John David Sheffield v John Julian Lionel George Sheffield and Others (1st Defendants) John Julian Lionel George Sheffield (2nd Defendant) John Julian Lionel George Sheffield and Others (3rd Defendants)
| Jurisdiction | England & Wales |
| Judge | HH Judge Pelling |
| Judgment Date | 13 December 2013 |
| Neutral Citation | [2013] EWHC 3927 (Ch) |
| Docket Number | Case No: HC12A02556 AND HC12FO1390 |
| Court | Chancery Division |
| Date | 13 December 2013 |
[2013] EWHC 3927 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Rolls Building
Fetter Lane
London EC4A 1NL
His Honour Judge Pelling QC
Sitting as a Judge of the High Court
Case No: HC12A02556 AND HC12FO1390
Mr Christopher Pymont QC (instructed by Trowers & Hamlins) for the Claimant
Mr Eason Rajah QC (instructed by Farrer & Co) for the Sheffield and Graham Defendants
Ms Constance McDonnell (instructed by Neale Turk) for Mr Ratcliffe
Hearing dates: 18–22, 25 and 27 November 2013
HH Judge Pelling QC:
Introduction
This is the trial of a claim by which the Claimant in his capacity as a beneficiary of a family trust seeks various accounts and payments of (a) a quarter of certain trust income received by the trust which he maintains should have been but was not paid to him; (b) a quarter of the income which he maintains the trustees ought to have obtained but failed to obtain from the exploitation of the trust assets and (c) restitution or compensation for benefits received or conferred by the trustees on others without his consent.
The trial took place between 18–22, and 25–26 November 2013. I heard oral factual evidence from the Claimant, Mr Simon Sheffield ("Simon") (a brother of the Claimant), Mr Fergus Graham ("Fergus") (the Claimant's brother in law), Mr Julian Sheffield ("Julian") (the father of the Claimant, Simon and Mrs Nicola Graham), Mr Philip Denee ("Mr Denee"), Mrs Nicola Graham ("Nicola") (the Claimant's sister), Mr John Ratcliffe ("Mr Ratcliffe") and Mr Nicholas Watson ("Mr Watson") (a valuer who advised the trustees at the time concerning what is referred to below as the 10.2 acre issue), and expert evidence from Mr William Sleeman ("Mr Sleeman") (the expert valuer called by the Claimant in relation to the 10.2 acre issue), Mr David Steel ("Mr Steel") (the expert called by the Claimant in relation to Sporting Rights Issue referred to below) and Mr Charles Huntington-Whiteley ("Mr. Huntington-Whiteley") (the expert called by the Defendants in relation to the Shooting Rights issue).
Background
Much of the relevant background is not in dispute. There is a significant amount of family history set out in the witness statements, the documentation that is included within the trial bundles and in the written openings. Much of it relates to the life and times of Mr John Vincent Sheffield ("JVS"). It is material to the present dispute only because it is argued by the Claimant to support his contention that JVS was motivated for much of his life to preserve assets from the effects of what he described in one document to which I will have to refer in more detail later in this judgment as " ruinous taxation". In particular this material focuses on his experience following the death of his father in 1946 when death duties resulted in the loss of much of the family wealth. The family history that matters for present purposes is as set out below. I find however that JVS was left mentally scarred by the experience that followed the death of his father and was motivated first to rebuild capital and then to minimise the effect of taxation on what had been accumulated so that it could be passed to successive generations. This is very clearly demonstrated by the series of handwritten letters he sent to the Claimant and by the correspondence with and attendance notes kept by Lawrence Graham, which I refer to in more detail below. Lawrence Graham acted as JVS's solicitors for much of the time that is relevant to this claim.
In 1936, JVS married Anne Margaret Sheffield ("AMS"). They had four children, of which the eldest is Julian. Shortly after his father died, JVS embarked on what proved to be a successful business career. He founded a company that proved a commercial success. In 1968, JVS became Chairman of a company with which there was an indirect family connection (Portals Limited which was later renamed Portals Plc) that manufactured bank note paper. That company was the ultimate owner of an estate in Hampshire called the Laverstoke Estate that was vested in a subsidiary called Laverstoke Estates Limited (subsequently renamed Portal Estates Limited). On becoming Chairman of Portals Limited, JVS became entitled to occupy a property on the estate called Laverstoke House as a benefit of his office. JVS and his family occupied that property until 1978, when he retired as Chairman of Portals Limited. Julian became Chairman in his place and moved to Laverstoke House where he lived with his family until his retirement.
