‘DECLARATION OF TRUST DATE: BY: John Dixon of The Stonehouse, Woolhope, Hereford, HR1 4QR (the ‘Owner’) RECITALS: (A) The Owner is the legal owner of the John C Dixon Capital Account of the Ernst and Young Limited Liability Partnership (‘Ernst and Young’), the accounts of which are currently audited by BDO (the ‘Capital Account’). (B) The Owner is the legal owner of the any [sic] undrawn Profits and Tax Retentions of John C Dixon in Ernst and Young (collectively of A and B ‘the balances’). (C) The Owner wishes to declare the trusts on which the above balances are now to be held. OPERATIVE PROVISION: The Owner irrevocably declares that he holds the balances to the credit of the Capital Account as at the date of this declaration on trust for Janet Dixon of The Stonehouse, Woolhope, Hereford, HR1 4QR absolutely’
‘OPERATIVE PROVISION The Owner irrevocably declares that cash representing any future income after taxation income from whatever source and any assets including properties, cars, chattels, insurance policies, pensions, annuities and investments accrue for the benefit of Janet Dixon’
‘Dear John, Deeds of Trust The purpose of this letter is to acknowledge the various Deeds of Trust we have executed today in relation to all our assets and future income. In consideration of the declarations of Trust dated today I detail in this letter the governance of any receipts by you of sums that belong to me under the terms of those Trusts. I am prepared as the occassion [sic] demands and with my agreement that sums be received by you as long as you recognise by signing this letter that they beneficially belong to me and as soon as practical be paid over to me or on my direction. To the extent that you defray expenditures out of any sums received by you that are governed by the Trust Deeds then to the extent that they represent household expenditures or other expenses for my account you do so as my agent. To the extent any expenditure by you, as agreed by me, is in relation to any expenses that are personal to you then those sums will represent interest free loans by me to you that are repayable on demand. Yours sincerely Janet Dixon Acknowledged John Dixon’
‘acts done or documents executed by the parties to the ‘sham’ which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create.’
‘The parties must have intended to create different rights and obligations from those appearing from (say) the relevant document, and in addition must have intended to give a false impression of those rights and obligations to third parties’
‘AG Securities[1990] 1 AC 417 … established that, when considering whether a transaction is a sham, the court is not restricted to considering activities which took place before or at the time of the transaction: it is perfectly proper to consider how the parties subsequently acted. In AG Securities[1990] 1 AC 417 at 475E-F, Lord Jauncey said that the defendants contended that: ‘[A]lthough the subsequent actions of the parties may not be prayed in aid for the purposes of construing the agreements they may be looked at for the purpose of determining whether or not parts of the agreement are a sham in the sense that they were intended merely as “dressing up” and not as provisions to which any effect would be given.’
‘When subsequent events are looked at the matter becomes even clearer’
‘[T]hough subsequent conduct is irrelevant as an aid to construction, it is certainly admissible as evidence on the question of whether the documents were or were not genuine documents giving effect to the parties’ true intentions.’
‘includes a gift, agreement or arrangement, and references to entering into a transaction shall be construed accordingly.’
‘(2) An order under section 423 may affect the property of, or impose any obligation on, any person whether or not he is the person with whom the debtor entered into the transaction; but such an order- (a) shall not prejudice any interest in property which was acquired from a person other than the debtor and was acquired in good faith, for value and without notice of the relevant circumstances, or prejudice any interest deriving from such an interest, and (b) shall not require a person who received a benefit from the transaction in good faith, for value and without notice of the relevant circumstances to pay any sum unless he was a party to the transaction. (3) For the purposes of this section the relevant circumstances in relation to a transaction are the circumstances by virtue of which an order under section 423 may be made in respect of the transaction.’
‘the defence is available to a person whose position has so changed that it would be inequitable in all the circumstances to require him to make restitution, or alternatively restitution in full. I wish to stress however that the mere fact that the defendant has spent the money, in whole or in part, does not of itself render it inequitable that he should be called upon to repay, because the expenditure might in any event have been incurred by him in the ordinary course of things.’
‘14. In my judgment, contemporaneous written documentation is of the very greatest importance in assessing credibility. Moreover, it can be significant not only where it is present and the oral evidence can then be checked against it. It can also be significant if written documentation is absent. For instance, if the judge is satisfied that certain contemporaneous documentation is likely to have existed were the oral evidence correct, and that the party using oral evidence is responsible for its nonproduction, then the documentation may be conspicuous by its absence and the judge may be able to draw inferences from its absence.’
‘Not in those words’, adding: ‘We discussed that Pure needed someone VAT registered and so used Barker.’
