Stow and Others v Stow and Others
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE WARREN,Mr Justice Warren |
| Judgment Date | 14 March 2008 |
| Neutral Citation | [2008] EWHC 495 (Ch) |
| Docket Number | Case No: HC07C01249 |
| Court | Chancery Division |
| Date | 14 March 2008 |
[2008] EWHC 495 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Warren
Case No: HC07C01249
Brian Green QC and David Drake (instructed by Messrs Fladgate Fielder) for the Claimants Henry Legge ( instructed by Messrs Mischcon de Reya) for the First Defendant)
Thomas Ivory QC and Michael Green (instructed by The Solicitor for Her Majesty's Revenue& Customs) the Second Defendants
Hearing dates: 14th and 15th February 2008
Approved Judgment
Introduction
This is an application by the second Defendants, the Commissioners for Her Majesty's Revenue & Customs (“HMRC”), for an order striking out the claim against them on the grounds that this court has no jurisdiction to try the claim as against them alternatively that it should not exercise such jurisdiction as it has. The basis for this contention is that the issues which arise in the present claim are identical to issues raised in certain tax appeals concerning inheritance tax and its predecessor capital transfer tax in which the claimants are involved. It is said therefore that the Special Commissioners have exclusive jurisdiction, at least so far as HMRC is concerned, in relation to those issues. Mr Brian Green QC and Mr David Drake appear for the Claimants; Mr Henry Legge appears for the first Defendant and Mr Thomas Ivory QC and Mr Michael Green appear for HMRC.
The background to the claim and the application
In order to deal with the application, it is necessary to give a summary of the facts. A summary, in its nature, is incomplete and possibly even inaccurate in some respects but I believe that what I am about to set out is sufficient to enable me properly to deal with the application.
The central character in the history is Edward Stow (“Edward”), a successful businessman who died on 30 July 2005. He had two wives, his second wife and widow, Zoe Stow (“Zoe”), being the first Defendant. He had two sons by his first marriage, namely the first Claimant (“Antony”) and the second Claimant (“Richard”). He had two sons by Zoe, of whom one survives namely the fourth Defendant (“Gary”).
There had been a family company, George Stow Company Ltd (“GSCL”) founded in the 1920s and specialising in all aspects of waterworks. In the early 1970s, after the end of the Nigerian civil war, Edward, according to HMRC, sought to re-establish GSCL's presence in Nigeria. He met with the third Claimant (“Mr Kebiru”). A Nigerian company, George Stow & Co (Nigeria) Ltd (“GSNL”) was formed which was involved in the conduct of the Nigerian business. The shareholders of GSNL were Mr Kebiru and another gentleman. It is not necessary, for the purposes of this judgment, to go into any detail about the operation of GSNL or of GSCL in relation to the Nigerian business.
On 27 February 1984, a declaration of trust was entered into between Mr Kebiru (named as settlor) and two trustees. The trust thereby created was to be known as “The Bompai Settlement”. According to its terms, Mr Kebiru settled a modest sum of money on discretionary trusts in favour of a class of Beneficiaries comprising Mr Kebiru and any person added to the class pursuant to Clause 9 (excluding persons who are excluded under Clause 8 and persons resident in Jersey). Three letters of wishes were signed by Mr Kebiru addressed to the trustees. The first, one assumes, was contemporaneous with the Bompai Settlement itself, the second was dated 28 April 1997 and the third was dated 2 January 2002. I do not need to go into the details of the letters of wishes save to note that Edward was mentioned as a person to whom the trustees should turn for advice if Mr Kebiru was not available and that Edward's children might well benefit on Mr Kebiru's death.
Further assets were settled into the Bompai Settlement which were or became of considerable value. Those assets, it seems to be common ground, represented the proceeds of certain Nigerian business interests. HMRC's position is that those settled assets were not beneficially owned by Mr Kebiru before becoming settled but were in the beneficial ownership of Edward. They assert that the settled property was derived from GSCL and GSNL which, in turn, were in the beneficial ownership of Edward. Further, HMRC may wish to maintain that the Bompai Settlement is a sham, in which case the beneficial ownership remained with Edward. If it is not a sham, then they maintain that, since Edward was the beneficial owner of the settled property immediately before the creation of the Bompai Settlement, he was the settlor, with all the tax consequences which would flow from that. None of that is accepted by the Claimants who maintain the property settled by the Bompai Settlement was property beneficially owned by Mr Kebiru.