By a conveyance dated 31 December 1968 JVS and AMS purchased from Laverstoke Estates Limited 1009.959 acres of land situated at Laverstoke and Whitchurch in Hampshire ("Laverstoke"). By Clause 2 of the conveyance, JVS and AMS declared that they held Laverstoke on trust as tenants in common as to one quarter for JVS and as to three quarters for AMS ("the 1968 Settlement"). At that stage they thus each held an interest in possession in the land the subject of the trust. Laverstoke included two farms called respectively Manor Farm and New Barn Farm. It also included a number of residential properties in not very good condition and the right to take all game on Laverstoke as well as a right to take game over adjoining land retained by the vendor ("the Shooting Rights").
On 8 February 1969, AMS died. By her will her share of Laverstoke was to be held on trust for the purpose of paying the income to JVS during his life and thereafter for Julian absolutely ("the AMS Will Trust"). From that point on until the events to which I refer below, JVS was the income beneficiary of the AMS Will Trust but of course continued to have a beneficial interest in possession in 25% of Laverstoke by operation of the 1968 Settlement. From AMS's death until 7 May 1974, JVS was sole trustee of the 1968 Settlement and was until 21 October 1998 joint trustee with Julian of the AMS Will Trust. On 7 May 1974 Julian became a joint trustee with JVS of the 1968 Settlement.
In 1971, JVS married France Crosthwaite ("France"). Following JVS's retirement as Chairman of Portals Limited, JVS and France moved into a property at Laverstoke known as New Barn House (which he had extensively modernised and refurbished) where he continued to live with France until she died and thereafter until his death on 9 May 2008. It is common ground that legal title to New Barn House was vested in the trustees of the 1968 Settlement and that it was part of the property the subject of that trust.
Laverstoke consists primarily of farming land and income in fact generated by the estate during the period I am concerned with consisted of salary and profits generated by agricultural activity carried on initially by two successive farming partnerships, and rent payable under various agricultural and agricultural business leases. Which source generated most income varied over time. I describe these arrangements below in more detail and in their chronological context.
By a Deed dated 20 May 1976, a partnership for farming the farmable land at Laverstoke was constituted between JVS, Mr Richard Frearson and his son Mr Charles Frearson ("the first farming partnership"). The first farming partnership was for a period of 15 years from 29 September 1975 and was terminable by the Frearsons after 10 years and by JVS after 12 years. JVS was entitled to a salary of £9,000 and an 8% share of the profits and the Frearsons a salary of £6,000 and 92% of the profits. JVS was permitted to dispose of his interest in the first farming partnership by testamentary disposition by operation of the express provisions of the Deed constituting the first farming partnership.
The land to be farmed by the first farming partnership (866.7 acres of Laverstoke) was let by the trustees of the 1968 Settlement to a nominee, Mr Monier-Williams (a partner in Lawrence Graham, the solicitors who at that stage acted for the trustees and JVS) at a rent of £1,000 per year and then sub-let by Mr Monier-Williams to the first farming partnership. The primary purpose of this structure at its inception was to prevent rights being acquired by the farming partnership under the Agricultural Holdings Act. The effect of this structure was that the only income that the trustees of the 1968 Settlement were entitled to was the rent payable under the lease to Mr. Monier-Williams and the only income that was available to be distributed to the beneficiaries of the 1968 Settlement was the rent net of trust expenses.
As will be apparent from this description, JVS's income from Laverstoke consisted of salary and profit share paid to him in his capacity as a partner in the first farming partnership and the rent paid for the land farmed by that partnership net of trust expenses which JVS received as to three quarters by reason of his income life interest under the AMS Will Trust and as to one quarter by reason of his status as a beneficiary under the 1968 Settlement.
It is likely that the rent receivable by the trustees from Mr. Monier-Williams was wholly or substantially expended on meeting trust administration expenses — see the attendance note prepared by Mr Monier-Williams of an attendance on JVS on 14 December 1978, which records JVS as saying that the rent received was insufficient to cover the cost of repairs and that he was in consequence seeking advice as to whether the rent could be increased. However,...
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