England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		29/11/2007

The Honourable Mr Justice Henderson :

Introduction and Background

1. This is my judgment on the preliminary issue which I directed to be tried, in advance of all other questions, at the pre-trial review held on 14 September 2007. The issue was framed in the following terms:

"Whether a sale was made in 1998 by Interlands SA, or by the personal representatives of the late Selim Dangoor, to Niazi Dangoor of the beneficial interest (held by Interlands SA or Selim Dangoor or his personal representatives, as the case may be) in the membership rights of Baker Street Limited."

2. The general substantive and procedural background to the case is conveniently set out in the judgment delivered by Sir Francis Ferris on 22 June 2007, to which reference may be made for an overview of the present dispute. Reference may also be made to the judgment which I gave at the pre-trial review for a brief explanation of the circumstances in which I ordered the preliminary issue to be tried. I will aim to confine my findings of fact in this judgment to those which are necessary for determination of the preliminary issue.
3. Berkeley Court is a substantial mansion block of flats, with commercial units on the ground floor and a basement used mainly for parking and storage. It stands on an island site on the north side of the Marylebone Road, London NW1, at the junction with Baker Street. The registered proprietor of Berkeley Court has at all material times been the seventh defendant, a UK company called Berkeley Court Investments Limited ("BCIL").
4. Berkeley Court was acquired in 1989 by a consortium of four persons or groups of persons under a Joint Venture Agreement dated 30 January 1989 ("the JVA"). The four participators in the JVA were:

(a) the trustees of a Jersey trust known as the Delta Trust;

(b) the trustees of another Jersey trust known as the E. M. Sofaer Discretionary Trust ("the Sofaer Trust");

(c) Mr Selim Dangoor, who was then resident in Sweden; and

(d) Mr William Simon Fattal and his brother Mr Elias Simon Fattal.

5. At the date of the JVA, the first claimant Walbrook Trustees (Jersey) Ltd was the sole trustee of the Delta Trust. Together with two individuals, it was also a trustee of the Sofaer Trust. The principal beneficiaries of the Delta Trust were, and are, the branch of the Dangoor family headed by Mr Naim Dangoor, who was one of the six children of Eliahu Dangoor and a grandson of Ezra Dangoor. Naim Dangoor was a brother of Selim Dangoor, the third participator in the JVA. He was also a brother of Doreen Dangoor ("Doreen"), who plays an important part in the dispute which I have to resolve.
6. Naim Dangoor's eldest son is Mr David A E Dangoor, who also features in the present dispute and gave evidence before me. I will refer to him as David Dangoor, or sometimes just as David. His first cousin, Selim Dangoor's eldest child and only son, is Mr David E R Dangoor, whom I shall call David E R Dangoor in order to avoid confusion.
7. Ezra Dangoor had another son, Sion, who in turn had ten children. Those children were therefore first cousins of Naim, Selim and Doreen Dangoor. Two of them are important for present purposes, Mr Albert Dangoor ("Albert") and Mr Niazi Dangoor ("Niazi"). Albert married his cousin, Doreen, and they had two children, Robert Dangoor (who is the sixth defendant) and Sandra Dangoor. Niazi lived in Israel and died without issue in February 2000. He is the Niazi Dangoor referred to in the formulation of the preliminary issue as the alleged purchaser of (in broad terms) Selim Dangoor's original one quarter beneficial share in the Joint Venture in the form which it took in 1998.
8. William and Elias Fattal are respectively the first and second defendants, and it is convenient to refer to them together as the Fattals, or the Fattal defendants. The latter term also includes the third defendant, Rysaffe Trustee Company (C. I.) Limited, which has been a co-trustee since July 2003 of two settlements which the Fattals made of their interests under the JVA in 1989. The original trustees of those settlements were, and continue to be, the first claimant (Walbrook Trustees (Jersey) Ltd) and the second claimant, which is a company incorporated in the Cayman Islands under the name Walbrook International Trust Company Limited which subsequently changed its name to Witco Ltd.
9. The fourth and fifth defendants, Mr Charles Sofaer and Mr Simon Dangoor, have been joined as representative beneficiaries of the Sofaer Trust and the Delta Trust respectively. It is convenient to refer to them, together with Robert Dangoor, the sixth defendant, as the non-Fattal defendants. The third claimant, Tiara Trustees Limited, is one of the two present trustees of the Sofaer Trust, together with Walbrook Trustees (Jersey) Limited.
10. I have now referred to all of the parties to the present proceedings apart from the fourth claimant, Mr Nicholas Cuttiford. Mr Cuttiford was until December 2006 a director of the first, second and third claimants, which are all trust companies formerly owned by Deloitte & Touche until a management buy out in December 2003, since when they have formed part of the Jersey arm of the Guernsey-based Walbrook Group. The first and third claimants were incorporated in Jersey; the second claimant, as I have already said, is a Cayman company. The business of the Walbrook Group is the administration of offshore trusts and companies.
11. On 13 March 1998 Walbrook Trustees (Jersey) Limited and Mr Cuttiford executed a trust instrument establishing a settlement to be known as the Sharet Trust. It was a discretionary trust, and the principal beneficiaries have at all times been Robert and Sandra Dangoor and their issue. The initial settled property was a cash sum of £10,000. There was no named settlor, but it is now common ground that the initial settlor was in fact Niazi, who as I have explained was a paternal uncle of Robert and Sandra Dangoor.
12. It is also now common ground that the Sharet Trust was set up in order to receive the property which by 1998 represented Mr Selim Dangoor's original one quarter share under the JVA, although the precise form which that property took in 1998, and whether it was beneficially owned by Selim Dangoor or by the company called Interlands SA ("Interlands"), are among the questions which I will need to consider. Furthermore, it is also clear that by October 1998 at the latest the property representing Selim Dangoor's original one quarter share had been transferred to, and accepted by, the trustees of the Sharet Trust as additions to the trust fund.
13. What is not clear – and this is the question which the preliminary issue is designed to resolve – is whether the property which was transferred had been the subject of an intermediate sale to Niazi. As will appear in due course, such a sale probably took place, if it took place at all, between 12 and 18 May 1998. Selim Dangoor himself had died on 26 April 1998. The Fattal defendants assert that there was a sale. The non-Fattal defendants vehemently deny that there was a sale. The claimants (to whom it is convenient to refer collectively in their various trustee capacities as Walbrook) say that they simply do not know one way or the other, and adopt a neutral stance.
14. The importance of the question is that, if a sale did take place, then on the assumption that the JVA was still subsisting, and subject to a number of other disputed points, it will have triggered certain pre-emption rights under the JVA which the Fattal defendants claim are still exercisable today, and should be exercised by Walbrook on behalf of the Fattal trusts. If, however, no sale took place, there can be no question of any pre-emption rights having been triggered, and there can be no challenge to the status of the Sharet Trust as a participator and owner of the 25% of the membership rights in Baker Street Limited which today represent the original share of Selim Dangoor under the JVA.
15. With this background, I will now describe the relevant provisions of the JVA and the evolution of the Joint Venture between its inception in 1989 and the establishment of the Sharet Trust in 1998.

The Relevant Terms of the JVA

16. The JVA recited that BCIL had been incorporated in England on 12 September 1988 with an authorised share capital of £10 million divided into 100,000 shares of £100 each, eight of which had been issued and registered in the names of the four participators, each participator having two shares. The Fattals are treated throughout the JVA as a single participator, on an equal footing with the Delta Trust, the Sofaer Trust and Selim Dangoor. Accordingly, one share was allotted to each of the Fattals. The JVA went on to recite that the directors of BCIL were Naim Dangoor, the Fattals and David Dangoor; that BCIL had at the request of the parties entered into a contract to purchase Berkeley Court from Trafalgar House Plc; and that the parties had agreed to participate together in the acquisition of the property and to hold it on the terms thereinafter set out, or in such other manner as might be agreed in writing between them.
17. Clause 2 of the JVA provided that after completion BCIL would hold Berkeley Court upon trust for the parties as tenants in common in equal shares.
18. Clause 3(1) provided that:

"Save as expressly provided herein to the contrary all questions relating to the financing of the purchase of the Property and all other matters relating to and arising out of the purchase holding and realisation of the Property or any part thereof shall be determined by a three fourths majority of the votes of the Parties."

Clause 3(2) recorded the parties' agreement that BCIL should seek a loan of between £4 million and £4.5 million for the purchase of the property, while Clause 4(1) provided that the purchase price and all "Expenditure" (which was widely defined to mean all liabilities, outgoings and expenses of every description arising from or in connection with the retention, letting, management and disposal of the property or any part thereof) should be provided by the parties in equal shares of 25% each.

