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ENGLAND
[1982] Ch 452
Court of Appeal
IRC v STYPE
The bones of story are that the deceased had embarked on a simple scheme to put the
bulk of his (very considerable) estate beyond the reach of the UK Revenue’s powers to collect
tax on his death, and the Court was simply not going to wear it. A strongly-worded
judgement, which does not actually decide anything very interesting.
Sir Charles Clore vested £20 million-worth of English land in a Jersey company
(Stype) as his nominee. Stype sold the land but did not collect the proceeds until after his
death, when it caused the purchaser - Prudential - to pay the money into an account in
Jersey.
Templeman LJ:
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We can deal summarily with the submission made on behalf of Stype Investments that
this court has no jurisdiction over Stype Investments which is a Jersey company or,
alternatively, that this court should not exercise jurisdiction over Stype Investments because
by doing so the English court would flout the privileges and the immunities granted by the
Crown to the courts and inhabitants of Jersey. The Jersey courts have jurisdictions over
causes of action which arise in Jersey. The English courts have jurisdiction over causes of
action which arise in England. In the present case Stype Investments voluntarily came to
England, accepted a conveyance of English land as nominee for Sir Charles and, if the
Inland Revenue are correct, incurred personal liabilities to the Crown for capital transfer tax
which became payable as the result of the death of Sir Charles. In these circumstances, the
English court has power to determine the dispute between the Inland Revenue and Stype
Investments over capital transfer tax. The exercise by the English court of its powers will
not cause any affront to the courts or the inhabitants of Jersey.
The first question which falls for determination is whether the £20 million which at
the behest of Stype Investments was paid by the Prudential and Messrs. Titmuss Sainer &
Webb to Stype Investments in Jersey in September 1979 represented property which at the
death of Sir Charles formed part of his estate situate in England.
Immediately after the conveyance of the Guy’s estate to Stype Investments and the
execution of the declaration of trust which acknowledged that the Guy’s estate would
“continue to remain in the beneficial ownership of Sir Charles,” the Guy’s estate belonged in
equity to Sir Charles in fee simple and his interest constituted property situate in England.
Stype Investments was entitled to be paid any outgoings or charges in respect of the estate,
but this entitlement did not affect the nature, quality or situation of the interest of Sir Charles
in the estate.
Immediately after the contract for sale had been entered into by Stype Investments
with the Prudential, Sir Charles was entitled in equity to the Guy’s estate in fee simple
subject to, and with the benefit of, the contract. He was entitled in equity to the purchase
price payable by the Prudential and to the benefit of the rights of Stype Investments to
enforce in England the obligations of the Prudential and to be paid damages for breach of
those obligations. Whether those interests of Sir Charles ought to be classified as
immovables, as the Inland Revenue assert, or as movables, as Stype Investments claims, is
immaterial. Those interests were property situate in England. The Guy’s estate was land in
England, the rights to specific performance and damages were enforceable, and only
enforceable, in England, and the purchase price was an obligation or debt which would fall to
be performed and paid by the Prudential, an English company, and this obligation or debt was
therefore also situate in England. Stype Investments was entitled to retain or be paid any
outgoings and charges in respect of the sale and to be indemnified against any liability which
Stype Investments incurred as a result of entering into the contract at the request of Sir
Charles, but this entitlement did not affect the nature, quality or situation of the interests of
Sir Charles in the estate and in the purchase price. Nor did it affect liability for capital
transfer tax. The interests of Sir Charles were property situate in England.
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The property of Sir Charles which at the date of his death was situate in England vests
automatically in his personal representatives constituted in England by virtue of an English
grant: see Dicey & Morris, The Conflict of Laws, 10th ed. (1980), vol. 2, p. 596.
Executors have power to act before they take out probate, but if they act in relation to
English assets they cannot thereafter renounce but may be cited to take probate and may be
peremptorily ordered to do so. Thus if the executors in the present case received, whether
within or outside the United Kingdom, £20 million representing property of Sir Charles
situate in England at his death, the executors would be liable to pay capital transfer tax just as
if they had proved the will of Sir Charles in England.
Similarly, it seems to us that if a stranger so deals with proceeds of sale of English
property belonging to a deceased in such manner as to submit the proceeds of sale to another
jurisdiction and is unable to pay and account for the proceeds of sale to the English
representatives when constituted in England, the stranger has intermeddled with the estate
and constituted himself an executor de son tort, liable to pay capital transfer tax in England.