On 9 June 2002, six settlements were created. These are known collectively as the Northend Settlements and are numbered 1, 2, 2A, 3, 3A and 4. Each of them is made between Mr Kebiru who is defined as “the Original Settlor” of the one part and persons defined as “the Original Trustees” of the other part. The Original Trustees in each case include Mr Kebiru and Edward. They also include one or more of Edward's sons. The present trustees of the Northend Settlements are as follows:
a. Northend Settlements (No 1 and No 4): Antony, Richard and Gary.
b. Northend Settlements (No 2, No 2A, No 3 and No 3A): Antony and Richard
Under the Northend Settlement (No 1), there is a wide power of appointment in favour of a class which included Edward when he was alive. Subject to any exercise of that power, Edward was the life tenant and there was a power to appoint capital to him. Under the other settlements, there is a power of appointment in favour of the Specified Class. Edward was not a member of the Specified Class (unless he was an employee or director of George Stow (Nigeria) Ltd) but could be added to the Specified Class pursuant to an overriding power of appointment. Mr Kebiru is one of the objects of the overriding power of appointment given to the trustees of each settlement. Property to a value of over £14 million pounds was settled into the Northend Settlements at the time of their creation and subsequently – according to Antony, Richard and Mr Kebiru between June 2002 and March 2003.
There is also a single associated letter of wishes relating to all six settlements. It is unsigned but Mr Kebiru's name (spelt in its alternative as Kabiru) appears at the end in the same typescript as the letter itself. The letter states:
“The source of the funds that I have used to make all these Settlements has been owned by me for many years and are all outside of Nigeria managed by my banks and legal adviser. I have tried to keep separate my funds outside Nigeria from those inside Nigeria, where successive governments have made wealth creation very difficult. If I or any member of my family wish to live outside Nigeria, these monies would then be available up to the whole amount of all the Settlements and I hope the Trustees will make my family's needs paramount over all other beneficiaries.”
Later, the following appears:
“During my lifetime I hope that my Trustees will accept my advice on all matters, in particular distribution. After my death and at any time that I am in Nigeria and in particular on investments and all other matters, I hope that my Trustees will accept the advice of Edward Stow. It was Edward and his father who guided my earlier business career and greatly assisted the people of Northern Nigeria with matter supplies and as a result have generated the great hand of friendship between many people.”
Consistently with the appearance of the Northend Settlements and the letter of wishes, the Claimants' case is that the assets of the Northend Settlements were, or were the proceeds of, investment of money and assets earned or acquired by Mr Kebiru by virtue of his commercial activities in Nigeria and were not provided, either directly or indirectly, by Edward.
HMRC's case, in relation to the assets of the Northend Settlements, is that they were provided, either directly or indirectly, by Edward. It seems to be common ground that the assets of the Bompai Settlement were appointed to Mr Kebiru sometime in 2002 and it was these assets which were settled into the Northend Settlements.
In contrast with their (undecided) position in relation to the Bompai Settlement, HMRC do not seek to argue that the Northend Settlements are shams. What they say is that Edward was the settlor of them for tax purposes. The possibilities are therefore as follows:
The first possibility is that Mr Kebiru was the beneficial owner of the assets settled into the Bompai Settlement. In that case there is no reason to doubt that he was also the beneficial owner of the assets which were appointed out to him in 2002. If the Bompai Settlement was a sham, the same position would obtain. It is not easy to see how HMRC could maintain, on this hypothesis, that Edward was the settlor (either in fact or for tax purposes) of the Northend Settlements or that he made a transfer of value when assets were settled into the Northend Settlements.
The second possibility is that Edward, rather than Mr Kebiru, was the beneficial owner of the assets settled into the Bompai Settlement. There are then two possibilities:...
To continue reading
Request your trial
-
HMRC v Volkswagen Financial Services (UK) Ltd
...and Excise Comrs v Yarburgh Childrens Trust [2002] STC 207” (emphasis added). 68. In Investrand BV v. Staatssecretaris van Financien [2008] STC 2298, the input tax in question was VAT on the cost of advisory services paid by Investrand in relation to arbitration proceedings to establish the......
-
The Commissioners for HM Revenue and Customs v Volkswagen Financial Services (UK) Limited
...and Excise Comrs v Yarburgh Childrens Trust [2002] STC 207” (emphasis added). 68. In Investrand BV v. Staatssecretaris van Financien [2008] STC 2298, the input tax in question was VAT on the cost of advisory services paid by Investrand in relation to arbitration proceedings to establish the......
-
Re DCC Realisations Ltd ((in Liquidation)) (formarly the Devon Cider Company Ltd) : Bramston v Murphy and Others
...to continue: a recent example, though involving considerably more complex facts and issues, can be seen in the decision of Warren J in Stow v Stow (HC07C01249) dated 14/03/2008. The present case differs, however, from Vandervell in a particularly important way. In Vandervell the litigation ......
-
Abbey Forwarding Ltd v Hone and Others
...jurisdiction to consider the validity of assessments and I was referred to the decisions in Glaxo Group v. IRC [1995] STC 1075 and Stow v. Stow [2008] Ch 461. This is not a case in which the principle has any direct application, as Mr Pickup accepted. It is not a case between HMRC and the t......