19. Clause 5 provided that at any time after the third anniversary of the date of completion any one or more of the parties might require the property to be sold by service of a notice in writing upon BCIL. The clause went on to provide in detail for the procedure to be followed after service of such a notice.
20. Clause 6(1) provided as follows:

"(1) Any of the Parties (hereinafter in this clause called "the Seller") wishing to sell his Share in the Property shall give notice in writing (hereinafter in this clause called "a Transfer Notice") to each of the other Parties specifying the price (hereinafter called "the Offer Price") at which the Seller's Share is offered by him and the third party (if any) to whom he proposes to transfer his Share if it is not purchased by the remaining Parties pursuant to the following provisions."

The remainder of clause 6 went on to provide that a party in receipt of a Transfer Notice might serve a Purchase Notice on the Seller stating his desire to purchase the Seller's Share for 90% of the Offer Price and that a sale should then be concluded between them at that price. If more than one of the parties served a Purchase Notice, they were to purchase the Seller's Share in equal shares or otherwise as agreed between them. If none of the parties served a Purchase Notice the Seller was to be free to sell his Share to the purchaser (if any) named in the Transfer Notice for a price no lower than the specified Offer Price. By virtue of clause 6(6), no party was entitled to serve a Transfer Notice in respect of part only of his Share, or to serve a Transfer Notice at all before 31 January 1990.

21. The pre-emption rights in clause 6 are the rights which the Fattal defendants say were triggered by the alleged sale to Niazi in 1998. It should be noted in this connection that clause 6 applies only to a sale of a party's share. There is no provision extending the application of clause 6 to any transactions other than a sale.
22. Clause 12 provided that subject to the provisions of clause 6 the rights and obligations of the parties under the JVA were personal to them, and none of the parties were to sell, assign, pledge or encumber their shares or any part thereof or their rights or obligations under the JVA without the prior approval of all the other parties.
23. Clause 14(3) provided that nothing in the agreement was to constitute a partnership between the parties, and their relationship was to be that of independent principals combining together in a joint venture.
24. Clause 14(6) provided that the agreement was to be governed by English law.

The Addendum to the JVA

25. By an undated memorandum, which must have been executed soon after the JVA, the parties agreed that each of the Fattals, and Selim Dangoor, should be at liberty without consent from any of the parties

"to transfer the whole of their respective Shares to the Trustees of a Trust so long as the ultimate beneficiaries are themselves and/or other members of their immediate family which for this purpose shall mean their respective spouses and children and their own parents and brothers or sisters."

The memorandum went on to say that any transfer pursuant to the above provision should not be deemed to be a disposal to which clause 6 of the JVA applied. Since clause 6 applies only to sales of a share, it follows that this final dispensation would have been relevant only if the transfer into settlement was effected by way of a sale.

26. By assignments dated 14 September 1989 William Fattal and Elias Fattal each assigned their beneficial interests in Berkeley Court to the first and second claimants as trustees of the W S and E S Fattal settlements respectively. Selim Dangoor, however, never availed himself of his right to do likewise.
27. Although Mr Cuttiford suggested in evidence that the addendum might be a home-made document, it was in fact drafted by a solicitor, Mr McCombie of Messrs McCombie Gordon & Lowe. In the course of his oral evidence Mr William Fattal produced a draft of the addendum which Mr McCombie had faxed to him on 31 January 1989, that is the day after the JVA was executed. The only difference between this draft and the addendum as finally signed was that at this stage it did not extend the same facility to Selim Dangoor.

The 1995 Re-organisation

28. As envisaged by clause 3 of the JVA, the original purchase price of Berkeley Court was to a large extent financed by bank borrowing. The purchase price was approximately £4 million – I do not think the exact figure is in evidence, but nothing turns on it. According to the oral evidence of Robert Dangoor, the amount that each party to the Joint Venture had to put up was £650,000, which implies that at least £1.4 million was borrowed.
29. The Joint Venture was not a purely commercial one, because each of the families concerned owned one or more flats at Berkeley Court, and various members of the families lived there both before and after 1989. The Delta Trust was appointed as co-ordinating agent at a specified fee, and management functions were delegated to a company called Monopro Limited which was controlled by David Dangoor.
30. In 1995 a re-organisation took place which was partly driven by tax considerations but was also designed to make a substantial return of capital to the original investors. The thinking behind it was set out in a letter of advice dated 21 June 1995 from Mr Mark Buzzoni, a solicitor and tax specialist who was at that time a partner of Messrs Alexanders Easton Kinch. Mr Buzzoni had previously acted for the Fattals in relation to UK tax matters connected with their investment in Berkeley Court. In 1995 he was introduced by them to Walbrook, and since then he has advised Walbrook on UK tax matters connected with Berkeley Court. He is now a partner of Taylor Wessing.
31. The main features of the proposed re-organisation were as follows:

(a) the trustees of the Delta, Sofaer and Fattal Trusts, together with Interlands ("the new investors") would promote a Manx company to be called Baker Street Limited;

(b) Baker Street Limited would borrow £7 million from the Royal Bank of Scotland and £1.6 million from the new investors;

(c) Baker Street Limited would buy Berkeley Court from the existing investors (i.e. the trustees of the Delta, Sofaer and Fattal Trusts, and Selim Dangoor) for £8.6 million;

(d) the existing investors would use the purchase price to pay off the existing bank borrowing, to finance the loan of £1.6 million to Baker Street Limited by the new investors, and to finance a further cash deposit by the new investors of £2 million with Royal Bank of Scotland; and

(e) the balance of the purchase price would be returned to the existing investors.

£8.6 million was the current market value of Berkeley Court according to a valuation obtained from Chestertons in June 1995.

32. The principal perceived tax benefit of the proposals was a reduction in the liability to UK income tax under Schedule A on the rental income from Berkeley Court. In computing the income chargeable to tax under Schedule A, interest on the bank borrowing was deductible; but by 1995 the net rental income from Berkeley Court exceeded the interest by about £340,000. The increased borrowing of £8.6 million under the proposals would give rise to considerably higher interest charges, and thus to a corresponding reduction in the taxable income.
33. Mr Buzzoni's letter also dealt with the capital gains tax position. He pointed out that on the assumption that the existing investors were not UK-resident, and that the relevant trusts had been set up by individuals who were not (and had not subsequently become) UK-domiciled, no charge to CGT would arise on a disposal of Berkeley Court by the existing investors. For the future, the new investors would be treated for CGT purposes, if that ever became relevant, as having acquired their interests in the property with 1995 base values. In other words, they would obtain a tax-free uplift in base cost over the original acquisition cost in 1989. Furthermore, because Baker Street Limited was to be a company limited by guarantee without shares, it would be arguable that under existing legislation any future gains made by Baker Street Limited could not in any event be attributed to the new investors. This was a reference to section 13 of the Taxation of Chargeable Gains Act 1992, which provided for the attribution of chargeable gains accruing to a non-UK resident company which would be a close company if it were UK-resident. In the form which it then took, the section provided for the gains to be attributed on a pro-rata basis to any person who was resident, and if an individual domiciled, in the UK, "and who holds shares in the company". The legislation was subsequently amended to make it clear that it applied to all forms of participation in the company, but in 1995 there was at least a respectable argument that the section could not apply to a company which had no shares.
34. In relation to inheritance tax, Mr Buzzoni's letter addressed the position of Mr Selim Dangoor and said this:

"Mr Dangoor's estate would be subject to UK inheritance tax on his share of the investment in the event of his death. Because he will cease to be an investor (and Interlands will step into his shoes for the future) the risk of a charge to inheritance tax on his death is avoided under current legislation provided that he is then domiciled outside the UK."

Under the existing ownership structure, Berkeley Court was owned by the investors as tenants in common. The only share which was not held in a trust was Selim Dangoor's, and if nothing was done his share would be liable to IHT on his death, even if he remained non-UK domiciled, because it would be property situated in the UK. This follows from section 6(1) of the Inheritance Tax Act 1984, which provides that "Property situated outside the United Kingdom is excluded property if the person beneficially entitled to it is an individual domiciled outside the United Kingdom." There is no similar exemption for property situated within the UK owned by a non-UK domiciliary. Under the proposed new structure, however, Selim Dangoor would hold his interest in Berkeley Court through Interlands (which was a company incorporated in the British Virgin Islands) and Baker Street Limited (a Manx company). Accordingly, his interest would no longer be property situated in the UK, and the risk of a charge to IHT on his death would be removed.