After the death of Sir Charles, Stype Investments was entitled and bound to complete
the contract with the Prudential and to receive the purchase price of £20 million. But the
right in equity to the purchase price was property situate in England at the death of Sir
Charles and the £20 million therefore belong to the personal representatives of Sir Charles
when constituted in England and to nobody else for the purpose of carrying out and
completing administration of the English estate. By procuring payment of the £20 million
in Jersey, Stype Investments transferred the right to the £20 million from the personal
representatives constituted in England to the personal representatives constituted in Jersey.
If this were not the case, Stype Investments would have no difficulty now in transferring the
£20 million from Jersey to England where it belongs. The act of transferring title from
England personal representatives to Jersey personal representatives constituted an
intermeddling with the English estate and constituted Stype Investments executor de son tort.
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In New York Breweries Co. Ltd. v. Attorney-General [1899] A.C. 62, an English
company transferred shares in the company from the name of a deceased domiciled American
into the names of his executors who had proved his will in New York but, to the knowledge
of the company, had not obtained, and did not intend to obtain, probate in England. The
company also paid dividends and interest to the executors. It was held that the company had
“taken possession of and administered” part of the testator’s estate, that the company was
executor de son tort and that the company was personally liable to deliver an account and pay
such duty as would have been payable if probate had been obtained in England.
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… mischief caused by the intermeddler by seeking to cloak themselves with title in a
foreign jurisdiction. The English personal representatives could only obtain a grant in Jersey
by accepting all the rights and liabilities of a Jersey personal representative. The English
personal representatives are only bound to collect and administer English assets according to
English law. In any event, an application by the English personal representatives in Jersey
would be certain to be opposed by foreign beneficiaries understandably opposed to the
payment of capital transfer tax. No one other than the Inland Revenue is anxious for capital
transfer tax to be paid. The estate of Sir Charles can be made to suffer to the extent of the
assets of the estate now situate in England. But the shares of Stype Investments and the
assets of the estate in England are held upon trust for the same foreign beneficiaries. In the
result, no one except the revenue will suffer if capital transfer tax is not wholly or partly
recovered.
Finally and most vehemently Mr. Price reiterated the submission which found favour
with Goulding J., that Stype Investments is not to be blamed and is not to be treated as an
executor de son tort because the decision of Stype Investments to require payment of £20
million in Jersey was, in the words of Mr. Price and in the words of the judge: “The natural
act of taking the money to be held in suspense at the place of residence of Stype Investments,
namely Jersey.” We are not impressed with this explanation nor with the explanations
proffered by the affidavit of Mr. Dobbs for the decision which was taken to direct the
Prudential to pay Stype Investments in Jersey. No explanation has been vouchsafed by the
other directors of Stype Investments or Mr. Sainer.
In the 12 months preceding his death Sir Charles had been engaged in transferring
property out of England with the object of avoiding the onerous burden of English taxes on
himself during his lifetime and on his estate after his death. Sir Charles was assisted in that
endeavour by Mr. Sainer and by the three executors named in his will. Those three
gentlemen were also trustees of his personal settlement and directors of Stype Investments.
The only other director of Stype Investments was Mr. Dobbs, the manager of a Jersey trust
Company.
Mr. Sainer deposes that the death of Sir Charles was unexpected. It was certainly
untimely so far as the avoidance of tax was concerned. Mr. Sainer, the executors and Mr.
Dobbs must have been acutely conscious of the difficulties caused by the untimely death of
Sir Charles. The letter from the Capital Taxes Office dated August 13, 1979, written a little
more than a fortnight after the death of Sir Charles and received six weeks before the
Prudential were due to pay £20 million, clearly foreshadowed a claim for capital transfer tax
in respect of the free estate of Sir Charles. On any footing the £20 million to be paid by the
Prudential was part of the free estate of Sir Charles. We do not know what discussions took
place between Mr. Sainer, the executors and Mr. Dobbs, or any of them, between the date of
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the death of Sir Charles on July 26, 1979, and the date when the Prudential paid £20 million
on September 29, 1979. It does not seem credible that no discussion took place or that no
investigation was made of the capital transfer tax position. Despite the magnitude of the
sum involved, no evidence has been produced that the advice of English counsel was sought
after the death of Sir Charles. In these circumstances there is a grave possibility that the
object of directing the Prudential to pay £20 million in Jersey was to evade tax on £20
million. If this was in fact the object, it may have been the product of a criminal conspiracy
to defraud the revenue. This court feels very strongly that the Inland Revenue should ask the
Director of Public Prosecutions to investigate. For present purposes it suffices that the
motives of the participants cannot alter or excuse the unlawfulness of the act of Stype
Investments in giving directions whereby £20 million, part of the English estate of Sir
Charles, was diverted to Jersey out of the reach of personal representatives constituted in
England and unlawfully lost to the Treasury. In our judgment, Stype Investments is liable
for intermeddling with the English estate….
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