Sherborne Corporate Services Ltd & Ors v Positive Approach Services Ltd & Ors [2016] EWHC 2867 (Ch)

[2016] EWHC 2867 (Ch)

Case No HC-2015-002695

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 15 November 2016

Before

RICHARD SPEARMAN Q.C.

(sitting as a Deputy Judge of the Chancery Division)

Between

SHERBORNE CORPORATE SERVICES LIMITEDClaimants

KENILWORTH CONSULTANTS INCClaimant

INTERIM EXECUTIVES (GUERNSEY) LIMITEDClaimant

IMPERIAL XEON GROUP LIMITEDClaimant

ANDREW JAMES GALLOWAYClaimant

ROBERT PETER HAWKINSClaimant

POSITIVE APPROACH SERVICES LIMITEDDefendants

KENNETH WILLIAMSDefendant

MARY WILLIAMSDefendant

STEPHEN WYNNE-WILLIAMSDefendant

TREVOR WILLIAMSDefendant

JAMES WYNNE-WILLIAMSDefendant

FREDERICK STEPHENSONDefendant

NICOLA WYNNE-WILLIAMSDefendant

David Fletcher (instructed by Ashfords LLP) for Claimant

for The Defendants did not appear and were not represented

Hearing Hearing dates: 24, 25, 26 October 2016

Judgment

RICHARD SPEARMAN Q.C.:

Introduction

[1]This is a claim based on a Deed of Acknowledgement and Satisfaction of a Debt dated 1December 2010 (“the Deed”), made between the Trustees of the Interim Executives (Guernsey) Limited (“IXG”) Occupational Pension Plan 2 (“the Plan”), on the one hand, and the Second Defendant, Mr Kenneth Williams (“Mr Williams”), on the other. By Clause 1 of the Deed, Mr Williams acknowledged and agreed that as from 17 June 2010 he owed a cash contribution of £1m to the Plan, and by Clause 2 he confirmed that on 21 June 2010 he transferred ownership of 9 shares in the First Defendant, Positive Approach Services Limited (“PAS”), to the Plan by way of payment in kind for that contribution.

[2]The Claimants’ case is that these obligations were not, in fact, performed, and (as re-prioritised at trial) their primary claim is for payment of £1m, with a claim in the alternative for declarations and other orders designed to secure the specific performance of Clause 2 of the Deed, together with sums relating to charges, interest, and costs.

[3]These claims are resisted on the grounds set out in an Amended Defence and Counterclaim of PAS, Mr Williams and the Third Defendant, Mary Williams (who is his wife), dated 24 February 2015 (“the Defence”). By paragraph 27 of the Defence, it is admitted that a contract was created by which Mr Williams agreed for good consideration to transfer £1m in the form of 9 Class A (voting) shares in PAS, and by paragraph 32 it is admitted that he executed the Deed. However, it is pleaded that Mr Williams entered into that contract and executed the Deed induced by and in reliance on a series of express and implied representations, which are said to have been false. Further or alternatively, it is pleaded that these representations were implied terms of that contract. Paragraphs 48-50 of the Defence plead that Mr Williams has suffered various financial losses as a result of the matters complained of in the Defence, including payments of £25,000 and £80,000 that he made in to the Plan in June and September 2010 respectively. The prayer for relief seeks rescission of the above contract and of the Deed, an order for re-transfer of those 9 A shares to Mr Williams in the event that they are held to have been transferred away from him, damages for misrepresentation, and damages for breach of contract.

[4]The Claimants deny that Mr Williams has any valid defence or counterclaim on the grounds set out in their Re-Re-Amended Reply and Defence to Counterclaim dated 27 June 2016 (“the Reply”). These grounds include denials that the alleged representations were made, or, if and to the extent that they were made, that they were inaccurate or that Mr Williams relied upon them. They also include denials of alleged illegality or alleged lack of capacity whether under the law of Guernsey or the law of the Seychelles, or that the Claimants’ entitlement to relief is tainted or affected by such matters. In addition (although this is not a comprehensive exposition of their pleaded case) the Claimants contend that Mr Williams is estopped from denying the truth of various documents relating to his ownership of the 9 A shares in PAS, and, to the extent that it is asserted that Mrs Williams owns 4 of those shares, that she is not a bona fide purchaser for value (such that, as the Claimants contend, she holds those 4 shares on trust for the Claimants).

[5]David Fletcher appeared before me on behalf of the Claimants, and I am grateful to him for his assistance. As explained in greater detail below, however, the Defendants did not appear and were not represented at the trial.

[6]In these circumstances, I have set out below the contents of the written materials before me in greater detail than I might otherwise have done, in the hope and expectation that the Defendants will thereby be able to discern clearly the evidential basis for my conclusions.

The parties

[7]IXG is a limited company incorporated in Guernsey and it is the principal employer in respect of what are known as the Interim Executives Limited Occupational Pension Schemes (“the Schemes”), which include the Plan. The Trustees of the Schemes are, and have been since 27September 2010, the First Claimant, Sherborne Corporate Services Limited, and the Second Claimant, Kenilworth Consultants Inc., both of which are companies incorporated in the Seychelles. The Fourth Claimant, Imperial Xeon Group Limited, a limited company registered in the Republic of Ireland, and the Fifth Claimant, Mr Andrew James Galloway, and the Sixth Claimant, Mr Robert Peter Hawkins, were appointed by IXG to be Trustees of the Plan and to act jointly with the First and Second Claimants by an Instrument of Appointment of New Trustees dated 17 December 2014.

[8]At the time the Deed was executed, Mr Williams was the sole, or at least the principal, director of PAS, and the owner of 9 A shares in PAS. Mrs Williams and the Fourth to Eighth Defendants, Stephen Wynne-Williams, Trevor Williams, James Wynne-Williams, Frederick Stephenson and Nicola Catherine Wynne-Williams (formerly Faulkner), are, or claim to be, the holders of further shares in PAS. According to paragraphs43.1 and

43.2 of the Defence, the Register of Members of PAS ought to record that

(i) Mr Williams holds 5 A shares,

(ii) Mrs Williams holds 4 A shares and 9 B (non-voting) shares,

(iii) Nicola Catherine Wynne-Williams holds 1 A share, and

(iv) the remaining 31 B shares are held as to 9 by Stephen Wynne-Williams, as to 10 by Trevor Williams, as to 9 by James Wynne-Williams, and as to 3 by Frederick Stephenson. From the materials before me it appears that they are all related to Mr Williams, either by blood or by marriage. Frederick Stephenson was Mr Williams’ brother-in-law, although he has, sadly, died.

The trial hearing

[9]As set out above, Mr Fletcher appeared before me for the Claimants. The Defendants did not appear and were not represented, although the First to Third Defendants had been represented for much of the proceedings, and quite possibly until very recently, by both solicitors and Counsel. In particular, the original Defence and Counterclaim of the First to Third Claimants, dated 17 October 2014, and the Defence, dated 24 February 2015, were settled by Mr Simon Goldberg, of Counsel, and were verified by a Statement of Truth made by Mr T.J. Luckhurst-Matthews, a Solicitor with Quantum Law LLP.

[10]At a pre-trial review on 17 October 2016, Mr Jonathan Crow QC, sitting as a Deputy Judge of the Chancery Division, gave directions relating to the trial of this claim, which was, by that time, listed to commence on Monday, 24 October 2016, with a time estimate of 8 days. The Order made on that occasion included an Order that the Claimants should file a revised trial timetable in accordance with the directions of the Court given at the pre-trial review. That revised trial timetable provided for a Judge’s reading day on 24 October 2016, with the hearing commencing with Opening Submissions on 25 October 2016. On 24 October 2016, Mr Williams sent an email to the Court that was copied to Mr Luckhurst-Matthews and was expressed to be sent on behalf of himself, Mrs Williams and PAS. That email reads as follows:

“I write concerning the case which starts trial today. It is important that I tell you that there are also, at the same time, proceedings in Guernsey and if they succeed the Trustees of the Scheme, who are the Claimants in this trial, will be removed and this will mean that this trial will not then be able to continue. Even if this trial finishes first, when the Trustees are removed there will be consequences for what happens next with this case. The solicitors who act for the other side in this case know all about this. I thought it very important to make sure that you were told about this, as it could make a difference to what happens and I do not believe that the Court has been told. With this happening, I do not believe that it makes any sense for me or my wife, or anyone from the company, to attend and I do not believe there will be any of the other Defendants attending either.”

[11]No communication was received from any of the other Defendants, although this is perhaps unsurprising. They were joined as additional Defendants pursuant to an Order of District Judge Britton, dated 5 June 2015, which contained detailed directions, including a direction for a pre-trial review, designed to bring this claim to trial. So far as concerns the Fourth to Eighth Defendants, those directions provided, in summary, that the Claimants should have permission to join them as additional Defendants, that they should file and serve Acknowledgements of Service and that they might, if so advised, file and serve Defences in response to the Re-Amended Particulars of Claim (“the Particulars”), but that they were not obliged to serve Defences and might instead elect to rely upon the Defences served by the original First to Third Defendants. In the event, the additional Defendants did not serve Defences, and they have taken no part in the present proceedings.

[12]Mr Williams’ email did not reach the Court until (according to a message from him which accompanied the version which did reach the Court) it was re-sent at 18.08 on 24 October 2016. It was then passed to me on the morning of 25 October 2016, and I informed Mr Fletcher about its contents at the start of the hearing. Having obtained instructions, Mr Fletcher told me, after the midday adjournment on 25 October 2016, that the contents of the email are a nonsense. According to his instructions, there are proceedings in Guernsey, but they have nothing to do with removing the Claimants as Trustees. Instead, they concern an issue which is limited to a particular pension fund owner, and, indeed, a particular issue concerning that individual’s pension fund, namely whether an Order should be made requiring or entitling the transfer of that fund to another pension provider.

[13]The Claimants had served witness statements for trial of Roger Mewis (“Mr Mewis”) dated 23 May 2016 and 21 October 2016 and of Leslie Everett (“Mr Everett”) dated 23 May 2016. Mr Mewis is a company director who founded the IXG Group of Companies together with his brother. Mr Everett has worked in the financial services industry since 1968, and was at the material time engaged by IXG Marketing Limited to develop and market IXG offshore pension products. They were called to give evidence, and they confirmed that the contents of their witness statements are true.

[14]The Claimants had also served experts’ reports of three experts:(1) First, a report dated 13 September 2016 of Davino Sabino (“Mr Sabino”), a partner in a firm which specialises in commercial law in the Seychelles, who was called to the Bar in London and has been in continuous practice as an Attorney-at-Law in the Seychelles since being admitted in 2007. His evidence concerns various aspects of the law of the Seychelles.

(2) Second, a report dated 9 September 2016 of Matthew Charles Newman (“Mr Newman”), a partner in a firm of Guernsey advocates, who is an advocate of the Royal Court of Guernsey. His evidence relates to various aspects of the law of Guernsey.

(3) Third, a report dated 21 September 2016 of James Quarmby (“Mr Quarmby”), a partner and head of private wealth at Stephenson Harwood LLP, who specialises in tax planning and wealth structuring for international private clients. His evidence relates to qualifying recognised overseas pension schemes (“QROPS”).

[15]In accordance with CPR 35.5, and as the court did not direct otherwise, the evidence of these experts was given in these written reports.

The Claimants’ witnesses of fact

[16]Mr Mewis’ evidence may be summarised as follows:(1) The IXG Group is a pension provider that specialises in providing offshorepension arrangements for high net worth individuals. It was set up in 2006, with the assistance of appropriate expert advice, to take advantage of changes to UK tax and pension rules in April 2006 which made it easier for individuals to transfer their personal pension funds away from the UK if they chose to do so, and offered both QROPS and Regulated Overseas Pension Schemes (“ROPS”). Such schemes provide pension holders with increased flexibility in terms of the assets that may be transferred into them and the tax treatment of those assets.

(2) The Plan was established by IXG on 2 June 2006 as a QROPS which was therefore open to UK residents to invest in pursuant to section 150 of the Income Tax (Guernsey) Law 1975. Approval for IXG’s Schemes (and the Plan) was provided by the States of Guernsey Tax Office by a letter to Mr Mewis dated 4 March 2008.

(3) The Plan had various Trustees over time. One of these Trustees was St Anne’s Trustees Limited (“SAT”). SAT brought proceedings against IXG in the Royal Court in Guernsey between 2010 and 2011, arising from IXG’s decision to replace it as Trustee. This dispute is “wholly unconnected” to the present claim.

(4) Although the IXG Schemes (including the Plan) were Guernsey based schemes and the Trustees were companies registered in the Seychelles, the Schemes (including the Plan) were, from February 2012, administered from offices on the island of Cyprus. In January 2015 that changed to Malta. There were good tax reasons for these changes.

(5) In the latter part of 2014, a decision was taken to appoint further Trustees to the Plan, namely the Fourth, Fifth and Sixth Claimants, in addition to the First and Second Claimants. On 17 December 2014, documents were executed to give effect to those appointments and the transfer of assets of the Schemes (including the Plan) from the First and Second Claimants to each of them and the new Trustees.

(6) The IXG Group included IXG Marketing Limited, the sole purpose of which was to market IXG pension products through the medium of a number of Independent Financial Advisors (“IFAs”). The intention was to set up a network of IFAs who could refer potential new clients to IXG, in return for which they would be remunerated on a commission only basis.

(7) On 6 July 2007, IXG Marketing Limited entered into a licence agreement with Mr Everett, and he became one of this network of IFAs. Mr Mewis and his brother knew Mr Everett “fairly well”. Accordingly, they knew that he had been prosecuted and sent to prison many years previously. However, they took the view that he had not been dishonest and that they should give him a second chance.

(8) IXG obtained professional advice that, in view of the risk associated with the provision of information about the Schemes by IXG marketing staff, any new member of the Schemes (including the Plan) should receive advice from their own financial and/or tax advisers before being accepted as a member. It was made clear to Mr Everett and all the other marketing staff that they were not regulated to provide advice to prospective new members but they were able to provide information about the Schemes (and the Plan). Mr Everett’s contacts included two financial advisers, Ben Kent and Mark Chamberlain (“Mr Chamberlain”). In about February 2010, through Mr Chamberlain, Mr Williams was introduced to IXG as a potential new member.

(9) Although the Defendants have suggested that Owen Richardson (“Mr Richardson”) of McLaran Financial was lining himself up to act as an agent or sub-agent for IXG, Mr Mewis has no recollection of him approaching IXG or IXG Marketing Limited to create any agency or licencing arrangement.

(10) Mr Mewis first met Mr Williams in December 2011. Accordingly, Mr Mewis was not present when the features and benefits of the IXG Schemes (including the Plan) were explained to Mr Williams by Mr Everett and Mr Chamberlain.