‘The declaration of Trust I instructed Penningtons directly to give advice and draft the relevant Trust Deeds. It is quite common for Partners in professional services firms to execute such arrangements. The scope was to ensure that all current and future assets were protected and to ensure that they were held and accrued for the benefit of my wife and by her will, our children. There are also some potential tax benefits with these arrangements.’
‘Deed of Trust As I recall at the time a number of partners and colleagues were contemplating and talking about similar arrangements and this prompted me to consider. The Trusts were executed so long ago they were clearly (as a matter of timescales) not executed in contemplation of the current situation. Tax benefits Gift to spouses are not subject to IHT and reduce the value of the donors estate for IHT purposes. As the likelihood is that females live longer than males (especially given the health history of my family) it also allows for a longer window to make “Potentially Exempt Transfers” for IHT purposes to children and other relatives. There are lots of materials on the Internet if you would like to know more.’
‘I was concerned about my husband remaining the beneficial owner of family assets when a partner in a professional services firm given the economic environment that had existed since the “credit crunch”. The environment was volatile and unpredictable.’
‘At the time the trusts were created the business world was very volatile - and assets held by a partner in a professional services firm inevitable [sic] would have been exposed to risk of litigation. There was conjecture about whether limited liability status for partners in professional service firms would be respected in any litigation and it has been standard practice for many years for partners in this situation to vest assets in favour of their spouses.’
‘With regard to the environment when the trusts were executed I can only refer you to the fact that when the trusts were executed the financial markets were coming out of turmoil with the interventions with Northern Rock, HBOS, RBS and Lloyds TSB. The impact on advisers was being actively discussed at the time. The existence of limited liability partnerships did not provide cast-iron protection against the risks of being in professional practice at this time and indeed there are articles on the internet on this point. Hence the execution of the trusts was based on real external influences at the time, were in no way in contemplation of the current proceedings, were not a sham and had real benefit for me and my family.’
‘Date of Event:2/9/2010 Author: Richard Risino Client: Temp Client Matter: Temporary Matter Matter No: Temp RLR and LZD calling John Dixon. John began the conversation by explaining that he had been given RLR’s name by Jonathan Levy at RPC. RLR explained that J Levy and RLR knew each other from their time at Berwin Leighton Paisner where they shared an office. John advised that the nature of his call was to discuss the asset ownership between himself and his wife. John had been speaking with his fellow partners at EY and it appears that many of them own assets entirely in their wife’s name. This is really a method of asset protection to try to avoid those assets being susceptible to attack by creditor [sic] of the LLP in the event that were to happen in such a high risk business. John asked for the general options available to him and his wife to try and safeguard this. LZD began by saying that this is possible between a husband and wife and there are no real inheritance tax or capital gains tax implications of the disposal between spouses, but the issue to be aware of is that any activity put in place with a view to defrauding creditors can be susceptible to being set aside. LZD was alluding to activity where an individual is aware that they may be subject to pursuit by a creditor or potentially heading towards bankruptcy and transferring assets out of their own name, and then those transactions can be set aside. LZD did not go into an enormous amount of detail but said that the two to five period was the important period and after that transfers tend to be less susceptible to attack. Ultimately there is no guarantee. John accepted this but was happy to hear that it is possible. John’s assets are as follows: There are a number of houses which are owned in joint names and although they are mortgaged there is significant equity in them. There are then antiques and possessions and a portfolio of investments. LZD advised that in order to transfer the houses into John’s wife’s name, the most appropriate way would be a simple Declaration of Trust. This would avoid having to make any contact with the mortgagor and then giving consent. Although legal title at the Land Registry would not be changed then ultimately the Declaration of Trust is sufficient for the purposes for John wants to achieve. In terms of the antiques, a similar Declaration of Trust or a letter of gift will be required to affect the transfer. In terms of investments and again this may be straightforward to achieve, although there may be certain income tax implications of arranging for the transfer. Following a discussion it appears John is most interested in transferring assets such as movables i.e. houses and antiques and possessions. Portfolio of the time being [sic] he will leave untouched. LZD then briefly advised John of the risks of transferring assets into his wife’s name such as the fact that his wife would have ultimate control of the assets if they were to divorce. This may put John in a less strong position and ultimately the control of estate planning is transferred into his wife’s name as she legally owns all of the assets. The following conversation did not appear as though a significant amount of estate planning is to be put in place at this juncture so that is not one of John’s concerns. John would like RLR to email him so that he can begin to put in place arrangements to make to transfer assets into his wife’s name. RLR Dictated on: 2/9/10’
‘The purpose of my letter simply to provide an estimate as to costs and for your information on the Standard Terms of Engagement which apply to your instructions in this matter. I understand that you are liaising with my colleague Richard Risino as to the assets to be transferred and the issues to consider in respect of each and therefore do not propose going into any further detail here…. Costs and Engagement Based on you wishing to transfer the beneficial ownership in the assets outlined to Richard by email, I expect the costs to be incurred in preparing the paperwork and liaising with you to be in the region of£1,000 to£1,250 plus VAT. If significant further correspondence is required or there are further assets to transfer, then I may have to revise that estimate…. …I am enclosing with this letter copy of Penningtons’
‘What happens if one of us or both of us dies whilst we own?’
