[View without highlighting]
[Printable RTF version]
IN THE HIGH COURT OF JUSTICE
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
MR JUSTICE BRIGGS
|| Polarpark Enterprises Inc
||- and -
MR. T. FANCOURT (instructed by Eversheds) appeared on behalf of the Claimant
MR R. TAGER, Q.C (instructed by RA Rosen & Co) appeared of the Defendants
Hearing dates: 11th, 12th January 2007
HTML VERSION OF JUDGMENT
Crown Copyright ©
Mr Justice Briggs :
- This is an appeal from the Order of Master Moncaster on 7th July 2006, whereby he ordered the defendant Rupert Allason to give possession to the claimant Polarpark Enterprises Inc of residential property known as Croftdown, Aldworth, Berkshire by 7th September 2006, and gave judgement to the claimant for damages to be assessed. Master Moncaster refused permission to the Defendant to appeal, but I gave permission on his written application on 3rd October 2006.
- Possession claims such as this claim are subject to the special procedure laid down under CPR part 55. Rule 55.5 (1) provides that the courts will fix a date for the hearing when it issues the claim form. In the present case that date was originally fixed as 20th March 2006, but was adjourned on a number of occasions, including 5th May 2006, and was heard in substance on 30th June 2006. Pursuant to CPR 55.8 the court can at such a hearing either (a) decide the claim, or (b) give case management directions. On 30th June 2006 the Master was invited by the claimant to decide the claim in its favour and by the defendant to give case management directions for a full trial, following full disclosure, and including cross examination. As will appear, the Master had already made an order for limited disclosure, and for the completion of written evidence, on 3rd May 2006.
- The basis of the claimant's claim, as reflected in Particulars Claim attached to the claim form, was that the claimant, a company incorporated in Panama, was the registered proprietor of Croftdown, that it had permitted the defendant's wife Mrs Nicole Allason to occupy Croftdown with her children and with the defendant as their family home until the defendant and Nicole's divorce in December 1996, and that thereafter the defendant had continued to occupy Croftdown as a home for himself and the two children of the marriage without any express consent or permission from the claimant, and had continued to do so after the expiry of three months' notice to quit given by the claimant on 22nd February 2002.
- By a Defence and Counterclaim served on 12th April 2006 whilst acting in person, the defendant raised three distinct and in substance mutually contradictory defences. First, he claimed beneficial ownership of Croftdown. Second he claimed title by adverse possession. Third, he claimed to have a right to occupy Croftdown for his lifetime pursuant to an agreement made in May 1980, which he alleged had been confirmed in February 1996 by Nicole as part of their separation negotiations.
- The claimant has not served a Reply and Defence to Counterclaim, but challenged each of the defences alleged in a witness statement of Carole Peet, a partner in the claimant's Solicitors Eversheds, dated 28th April 2006. In a witness statement in reply dated 2nd May 2006 the defendant sought to answer Ms Peet's evidence, but said nothing more about the agreement alleged as his third line of defence. On 3rd May 2006 Master Moncaster gave directions for the completion of the evidence, including an order that the claimant file further evidence dealing with the creation of Niro Trust (to which I shall refer shortly) and with the purchase of Croftdown, requiring there to be exhibited to that evidence all documents relating to those matters created up to 31st December 1980 in the control of the Claimant or the Trustees of the Niro Trust.
- Disclosure pursuant to that order was given in a further witness statement of Carole Peet dated 26th May 2006. On 13 June the Defendant inspected and obtained copies of documents relevant to the Niro Trust, and in response to a written enquiry by him, Eversheds confirmed that apart from the documents which he had inspected, and those disclosed in the manner which I have described, "we do not possess or control any other documents relevant to the creation of the Niro Trust dated before the 31st December 1980."
- On 27th June 2006, three days before the date fixed for the adjourned hearing of the possession claim, the defendant (by now assisted by solicitors and counsel) made and served a further witness statement in which, for the first time, he gave details of his third defence, namely that he enjoyed the benefit or a right to occupy Croftdown for life.
- In a detailed reserved judgment, Master Moncaster rejected all three of those defences. As to the defendant's claim to be the beneficial owner or Croftdown, the Master regarded this as neither honest nor bona fide. He rejected the adverse possession claim as "simply hopeless". Neither of those conclusions has been challenged on this appeal.
- Master Moncaster rejected the third defence on the ground that, although the evidence in support of it would if true give rise to an arguable claim for a life interest or for equivalent relief by way of estoppel, the evidence was, to use his words, "simply incredible". Accordingly it was in the Master's view appropriate for him to decide the claim under CPR 55.8 (1) (a) rather than to give directions for case management, there being no realistic prospect of any of the defences succeeding at a trial.