(11) However, on the basis of what he was told, Mr Mewis considered that the Plan was ideal to meet Mr Williams’ needs. Mr Mewis understood from Mr Everett that a copy of the IXG Portfolio brochure was given to Mr Williams (by Mr Chamberlain) to provide information to him about the features and benefits of the Plan. This brochure had been prepared by professional advisers, and Mr Mewis stands by the accuracy of its contents. Mr Mewis’ understanding was as follows. Over a period of several months, first Mr Chamberlain and then Mr Everett had met Mr Williams and his financial advisers. Mr Williams owned a successful nursing home business in the North East which operated through the medium of PAS. Mr Everett said that Mr Williams (a) was at (or close to) retirement age and was keen for his estate to avoid Inheritance Tax, (b) wanted to put assets out of reach of his children and to protect his wife, (c) valued PAS in excess of £1m, and (d) “owned all the shares” in PAS and wanted to transfer all those shares into his pension.

(12) Mr Mewis does not believe that the features and benefits of the Plan were misrepresented to Mr Williams, or that Mr Williams could possibly have misunderstood those matters, and he suggests (i) that Mr Williams obtained independent advice before deciding to become a member of the Plan and (ii) that the events which followed Mr Williams’ decision are inconsistent with Mr Williams’ case. (In answer to questions from me as to what he believed lay behind Mr Williams’ stance in the present claim, Mr Mewis stated, in summary, that, having met Mr Williams, he had formed the impression that Mr Williams had latched on to the tax advantages of becoming a member of the Plan, but that he had not appreciated, or did not appear able to accept, that once assets were placed in a pension fund they could not be accessed as if they were in a Bank, especially if they were not in liquid form.)

(13) Mr Mewis then goes over the history of Mr Williams’ application to become a member of the Plan and his entry into the Deed. These matters can be tracked through the contemporary documents, which I consider later in this judgment.

(14) Mr Mewis next addresses the charges payable, and paid, by Mr Williams. In brief: (a) an invoice was raised on 15 September 2010 for £104,753.52 based on 9% of the assets being transferred by Mr Williams to the Plan plus a one-off administration fee of £1,000, (b) that invoice sets out that Mr Williams paid £61,000 of those fees but the balance of £44,753.52 was held aside by the Trustees at Mr Williams’ request, (c) Mr Williams has paid nothing further towards scheme fees since he made that payment of £61,000, although the Scheme charges that he owes increased to £50,056.99 as at 13 August 2013 and by 31 May 2015 had reached £119,102.99, and (d) costs continue to increase Mr Williams’ liability in accordance with the Plan documentation, and an up to date statement of his pension scheme charges is in the course of being prepared. Mr Mewis amplifies some of these matters in his second witness statement (in which he also confirms, for the avoidance of doubt, that none of the Trustees of the Schemes (including the Plan) are remunerated for their office as Trustee).

(15) Mr Mewis then rehearses events in 2011 and the emergence of the dispute which forms the subject of the present claim. However, beyond a limited number of specific matters which I set out and address later in this judgment, I do not consider that these events are material to the issues that I have to decide.

(16) Finally, Mr Mewis expresses the view that “this claim is essentially a simple one of Mr Williams reneging of what he agreed to contribute to his off shore pension scheme in 2010”, although it has become highly complex by reason of the arguments which have been raised by Mr Williams and those acting on his behalf.

[17]Mr Everett’s evidence accords with what Mr Mewis says that he was told about Mr Williams. I return below to that part of it which deals with the misrepresentations alleged by Mr Williams. It also explains that, in about December 1994, Mr Everett pleaded guilty (on advice) to an offence of “unlawful deposit taking” contrary to the Banking Act which was then in force, which he maintains was not an offence of fraud or dishonesty, in connection with his involvement in advising a number of clients (none of whom lost money) in respect of investing in a hotel development. Mr Everett’s evidence concerning his dealings with Mr Williams includes the following:

“17. … In terms of the advantages of the schemes, I would summarise those as follows:- (a) flexibility in terms of the types of asset(s) that could be put into the schemes - it could be virtually any asset with a quantifiable value to include property, shares in public or private companies, investments or even chattels such as works of art or antiquities provided that the asset had a value that could be established and was an appreciating type of asset; (b) unlimited contributions could be made into the schemes, free of UK tax; (c) UK Inheritance Tax (“IHT”) advantages in that the asset, once transferred into the scheme, would be owned by the scheme and would not, therefore, be charged to IHT in the event of the pension holder's death; (d) UK Capital Gains Tax (“CGT”) advantages in that capital gains achieved after the asset was transferred to the pension scheme would not be subject to CGT in the UK … 21. I was not aware that Mr Chamberlain signed any agreement with IXG Marketing Limited. Nevertheless, he acted as my “sub-agent” and would be paid a share of any commission from IXG for referring any client that joined either of the schemes. 22. One client that Mr Chamberlain referred to me was Mr Kenneth Williams. I understand that Mr Williams refers in the case papers to two meetings I had with him at an hotel in Team Valley, Gateshead in late 2009 / early 2010. I recall those meetings although, looking back, it is difficult for me to distinguish between the two. I do not have any written records of those meetings now. 23. As I recall, the first of those meetings felt like an exploratory meeting whereby Mr Williams wanted me to outline the scheme, how it worked and how it would benefit him. I cannot recall if Mr Williams' associate, Mr Owen Richardson, was also present at that first meeting, but he was certainly present at the second meeting. Mr Williams introduced Mr Richardson as his “financial adviser”

. I understood that Mr Richardson had his own firm of financial advisers called McLaran Financial of Regent Chambers, 1 Princes Street, Bishop Auckland, County Durham. 24. I was aware that, by the time of the first meeting, Mr Williams had previously met with Mr Chamberlain on more than one occasion. Mr Williams had been provided (by Mr Chamberlain I believe) a copy of the brochure from IXG, however, we did not spend time going through the brochure - I assumed that he had read it. As I recall, he just wanted to hear from me about the scheme. 25. At both meetings, Mr Williams also brought his brother-in-law, Fred Stephenson. Mr Williams introduced and described Mr Stephenson as his “accountant and bookkeeper”. In other words, at the second meeting I can remember there were five people present - Mr Williams, Mr Stephenson, Mr Richardson and then Mark Chamberlain and myself. 26. The impression I got from Mr Williams, Mr Stephenson and Mr Richardson was that the three of them knew each other very well and for a long time. I understand that Mr Stephenson has since died and I was sorry to hear that. 27. The second meeting was very much a repeat of the first meeting whereby Mr Williams and his two advisers asked various questions about the scheme and I answered those questions as far as I was able. I remember thinking that I was being asked many of the same questions that I was at the first meeting but I did not wish to appear rude by pointing that out. On the contrary, I fully understood the need for Mr Williams to be entirely happy that the scheme was right for him and his needs. 28. During the course of my meetings with Mr Williams (and the others in attendance), Mr Williams explained his circumstances and what he was trying to achieve. He said that he had built up his care home business over many years and had worked hard during his lifetime and paid his taxes and he wanted to protect what he had built up. 29. I did not meet Mr Williams’ wife, however, Mr Williams explained to me how he wanted to provide for her and also protect her, upon his death. He seemed very sure that his wife would out-live him. He explained a little about his and his wife's children and inferred that they were a relevant consideration. I cannot recall the words that he used, however, he suggested that he was concerned that, following his death, their children might put their mother under pressure to sell assets and give money to them. I was not sure if this was an indication that there were financial difficulties within the family or the children were difficult or if there was some other reason why he wanted to protect his wife in such a way. This, I understood, was Mr Williams' main concern. 30. I explained how the scheme worked and the benefits of it to Mr Williams and Mr Richardson many times. The key to the tax situation was to remember that after assets went into the scheme they were then sheltered from UK tax (but UK tax may well be payable before the assets went into the scheme). I reminded Mr Williams on several occasions that I was not a tax expert and the rules of the IXG scheme required him to take his own financial advice before it was possible for him to become a member. He clearly understood that. 31. Mr Williams required constant assurance and re-assurance that the scheme met his needs. He required more reassurance than any other client I had met. As Mr Williams’ main concern was Inheritance Tax, I assured him that the scheme was ideally suited to deal with that concern because the assets would be held by the Trustees and they would only act in accordance with the Trust Instrument. 32. Paragraph 19 of the Amended Defence and Counterclaim makes various allegations about what Mark Chamberlain and I allegedly said to Mr Williams before Mr Williams applied to become a member of the IXG plan. I have been asked to comment on those allegations. 33. I note that those allegations are set out in a structured sequence, however, discussions with Mr Williams (and Mr Stephenson & Mr Richardson) did not proceed in such a way. Before addressing the specific allegations made, I will confirm what I said to Mr Williams about the operation of the IXG pension schemes and their advantages. 34. I explained to Mr Williams (in common with all clients/prospective clients of IXG) that the pension scheme operated by the member joining an occupational pension scheme and therefore becoming an employee of an Interim Executives company. This, I carefully explained to him, allowed the member to transfer assets into the scheme as a "tax shelter". As a consequence, I explained, such assets would then be "protected against IHT and CGT". I then qualified what I said by explaining that any transfer of assets into the scheme would have been a "disposal" for CGT purposes and CGT could therefore arise on that transfer. 35. It was my normal practice to always say to all potential new clients of IXG that, "I am only a marketing man, I am not authorised to give financial or tax advice". I would say that, for their "protection", they were "required to consult their IFA or Accountant". I said those words to Mr Williams when I met him. 36. Indeed, in all cases including that of Mr Williams, I made it clear that I was not a tax accountant or tax advisor and that tax advice from the prospective client's own accountant would be necessary before they joined either of the schemes. I gave that advice to Mr Williams on several occasions and he accepted it. Mr Williams then signed a letter confirming this and a copy of that letter dated 11 February 2010 is produced at page 34 of LJE2.” (a) flexibility in terms of the types of asset(s) that could be put into the schemes - it could be virtually any asset with a quantifiable value to include property, shares in public or private companies, investments or even chattels such as works of art or antiquities provided that the asset had a value that could be established and was an appreciating type of asset; (b) unlimited contributions could be made into the schemes, free of UK tax; (c) UK Inheritance Tax (“IHT”) advantages in that the asset, once transferred into the scheme, would be owned by the scheme and would not, therefore, be charged to IHT in the event of the pension holder's death; (d) UK Capital Gains Tax (“CGT”) advantages in that capital gains achieved after the asset was transferred to the pension scheme would not be subject to CGT in the UK …

The background to the Deed

[18]The background to the Deed is as follows. As principal employer in respect of a number of Occupational Pension Schemes, IXG is able to offer pension arrangements for both residents and non-residents of Guernsey. Another company, Interim Executives (Malta) Limited (“IXG Malta”) is an adhering employer for purposes of those Schemes. The Plan is a pension scheme which was approved by HMRC as a QROPS for UK purposes, with effect from 15 December 2006, by a letter of that date from HMRC to Mr Mewis. By letter dated 11 February 2010, Mr Williams informed the Directors of IXG Malta that:

“After consulting and reviewing your company’s Contract for Services, I wish to apply to become an Executive of the Interim Executives Group of Companies.”

[19]The letter enclosed (among other things), a Member’s Confirmation Letter and asked that a contract for services should be returned to Mr Williams at their convenience. The letter concluded:

“I wish to join the Interim Executives Group of Companies Pension Scheme, as described within the Contract. I have seen a copy of the Scheme’s charges. I am aware of and agree to these scheme charges.”

[20]According to the Claimants’ case, in accordance with the law of Malta, an individual is classed as an employee of an entity not only when the individual enters into a contract of service with that entity, but also when the individual enters into a contract for services with that entity. Further, once an individual has entered into a contract for services with a company such as IXG Malta, then, regardless of the value of the services actually provided, that individual will be able to make contributions to a Scheme like the Plan of an unlimited amount, which will qualify for the tax advantages offered by the Plan, by reason of the combined effect of the laws of Guernsey, Malta and the United Kingdom.

[21]Mr Williams signed three further letters, each dated 11February 2010. The first, addressed to the Directors of IXG Malta, stated:

“I confirm that, prior to joining the Interim Executives Group of Companies Pension Scheme, I will have sought appropriate advice concerning any transfers, which I may wish to make into the pension scheme.”

The second, addressed to the Trustees of the Scheme, stated:

“I confirm that the Trustees may pay to the protector a maximum of 9% (nine percent) of the transfer value as a commission for services provided in the execution of the transfer of funds into the Interim Executives Group of Companies Pension Scheme.”

The third, also addressed to those Trustees, stated:

“I acknowledge that, should I issue an instruction to terminate, for whatever reason, the transfer of my pension fund into the Interim Executives Group of Companies Pension Scheme at any point after the process has commenced, I will be responsible for any costs incurred, including disbursements, by the Trustee and Scheme Manager.”

[22]On 12 February 2010, Mr Williams completed a Declaration of Source of Funds addressed to the same Trustees. This document included a declaration by an intermediary, namely Mr Richardson, which was also dated 12 February 2010. That Declaration stated:

“I/we have made enquiries unto the best of my/our knowledge and believe the funds or assets being transferred to you were not derived from, nor are they being employed in illegal transactions by the person/company for who I am/we are acting.”

[23]This is one of a number of documents upon which the Claimants rely as supporting their case that Mr Williams had access to, and took, independent professional financial advice.

[24]On 26 February 2010, Mr Mewis, for and on behalf of IXG Malta, wrote to Mr Williams confirming his appointment as an Executive of the Interim Executives Group of Companies with effect from 26February 2010. The letter set out the sums which IXG Malta would pay to Mr Williams in the event that it authorised his services, stated that he would be liable for income tax and National Insurance, and contained wording designed to protect the secrets and confidential information of IXG Malta and, further, post-termination restrictions relating to Mr Williams’ entitlement to compete with IXG Malta. It also stated:

“As an Executive of the company, you may be invited to join the Interim Executives Group of Companies Occupational Pension Scheme. If you wish or do not wish to join the said pension scheme, would you kindly sign below.”

[25]Mr Williams countersigned that letter on 5 March 2010, stating:

“I have read, understood and signed this statement and agree to accept this Contract for Services with the company on these terms.” and “I do wish to join the Interim Executives Group of Companies Occupational Pension Scheme, as described in the Contract, subject to my approval to admissibility to the said scheme by Interim Executives (Malta) Limited at their sole discretion.”

