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URL: https://www.bailii.org/ew/cases/EWFC/HCJ/2025/958.html
Cite as: [2025] EWFC 958

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Warning: This judgment was delivered in private. The judge has given leave for this version of the judgment to be published on condition that (irrespective of what is contained in the judgment) in any published version of the judgment the anonymity of the parties must be strictly preserved. All persons, including representatives of the media, must ensure that this condition is strictly complied with. Failure to do so will be a contempt of court.

 

Cite as: AB v CD & Ors [2025] EWFC 958

CASE NUMBER: BD19D06192

IN THE FAMILY COURT

SITTING IN BIRMINGHAM

Birmingham Civil and Family Justice Centre

Priory Courts, 33 Bull Street

Birmingham, B4 6DS

 

Date: 13 February 2025

B e f o r e:

 

HIS HONOUR JUDGE RICHARD WILLIAMS

- - - - - - - - - - - - - - - - - - - - -

 

AB

Applicant

- and -

 

(1) CD

(2) EF

(3) GH

Respondents

- - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - -

Representation:

 

Samuel Davis (instructed by Rayden Solicitors) for AB

Ewan Murray (instructed by Halo Solicitors) for CD

Nicholas Wilkinson (instructed by Lodders Solicitors) for EF

GH was not in attendance and was not represented

- - - - - - - - - - - - - - - - - - - - -

 

Hearing dates: 16, 17, 18, 21, 22 October

2024, and 13 February 2025

  - - - - - - - - - - - - - - - - - - - - -

JUDGMENT APPROVED


This judgment was handed down on 13 February 2025 and released to the National Archives for publication on 11 April 2025 following an agreed process of anonymisation and having regard to the recent guidance from the Honourable Mr Justice Peel that anonymised case names should not spell out discernible words.

 

HHJ Richard Williams:

Introduction

 

1.      This is my judgment following the trial of preliminary issues in financial remedy proceedings.

 

2.      For ease of reference, and with no disrespect intended, I shall refer to the family members by their anonymised names in this published judgment. Other terms have been anonymised including company and place names.

 

3.      AB (the Applicant) was married to CD (the 1st Respondent), who is (i) the son of EF (the 2nd Respondent) and her late husband, EF-H [1], and (ii) the brother of GH (the 3rd Respondent).

 

4.      The preliminary issues to be determined are as follows:

 

a.       CD was the sole registered shareholder of GUTHRUM Limited ("GUTHRUM"). Shortly after he and AB separated, CD signed share transfers ("the Share Transfers"), whereby he transferred his shares in GUTHRUM 50% to EF and 50% to GH. In summary, the respective cases are –

 

i.       AB says that the Share Transfers were made with the intention of defeating her claim for financial relief and as such should be set aside;

 

ii.      EF says that, at the time of the Share Transfers, GUTHRUM had no value such that there was never any intention to defeat AB's claim for financial relief and no consequential loss suffered. In any event, the Share Transfers were only made to regularise the position that CD had always held the shares in GUTHRUM on trust for EF. By mistake, GUTHRUM's accountant drafted the Share Transfers to EF and GH, rather than to EF alone. EF seeks a declaration that she is the sole beneficial owner of the shares in GUTHRUM;

 

iii.       From the outset and throughout almost the entirety of these long running proceedings, CD was in agreement with AB's case. However, on the morning of the trial, CD made an application in the face of the court, and was granted permission, to amend his statement of case to support EF's case that he had always held the shares on trust for EF; and

 

iv.       As a result of failing to comply with court directions, GH is debarred from advancing any positive case on this preliminary issue. He played no active part at the trial.

 

b.      CD is the registered owner of BLACKSMITH Caravan Park and the adjoining family home at BLACKSMITH House (together "BLACKSMITH"):

 

i.       It is EF's case that she provided a loan to CD of £251,142 ("the Alleged Loan") towards the purchase of BLACKSMITH, which must be repaid;

 

ii.      It is AB's case that there was no Alleged Loan or, if made, it has since been waived/forgiven/gifted; and

 

iii.       It was CD's case initially that the Alleged Loan was statute-barred. However, in his amended statement of case, CD now accepts that the Alleged Loan must be repaid.

 

Background in more detail

 

5.      Before an acrimonious falling out, the family owned and operated a very successful caravan park business comprising some 15 - 20 sites across three regions and a substantial trade in caravan refurbishment/sales. The business operated through multiple companies and partnerships. The companies participated in interest-free inter-company loans repayable on demand.

 

6.      So far as is relevant to the present proceedings:

 

a.       GUTHRUM carries on the business of owning and operating a residential caravan site ("GUTHRUM Park"). CD and EF were/remain co-directors, and CD was the sole registered shareholder on incorporation.

 

b.      WINNIPEG Caravan Park Ltd ("WINNIPEG") carries on the business of owning and operating a residential caravan park. EF, EF-H and GH were co-directors and equal shareholders.

 

c.       GLENOGIL Caravan Sales Limited ("GLENOGIL") carries on the business of trading in caravans and mobile/residential homes. EF, EF-H and GH, were co-directors and equal shareholders.

 

7.      On 19 April 2019, AB and CD separated.

 

8.      On 30 April 2019, CD transferred his shareholding in GUTHRUM 50% to EF and 50% to GH.

 

9.      In May 2019, AB petitioned for divorce and made an application for financial orders under the Matrimonial Causes Act 1973 ("the 1973 Act").

 

10.  Later that month, "GH became involved in ...... a heated discussion with CD. GH's wife, was concerned at developments and called the police. The act of calling the police was regarded by some in the family, particularly by EF, as an act which was not consistent with the family ethic of resolving matters themselves rather than involving outside agencies. The arguments between the brothers CD and GH, and between GH and his mother, EF, got worse." [2]

 

11.  In parallel litigation in the Business and Property Courts, GH pursued an unfair prejudice petition [3] ("the Company Proceedings") and a partnership claim [4] ("the Partnership Proceedings") against EF, which were subsequently concluded by way of:

 

a.       On 19 November 2021, the amended unfair prejudice petition was struck out. [5]

 

b.      In May 2023, on the first day of the trial, the Partnership Proceedings were settled on confidential terms.

 

12.  On 15 July 2020, AB made an application for an order pursuant to s.37 of the 1973 Act ("the Section 37 Application") that the Share Transfers be set aside on the ground that they were made with the intention of defeating her claim for financial relief.

 

13.  On 23 September 2020, GH was removed as a director of GLENOGIL.

 

14.  On 9 December 2020, GH was removed as a director of WINNIPEG.

 

15.  By order dated 14 January 2021, GH was joined as a party and directed to file and serve any witness statement in response to the Section 37 Application by 26 February 2021.

 

16.  By order dated 14 September 2021, GH was directed to file and serve (i) his statement of case in respect of the Section 37 Application and (ii) his witness statement in support, by respectively 28 October 2021 and 21 December 2021.

 

17.  On 29 January 2022, GUTHRUM was served with statutory demands by WINNIPEG (£942,296.42) and by GLENOGIL (£126,024) in respect of outstanding inter-company loans.

 

18.  By order dated 4 March 2022, GH was put on notice that, at the next hearing on 11 March 2022, the other parties would be seeking an order preventing him from pursuing a case on the Section 37 Application.

 

19.  By order dated 11 March 2022, GH was debarred from pursuing a case on the Section 37 Application unless he filed and served (i) his statement of case in respect of the Section 37 Application and (ii) his witness statement in support, by respectively 28 March 2022 and 7 April 2022.

 

20.  On 13 April 2022, EF-H died. As a consequence, EF became sole director of both GLENOGIL and WINNIPEG, whilst also effectively becoming the majority shareholder of both companies; 1/3rd in her personal capacity and 1/3rd as the personal representative of EF-H's estate.

 

21.  On or about 28 April 2022, WINNIPEG applied on behalf of itself and GLENOGIL for an administration order in respect of GUTHRUM ("the Administration Proceedings"). In her witness statement in support of the application, EF explained that –

 

"[39.] As a result of the family proceedings, there is a risk that control of GUTHRUM.... will pass to CD and/or his estranged wife. The Applicant and GLENOGIL... are not prepared to leave significant debts outstanding where this is a real possibility, nor continue to provide security and guarantees for RBS for [GUTHRUM's] outstanding loan to RBS. It is for this reason that the Applicant and GLENOGIL... have requested repayment of the outstanding debts..."

 

22.  By order dated 5 May 2022, it was recorded that GH had failed to comply with the previous directions such that he was now debarred from pursuing a case on the Section 37 Application. It was ordered that the financial remedy proceedings, including the Section 37 Application, be stayed until the conclusion of the Administration Proceedings.

 

23.  By order dated 27 July 2022 made in the Administration Proceedings, GUTHRUM was placed in administration, and Messrs P and T were appointed as joint administrators ("the Administrators").

 

24.  The Administrators' proposals were dated 16 September 2022 and recorded the following: –

 

a.       assets largely comprising freehold land and buildings, which had been professionally valued, in the region of £3,950,000 to £4,400,000;

 

b.      secured liability of £1,600,000 to Royal Bank of Scotland;

 

c.       preferential liability of some £1,500 to HMRC;

 

d.      unsecured claims totalling some £1,250,000, which sum included the claims of WINNIPEG and GLENOGIL, and a disputed claim by GH of £156,000 in respect of alleged management fees; and

 

e.       notwithstanding that GUTHRUM was balance-sheet solvent, the Administrators took the view that there was insufficient working capital to discharge the debts, and so it was proposed that the business and assets be sold to produce a better result for GUTHRUM's creditors than would be achieved in liquidation.

 

25.  On 8 October 2022, the Administrators' proposals were approved without modification by the deemed consent procedure pursuant to s.246ZF of the Insolvency Act 1986 ("the 1986 Act").

 

26.  In April 2022, the Administrators began marketing GUTHRUM's business and assets for sale, which resulted in five offers ranging from £3,300,000 to £5,750,000 with the highest offer being made by GH.

 

27.  On 18 July 2023, the Administrators applied in the Administration Proceedings for an order extending the administration period for one year. In her written evidence in response, EF opposed the application on the basis that such an extension was unnecessary, since GUTHRUM could be rescued as a going concern without the need for any extension having regard to her refinancing proposal. That proposal, in short, was that a special purpose vehicle, SPV(PA) Group Limited ("SPV(PA)"), was established and which would grant GUTHRUM a secured loan facility of £3,950,000. That facility would allow for (i) GUTHRUM's creditors to be paid in full, (ii) the surplus to be used as working capital, and (iii) GUTHRUM to be rescued as a going concern. The draft loan facility agreements provided for interest at 3% until the date of repayment (27.09.24) and 5% thereafter.

 

28.  On 22 August 2023, WINNIPEG loaned £4 million to SPV(PA) for the purpose of making the onward loan to GUTHRUM.

 

29.  On the 24 August 2023, I approved a draft consent order in the Administration Proceedings, which in summary provided for:

 

a.       An extension of the administration.

 

b.      A direction that the Administrators perform their functions (insofar as reasonably practicable) to achieve the objective of rescuing GUTHRUM as a going concern.

 

c.       In the event that EF's proposed refinancing completed, a practical mechanism whereby the monies advanced be used to discharge all of GUTHRUM's liabilities and the administration costs and expenses.

 

d.      A direction that the proposed refinancing did not complete before 14 days' notice of the order had been provided to GH. The rationale being that the Administrators wished to give GH the opportunity, if he wished, to put forward any alternative proposal and bearing in mind that he had already made an offer to buy the business and assets of GUTHRUM when he understood that the approved proposals were effectively a sale rather than preserving GUTHRUM as a going concern.

 

30.  On 13 September 2023, GH applied in the Administration Proceedings under Paragraph 74 of Schedule B1 to the 1986 Act for a direction that the Administrators do not cause or authorise GUTHRUM to enter into the proposed loan, since it would cause unfair harm to his interests as a member of GUTHRUM ("the Insolvency Application").

 

31.  On 27 September 2023, GH issued (i) an unfair prejudice petition pursuant to s.994 of the Companies Act 2006 ("the 2006 Act") alleging that, by lending £4 million of WINNIPEG's money to SPV(PA), EF was in breach of her director's duties to WINNIPEG by acting for her own purposes; and (ii) an application for an interim injunction ("the Injunction Application") restraining EF and SPV(PA) from paying away the £4 million pending determination of the unfair prejudice petition.