- The defendant has challenged the Master's rejection of his third defence on no less than sixteen written grounds, amplified by a twenty page skeleton argument from Mr Romie Tager QC, and further amplified in oral submissions by Mr Tager to me. I imply no criticism of the detail or length of those grounds and submissions by saying that, from start to finish, the central question on this appeal has always been, and remains, whether the Master was right to treat the defendant's evidence in support of his alleged right to occupy Croftdown for life as incredible. It is common ground that, although not in form a summary judgment hearing, the Master applied the correct test in considering whether the claim should be determined then or managed towards a trial, namely whether in the circumstances of this case, the defendant's evidence could properly be treated without the cross examination and the other processes preparatory for and during a full trial, as incredible: see for example National Westminster Bank v Daniel  1WLR 1453. The first of the Defendant's grounds of appeal simply challenged the Master's conclusion to that effect as "wrong". All the other grounds of appeal sought indirectly to lead the court to that same conclusion.
- Before addressing the grounds of appeal directly, it is necessary both to describe the defendant's case in support of his alleged right to occupy Croftdown for life, and to set it in the context revealed by the surviving documentation. By March 1980 the defendant and Nicole were married and expecting their first child. Croftdown had been identified by them as an additional residence (the defendant already having a London home). He was a Member of Parliament and a successful author. It was from the outset contemplated that the purchase price would be raised mainly by him, with the assistance of a loan from his bankers Coutts & Co. From the outset, both the defendant and Nicole, who was domiciled in Bermuda, were concerned to minimise any tax consequences, and in particular Capital Gains Tax consequences, of the acquisition of a second home, as is apparent from the defendant's letter to his bank manager Mr Bluemel of Coutts & Co dated 25th April 1980 which included the following paragraph:
"I am taking tax advice from the leading Solicitors in the field so as to minimise the tax implications, especially the dread CGT, and will keep you informed of the vehicle chosen to undertake the purchase, which maybe an overseas company or trust."
- The defendant's evidence is that on the day before he wrote that letter, he had lunch with Mr Littlejohn, the Estates and Mortgages manager of the Bank of Bermuda Limited at which he explained the proposed Croftdown transaction to him. This is what he said:
"Mr Littlejohn confirmed both at this meeting, and during subsequent conversations over the next few weeks, that Croftdown was to be my home, and that whatever tax avoidance arrangements were made, it was understood and agreed that I would be allowed to remain there, for as long as I wished. In return I was to provide the £120,000 balance for the required purchase price and take responsibility for paying outgoings and running expenses for the maintenance of the property.
This was something also discussed on a number of occasions prior to the purchase of Croftdown with my ex-wife, to which she readily agreed. We had a similar discussion after the breakdown of our marriage, when again she re-affirmed that it was understood that Croftdown would remain available to me as my home, for as long as I wanted to live there
- Earlier in the same witness statement the defendant described payment for all maintenance to the building and grounds as a responsiblity which he had discussed and agreed with Mr Littlejohn at the outset, as a condition for his occupation of Croftdown.
- The leading solicitors in the field of tax mitigation referred to by the defendant in his letter to Mr Bluemel were Messrs Landau & Landau of 38 North Audley St, London W1. It appears from a letter dated 19th May 1980 to Mr Littlejohn from Mr Micheal Tussaud of Gordon Dadds and Co, whom the defendant and Nicole appear to have instructed for the purpose of the purchase, that the meeting with Landau & Landau was to have taken place on 27th May, but was adjourned to the 2nd June. On 28th May Mr Tussaud wrote to Mr David Landau (of Landau & Landau) in anticipation of that meeting, in the following terms:
"Mr & Mrs Rupert Allason
In anticipation of our meeting at 2.30 on the afternoon of Monday 2nd June, I am writing to let you know what is happening with regard to the house that the Allasons are purchasing.
They have found a freehold property in Berkshire and Rupert appears to be buying it on an overdraft £170,000. It contains a bungalow which will be sold off separately for about £55,000. I think it is Rupert's intention go give the house to Nikki, but, of course, I expect you will advise that she should not take it into her own name.
You will recall that a Trust was set up prior to their marriage last Summer but it is still in escrow. You will recall that you were previously asked for your advice generally on the Trust and also on the advisability on setting up a company. The Allasons would now like to clear the matter with you and then act upon your advice."
- On the following day the defendant himself wrote a briefing note for David Landau. Under the heading "Objective" it stated: "Eliminate danger of CGT (CTT?). Find out most tax-efficient solution." The note made no reference to any agreement between the defendant and Mr Littlejohn, or to the defendant obtaining any right of occupation of Croftdown.