[26]On 17 March 2010, Mr Mewis wrote to Mr Williams for and on behalf of IXG, welcoming Mr Williams to the Interim Executives (Guernsey) Group of Companies Pension Scheme and enclosing a number of documents. Mr Mewis also sent Mr Williams an Announcement Letter, introducing the Scheme to Mr Williams. The letter stated (among other things): “I am pleased to inform you that the company operates a defined contribution scheme. I am writing to give you a brief description of the nature of the scheme, and to invite you to become a member as you indicated you wish to join. The scheme was established under irrevocable trust with an effective commencement date of 2 June 2006. The scheme assets (“the funds”) are held securely on behalf of the members by a professional trustee company, registered in Alderney. The administration and management of the scheme is vested in the Trustee, which may appoint another person or other persons to act as the Administrator in accordance with the Trust Provisions. The purpose of the scheme [is] to provide retirement benefits on a tax efficient basis for those employees of the company and the employees of any other participating employer, to whom the company offers membership. … The benefits of the scheme will normally be paid out of the individual member’s account in the fund at the date of leaving, retirement or death, as the case may be. The individual member’s account is defined in the rules of the scheme as follows: ‘Individual member’s account’ means from time to time the total of contributions paid into the scheme by the employer and the member (if any), any additional voluntary contributions paid by the member, transfer values paid to the scheme in respect of the member (from whatever source deemed acceptable by the Trustee) and investment yields and accretions earned and credited to all contributions and sums received in respect of the member. PROVIDED THAT(a) any transfers from UK registered schemes which are received shall be held in the fund and shall be separately identifiable; and

(b) no transfer payments shall be accepted into the fund by the Trustee in respect of an enhanced protection member which would prejudice the status of that member as such a member.’ This definition accords with the requirements of Guernsey trust law. The Trustee holds very wide investment powers, and the Trustee may consult with any special consultant, including the protector through whom you may relay any specific preferences which you may have. The protector will discuss these preferences with the Trustee, which holds the ultimate decision making power over investment. The scheme has been approved by the Administrator of Income Tax for the States of Guernsey under Section 150 of the Income Tax (Guernsey) Law 1975. This is a very tax efficient form of benefit provision. The income and gains of the funds of the scheme are free from Guernsey Tax on income and gains, although in certain circumstances the Trustees may be required to deduct Guernsey Income Tax from members’ pension payments. … For the avoidance of any doubt, the provisions of the Trust instrument and the rules which govern the scheme shall take precedence over this announcement. Early retirement benefits may be taken in appropriate circumstances, and benefits will not normally commence before age 50. By way of example, you may draw your benefits either as regular payments as pension together with a lump sum, which in the majority of situations will represent up to a maximum of 25 percent of your individual member’s account. Your family, and their successors, may benefit from the assets in your residual individual member’s account on or after your death.” ‘Individual member’s account’ means from time to time the total of contributions paid into the scheme by the employer and the member (if any), any additional voluntary contributions paid by the member, transfer values paid to the scheme in respect of the member (from whatever source deemed acceptable by the Trustee) and investment yields and accretions earned and credited to all contributions and sums received in respect of the member. PROVIDED THAT (a) any transfers from UK registered schemes which are received shall be held in the fund and shall be separately identifiable; and (b) no transfer payments shall be accepted into the fund by the Trustee in respect of an enhanced protection member which would prejudice the status of that member as such a member.’

[27]Mr Mewis, for and on behalf of IXG Malta, sent two further Announcement Letters to Mr Williams. The first introduced the “Interim Executives (Guernsey) Occupational Pension Plan”. The second introduced Mr Williams to the “Interim Executives (Guernsey) Limited S40(o) Plan”. These letters were in substantially the same terms as the first Announcement Letter. The letter relating to the “Interim Executives (Guernsey) Occupational Pension Plan” stated that this plan had been established as an irrevocable trust with an effective commencement date of 2 June 2006 and that “the plan has been approved by the Administrator of Income Tax for the States of Guernsey under Section 150 of the Income Tax (Guernsey) Law 1975”. The second stated, in respect of the “Interim Executives (Guernsey) Limited S40(o) Plan”, that this plan had been established as an irrevocable trust on 11 February 2008 and that “the plan has been approved by the Administrator of Income Tax for the States of Guernsey under Section 40(o) of the Income Tax (Guernsey) Law 1975”.

[28]A member’s booklet, dated September 2011, contains further information relating to the “Interim Executives Group of Companies Occupational Pension Scheme”. The booklet explained (among other things) that:(i) “The scheme is open to all employees who are invited to join by the principal employer or an adhering employer”;

(ii) “The sole purpose of the scheme is the provision of superannuation benefits out of the monies and assets which are held in the fund of the scheme”;

(iii) There were significant tax advantages because approval had been given by the Director of Income Tax for the Bailiwick of Guernsey under Section 150 of the Income Tax (Guernsey) Law 1975 (as amended) and because there was also approval and tax exemption for the Section 40(o) part of the scheme, such that: “All the income of the scheme derived from investments or deposits may be accumulated free of Guernsey Tax. Further, where annuities are paid out of the scheme in respect of non-Guernsey service, there is no requirement for the Trustee to deduct Guernsey Income Tax before paying out the annuities, unless the member is resident of Guernsey”;

(iv) “The Section 150 Scheme is principally open to residents of Guernsey” and “Under the Terms of Approval, the contributions and benefits under the Section 150 Scheme must be in relation to your employment as an employee with your employer”;

(v) “A major attraction of the Section 40(o) Scheme is that there are no statutory limits on the level of Company or Member contributions and payments which may be made to the Scheme or the benefits payable under the Scheme”; and

(vi) “The Scheme offers very wide flexibility, enabling you to protect your investments in a tax-free environment, making it a very tax advantageous method of providing for retirement and family benefits. You may take part of your benefits as a pension and / or in lump sum form or in-specie. Most importantly, your benefits are paid free of Guernsey Tax to yourself and your family, as non-residents of Guernsey”.

[29]On 17 June 2010, Mr Williams wrote to the then Trustee of the Scheme (SAT) stating: “I wish to make a personal contribution of £1,000,000 into my pension scheme”.

[30]On 21June 2010, Mr Mewis replied:

“Further to your letter dated 17 June 2010, the Trustee has accepted your proposed personal contribution of £1,000,000 (one million pounds sterling) into the scheme and by this letter a debt of £1,000,000 (one million pounds sterling) has been created.”

The letter explained that the debt might be discharged by means of (a) cash or (b) an in-specie transfer of personal assets or (c) a combination of cash and assets. It continued:

“Where a transfer of assets is involved, a professional valuation should accompany the letter advising the Trustee of how you would prefer to discharge the debt.”

[31]Also on 21 June 2010, Mr Williams sent two letters to the Trustee, each entitled “Re in-specie transfer”. The first stated:

“In discharging the debt of £1,000,000 (one million pounds) to the scheme, I proposed an in-specie transfer of transferring ownership of the assets, being shares in Positive Approach Services Limited. As indicated by the company documents already submitted, the value of the shares exceeds the said debt.”

The second stated:

“In transferring ownership of the assets, being shares in Positive Approach Services Limited, to the scheme on 21 June 2010, this represents the full and final payment in the discharge of the debt I owe to the scheme. I will sign any necessary documentation to register the date of the transfer of ownership of the assets to the scheme.”

[32]The papers before me include a Share Certificate of PAS, dated 21 June 2010 and signed by Mr Williams as Director. The Share Certificate bears the number 3 and relates to nine shares. It certifies that Interim Executives Group of Companies Pension Scheme is the registered holder of nine shares of £1 each, fully paid in PAS. It is signed by Mr Williams as Director and by another signatory as Secretary.

[33]On 23 June 2010, Mr Mewis, as Director of IXG, sent a letter to Mr Williams entitled “Re: IXG Pension Scheme – In-specie Transfer”. The letter stated:

“This is to advise you that the ownership of the nine (9) Positive Approach Services Limited shares was transferred from yourself into that of the IXG Pension Scheme on 21 June 2010. I had a meeting with the Scheme solicitors today to prepare documentation to register the said transfer of share ownership. I shall be writing to you in due course concerning this matter and your IXG Pension Scheme.”

[34]On 8 September 2010, Mr Mewis wrote to Mr Williams, stating:

“Further to our enclosed letter, dated 23 June 2010, the Scheme is awaiting two items: • Nine (9) Positive Approach Services Limited Company issued shares, made out in the name of Interim Executives (Guernsey) Limited Occupational Pension Plan, together with copies of minuted and signed company documentation, dated the 21 June 2010, specifying the recovery of the said shares from yourself and the re-issue of the same to the Scheme; and • A professional valuation of the said shares. It is imperative that the above items are sent to us without delay and as a matter of urgency, as the Scheme’s solicitors are becoming concerned that they are unable to finalise the registration of the in-specie transfer. Given that the Scheme is the sole shareholder of the company and to protect the interests of the Member, being yourself, no other shares may be issued without the consent and authority in writing from the Trustee.”

[35]In paragraph 52 of his first Witness Statement, Mr Mewis states that, in response to his letter dated 8 September 2010, a number of documents were received by him/IXG, as follows: (i) A copy of a letter from chartered accountants, Bell Anderson Limited, to Mr Williams, dated 9 September 2010, which states:

“Ordinary B Non-voting Shares We understand that it is the intention of the Directors to cancel the above ordinary B non-voting shares in accordance with the requirements for reduction of share capital pursuant to Section 641 of the Companies Act 2006 and you have instructed us to prepare the necessary documentation. The Directors consider that as the shares are non-voting, they are of negligible value and therefore, following changes in the Companies Act 2006, have agreed to cancel the shares.” (ii) A letter from the same chartered accountants, addressed to the Trustee of the Scheme, dated 12 September 2010, enclosing a share valuation for PAS. The valuation itself is entitled “Business Valuation for Positive Approach Services Limited as at 31 August 2010”

. Appendix 1 to that valuation was entitled “Earnings Report” and placed a value on PAS of £1,058,928. According to that appendix, that valuation was based on an average net profit before tax of £250,000, tax at 20% in the sum of £50,000, a growth rate of 0%, and a price/earnings ratio of 4.144. This was said to produce a commercial valuation for a business with average systems of £828,800. The appendix adds to this a systems premium of 27.77% or £230,128, producing a total valuation figure of £1,058,928. (iii) Minutes of the meeting of the Board of Directors of PAS, dated 21 June 2010. These minutes record that those present were Mr Williams in his capacity as Director and Mr Frederick George Stephenson in his capacity as Company Secretary, and they are signed by those two individuals. They also bear a third signature, which is dated 14 September 2010. This appears to be some form of verification of the minutes made for the purposes of compliance with the requests contained in Mr Mewis’ letter dated 8 September 2010. The minutes state:

“Matters for Discussion: 1. Recovery of nine ordinary £1 Positive Approach Services Limited Shares issued to Mr Kenneth Williams. Share certificated retained and annotated. 2. Re-issue of said nine ordinary £1 shares to Interim Executives (Guernsey) Limited Occupational Pension Plan. These items agreed and agreed upon, there being no more business the meeting is concluded.”

These items agreed and agreed upon, there being no more business the meeting is concluded.” (iv) Further minutes of a Board meeting of PAS, dated 21June 2010, recording the same individuals as being present and signed by the same individuals and countersigned by the same third signatory, also on 14 September 2010. These minutes record:

“Matters for discussion: 1. Dissolution of Class B Shares. These items agreed and agreed upon, there being no more business the meeting is concluded.”

These items agreed and agreed upon, there being no more business the meeting is concluded.” (v) A Share Certificate numbered 3, relating to nine shares in PAS, stating that the capital of PAS is £9 divided into nine shares of £1 each, and certifying that Interim Executives (Guernsey) Limited Occupational Pension is the registered holder of nine ordinary shares of £1 each, fully paid in PAS, and that the Certificate has been executed by PAS in the presence of Mr Williams (as Director) and Mr Stephenson (as Secretary). This Certificate is dated 21 June 2010, and the photocopy of it which was sent to Mr Mewis / IXG is again countersigned by the same signatory as the Board Minutes, also on 14 September 2010.

[36]On 15 September 2010, the Second Claimant, Kenilworth Consultants Inc., sent an invoice to the Trustee of the Plan in respect of “Professional services provided by the Protector, in accordance with the provisions of the Agency Agreement, dated 17 August 2006”. The invoice related to Mr Williams, and recorded that he had transferred assets of £1,163,928 comprising £1,058,928 in respect of shares and £105,000 in respect of cash. It recorded that the first Claimant, Sherborne Corporate Services Limited, was entitled to 9 percent commission, in the sum of £104,753.52 and that there was also due a one-off administration fee of £1,000. These charges accorded with other documents relating to the Plan, which are included in the trial documents, the contents of which, according to the evidence before me, had previously been communicated to Mr Williams.

[37]On 2 November 2010, Mr Mewis sent a letter to Mr Williams, stating that further to Mr Mewis’ letter dated 23 June 2010 and the transfer of ownership of nine shares in PAS, which had made the Scheme the sole shareholder in and owner of PAS:

“We need to formalise your position as Director”

. The letter continued:

“As advised, the Trustees of the Interim Executives (Guernsey) Plan, on the recommendation of Interim Executives (Malta) Limited, with whom you have a contract for services, wish to confirm, as previously advised, that you are the Trustee appointed Director of Positive Approach Services Limited with effect from 21 June 2010. Of the salaried sum you receive from the company, the sum of £500 (five hundred pounds) per month reflects the fiduciary duties undertaken as a Director. Would you kindly enter into the company records this Directorship appointment?”

Would you kindly enter into the company records this Directorship appointment?”

[38]On the face of it, these documents - including and in particular the valuation figure of £1,058,928 (which related to the entire value of PAS and which was put forward as representing the value of the shares which Mr Williams had transferred to the Scheme in discharge of his obligation to pay into the Plan £1m or make an in-specie transfer of personal assets of equivalent value) – establish that:(1) The basis upon which the nine A voting shares in PAS was transferred by Mr Williams and accepted in discharge of that obligation was that those shares represented the entirety of the shareholding in PAS.

(2) This is what Mr Williams represented the position to be.

[39]These conclusions are, however, subject to the case set out in the Defence to the effect that important documents were not genuine or were not created on the dates on which they purport to have been created, and that this was known to IXG.

The Deed

[40]The Deed itself was executed by Mr Williams (as “Member”) and by the Trustees of the Plan on 1 December 2010. It provides as follows:

“Whereas: (A) The Member is a member of the Plan. (B) By letter of 17th June 2010 delivered to the Plan the Member committed to make a contribution of £1,000,000.00 (one million pounds) (the “Committed Contribution”) to the Plan. (C) In the form of 9 Positive Approach Services Limited shares valued at £1,000,000.00. NOW THIS DEED WITNESSES as follows:- 1. The Member and the Plan each acknowledge and agree that, as from 17th June 2010 the Member owed a cash contribution to the Plan of £1,000,000.00 (the “Contribution”). 2. The Member hereby confirms that on 21st June 2010 the Member transferred ownership of 9 Positive Approach Services Ltd shares to the Plan by way of payment in kind in full of the Contribution. All of the shares are confirmed by the Member to be transferred to the Plan with full title guarantee free from all encumbrances and all rights of third parties whatsoever. Such transfer was effected by the Trustees as the property of the Plan. 3. The Plan hereby agrees and acknowledges that the 9 Positive Approach Services Ltd shares became the absolute, unencumbered property of the Plan on 21st June 2010. The Plan hereby confirms its acceptance of the shares in full and final satisfaction of the Contribution. 4. This Deed shall be interpreted in accordance with English Law and the parties each submit themselves to the exclusive jurisdiction of the Courts in England in respect of any matter, question or dispute arising out of this Deed.”