‘Initially we were instructed that Mr Dixon was purchasing the property jointly with his wife but on July 18, 2014 Mr Dixon instructed us to amend the Agreement for sale to reflect Mrs Dixon as the sole purchaser’
‘Mr and (to the extent relevant) Mrs Dixon’s purposes in entering into the Declarations of Trust were: (a) To ensure that their family were protected against economic risk at a time of potential economic turmoil. (b) Avoidance of inheritance tax by transferring Mr Dixon’s assets to his spouse, Mrs Dixon, who they believed was likely to live longer. (c) To ensure that, in the event that anything happened to Mr Dixon, Mrs Dixon would be able to provide, and afford professional care for Patrick. (d) To ensure that Mrs Dixon had access to income and assets to launch and support her business ventures, referred to above. (e) To reflect and facilitate the pre-existing position, which was that Mrs Dixon had control of all of the family’s assets and financial affairs.’
‘(a) Funds well in excess of£1m received from my income were invested by Janet at her direction into businesses she controlled. The relevant accounts of those businesses have been supplied to the Claimants. (b) All decisions subsequent to the [DoTs] as to property purchases and sales, lettings, insurance, were made and handled by Janet alone. (c) Between the end of 2014 and 2016 I undertook a number of consultancy roles where the income (in excess of£1m ) was received directly by a business Janet controlled and in which I had no interest. The monies were then expended at her direction. (d) For the majority of time when at Reckitt from 2016 to my departure in 2023 my salary was received directly by Janet. This income was significant and was earned over 7 years. (e) Janet has purchased and maintained in her own name motor vehicles used by me, herself and other family members. (f) Janet has supported and maintained her children financially including guaranteeing a number of property leases on their behalf. (g) Janet & I have had separate bank accounts for over 30 years. I do not have access to funds in Janet accounts. There has been one joint account that is not being used - the last operating joint account was closed many years before the [DoTs]. (h) All insurances and utility bills have since the [DoTs] been in Janet’s sole name. (i) Janet directly funded care for her autistic son until his death in 2017, and then she directly funded legal costs into the proceedings and inquest into his death including the use of Counsel. (j) A specific mention should be made in this regard to the Barbados property….. Janet managed the lettings, upkeep and sale of the property alone.’
‘The first limb of the s 423 purpose – putting assets beyond the reach of a person who is making or may at some time make a claim against him – has inherent in it the assumption that following the transaction, the person does not have sufficient funds remaining with him to satisfy the actual or potential claim made against him. If a person … has plenty of assets left with which to meet the claim, then however many additional assets are gifted to people, he … cannot have the s 423 purpose.’
‘The important point for present purposes is that, although section 423 finds itself in the same Act as those provisions which are concerned with bankruptcy or corporate insolvency, its scope is wider. There is no need for there to be any insolvency. The unfortunate reality of life is that even very wealthy debtors are sometimes unwilling, rather than unable, to pay their debts. They may well make strenuous efforts to use various instruments, including a limited company, for the purpose of putting their assets beyond the reach of a person who is making, or may make, a claim against them; or otherwise prejudicing the interests of such a person.’
‘I reject that argument. The 898,000 US dollars used to buy a Barbados property came from Mr Dixon’s own bank account, but the property was put into the name of the respondent. Assuming that the Trustees’ case on the declarations of trust and a transaction at an undervalue succeeds, the money used to buy the property cannot be argued to have been a joint asset. It is not held in a joint bank account and there was no other relevant trust of the bank account. The fact that on a divorce the respondent might have had a claim to one-half of the assets of her husband does not mean that while they were married she beneficially owned half the money in his bank account from time to time.’
‘(2) Mr and (to the extent relevant) Mrs Dixon’s purposes in entering into the Declarations of Trust were: (a) To ensure that their family were protected against economic risk at a time of potential economic turmoil.’