John Michael Gee v John Richard Gee
| Jurisdiction | England & Wales |
| Judge | Mr Justice Birss |
| Judgment Date | 21 December 2018 |
| Neutral Citation | [2018] EWHC 3807 (Ch) |
| Date | 21 December 2018 |
| Court | Chancery Division |
| Docket Number | Case No: C31BS166 |
[2018] EWHC 3807 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
PROPERTY TRUSTS AND PROBATE LIST (ChD)
The Rolls Building
7 Rolls Buildings
Fetter Lane
London EC4A 1NL
Mr Justice Birss
Case No: C31BS166
Mr L Blohm Qc (instructed by Thrings) appeared on behalf of the Claimant
Mr D Rees Qc (instructed by Royds Withy King) appeared on behalf of the Defendant
(As Approved)
I am going to decide the main question that arises today. That is the essential scheme of the relief to be granted following my judgment handed down in June [2018] EWHC 1393 (Ch), and my further judgment on relief on 22 October ( [2018] EWHC 3587 (Ch). The background and history I will not rehearse again.
This is a proprietary estoppel claim. I set out in the main judgment an indicative series of transfers to what seemed to me at the time of that judgment and on the evidence, to satisfy the equity established in favour of the claimant, John Michael (JM) in relation to the farm in Oxfordshire. As it emerged at the hearing on 22 October, a part of that scheme was not appropriate and the scheme was adjusted to take that into account. Essentially it came down to transferring some assets to Pamela, although in the course of today that has also been adjusted again so that the land will not be going to Pamela because, Pamela has explained where she wishes the assets to go. So the order will transfer those assets in the hands of the three individuals that Pamela has explained to me she wishes them to go to.
Then the land was to be separated from the company and then the shares in the company that were held by Robert, the relevant proportions would be provided by Robert to John Michael, such that John Michael would end up with a 52 per cent shareholding. That is what I held he ought to receive in order to satisfy the equity. The landholding would be adjusted in a similar way to leave John Michael holding 46 per cent of the land. The complexities of the holdings are explained in my previous judgments.
The principles were resolved in October. The parties were then able to take tax advice. The tax advice, it is common ground, is firmly of the view that separating the land from the company is not an advantageous thing to do from a tax point of view. It is, I should say, nothing to do with any unlawful avoidance of tax; it is simply that the nature of property transactions, sometimes one transaction has a particular tax consequence and another transaction has a different tax consequence. Parties in those circumstances and the court when settling relief in a proprietary estoppel case are entitled to take into account the different tax consequences and different ways of arranging transactions.
As I said, it is common ground that the scheme I had proposed would have a highly adverse tax consequence. It would require about £1 million to have to be paid in tax, whereas if the land which is currently held by the company is left in the hands of the company, then that tax consequence does not arise. It is common ground that whatever I do, I should leave the land in the hands of the company.
Mr Blohm submits, and it is again common ground between the accountants that this is possible, that the way to give effect to my judgment would be to leave the land that is in the hands of the company in the hands of the company and treat the parties, that is to say particularly really John Michael and Robert, as holding notional shares in it. I do not mean shares in respect of company shares, but I suppose a notional share of the land holding which the company holds, in proportions to their shareholdings in the company. Then to adjust the holdings in such a way as to get the right result, where the aggregate effect is that John Michael is holding 46 per cent of the land even though he has 52 per cent of the shares. It is common ground that that can be done. The tax consequence of doing that is a charge of about £30,000. Earlier this morning I indicated in my judgment that tax liability, although technically it would be to Robert in these circumstances, is a tax liability which should be shared in proportion to the company's shareholdings between John Michael and Robert.
The alternative proposed by Mr Rees for the defendant is a demerger arrangement. This is really a new suggestion as compared to the situation in October. The demerger starts essentially from where I have just put it, in other words the land is in the hands of the company, but then it creates two further companies, one to be held 100 per cent by Robert and the other to be held 100 per cent by John Michael. In the first instance those two companies would hold shares in the land, but one would then adjust the holdings in the land further, if one could, to achieve what could be called a clean break, whereby in the end Robert is holding 100 per cent of the shares in a company which holds a specific holding of...
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