NOW THIS DEED WITNESSES as follows:-

The dispute about authenticity of documents

[41]By paragraph 14 of the Defence, it is admitted that in early 2010 the nine voting ‘A’ shares in PAS were owned by Mr Williams, but it is denied that it was represented to IXG by or on behalf of Mr Williams that, as from 21 June 2010, Mr Williams was the owner of all the shares in PAS. Paragraphs 14 and 15 of the Defence further plead as follows:

“14.1 it is admitted that in a letter dated 9 September 2010 to the Second Defendant Bell & Anderson noted that it was the intention of the First Defendant’s directors to cancel the B shares; 14.2 if, which is not admitted, the said letter dated 9 September 2010 was sent to IXG, it was not sent by the Defendants or with their knowledge or consent. The Defendants note that the Claimants have declined to plead the sender of the said letter; 14.3 it is denied that with the copy of the letter dated 9 September 2010 allegedly sent to IXG were sent copies of two board resolutions dated 2010 showing by the first resolution that the B shares had been dissolved; and by the second resolution that the A shares had been reissued to IXG. For the reasons which appear below, no such signed board resolutions existed on 9 September 2010; 14.4 a board resolution dated 21 June 2010 relating to the dissolution of the B shares only was sent by Mark Chamberlain of IXG’s marketing team on the instruction of Roger Mewis, a director of IXG, to the Second Defendant on or around 8th September 2010, shortly after Mr Chamberlain had told the Second Defendant that he should make it look like a board meeting had taken place on 21 June 2010; 14.5 the said board resolution dated 21 June 2010 was signed by the Second Defendant and Mr Stephenson on or after 10th September 2010 and was sent by the Second Defendant to Mr Chamberlain’s home address at Mr Chamberlain’s request; 14.6 Mr Chamberlain took the said board resolutions to Saddlers, a firm of accountants in Liverpool, whereupon they were signed by Saddlers on or around 19 September 2010; 14.7 no board resolution was passed by PAS concerning the reissue of the A shares to IXG on 21 June 2010, in September 2010, or at all. 15. IXG by its director Mr Mewis and its agent Mr Chamberlain was well aware that PAS had not passed any board resolutions on 21 June 2010. The retrospectively created resolution dated 21 June 2010 relating to the B Shares was IXG’s suggestion to the Second Defendant as to how it might be made to look like a resolution relating to the B Shares had been passed on 21 June 2010. In the circumstances, it is denied that was any effective representation by the Second Defendant that he was the owner of all of the shares in PAS. It is also denied that IXG was induced by any representation contained in the letter of 9 September 2010 (if received) or any board resolution sent with that letter.”

[42]These allegations are denied by Mr Mewis, who states as follows in paragraphs 59 and 60 of his first Witness Statement:

“59. As I understand it, those representing Mr Williams and PAS are trying to argue that IXG or the Trustees were in some way complicit in “backdating” the company board minutes and/or resolutions. I do not understand that at all. I did not suggest that any document should be backdated. I assumed that the proper company procedures had been followed and I asked for copies of the paperwork. I could see the date that the documents had been counter-signed but the paperwork was a mere formality as far as I could see. If Mr Williams and Mr Stephenson had done anything wrong by “back-dating” the documents, I do not understand how such behaviour can now be used against IXG and the Trustees. 60. I also understand that Mr Williams and those representing him are complaining that the proper procedures to transfer his shares to the Plan were not followed including the completion of a Stock Transfer Form and the payment of Stamp Duty. I do not believe that that is correct because Mr Williams shares were not transferred from him to the Plan. Instead, they were cancelled and at the same time the same number of shares were issued to the Plan.”

[43]Mr Williams has made a Witness Statement in these proceedings, dated 23 May 2016. In paragraph 9 of that Witness Statement, he states:

“Bell Anderson confirmed a valuation of PAS at £1,000,000. That valuation was accepted by IXG Limited. I was advised by MC [i.e. Mark Chamberlain, who Mr Williams describes as part of the sale team for IXG to which he was introduced] that a valuation of £1,000,000 met the minimum contribution to the Scheme. It was obvious that the asset that made up the value of the contribution were the shares of PAS only.”

[44]It seems to me that this evidence accords with the Claimants’ case in these proceedings.

[45]At paragraph 14 of that Witness Statement, however, Mr Williams states that various issues concerning the shareholdings in PAS did not emerge until after the Deed had been executed, when they were communicated to Mr Mewis by an email from Mr Richardson, dated 19 April 2011. It appears from the email that at that time at least Mr Richardson was providing advice to Mr Williams and PAS. The subject of the email is “IXG Pension Scheme – Positive Approach Services Limited”. The email reads as follows:

“I am sitting with Mr Kenneth Williams, who is a member as above Scheme (sic). He has given me the authority to contact you directly to discuss his current position. Mr Williams was advised by Mr Mark Chamberlain who used the Company Register to obtain the necessary details in order he (sic) may prepare the resolution documents for dissolution of the ‘B’ shares and the transfer of the ‘A’ share to the Trust. Unfortunately, the resolution prepared by Mr Chamberlain and accepted into the Company’s Register made a transfer of nine shares from Mr Williams to the Trust. However, a one further share was not transferred. This was an (sic) mistake by Mr Chamberlain. This we fear, makes any statement that the nine shares represented the total ownership of Positive Approach Services Limited as incorrect. It was always our intention to transfer the sole ownership to the Trust at that time. We are concerned that we are making a serious error. As a consequence, we have delayed our annual filing at Companies House, until we can get clarification in this matter. We would appreciate your assistance in helping us resolve this one share problem. If you require any further information, please feel to contact myself or Mr Williams directly.”

If you require any further information, please feel to contact myself or Mr Williams directly.”

[46]In paragraph 15 of his Witness Statement, Mr Williams states as follows:

“Fundamentally, the position was that in order to achieve the position that RM [i.e. Mr Mewis] required, the shares, including the B shares then in issue, were bought back by resolution at a General Meeting of the company which was backdated to 21st June 2010. I confirm that no such General Meeting actually took place in June 2010. Although the intention was to achieve what RM required in order to enable a valid transfer of the required shares, this could not have been done when he required it because of the true position regarding the shares in PAS as they were at the time. It was his idea to backdate the general meeting… I was told to backdate the Share Certificate to the 21st June 2010…”

[47]In circumstances where Mr Mewis has given oral evidence confirming the truth of his witness statements and Mr Williams has not attended the trial, or, in my judgement, given a satisfactory explanation as to why he has chosen neither to appear nor to be represented, it is impossible to prefer Mr Williams’ case to that of the Claimants.

[48]Further, even if Mr Williams’ case with regard to the backdating of documents was correct, on his own case, and as set out in the email of 19 April 2011:

“It was always our intention to transfer the sole ownership to the Trust at that time.”

Accordingly, on his own case, any backdating which may have occurred would, it seems, have been designed to secure the result which Mr Williams intended at all material times.

[49]In fact, the email does not suggest that the contents of the Board minutes of PAS, dated 21 June 2010, are incorrect, or did not reflect the position as it was understood to be as at that date. On the contrary, the email suggests that (with input from Mr Chamberlain) the B shares were in fact dissolved, and that the 9 A shares which had previously been issued to Mr Williams were in fact transferred to the Trust. The points made in the email are, first, that any statement that the 9 shares which were transferred to the Plan represented the total ownership of PAS was incorrect, because there was, in fact, one further share in PAS; and, second, that, by mistake, this one further share was not transferred to the Plan.

[50]This seems to me to accord with Mr Mewis’ evidence, contained in paragraph 70 of his first Witness Statement, as to the explanation for the contents of the email dated 20 April 2011 that he sent in response to the email dated 19 April 2011. He states:

“[I] asked [Mr Williams] to destroy the original Share Certificate and re-issue the shares in the name of ‘Interim Executives Group of Companies Pension Scheme’ with the issue date as before – 21 June 2010… because the previous Share Certificate was incorrect.”

[51]Mr Mewis’ email, dated 20 April 2011, states:

“The easiest way to deal with this, subject to Mr Williams’ agreement, is for Mr Williams to return the single share to the company, on a no-cost basis, so that only nine shares have been issued. As such, the IXG Scheme, on behalf of Mr Williams, will have sole ownership of Positive Approach Services Limited.”

[52]Finally, even if the above points are incorrect, it does not seem to me that Mr Williams’ case to the effect that the contents of the documents dated 21 June 2010 should be impugned is of any assistance to him, at least as regards the primary way in which the Claimants now advance their case. The thrust of Mr Williams’ contentions is to the effect that there was no valid transfer of shares in PAS, alternatively that any valid transfer was restricted to the 9 A shares in PAS which were held in his name, and that there was not, and could not have been, any valid transfer of the single remaining A share and/or any of the B shares. If and to the extent that those contentions are correct, they have the effect of invalidating, or calling into question, the extent to which Mr Williams discharged his debt of £1m by making an in-specie transfer of personal assets. However, that would not relieve him of the obligation to discharge that debt, but would merely mean that he is required to discharge it by making a money payment of £1m. This is precisely the primary relief which the Claimants now seek against him. In advancing their primary case, the Claimants are, in essence, accepting that the Defendants, and the documents in the case, have raised issues about whether Mr Williams made an effective transfer of all the shares in PAS, which it is impossible for the Court to resolve. I accept this is so, and, accordingly, that on his own case Mr Williams did not perform Clause 2 of the Deed.

The Defendants’ pleaded claims of misrepresentation

[53]Paragraphs 16, 17 and 18 of the Defence plead as follows:

“16. The Second Defendant was introduced to IXG by his financial broker Owen Richardson. Mr Richardson introduced the Second Defendant to Mark Chamberlain, a member of IXG’s marketing team, in order to discuss the Second Defendant’s potential participation in a different scheme known as Cartel. The Second Defendant did not ultimately pursue his interest in Cartel. 17. Mr Chamberlain became a regular visitor to the Second Defendant’s home. In or around September 2009 Mr Chamberlain acting as agent for the Claimants mentioned the Schemes for the first time to the Second Defendant. The Second Defendant indicated to Mr Chamberlain that he would be interested in a scheme which permitted transfers of PAS’s assets into an offshore pension scheme, which could then be accessed by the Second Defendant in order to reinvest in PAS without any tax consequences. 18. Thereafter Mr Chamberlain as agent for the Claimants made representations about the Schemes during a number of visits to the Second Defendants home between September 2009 and February 2010. During one such visit during 2009, the date of which the Second Defendant cannot precisely identify, Mr Chamberlain provided him with a brochure for the Schemes, which had been produced by a company called IXG Services Limited.”

[54]Having laid the ground in that way, two sets of representations are pleaded in paragraphs 19 and 20 of the Defence respectively.

[55]The case concerning express representations is pleaded in paragraph 19 of the Defence as follows:

“19. Mr Chamberlain introduced the Second Defendant to Les Everett, the Sales and Marketing Manager of IXG Marketing Limited. The Second Defendant met with Mr Everett on two occasions at a hotel at Team Valley, Gateshead in late 2009, at which meetings Mr Everett as agent for the Claimants repeated and confirmed the representations which Mr Chamberlain had made to the Second Defendant at their meetings and which appeared in the said brochure, which included the following (“the Express Representations”): 19.1 that PAS and the Second Claimant could remain domiciled in the UK and, by transferring their UK based assets into the Schemes, those assets would be immune from attack by the UK tax authorities; 19.2 that profits made by PAS if paid into the Scheme would be immune from UK corporation tax, and PAS would not even be required to submit a tax return to HMRC; 19.3 that the immunity from corporation tax of profits paid into the Scheme would apply even where a third party took equity in PAS, so that the Second Defendant was not the sole shareholder in PAS and not all of the shares in PAS were assets in the Schemes; 19.4 in response to a specific question by the Second Defendant, that he would be permitted, once PAS had transferred assets into the Schemes, to make withdrawals from the Scheme tax free and reinvest the proceeds of those withdrawals back into PAS as capital, equity or director’s loan; 19.5 that transfers into the Scheme would be liable for capital gains tax (“CGT”), but that CGT was capable of being mitigated in respect of such transfers; 19.6 that PAS’s ability to raise bank finance would not be adversely affected by the transfer of PAS shares into the Schemes.” 19.1 that PAS and the Second Claimant could remain domiciled in the UK and, by transferring their UK based assets into the Schemes, those assets would be immune from attack by the UK tax authorities; 19.2 that profits made by PAS if paid into the Scheme would be immune from UK corporation tax, and PAS would not even be required to submit a tax return to HMRC; 19.3 that the immunity from corporation tax of profits paid into the Scheme would apply even where a third party took equity in PAS, so that the Second Defendant was not the sole shareholder in PAS and not all of the shares in PAS were assets in the Schemes; 19.4 in response to a specific question by the Second Defendant, that he would be permitted, once PAS had transferred assets into the Schemes, to make withdrawals from the Scheme tax free and reinvest the proceeds of those withdrawals back into PAS as capital, equity or director’s loan; 19.5 that transfers into the Scheme would be liable for capital gains tax (“CGT”), but that CGT was capable of being mitigated in respect of such transfers; 19.6 that PAS’s ability to raise bank finance would not be adversely affected by the transfer of PAS shares into the Schemes.”

[56]The case concerning implied representations is pleaded in paragraph 20 of the Defence, as follows:

“20. Further, Mr Chamberlain and / or Mr Everett by their conduct as aforesaid and in seeking to persuade the Second Defendant to participate in the Schemes as agents for the Claimants made the following representation (“the Implied Representations”): 20.1 that the Schemes would not be illegal, in the sense that they were contrary to the criminal law of the jurisdiction within which the Schemes were to operate; 20.2 the Third Claimant would not take any steps including the appointment of trustees which would render the Schemes illegal; 20.3 that the Schemes would not be administered in a way which was illegal; 20.4 the Third Claimant would not take any steps including the appointment of trustees which would render the administration of the Schemes illegal; 20.5 that the trustees of the Scheme were permitted by their Memoranda of Associations to carry out trust business; and 20.6 the Third Claimant would not appoint any trustee of the Schemes which was not permitted by its Memorandum of Association to carry out trust business.” 20.1 that the Schemes would not be illegal, in the sense that they were contrary to the criminal law of the jurisdiction within which the Schemes were to operate; 20.2 the Third Claimant would not take any steps including the appointment of trustees which would render the Schemes illegal; 20.3 that the Schemes would not be administered in a way which was illegal; 20.4 the Third Claimant would not take any steps including the appointment of trustees which would render the administration of the Schemes illegal; 20.5 that the trustees of the Scheme were permitted by their Memoranda of Associations to carry out trust business; and 20.6 the Third Claimant would not appoint any trustee of the Schemes which was not permitted by its Memorandum of Association to carry out trust business.”