35. Mr Buzzoni gave oral evidence at the hearing, and confirmed in answer to a question from myself that it was essential to the fiscal efficacy of this part of the re-organisation that Interlands was itself the beneficial owner of its share in Berkeley Court, and the plan would not have worked if Interlands was merely a nominee for Selim Dangoor.
36. The implementation of the 1995 proposals is dealt with in an agreed statement of facts which was submitted to me on behalf of all the parties except for BCIL at the start of Day 3 of the hearing. The agreed statement records that on 20 October 1995 the existing investors all agreed to sell, and assigned, their respective beneficial interests in Berkeley Court to Baker Street Limited, which agreed to buy those interests for the aggregate sum of £8.6 million, which it paid to them and was to be apportioned between them according to their respective beneficial shares in the property. It is further agreed that, for the purposes of this transaction, the vendors waived as between themselves both restrictions against transfer and pre-emption rights under the JVA in order to enable the transaction to proceed, and directed BCIL to declare that it held Berkeley Court on trust for Baker Street Limited absolutely, which BCIL then did. As a result of this transaction, from 20 October 1995 BCIL held Berkeley Court on trust for Baker Street Limited absolutely instead of (as previously) on trust for the vendors as tenants in common.
37. The reason for the production of this agreed statement of facts was that the trial bundle contained two unstamped documents, namely an agreement and assignment dated 20 October 1995 made between the original investors as vendors (1) Baker Street Limited as purchaser (2) and BCIL (3), and a declaration of trust by BCIL also dated 20 October 1995. Each of these documents related to property situated in the UK, i.e. Berkeley Court, and accordingly by virtue of section 14(4) of the Stamp Act 1891 could not

"be given in evidence, or be available for any purpose whatever, unless it is duly stamped in accordance with the law in force at the time when it was executed."

I took the point, as I was bound to do, that the documents could not be relied upon unless an undertaking was given to have them duly stamped. The parties considered their positions in the light of this indication, and on Day 2 made submissions to me about possible ways of dealing with the problem. Miss Talbot-Rice, who appeared for the non-Fattal defendants, persuaded me that I could properly proceed on the basis of an agreed statement of facts if an undertaking was not forthcoming, and after the parties had given further consideration to the position overnight that is indeed what happened.

38. The principal authority relied upon by Miss Talbot-Rice in support of her submission was the decision of the Court of Appeal in Parinv (Hatfield) Ltd v IRC [1998] STC 305, where the leading judgment was delivered by Millett LJ. He pointed out at 309f that the legislation contains no provision which enables the Revenue to sue for stamp duty, because no legal obligation is imposed on the taxpayer to pay the duty, or even to submit instruments for adjudication for stamping. As Donovan LJ observed in Henty and Constable (Brewers) Ltd v IRC [1961] 1WLR 1504 at 1511, there was merely "the prospect of future disabilities" if the instruments in question were not stamped, including the disabilities set out in section 14(4) of the 1891 Act. With regard to the position of the court, Millett LJ went on to say at 310b:

"It must proceed on evidence. It may not receive an unstamped document in evidence. Where the instrument is unstamped, secondary evidence of it (whether by way of photocopy or otherwise) may not be given. But this does not preclude the court from resolving disputes of fact which can be resolved without reference to the inadmissible evidence or from acting where it is called upon to decide a question of law on the undisputed facts stated in a case stated. The circumstance that the facts also appear in an unstamped instrument which it is unnecessary to put in evidence does not prevent the court from acting on the facts appearing in the case stated."

Although the observations of Millett LJ were made in the context of an appeal by case stated, it seemed to me that the same reasoning was applicable in any case where the court was asked to proceed without reference to the inadmissible evidence and could properly do so. Furthermore, it seemed to me that there was no principle of public policy which should inhibit me from proceeding on the basis of an agreed statement of facts in the present case, given the structure of the legislation and the absence of any legal obligation to pay the duty. I took the view that the matter could be tested by supposing that the relevant transactions had been pleaded by one of the parties, and then admitted by the other parties, so that they were not in issue at trial. In such circumstances I do not believe it would have occurred to anybody to say that the court could not proceed on the agreed basis merely because the documents in question were unstamped.

39. Baker Street Limited itself was incorporated in the Isle of Man on 6 July 1995. The subscribers to the memorandum of association were the first and second claimants. As I have already said, it was a private company limited by guarantee and had no share capital. By a declaration of trust dated 29 June 1995, the first and second claimants declared that they held the benefits of their membership of the company upon trust as nominees for the new investors in the following proportions:

The Delta Trust 25 %

The Sofaer Trust 25%

Interlands 25%

The William Fattal Trust 12.5%

The Elias Fattal Settlement 12.5%

They went on to say that they would act in accordance with the written instructions of the relevant owner concerning its proportion of the membership as set out above, and that they would deal with all the benefits of membership of the company, including all rights to distributions and all voting rights, in such manner as the relevant owner should from time to time direct in writing. I should add that this declaration of trust was not a document which required to be stamped, because it was executed (presumably) in Jersey, and related to property situated outside the UK, namely the membership rights in Baker Street Limited.

40. By a further declaration of trust dated 15 January 1996, the first claimant declared that it had control of the £2 million deposited with the Royal Bank of Scotland by the new investors, which was designated the Baker Street Members Account, and that it would hold the amounts standing to the credit of the account from time to time upon trust for the new investors in the proportions which I have already set out.
41. I heard no evidence from anybody who was directly concerned with either the establishment or the activities of Interlands. A company search carried out in September 2007 reveals that it was incorporated in the British Virgin Islands on 10 May 1993 as an International Business Company, and as such is not allowed to engage in any trading activities in the British Virgin Islands or to carry on certain categories of business such as banking or trust business. Its registered office is Morgan & Morgan Trust Corporations Limited at an address in Tortola. As an International Business Company, it is not required to publish or disclose any financial information, or details of its directors and shareholders. It is still in existence and in good standing, having paid its 2007 licence fee in May 2007. The only registered charge shown on the register is a Security Agreement dated 20 October 1995 between Royal Bank of Scotland and the new investors, including Interlands, charging the monies in the Baker Street members' sinking fund account number 20086837. This was the fund which held the cash deposit of £2 million referred to in Mr Buzzoni's letter, and it was charged to the bank, together with a first charge on their interests in Berkeley Court itself, as security for the borrowing of £7 million by the new investors.
42. The President of Interlands, at any rate in 1998, was Selim Dangoor's son, Mr David E R Dangoor. I infer from this, and from Mr Buzzoni's letter of advice, that the company was under family control and could be relied upon to do Selim Dangoor's bidding during his lifetime. I also infer that it was intended to be the beneficial owner of its membership rights in Baker Street Limited and its share of the members' sinking fund account, and that it did not hold those assets as a mere nominee for Selim Dangoor.

The 1998 transactions: the documentary record

43. I can now move on to the key events of 1998 involving Interlands and the Sharet Trust. I shall begin by referring to the relevant contemporary documents and making some comments on them. It may be relevant to note that the production of these documents has been a slow and tortuous process, and that some of the most important ones have only been produced very recently in response to orders which I made at the case management conference in September.
44. The story begins on 22 January 1998, when Walbrook Trustees (Jersey) Limited wrote to Doreen at 109 Berkeley Court where she had lived with her husband Albert and her family for many years. The letter was signed by Vijay Khakria, who was a trust manager, and it bore the reference of Mr Cuttiford, who confirmed that he would have seen it and checked the tax part of it (his background at Walbrook was as a tax partner). The letter reads as follows:

"Dear Mrs Dangoor,

New Discretionary Trust

Thank you for calling and it was a pleasure to talk to you.

We discussed the possibility of the formation by your brother Selim of a new Jersey discretionary trust for the benefit of your children and further descendants. You have asked me to provide a brief summary of the implications for the beneficiaries, and supplied the following information:

The beneficiaries are to be your two children, both of whom were born and are resident in London, along with any issue they may have. They are currently in their thirties, and unmarried. Their domicile has not been tested, although an argument that they are Iraqi domiciled might be successful, and if appropriate we should test this.

The settlor is to be Selim Dangoor, who is Swedish resident, and non-UK domiciled. It is not intended that you or any other person will establish a further trust for the benefit of either Selim or his immediate family in consideration for his establishing a trust for the benefit of yours. Mr Dangoor is willing to be excluded from any benefit under the trust.

The settled property will comprise some or all of his 25% shareholding in Baker Street Limited, a company which we administer in this office.

The information in this letter is a broad outline of the implications for your children, based upon current legislation. It does not constitute taxation advice, which should be sought separately."