- The defendant and Nicole met David Landau on 2nd June, in company with Mr Tussaud. The defendant says this about that meeting:
"I explained to Mr Landau my proposals regarding the purchase of Croftdown. I told him about the advice we had received from Mr Littlejohn, explaining that my wife and I wanted to be advised by him, as an expert in this area. During our discussions I told him that Croftdown was being purchased with a view to being retained in the family for the long-term - subject only to the early sale of the gardener's cottage. I explained that it was a fundamental feature of this transaction that I would be living in the property as my country home, and that this had been agreed with my wife and Mr Littlejohn.
I recently spoke to Mr Landau, following the service of these proceedings. He recalled advising me in 1980, and confirmed to me from him recollection that he had no doubt that it was intended and agreed at the time that my interest or rights in the property were such that the Claimant or the trustees could not require me to leave if I wished to continue living in Croftdown."
- Mr Landau's attendance note of that meeting has survived. Under the Heading " Re: Mr and Mrs Allason" it reads as follows:
"Attending Mr and Mrs Allason when they called in company with Mr Tussaud, and we discussed further their joint tax affairs. The existing settlement did not appear to be worth pursuing since it had assigned to it the right to income which would then be taxable under S. 478. We suggested that a fresh Settlement be established, the beneficiaries of which would be the Settlor's issue and spouse after her death, with powers to add additional beneficiaries granted to an additional protector. This Settlement would then incorporate a Hong Kong Company which would then purchase the property proposed. We advised on the Capital Gains Tax, Capital Transfer Tax, and Income Tax consequences of the formation of such Trust and Company.
Engaged- one hour."
- In a witness statement made on 27th July 2006 (and therefore not before the Master) Mr Landau said that he remembered the defendant as a client and the broad nature of the circumstances in which he advised him. Having confirmed the attendance note as having been made by him at the time, he continued as follows:
"The general advice I gave on a tax mitigation structure was such that under the legislation then in force any rights of occupation by the defendant would not in any way affect the viability of the form of settlement that I was advising with the use of an off-shore company owned by the settlement as the vehicle that would acquire and beneficially own the property."
I was invited by both parties to take that witness statement into account on this appeal.
- On 4th June, Mr Tussaud wrote to Mr Littlejohn to confirm the proposed arrangements regarding the purchase of Croftdown by a trust. He identified the Claimant Polarpark Enterprises Inc as the vehicle for the acquisition of Croftdown, with completion planned for the 25th June. The letter continued:
"Rupert intends to repay certain loans and make a gift to Nikki and to this end £120,000 is to be made available and perhaps you would be kind enough to let me know the name, address and account number of Midland Bank at which you would like to receive the cash.
I confirm the advice given to us by Mr David Landau in that it is order for the Settlement to be created after the exchange of contracts but preferably before completion. The technical reason for this is that if Nikki does not settle the cash itself then she has in effect settled the shares in Polarpark. I confirm that I shall be writing to Walter Maddocks requesting him to draft a new Settlement to give effect to these proposals."
Mr Maddocks was an attorney at Messrs Conyers Dill & Pearman in Bermuda.
- It appears from a further letter from Mr Tussaud to the Bank of Bermuda dated 5th June that Mr Littlejohn arranged for Gordon Howard, another trust officer at the bank to authorise Gordon Dadds to complete the purchase of Croftdown on behalf of the claimant.
- Mr Tussaud duly requested Mr Maddocks to prepare the Trust deed, by telex dated 9th June 1980. It is important both for what it does and does not contain, and I shall quote it in full:
"Re: Mrs Nicole Allason
Having received expert tax advice Nikki has decided not to deliver the settlement executed in Escrow shortly before her marriage. However, it has been decided that a new Settlement should be made without delay prior 25th June 1980.
The beneficiaries of the new Settlement are to be Nikki's children, their spouses and her husband, Rupert Allason, after Nikki's death and also such other people as the protector(s) may appoint.
As you are aware, Johnny Littlejohn has formed a company named Polarpark Enterprises Inc. and the shares are to be owned by the Trustees of the Settlement. The Trustees are to be the same as those in the settlement which was not delivered, namely the Bank of Bermuda Ltd and Bermuda Trust (Far East) Ltd.
Polarpark is to purchase a property in England and the Settlement will need a clause whereby the Trustees may allow Nikki and her family to reside in the property on the condition that the family keep it in good repair and pay all the normal outgoings.
It is suggested that, subject to your advice, the protector(s) of the Settlement should be yourself, Johnny Littlejohn and the Bank of Bermuda.