[57]Paragraphs 21-22, 24-15, 27-29, 32, 40 and 48-50 of the Defence plead as follows:

“21. Further and/or alternatively, the Claimants and/or the predecessors of the First and Second Claimants had notice of the said representations, and the Defendants will rely upon the close connection between the Third Claimant and IXG Marketing Limited as justifying the drawing of an inference that the Claimants were aware of the said representation. 22. Induced by an in reliance upon the Express Representations and the Implied Representations, the Second Defendant in February 2010 indicated that he intended to participate in the Schemes and that he intended to transfer his shares in PAS into the Schemes… … 24. … The Second Defendant consented to his appointment as an executive of IXG and accepted his invitation to join the IXG Occupational Scheme induced by and in reliance upon the Express Representations and Implied Representations. 25. … The Second Defendant consented to his membership of the Plan induced by and in reliance upon the Express Representation and Implied Representations. … 27. … It is further admitted and averred that by IXG’s acceptance as agent for the Trustees of the Schemes of the Second Defendant’s offer a contract (“the Contract”) was created by which the Second Defendant agreed for good consideration to transfer £1,000,000 in the form of 9 PAS shares to the Trustee of the Schemes to be held in accordance with the terms of the Schemes. 28. The Second Defendant entered into the Contract induced by and in reliance upon the Express Representations and the Implied Representations, for which the trustees of the Plan are now liable. 29. Further and/or alternatively, the Contract was part oral and part in writing. The written element consisted of the letters dated 17 June 2010 and 21 June 2010. The oral element consisted of the Express Representations. The Implied Representations were implied terms of the contract. … 32. … The Second Defendant executed the Deed induced by and in reliance upon the Express Representations and the Implied Representations. The First and Second Claimants were prohibited by paragraph 5 of their respective Memoranda of Association from conducting trust business and from entering into the Deed... … 40. …The second sentence is denied. As the Claimants are well aware, by the Spring of 2012 the Second Defendant had discovered that the Express Representations and the Implied Representations were false. PARTICULARS OF FALSITY 40.1 PAS and the Second Claimant were not able, whilst remaining domiciled in the UK, to achieve immunity for their assets from the UK tax regime by transferring those assets into the Plan. In fact, the said assets were liable to both corporation tax and capital gains tax; 40.2 Profits made by PAS paid into the Scheme were not immune from corporation tax, at least not without a convoluted process involving the making of artificial declarations of payment of a bonus by PAS to the Second Defendant and subsequent waiver of that bonus by the Second Defendant, which declarations were vulnerable to challenge by HMRC; 40.3 PAS were required to submit a UK corporate tax return; 40.4 In order to achieve any potential corporation tax benefit from the Plan, all shares in PAS were required to be held by Trustees of the Plan in accordance with the terms of the Plan, and so the purported corporation tax benefits were not possible in conjunction with third party equity investment in PAS; 40.5 It was not possible to make withdrawals from the Plan due to the litigation between SAT and IXG; 40.6 It was not possible for the Second Defendant to mitigate the incidence of CGT on transfers into the Plan; 40.7 Banks would not lend to PAS due to concerns over the regulation of the First and Second Claimants; 40.8 by paragraph 5 of each of their respective Memorandum of Association the First and Second Claimants are prohibited from carrying out any trust business; 40.9 The First and Second Claimants have been granted no licence by the GFSC and accordingly their appointment as trustees of the Plan was illegal under section 1 of the 2000 Law… … 48. Induced by and in reliance upon the Express Representations and the Implied Representations, the Second Defendant entered into the Deed and/or the Scheme and/or the Contract and/or the Plan and paid the following sums to the SAT, the then Trustee of the Plan, as fees for the Trustees of the Plan: 48.1 £25,000 in June 2010; 48.2 £80,000 in September 2010. 49. Further, by reason of the matters pleaded at paragraph 40 above, the Claimants are in breach of the express and implied terms of the Contract. 50. By reason of the matters aforesaid the Defendants have suffered loss and damage and the Defendants will rely upon the provisions of section 2 of the Misrepresentation Act 1967 as entitling them to the relief claimed. PARTICULARS OF LOSS 50.1 If, which is denied, the transfer of 9 A shares from the Second Defendant to IXG was an effective transfer, the Second Defendant has lost the value of those shares being £1,000,000; 50.2 The sum of £105,000 paid by the Second Defendant in respect of the Trustee’s fees. 50.3 The sum of £71,766.95 allegedly due for Scheme charges.” 40.1 PAS and the Second Claimant were not able, whilst remaining domiciled in the UK, to achieve immunity for their assets from the UK tax regime by transferring those assets into the Plan. In fact, the said assets were liable to both corporation tax and capital gains tax; 40.2 Profits made by PAS paid into the Scheme were not immune from corporation tax, at least not without a convoluted process involving the making of artificial declarations of payment of a bonus by PAS to the Second Defendant and subsequent waiver of that bonus by the Second Defendant, which declarations were vulnerable to challenge by HMRC; 40.3 PAS were required to submit a UK corporate tax return; 40.4 In order to achieve any potential corporation tax benefit from the Plan, all shares in PAS were required to be held by Trustees of the Plan in accordance with the terms of the Plan, and so the purported corporation tax benefits were not possible in conjunction with third party equity investment in PAS; 40.5 It was not possible to make withdrawals from the Plan due to the litigation between SAT and IXG; 40.6 It was not possible for the Second Defendant to mitigate the incidence of CGT on transfers into the Plan; 40.7 Banks would not lend to PAS due to concerns over the regulation of the First and Second Claimants; 40.8 by paragraph 5 of each of their respective Memorandum of Association the First and Second Claimants are prohibited from carrying out any trust business; 40.9 The First and Second Claimants have been granted no licence by the GFSC and accordingly their appointment as trustees of the Plan was illegal under section 1 of the 2000 Law… … 48.1 £25,000 in June 2010; 48.2 £80,000 in September 2010. 50.1 If, which is denied, the transfer of 9 A shares from the Second Defendant to IXG was an effective transfer, the Second Defendant has lost the value of those shares being £1,000,000; 50.2 The sum of £105,000 paid by the Second Defendant in respect of the Trustee’s fees. 50.3 The sum of £71,766.95 allegedly due for Scheme charges.”

[58]It seems from these pleas that the claims for breach of contract stand or fall with those for misrepresentation, and therefore there is no need to give separate consideration to them.

[59]In order to make sense of some of these pleaded allegations, it is necessary to refer back to paragraph 3.4 of the Defence, which pleads as follows:

“3.4 it is admitted and averred that pursuant to section 1 of The Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law, 2000 (“the 2000 Law”) the First and Second Claimants as Seychelles companies were prohibited from acting as trustees of the Plan except under the authority of and in accordance with the conditions of a licence granted by the Guernsey Financial Services Commission (“GFSC”).”

[60]The brochure that is referred to in the Defence includes the following text:

“The IXG Pension Solution There are a number of major differences between a UK regulated scheme and the QROPS approved IXG Pension Scheme. Operating out of Guernsey, the IXG range of Occupational Pensions Schemes have forged new ground and are designed essentially for high-net worth individuals who, as members, would profit from the following remarkable benefits: • A sophisticated arrangement that mitigates exposure to IHT on the member’s estate following the member’s demise • No IHT liability on a member’s estate upon death • No CGT on assets • No requirement for an Annuity or Alternative Secured Pension (ASP) • The Trust Instrument is specifically structured to avoid problems associated with a late member’s estate, if they were over the age of 75 • No ten year tax change, as with family trusts • No limit on non QROPS contributions, be they cash or assets • No limit on non QROPS benefits • No lifetime limit, as with UK pension schemes • 25% tax free lump sum into the UK from both the QROPS Scheme and the ROPS Plan • Estate and Tax planning for members’ other intrinsic assets, ie residential and commercial property, second homes, unit trusts, stocks, shares, cash and the like • A QROPS approved and, more importantly, a QROPS Compliant Scheme, which accepts UK registered pensions transfers • Crafted by the UK’s leading pensions and tax experts, most of whom are ex-HMRC Senior Revenue Treasury Officers • This is NOT a device to liquidate UK pensions • The services of existing advisers and/or fund managers are actively encouraged to be retained if the client wishes to do so • Early pension benefits may be realised from age 35 for individuals engaged in certain specialist professions including, but not limited to, sports personalities reflecting the potential lifespan of their respective careers The following is an extract from an article written by Stephen Degnan, of Alex Ure & Associates, in response to a magazine article on QROPS: ‘Interim Executives Group ensured from the outset that its pension schemes fully met the statutory definition of a QROPS. It can offer clients benefits of saving outside EU constraints, but with the guarantee of immunity from attack by the UK tax authorities’.”

[61]In a Response to a Request for Further Information, dated 18 December 2014, the Defendants’ case in respect of the alleged express representations was clarified as follows:(a) each of those representations was said to have been made by Mr Chamberlain and repeated by Mr Everett, and

(b) further, the representations pleaded at paragraphs 19.1, 19.2 and 19.5 of the Defence are said to have appeared in the brochure.

The Claimants’ answer to the claims of express misrepresentations

[62]In so far as the express representations are alleged to have been made by Mr Chamberlain and repeated by him, Mr Everett’s evidence in paragraphs 37 and 38 of his Witness Statement is as follows: “37. Looking at the sub-paragraphs of paragraph 19 of the Amended Defence and Counterclaim, I will comment as follows:-19.1 I accept that I advised Mr Williams that he would remain a UK national and that his company would remain a UK registered company after he joined the scheme and transferred shares in the company into the scheme. I did not say that assets transferred into the scheme would be "immune from attack"; instead, the expression that I used was that the assets would be "sheltered" from the UK tax authorities. This was an expression I would use with all clients or potential clients of the schemes.

19.2 I did not say that trading profits made by Mr Williams' company, PAS, would be "immune from corporation tax". We did not really talk about corporation tax - my advice was limited to IHT and CGT although I accept that I did say that the shares in the company would be held off-shore. Nor would I have advised on the filing of tax returns as that was outside my remit and something that Mr Williams' accountants would have advised on.

19.3 Again, such specific matters (PAS being immune from corporation tax even where a third party took equity in PAS etc.) would not have been something that I would have advised upon and I would have said was something for tax accountants to advise upon.

19.4 I do recall Mr Williams asking about making withdrawals from the scheme and I accept that I said that he would be permitted to make tax free withdrawals from the scheme to a certain limit and do as he pleased with those withdrawals.

19.5 I agree that I said that transfers into the scheme could be liable for CGT but once the asset was in the scheme any capital gains would be tax free. I could not comment on mitigating the initial CGT liability.

19.6 I did not comment on PAS's ability to raise bank finance after the transfer of shares to the pension scheme. Again, that was not something that was within my remit. 38. I note what is alleged in paragraph 19 of the Defence & Counterclaim, however, I must make it clear that during my discussions with Mr Williams it was clear that his main concern was avoiding IHT and how his company would be controlled following his death. Paragraph 19 does not mention that, however. Mr Williams appeared to me to take great comfort from me explaining to him how, in the event of his death, the professional Trustees of the scheme would decide how the company was operated because they would own it - but for his estate’s benefit.” 19.1 I accept that I advised Mr Williams that he would remain a UK national and that his company would remain a UK registered company after he joined the scheme and transferred shares in the company into the scheme. I did not say that assets transferred into the scheme would be "immune from attack"; instead, the expression that I used was that the assets would be "sheltered" from the UK tax authorities. This was an expression I would use with all clients or potential clients of the schemes. 19.2 I did not say that trading profits made by Mr Williams' company, PAS, would be "immune from corporation tax". We did not really talk about corporation tax - my advice was limited to IHT and CGT although I accept that I did say that the shares in the company would be held off-shore. Nor would I have advised on the filing of tax returns as that was outside my remit and something that Mr Williams' accountants would have advised on. 19.3 Again, such specific matters (PAS being immune from corporation tax even where a third party took equity in PAS etc.) would not have been something that I would have advised upon and I would have said was something for tax accountants to advise upon. 19.4 I do recall Mr Williams asking about making withdrawals from the scheme and I accept that I said that he would be permitted to make tax free withdrawals from the scheme to a certain limit and do as he pleased with those withdrawals. 19.5 I agree that I said that transfers into the scheme could be liable for CGT but once the asset was in the scheme any capital gains would be tax free. I could not comment on mitigating the initial CGT liability. 19.6 I did not comment on PAS's ability to raise bank finance after the transfer of shares to the pension scheme. Again, that was not something that was within my remit.

[63]The Defendants have not attended the trial to challenge that evidence, or to give evidence in support of their pleaded case that express representations were made by Mr Chamberlain and repeated by Mr Everett. In these circumstances, that case must be rejected. Although Mr Chamberlain has not been called as a witness by the Claimants, the Defendants’ pleaded case is that all the representations made by him were repeated by Mr Everett. I consider that Mr Everett’s denials sufficiently meet that case in circumstances where the Defendants have not called any evidence in support of it.

[64]Further, those denials do not stand alone, because it is necessary to consider whether, as a matter of common sense and probability, express representations of the kind alleged by the Defendants are likely to have been made. For example, there is a tension between the suggestion that Mr Williams was told that monies withdrawn from the Plan could be reinvested back into PAS as equity (which forms part of paragraph 19.4 of the Defence) and the fact that Mr Williams agreed to transfer shares in PAS to the Plan in discharge of his obligation to pay £1m, because the creation of further equity in PAS would or might dilute the value of the shares that he agreed to transfer such that, over time, the value of that transfer could be reduced below £1m, in principle, it would seem, without limit.

[65]To the extent that Mr Everett admits that certain representations were made by him, what he admits to telling Mr Williams seems to me to have been accurate in light of all the other evidence before me as to the way in which the Schemes operated and the tax advantages that they offered to individuals like Mr Williams.

[66]In this regard, at paragraphs 5 to 7 of his report, Mr Quarmby explains:

“5 QROPS were created as part of the “A Day” reforms contained in Finance Act 2004 and which came into effect from 6 April 2006. One of the stated aims of the A Day reforms was to “simplify” the pension regime generally and pat of that project included making it easier for individuals who leave the UK to transfer their UK pension rights abroad. The government therefore introduced the concept of a qualifying recognised overseas pension scheme (QROPS) to which individuals who are leaving the UK can transfer funds from registered pension schemes (RPS) without an unauthorised member payment charge. Despite the intention behind the legislation, there is no actual requirement for individuals transferring pension funds from an RPS to a QROPS to be, in fact, non-UK resident. 6. The IHT treatment of QROPS was left unclear as a consequence of the Finance Act 2004 and this necessitated further legislative action by the Government, which bore fruit in 2010 when various amendments were made to the IHT legislation by way of statutory instrument: SI 2010/51. This SI set out the requirements for a scheme to qualify as a “qualifying non-UK pension scheme” (QNUPS) which term was also inserted into various provisions of the Inheritance Tax Act 1984. This SI put beyond doubt that a QROPS would, provided it also qualified as a QNUPS, gain the benefit of the inheritance tax (IHT) exemptions for pension schemes contained in the Inheritance Tax Act 1984 (as amended). The main exemption from IHT is contained in Section 58 IHTA; which makes it clear that funds within a QROPS will not be “relevant property” for the purposes of that tax. This means that, on the death of the member, there will be no IHT to pay on the funds within the QROPS. … Additionally, there is a general exemption under Section 10 IHTA where dispositions are not intended to confer gratuitous benefit. It is generally thought that when members make contributions to pension schemes (as is the case here) there is no intention to confer a gratuitous benefit. 7. With effect from 5 April 2015 HMRC delisted most of the QROPS in existence and subsequently changed the qualifying conditions for QROPS going forward. The tax position of de-listed QROPS is somewhat unclear but we have heard nothing from HMRC to suggest that de-listed schemes would lose their IHT exemption.”