The letter then went on to give a brief outline of the UK tax implications of the proposed new trust.

45. It is clear from the letter of 22 January that it had been preceded by a discussion with Doreen, who had provided the information recorded in the letter and had asked for a summary of the implications for the beneficiaries. The discussion had presumably taken place over the telephone, because there is nothing to suggest that Doreen had flown to Jersey in order to make a personal call at Walbrook's offices. Mr Cuttiford said that he had not been a party to the conversation, so it must have taken place between Doreen and Mr Khakria. This might also explain why the letter went out under Mr Khakria's name, although Mr Cuttiford was senior to him. The bundle contains some manuscript notes, which Mr Cuttiford confirmed were not in his handwriting and which appear to relate to the subject matter of the letter. I infer that they are Mr Khakria's notes of his conversation with Doreen.
46. It is convenient to record at this stage that Mr Khakria left Walbrook later in 1998, and did not give evidence before me. Doreen is now about 80 years old, but in good health for her age and nobody had suggested that she would be unable to give evidence. Nevertheless, she too did not give evidence before me. Albert, her husband, died in April 2005.
47. Mr Khakria's notes indicate that the primary object of the trust was to settle a share of Baker Street Limited, that there was some discussion of 'fiscal advantages', and that the primary beneficiaries were to be Robert and Sandra Dangoor and their issue per stirpes. The note envisaged that there would be a declaration and letter from the settlor, and that passports or identity cards would need to be sent to Walbrook (Mr Cuttiford explained that this was necessary to comply with Jersey money laundering regulations). The name of the new trust was still to be decided, as was the identity of the successor protector. The note does not in terms record, but clearly implies, that Doreen was herself to be the initial protector. Opposite the reference to the successor protector the name of Niazi Dangoor has been written in blue ink in capital letters. It is not clear whether this is contemporaneous with the original document or a later addition. There was also some discussion of the initial settled property, and a figure of £100 was evidently mentioned.
48. About three weeks later, on 11 February 1998, Mr Khakria sent a fax to Doreen headed "The Sharet Trust". It is clear, therefore, that the name of the new trust had by now been settled. Mr Khakria's message read as follows:

"Further to our recent conversations, I am pleased to attach a letter addressed to the Trustees, instructing them to execute the above Trust, along with a letter from us to you, asking you to accept the appointment as first Protector to the above Trust.

Please let me know if you consider these suitable.

I am in the process of redrafting the Declaration, and will forward a copy as soon as it is complete.

Robert has asked me whether it is possible to vary the ultimate trust, and you will see in due course that I have made provision to allow the Protector to request that new people be added, as appropriate."

Mr Khakria went on to answer a further question from Robert concerning the trust period, explaining why a royal lives perpetuity period had been included in the draft in addition to the statutory period of 100 years applicable in Jersey, and recommending inclusion of a provision enabling the proper law of the trust to be changed.

49. There were two enclosures with the fax of 11 February. The first was a draft letter from the settlor to Walbrook Trustees (Jersey) Limited. It must have been decided by this stage that Niazi was to be the settlor, at least nominally, because his name is typed at the top right hand corner of the draft. The draft was in the following terms:

"The Sharet Trust

I hereby irrevocably instruct you to execute a Declaration of Trust substantially in the terms of the draft as discussed with Mrs Doreen Dangoor. You are to hold the assets detailed below upon the trusts therein contained and other assets which I may transfer to you from time to time.

The following assets are being transferred into the name of Walbrook Trustees (Jersey) Limited:-

Ten Thousand Pounds Sterling

The Trust gives you wide discretionary powers over capital and income, including power to distribute either capital or income within a very long period amongst a class of beneficiaries.

…

I would like you to consult Mrs Doreen Dangoor in her capacity as first Protector of the Trust or such person or persons as she may from time to time nominate at regular intervals during the Trust Period with regard to the Trust Fund and to invest the Trust Fund in such manner as she or the person or persons nominated by her may request and generally to act in accordance with his/her or their wishes."

50. It is worth noting that this draft clearly envisaged that Niazi would not only be the settlor of the initial £10,000 but that he might also subsequently transfer other assets into the trust: that is the force of the words "and other assets which I may transfer to you". There is nothing to indicate that assets might be transferred by anybody else, even though the proposal had originated as a proposed settlement by Selim Dangoor.
51. The second enclosure was a draft letter from Walbrook to Doreen inviting her to accept appointment as the first Protector of the Sharet Trust. The letter said, among other thing:

"We understand that you are aware of the terms of your protectorship, and of the objectives of the Settlor towards the Beneficiaries … If you have any doubt about your role and duties in regard to the foregoing you should contact the Settlor/Beneficiaries in order to have a full understanding of their wishes and intentions."

52. Again, it seems clear the "Settlor" referred to in this draft letter must by this stage have been Niazi rather than Selim Dangoor.
53. On 13 February Mr Khakria wrote again to Doreen, enclosing a revised draft deed "reflecting the various changes we have discussed". He referred to various revisions which he had suggested, and continued:

"Finally, the re-drafting has resulted in a deed materially different than the original draft precedent, as the changes you have requested are unusual. It is my strong recommendation that these changes be reviewed by a specialist trust draftsman to ensure that they do not render the trust defective. For this reason, I have forwarded a copy to a local firm of lawyers requesting an indication of the fees they might seek to charge to review and where necessary re-draft these clauses. I will discuss this quotation with you when I receive it."

54. It is not clear from the documents whether Doreen agreed with Mr Khakria's recommendation, but on 20 February he wrote to her again enclosing a revised draft deed "reflecting the various changes we have discussed over the last week", together with a revised letter appointing her as the first Protector of the Sharet Trust and a draft letter of wishes from herself. He said he was sure that this was now "closer to reflecting your wishes and the wishes of the Settlor". He then set out his understanding of the basis on which fees for the work would be charged, saying that they had agreed a fixed fee of £2,000 "in order to form this Trust to your satisfaction". Thereafter, Walbrook's fees would comprise two elements: an annual fee for the provision of trustees, and quarterly fees for administrative work and disbursements. He concluded:

"I hope that this reflects your understanding of our agreement, and would appreciate your confirmation in due course."

55. The draft letter of wishes enclosed with Mr Khakria's letter of 20 February referred expressly to Niazi as the person who had "created" the Sharet Trust. The draft letter confirmed that it was not intended that Doreen should obtain any benefit from the trust, and the principal beneficiaries were intended to be Robert and Sandra in equal shares per stirpes. The letter expressed the wish that no illegitimate or legitimated beneficiary should benefit, and dealt with the ultimate trusts to take effect at the end of the trust period.
56. Doreen appears to have duly signed the letter appointing her as the first Protector, and she also nominated David Dangoor as her successor Protector. She presumably returned the copy which she had signed to Walbrook.
57. On 23 February Niazi signed and dated a letter of instruction to Walbrook, in the form of the draft which Mr Khakria had sent to Doreen on 11 February. The letter was headed with his address at 186 Ben-Yehouda Street, Tel-Aviv.
58. On 25 February Mr Khakria wrote again to Doreen, enclosing a further draft of the trust deed "reflecting the Settlor's wishes as communicated to me through Robert this morning", and also enclosing a new draft letter from Doreen to Walbrook, "addressing your concerns". He asked Doreen to let him know if any further changes were necessary. Robert was asked in cross-examination how Niazi's wishes had been communicated to him on this occasion. He professed to be unable to remember, but said he thought it would have been through one of his parents. He said that he did not himself speak to Niazi about his wishes. There is no evidence about the nature of the changes that were made, and none of the drafts of the Sharet Trust before it was executed appear to survive.
59. The revised draft letter of wishes was in the same form as the one which Doreen had already signed, apart from the final paragraph which contained different wishes to take effect at the end of the trust period.
60. On 13 March the Sharet Trust was executed in Jersey by the two original trustees, Walbrook Trustees (Jersey) Limited and Mr Cuttiford. On the same day, Doreen seems to have signed another copy of the letter appointing her as the first Protector, changing the date from 20 February to 13 March. She also signed the revised letter of wishes.
61. There matters appear to have rested until 12 May 1998, when an important meeting took place at Berkeley Court at 8.00 am. The meeting was attended by Albert, Doreen and Robert Dangoor, and by Mr Cuttiford and Mr Robert Taylor representing Walbrook. Mr Taylor had joined Walbrook in March or April, and one of the purposes of the meeting was to introduce him to the Dangoors. Indeed, Mr Cuttiford said it was the main purpose, but he agreed that there had also been a general discussion. The surviving note of the meeting was not prepared by Mr Cuttiford, as appears from a note at the bottom copying it to Mr Cuttiford and Mr Khakria. It must therefore have been prepared by Mr Taylor.
62. Mr Taylor's note began by recording that the Sharet Trust had been set up for the benefit of Robert and his sister by their uncle, who was a non-domiciliary and lived in Israel. The note went on to say that the following matters had been discussed and agreed:

"1. The uncle wished to acquire the 25% Interlands interest in Baker Street Limited and transfer it to the trust. We drafted a letter for him to sign confirming the addition of this asset to the trust.