No income producing assets will be owned by the Trust or PolarPark, and the Trust is to be created purely to hold such non-income producing assets such as property, gold etc
(illegible) that Nikki would be most grateful if you could give the drafting of this Settlement top priority so that it can be sent to England by express post, executed by Nikki and returned to you in time for completion on 25th June 1980.
If you should care to telephone me I should be happy to discuss any details with you.
Hoping you are well"
- Mr Maddocks duly prepared a Deed of Settlement for the constitution of the Niro Trust, and it was executed by Nicole as settlor and by the Bank of Bermuda Ltd and Bermuda Trust (Far East) Ltd as trustees on 14 June 1980. The initial property of the settlement was identified in clause 1 and the First Schedule as £120,000 assigned by Nicole to the Trustees. The beneficiaries were identified by clauses 8 and 9 (a) together with the Second Schedule as: "1. The children of the Settlor: 2. The spouse of the children of the Settlor: 3. From and after the death of the Settlor her husband Rupert Allason: 4. Such other persons as may from time to time be appointed by…the protectors". The Trust Fund was held on discretionary trusts for the beneficiaries, with a gift over at the end of Trust Period (as defined) to all the children and remoter issue of Nicole as should then be living.
- Clause 10 (e) of the Settlement conferred the following power on the Trustees:
"to permit Settlor or any discretionary object to reside in and to occupy any real property or land or building which may at any time form a part of the Trust Fund for such period or periods and on such terms as the Trustees shall in their absolute discretion think fit but so that during such period or periods as they shall be so permitted the Settlor or such discretionary object shall maintain and keep the said property in good and substantial repair and condition and shall pay any rates, taxes and assessments impositions or outgoings which may at any time be levied charged or imposed thereon or in respect thereof and shall keep the same property insured against fire damage and other perils to the full insurable value thereof in some insurance office approved by the Trustees"
- £120,000 was not in fact assigned by Nicole to the trustees of Settlement on 14th June 1980. Surviving microfiche records show that it was lent by Coutts & Co to the defendant on 25th June, transferred by him to an account of Nicole at the Bank of Bermuda on the same day, and by her to the Trustees, by them to Polarpark and by Polarpark to the vendors of Croftdown as part of the completion monies all on the same day. As is common ground the claimant was then duly registered as the proprietor of Croftdown and the Trustees of the Settlement have at all times been the claimant's only shareholders.
- The final relevant document consists of a file note made by Mr Howard of the Bank of Bermuda on 11th June 1980, recording a discussion he had with Mr Littlejohn in connection with the formation of the Niro Trust for the benefit of Nicole Allason. The memorandum is note-worthy only in the sense that it makes no mention at all of any right of occupation to be conferred upon the defendant in relation to Croftdown.
- The rest of the story can be briefly told. The defendant and Nicole used Croftdown as one of their homes until their separation and divorce in 1996. They have two children who were born in 1980 and 1987 respectively. Following the separation the defendant continued to live at Croftdown, for at least part of the time with the two children. Notwithstanding suggestions to the contrary in Mr Tager's skeleton argument, which the claimant sought to challenge by further evidence leading to a withdrawal of those assertions, it became common ground before me that during the period 1996 to early 2002 the claimant and the Bank of Bermuda both protested and sought an explanation from the defendant as to the basis of his continued occupation of Croftdown, and endeavoured to obtain documents relevant to the circumstances of its purchase and the creation of the Niro Trust. As pleaded in the Particulars of Claim, the claimant then gave notice requiring the defendant to vacate Croftdown in February 2002.
- Master Moncaster found the defendant's assertion that he had agreed with Mr Littlejohn and with his wife that he was to have a right to occupy Croftdown for life in consideration of the payment £120,000 towards the purchase and the discharge of maintenance and repairing obligations incredible, for five reasons. First, his account of that agreement was inconsistent with the contemporaneous documents recording the making of the arrangement for the purchase and the setting up of the trust. Second, the alleged agreement of a right for him to occupy for life was irreconcilable with clause 10 (e) of the Settlement Deed. Third, the alleged agreement was incompatible with the stated tax saving objective of the whole scheme. Fourth, his account was supported by what the Master regarded as the absurd (and therefore untruthful) suggestion, in paragraph 25 of defendant's second witness statement (quoted above), that Mr Landau could after twenty six years recall having been told when giving his tax advice in 1980 that the defendant was to have such a right of occupation. Finally, the Master concluded that the defendant's present claim was inconsistent with the manner in which he had addressed what was to happen to Croftdown in the context of the ancillary relief proceedings connected with his divorce.