[67]At paragraphs 8 to 10 of that report, Mr Quarmby explains the purpose of QROPS in the following terms:

“8. As noted above, QROPS were created to enable individuals to transfer funds from their registered pension schemes overseas in pursuance of an intention to live abroad. However, there was no requirement placed in the legislation for the member concerned to have actually left the UK. 9. However, once the IHT efficiency of QROPS was put beyond doubt in the statutory instrument in 2010 it became apparent to advisers that these vehicles could be useful for a secondary purpose, that of enabling IHT planning for UK domiciled individuals. To explain, for some years it has been very difficult for UK domiciled individuals to use trusts to facilitate IHT planning due to the reforms in the taxation of trusts introduced in 2006 under which gifts into trusts were restricted to the individual’s “nil rate band” (which currently stands at £325,000). This development was a major blow to the use of trusts for IHT planning purposes and, as such, the arrival of QROPS on the scene was of great interest to advisers and their clients. 10. The vast majority of QROPS used to date have been for the primary purpose of facilitating a transfer from an RPS overseas. A small but growing minority of individuals have used QROPS for the secondary purpose of IHT planning and it is clear from the pleadings in this case that the Interim Executives (Guernsey) Limited Occupational Pension Scheme (the “Scheme”) was to be used for such a purpose.”

[68]At paragraphs 11 to 12 of his report, Mr Quarmby explains the tax benefits of QROPS as follows:

“11. I have already set out the IHT treatment of QROPS, from which you can see that there is generally an exemption from IHT on the contribution of funds to a QROPS and thereafter. This means that, upon death of the member and the payment of the funds out to the heirs and successors, there should be no IHT payable. 12. The other tax benefit of a QROPS is that the funds, once in the scheme, will generally not be liable to income tax or capital gains tax (CGT) as the Trustees, by definition, will be non-UK resident. This freedom from taxation is because of two principles – firstly that non-resident individuals are generally not liable to UK income tax or CGT on foreign source income or foreign source gains and, secondly, it is generally thought that the offshore anti-avoidance provisions which would normally “look through” offshore structures do not apply to bona fide pension schemes.”

[69]At paragraphs 13 to 15 of his report, Mr Quarmby deals with the issue of taxation of contributions to a QROPS in the following terms:

“13. As far as IHT is concerned, as noted in para 6 above, there will generally be no IHT on the contribution of assets to a QROPS. 14. The transfer of an asset in specie, which is what happened in this case, will be a disposal for CGT purposes and if the asset in question is standing at a gain then there will be tax on the person making the disposal, in this case the Second Defendant. 15. Contributions to a QROPS do not gain any kind of tax relief either for a member contribution or for a contribution by an employer.”

[70]At paragraph 17, Mr Quarmby states:

“17 There is nothing in IXG’s brochure which is inaccurate as far as the taxation of QROPS is concerned, except reference to the ability of the QROPS to “hold any asset with intrinsic value”

. Whilst this is technically correct, it should be noted that QROPS which receive transfers from an RPS are penalised if they invest in “taxable property” which includes (inter alia) residential UK property. The distinction has not been drawn in IXG’s brochure but does not appear to be relevant in this case as there has been no transfer from an RPS.”

[71]At paragraph 19, Mr Quarmby explains that he has been asked to report on the tax consequences of Mr Williams’ transfer (or purported transfer) of PAS shares to the Scheme, in respect of each of the allegations set out in paragraphs 19 and 40 of the Defence. Mr Quarmby then addresses each of these allegations separately.

[72]In respect of the express representations pleaded at paragraphs19.1 and

19.2 of the Defence, the Defendants also rely on the following wording in the brochure:

“Interim Executives Group ensured from the outset that its Pension Scheme fully met the statutory definition of a QROPS. It can offer clients benefits of saving outside EU constraints but with the guarantee of immunity from attack by the UK tax authorities.”

[73]In my view, this wording has to be read in context. It is preceded by a detailed list of the “remarkable benefits” of the Schemes, which include mitigation or elimination of exposure to IHT and CGT. In context, I consider that what this wording is representing is that the Schemes are compliant with UK tax legislation and HMRC approvals, and that assets within them do not attract those taxes. On the evidence before me, all that is true.

[74]The wording relied upon by the Defendants, whether read in isolation or (as I consider to be the correct approach) together with the other wording of the brochure, is referring to whether assets placed in the Scheme will attract tax within the Scheme thereafter, as opposed to whether there will or may be tax consequences – whether relating to CGT or relating to Corporation Tax - arising from such realisation and disposal of those assets as may be necessary to enable them to be contributed to the Scheme.

[75]Still less, in my view, is the wording of the brochure capable of being interpreted as representing that if Mr Williams became a member of the Scheme, this would have any effect on the liability of PAS to pay Corporation Tax, or to submit tax returns to HMRC. The Plan was clearly and obviously a personal pension plan for Mr Williams (who, as an individual, would not be liable to pay Corporation Tax), not PAS (which, as a company, was not only liable to pay Corporation Tax but also was liable to pay such tax on profits - and in addition CGT on capital gains - made by it outside the ambit of the Schemes).

[76]In this context, with regard to the first alleged express representation (pleaded in paragraph 19.1 of the Defence), Mr Quarmby states, at paragraph 21 of his report:

“21. … If this refers to immunity from IHT then this position is broadly correct, although “exemption” is a better word. I would say that the word “immune” is rather strong as no one is “immune from attack” from HMRC – it is their job to recover as much tax as possible from tax payers and they have many powers to question taxpayers and to raise assessments for tax. The real question is whether any attack is likely to be successful and, in my view, a correctly set up QROPS should be exempt from IHT. Insofar as other taxes are concerned, generally speaking the foreign income and gains arising to a QROPS will be exempt from taxation in the UK. However, note that non-resident persons, including QROPS, can be liable to tax on UK source income if received directly.”

[77]Mr Quarmby’s evidence concerning the second alleged express representation, contained in paragraph 22 of his report, is as follows:

“22. … This seems a highly improbable claim to make on behalf of a QROPS which owns shares in a UK trading company. Profits distributed by way of dividend by UK companies are always made post-tax and as such dividends are never deductible for the purposes of corporation tax. If the plan was for PAS to pay dividends to its shareholder trustee, then it is difficult to see how anyone would expect that dividend to bestow some kind of tax exemption on the company. With regard to the requirement to submit tax returns – all UK companies are required to submit tax returns, even if it is a “nil return”

. It does not appear evident from any of the papers presented to me that it was ever intended that PAS would make pension contributions directly to the scheme. I assume that this is because the “employer” for the purposes of the Scheme is the company called Interim Executives (Guernsey) Limited.”

[78]As Mr Quarmby further explains in paragraph 23 of his report, the liability to Corporation Tax of a UK company is in no way dependent upon its ownership. Accordingly, the transfer of ownership of PAS from Mr Williams to the Scheme would make no difference to the liability of PAS to Corporation Tax, which would instead be dependent upon the taxable profits of PAS. This not only supports Mr Quarmby’s evidence concerning the improbability of the alleged representations having been made, but also goes to the issue of reliance. Mr Williams had his own financial advisers, and, leaving aside the failure of the Defendants to contest the claim at trial, it is hard to believe that representations of the type which are alleged in the Defence to have been made could have been relied upon.

[79]For these reasons, and in light of this evidence and the other evidence of the Claimants, which has not been countered by any expert evidence adduced on behalf of the Defendants or otherwise challenged by them at trial, I am unable to see that there is anything in the Defendants’ case based on the first two alleged express representations.

[80]In respect of the fifth alleged express representation, pleaded in paragraph 19.5 of the Defence, the Defendants’ further information explained that they rely upon the following wording in the brochure:

“Operating out of Guernsey, the IXG range of occupational pension schemes have forged new ground and are designed essentially for high-net worth individuals who, as members, would profit from the following remarkable benefits... • No CGT on assets…”

[81]In my view, for the reasons set out above, this wording is not making any representation about the possibility of mitigating CGT in respect of transfers into the Scheme. I am accordingly unable to see that there is anything in the fifth alleged express representation.

[82]I should add that Mr Quarmby makes further points concerning the express representations alleged in paragraphs 19.4 and 19.5 of the Defence (see paragraphs 24 to 26 of his report), and with regard to the Particulars of Falsity contained in paragraphs 40.1 to 40.6 of the Defence (see paragraphs 28 to 33 of his report). However, in light of my acceptance of the evidence of Mr Everett concerning these alleged representations, it is unnecessary to rehearse those aspects of the evidence of Mr Quarmby.

[83]My acceptance of that evidence also makes it unnecessary to consider the Particulars of Falsity alleged in paragraph 40.7 of the Defence. I would add, however, that whether or not banks would lend to PAS due to concerns over the regulation of the First and Second Claimants, would appear, at least in the first instance, to be a matter within the knowledge of the Defendants. They have called no witnesses at trial to give evidence in support of this allegation. Further, so far as I can see, neither Mr Williams’ Witness Statement nor the documents exhibited to it contain any material which bears out this allegation. Nor has my attention been drawn to any documents in the trial bundles which support it. In my view, these matters provide a further basis for saying this allegation is not made out.

The Claimants’ case in answer to the claims of implied misrepresentations

[84]That leaves for consideration the implied representations alleged in paragraphs 20.1 to 20.6 of the Defence, the allegations contained in paragraphs 32 and 3.4 of the Defence, and the Particulars of Falsity alleged in paragraphs 40.8 and 40.9 of the Defence.

[85]These allegations raise issues concerning(a) the law of the Seychelles and

(b) the law of Guernsey. The Claimants’ pleaded case in response to these allegations is contained in paragraphs 23 and 3 of the Reply respectively.

[86]Paragraph 23 of the Reply pleads as follows:

“(1) On a proper construction and in accordance with the law of Seychelles, the proper meaning of ‘trust business’ in the Memoranda of Association of Sherborne and Kenilworth is the provision of trustee services for the formation, registration and administration of an international trust. (2) In any event however, any issues as to whether the trustees of the Scheme are acting within their powers is a matter falling within the jurisdiction of the courts of Guernsey and to be determined according to the law of Guernsey in accordance with section 2 of the 2008 Trust Deed. (3) By an Order of the Royal Court of Guernsey (‘RCG’) dated 29 November 2011 (which Order is referred to in paragraph 8 of the Particulars of Claim), the court, having recited at Recital D that on 26 January 2011 IXG had produced an opinion on the law of the Seychelles dated 25 January 2011 signed by Charles Lucas, a copy of which was annexed to the Order, which opinion concluded, for the reasons stated in sub-paragraph (1) above, that Sherborne and Kenilworth did have trust powers, indeed that the property of the Plan be vested in Sherborne and Kenilworth and that the parties do everything in their power to give effect to that Order. Having regard to the provisions of section 2 of the 2008 Trust Deed, as pleaded in sub-paragraph (2) above, the said Order of the RCG ought to be recognised as an authoritative ruling on the trust powers of Sherborne and Kenilworth. (4) The Scheme is approved as complying with Guernsey tax requirements by the Guernsey Income Tax Supervisor (‘GITS’) who on 4 March 2008 approved the 2008 Trust Deed and is notified of all changes of trusteeship. No issue has been taken by GITS over the powers of Sherborne and Kenilworth. (5) Section 10(1) of the International Business Companies Act 1994 (Seychelles) provides that an act of a company incorporated under that Act is not invalid by reason only of the fact that the company was without capacity or power to perform the act. Accordingly if, which is denied, Sherborne and Kenilworth lacked trust powers at the date of execution of the Deed of 1 December 2010 the Deed was not invalid in consequence of such lack of power and so far as the 2nd Defendant is concerned he was entitled to assume in consequence of s10(1) that Sherborne and Kenilworth had power to execute that Deed. Accordingly, the alleged implied representation is denied. (6) If, contrary to the matters pleaded in (5) above, there was an implied representation in the terms pleaded in paragraphs 20.5 and/or 20.6 of the Re-Amended Defence, the 1st and 2nd Claimants by the Deed of Assignment of December 2014 assigned the benefit of the right to enforce the Deed to the 4th, 5th and 6th Claimants, which Claimants have unimpeachable trust powers.”

[87]In his Skeleton Argument before me, Mr Fletcher stated that the Claimants were not relying on paragraphs 23(2), 23(3) and 23(4), but that the Court should still “have regard” to the matters pleaded in paragraphs 23(3) and 23(4) of the Reply.

[88]Paragraph 3 of the Reply pleads as follows:

“3. …section 1 of the 2000 Law of Guernsey provides that a Bailiwick company shall not carry on by way of business ‘in or from within the Bailiwick’ any regulated activities except under the authority of a licence granted by the GFSC. The Plan is administered by trustees resident in Cyprus with the consent of the Guernsey tax office and not ‘in or from the Bailiwick’ and thus does not require a licence. Further or alternatively, s1 of the 2000 Law only applies to activities carried on ‘by way of business’. None of the Claimants appointed as trustees have received any fee, income or consideration for so acting.”

[89]I turn to the issues raised by these pleaded contentions.

(i) The law of the Seychelles

[90]Mr Fletcher submitted that paragraph 23 of the Reply gave rise to the following issues:(1) Having regard to the abolition of the ultra vires rule in Seychelles law by section 10(1) of the International Business Companies Act 1994 (“the IBCA”), does any limitation on the powers of the First and Second Claimants in their Memoranda of Association matter?

(2) What is the proper construction of “trust business” in those Memoranda of Association according to Seychelles law?

(3) In any event, does the appointment of fresh trustees (namely, the Fourth, Fifth and Sixth Claimants) in December 2014 resolve any problem over the restriction on the powers of the First and Second Claimants?

[91]Mr Fletcher further submitted that even if the resolution of the first of those issues renders it unnecessary to decide the second of those issues in these proceedings, it may be necessary to decide that second issue in order to dispose of the costs of earlier proceedings. The explanation for this, in brief, is as follows:(1) The present claim was preceded by a claim in the Bristol District Registry of this Court (Claim No 3BS30371) pursuant to section 118 of the Companies Act 2006 (“the s118 Claim”) in which an Order was sought that PAS provide a copy of its Register of Members. The Claimants’ case is that the s118 Claim was brought after a request for copies of that Register had been ignored.