 

32.  The Insolvency Application and the Injunction Application were heard together before me on 29 November 2023 when I reserved judgment.

 

33.  By order dated 14 December 2023, the stay on the financial remedy proceedings was lifted, and it was directed that the Section 37 application be listed for hearing before me.

 

34.  On 16 February 2024, I dismissed the Insolvency Application and the Injunction Application [6]. In doing so, I determined amongst other things that:

 

"[52]...... It strikes me as unreal to proceed on the Insolvency Application by reference to GH's interests as a member when in short time there will be a hearing in the Financial Remedy Proceedings to determine the Section 37 Application, which determination will be binding upon GH. In light of the debarring order, there can realistically be only one of two outcomes – either EF is the beneficial owner of the shares, or CD is the beneficial owner of the shares and in which case they are a financial resource available to meet AB's assessed reasonable needs. Therefore, the reality is that GH is pursuing the Insolvency Application without any legitimate interest as a member for doing so, but rather in an attempt to pursue his interest as a prospective purchaser of the site.

 

[53.] I am not satisfied that GH has standing to bring the Insolvency Application.

 

........

 

Risk that the loan is not repaid in full

 

[87.] Firstly:

 

a.       GH argues that there are good reasons for thinking that GUTHRUM may be unable to repay SPV(PA) the £4 million. GH states in his written evidence that he expects GUTHRUM to be badly run by EF.

 

b.      EF argues that she has adduced credible evidence of her ability to run GUTHRUM profitably and well. But even if that proved not to be the case, WINNIPEG's exposure to GUTHRUM's credit risk is short term, since the intention is for GUTHRUM to obtain long term refinancing from a commercial bank within 18 months.

 

c.       GH argues that whether a bank would be prepared to provide substitute lending of £3.5 million to GUTHRUM after 18 months is speculative at best, and involves an unsafe assumption as to what value a bank would place on the site. If GUTHRUM is unable to repay SPV(PA) then SPV(PA) will be unable to repay WINNIPEG. It might be expected that GUTHRUM would be able to pay something to SPV(PA) even if put through an insolvency process, and that SPV(PA) might then be able to pay something to WINNIPEG even if SPV(PA) is itself put through an insolvency process. If, in the meantime, the court orders EF to buy GH's shares in WINNIPEG, it will have to estimate the amount that GUTHRUM would be able to repay SPV(PA), and SPV(PA) be able to repay to WINNIPEG. This exercise is likely to be difficult, and inherently uncertain.

 

d.      EF argues that there is no reason to fear that WINNIPEG will not be repaid in full, since on GH's own case GUTHRUM's site is worth nearly £1.75 million in excess of the loan amount.

 

[88.] Ultimately, I consider that an analysis of the risk of default is academic for the purposes of the Injunction Application. By virtue of s.996 of the 2006 Act, the court has a wide discretion as to the nature of the relief to be granted in that it can "make such order as it thinks fit". That wide discretion extends to prescribing on a buy-out the method and assumptions for valuation including that the valuation be carried out on the basis of hypothetical factual assumptions seeking to put the petitioner back in the position that that they would have been had the unfairly prejudicial conduct not occurred in the first place.

 

[89.] Therefore, if the loan remains unpaid at the time of the trial of GH's unfair prejudice petition and the court finds EF's conduct has been unfairly prejudicial, the court can and no doubt will simply order that the valuation of GH's shares be calculated on the hypothetical assumed basis that WINNIPEG did not advance the £4 million to SPV(PA). There is no suggestion that EF would not be able to pay any such adjusted higher figure. Indeed, by her solicitors' letter dated 29 November 2023, EF made an offer to purchase GH's shares in WINNIPEG on the following terms:

 

a.       The fair value of GH's shares be calculated as 1/3rd of the market value of WINNIPEG's total issued capital without any minority discount being applied.

 

b.      The market value be calculated on the hypothetical assumed bases that –

 

i.                    WINNIPEG did not advance the £4 million to SPV(PA); and

 

ii.                  WINNIPEG did not advance a director's loan to EF in the sum of £3.2 million.

 

c.       In the absence of agreement, the fair value to be determined by a jointly instructed expert.

 

d.      Each party to bear their own costs of the unfair prejudice petition, which was issued without EF having been given a reasonable opportunity to purchase GH's shares.

 

e.       The offer to remain open for a period of 4 months.

 

 [90.] This offer was expressed as an O'Neill v Phillips offer such that, if not accepted, GH's petition may fall to be struck out as an abuse of process in the event that the court was subsequently to conclude that continued prosecution of the claim would serve no useful purpose in that the offer cures the alleged prejudicial conduct by providing all the relief that GH could reasonably expect to obtain at the trial of the petition.

 

Prevented from buying GUTHRUM's site

 

[91.] Secondly, in his written evidence, GH states that: "Unless EF is stopped from using WINNIPEG's money to refinance GUTHRUM ..... [this will] prevent me buying the site at GUTHRUM... I do not think the court could adequately compensate me for my loss. It will be difficult for the court to calculate what that loss will be."

 

.........

 

[95.] In summary:

 

a.       in order for a petition to be successful there must have been conduct that is unfairly prejudicial to the interest of the petitioner as a member of the subject company;

 

b.      the requirement that conduct must be unfairly prejudicial to the interest of a member in his capacity as such must not be too narrowly construed albeit subject to limits; and

 

c.       whilst unfairly prejudicial conduct can impact upon the interest of the petitioner beyond his capacity as a member of the subject company, that impacted interest must still be sufficiently connected to and bound up with his company membership.

 

[96.] In complaining that he will be prevented from buying GUTHRUM's site, GH is seeking to safeguard his personal interest as a potential purchaser of that site, rather than seeking to safeguard the financial worth of his investment in WINNIPEG. The prejudicial impact upon GH's interest as a potential purchaser of GUTHRUM's site is not sufficiently connected/bound up to his membership interests so far as they relate to WINNIPEG. Therefore, any difficulty over quantification does not arise because the loss of opportunity of GH buying GUTHRUM's site could not in any event found a claim for relief brought in connection with WINNIPEG pursuant to s.994 of the 2006 Act."

 

35.  By order dated 6 June 2024 made in the Administration Proceedings, I directed that GH pay the additional costs and expenses of GUTHRUM incurred by virtue of it being in administration from the 13 September 2023 to 9 March 2024 ("the Additional Administration Costs") to be summarily assessed on the papers to be submitted pursuant to the assessment process provided therein.

 

36.  By order dated 19 September 2024 made in the Administration Proceedings, I extended the period of the administration to 30 January 2025 because of continuing delays with the refinance monies being deposited with the solicitors. During the trial of the preliminary issues in the financial remedy proceedings, it was submitted on behalf of EF that, in the event, that the Share Transfers are set aside, EF will withdraw her offer of refinance.

 

37.  By order dated 13 December 2024 made in the Administration Proceedings, I summarily assessed the Additional Administration Costs payable by GH in the sum of £91,957.

 

38.  By order dated 23 January 2025 made in the Administration Proceedings, I further extended the period of the administration to 31 July 2025.

 

39.  In preparation of this judgment:

 

a.       I read and heard evidence from AB, CD and EF.

 

b.      I read the written evidence of the jointly instructed experts

 

i.       VAL-L, commercial property consultants; and

 

ii.      VAL-C, forensic accounting and valuation services.

 

c.       I read and heard submissions by counsel for each of AB, CD and EF.

 

Summary of the written evidence of the witnesses of fact

 

40.  It was the written evidence of AB that:

 

a.       After they were married, in 1999, AB and CD moved to live at AB-CD PARK, another park owned by EF, GH and EF-H. Whilst living there, they sold a number of units thereby generating a profit of around £798,000.

 

b.      AB and CD decided that they wanted a more permanent and stable base for their young children and a business of their own. Therefore, in June 2006, they purchased for £625,000 in cash BLACKSMITH House and BLACKSMITH Carvan Park, which were registered in CD's sole name.

 

c.       AB and CD had sufficient funds of their own, from buying and selling units, to purchase BLACKSMITH House and BLACKSMITH Caravan Park without any financial assistance from EF. The written loan agreement for £251,142 and disclosed by EF for the first time at the failed FDR, on 20 July 2020, is not genuine and has been generated by EF for the purposes of these proceedings.

 

d.      In around June 2014, GUTHRUM Park came on the market. CD provided AB with a copy of the sales brochure. AB was excited but cautious due to the costs involved. However, CD reassured her that he was owed money from other family businesses, which would be used for the deposit, with the balance of the purchase costs being funded by way of a mortgage. There was existing planning permission to develop a further 19 units. Their plan was to develop all 19 units generating estimated profits of £100,000 - £120,000 per unit. Those profits would then be used to pay off the mortgage and to build their forever home on GUTHRUM Park.

 

e.       CD explained he was the sole shareholder, and GUTHRUM was theirs. AB was not happy about EF being appointed a co-director, but CD explained that EF and GH had provided security as guarantors for the mortgage.

 

f.        Throughout the marriage, AB worked in partnership with CD in developing their caravan parks by getting caravans ready for sale, dressing caravans, conducting viewings and running the businesses generally when CD was working on other family-owned parks.

 

g.      AB did not find out about the Share Transfers until the failed FDR in July 2020. Whilst the Share Transfers took place on 30 April 2019, Companies House was not updated until the end of July 2019. Contradictory evidence has been given as to why the Share Transfers took place.

 

41.  Initially, it was the written evidence of CD that:

 

a.       In 2014 an opportunity came up to purchase GUTHRUM Park. EF mainly dealt with the negotiations over the purchase given she already owned a number of caravan parks in that part of the country.

 

b.      GUTHRUM was set up with CD as the 100% shareholder, and with CD and EF as directors. EF gave CD 100% of the shares because she wanted to give him something of his own as he was suffering with depression and serious issues with his eyesight. EF wanted to ensure that CD had some financial security in case he lost his eyesight.

 

c.       CD put no money whatsoever towards the purchase price of some £3 million for GUTHRUM Park. The finances were arranged by CD and EF through a commercial loan from RBS for £2.5 million, secured against the assets of GUTHRUM and WINNIPEG, and the balance by way of an intercompany loan from WINNIPEG.

 

d.      EF took control of the financial side of the running GUTHRUM, whilst CD dealt with developing the site by constructing new roads and bases for static caravans, groundworks, installation of services and general improvements. CD undertook most of the labouring work himself. He also carried out the day to day tasks involved in running the site, which included arranging gas deliveries, general maintenance and upkeep. CD received no remuneration for his work in the business either by way of salary or dividends.

 

e.       EF and GH were worried about the impact of the divorce on GUTHRUM. CD does not enjoy a good relationship with GH, who can be quite threatening and abusive. EF and GH took CD to a meeting with GUTHRUM's then accountant, ZAA. CD was told by the accountant, his mother and his brother, that he must sign over his shares in GUTHRUM otherwise he would lose them in the divorce and have nothing. Having initially refused, CD under pressure from his mother and brother eventually signed the Share Transfers feeling he had no alternative.

 

f.        CD does not read very well, and did not read the documents before signing them. He and GH are not on good terms, and CD would never have agreed to signing his shares to GH. On reflection, because CD was forced by his mother and brother to transfer his shares to them, he now accepts that the Share Transfers should be set aside by the Court.

 

42.  It was CD's updated written evidence that:

 

a.       He no longer supports AB's application to set aside the Share Transfers.

 

b.      If someone had asked him in 2018, for example, who actually owned GUTHRUM, CD would have said EF and his late father. His mum was much more involved but his father was alive then and they were in business together. CD did work on GUTHRUM Park, like he did in lots of the other parks.

 

c.       The inter-company loans used to purchase GUTHRUM Park were made by family companies in which CD had no ownership interest. Also, the commercial mortgage was guaranteed against family companies in which CD had no interest. The BLACKSMITH Caravan Park was not used to provide any security.

 

d.      When signing the Share Transfers, CD thought he was just signing off on some accounts. It was much later that GH told CD that he did not hold the share ownership of GUTHRUM. CD got mad with EF and GH for taking the shares away without telling him. It was more upsetting that 50% of the shares were in GH's name, and not 100% of the shares in EF's name (or his parents' names). CD and EF have a very bad relationship, and he would certainly not have signed over 50% of GUTHRUM to GH.