2. We discussed implications of the Budget i.e. if Robert was UK domiciled the gains would be attributed to any capital payments to him. We discussed Robert's domicile status which has never been tested, but might be difficult to argue as non-UK domiciled as he was born in UK and spent all his life here. His father has been in the UK for some considerable time (around 40 years). Again his domicile had never been tested. We made the point that it would be necessary to establish non-domicile status for father to have any prospect of arguing Robert as non-domicile.

…

PS At the next meeting with David Dangoor the transfer of Interlands was discussed. He made a point that money sitting in Members Account re Berkeley Court would also need to be transferred and approval of the other members may be required.

Action (1) NC to provide letter(s) to Robert Dangoor for his uncle to sign, to replace the draft given at the meeting."

63. I would at this stage make the following comments on this note.
64. First, Niazi evidently wished to acquire Interlands' 25% share in Baker Street Limited and to transfer that share into the Sharet Trust. The verb "acquire" suggests, to my mind, a positive action on Niazi's part by which he would become the beneficial owner of Interlands' share in Baker Street Limited, thereby enabling him to transfer it to the trust in his own right. Such an action would be entirely consistent with the letter of instruction to Walbrook which he had signed on 23 February: see paragraph 57 above. An acquisition presupposes a change of ownership, and this wording could not have been used if it was only envisaged that Niazi would request a third party to transfer Interlands' interest in Baker Street Limited to the trust without first obtaining beneficial ownership of that interest himself.
65. Secondly, it appears from the final note of action to be taken that a draft letter for Niazi to sign had been prepared in advance of the meeting, but it was agreed that this draft should be replaced with one or more appropriate letters which Mr Cuttiford would draft and give to Robert for his uncle to sign.
66. Thirdly, it is reasonably clear that Niazi had not already acquired Interlands' interest in Baker Street Limited. The language of the note shows that this was something he wished to do in the future, not something that he had done already. It is for this reason that, if there was indeed a sale of Interlands' interest to Niazi, 12 May is the earliest date on which it can plausibly be supposed to have been effected.
67. Fourthly, there was obviously considerable discussion about the domicile of Robert and his parents, and the implications of the recent Budget. Several important changes to the taxation of overseas trusts had been announced by the Chancellor of the Exchequer on Budget Day, which was 17 March 1998. One of those changes concerned section 87 of the Taxation of Chargeable Gains Act 1992, which deals with the attribution of gains of overseas settlements to beneficiaries who are resident and domiciled in the UK. Before Budget Day, the scope of the section had been confined to cases where the settlor was UK-domiciled and resident, either when he made the settlement or during the year when the gains arose. However, this limitation was now to be removed, with the result that section 87 would apply to all overseas settlements, even if the settlor had never been UK-resident or domiciled. Accordingly, the Sharet Trust would be within the scope of section 87, even though Niazi was resident and domiciled in Israel.
68. Finally, the postscript to the note indicates that there was a subsequent meeting with David Dangoor at which the "transfer of Interlands" was discussed, and he pointed out that it would also be necessary to transfer the appropriate share of the money in the Members' Account, and to obtain the approval of the other members. Although the postscript refers to the "transfer of Interlands", it is reasonably clear from the context of the note as a whole that this was a shorthand reference to the proposed transfer of Interlands' 25% share in the membership rights in Baker Street Limited and not to a transfer of the shares in Interlands itself. After all, if Interlands itself had been transferred there would have been no need for a separate transfer of Interlands' share of the money in the Members' Account.
69. On 14 May Mr Cuttiford faxed to Robert draft letters for signature by Niazi and Interlands. He sent the fax to Robert "c/o Mrs Doreen Dangoor" at Albert and Doreen's home fax number. The draft letter for signature by Niazi was addressed to Walbrook Trustees (Jersey) Limited and read as follows:

"Dear Sirs

The Sharet Trust of 13 March 1998

I am arranging for an interest in Baker Street Limited to be transferred to you as trustees of the above trust. I am also arranging for the respective beneficial interests in the Baker Street Limited members' accounts and members' sinking fund account held at the Royal Bank of Scotland International to be transferred to you. Please treat these as additions to the trust fund."

The draft letter for signature by Interlands was also addressed to Walbrook Trustees (Jersey) Ltd, and said this:

"Dear Sirs

Baker Street Limited

Please transfer our interest in Baker Street Limited together with our interests in the members' accounts and members' sinking fund account held at the Royal Bank of Scotland International to yourselves as trustees of the Sharet Trust dated 13 March 1998."

The draft envisaged that it would be signed on behalf of Interlands by two authorised signatories.

70. I comment at this stage that the wording of the draft letter from Niazi plainly presupposed, in my view, that Niazi would be the beneficial owner of the interests to be transferred at the time when the transfers took place. It was only on that basis that he could properly direct Walbrook to hold those interests as additions to the trust fund of the Sharet Trust. This assumption also appears to be entirely consistent with the decision which had been taken at the meeting on 12 May.
71. In his covering message to Robert on 14 May, Mr Cuttiford said that he had spoken to the bank and they could see no objection. They had, however, asked for a brief explanation in writing, which Mr Cuttiford had given them and to which he was awaiting a response. The "brief explanation" was contained in a fax sent by Mr Cuttiford to Royal Bank of Scotland International on the same day, in which he said this:

"Further to our telephone conversation it has been decided for family and tax reasons for Interlands' interest in [Baker Street Limited] and respective members' accounts and members' sinking fund account be transferred to a new trust entitled "The Sharet Trust" created on 18 March 1998.

…

Please let me have the bank's agreement to the transaction a.s.a.p. so that I can progress matters."

The date on which the Sharet Trust had been created was in fact 13 not 18 March 1998, but nothing turns on this minor slip.

72. On the following day, 15 May, Mr Cuttiford heard from the bank that they had no objection to the transfer, and were in fact in favour since it would then bring everything within Walbrook's control. Mr Cuttiford sent a fax to Robert, again at Doreen's address, giving him this news. He said that there might be some paperwork to complete, and the bank might have to take legal advice, but "the transaction can in the meantime go ahead".
73. On 18 May Niazi signed and dated a letter to Walbrook in the form of the draft prepared by Mr Cuttiford. His signature of the letter was notarised before a notary in Ramat-Gan, Israel, who certified that Niazi appeared before him, identified himself by his Israeli identity certificate, and signed the letter of his own free will. The fact that Niazi's signature of the letter was notarised indicates that it was seen as important, and reinforces the inference that the property to be transferred was indeed his to dispose of.
74. On the same day a letter from Interlands to Walbrook appears to have been dated and signed by the President of Interlands. The body of the letter was in the form of Mr Cuttiford's draft, and it bore the letterhead of Interlands at its registered office in the British Virgin Islands. However, there is nothing to indicate that it was in fact sent from the registered office, and the President of Interlands who signed the letter was David E R Dangoor, as can be seen by comparing the signature with that on the stock transfer form which I mention below. David E R Dangoor lives with his family in New York. The letter differs from Mr Cuttiford's draft in that the President is the only signatory on behalf of Interlands, whereas the draft had envisaged signature by two authorised signatories. Mr Cuttiford explained this in his oral evidence by saying that he personally checked the signature against one which Walbrook already held, and they were told (he did not say when or by whom) that the President had authority to sign documents on behalf of Interlands alone. It seems a little odd, if this is right, that Mr Cuttiford should have drafted the letter as he did, but on balance I am prepared to accept his explanation, and I infer that the letter was indeed signed by David E R Dangoor and that he had the authority of Interlands to do so.
75. It seems that the letter from Interlands was not sent direct to Walbrook, but was first sent by fax to Robert. At any rate, on 1 June 1998 Robert sent a fax to Mr Cuttiford saying:

"We have received a faxed copy of the letter of transfer regarding Baker Street Limited, which I attach for your reference.

The President of Interlands SA has signed the letter and we are informed that he is empowered to sign alone on behalf of the company. Would you please advise if this is sufficient for your purposes and we await your reply … so that we can arrange to send you the original documents."