(2) On 30 September 2013, the Court ordered PAS forthwith to send IXG’s solicitors a copy of that Register. On 14 April 2014, PAS complied with that Order, and the information disclosed was pleaded at paragraph 26 of the Particulars in the present case.

(3) The s118 Claim was brought against PAS, and was initially been brought in the name of IXG alone. However, at the hearing of a successful application for Summary Judgment on 30 September 2013, at which the above Order was obtained, permission was sought to join as Claimants the First and Second Claimants in the present claim, on the basis that they were the Trustees of the Plan. That application was opposed on the basis that the disclosure in the s118 Claim included the Memoranda of Association of those Trustee companies and that those Memoranda precluded those companies from carrying out “trust business”. It was contended, therefore, that those companies lacked the capacity to act as trustees. That issue generated significant costs in the s118 Claim, since it was necessary to obtain expert evidence on the law of Seychelles as to the meaning of the phrase “trust business” (this is, on the Claimants’ case, inserted as a standard exclusion in the Memoranda of all International Business Companies formed in the Seychelles).

(4) Paragraph 5 of the Order of 30 September 2013 made in the s118 Claim excluded, from the costs order in favour of the Claimants in that claim, the costs of the application to add those Trustee companies.

(5) On 6 June 2014 a further order was made in the s118 Claim. By that Order, the Court declined an application by PAS to alter the Register, issued by PAS pursuant to the earlier Order. Paragraph 8 of that Order provides that: “All costs incurred by the parties since 10 November 2013 (including the costs of and incidental to the “trust business” issue) shall be reserved to the trial judge in the main action.”

(6) In the result, substantial costs incurred in the s118 Claim depend upon the outcome of the “trust business” issue in the present claim. In this regard, the significance of 10 November 2013 in the above Order is that this is the date on which the “trust business” issue was first raised as a defence to the application to add the above Trustee companies as parties to the s118 Claim.

[92]With regard to point (2) above, I pause to interject that the information disclosed at that stage indicated that:(a) Mr Williams was then registered as holder of only 5 of the 9 A shares, the other 4 having been transferred to Mrs Williams;

(b) no 10th A share existed; and

(c) the B shares had all been cancelled on 21 June 2010. How Mrs Williams came to have or could have had transferred to her some of the 9 A shares which, on one view at least, Mr Williams also transferred to the Plan is one of the mysteries and complications surrounding the shareholdings in PAS. There are others, not least the contradiction between this state of affairs and that pleaded in paragraphs

43.1 and

43.2 of the Defence. The trial papers contain a copy of the Register of Members which appears to contain a number of anomalies as to dates and shareholdings. In light of these uncertainties, which include issues as to whether there were and are other shareholders in PAS, I consider that Mr Fletcher was sensible at trial to prioritise obtaining a pecuniary remedy against Mr Williams rather than on Order for specific performance of Clause 2 of the Deed.

[93]Although Mr Fletcher addressed the three issues that he had identified in the order set out in paragraph 90 above, I consider that it is convenient to consider the second issue first.

[94]Mr Fletcher’s submissions concerning that issue were as follows:(1) The significance of the Order of the Royal Court of Guernsey of 29 November 2011 that is referred to in paragraph 23(3) of the Reply is that the senior court in Guernsey made an order after considering a legal opinion on the law of Seychelles on the very point which is now before this Court. The background to that Order is that SAT took the “trust business” point in relation to the First and Second Claimants in the present claim by way of defence to IXG’s claim against SAT. However, the matter was ultimately resolved by a Consent Order which recites at recital D the opinion of Charles Lucas (“Mr Lucas”). On the basis of that opinion, the Guernsey Court approved an Order resolving the Guernsey trust litigation and ordering the assets of IXG to be vested in the First and Second Claimants in the present claim. Although the Claimants in the present claim no longer contend that the Order of the Guernsey Court is binding on this Court, it is nevertheless a relevant factor to which this Court can properly have regard that the Guernsey Court made an order based on acceptance that the restriction of “trust powers” did not preclude the First and Second Claimants from acting as trustees.

(2) The contention that the proper meaning of “trust business” is, as pleaded at paragraph 23(1) of the Reply, “the provision of trustee services for the formation, registration and administration of an international trust” is supported by the expert opinion of Mr Sabino. Moreover, his opinion is consistent with the three opinions of Mr Lucas previously obtained and exhibited to Mr Sabino’s opinion.

(3) Although it is problematic that the IBCA contains no definition of “trust business”, and that there is no interpretative material of any assistance, Mr Sabino’s detailed and carefully argued opinion is based upon a close analysis of the relationship between three major Seychelles laws all passed in 1994, and also upon inferences to be drawn from the replacement of section 5(1)(c) of the IBCA 1994 in the amending International Business Companies (Amendment) Act 2009 (“the IBCAA”) in which “trust business” was replaced by “international corporate services, international trustee services or foundation services ...”

(4) From an overview of all the relevant legislation and the history of that legislation, it is clear that the Seychelles legislature in excluding “trust services” was referring to those activities which were expected to be regulated by the Seychelles International Business Authority (“SIBA”), the regulatory body established by the Seychelles International Business Authority Act 1994 (“SIBAA”).

(5) There would be no rational policy for preventing an International Business Company (“IBC”), intended in 1994 as the new corporate vehicle for international business, from acting as trustee of international trusts. Further, Mr Sabino demonstrates such an interpretation is in conflict with provisions of the International Trusts Act 1994 (“ITA”) and the amending International Trusts Amendment Act 2011 (“ITAA”) which in certain circumstances permit or require an IBC licensed by SIBA to act as trustee of an international trust. Finally, as Mr Sabino contends, section 22(1) of the ITA is also inconsistent with an interpretation of “trust business” as meaning “acting as a trustee” since section 22(1) provides that an International Trust may be administered by a corporate trustee.

(6) At no stage of either the Guernsey litigation or the current litigation has any contrary opinion been produced from a Seychelles legal expert supporting the construction contended for by the Defendants.

[95]First, with regard to the 1994 legislation in the Seychelles, Mr Sabino makes reference to the legislation referred to above and to the Licensing Services (Amendment) Regulations 1995 “which introduced licensing pursuant to the 1994 Acts”, and opines as follows (I have added my own numbering here and below, to make the text easier to follow):(1) “In 1994, having emerged as a democracy, the Seychelles passed a number of laws designed to promote itself as a provider of international business and financial services and to cater for the offshore business sector. Notably the Seychelles Parliament passed SIBAA, which establish SIBA as the regulatory and supervisory authority for international business. In particular, section 4 of SIBAA sets out the objects of establishing SIBA s including monitoring, supervising and ensuring that international business activities are transacted in conformity with the laws of Seychelles and observing the good repute of the Seychelles as a centre for international business activities. Section 5 also states that SIBA is to be the authority for registration purposes of the written laws specified in the 1st Schedule to that Act. The written laws referred to in the 1st Schedule to the Act are the IBA and the ITA, both passed in 1994.”

(2) “The initial intention was that IBCs should be the vehicle for offshore business and that the formation administration and registration of international trusts should be licenced by registered agents regulated by SIBA. Regulations referred to above and introduced in 1995 commenced that process which developed as the years went on. Thus an important part of the function of SIBA (which ultimately changed its name to the Financial Services Authority in 2013) was to regulate companies and agents which were engaged in the business of forming, setting up and organising offshore companies.”

(3) “The IBCA established a new legal entity known as an International Business Company (“IBC”). Thus alongside onshore companies there would exist offshore IBCs regulated where necessary by the SIBA. Section 5(1) of the IBCA set out a number of exclusions of areas of business in which IBCs were not permitted to engage and these included in subsection (c) ‘banking as defined in the Financial Institutions Act or a trust business’. It is this exclusion on which I am asked to advise as to its proper interpretation.”

(4) “It should also be noted that section n12 of the IBCA provided that the Memorandum of Association of an IBC should contain limitations on the powers of an IBC as set out in section 5(1) of the Act. Following the passing of that Act those limitations were required to be set out in the Memoranda of Association of all IBCs formed in the Seychelles until as explained below the Act was amended in 2009.”

(5) “The ITA introduced for the first time into the Seychelles law the concept of an ‘international trust’. The Seychelles legal regime is based on the French Napoleonic Code and does not recognise the concept of a trust as being a split between the legal and beneficial ownership of property. Thus the ITA contains a precise definition of a trust which would not be necessary if that concept already existed in Seychelles Law. An international trust must comply with the requirements of the ITA and is in some respects subject to the supervisory jurisdiction of SIBA. It should be noted however that there is nothing in the ITA or in any other Seychelles legislation to suggest that Seychelles law does not recognise foreign trusts, and it follows that in my opinion a foreign trust operating outside the jurisdiction of the ITA and of SIBA can exist.”

(6) “It is important to consider the relationship between the IA and the IBCA, and the extent to which IBCs are permitted to carry out trust business. Section 4(1)(b) of the ITA provides that at all time there must be either (1) a resident trustee resident in the Seychelles or (2) an IBC authorised by SIBA to act as a trustee or (3) a financial institution. It does not however follow that a non-licenced IBC cannot be a trustee of an international trust, although the trust would require as stated above one of the three alternative entities as one of its trustees. Section 22(1) of the Act provides that an International Trust may be administered by a corporate trustee provided that the number of trustees does not become less than two.”

(7) “Section 22 appears to be recognition for the fact that IBCs can be trustees of international trusts, whether or not registered. This immediately creates a problem in relation to the phrase ‘trust business’ , in section 5(1)(c) of the IBCA, because it appears to be in direct conflict with any suggestion that the phrase ‘trust business’ means that an IBC is not empowered to be a trustee of an international trust. The provisions of the ITA allow as stated above and in some circumstances require an IBC to be a trustee of an international trust.”

(8) “It was pointed out in the previous opinions of Mr Lucas that the phrase ‘trust business’ is not defined in the IBCA, nor is there any interpretive material that deals explicitly with the meaning of that phrase. Local jurisprudence suggests that in interpreting legislation, the intention of Parliament and the context in which the laws were enacted should be considered (see Sawge v R [2016] SCCA15 Seychelles Court of Appeal and Pool v Controller of Taxes

[1977] SLR124

).”

(9) “As stated above the context for the 1994 laws was the creation of an offshore business sector and in my opinion in interpreting the phrase ‘trust business’ it is necessary to consider all three of the 1994 acts and the interrelationship between them, and to consider the clear legislative intention of introducing a regulatory regime for the Seychelles governed by the SIBA.”

(10) “Having regard to all these matters it is my opinion that it cannot have been the intention of the Seychelles Parliament to preclude an IBC from acting as a trustee either of an international trust or of a foreign trust, this being inconsistent with the ITA. In my view, having regard solely to that legislation and not taking into account subsequent amendments to that legislation which I deal with below, the clear and obvious meaning of ‘trust business’ is that it refers to the business of setting up, administering and organising trusts, i.e. trusts services. The reason for the preclusion therefore is, as becomes apparent from other legislation that the scheme of the Seychelles legislation was that the regulation of corporate trust business should be carried out by domestic Seychelles companies established under the Seychelles Companies Act 1972 and not by IBCs.”

[96]Second, Mr Sabino expresses the opinion that the issue becomes even clearer in light of amendments to the 1994 legislation in the Seychelles. In addition to the legislation referred to in Mr Fletcher’s submissions, Mr Sabino makes reference in this context to the International Corporate Service Providers Act 2003 (“ICSPA”). He reasons as follows:(1) “In 2003, the ICSPA was passed. This Act makes more explicit provisions for the regulation of trust services by SIBA. Section 2 of the Act defines ‘international trustee services’ as meaning: ‘the following services provided in or from Seychelles for remuneration: (a) Services connected with the formation, registration or administration of an international trust; (b) Serving as resident trustee of an international trust; (c) Such other services as may be prescribed.”

(2) “Section 3(1) provides that no person shall provide international trustee services except under and in accordance with a licence issued subsection 5. In 2009 the IBCAA was passed being an Act to amend the 1994 IBCA, and importantly this entirely repealed section 5(1)(c) of the 1994 Act and replaced the exclusion of trust business with the following exclusion: (e) ‘Carry on international corporate services, international trustee services or foundation services as defined in the International Corporate Service Providers Act 2003’.”

(3) “Finally in 2011 the ITA was amended by the ITAA, which replaced section 4(b) of the ITA 1994 with a provision that at least one trustee of an international trust shall be a company licenced under the ICSPA to provide international trustee services.”

(4) “Thus the combined effect of the amendments passed in 2003, 2009 and 2011 has been to replace the exclusion of trust business with an exclusionary provision which prevents an IBC from providing corporate trust services but to require that an international trust have at least one trustee licenced by SIBA as a corporate service provider.”

(5) “In my opinion the 2009 amendment to the IBCA did not represent a change in the law but was intended to clarify the meaning of the phrase ‘trust business’ in accordance with the initial intentions as set out in the IA. In my view therefore it is proper to have regard for the 2009 amendment of the IBCA as relevant to the interpretation of the initial legislation. In effect, that which was not initially spelt out in the legislation is now spelt out very clearly in the amending legislation and there is now no doubt that an IBC has power to act as a trustee.”

[97]Third, Mr Sabino sums up the above points as follows:

“My overall opinion therefore is that both as a matter of interpretation of the 1994 legislation as it stood in 1994 and also having regard to later legislation it is clear that the proper interpretation of the phrase ‘trust business’ in the 1994 Act at the date of which it was passed was that it was intended to preclude IBCs from providing services for the formation of trusts, those services being services which were to be regulated by SIBA and to be carried out by domestic companies. I have reached this conclusion not simply on the basis of my interpretation of the phrase ‘trust business’ and the context of the 1994 IBCA, but also having regard to the interrelated provisions of the other 1994 legislation and in particular the provisions of the ITA.”

[98]Fourth, Mr Sabino addresses the fact that Clause 5 of the Memoranda of the First and Second Claimants in the present case stipulate that “The Company shall not carry on any banking, insurance, reinsurance, or trust business”. He expresses the following view:

“As a point of detail I refer yet again to section 12 of the IBCA and the requirements for the Memoranda of Association of IBCs to state certain exclusions and in particular the exclusion of trust business. Confusingly, section 12 continues to require that restriction to be set out in the Memoranda of Association of IBCs. This however supports my view that there has not been a change in the law as a result of the 2009 amendments, and that those amendments simply clarify that which was intended from the outset. Thus the scheme of the legislation is that the phrase ‘trust business’ should continue to be used as it is now clear that it means and always did mean the formation regulation and management of trusts. I add that there is no conceivable policy reason why the Seychelles Parliament would wish to preclude the newly created IBC from carrying on trust business internationally, bearing in mind that the ITA explicitly required a licenced IBC as one of three potential trustees. In any event, had it been the intention of the Seychelles Parliament to limit the powers of IBCs in this drastic manner the matter could have been made clear and explicit without any difficulty.”