 

e.       CD does not know what his thinking was at the time he made his earlier witness statement, but he was very angry with EF and GH about what had happened. With time passing, he can now see that the Share Transfers were just a practical business decision. However, at the time, he felt like he had been excluded from a family decision, which is why he was so angry.

 

43.  It was the written evidence of EF that:

 

a.       The family wealth and business interests have been accumulated through the hard work of EF and her husband, who have wanted to see their children succeed too.

 

b.      EF helped CD purchase his own business, The BLACKSMITH Caravan Park, and his house, The BLACKSMITH, in 2006 by lending him the sum of £251,412. The former accountants (NU, RE  & Co) drew up a loan agreement, which CD signed and in which he agreed to repay the loan when in a position financially to do so. AB knew about the loan as she and CD did not have the money to buy the site without it.

 

c.       In 2014, GUTHRUM was incorporated at EF's instigation for the sole purpose of purchasing GUTHRUM Park, which was a site she identified and did the negotiations to secure the purchase. It was a park that for all intents and purposes was a property that EF, together with her husband, were acquiring. All of the purchase money was raised by them without any financial contribution by CD. GUTHRUM Park was purchased for the sum of £3,056,398.70, and which purchase was funded by way of -

 

i.       An inter-company loan in the sum of £558,211.70 from WINNIPEG, which was majority owned by EF and her husband. CD had no interest in WINNIPEG and was not owed any money by WINNIPEG; and

 

ii.      An RBS loan of £2.5 million secured against the assets of both GUTHRUM and WINNIPEG.

 

d.      EF and her husband decided to give CD the opportunity to have some recognition to help him show his wife that he was worthy and for her to respect him more. EF and her husband therefore agreed that CD would be the sole shareholder of GUTHRUM but on the basis that they all agreed that EF and her husband were in truth the owners of GUTHRUM, which is why all the finances to buy GUTHRUM Park came from them. It was agreed and understood that CD was an owner in name only and this was the way in which the company was always run. EF was appointed a director of GUTHRUM and ran the company. CD's involvement has been by way of practical hands on work done from time to time to help out when needed, but he was not remunerated for that work in much the same way as GH, who also helped out.

 

e.       AB knew at the time of purchase and has known throughout that in truth EF was the owner and controller of the business no matter whose name was on the door/ownership papers.

 

f.        By March/April 2019, it was clear that CD was struggling physically and mentally. His health was deteriorating. He had problems with his eyes and was at risk of going blind. He wasn't getting treatment. He couldn't work. EF continued to run the business. What the accountant was advising made perfect sense due to CD's failing health and vulnerability. Therefore, it was agreed that the formal ownership of GUTHRUM would come back to EF and her husband. The Share Transfers were simply a reflection of what had been the case throughout namely the business was EF's and her husband's.

 

g.      However, the Share Transfers went to EF and GH, which EF had not appreciated at the time. As has now become apparent from the parallel court proceedings, the transfer of shares to GH was organised and driven by the accountant, who was letting GH dictate that over and above EF's instructions.

 

44.  I am unable in the course of this judgment to refer to all the evidence and argument relied upon by the parties, but I have taken it all into account in reaching my decisions.

Burden and Standard of proof

 

45.  The legal burden rests upon the party making a claim to prove the facts essential to that claim.

 

46.  By contrast, the evidential burden obliges the party upon whom that burden rests to adduce sufficient evidence, which if believed and if left uncontradicted and unexplained, could be accepted by the court as proof of the disputed fact. Usually the party who bears the legal burden also bears the evidential burden, although a party who would otherwise bear the evidential burden may be able to rely upon a rebuttable statutory presumption as to a particular matter - Phipson on Evidence 20th Ed. at paras 6-02 to 6-03.

 

47.  This is not a Criminal trial where the standard of proof is beyond reasonable doubt so that I must be sure before making a finding of fact. Rather, I must apply the lower civil standard of proof being the balance of probabilities. In other words, in making a finding of fact, I must be satisfied that more likely than not it is true. In Re B [2008] UKHL 35, Baroness Hale said

 

"[32.] In our legal system, if a judge finds it more likely than not that something did take place, then it is treated as having taken place. If he finds it more likely than not that it did not take place, then it is treated as not having taken place. He is not allowed to sit on the fence. He has to find for one side or the other. Sometimes the burden of proof will come to his rescue: the party with the burden of showing that something took place will not have satisfied him that it did. But generally speaking a judge is able to make up his mind where the truth lies without needing to rely upon the burden of proof."

 

General observations upon the evidence of witnesses of fact

 

Indicators of unsatisfactory witness evidence

 

48.  In Painter v Hutchinson [2007] EWHC 758 (Ch) at [3], Lewison J (as he then was) identified a non-exhaustive list of indicators of unsatisfactory witness evidence including:

 

a.       Evasive and argumentative answers;

 

b.      Tangential speeches avoiding the questions;

 

c.       Blaming legal advisers for documentation (statements of case and witness statements);

 

d.      Disclosure and evidence shortcomings;

 

e.       Self-contradiction;

 

f.        Internal inconsistency;

 

g.      Shifting case;

 

h.      New evidence; and

 

i.        Selective disclosure.

 

Interference with memory

 

49.  It is a striking feature of this case that the witnesses were seeking to recall events and conversations that took place many years ago, which necessarily gives rise to particular problems. Apart from the fact that, quite understandably, it is often difficult for witnesses to remember accurately what happened or what was said so long ago, witnesses can easily persuade themselves that the accounts they now give are the correct ones.

 

50.  In Gestmin SGPS SA v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm), Leggatt J, as he then was, made the following observations about the interference with human memory introduced by the court process itself:

 

"[19.] The process of civil litigation itself subjects the memories of witnesses to powerful biases. The nature of litigation is such that witnesses often have a stake in a particular version of events. This is obvious where the witness is a party or has a tie of loyalty (such as an employment relationship) to a party to the proceedings. Other, more subtle influences include allegiances created by the process of preparing a witness statement and of coming to court to give evidence for one side in the dispute. A desire to assist, or at least not to prejudice, the party who has called the witness or that party's lawyers, as well as a natural desire to give a good impression in a public forum, can be significant motivating forces.

 

[20.] Considerable interference with memory is also introduced in civil litigation by the procedure of preparing for trial. A witness is asked to make a statement, often (as in the present case) when a long time has already elapsed since the relevant events. The statement is usually drafted for the witness by a lawyer who is inevitably conscious of the significance for the issues in the case of what the witness does nor does not say. The statement is made after the witness's memory has been "refreshed" by reading documents. The documents considered often include statements of case and other argumentative material as well as documents which the witness did not see at the time or which came into existence after the events which he or she is being asked to recall. The statement may go through several iterations before it is finalised. Then, usually months later, the witness will be asked to re-read his or her statement and review documents again before giving evidence in court. The effect of this process is to establish in the mind of the witness the matters recorded in his or her own statement and other written material, whether they be true or false, and to cause the witness's memory of events to be based increasingly on this material and later interpretations of it rather than on the original experience of the events."

 

Importance of corroborating contemporaneous documents, if available

 

51.  In The Ocean Frost [1985] 1 Lloyd's Rep 1, Robert Goff LJ observed (and which observation was described as "salutary" by Lord Mance in Central bank of Ecuador v Conticorp SA [215] UKPC 11 at [164]):

 

"[57]................................... It is frequently very difficult to tell whether a witness is

telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses' motives, and to the overall probabilities, can be of very great assistance to a Judge in ascertaining the truth."

 

52.  Similarly, in Gestmin SGPS SA v Credit Suisse (UK) Limited, Leggatt J, having commented upon the unreliability of human memory, concluded that:

 

"[22.] In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose - though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth."

 

Adverse Inferences

 

53.  The court may draw adverse inferences from the failure of a party (i) to produce contemporaneous documents that would have otherwise existed and supported their case, and/or (ii) to call as a witness at trial a person who might be expected to give important evidence.

 

54.  In Re: Mumtaz Properties Ltd [2011] EWCA Civ 610, Arden LJ said:

 

"[14] In my judgment, contemporaneous written documentation is of the very greatest importance in assessing credibility. Moreover, it can be significant not only where it is present and the oral evidence can then be checked against it. It can also be significant if written documentation is absent. For instance, if the judge is satisfied that certain contemporaneous documentation is likely to have existed were the oral evidence correct, and that the party adducing oral evidence is responsible for its non-production, then the documentation may be conspicuous by its absence and the judge may be able to draw inferences from its absence."

 

Subsequent conduct

 

55.  In Carmichael and another v National Power Plc [1999] 1 WLR 2042, the House of Lords held that the Industrial Tribunal had been entitled, when determining as a question of fact whether a contract of employment had been agreed between the parties, to have regard to the parties' subsequent conduct. In so deciding, Lord Hoffman said this (at [2050H], and with my emphasis added):

 

".......In the case of a contract which is based partly upon oral exchanges and conduct, a party may have a clear understanding of what was agreed without necessarily being able to remember the precise conversation or action which gave rise to that belief. As the Court of Appeal pointed out, the tribunal did not make any specific findings about what was said at the interviews or on any other occasion. But the terms of the engagement must have been discussed and these conversations must have played a part in forming the views of the parties about what their respective obligations were.

 

The evidence of a party as to what terms he understood to have been agreed is some evidence tending to show that those terms, in an objective sense, were agreed. Of course the tribunal may reject such evidence and conclude that the party misunderstood the effect of what was being said and done. But when both parties are agreed about what they understood their mutual obligations (or lack of them) to be, it is a strong thing to exclude their evidence from consideration. Evidence of subsequent conduct, which would be inadmissible to construe a purely written contract (see Whitworth Street Estates (Manchester) Ltd. v. James Miller and Partners Ltd. [1970] A.C. 583) may be relevant on similar grounds, namely that it shows what the parties thought they had agreed. It may of course also be admissible for the same purposes as it would be if the contract had been in writing, namely, to support an argument that the terms have been varied or enlarged or to found an estoppel."

 

Lucas Direction

 

56.  I remind myself that witnesses can often lie and for different reasons. Lies in themselves do not necessarily mean that the entirety of the evidence of a witness should be rejected. A witness may lie because of fear of the truth, misplaced sense of loyalty, torn loyalties, or in a stupid attempt to bolster a case, but the actual case nevertheless remains good irrespective of the lie. A witness may lie because the case is a lie.

 

Assessment of the witnesses of fact in this case

 

57.  I consider that much of the witness evidence of fact was tainted to a material extent by indicators of unsatisfactory witness evidence. I will refer when relevant to those indicators later in this judgment when considering specific issues, but, in the meantime, give some other examples.

 

AB

 

58.  Shifting evidence - AB, consistent with her written evidence, said in her oral evidence that she was actively involved in the business, which was a massive enterprise with the whole of the family acting as a team. AB assisted her husband working across multiple sites. However, in her Form E, AB had earlier stated that:

 

a.       "I enjoyed an incredibly high standard of living, I have never been required to work, I wanted for nothing."

 

b.      "I have no earning capacity, I have always been provided for by [CD] therefore I believe that it is a case for joint lives maintenance".

 

In her oral evidence, AB unconvincingly sought to explain away this contradiction by saying that, although she had assisted in the business, she had not worked. However, again in her Form E, when asked to detail "any particular contributions to the family property and assets...that have been made by you", AB simply left that section of the form blank.

 

59.  Inconsistencies:

 

a.       AB said in her oral evidence that, if EF had made a loan to help purchase BLACKSMITH, CD would have told her about it but he did not. However, earlier in her oral evidence, AB accepted that she was not privy to all the discussions between CD and EF.

 

b.      In her written evidence, AB said that they did not need a loan from EF because they had generated profits of around £798,000 from the sale of various units. However, in her oral evidence AB variously said that CD was in control of everything, she did not know if he had paid tax on the sales, some sales went through the accounts, some sales did not go through the accounts, and she had not seen the accounts in any event, all of which meant it was difficult to understand the basis of her belief that such a level of profits had ever been generated.