Mr Cuttiford replied on the same day, saying that the letter from Interlands looked fine and was sufficient for Walbrook's purposes. He asked Robert to send him the original.

76. On 12 June Doreen wrote to Mr Cuttiford, enclosing what I presume were the originals of the letters from Niazi and Interlands dated 18 May. She said she understood that the formal approval of the other shareholders was required in connection with the transfer, and asked Mr Cuttiford to confirm, first, that the approval of the other shareholders had been obtained, and secondly, that the transfer to the Sharet Trust of an interest in Baker Street Limited had been completed to Walbrook's satisfaction with the result that the Sharet Trust now owned the interests transferred.
77. On 17 June Walbrook wrote to the Fattals and to Mr E Sofaer seeking their approval "to transfer the 25% holding in Baker Street Limited previously held by Interlands SA to the Sharet Trust", and asking them to countersign the letter to indicate their agreement. The letters were signed on behalf of Walbrook by a Trust Officer, Daniel Hawson. On 22 June Mr Sofaer countersigned and returned the letter which he had received.
78. On 18 June Mr Hawson sent a fax to David Dangoor at Monopro Limited attaching copies of the latest loan repayment schedules and bank reconciliations for Baker Street Limited. The enclosures showed that the balance on the Members' Sinking Fund Account No. 20086837 as at 16 June 1998 was £2,602,922.34; that the closing balance on the Members' Offshore Account with Royal Bank of Scotland Jersey on the same date was £52,923.79; and that the closing balance on the Members' UK Account with Royal Bank of Scotland International was £198,310.20.
79. On 30 June a letter seeking consent to the transfer was sent by Mr Hawson to Mr Naim Dangoor, presumably on the footing that he could speak for the Delta Trust, and on 3 July he countersigned the letter saying he agreed to the proposal.
80. On 7 July Mr Hawson wrote again to the Fattals seeking their approval to the transfer, and on 10 July, following a telephone conversation with William Fattal, he faxed to him a copy of his letter of 7 July. On 10 July William Fattal replied, saying on behalf of himself and his brother:

"We confirm our approval to the transfer of the 25% in Baker Street Limited held by Interlands SA to the Sharet Trust, which we understand to be related to Albert Dangoor's family and on the basis that the rights and obligations of Interlands SA under the shareholders' agreement will pass to the Sharet Trust."

81. On 14 July Walbrook wrote under the letterhead of Baker Street Limited to Interlands at its address in the British Virgin Islands, enclosing a stock transfer form in respect of Interlands' 25% share in Baker Street Limited and saying:

"We propose to transfer this share to the Sharet Trust in its entirety. Please sign and affix the Interlands company seal to this document and return a completed copy to this office at your earliest convience."

The enclosed stock transfer form described the security to be transferred as "twenty five per cent share in Baker Street Limited", and left the consideration money box blank. It does not seem to have occurred to Walbrook, or indeed to anybody else involved in the transaction, that use of a stock transfer form was inappropriate for a transfer of membership rights in a company limited by guarantee.

82. Meanwhile, Doreen had still not received the confirmation requested in her letter of 12 June 1998. On 12 August Robert faxed a copy of the letter of 12 June to Mr Cuttiford, with a manuscript addition saying "Are you able to confirm the above?" Walbrook eventually replied on 3 September, confirming that they had received approval from all the shareholders but saying that they were still awaiting receipt of a completed stock transfer form from Interlands. On the same day Walbrook wrote to Interlands on behalf of Baker Street Limited, referring to their earlier letter of 14 July and asking for the completed stock transfer form to be returned as soon as possible.
83. On 9 September Doreen wrote to Walbrook in reply to Walbrook's letter of 3 September. She said:

"With regard to the stock transfer form required from Interlands SA, I would appreciate it if you would kindly prepare this and send it to me in order that I may arrange for it to be signed."

The letter gave no explanation for this apparently strange request, but Walbrook do not seem to have questioned Doreen's ability to act as an intermediary on behalf of Interlands and on 15 September they sent her a stock transfer form to be completed by Interlands, saying they looked forward to receiving a completed copy in due course. This form was then signed and dated by David E R Dangoor, in his capacity as President of Interlands, on 12 October, with the consideration money box still left blank, and on 21 October Doreen wrote to Walbrook enclosing the completed stock transfer form and repeating the request for confirmation which she had originally made on 12 June. On 27 October Walbrook replied, saying:

"I refer to your letter of the 21 October 1998 and hereby confirm that the Sharet Trust now owns a 25% share in Baker Street Limited, together with the beneficial interests in the Baker Street members' accounts and members' sinking fund account held at the Royal Bank of Scotland International."

84. On 25 November 1998 Mr Buzzoni wrote to David Dangoor, following a conversation between them in which Mr Buzzoni had promised to identify some of the changes to the tax position affecting Berkeley Court since the 1995 re-organisation, and to give the owners an opportunity to consider whether they wished to embark on a further re-organisation. For present purposes the details of the letter do not matter, although it is worth noting that David Dangoor had informed Mr Buzzoni that the current market value of Berkeley Court was about £11.3 million. One of the matters which Mr Buzzoni discussed in his letter was the "beneficiary charge" to CGT under section 87 of the 1992 Act. He also discussed the "settlor charge" under section 86, which arises in relation to gains realised by a trust at a time when the settlor is alive, is domiciled in the UK, and retains an interest in the settlement (the latter concept being widely defined to include a possibility of benefit for the settlor's spouse or children, or after the 1998 changes to the legislation his grandchildren). Mr Buzzoni expressed the view that neither of these charges was an immediate problem, because neither of them could attach to someone who was not UK-domiciled. However, he did not at this stage know about the acquisition of the Interlands share in Baker Street Limited by the Sharet Trust.
85. On 7 December David Dangoor telephoned Mr Buzzoni in response to the latter's letter of 25 November. Mr Buzzoni's attendance note of their conversation includes the following:

"5. You said that there was one transaction of which [Mr Buzzoni] was not aware, following the death of Selim Dangoor, Interlands SA had sold its interest in Baker Street Limited to the Sharet Trust. The Sharet Trust was a trust established by Niazi Dangoor for the benefit of his nephew and niece, Robert Dangoor (aged 39) and Sandra Dangoor (who was unmarried and in her forties).

6. Robert and Sandra's mother, Doreen, was your father's sister. You did not know whether Robert and Sandra were domiciled in the UK, but they were certainly long-term UK residents."

It will be noted that this attendance note refers in terms to a sale of Interlands' interest in Baker Street Limited, but names the purchaser as the Sharet Trust rather than Niazi.

86. On the same day Mr Buzzoni wrote to Walbrook, enclosing a copy of his letter to David of 25 November and saying that David had now expressed the wish that he should go ahead and formulate a proposal to be reviewed by tax counsel. He said that both he and David were concerned, if possible, for any restructuring to be completed before the Budget in March 1999. He asked for confirmation on behalf of Baker Street Limited that he could regard himself as instructed to carry out this review. He then went on to say:

"Secondly, I understand from David that, following the death of Selim Dangoor, one of the members of Baker Street Limited, Interlands SA, sold its interest in that company to Walbrook, as trustee of a trust established by Niazi Dangoor for the benefit of his nephew and niece. It would be helpful in relation to that transaction to have a copy of the new trust deed and a copy of the sale agreement or details of the terms upon which the sale took place. It would also be helpful to know what happened to the security deposit held by RBS on behalf of Mr Selim Dangoor. Have RBS agreed to the substitution of other security and released that money?"

Mr Buzzoni copied this letter to David Dangoor at Monopro Limited.

87. On 14 January 1999 Mr Taylor of Walbrook wrote to Mr Buzzoni, confirming his instructions to carry out the review outlined in his letter of 25 November. Mr Taylor also confirmed that he was putting together the documentation in respect of the transfer by Interlands, and said that it would follow shortly.
88. On 26 January Mr Buzzoni wrote again to Mr Taylor, saying that he was now preparing papers for counsel and asking for the documentation relating to the transfer by Interlands as a matter of some urgency.
89. On 27 January 1999 Mr Taylor replied, enclosing copies of:

(a) the trust instrument of the Sharet Trust;

(b) the letter from Interlands dated 18 May 1998 confirming that its interest in Baker Street Limited and the members' accounts should be held for the Sharet Trust;

(c) the letter from Niazi dated 18 May 1998 confirming that the transfers of Interlands' interest in Baker Street Limited and the members' accounts were additions to the Sharet Trust;

(d) the fax of 14 May 1998 to the Royal Bank of Scotland International; and

(e) the letters of consent from the other members.

