Barker v Confiànce Ltd & Ors, Court of Appeal - Chancery Division, November 08, 2018, [2018] EWHC 2965 (Ch)

Resolution Date:November 08, 2018
Issuing Organization:Chancery Division
Actores:Barker v Confiànce Ltd & Ors
 
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Neutral Citation Number: [2018] EWHC 2965 (Ch)

Case No: HC-2017-001868

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND

AND WALES

PROPERTY TRUSTS AND PROBATE LIST (ChD)

Royal Courts of Justice

Rolls Building, Fetter Lane, London, EC4A 1NL

Date: 08/11/2018

Before:

MR JUSTICE MORGAN

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Between:

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Stephen Moverley Smith QC and Adam Cloherty (instructed by Memery Crystal LLP) for the Claimant

Elspeth Talbot Rice QC and Emer Murphy (instructed by Reynolds Porter Chamberlain LLP) for the First Defendant

Jonathan Seitler QC and Stephen Hackett (instructed by Mishcon de Reya LLP) for the Applicants

Hearing dates: 3 October 2017, 30 and 31 July 2018 and 5 October 2018

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The Hon Mr Justice Morgan:

Introduction

  1. This is an application by Tom and Freya Barker for an order pursuant to CPR 19.7(7) to the effect that the court should direct that an earlier order of the court, made by Asplin J on 25 July 2014, is not binding on them.

  2. The facts, or some of them, which form the background to this application, have been considered by the courts on earlier occasions. Some of the relevant background was considered in detail in the context of a professional negligence claim which was tried by Roth J. He gave his judgment, dismissing the claim, on 23 March 2016: see Barker v Baxendale Walker Solicitors [2016] EWHC 664 (Ch). Some more of the background facts were the subject of proceedings which were determined by Marcus Smith J on 19 June 2017: see Twin Benefits Ltd v Barker [2017] EWHC 1412 (Ch). Then, an appeal to the Court of Appeal from the judgment of Roth J was allowed on 8 December 2017: see Barker v Baxendale Walker Solicitors [2018] 1 WLR 1905.

  3. On the present application, I was taken in detail to the facts, or the alleged facts, which are said to be relevant and I heard extensive submissions from counsel for three parties, namely, Tom and Freya Barker, Mr Barker and Confiànce Ltd. For reasons which I need not explain, the hearing of this application went part heard from October 2017 to July 2018 and then to October 2018. During the period that this matter was adjourned part heard, the submissions made by the parties, in particular, the submissions made on behalf of Tom and Freya Barker have changed somewhat, possibly as a result of the Court of Appeal giving its judgment in the professional negligence proceedings on 8 December 2017 and the Supreme Court, on 31 July 2018, dismissing a petition by Mr Baxendale-Walker for permission to appeal against the decision of the Court of Appeal.

  4. Although the detailed facts, or alleged facts, which are said to be relevant to this application are very extensive and although the submissions of the parties were wide ranging, I will attempt to give my reasons for my decision by referring to matters of facts as concisely as possible and referring only to those submissions which in the end are material to the outcome.

  5. The application which was made to me had been foreshadowed in some of the submissions made to Marcus Smith J in the Twin Benefits proceedings to which I have referred. The learned judge summarised the background facts for the purposes of giving his judgment and, at any rate in relation to some of the relevant facts, I will base my own statement on that earlier summary, for which I am grateful. I will need to supplement that earlier summary in the light of further material which I was shown but which was not available to Marcus Smith J.

    The facts

  6. Mr. Barker, set up a business called "121 Consulting" in 1991. 121 Consulting delivered management consultancy and project services, and was very successful. The business developed into a set of trading companies under a group holding company, Team 121 Holdings Limited ("Team 121 Holdings").

  7. By the spring or summer of 1998, Mr. Barker, who had a majority shareholding in Team 121 Holdings, was looking to sell. Since the group was considered to be worth £30m to £40m, the impact of capital gains tax on any such sale would be considerable. Mr. Barker therefore sought tax planning advice from, amongst others, a firm of solicitors called Baxendale Walker Solicitors. Mr. Paul Baxendale-Walker was the principal partner in that firm, and was involved in providing tax planning advice to Mr. Barker.

  8. As a result of the advice received, Mr. Barker set up a tax avoidance scheme which was based on the establishment of an employee benefit trust ("EBT"). Had the scheme been successful, it would have avoided a very significant liability to capital gains tax and, eventually, inheritance tax.