 

CD

 

60.  Shifting case:

 

a.       In his Defence, endorsed with a statement of truth, CD stated that

 

"[7.] It is averred that [EF] agreed to the entire issued share capital [of GUTHRUM] being vested in [CD] in recognition of his efforts in identifying the land and facilitating its purchase as [the] land was at all times intended to belong to [CD]. Additionally, in agreeing to the entire issued share capital being vested in [CD], [EF] was motivated by her desire to provide [CD] with financial security.

 

.......

 

[9.] It is averred that the signature of [CD] in relation to the [Share Transfers] was procured by [EF] and [GH] in the following circumstances:

 

....

 

(b)] In April 2020, [CD] was invited by [EF] and [GH] to a meeting at the offices of Z-Accountants [(GUTHRUM's former accountants)] at which meeting [CD] was coerced by [EF] and [GH] into signing documentation by informing him, inter alia, that if he did not sign over the issued share capital he would lose them during the divorce."

 

b.      In his Amended Defence, also endorsed with a statement of truth, CD stated that –

 

" [7.] It is averred that [EF] agreed to the entire issued share capital [of GUTHRUM] being vested placed in the name of in [CD] in support of his standing within the family recognition of his efforts but it was always intended that [EF] (along with her husband) was going to be the owner of the shares....

 

[8.] ..... the shareholding was transferred without his knowledge, save that [CD] accepts that the ultimate owners of [GUTHRUM] were his parents."

 

c.       CD's explanation for his extraordinarily late and stark change of case was that, until relatively recently, he had been consumed with anger that GH was trying to steal shares in GUTHRUM that belonged to his mother and father. However, that explanation made absolutely no sense.

 

d.      In her Particulars of Claim dated October 2021, EF had claimed that:

 

"[3.] On 21 July 2019 Z-Accountants....([GUTHRUM's] former accountants) erroneously transferred the entire issued share capital as to:-

 

     50 to [GH], and

 

     50 to [EF].

 

The entire issued share capital was to be transferred to [EF] and her husband.

 

[4.] [GUTHRUM] is the subject of a dispute in the...Business and Property Courts.... [between GH and EF] and in which [EF] contends while GH is the legal owner of 50% of the shares....in [GUTHRUM], he holds such shares on trust for EF alone.... and he is hereby required to transfer the shares that he holds in [GUTHRUM] to EF.

 

[5.] By resolution of the board of directors of [GUTHRUM] passed on 5 May 2020 Z-Accountants['s]... appointment as accountants for [GUTHRUM] was terminated...."

 

e.       At the time Z-Accountants' appointment was terminated, CD remained a director of GUTHRUM. However, even if as an officer of the company he was not then aware of the reason for Z-Accountants appointment being terminated, CD must have known by the time of EF's Particulars of Claim, over 3 years ago, that it was EF's case that the Share Transfers drafted by Z-Accountants were wrongly drafted by transferring any shares to GH. If CD was genuinely consumed with anger that GH was trying to steal his parents' shares then he could simply have admitted EF's claim in his Defence, but rather he chose to deny it and maintain that denial until the very last moment.

 

61.  Inconsistencies:

 

a.       CD failed to disclose the Alleged Loan as a liability in his Form E. In his oral evidence, he sought to blame his former solicitors for the omission.

 

b.      CD said in his oral evidence that AB knew about the Alleged Loan prior to the FDR. However, he then said that he did not discuss finances with AB during the marriage. When asked therefore how it was that AB knew about the Alleged Loan, he unconvincingly sought to claim that she overheard him talking about it on the phone.

 

c.       In his Form E, CD stated that the standard of married living was "Very good. I worked very hard to provide for my family. [AB] chose not to work. We had whatever we wanted including nice cars, expensive jewellery for [AB] and other material things. We enjoyed regular holidays abroad including Dubai each year and all inclusive holidays to Spain and Cyprus." In his oral evidence, when asked why he had chosen to pay for expensive holidays over repaying the Alleged Loan, CD then claimed that they went on holidays, but they were not expensive, as they could not afford them.

 

d.      In his oral evidence, CD said that he and AB separated many years before the Share Transfers were made. When it was pointed out to him that in his written evidence he had accepted that they had separated "only a few weeks beforehand", CD then said he could not remember when they separated.

 

62.  Contradiction - In his written evidence, CD stated that he was told by Mr ZAA, EF and GH to sign the Share Transfers or he would lose them in the divorce. However, in his oral evidence, he claimed that was never said or he could not remember that being said.

 

EF

 

63.  Inconsistencies:

 

a.       In her oral evidence, EF said that at the time of the Share Transfers:

 

i.       She had not given much thought either to the separation of AB and CD or to the potential financial claims of AB; and

 

ii.      She did not discuss them with CD as she was too busy with other matters. In particular, she did not remember saying that CD would lose GUTHRUM in the divorce if he did not transfer the shares away.

 

The impression given by EF was that she had been uninterested in the impact that the divorce might have upon the ownership of GUTHRUM.

 

b.      However, on 28 January 2022, EF signed the minutes, as Chairperson, of the meetings of the boards of directors of WINNIPEG and GLENOGIL. The minutes are in the same terms and record (with my emphasis added) –

 

"[4.2] The Chairperson reported that one of the directors of GUTHRUM, CD , was subject to matrimonial proceedings..... As a result of the claims being made by AB.. in those Proceedings, there is a realistic prospect that the ownership and management of GUTHRUM may change and that there was a significant risk that the Intra-group Loan would not be repaid or refinanced when demanded.

 

[5.] RESOLUTION

 

In the light of the matters reported to the meeting, the Board resolved that there was a significant risk that the Inter-group Loan would not be repaid when demanded and that it was in the best interests of the Company to demand the immediate repayment of the Intra-group Loan now and to take steps to enforce the repayment of the Intra-group Loan should payment not be immediately forthcoming following the making of the demand.

 

[6.] BOARD'S INSTRUCTIONS

 

The Board instructed the Chairperson to take immediate steps to demand the immediate repayment of the Intra-group Loan and if necessary seek the services of the Company's solicitors to assist with the making of the demand and enforcing repayment of the Intra-group Loan."

 

c.       Those minutes record that EF sought to enforce the inter-company loans to protect the interests of WINNIPEG and GLENOGIL because of concerns over the solvency of GUTHRUM upon a change of ownership arising from the financial remedy proceedings. However, EF has nevertheless spent significant time and money in:

 

i.       defending the Section 37 Application and despite her case that the shares in GUTHRUM had/have no financial value; and

 

ii.      seeking to rescue GUTHRUM as a going concern from the very Administration that EF chose to trigger through her control of WINNIPEG and GLENOGIL and by enforcing the inter-company loans. Indeed, EF's proposed company rescue is being financed effectively through a replacement inter-company loan from WINNIPEG in the sum of some £4 million, which is over 4 x the amount of WINNIPEG's original inter-company loan and which EF had decided to enforce because of concerns over GUTHRUM's ability to repay/refinance that substantially smaller loan.

 

64.  Blaming advisers for documentation - EF repeatedly sought to blame advisers for the contents of documents, which were inconsistent with her case. For example, in her third witness statement dated 8 August 2023 filed in the Administration Proceedings, EF stated (at para 7.) that "the Joint Administrators' valuers had valued [GUTHRUM Park] at £3.95 million...... [which] meant that [GUTHRUM] was no longer balance sheet insolvent contrary to valuations that I had obtained." In her oral evidence, EF said that those words had been included in the witness statement without her knowledge. Later in that same witness statement, EF stated (at para 16.) that "I expect that [post administration GUTHRUM] will be able to generate over £290,000 of turnover from rent, commissions, rates and utilities." Again in her oral evidence, EF said that she did not know who wrote those words, but they were not her words. She then said that GUTHRUM was not and would not be profitable. Ultimately, EF was simply unable to reconcile the fact that she is pursuing inconsistent parallel cases in two different courts albeit now before the same judge:

 

a.       In the Administration Proceedings, it is EF's case that GUTHRUM is balance sheet solvent and will be highly profitable once the proposed company rescue has been completed.

 

b.      In the Section 37 Application, it is EF's case that GUTHRUM has no commercial value and she is only pursuing the company rescue for sentimental reasons and in the memory of her late husband, who loved GUTHRUM Park. Although, if EF-H loved GUTHRUM Park so much, it then begs the question why did he ever agree as co-director to pass the resolutions in January 2022 to enforce the inter-company loans and thereby put GUTHRUM into administration in the first place.

 

It was argued that the family are a travelling family and whilst EF may be an impressive businesswoman, literacy is not a high priority. Therefore, when legal documentation is required, the family rely heavily on their advisers to ensure that their position is protected. Whilst that is likely true, I cannot and do not accept that professional advisers would have drafted the contents of legal documents without EF's express instructions and her full knowledge of the contents.

 

Overall approach to findings of fact in this case

 

65.              In my assessment:

 

a.       AB was not a reliable witness.

 

b.      CD and EF were neither reliable nor at times honest witnesses.

 

66.  In addition, AB, CD and EF were not detached or objective observers. They were subject to significant motivating forces and powerful biases:

 

a.       They all have a financial interest in the outcome of the case.

 

b.      It is not unusual for cases involving family disputes to generate strong feelings on both sides of the argument. However, a striking feature of this case and indeed the wider litigation was the extreme and deep-seated feelings of anger, resentment, betrayal and bitterness that have been generated amongst this family following the breakdown in relations, which has pitched brother against brother, mother against son, husband against wife, and mother against daughter-in-law. By way of illustration -

 

i.       I have viewed the video of an ugly confrontation between AB and EF outside BLACKSMITH. As I observed during the hearing, it was a particular concern that AB and EF each felt able to make such derogatory comments about the other in the presence of AB's daughter/EF's granddaughter; and

 

ii.      In parallel non-molestation proceedings, which were ultimately compromised by way of cross-orders, AB and CD made serious allegations against each other of abusive and threatening behaviour.

 

67.  For all these reasons, I have approached the evidence of all the witnesses of fact with a substantial degree of caution. I am unable safely to accept their evidence unless it is corroborated by other reliable evidence, or is contrary to their own interests.

 

68.  In making my findings of disputed facts in this case, I have had particular regard to what the parties have subsequently said and done, the undisputed facts, the inferences properly to be drawn from those undisputed facts and any missing relevant evidence, the contents of the reliable contemporary documents, and the overall probabilities including by reference to the parties' motives.

 

The Share Transfers

 

Statutory framework

 

69.  Section 37 of the 1973 Act provides (so far as relevant) that:

 

"(2) Where proceedings for financial relief are brought by one person against another, the court may, on the application of the first-mentioned person—

 

.......

 

(b) if it is satisfied that the other party has, with that intention, made a reviewable disposition and that if the disposition were set aside financial relief or different financial relief would be granted to the applicant, make an order setting aside the disposition;

 

.........

 

and an application for the purposes of paragraph (b) above shall be made in the proceedings for the financial relief in question.

 

......

 

(4)         Any disposition made by the other party to the proceedings for financial relief in question (whether before or after the commencement of those proceedings) is a reviewable disposition for the purposes of subsection (2)(b) above unless it was made for valuable consideration (other than marriage) to a person who, at the time of the disposition, acted in relation to it in good faith and without notice of any intention on the part of the other party to defeat the applicant's claim for financial relief.

 

(5)          Where an application is made under this section with respect to a disposition which took place less than three years before the date of the application ......    and the court is satisfied—

 

(a)          in a case falling within subsection (2) ... (b) above, that the disposition or other dealing would (apart from this section) have the consequence....

 

.......

 

of defeating the applicant's claim for financial relief, it shall be presumed, unless the contrary is shown, that the person who disposed of ....... the property did so ....... with the intention of defeating the applicant's claim for financial relief."

 

70.  In Kremen v Agrest and Fisherman [2010] EWHC 2571 (Fam), Mostyn J summarised the statutory test as follows in the context of a charge entered into over the family home:

 

"[8] This is the Part III counterpart to the more familiar s 37 of the MCA 1973. It is entitled 'Avoidance of transactions intended to defeat applications for financial relief'.

 

[9] For W's application to succeed the following has to be demonstrated:

 

 

(i)       That the execution of the charge was done by H with the intention of defeating her claim for financial relief. This is presumed against H, and he has to show that he did not bear that intention....... The motive does not have to be the dominant motive in the transaction; if it is a subsidiary (but material) motive then that will suffice: see Kemmis v Kemmis (Welland and Others Intervening), Lazard Brothers and Co (Jersey) Ltd v Norah Holdings Ltd and Others [1988] 1 WLR 1307, [1988] 2 FLR 223.