- In assessing the credibility or otherwise of the defendant's evidence, the Master had well in mind his conclusion (not challenged on this appeal) that the defendant's assertion that he was the beneficial owner of Croftdown was a defence put forward dishonestly and in bad faith, together with other instances of apparent dishonesty on the part of the defendant, such as his assertion ( contrary to earlier correspondence) that he had not seen the Deed of Settlement, and the conclusion of the Bermudian judge hearing the divorce proceedings that the defendant had given dishonest evidence to him. The Master may also have been aware that the defendant had been criticised as a dishonest witness by Laddie J in Allason and another v Random House UK Ltd (in a judgement given on 16th October 2001) because, without naming it, he noted that the defendant had been an untruthful witness in England. Nonetheless, he made it clear in paragraph 46 of his judgment that those matters would not be sufficient to justify a conclusion that his present evidence was incredible. I consider that he was right to exercise that caution.
- I turn now to address the defendant's grounds of appeal, leaving until last the central question whether the Master's conclusion that the Defendant's evidence was incredible was simply wrong, raised by ground 1.
- Mr Tager's first main line of attack, identified by grounds 2 and 3 in the Appellant's Notice was that, as he put it, the claimant had chosen not to adduce the evidence of any witnesses to challenge the defendant's account in circumstances where, although Mr Littlejohn himself had died, witnesses were available. In particular, he identified Nicole, who he suggested ( with some support from the claimant's evidence) was cooperating with the claimant, Mr Howard or other trust officers at the Bank of Bermuda and the directors of the claimant itself. He suggested that the Master should have drawn an intference adverse to the claimant from their not being deposed as witnesses, and in particular the inference that the claimant either suspected or feared that such witnesses would or might give evidence supportive of the defendant's case. He relied for that purpose on Wisniewski v Central Manchester Health Authority  Lloyds' Rep (Med) 223, and the summary of the principles to be derived from the judgment of Brooke LJ in that case provided by Mann J in Fulham Leisure Holdings Ltd v Nicholson Graham & Jones (unrep) 31st July 2006, at paragraphs 71 -72. For present purposes, it is sufficient to recite Mann J's concise summary:
"1 In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.
2 If a court is willing to draw such inferences they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.
3 There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.
4 If the reason for witness's absence or silence satisfies the court then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his or her absence or silence maybe reduced or nullified."
- In my judgement the application of those principles to the circumstances of the present case leaves no room at all for Mr Tager's submission that any inferences adverse to the claimant should have been have been drawn by the Master from its decision not to deploy witness statements from Nicole, from the Bank of Bermuda or from its directors at the hearing on 30th June. First, the hearing was not a trial. Although in form it was a hearing of the claim, it was in substance a hearing designed to enable the court decide whether to give judgment without a full trial, or directions for a trial. It was therefore both natural and appropriate in my judgement for the claimant to submit that the defences advanced were manifestly without substance, on the basis of the surviving documents, such that if the submission was accepted the case would be over without the expense of deploying further evidence, but that if not accepted there would be a trial at which the claimant would have every opportunity to call further witnesses.
- The analogy with a summary judgement hearing is in substance close. A party seeking summary judgment usually achieves nothing by deploying oral evidence contradicting his opponent's case beyond showing that there may be a triable issue. His claimed summary judgement will either succeed on the documents, or there will be a trial. In the present case, the decision not to deploy evidence in relation to the defendant's third line of defence is all the more understandable because it was only supported by any evidence in a witness statement served three days before the hearing. The deployment of further evidence by the claimant in response would have necessitated the delay and expense of a further adjournment. Accordingly this is not a case in which in my judgment it was reasonable to expect the claimant to have deployed such witnesses, with the consequence that the occasion for drawing adverse inferences did not arise.
- In any event, it was common ground before me that the whole purpose of the hearing before the Master on 30th June was to establish whether or not the defendant had put forward a case for being entitled to remain in occupation of Croftdown which necessitated an answer. As the third of Mann J's propositions makes clear, it is only where there is a case to answer that any occasion for the drawing of inferences from the failure to call witnesses arises. Putting it in my own words, inferences which may be drawn from the failure to call witnesses go to the relative weight of competing evidential cases but only where the evidence which such witnesses might have been expected to challenge is itself not inherently incredible.
- Mr Tager's next line of attack, directed at the Master's conclusion that his client's evidence was inconsistent with contemporaneous documents, and with the Deed of Settlement, was a submission that this was simply not a case in which on 30th June 2006, the court could safely assume that there was a reliable documentary record against which to judge the defendant's evidence. This is reflected in the fourth, fifth and sixth grounds of appeal. Mr Tager put the point in two alternative ways. First he submitted that the claimant's compliance with the Master's order for limited disclosure on 3rd May 2006 was so unsatisfactory that it ought to be inferred that the claimants either had or could with proper diligence obtain further relevant documents, which might corroborate the defendant's case. Alternatively (and I think in the end by way of preference) Mr Tager submitted that scrutiny of the available materials suggested that the Bank of Bermuda and the claimant had long since disposed of their files relevant to the purchase of Croftdown and the creation of the Niro Trust, such that the small fragment which had fortuitously been preserved by the defendant himself in his own files, and then provided by him to the claimant and exhibited to Ms Peet's witness statement could therefore be regarded as no more than an unsatisfactory fragment from which no conclusion as to the true basis of the transactions could safely be drawn without a full trial.