[99]Finally, Mr Sabino concludes as follows:

“In conclusion therefore it is my opinion the phrase ‘trust business’ in the Memoranda of Association of the two Claimant companies Sherborne and Kenilworth means that those companies cannot provide services connected with the formation, registration or administration of an international trust but does not preclude them from (a) acting as resident trustee of an international trust under licence or (b) acting as trustee of an international trust without licence or (c) acting as trustee of a foreign trust outside the scope of the ITA.”

[100]It seems to me that this is a point of potential general importance for companies incorporated under, and subject to, the law of the Seychelles, and it is unfortunate that it arises for determination in an English court and without the benefit of opposing legal argument. However, one possible explanation for this is that the Defendants were unable to find any expert on the law of Seychelles to express contrary views to Mr Sabino’s.

[101]On the materials before me, however, I accept Mr Fletcher’s submissions.

[102]That conclusion makes it unnecessary, and probably unwise, to seek to determine the first and third issues identified by Mr Fletcher, especially because, as at present advised, I am not convinced that Mr Fletcher’s arguments in relation to either of them would necessarily be a complete answer to the allegations which underlie the Defendants’ case concerning implied misrepresentations. So far as concerns the first issue, it seems to me that the underlying issue, or one issue, can be classed as an issue of illegality, and I am not persuaded that an issue of illegality is the same as the issue of whether a company acts ultra vires or not. So far as concerns the third issue, my tentative inclination would be to say that an appointment of new (or additional) trustees in December 2014 would not necessarily render accurate an implied representation made in 2010 concerning legality (or for that matter the vires of then current trustees).

[103]For completeness, however, I will set out the main points made by Mr Fletcher with regard to these issues.

[104]With regard to the first issue, Mr Fletcher’s main points were as follows:(1) The succession of trusteeship is as follows:

a. As from 27 August 2010 the Trustees were SAT.

b. On 27 September 2010 SAT were removed by IXG as a result of a dispute between IXG and SAT which has nothing to do with the current litigation and which was litigated in the courts of Guernsey. In place of SAT, IXG appointed three new Trustees, the First Claimant, the Second Claimant, and Guinness Maher Trust Corporation Limited (“Guinness”). Guinness was subsequently removed in December 2010, leaving the First and Second Claimants as the Trustees.

c. Between 1 December 2010 and 17 December 2014 the Plan was administered by the First and Second Claimants as Trustees.

d. On 17 December 2014 IXG appointed three fresh Trustees, namely the Fourth, Fifth and Sixth Claimants. The powers of these Trustees to carry on Trust business are not in dispute. Although the assets of the Plan are now vested in all five Trustees, all duties, discretions and powers relating to the management of the section 40(o) Scheme (including Mr Williams’ pension Plan) are delegated to the new Trustees.

(2) By a Consent Order of 28 January 2015 permission was granted to add the three additional Trustees as Claimants in this claim.

(3) No issues have been raised by the Defendants as to the validity of their appointments.

(4) However, there remains an issue as to the vesting of the causes of action to which this action relates in the new Trustees, which is answered by a Deed of Assignment and Instrument of Assignment dated 17 January 2015 (pleaded in paragraph 19A of the Particulars). By this Deed, the contractual claim, which initially vested in the First and Second Claimants, was re-vested in all five Trustees. The Deed of Assignment is applicable if the law of England and Wales applies to the assignment, and the Instrument of Assignment is applicable if the proper law is the law of Guernsey. The Claimants did not pursue arguments based on the law of Guernsey, but contended instead that the law of England and Wales applied to the validity of the Deed of Assignment, and that the Deed of Assignment complies with section 136 of the Law of Property Act 1925 (“s136”).

[105]With regard to the third issue, Mr Fletcher’s main points were as follows:(1) Section 10(1) of the IBCA 1994 provides as follows: “An act of a company incorporated under this Act and a transfer of immovable property by or to a company so incorporated is not invalid by reason only of the fact that the company was without capacity or power to perform the act or to transfer or receive the property...”

(2) The section goes on to provide that the lack of capacity or power may be pleaded in internal proceedings of the company (section 10(1)(b). Section 10(2) goes on to give the Seychelles courts power to set aside contracts in internal proceedings brought by members against the company.

(3) Section 10(1) mirrors section 39(1) of the Companies Act 2006, re-enacted from the Companies Act 1985, and being initially enacted in the European Communities Act 1972. This provision, in accordance with EU law, abolishes the ultra vires rule in English law.

(4) Section 10(1) is a complete answer to the “trust powers” defence. Even if (which the Claimants do not accept) the limitation in the Memoranda of Association precludes those companies from acting as trustees, it does not affect the validity of the Deed of 1 December 2010.

(5) It is to be noted that the Defendants initially pleaded reliance on section 10(2) of the IBCA 1994 in the Defence, in which they pleaded that the Deed was voidable under section 10(2). This was coupled with a threat to take the matter before the Seychelles courts. That pleading was deleted from the Defence following a threat to apply to strike it out. Section 10(2) has no relevance to the present case, since it concerns internal company proceedings.

(6) The Defendants do not plead that the First and Second Claimants acted ultra vires, and in the light of section 10(2) they could not argue that point. Instead they plead an “implied representation” that trust companies would not be appointed which lacked trust powers. This is simply seeking to agree the ultra vires issue by the back door. Either those companies had power to enter into the Deed or they did not. The purpose of abolition of the ultra vires rule in English and Seychelles law is to ensure that a third party dealing with a company does not need to concern itself with the scope of the objects clause of the company with which it is dealing. (ii). The law of Guernsey

[106]Mr Fletcher’s submissions concerning this topic were as follows:(1) Initially, there was an issue concerning the Instrument of Assignment of 17 January 2015. However, that no longer arises for the following reasons. The First and Second Claimants have assigned the benefit of the claim for breach of the Deed to the new trustees appointed in December 2014, that is to say the Fourth, Fifth and Sixth Claimants, acting in conjunction with the First and Second Claimants, but with sole jurisdiction over Mr Williams’ pension Plan. In part this arrangement was designed to deal with the ongoing dispute about the trust powers of the First and Second Claimants, and it is the foundation for paragraph 23(6) of the Reply. Although the Claimants pleaded in paragraph 19B of the Particulars that the assignment to the new trustees is governed by the law of Guernsey as to assignment of choses in action, they did not pursue this point at trial.

(2) Instead, the Claimants contended that English law applies as to the requirements for assignment of a chose in action: see s136. Their basis for that contention is that both the Deed and the Deed of Assignment contain English choice of law clauses. The correspondence giving notice of the assignment for the purposes of s136 is included in the trial papers.

(3) The second issue concerning the law of Guernsey remains live. It relates to the contention that the First and Second Claimants required a licence granted by the Guernsey Financial Services Commission (“GFSC”) pursuant to the Regulation of Fiduciaries, Administration of Businesses and Company Directors (Bailiwick of Guernsey) Law 2000 (“the Fiduciaries Law”). This arises from paragraphs 3.4 and 40.9 of the Defence. The Claimants’ case in answer is pleaded in paragraph 3 of the Reply. In summary, the Claimants contend that the Fiduciaries Act does not apply to the Claimants in their capacity as Trustees and that the Plan does not require a licence from the GFSC because (a) the Plan is not administered “in or for the Bailiwick” and (b) those activities of those Claimants are not carried out “by way of business" because they have never been remunerated for carrying out the same (see Mr Mewis’ evidence summarised in paragraph 16(14) above).

(4) The Claimants’ case on the second issue should be upheld in light of the contents of the report of Mr Newman.

[107]Mr Newman addresses the question of whether the First and Second Claimants require a licence granted by the GFSC pursuant to the Fiduciaries Law to act as trustees of the Plan at paragraph 2.3 of his report. He provides the following opinion:

“(a) Section 1 of the Fiduciaries Law prohibits a person other than a Bailiwick company from carrying on ‘by way of business in or from within the Bailiwick’ any ‘regulated activities’ except under the authority of and in accordance with the conditions of a licence granted by the GFSC. (b) Regulated activities which are prohibited in the absence of a licence are set out in section 2 of the Fiduciaries Law and include the management or administration of trusts including acting as a corporate trustee. By virtue of an Instrument of Removal and Appointment of Trustees dated 27 September 2010, the First and Second Claimants were appointed as trustees of the Plan and therefore their activities are regulated activities which require a licence pursuant to section 1 of the Fiduciaries Law. I cannot see that any of the exemptions set out in section 3 of the Fiduciaries Law are applicable. (c) The ‘Bailiwick’ is defined in section 58 of the Fiduciaries Law as the Bailiwick of Guernsey. The Bailiwick of Guernsey comprises the inhabited islands of Guernsey, Alderney, Sark, Herm, Breqhou, Jethou and Lihou (plus other uninhabited islands). It is pleaded at paragraph 1 of the Re-Amended Particulars of Claim that the First and Second Claimants are limited companies incorporated in the Seychelles. It is also pleaded at paragraph 3 of the Re-re-amended Reply and Defence to Counterclaim that the First and Second Claimants are resident in Cyprus. If these pleaded paragraphs are factually correct, then the First and Second Claimants will not require a licence pursuant to section 1 of the Fiduciaries Law. (d) The words ‘by way of business’ are defined in section 58(3) of the Fiduciaries Law. A person who carries on any activity shall be deemed to do so by way of business ‘if he receives any income, fee, emolument or other consideration in money or money’s worth for doing so’. It is pleaded at paragraph 3 of the Re-re-amended Reply and Defence to Counterclaim that neither of the First or Second Claimants receives any fee, income or consideration for acting as trustees. If they indeed do not receive any consideration, whether monetary or otherwise, for their services, then they will not require a licence pursuant to section 1 of the Fiduciaries Law.”

[108]Mr Newman also addresses the consequences and effect under the law of Guernsey of the First and Second Claimants not having such a licence if, in fact, they required the same. His opinion concerning this issue is contained in paragraph 2.4 of his report:

“(a) Subsection 1(3) of the Fiduciaries Law indicates that a person who contravenes the requirement set out in section 1 of the Fiduciaries Law by carrying out any regulated activities without a fiduciary licence is guilty of an offence. (b) Section 47(1) of the Fiduciaries Law states that a person guilty of an offence described in subparagraph (a) above is liable on summary conviction to a fine not exceeding level 5 on the uniform scale, being £10,000 (section 1(2) of the Uniform Scale of Fines (Bailiwick of Guernsey) Law, 1989), and/or to imprisonment for a term not exceeding 3 months. Alternatively on conviction on indictment, the guilty person is liable to a fine and/or imprisonment for a term not exceeding 2 years. (c) By section 48(1) of the Fiduciaries law if the offence is committed by a company and is proved to have been committed with the consent or connivance of, or is attributable to any neglect on the part of any director, chief executive, controller, manager, secretary or other similar officer of the company or any person purporting to act in such capacity, that person as well as the company is guilty of the offence and may be proceeded against and punished accordingly. If the company is managed by its members, such proceedings and punishment can apply to a member in connection with his functions of management as if he were a director (section 48(2) of the Fiduciaries Law). (d) If the First and Second Claimants were in fact required to have a licence granted by the GFSC in order to be trustees of the Plan, by carrying on a regulated activity without a licence from the GFSC, they would be guilty of a criminal offence as specified above. However, Section 1(4) of the Fiduciaries Law states that ‘The fact that a regulated activity is carried on in contravention of this section shall not of itself affect any civil liability arising in respect of the carrying on of the activity’. Therefore, even if the First and Second Claimants were guilty of such an offence, the Plan would not be void or voidable under Guernsey law as a result, nor would the offence in itself have any bearing on the legality or otherwise of any powers exercised by the First and Second Claimants in their capacity as trustees of the Plan.”

[109]Mr Newman states the following conclusion at paragraph 3.2 of his report:

“3.2 If the pleaded position is factually correct that the First and Second Claimants are companies incorporated in the Seychelles resident in Cyprus acting as trustees for no consideration, then they are not required to have a Fiduciaries Licence granted by the GFSC pursuant to the Fiduciaries Law and thus no offence has been committed under Guernsey law.”

[110]In light of this expert evidence, together with the other evidence adduced by the Claimants which lays the factual ground for Mr Newman’s discussion of the issues of Guernsey law and the conclusion that he reaches on those issues, the Claimants’ case on the live issue of Guernsey law must succeed, and the Defendants’ case (that is pleaded in paragraphs 3 and 40.9 of the Defence) must be rejected.

The assignment of claims

[111]In view of my rejection of the aspects of the Defendants’ pleaded case which are discussed in detail above, it may not be strictly necessary to resolve the aspect of the Claimants’ pleaded case which is pleaded in paragraph 23(6) of the Reply. As there expressed, the need to determine the effectiveness of the assignment to the Fourth, Fifth and Sixth Claimants of the right to enforce the Deed, and whether those Claimants have “unimpeachable trust powers” would appear to arise only in the event that (contrary to my findings above) the Defendants had succeeded on their contentions concerning the “trust business” point vis-à-vis the First and Second Claimants. In case I am wrong about that, however, I should make clear that I would uphold the Claimants’ case on the effectiveness of the assignment and the “unimpeachable” nature of the trust powers of the Fourth, Fifth and Sixth Claimants (although I do not decide that the validity of those points would necessarily be an answer to the Defendants’ claims of misrepresentation). I consider it is sufficient in this regard to state that I accept Mr Fletcher’s submissions which are summarised at paragraphs 104(2)-104(4) and 106(2) above.

Conclusion

[112]For these reasons, the claim succeeds and the counterclaim must be dismissed.

[113]As at present advised, although I am prepared to hear further argument on these points, it seems to me likely that the appropriate outcome is that:(1) There should be judgment for the Claimants against Mr Williams for the following relief claimed in the Particulars: (a) the sum of £1,000,000, pursuant to Clause 1 of the Deed; (b) interest on that sum at such rate and for such period as the Court shall determine upon hearing further argument; (c) such charges relating to the Scheme and the Plan as the Court is satisfied are payable upon hearing further argument; (d) if the Claimants satisfy the Court that this is necessary or appropriate, a declaration that Mr Williams is liable for further charges going forward; and (e) the costs of the present proceedings.

(2) The remaining claims in the Particulars should be dismissed, save perhaps the claim for costs as against PAS and Mrs Williams, because they also joined in with advancing the Defence.

(3) PAS should be ordered to pay such costs of the s118 Claim as were remitted to be determined by this Court.

[114]I invite Mr Fletcher to submit a draft order which reflects these rulings. I will hear submissions on the points identified above, and any other issues which the parties may wish to raise, either when judgment is handed down, or at some other convenient date. In order to afford the Defendants an effective opportunity to participate in any further argument, the Claimants’ solicitors should send them copies of any further written submissions that the Claimants may wish to make, together with copies of this draft judgment and any corrections to the draft judgment the Claimants may wish to suggest.