 

(ii)     That the execution of the charge had the consequence of defeating her claim. This means preventing relief being granted, or reducing the amount of any such relief, or frustrating or impeding the enforcement of any order awarding such relief......

 

(iii)   That the court should exercise its discretion to set aside the charge......."

Defeating AB's claim for financial relief?

 

71.  AB argues that:

 

a.       The valuation of VAL-C, the jointly instructed accountancy expert, is contested and in any event is now historical.

 

b.      GH has made an offer to purchase the business and assets of GUTHRUM for

£5.75 million and has pursued highly contested (and expensive) litigation to try and force his offer to be accepted.

 

c.       EF appears to accept that VAL-C's valuation is wrong, since, in her third witness statement dated 8 August 2023 in the Administration Proceedings, EF stated that:

 

"[8.] Whilst it may be said to look odd that WINNIPEG and GLENOGIL, who applied and supported the appointment of the Joint Administrators, are now objecting to the extension of the administration it is important to set out the context.

 

[9.] On receipt of the draft sales particulars from the Joint Administrators (based on their new valuation of £3.95million), it became apparent that the rescue of [GUTHRUM] was possible........

 

[25.] I recognise that on a sale of the site for the figure put forward by GH there would be a return to shareholders of approximately £1.35 million each (£2.7 million in total), however there are a number of reasons why retaining [GUTHRUM] as a going concern is more valuable than this outcome:

.......

 

e.    ..........Whilst at the time of WINNIPEG making the application for administration it felt like I had little other option (the position of the Company based on the earlier valuation meant I needed to consider the best interests of WINNIPEG and GLENOGIL as its creditors) that is now not the situation, and if there is any opportunity to rescue [GUTHRUM] without selling its site (as I now believe there is) then this would be a much better outcome."

 

d.      In all the circumstances, it is clear that AB has been right all along that GUTHRUM has always had a substantial value.

 

72.  EF argues that there is an abundance of evidence, which is not challenged by AB, which demonstrates that the shares in GUTHRUM had no value in 2019 such that the Share Transfers did not have the consequence of defeating AB's claim for financial relief:

 

a.       VAL-C expressed the opinion in his report dated 11 March 2022, that "I do not consider any value can be attributed to [CD's] 100% shareholding in [GUTHRUM] as at the 2019 valuation date". AB has not sought to challenge VAL-C's report, either in writing or orally, and so it must stand.

 

b.      There is corroborating valuation evidence from GUTHRUM's former accountant, Mr ZAA, who in the Administration Proceedings provided a witness statement dated 2 November 2023 in support of GH. Mr ZAA stated that "[18.] ....At the time [of the Share Transfers], the overall value of [GUTHRUM] was negligible. Although the park had value, this was offset by its bank borrowing, intercompany liabilities and provisions."

 

73.  In closing arguments, I was referred to the Court of Appeal decision in Griffiths v TUI (UK) Limited [2021] EWCA Civ 1442. I was not referred to the decision of the Supreme Court in TUI UK Ltd (Respondent) v Griffiths (Appellant) [2023] UKSC 48, which decision I only became aware of after I had circulated my draft written judgment. The Supreme Court overturned the Court of Appeal and held that the trial judge was wrong (i) to allow the defendant to make detailed criticisms of the report of the claimant's expert, and (ii) to accept those submissions. By doing so the trial judge denied the claimant a fair trial. Lord Hodge said this:

 

"[36.]   In this judgment I address civil proceedings and leave to one side questions of criminal procedure. It is trite law that as a generality in civil proceedings, the claimant bears the burden of proof in establishing his or her case. It is trite law that the role of an expert is to assist the court in relation to matters of scientific, technical or other specialised knowledge which are outside the judge's expertise by giving evidence of fact or opinion; but the expert must not usurp the functions of the judge as the ultimate decision-maker on matters that are central to the outcome of the case. Thus, as a general rule, the judge has the task of assessing the evidence of an expert for its adequacy and persuasiveness. But it is trite law that English law operates an adversarial system, and the parties frame the issues for the judge to decide in their pleadings and their conduct in the trial. It is also trite law that, in that context, it is an important part of a judge's role to make sure that the proceedings are fair. At the heart of this appeal lies the question of the requirements of a fair trial.

 

........

 

[70.]    .......

 

(i) The general rule in civil cases, as stated in Phipson, 20th ed, para 12-12, is that a party is required to challenge by cross- examination the evidence of any witness of the opposing party on a material point which he or she wishes to submit to the court should not be accepted. That rule extends to both witnesses as to fact and expert witnesses.

 

........

 

(vii) The rule should not be applied rigidly. It is not an inflexible rule and there is bound to be some relaxation of the rule, as the current edition of Phipson recognises in para 12.12 in sub-paragraphs which follow those which I have quoted in para 42 above. Its application depends upon the circumstances of the case as the criterion is the overall fairness of the trial.....

 

.........

 

[71.] In assessing the fairness of the trial in this case it is important to have regard to the approach which TUI's legal team adopted in response to the claim. TUI in its defence put Mr Griffiths to proof of his claim. TUI chose not to lodge the report of an expert microbiologist, which it obtained. That report might have put forward a case on causation which differed from that of Professor Pennington. TUI failed to lodge the report of their expert gastroenterologist in a timely manner and called no witnesses as to fact. The CPR Pt 35.6 questions, which I have set out in para 14 above, were not clearly focused on the matters which were the objects of criticism in counsel's submissions and did not put Professor Pennington on notice of those criticisms. TUI chose not to request that Professor Pennington be made available for cross-examination. TUI's challenge to his evidence was not intimated to Mr Griffiths' legal team until the submission of its skeleton arguments on the eve of the trial, by which time it would have been too late for them to seek to have him attend to give evidence.

 

.......

 

[75.] ....... In the absence of a proper challenge on cross-examination it was not fair for TUI to advance the detailed criticisms of Professor Pennington's report in its submissions or for the trial judge to accept those submissions."

 

74.  The Supreme Court decision in TUI UK Limited does not cause me to change my view that I am entitled in the present case to evaluate the written evidence of the jointly instructed experts. There is no unfairness in me doing so in circumstances where AB sought to challenge that evidence prior to trial. Once the stay had been lifted, AB applied at the Pre-Trial Review hearing on 4 April 2024 for permission to obtain updated valuations. That application was actively opposed by EF. I dismissed the application because I did not consider updated valuations would assist me when the Administrators had in the meantime successfully marketed GUTHRUM Park for sale on the open market. The rule in TUI UK Limited is described by the Supreme Court as being flexible, and its application depends upon the particular circumstances of the case. The circumstances in TUI UK Limited, including the litigation conduct of the defendant, were very different to and distinguishable from the circumstances in the present case.

 

75.  Ultimately, I must assess the expert evidence to see what assistance can be derived from it and viewed in the context of the circumstances of the case as a whole, although I should not depart from it without good reason particularly where the evidence is from a single joint expert.

 

76.  It is well established that expert valuations of private companies are notoriously fragile and should be treated with caution. In Martin v Martin [2018] EWCA Civ 2866, Moylan LJ said:

 

"[90.] Where do valuations of a private company fall in this spectrum? The first point to recognise is that this can, of course, vary depending on the facts of the case. In Wells v Wells and Versteegh v Versteegh the trial judge, respectively, had been unable to value the shares "with any reasonable precision" (Thorpe LJ at [7]) and had been "unable to reach a safe valuation" (Lewison LJ at [193]) because of the uncertainties present in those cases. It might be, in contrast, that, as suggested in White v White, the company can be valued by reference to its assets which are, in themselves, capable of being securely valued.

 

[91.] Subject to that introduction, how should family courts approach valuations of private companies, in particular trading companies? This general issue has very recently been considered by this court in Versteegh v Versteegh. The conclusion and guidance given were that such valuations need to be treated with caution. Although in my view the guidance is clear, given the arguments in the present case I propose to quote at some length from that case which in turn quoted what I had said, sitting at first instance, in H v H [2008] 2 FLR 2092. King LJ said:

 

"[136] In H v H [ 2008] 2 FLR 2092 Moylan J highlighted the fact that the vulnerability of valuations had been specifically recognised by the House of Lords in Miller v Miller; McFarlane v McFarlane: [2006] UKHL 24, [2006] 1 FLR 1186. Moylan J said:

 

"[5] The experts agree that the exercise they are engaged in is an art and not a science. As Lord Nicholls said in Miller v Miller; McFarlane v McFarlane [2006] 2 AC 618 [26]: "valuations are often a matter of opinion on which experts differ. A thorough investigation into these differences can be extremely expensive and of doubtful utility". I understand, of course, that the application of the sharing principle can be said to raise powerful forces in support of detailed accounting. Why, a party might ask, should my "share" be fixed by reference other than to the real values of the assets? However, this is to misinterpret the exercise in which the court is engaged. The court is engaged in a broad analysis in the application of its jurisdiction under the Matrimonial Causes Act, not a detailed accounting exercise. As Lord Nicholls said, detailed accounting is expensive, often of doubtful utility and, certainly in respect of business valuations, will often result in divergent opinions each of which may be based on sound reasoning. The purpose of valuations, when required, is to assist the court in testing the fairness of the proposed outcome. It is not to ensure mathematical/accounting accuracy, which is invariably no more than a chimera. Further, to seek to construct the whole edifice of an award on a business valuation which is no more than a broad, or even very broad, guide is to risk creating an edifice which is unsound and hence likely to be unfair. In my experience, valuations of shares in private companies are among the most fragile valuations which can be obtained."

 

[137] Moylan J was referring to a business valuation, as was the Court of Appeal in Wells v Wells. Here the court is more specifically concerned with valuations relating to property developments. For the reasons given by Lewison LJ at [184] - [195], the same principle found in Miller and H v H applies as much to development land valuation as to conventional business valuations, perhaps even more so given the dramatic effect that even a small adjustment in a variable can make to a valuation and given the inherent unpredictability, described by Lewison LJ, in relation to property development projects."

 

Lewison LJ said:

 

"[185] The valuation of private companies is a matter of no little difficulty. In H v H [2008] EWHC 935 (Fam), [2008] 2 FLR 2092 Moylan J said at [5] that "valuations of shares in private companies are among the most fragile valuations which can be obtained." The reasons for this are many. In the first place there is likely to be no obvious market for a private company. Second, even where valuers use the same method of valuation they are likely to produce widely differing results. Third, the profitability of private companies may be volatile, such that a snap shot valuation at a particular date may give an unfair picture. Fourth, the difference in quality between a value attributed to a private company on the basis of opinion evidence and a sum in hard cash is obvious. Fifth, the acid test of any valuation is exposure to the real market, which is simply not possible in the case of a private company where no one suggests that it should be sold. Moylan J is not a lone voice in this respect: see A v A [2004] EWHC 2818 (Fam), [2006] 2 FLR 115 at [61] - [62]; D v D [2007] EWHC

278 (Fam) (both decisions of Charles J)."

 

[92.] Given the proximity of the decision in Versteegh v Versteegh, and also, as it happens, given that my views have not changed from what I said in H v H, I can see no reason why we should depart from the conclusions and guidance set out in the former, namely that valuations of private companies can be fragile and need to be treated with caution. Further, it accords with long-established guidance and, I would add, financial reality."

 

77.  In all the circumstances, I am unable and do not attach weight to the expert valuations in the present case and for the following reasons:

 

a.       VAL-C valued GUTHRUM at the time of the Share Transfers on 30 April 2019 on the basis of GUTHRUM's net assets "adjusted to include the market value of the site at GUTHRUM Park, per the valuation report prepared by VAL-L" being £2,486,000 (as at 14 October 2021) and giving net liabilities of £370,496. Therefore, the accuracy of VAL-C's valuation is entirely reliant upon the accuracy of the land valuation by VAL-L.

 

b.      VAL-L produced 2 land valuations as at 18 March 2020 (£2,042,000), and as at 14 October 2021 (£2,486,00). The increased valuation largely reflected the fact that there was outline planning permission for a further 19 plots not referenced in the earlier valuation.