  9. On 6 October 1998, Team 121 Holdings entered into a trust deed (the "Trust Deed") with an offshore trust company based in Jersey, Matheson Trust Co. (Jersey) Ltd ("Matheson"). By the Trust Deed, Team 121 Holdings constituted a trust (the "Trust") by settling the sum of £100 on trust for beneficiaries defined as being present, past and future employees of the Team 121 group, and the families of those employees, but expressly excluding specified "Excluded Persons", defined in Schedule 3 of the Trust Deed. The definition of Excluded Persons in Schedule 3 to the Trust Deed was based upon the wording of section 28(4) of the Inheritance Tax Act 1984 (``IHTA''), and was critical to the working of the tax avoidance scheme. Clause 11 of the Trust Deed contained a power of variation in wide terms which permitted alterations and additions to the provisions of the Trust Deed. Paragraph 1.2.18 of Schedule 1 to the Trust Deed conferred on the Trustee power to appoint any part or all of the Trust Fund on the trusts of any other existing settlement or to declare any new settlement.

  10. Mr. Barker, and a Mr. Speksnyder, were appointed protectors of the Trust. Mr. Speksnyder subsequently ceased to be a protector (on 28 September 1999), and from then on Mr. Barker was the sole protector of the Trust.

  11. On 15 October 1998, Mr. Barker as grantor executed a deed declaring that he held all his shares in Team 121 Holdings (the "Shares") on trust for the EBT (the "Deed of Gift"). This gift of the beneficial interest in the Shares was, however, expressed to be conditional. The condition was that:

    "... in the event that the Inland Revenue determines in writing to the Grantor that, in respect of this transfer of the equitable interest in the Shares to the [EBT], the trusts of the [EBT] do not satisfy the conditions for exemptions from inheritance tax set out in Section 28 Inheritance Tax Act 1984 or do not satisfy the conditions for a no gain/no loss of disposal for the purposes of capital gains tax set out in Section 239 Taxation of Chargeable Gains Act 1992; then...the Trustees shall hold the Shares and any income arising to the Shares and any capital proceeds of disposal of the Shares and any income arising from such capital proceeds upon trusts absolutely for the Grantor".

  12. On 23 March 1999, Matheson as trustee of the Trust declared a sub-trust (the "Sub-Trust"). The beneficiaries of the Sub-Trust were termed the "Principal Beneficiaries", which term was defined as follows:

    "...the widow, children and remoter descendants and the mother and sisters of Iain Paul Barker who shall be living after his death..."

  13. The beneficiaries of the EBT included former employees of the Team 121 group and their children. The beneficiaries of the Sub-Trust comprised the Principal Beneficiaries. Essentially, these were:

    i) Mr. Barker's children and any unborn descendants; Mr. Barker had five children by three women:

    a) at around the time when the tax scheme was being considered, Mr. Baxendale-Walker introduced Mr. Barker to a Ms. Susan Glover, with whom Mr. Barker formed a personal relationship, resulting in the birth of twin children, Tom and Freya Barker, in 2001; Mr. Baxendale-Walker is the godfather of Tom and Freya; Mr. Barker and Ms. Glover's relationship subsequently broke down;

    b) In 2004, Euan Barker was born (by Ms. Deborah Siddoway, also known as Deborah Barker);

    c) In 2004, Lauren Chadwick was born (by Ms. Julie Chadwick);

    d) In 2006, Rowan Barker was born (by Ms. Siddoway, also known as Deborah Barker);

    ii) Mr. Barker's mother, Ms. Joan Barker;

    iii) Mr. Barker's two sisters, Ms. Ingrid Heywood and Ms. Margot White.

  14. The Shares were sold in mid-1999 for a substantial consideration. I understand that the Sub-Trust received the Shares and/or their proceeds.

  15. Her Majesty's Revenue and Customs ("HMRC") began investigating the EBT in 2005 and, in 2010, HMRC issued three Notices of Assessment to Mr. Barker, asserting a liability to tax on the income and gains arising via the Trust and Sub-Trust. Mr. Barker sought to appeal against the Notices of Assessment to the First-tier Tribunal. However, during the course of that appeal, Mr. Barker reached a settlement with HMRC, which concluded in April 2013 and which involved Mr. Barker paying £11.3m to HMRC.

  16. The settlement with HMRC was made on the basis that Mr. Barker had failed effectively to give away the Shares, and that he could be taxed on their capital gains. Nevertheless, the proceeds of sale of the Shares remained in the Sub-Trust, of which Mr. Barker was not a beneficiary. Mr. Barker accordingly sought to wind up the Trust and the Sub-Trust, thereby avoiding on-going trustees' costs and (more to the point) securing the return to him of as much of the assets held by the Trust and the Sub-Trust as possible.

  17. It is necessary to refer to some of the steps taken by Mr Barker before he commenced proceedings to undo the Trust and the Sub-Trust. He consulted Farrer & Co who instructed counsel. By January or February 2014, Mr Barker's legal team had prepared draft court proceedings and a draft witness statement to be made by Mr Barker. It seems that Mr Barker's wish was to negotiate terms of settlement with the trustee and the beneficiaries before...

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