Mr Taylor then said:

"We do not know the details of the arrangements between Interlands SA and Mr Niazi Dangoor to acquire the 25% interest in Baker Street which he then added to the Sharet Trust. I trust that this documentation is sufficient for your purposes."

I comment that, although Walbrook appear not to have known the details of the arrangements between Interlands and Niazi, Mr Taylor seems to have been in no doubt that Niazi had himself acquired Interlands' interest in Baker Street Limited and then added it to the Sharet Trust.

90. In February 1999 Mr Buzzoni sent instructions to leading tax counsel, Mr Rex Bretten QC, to advise on a possible further re-organisation. In his Instructions he said his understanding was that Interlands was a company controlled by the late Selim Dangoor who had at all times been domiciled, resident and ordinarily resident outside the UK (paragraph 6); that the settlor of the Sharet Trust was "believed to have been Mr [Selim] Dangoor", and the beneficiaries of the trust were understood to be domiciled, resident and ordinarily resident outside the UK (paragraph 10.2); and that on 18 May 1998 Interlands had transferred its rights as a member of Baker Street Limited to the Sharet Trust together with the benefit of its security deposit (paragraph 14). Mr Buzzoni was asked in cross-examination what he meant by "transferred" in paragraph 14 of his Instructions. He was unable to recollect what he thought, but said he had probably been keeping his options open in terms of whether it was a sale or a gift. If he had known for sure that it was a sale, he would have said so. In answer to a question from myself, whether there might have been some tax advantage in Niazi being the settlor of the Sharet Trust, Mr Buzzoni said he thought it would not have made any difference from a UK standpoint, because Selim Dangoor was also resident and domiciled outside the UK, but "it might from some foreign tax standpoint".

The Oral Evidence

91. I heard oral evidence from Mr Buzzoni and Mr William Fattal on behalf of the Fattal defendants, from Mr Cuttiford for Walbrook, and from Robert Dangoor and David Dangoor for the non-Fattal defendants.

Mr Buzzoni

92. I have already referred to the main points which emerged from Mr Buzzoni's evidence, and there is little to add. Although he has always taken his formal instructions from Walbrook, his main point of contact has been with David Dangoor whom he describes as "the principal person with whom I have engaged in detailed discussions throughout". Indeed, he says he cannot think of any transaction or matter relating to Berkeley Court upon which he has been asked to give advice in which David Dangoor was not involved. With particular reference to the telephone call which he received from David Dangoor on 7 December 1998, he says:

"David Dangoor volunteered to me that there had been a transaction in relation to ownership of [the] interest in Baker Street Limited of which I should be aware. He informed me that Interlands had sold its interest in Baker Street Limited to the Sharet Trust which was a trust which had been established by Niazi Dangoor for the benefit of Robert and Sandra Dangoor."

This evidence is reflected in the attendance note to which I have referred in paragraph 85 above.

93. Mr Buzzoni regarded this as an important transaction for two reasons. First, he wished to ensure that the sale of the interest in Baker Street Limited would not affect the banking arrangements with Royal Bank of Scotland, which had a charge over Berkeley Court and the security deposit. Secondly, he wished to ascertain the effect of the sale in terms of UK taxation, bearing in mind that the market value of Berkeley Court (as he had been told by David Dangoor) was now about £11.3 million, so there was a very substantial equity above the 1995 purchase price of £8.6 million. It was in the light of these concerns that Mr Buzzoni wrote to Walbrook on 7 December, and copied his letter to David Dangoor. However, the only responses that he received from Walbrook were their letters of 14 and 27 January 1999, which I have already described. He does not recall David Dangoor responding to his letter of 7 December or commenting on its content, and believes that if he had done so he would probably have made an attendance note.
94. I found Mr Buzzoni to be a reliable witness who had no personal axe to grind and did his best to assist the Court. I have no hesitation in accepting his evidence.

Mr William Fattal

95. Much of Mr Fattal's written and oral evidence was devoted to explaining the steps he has taken to obtain information about the Sharet Trust and its acquisition of Selim Dangoor's former share under the JVA, and to voicing his suspicions that material was deliberately withheld from him both by Walbrook and by the non-Fattal defendants. For present purposes I do not need to go into this history at any length. It is enough to record that, following an order made by Hart J in separate disclosure proceedings on 3 October 2003, a number of the key documents were disclosed to Mr Fattal, including Mr Cuttiford's fax of 14 May 1998 to the Bank, Niazi's letter of 18 May to Walbrook with its accompanying Israeli notary's certificate, Interlands' letter of 18 May 1998 to Walbrook, an unsigned and undated copy of the stock transfer form relating to the transfer of Interlands' interest in Baker Street Limited to Walbrook, and Walbrook's letter to Mr Buzzoni of 27 January 1999. This material was sufficient to alert Mr Fattal to the possibility that there had been an intermediate acquisition by Niazi of Interlands' share in Baker Street Limited before it was transferred into the Sharet Trust.
96. Mr Fattal was not personally involved in the disputed transactions, so for the most part his evidence is of no direct assistance to me in resolving the preliminary issue. However, there is one important piece of evidence in Mr Fattal's fourth witness statement, dated 28 September 2007, to which I must refer. He says he would like to make clear what his understanding was before October 2003 about the nature of the transfer of the Interlands/Selim Dangoor share in the Joint Venture to the Sharet Trust, and gives the following explanation:

"5. What happened was that, at some point shortly before my letter of 10 July 1998 to Walbrook [see paragraph 80 above], Doreen Dangoor telephoned me and, having referred to the fact that her brother Selim had recently died, told me in words to the effect that "we" – being her and her husband Albert – "had bought Selim's share and wanted to put it into a trust they had set up for their children called the Sharet Trust." She informed me this had been agreed with Walbrook and in a second call chasing for my agreement informed me that all the other shareholders had already agreed.

6. That was the source of my understanding about the Sharet Trust to which I referred in my letter of 10 July 1998 to Walbrook. It was also the basis for what I said on page 2 of my letter of 22 February 2002 to David Dangoor ("His shares I was led to believe were purchased by your Uncle Albert") …

7. It was only after October 2003 that I realised … that the transfer of Selim's share had been acquired by Niazi Dangoor who then transferred it to the Sharet Trust."

97. Mr Fattal was not cross-examined on this evidence, and I therefore accept his account of his telephone conversation with Doreen. It will be noted that what Doreen apparently referred to was a purchase of Selim Dangoor's share by her husband and herself, and she gave Mr Fattal to understand that it was they who had established the Sharet Trust. There was no mention at all of Niazi's involvement.

Mr Cuttiford

98. Walbrook's position in the present dispute is one of studied neutrality. It could hardly be otherwise, given the multiple conflicts of interest arising from Walbrook's trusteeship of Baker Street Limited and the various family settlements which participate in the Joint Venture in its present form, including the Sharet Trust. Mr Cuttiford embodies this position of conflict in an acute form. He was a director of the three claimant Walbrook companies until his retirement in December 2006, and he has been an individual trustee of the Sharet Trust since its inception. He has been the hapless figure in the middle, caught in the cross-fire between the warring Fattal and non-Fattal factions among the beneficiaries. It was difficult not to sympathise when he said in answer to one question in cross-examination, suggesting that he probably felt quite uncomfortable when both Robert and David Dangoor had been berating him for what they saw as his indiscretion in disclosing confidential information to the Fattals, "Well, no more than usual."
99. Mr Cuttiford confirmed, in his capacity as a trustee of the Sharet Trust, that Interlands' interest in Baker Street Limited was indeed transferred to the Sharet Trust in 1998, and that no payment was made by the trustees for it. As he said, "We didn't pay anything for it, it was gifted into trust." He accepted, however, that he had no way of knowing whether Interlands had been paid for its interest by a third party, whether Niazi, Doreen or anybody else, before the transfer took place. He also accepted that the actual transfer which took place could have taken the same form if Interlands had previously agreed to sell its interest to a third party and been paid for it, with the result that the transfer was made by Interlands as nominee for the third party purchaser. Mr Cuttiford agreed that none of this would have made any difference so far as the Sharet Trust was concerned.
100. In cross-examination Mr Cuttiford professed to know nothing about the existence of any agreement with Niazi, even though he was present at the meeting on 12 May 1998, of which he claimed to remember very little, and even though he was the draftsman of the letters which were signed by Niazi and Interlands on 18 May. He said Walbrook never had any evidence that any transfer had been made to Niazi, either by way of sale or by way of gift. He was unable to throw any light on the "family and tax reasons" for the transfer of Interlands' interest in Baker Street Limited to the Sharet Trust, referred to in his message of 14 May 1998 to Royal Bank of Scotland International, apart from some speculations (which I did not find helpful) about what the tax reasons might have been. His explanation of the letter which he drafted for Niazi to sign was that it was something Walbrook would like to have on their files to indicate that additional funds had been settled, but it did not necessarily imply that Niazi was the settlor. The words "I am arranging for an interest in Baker Street Limited to be transferred to you" were not standard, and if Walbrook had known that Niazi was to be the settlor he would have used the words "I am settling". In re-examination, Mr Cuttiford said it appeared from the terms of the letter that Niazi had authority to make the transfer happen, but "more than that, I would not like to say".
101. Mr Cuttiford agreed in cross-examination that the Sharet Trust was formed to take a 25% share in Baker Street Limited, and to the question "From Niazi Dangoor?" He replied "Ostensibly". He then denied having been told by anybody that the disposition by Niazi was ostensible only. In re-examination he was asked what his state of knowledge had been when he drafted the letter for Niazi to sign, and said

"He wanted to, I guess, appear to be the settlor of the Interlands interest in the trust."