 

c.       Assets to be valued fall into different categories. There may be relatively unique assets (e.g. a work of art), with no or few comparables, such that expert opinion may differ very substantially, and the valuation figure must be inherently speculative and fragile. However, where there is an active market with a number of comparables (e.g. residential property), it may not be difficult to provide a secure valuation.

 

d.      GUTHRUM Park is unique

 

i.       EF stated in her third witness statement that "[25.a.] ....Caravan sites can be difficult to source and acquire, and the opportunity to purchase another site similar to GUTHRUM Park, which is close to my other sites and my home ......is not something that could be replicated....... It is not like a house or other property that are easily replaced with like for like (or as good as)."

 

ii.      VAL-L in their 2021 valuation stated, "This is a specialist market".

 

e.       The few "comparables" attached to Appendix 2 of VAL-L's 2021 valuation are in no way comparable to GUTHRUM Park including as they do trading estates and a service station.

 

f.        VAL-L's valuations were carried out during the COVID-19 pandemic. In their 2021 valuation, VAL-L warned that "Our valuations are therefore reported on the basis of 'material valuation uncertainty' as per VPS 3 and VPGA 10 of the RICS Red Book Global. Consequently, less certainty - and a higher degree of caution - should be attached to our valuation than would normally be the case. Given the unknown future impact that COVID-19 might have on the real estate market, we recommend that you keep the valuation of this property under frequent review".

 

g.      The best and fairest way to ascertain the market value of any asset, including land, is by means of a sale on the open market. FPR 25.4 provides that the court may only give permission for expert evidence if "necessary to assist the court to resolve the proceedings". At the Pre-Trial Review hearing, I refused permission for updated valuations because I did not consider them necessary when the Administrators had in April 2023 marketed GUTHRUM Park for sale on the open market.

 

h.      Contrary to the opinion expressed by VAL-L that "the demand for this type of investment is limited", the Administrators' marketing exercise resulted in five offers ranging from £3,300,000 to £5,750,000.

 

78.  Nor do I attach any weight to Mr ZAA's valuation. He is not a court appointed expert and his valuation is non-FPR compliant. Further, his valuation was on a net asset basis, but adopting the net book value of GUTHRUM Park as per the accounts.

 

79.  I do not consider that for present purposes it is necessary for me to fix a specific value of the shares in GUTHRUM at the time of the Share Transfers, but I do find that at that time the shares in GUTHRUM had a substantial value:

 

a.       The Share Transfers were completed in April 2019 prior to the COVID-19 pandemic. GUTHRUM Park was acquired for some £3 million in 2014. It is likely that the value of GUTHRUM Park would thereafter have increased, not decreased, in a rising property market in the 5 year period before the Share Transfers were made, particularly when the site was being developed during that time. In his Form E CD stated that "I had been working and spending money on GUTHRUM... purchased by my mother, brother and myself some 4 - 5 years ago." Further, in his initial written evidence, CD stated that "My role [in the business] was to deal with developing the site, constructing new roads and bases for static caravans on it, groundworks, installation of services and improving generally."

 

b.      Even ignoring GH's offer, the next highest offer received by the Administrators for the GUTHRUM Park site was £3.685 million. Substituting that figure in place of the VAL-L figure of £2.486 million in VAL-C's calculation would result in an adjusted net assets value of £828,504.

 

c.       It is no coincidence that EF and GH have devoted huge resources fighting over control of GUTHRUM Park. GH made an offer of £5.75 million to purchase the site from the Administrators, whilst EF made a counter-offer to re-finance the rescue of GUTHRUM by way of a £4 million inter-company loan. EF and GH then expended significant time and money litigating over which offer the Administrators ought to accept. Whilst there is clearly no love lost between EF and GH, they are very successful business people with vast specialist knowledge of this particular sector. They, more than anyone else, know the true commercial value of GUTHRUM Park.

 

80.  Having determined that the Share Transfers had the consequence of defeating AB's claim for financial relief, it falls upon EF, now supported by CD, to prove that was not the intention and having regard to the fact that the Share Transfers were made less than 3 years before the Section 37 Application was made.

 

Shares held on trust?

 

81.  It is not disputed that GUTHRUM was incorporated as a special purpose vehicle to acquire and hold GUTHRUM Park.

 

82.  It is EF's case that the Share Transfers were made due to CD's deteriorating health and the need to regularise the ownership position that CD had always held the shares in GUTHRUM on trust for her.

 

Applicable legal framework

 

83.  EF's Particulars of Claim assert that CD held the GUTHRUM shares "on bare trust for" EF. CD's Amended Defence asserts that EF is the beneficial owner of the GUTHRUM shares pursuant to either (i) "an express agreement", or (ii) "a resulting or common intention constructive trust". Neither statement of case fully particularises the basis of those claims.

 

84.  A bare trust is a form of express trust, whereas resulting and common intention constructive trusts arise by operation of law.

 

85.  There are certain requirements that must be satisfied in order for an express trust to be valid. Snell's Equity (34th ed) summarises the position at para 22-012 as follows:

 

"If the trust is to operate, its essential elements must be defined clearly enough to enable the trustee, or the court in default, to execute the trustee's duties.

 

There are therefore three main ways in which an express trust must be sufficiently certain:

 

(i)          the settlor must intend to impose legally enforceable duties of trusteeship on the owner of the property;

 

(ii)        the subject-matter of the trust must be certain; and

 

(iii)      the objects or persons intended to have the benefit of the trust must be certain."

 

86.  So far as the duties of a bare trustee, Snell's Equity further summarises the position at para 21–027 as follows:

 

"A bare (or simple) trust is one where property is vested in one person on trust for another, but where the trustee owes no active duties arising from his status as trustee. His sole duty is to convey the trust property as the beneficiary directs him. An example is where property is transferred to T "on trust for B absolutely". In such a case, T's sole duty is to allow B to enjoy the property and to obey any direction he may give as to how the property should be disposed of."

 

87.  A resulting trust takes a narrow approach, presumptively recognising a share in property based on the proportion of the purchase price contributed, although the presumption can be rebutted through evidence of contrary intention.

 

88.  Only direct contributions towards the purchase price give rise to the presumption of a resulting trust in favour of the contributor. However, the amount paid through a mortgage is treated as a direct contribution by the mortgagor towards the purchase of a property, since they have a legal liability to repay it. In Curley v Parkes [2004] EWCA Civ 1515, Gibson LJ stated that:

 

 "[14.]........................... Because of the liability assumed by the mortgagor in a case

where monies are borrowed by the mortgagor to be used on the purchase, the mortgagor is treated as having provided the proportion of the purchase price attributable to the monies so borrowed."

 

89.  A constructive trust is founded on a wider range of circumstances than merely the proportion of the purchase price contributed. As observed by Edmund-Davies LJ in Carl Zeiss Stiftung v Herbert Smith & Co. (no.2) [1969] 2 Ch. 276 at 300:

 

"English law provides no clear and all-embracing definition of a constructive trust. Its boundaries have been left perhaps deliberately vague so as not to restrict the court in technicalities in deciding what the justice of a particular case might demand."

 

90.  That said, there are established categories of case where the imposition of a constructive trust by operation of law is recognised - Cobbe v Yeoman's Row Management Ltd [2008] UKHL 55, Lord Scott at para [30.].

 

91.  In Matchmove Limited v Dowding and Church [2016] EWCA Civ 1233, which was a dispute between former friends over the beneficial ownership of an investment property, the Court of Appeal observed that:

 

"[29]....................... a common intention constructive trust could arise where (i) there

was an express agreement between parties as to the ownership of property

(ii) which was relied upon by the claimant (iii) to his or her detriment such that (iv) it would be unconscionable for the defendant to deny the claimant's ownership of the property."

 

92.  Therefore, whilst indirect contributions may constitute sufficient detrimental reliance to give rise to a constructive trust, only direct contributions to the purchase price give rise to the presumption of a resulting trust in favour of the contributor. By way of illustration, in Ivin v Blake [1994] 2 F.C.R 504, the daughter, without being paid a proper wage, helped her mother run a pub, which generated sufficient funds to enable the mother to pay the deposit on a house purchase. The Court of Appeal held that that the daughter's indirect contribution towards the purchase of the house was not sufficient to give rise to a beneficial interest under a resulting trust. In addition, the daughter's indirect contribution towards the purchase of the house was not sufficient to give rise to a beneficial interest under a constructive trust in the absence of any agreement that she would do so.

 

93.  It was (i) the written evidence of EF and (ii) the oral evidence of CD and EF that it was agreed that CD as nominee would hold the shares on trust, which is suggestive of a claim for a beneficial interest under an express trust.

 

94.  It was the written and oral evidence of EF and CD that she alone arranged the funding of the purchase of GUTHRUM Park with CD making no financial contribution, which is suggestive of a claim for a beneficial interest under a resulting trust.

 

95.  It was the written evidence of EF and (belatedly) of CD that there was a shared understanding that CD held the shares on trust, which understanding EF then relied upon to her detriment by largely running the business. That is suggestive of a claim for a beneficial interest under a common intention constructive trust.

 

Bare Trust

 

96.  It was EF's written evidence that there was an agreement that CD as nominee hold the shares on trust, but without giving any particulars about when, where and how that agreement was made.

 

97.  However, it was argued on behalf of EF and CD, and relying upon Gill v Thind

[2023] EWCA Civ 1276, that:

 

a.       No particular form of expression is necessary for the creation of an express trust, if on the whole it can be gathered that a trust was intended.

 

b.      In the case of an oral declaration, it may not be possible for the court to make a finding as to the exact words used, and so the court may only be able to make a finding as to their gist. In those circumstances, there would be nothing wrong in the court finding on balance that words were said sufficient to demonstrate an intention to declare a trust.

 

98.  It was further argued on behalf of EF and CD that:

 

a.       In his oral evidence, CD confirmed that, after EF had looked at GUTHRUM Park and when they were sat around the kitchen table, EF said she was going to buy the property and put it into CD's name, although the property would be EFs.

 

b.      In her oral evidence, EF confirmed that it had been agreed when sat around the table that CD would hold the shares in GUTHRUM on trust for EF and her husband.

 

c.       This oral evidence was not challenged by or on behalf of AB such that the court can be satisfied that words were spoken sufficient to establish an express trust.

 

99.  CD and EF were cross examined at length by counsel for AB, but at no time during that cross examination did either CD or EF make any mention of the alleged discussion/agreement around the kitchen table, which was only mentioned for the first time in response to questions put to them by counsel for CD, when re-examining CD and then cross-examining EF. In my judgment, it is simply incredible that CD and EF would not have previously mentioned such an important discussion/agreement, if true, in the course of this protracted litigation dating back almost 6 years, and which has generated large volumes of statements of case and written evidence. In my assessment, CD and EF were making up their oral evidence regarding the alleged discussion/agreement around the kitchen table.

 

100.   Even if I am wrong about that, and there was indeed some discussion around the kitchen table as now claimed, there is a further insurmountable difficulty, since it is impossible to identify, with sufficient certainty to meet the requirements necessary for the creation of an express trust, who was to benefit under any such trust:

 

a.       In the Amended Defence and Counterclaim, which was filed in the Partnership Proceedings and signed by EF with a statement of truth dated 4 December 2020, it was stated that –

 

 "[13.(b)] .. The site at GUTHRUM Park was purchased by EF. The shares in GUTHRUM Park were put into the name of the Third Defendant ("CD") in order that they would pass to him on EF's death, but he was not intended to obtain beneficial ownership until her death. Upon CD becoming ill in the middle of 2019, CD agreed to transfer legal title in the shares to EF. Because of the manner in which the transfer documentation was erroneously prepared by GUTHRUM's accountants, legal title was transferred to GH and EF as holders of 50% each of the shares. There was no transfer of the beneficial title, which has at all times remained with EF. In the alternative, if beneficial title in the shares was transferred to CD, it was re- transferred to EF in 2019;"

 

b.      In her first witness statement dated 14 August 2020 and filed in response to the Section 37 Application, EF stated –

 

"[6.] ......My husband and I agreed that CD would be the sole shareholder in [GUTHRUM] but on the basis that we all agreed that this was my business (as in my husband and I) .... and we were in truth the owners of the company and the caravan park the company was buying and not CD....."

