivings about making a finding as to the status of the named putative trustees as trustees of the Settlement for the purposes of all the provisions of the two identified Acts. As a result of that the final form of issue (b)(ii) is as follows:

(b) In particular whether...

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