- I have no hesitation rejecting the first of those two alternatives. There is in my judgement no evidence at all which could enable, still less incline the court to the conclusion that the claimant's disclosure pursuant to the Master's order of 3rd May 2006 was other than full and proper. Nor is it surprising that, after the passage of twenty six years, documents recording the transactions in 1980 have since been disposed of by the Bank, the claimant and the solicitors concerned.
- Mr Tager's second point it is of more substance. I consider it probable that only a modest proportion of the relevant documents which originally recorded the design and implementation of the 1980 transactions have survived, so that as a matter of abstract theory there might originally have existed other documents which could have thrown further light on the transactions. But Mr Tager's submission faces two insuperable obstacles. The first is that it is my judgment no more than an improbable speculation that further documents might become available in time for a full trial of this claim. It is as I have said now common ground that efforts to trace contemporaneous documents have been going on for some time. It is not suggested that the defendant is likely to find further documents and as I have concluded, the claimant has made proper disclosure of available documents in its and the Trustees' control. In assessing therefore whether there is a case advanced by the defendant which has a more than fanciful prospect at trial, the proper assumption to make is that the trial judge would be faced with the same documentary fragment as faced the Master.
- The second obstacle is that although it may be right to say, for example, that there may have been other memoranda in the trust file at the Bank of Bermuda recording the basis of the transaction, and other documents originally retained by Gordon Dadds relevant to their client's instructions, the surviving documents do demonstrate beyond any serious doubt that neither Mr Tussaud of Gordon Dadds nor Mr Maddocks of Conyers Dill & Pearman was aware of what the defendant now claims to have been a fundamental feature of the transaction, i.e. his right to occupy Croftdown for life. Those conclusions flow inescapably, as it seems to me, from the terms of Mr Tussaud's instructions to Mr Maddocks in the telex which I have quoted in full and from the terms of the trust deed actually prepared by Mr Maddocks, in particular clause 10 (e).
- This is not a case in which any suggestion is or could be made that the transactions as documented were in any sense a sham, concealing an underlying and different reality. As Mr Tager rightly put it, the transaction was structured and recorded for the purposes of tax avoidance rather than evasion. It follows that Mr Tussaud's instructions to Mr Maddocks and his implementation of them, in particular in the form of clause 10 (e) of the Deed of Settlement must have been in ignorance of any intention that the defendant should have a right of occupation of Croftdown for life, as the Master correctly concluded. The relevant inconsistency is not therefore merely that the defendant's case as now advanced is not recorded in the surviving documents, such that the submission that they are only a fragment would be of real force. The relevant inconsistency lies between the defendant's uncorroborated case that his right of occupation was agreed by Mr Littlejohn and his wife, and notified to Mr Landau in Mr Tussaud's presence at the meeting on 2nd June, and the fact (as I find it) established by the documents that Mr Tussaud was entirely unaware of it. Just as there is no suggestion of sham, nor is their any suggestion that Mr Tussaud was negligent in giving instructions to Mr Maddocks as to the basis upon which the Deed of Settlement would record the rights or expectations of the parties in relation to Croftdown. I therefore reject Mr Tager's second main submission.
- The seventh and tenth grounds of appeal sought to challenge the Master's reliance upon the inconsistency between defendant's case and clause 10 (e) of the Deed of Settlement. Taking the tenth ground first, Mr Tager submitted that there was nothing in fact inconsistent between the existence of a power in the Trustees of the type set out in clause 10(e), and an agreement by Mr Littlejohn on their behalf to secure the satisfactory maintenance and upkeep of Croftdown by permitting the defendant to occupy for life, in circumstances where none of the other discretionary beneficiaries could be shown to have the means with which to do so. It was suggested that, strictly, Croftdown was not in fact part of the trust property at all so as to fall within the purview of clause 10(e), but rather, the beneficial property of the claimant in circumstances where the trust property was limited to the claimant's shares.