 

c.       In their Points of Defence filed in the Companies Proceedings and signed with a statement of truth by both EF and EF-H dated 15 January 2021, it was alleged that –

 

"[4.] While GH is the legal owner of 50% of the shares in [GUTHRUM] he holds such shares on trust for EF alone...."

 

d.      In EF's Particulars of Claim dated October 2021, it was alleged that:

 

"[2] On incorporation of [GUTHRUM] the entire issued share capital was vested in the sole name of [CD] holding on bare trust for [EF].

 

e.       In her second witness statement dated 1 February 2022, EF stated

 

"[7.] ... The issued share capital of [GUTHRUM] was divided into 100 shares of £1 each and all put in CD's name. I was to remain the real owner of the site it was mine and there was no confusion in the family that it was anything but my site...."

 

f.        In her oral evidence, EF said that she and her late husband, EF-H, were the beneficial owners of the shares in GUTHRUM.

 

g.      In his earlier written evidence, CD made absolutely no mention of EF-H having had any involvement in the business. He stated that "the acquisition price was funded by way of an intercompany loan from my mother's business WINNIPEG ...The finances were arranged by myself and my mother....[who] took control of the financial side of running the business. My role was to deal with developing the site.."

 

h.      In his updated written evidence, CD claimed that EF and EF-H together beneficially owned GUTHRUM. He stated that "My mum was much more involved but my father was alive then and they were in business together."

 

i.        In his oral evidence, CD said that EF was the sole beneficial owner of the shares in GUTHRUM.

 

EF's and CD's ever changing narrative was utterly confused and confusing as to whether it was EF and EF-H, or EF alone, who were the beneficiaries under the alleged bare trust.

 

101.The bare trust claim fails.

 

Resulting trust

 

102.   In Faiza Ben Hashem v Abdulhadi Ali Shayif and another [2008] EWHC 2380 (Fam), Munby J emphasised the importance of adopting a principled approach by identifying the character of the payments made towards the purchase of the property:

 

"[112.] Again, it is necessary to start from first principles. The foundation of the wife's case is the undoubted fact that the husband funded the acquisitions of all five properties, save insofar as the rental incomes were sufficient to service the mortgage loans. But that, of itself, takes the wife nowhere. For someone may provide money used in the acquisition of a property without thereby acquiring any interest in that property. It all depends upon the character in which the money is provided. Was the money provided by way of gift, by way of loan or in the character of purchaser? Only in the last case will there be any question of a resulting or constructive trust. If there was in truth a gift, the donor has no claim at all. If there was a loan, the lender has a claim for the repayment of his money with interest but no claim to, or any interest in, the property (save insofar as the loan is secured by a charge or mortgage of the property). But if the payment was in the character of purchaser, the investor has a claim to a share in the property by way of a constructive or resulting trust (for present purposes nothing turns on the important conceptual differences between these two classes of trust) and proportionate to his investment.

 

[113.] A simple example will make the differences clear. Let us suppose that A provides £10 and B provides £90 towards the purchase of a property which is bought for £100 and eventually sold for £200. If A provided the £10 as a gift, then he gets nothing on the sale; the entire £200 goes to B. If, on the other hand, A provided the £10 as a loan, then he will recover the £10 plus interest (say £5) – a total of £15; the other £185 will go to B. But if A provided the £10 as a contribution to the purchase price and in the character of a purchaser, then, other things being equal, the proceeds of sale will be held on (constructive or resulting) trust as to 10% for A and 90% for B, so A will receive £20 and B will receive £180. (As will be appreciated, whether A is better off if he lent the money or if he invested it qua purchaser will depend upon whether the property is increasing in value at a rate greater than prevailing interest rates.)

 

[114.] Now whether A provided the money by way of gift, or by way of loan, or qua purchaser is, in the final analysis, a simple question of fact, to be determined in the light of all the evidence as to the relevant circumstances, including, subject to the rule in Shephard v Cartwright [1955] AC 431(see per Viscount Simmonds at page 445), the parties' evidence as to their intentions at the time.

 

[115.] Sometimes the answer to the question will be obvious, indeed so obvious that the question never arises. A bank which advances money to fund a purchase will usually do so by way of loan, and it makes no difference for this purpose that the loan is secured by a charge or mortgage of the property. Where contributions are made by two people living together as a couple the obvious assumption will be that each is contributing qua purchaser, so their claims inter se, unless they are married, will fall to be resolved through the mechanism of trust law. In other situations the answer may be less obvious.

 

[116.] An illuminating example of the factual difficulties is provided by the decision of the Court of Appeal in Hussey v Palmer [1972] 1 WLR 1286. I say nothing as to the legal basis of the decision (which is controversial to say the least) and refer to the case simply to draw attention to the differing ways in which the judges analysed the facts with a view to determining whether the money provided by the defendant's mother-in-law, which he conceded had not been a gift, was provided, as Cairns LJ held, by way of loan or, as Lord Denning MR and Phillimore LJ held, qua purchaser entitling her to sue on a resulting trust."

 

103.   It is not disputed that the purchase of GUTHRUM Park in October 2014 was funded entirely by way of:

 

a.       a secured loan of £2.5 million from The Royal Bank of Scotland; and

 

b.      an inter-company unsecured loan of £558,211.70 from WINNIPEG.

 

104.   WINNIPEG and WOOD Limited ("WOOD") (a company owned and controlled by GH) were also signatories to the loan agreement ("the RBS Loan Agreement") made between GUTHRUM and The Royal Bank of Scotland in order to provide additional 'group' security for the loan. The copy of the RBS Loan Agreement disclosed by EF into these proceedings is incomplete running to only 14 of 23 pages. I draw an adverse inference that EF has not disclosed a full copy of the RBS Loan Agreement because it would show, inconsistent with her case, that GH was also involved in arranging the finance for the purchase of GUTHRUM Park. It is likely that the security offered by WOOD was in similar form to that provided by WINNIPEG being a guarantee for the £2.5 million loan supported by:

 

a.       a 1st legal charge over WINNIPEG Caravan Park; and

 

b.      a debenture over WINNIPEG.

 

105.   The RBS Loan Agreement provides that GUTHRUM alone is liable to repay the loan and interest. Therefore, it appears that the contributions of WINNIPEG and WOOD were limited to the provision of security for the loan to GUTHRUM. It is doubtful that such a limited contribution would be sufficient to give rise to the presumption of a resulting trust, since subsequent enforcement of the security would not be a contribution to the purchase price - Carlton v Goodman [2002] EWCA Civ 545.

 

106.   The money provided by WINNIPEG towards the purchase of GUTHRUM Park was in the form of an unsecured loan, which WINNIPEG subsequently sought to enforce by applying for and obtaining the Administration Order. Therefore, the presumption of any resulting trust in favour of WINNIPEG as contributor to the purchase price is clearly rebutted by evidence that the money was provided by way of a loan rather than an investment. However, again the point is academic, since WINNIPEG has never asserted any such beneficial interest.

 

107.   Ultimately, EF herself made no direct contribution in the character of purchaser towards the purchase price of GUTHRUM Park, such that the presumption of a resulting trust in favour of EF does not arise.

 

108.   The resulting trust claim fails.

 

Common intention constructive trust

 

109.   I have rejected the evidence of CD and EF regarding an express agreement, but a common intention justifying the imposition of a constructive trust may be properly inferred from the parties' conduct. Lewin on Trusts (20th Ed) summarises the position at para 10-066 as follows:

 

"If there is no actual common intention between the parties that the legal ownership of property is not to follow the legal ownership, the court must go on to consider whether such a common intention may be inferred. An inferred intention is, in the case of each party, the intention which was reasonably understood by the other party to be manifested by that party's words and conduct notwithstanding that he did not consciously formulate it in his own mind and even where he acted with some different intention which he did not communicate to the other party. A common intention that beneficial ownership be shared will, in the case of property vested in one legal owner, easily be inferred where there is a direct financial contribution by another to the purchase price..."

 

110.   Whilst I have found that EF did not directly fund the acquisition of GUTHRUM Park, the requisite common intention may nevertheless be properly inferred from consideration of a wider range of conduct. In Faiza Ben Hashem, Mumby J stated:

 

"[127] .... the claim to a constructive trust is founded on a wider range of circumstances than the mere fact that the husband initially funded the acquisitions of the Properties - in other words, is founded on an overall assessment of the conduct of the parties from which, it is submitted, one can properly infer a common intention justifying the imposition of such a trust he claim to a constructive trust is founded.."

 

111.   An overall analysis points, in my judgment, not in favour of the existence of a common intention constructive trust over the GUTHRUM shares in favour of EF but decisively in the other direction of a gift of the shares having been made to CD:

 

a.       It is not seriously disputed that EF, as the undoubted head of the family, made a significant contribution by way of facilitating the acquisition of GUTHRUM through inter-company funding/security and thereafter being heavily involved in the running of the business. However, in doing so, I find that EF was more likely motivated by a wish to assist CD, in the same way and to her great credit that she has assisted her other children, rather than to acquire herself a proprietary interest in the business –

 

i.      In the Defence and Counterclaim in the Partnership Proceedings signed by EF on 5 June 2020 with a statement of truth, it was stated (with my emphasis added) that:-

 

"[12.] As she did with her other children, EF gifted specific sites (known as X-6 and WOOD) to GH. By reason of his (accidental) interests in X-7 and X-5, GH has received far more than his siblings."

 

ii.      YY is another child of EF and EF-H. In the Amended Defence and Counterclaim in the Partnership Proceedings signed by EF with a statement of truth on 10 November 2020, it was stated that:

 

"[3.(3)] The fact that EF and EF-H purchased PARK ZERO for YY was confirmed in a letter dated 2 June 2005 sent to EF and EF-H by their then accountants, NU, RE  & Co. That letter stated: "You also purchased a site for YY [sic] which cost £459,844";

 

...........

 

[7.] In accordance with her treatment of her other children, EF purchased OVERWATER Caravan Park together jointly with YY in around 2011. The purchase price was £1.6 million. YY funded her share of the cost of acquisition by transferring the beneficial ownership of a caravan site known as PARK ZERO, with an estimated value of around PARK ZERO for a price of £500,000 to EF and EF-H.....

 

........

 

[25.] ...... GH has no interest in OVERWATER Caravan Park, which is beneficially owned by YY alone...."

 

iii.      In CD's original Defence in the present proceedings, it was stated that:-

 

"[7.] .....in agreeing to the entire issued share capital [of GUTHRUM] being vested in [CD], [EF] was motivated by her desire to provide [[CD] with financial security."

 

b.      It is not disputed that the family relies heavily upon their advisers to ensure that their position is protected. If it was intended that EF was to retain beneficial ownership of the shares then no doubt the advisers would have advised upon the need for and drafted the necessary documentation to record the existence of the trust. They did not.

 

c.       The notes to the financial statements for GUTHRUM for the year ended 31 July 2016, which were approved by the Board for issue on 6 April 2017 and signed by EF in her capacity as director, record –

 

"11 Control

 

It is the opinion of the directors that CD who holds 100% of the issued share capital of GUTHRUM... is the company's ultimate

controlling party."

 

d.      The notes to the financial statements for WINNIPEG for the year ended 31 July 2016, which were approved by the Board for issue on 28 February 2017, record –

 

"12 Related party relationships and transactions

 

A third party charge of debt was created on 2 January 2013 for securing all monies due from WOOD to the Royal Bank of Scotland.

 

Included within other debtors is £1,348,278 (2015 - £1,352,028) due from WOOD, a company wholly owned by a director of the company.

 

Also included within other debtors is £558,200 (2015 -£558,211) due from GUTHRUM, a company associated by a director of the company.

 

Included within other creditors is £629,275 (2015 - £621,375) due to GLENOGIL, a company wholly owned by the directors of the company."

 

Therefore, the notes record that GLENOGIL, but not GUTHRUM, was owned by a director of WINNIPEG. The directors of WINNIPEG at the time were EF, who signed the financial statements on behalf of the Board, EF-H and GH.

 

e.       It is not disputed that the Share Transfers were drafted by Mr ZAA, whose attendance note ("the Attendance Note") records as follows:

 

A close-up of a test

AI-generated content may be incorrect.