- In my judgement these submissions fail to see the wood for the trees. Both Mr Tussaud's instructions to Mr Maddocks, and clause 10(e) itself set in its context plainly demonstrate that the power conferred on the Trustees was intended to relate to the occupation of Croftdown. If as the defendant contends it had already been agreed that he should had a life right of occupation in consideration of an obligation in relation to maintenance and the payment of £120,000, then it is in my judgement inconceivable that the Deed of Settlement would have been silent as to this or would have contained clause 10(e) in the form as drafted, in circumstances where it is common ground that no intention to create a sham was present in the minds of anybody.
- Mr Tager's second point was that the inconsistency now apparent between the defendant's case and clause 10(e) of the Deed of Settlement is of little relevance in circumstances where the defendant did not see the Deed of Settlement at the time. In my judgement this submission begs the question. As the Master observed, the defendant had in paragraph 6 of his first witness statement falsely denied ever having previously seen the Deed of Settlement. Mr Tager sought to pour cold water on that conclusion by suggesting that what the defendant really meant was he had not seen it in precisely the form as executed, but only in the form of an unexecuted and slightly different draft produced to me at the hearing of this appeal. In the absence of any evidence from the defendant himself that this is what he meant by paragraph 6 of his first witness statement, I reject that submission. The fact that he had in correspondence in 1997 referred to a particular provision of the Deed of Settlement was pointed out by Miss Peet in her witness statement dated 26 May 2006, and not addressed at all in the defendant's witness statement dated over a month later. In my judgement the Master was perfectly entitled to reject as incredible, without cross examination, the defendant's evidence about when he first saw the first saw the Deed of Settlement, so that this alternative submission is without force.
- The eighth, eleventh and thirteenth grounds of appeal were all directed towards undermining the Master's conclusion that the defendant's asserted right of occupation of Croftdown was inconsistent with the tax avoidance purpose of the structure put in place in 1980. In particular, reference was made to the fact that the defendant continued in occupation of Croftdown after separating from his wife in 1996, without being required to leave until February 2002. Further, ground eleven suggested that the tax avoidance point had not been made good by reference to the relevant legislation as at 1980, before the Master.
- Taking the two points in turn, there is in my judgement nothing in the point that the defendant was not more speedily required to leave Croftdown after he and Nicole separated. He remained the father of the two (then minor) children. They were the primary beneficiaries of the Settlement and in the light of their parents' unfortunate divorce, needed to have one or other of them present if they were to have any further enjoyment of Croftdown. It was in my judgement neither a breach of trust nor something which imperilled any tax efficiency of the structure for the Trustees to permit the claimant to take no steps to procure the defendant's speedy eviction. The Master reached the same conclusion by a slightly different route. Either way, his continued occupation is not in my judgment corroborative of his account that he did so as of right pursuant to an agreement to that effect made in 1980.
- As to the second point, the question is not whether as a matter of legal analysis the existence of the alleged right of occupation for life would necessarily have been fatal to the tax efficiency of the structure put in place in 1980. The incredibility of the defendant's account of his obtaining such a right by agreement stems principally from the clear inference from the surviving documents that, contrary to his case, it was not the subject of anxious and detailed discussion either with Mr Tussaud, or with Mr David Landau, in Mr Tussaud's presence.
- That it was not so discussed is a conclusion directly attacked by the ninth ground of appeal, in support of which Mr Tager relied on paragraph 4 of Mr Landau's witness statement which I have already quoted in full. Mr Tager submitted that a fair reading of that paragraph suggested that Mr Landau had indeed given advice as to the tax consequences of the defendant's (by then) agreed right of occupation for life, such that it was corroborative of the defendant's evidence that he discussed it with Mr Landau. In my judgement that paragraph does nothing of the kind. All that Mr Landau says in terms is that he gave general advice on a tax mitigating structure such that, in his opinion, the structure which he recommended would not in fact have been undermined by any rights of occupation enjoyed by the defendant. He does not suggest that he gave detailed advice upon the affect of any specific rights of occupation, or that such rights were explained to him. Far from corroborating the defendant's account, in my judgement Mr Landau's witness statement positively contradicts it, in circumstances where Mr Landau must have been asked, when invited to provide a witness statement, whether he had indeed recently given the defendant the confirmation set out in paragraph 25 of the defendant's second witness statement. In my judgement the absence of any confirmation that he had recently done so, in Mr Landau's witness statement, is positively harmful, rather than helpful to the defendant's case. I reject Mr Tager's submission that Mr Landau's evidence in relation to these matters was ambiguous, in a way that necessitated a trial for its clarification.
- In the same context, I have read the additional fresh evidence of Mr Brian Pearl and Mr Norris Gilbert, sought to be introduced on the defendant's behalf for the first time on this appeal. Its admission was opposed by Mr Fancourt QC who appeared for the claimant, in reliance on the principles set out in Hertfordshire Investments Ltd v Bubb  1WLR 2318. Rather than become involved in a time consuming dispute about admissibility, I decided to admit the evidence for what it was worth. In my judgment neither of those witness statements was of any significant assistance to the defendant. They simply failed to get to grips with the concrete question whether the agreement alleged by the defendant with regard to a right to occupation of Croftdown for life was or was not made. Nor do they offer any assistance on the critical question why, if such an agreement had been made, neither Mr Tussaud nor Mr Maddocks was made aware of it.
- Ground 12 consisted of a direct attack on the Master's conclusion that the defendant's case about a right of occupation for life was inconsistent with the way in which he had dealt with Croftdown in the context of the divorce proceedings. In paragraph 54 of his judgment, the Master contrasted the defendant's assertion of a right of occupation for life with his concurrence with the Bermudian judge's view that the property belonged in substance to the children and should be available if necessary for the payment of their school fees. In my judgment there is no necessary inconsistency between the two. While it is true that the defendant does not appear to have asserted a right of occupation for life in the divorce proceedings, a valuable interest which he ought to have disclosed if it existed, there is in my judgment no inconsistency between the existence of such a right, and a readiness to abandon it in circumstances where to do so would release substantial funds for his children's education. I consider therefore that this criticism of the Master's analysis is made good.
- Ground 14 ( concerning the existence or otherwise of communications in connection with the defendant's occupation of the property in or after 1996) fell away because of the common ground which emerged during the appeal that there had been such communications.
- Grounds 15 and 16 contained assertions that the Master ignored two suggested items of evidence corroborative of the defendant's account. The first was his IVA proposal, in March 2002, in which the defendant asserted that he occupied Croftdown as a tenant on terms that he paid the outgoings. In paragraph 59 of his judgment the Master did indeed treat that as slight corroboration of the defendant's case, albeit being insufficient to displace the obstacles presented by the other inconsistencies to which I have referred. In my judgement he was right to do so. As the Master pointed out, this statement was made after the defendant had received the claimant's notice to vacate Croftdown and it can be no more than self-corroboration in any event. It constitutes no significant independent verification of his case. At the highest, it might suggest some answer to the proposition that the defendant invented his present case during these proceedings in 2006.
- The second item of supposed corroboration is the defendant's own evidence in the witness statement dated 27th June 2006 that Nicole had confirmed the alleged agreement in 1996. For the reasons already given, nothing turns on the fact that this evidence, served three days before the hearing, was "unchallenged" in the sense that it was not contradicted by any witness statement from Nicole. Otherwise, it is again pure self-corroboration and was no doubt part of the evidence which, taken as a whole, the Master regarded as incredible.
- I return therefore to the first overarching ground of appeal, that the Master's conclusion that the defendant's evidence in support of his third defence was incredible was wrong. It will be apparent that I have rejected all the specific attacks on the grounds for the Master's conclusion other than the Master's final ground, based as it was upon the supposed inconsistency between the defendant's case and his attitude to Croftdown during the divorce proceedings. In fairness, my approach to the inconsistency of the defendant's case with the tax avoidance sought to be achieved in 1980 has involved a slightly different analysis from that of the Master.
- Overall however, I have reached the clear conclusion that notwithstanding those two points, the Master was right to regard the defendant's evidence of an agreement for a right of occupation of Croftdown for life as incredible. He plainly applied the correct legal test and included as the foremost of his reasons the fact that the defendant's case is incompatible with what the contemporaneous documents, including clause 10(e) of the Deed of Settlement, show to have been the true position. Putting the matter in my own words, I find the defendant's evidence on this point incredible because the necessary averment that he must have explained such a fundamental aspect of the transaction to those advising him about it, including both Mr Tussaud and Mr Landau is irreconcilable with the fact, clearly established by the documents, and not contradicted by Mr Landau, that no such explanation of the existence of such an agreement was communicated either directly to Mr Tussaud, or to Mr Landau in Mr Tussaud's presence. If one were to imagine a trial at which the defendant gave the same evidence, and at which Mr Tussaud had the defendant's case put to him in cross examination, it seems to me inevitable that Mr Tussaud would say (however slight his actual recollection of events after twenty-six years), that no such explanation could have been given to him prior to his telexed instructions as to the preparation of the Deed of Settlement which he sent to Mr Maddocks, or prior to the completion of the purchase of the property for the benefit of the family in the manner set out in detail in the Deed of Settlement which had by then been prepared. In my judgment it is inconceivable that in those circumstances the defendant's evidence would prevail, and for that reason his prospect of succeeding in establishing the alleged right of occupation for life is no more than fanciful.
- Accordingly, I dismiss this appeal.
Copyright Policy |
Donate to BAILII