 

f.        It is striking that the Attendance Note expressly records that 50 shares were to be transferred to EF and 50 shares were to be transferred to GH as "per [EF's]  instruction", which is wholly contrary to EF's pleaded claim that she was the sole beneficial owner of those shares. I attach significant weight to the Attendance Note, which is a contemporaneous document prepared by a professional advisor. In her written evidence, EF alleged that Mr ZAA had been influenced by GH to procure the transfer of the 50 shares to GH contrary to EF's instructions. In my judgment, this amounts to an allegation of dishonesty against Mr ZAA. In Vogon International Ltd v the Serious Fraud Office [2004] EWCA Civ 104 at [29] May LJ (with whom Lord Phillips MR and Jonathan Parker LJ agreed) said, "It is, I regret to say, elementary common fairness that neither parties to the litigation, their counsel nor judges should make serious imputations or findings in any litigation when the person concerned against whom such imputations or findings are made have not been given a proper opportunity of dealing with the imputations and defending themselves." In my judgment it is simply unfair to raise a very serious allegation against Mr ZAA indirectly in the course of these proceedings without giving him the opportunity to respond. Having raised an allegation against Mr ZAA that required to be answered, EF ought to have summonsed Mr ZAA to give evidence, but she chose not to do so.

 

g.      It was EF's assertion unsupported by any medical evidence that the Share Transfers were made because of CD's deteriorating health such that he could not work and "we really needed to officialise what the reality of the ownership of the business was". However, that explanation made no sense, since it is not disputed that CD remained a director of GUTHRUM. As a continuing director, CD was under a legal duty to manage and run GUTHRUM.

 

h.      Having regard to the fact that the Share Transfers took place 11 days after AB and CD separated, the more likely explanation for making the Share Transfers was the reality that CD owned the shares in GUTHRUM and there was a pressing need to keep those shares out of the likely subsequent financial remedy proceedings. As already noted earlier in this judgment, there is no love lost between EF and AB such that EF was highly motivated to ensure that AB received as little as possible in the financial remedy proceedings.

 

i.        In the Partnership Proceedings, EF signed a Defence and Counterclaim, which stated that:

 

"[13. (b)] ....it is admitted and averred that GH and EF are the legal owners of 50% of the issued shares in [GUTHRUM]. However, they hold such shares on bare trust for [CD]".

 

In her oral evidence, EF sought to distance herself from that admission by bizarrely claiming that she had no idea how it had got into her defence and notwithstanding that EF signed it with a statement of truth. It is striking in my judgment that EF signed that defence on 5 June 2020 in the month before AB made her Section 37 Application.

 

j.        The WINNIPEG and GLENOGIL Board minutes together with EF's witness statement in support of the subsequent application for an administration order, state that as a result of the financial remedy proceedings there was a risk that ownership / management / control of GUTHRUM may change. However, if EF (either alone or with EF-H) beneficially owned the whole of the shares in GUTHRUM, as EF claims, then there was never a risk of a change of ownership/management/control because the shares would not be a matrimonial asset subject to the court's distributive powers.

 

112.     The common intention constructive trust claim fails.

 

Discretion

 

113.       I am wholly satisfied that:

 

a.       The Share Transfers had the effect of defeating AB's claim for financial remedies;

 

b.      EF and CD have not shown that the Share Transfers were made without the intention of defeating AB's claim for financial remedies; and

 

c.       It has not been shown that the Share Transfers were made in good faith and for valuable consideration and without actual or constructive notice of AB's potential claim for financial remedies.

 

114.     Whilst the statutory criteria are met for making an order setting aside the Share Transfers, I still retain a discretion as to whether or not to make such an order.

 

115.     It is argued on behalf of EF that transferring the shares back to CD serves no purpose. CD would simply be the shareholder of an insolvent company, since EF would have no reason to pursue her rescue attempt and the business will fail.

 

116.     I disagree that transferring the shares back to CD serves no useful purpose:

 

a.       I accept that transferring the shares back to CD will cause EF to withdraw her proposed company rescue as she has threatened to do.

 

b.      The Administrators will then be compelled to revert to their original proposal of selling the business and assets of GUTHRUM.

 

c.       Having regard to the very significant time and money spent by GH on the Insolvency Application and the Injunction Application seeking to prevent EF from proceeding with her rescue of GUTHRUM as a going concern, it is likely that GH will realise his long held ambition of purchasing GUTHRUM Park. GH has made an offer to purchase GUTHRUM Park for the sum of £5.75 million. In the Insolvency Application, the Administrators were satisfied that GH "had demonstrated sufficient funds to enable such a purchase to take place."

 

d.      According to the last order made in the Administration Proceedings and dated 6 June 2024, the following amounts would be payable from the proceeds of sale of GUTHRUM Park

 

i.   RBS secured loan -                                  £1.6 million

 

ii.   HMRC preferential creditor -                  £1,500

 

iii.   Unsecured claims -                                  £1.25 million

 

iv.   Ordinary expenses -                                 £56,153

 

v.     Corporation Tax -                                    £45,205

 

vi.   Maximum professional fees -                  £718,920

 

vii. Total -                                                      £3,671,778

 

e.       However, I consider that the figure of £1.25 million in respect of unsecured creditors is overstated, since EF admitted in her oral evidence that the inter-company loans from WINNIPEG and GLENOGIL were interest free, and so interest totalling some £202,481 ought not to have been included in the statutory demands served upon GUTHRUM. EF once again sought to distance herself from her own documents by claiming that the interest figures quoted in the Particulars of Claim and in her witness statement dated 22 March 2022 had been included without her knowledge. She said that she had signed the witness statement without reading it, and despite it being endorsed with a statement of truth. Deducting that amount of interest gives an adjusted total amount payable of £3,469,297, which would leave surplus funds of some £2.28 million on a sale to GH for the sum of £5.75 million.

 

f.        Even if the Administrators chose to re-market GUTHRUM Park, rather than

proceeding with GH's original offer, that would likely give rise to a bidding war between EF and GH again to the financial benefit of CD.

 

g.      In my judgment, GUTHRUM remains balance-sheet solvent such that following the sale of its business and assets there will likely be a substantial surplus available for payment to its shareholder, CD.

 

Conclusion

 

117.     The Share Transfers are set aside.

 

Alleged Loan

 

118.        CD and EF rely upon the following written agreement ("the Loan Agreement") signed by CD and dated January 2006:

A letter from a person

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119.   It was AB's evidence that the Loan Agreement is not a genuine document, since she and CD had sufficient monies of their own to purchase BLACKSMITH without the assistance of any loan.

 

120.   However, in her oral evidence, AB conceded that she had no direct evidence to substantiate that the Loan Agreement had been fabricated for the purpose of these proceedings.

 

121.   NU, RE  & Co., the then accountants, wrote to EF-H, GH and EF on 7 January 2008 ("the 2008 Letter") (with my emphasis added) as follows:

 

"We have completed accounts for X-1, X-2, X-3 and X-4 for the year ended 31 July 2006 and two copies are enclosed. At our meeting we discussed that bankings and cash spendings exceeded recorded income from VAT records and in order to balance the cash account we have had to add £104,000 to takings. The same problem arose in reconciling X-5 figures to 31 July 2006 and further additions of £175,345 have been included to balance this account.

 

............

 

X-5 was purchased during this year and £4,110,713 was paid out and a bank loan of £3,000,000 taken out towards this. You also paid £251,142 towards the BLACKSMITH site. Several amounts were introduced into this business from WINNIPEG, The X-6 and X-5 accounts.

 

............."

 

122.   Therefore, I find that the sum of £251,142 was paid to CD to enable him to purchase BLACKSMITH.

 

123.   However, I do not find that the Loan Agreement is legally enforceable by EF for the following primary reasons:

 

a.       The 2008 Letter states that the sum of £251,142 comprised several amounts from WINNIPEG, The X-6 and X-5. There is no breakdown of who paid what.

 

b.      It is not disputed that at the time of the Alleged Loan -

 

i.       WINNIPEG was owned equally by EF-H, EF and GH;

 

ii.      The X-6 was owned solely by GH; and

 

iii.       GH was a one third partner in X-5.

 

c.       Unsurprisingly having regard to the time that has now elapsed, EF was unable in her oral evidence to say how much of the Alleged Loan was owed to GH.

 

d.      EF has failed to establish what, if any, amount of the Alleged Loan was paid by and therefore owed to her and/or EF-H personally.

 

124.   Even if I am wrong about that, and EF was able to establish that the Alleged Loan is owed to her/EF-H personally, I find for the following reasons that it is very much a soft loan, which AN will not be required to repay at the conclusion of the financial remedy proceedings for the following primary reasons:

 

a.       CD failed to mention the Alleged Loan as a liability in his Form E.

 

b.      In his oral evidence, CD said for the first time that he had received text messages from EF asking when the Alleged Loan would be repaid. Any such texts messages were plainly relevant and ought to have been disclosed, but they were not. I draw an adverse inference that CD failed to disclose these alleged text messages because he did not receive them, and EF did not before the commencement of these proceedings ever seek repayment of the Alleged Loan.

 

c.       CD claimed in his oral evidence that he was struggling financially to repay the Alleged Loan. He also claimed that his parents knew that he was struggling financially, although that is of course entirely inconsistent with his claim that EF was pressing him for repayment via text messages. In any event –

 

i.       In his Form E, CD stated that "[AB] has demanded large sums of money from me which has significantly depleted the savings I had. I believe that this can be seen from the bank statements that have been provided."

 

ii.      In his oral evidence, CD did not seriously dispute that he had the sum of £156,000 in his Barclays Bank account at the commencement of the financial remedy proceedings.

 

iii.       In his oral evidence, CD did not seriously dispute that at the commencement of the financial remedy proceedings he owned a Range Rover valued at £90,000.

 

iv.       In his oral evidence, CD accepted that his updating financial disclosure showed that he had transferred the total sum of £60,940 from his bank accounts to JY. He denied that JY was his new partner, but rather a friend, who was looking after the BLACKSMITH Caravan Park for him.

 

v.      It is clear that, since the time of the Alleged Loan, CD has been able to generate a very significant income from which he has chosen to pay for expensive family holidays, luxury motor vehicles, accrue substantial savings, and make large payments to a friend, rather than making any repayments towards the Alleged Loan.

 

d.      EF's failure to demand repayment of the Alleged Loan prior to the commencement of these proceedings combined with CD's failure to make any repayments of the Alleged Loan in the almost 20 years since BLACKSMITH was purchased (and despite having the financial means to do so), makes it inherently unlikely that CD will be obliged to repay the Alleged Loan following the conclusion of these proceedings.

 

e.       I acknowledge that in the Company Proceedings EF successfully sought to enforce several inter-company loans. However, EF only sought to enforce those inter-company loans after she and GH had fallen out. In Family v Family, Falk J held that:

 

"[87.] ... GH's position is that there was a non-contractual understanding between the parties that the loans would remain outstanding 'indefinitely'....

 

[88.] It is of course quite possible to enter into informal arrangements or understandings which fall short of a legal agreement, including an understanding that in certain circumstances one entity will not insist on enforcing its legal rights against another....

 

.......

 

[93.] In this case there has of course been a material change of circumstances. The relationship between the parties has wholly broken down ..... I do not see how it is arguable that any understanding that the parties had about the loans could realistically be interpreted as surviving this."

 

The Alleged Loan would never have arisen but for EF having been joined as a respondent to AB's Section 37 Application. Whilst there was a time during the financial remedy proceedings when EF and CD were estranged, it is clear that they are now reconciled and as evidenced by the fact that CD changed sides to support EF's claims

 

Overall conclusion

 

125.     The Share Transfers are set aside.

 

126.     EF's claim in respect of the Alleged Loan is dismissed.



[1] For the avoidance of doubt, any reference to EF-H is a reference to EF's late husband.

[2] Quoted from a Court of Appeal judgment concerning, centrally, GUTHRUM.

[3] The petition was in respect of GUTHRUM and four further companies owned/controlled by the parties/family members.

[4] The claim as in respect of 3 partnerships controlled by the parties/family members. 

[5] This was concluded in a second Court of Appeal judgment concerning, centrally, GUTHRUM.

[6] In the Business & Property Courts, sitting as a High Court Judge.


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URL: https://www.bailii.org/ew/cases/EWFC/HCJ/2025/958.html