Mr Cuttiford was also asked in re-examination to elaborate on what he had meant by "ostensibly" in cross-examination, to which he answered:

"It was originally the intention that Selim Dangoor would settle the trust, I don't think there is any doubt about that, and he would put his interest in BSL … into the trust … I don't know where Niazi Dangoor came into it at that time … All we do know is that the documentation creating the settlement was in the name of Niazi Dangoor. He arranged for the transfer of the interest owned by Interlands into the Sharet Trust, which was the original intention always, for that interest to come into trust. Whether – I have no idea of the arrangements between Interlands and Niazi, Interlands and Selim, … I don't know. I mean it's all speculation …"

102. I found much of Mr Cuttiford's evidence surprisingly vague and unfocused for a trust administrator of his long experience and seniority. I formed the impression that he was desperate to stick to the line that he knew nothing at all which would help me to resolve the present dispute, and that he actually knew, or at least suspected, considerably more than he was prepared to say. In particular, I found his explanation for the wording of Niazi's letter of 18 May 1998 wholly unconvincing. In my view the wording clearly implies that Niazi either was already the owner of the interests to be transferred or that he would be by the date when the transfers took place. Indeed, it is hard to see what use this letter would have been for Walbrook's records if this were not the case. Furthermore, this interpretation fits in with the agreement recorded in paragraph 1 of Mr Taylor's note of the meeting on 12 May 1998.

Robert Dangoor

103. In his first two witness statements made in August and December 2006, Robert Dangoor confidently asserted that there was no sale of Interlands' interest to Niazi, and that William Fattal had no grounds for suggesting the contrary. He gave no impression that he might have any background information that was relevant to the question. However, in a further witness statement made a few days before the start of the trial, on 5 October 2007, he belatedly produced an explanation for a feature of the case which is on the face of it surprising if Interlands' interest was indeed transferred to the Sharet Trust for no consideration, namely why Selim Dangoor (through Interlands) should have wished to settle valuable property for the benefit of his nephew and niece, Robert and Sandra, and their issue, rather than for the benefit of his own immediate family (he had four children, and at least ten grandchildren). Robert Dangoor was apparently prompted to produce this evidence by a note of a meeting in February 2006 between William Fattal and various representatives of Walbrook, including Mr Cuttiford, which William Fattal had exhibited to his fourth witness statement on 28 September 2007. One of the matters discussed at the meeting was the transaction that appeared to have taken place between Interlands and Niazi. In the course of this discussion one of the Walbrook representatives, Ms Katrina Le Vesconte, is reported to have noted that "on the face of it most commercial people will not give shares away, so it is likely to have been sold".
104. Robert Dangoor's response to this was to say that his uncles and aunts were all part of a close-knit family, who did not necessarily deal with each other on a commercial basis. There was a particularly close relationship between Selim Dangoor and his younger sister, Doreen. Whenever Selim and his family came to London, they stayed with Doreen and Albert; and in the month or so before Selim's death, Doreen flew to Sweden to see him on several occasions, as she had done some years previously when he was seriously ill. Robert's father, Albert, also had a special relationship with Selim both socially and in business, as did Robert himself. Selim Dangoor had been a very successful businessman, and he had made it clear to Albert that he wished to make provision for Robert's family. Selim and his own children were all comfortably off.
105. Robert Dangoor went on to say that his uncle Selim's success was such "that my impression was that his share in Berkeley Court was not a big asset for him". Furthermore, it was Albert who had introduced Selim to the Berkeley Court venture, and Albert had attended shareholder meetings of BCIL on behalf of his uncle. Robert concluded his witness statement by saying that Ms Le Vesconte's comment in 2006 had been entirely misplaced:

"I believe it was my uncle Selim's wish to give his share in Berkeley Court to my family. I do not know why my father's brother, Niazi, was involved but no doubt there was some good reason for it. Given the family relationships involved, the notion that Niazi (or anyone) paid for the share is inconceivable to me."

106. When Robert said he believed it was Selim Dangoor's wish to give his share in Berkeley Court to his family, the implication is that he did not know this for certain, and it was the conclusion which he drew from the matters referred to in his fourth witness statement. In cross-examination, however, Robert claimed to have spoken to Selim Dangoor before his death and to have thanked him for setting up the Sharet Trust. The key passage was as follows:

"Q. I suppose in your state of ignorance it was not necessary to thank anybody for what was happening.

A. No, I did thank.

Q. Who did you thank?

A. I did speak to my uncle Selim before he passed away and –

Q. And what did you say to him?

A. I just said: "Thank you for arranging what you have done for us, for myself and my sister."

Q. You said that.

A. Yes."

Robert was then asked why he had not referred to this conversation in his witness statement, and to give fuller details of what was said on each side. He agreed that Selim Dangoor had conveyed to him by the conversation that he had given the Interlands share to Robert and his family, although he did not spell it out because he was "a person who never said things in a very straight way. He was always very cagey about the way he did things and sometimes one never understood from him what he actually meant."

107. It was squarely put to Robert Dangoor by Counsel for the Fattal defendants, Mr Bompas QC, that his account of this conversation with Selim Dangoor was an invention. It was suggested that if the conversation had taken place Robert would have referred to it, at the very latest, in his fourth witness statement, and he would not have needed to rely on the executed stock transfer form (as he had on various earlier occasions) for the proposition that there was no sale to Niazi. Having considered the matter carefully, I am driven to conclude that Robert Dangoor's account of the supposed conversation is indeed untrue. Not only would the conversation have been referred to in Robert's witness statement, if it had indeed taken place, but it is also inconsistent with the clear implication in his witness statement that he did not know for certain about Selim Dangoor's intentions. In my view it was probably a belated realisation of this inconsistency which led Robert Dangoor to claim that his uncle was a person who never said things in a very straight way.
108. The conclusion which I have reached on this point means that I can place little, if any, reliance upon Robert's evidence where it is uncorroborated or self-interested. For example, I cannot accept his evidence that he was not involved in any of the dealings between Selim Dangoor, Niazi and his father, or that he had no knowledge of what Niazi was doing. The picture which Robert sought to paint in his oral evidence was that he only became involved after the decision to establish the Sharet Trust had been made, and there were points of detail on the drafting of the trust deed and so on to discuss with Walbrook. He said that he acted as an intermediary between his father and Walbrook, but Niazi's only communications were with Albert, and he (Robert) had no dealings at all with either Niazi or Interlands. So far as Doreen is concerned, Robert said she had probably never seen a trust deed before, and she did not involve herself in the discussions that were taking place between Selim, Albert and Niazi. Her role was to look after the house, and she left all business affairs to her husband. Robert claimed to have discussed the whole case with her, but

"apart from the fact that she, throughout her life with my father, did not get involved in his business affairs, she wasn't part of the decision-making of what went on between uncle Selim and uncle Niazi …"

109. Robert then sought to explain Doreen's communications with Mr Khakria on the basis that she was ten years younger than Albert, who would then have been about 80. It would have been difficult for him to write letters on a typewriter, and he did not know how to use a computer. Doreen's role as the protector of the Sharet Trust meant that she became the main point of contact for correspondence in relation to the Sharet Trust. Whereas Robert was the verbal link between Walbrook and the Sharet Trust, his mother was the postal link. Robert was asked in re-examination if Doreen knows why Niazi was involved, to which his reply was:

"I don't think she does, no. I think that was something that my father would have organised."

110. The convenient picture which emerges, therefore, is that the three people who could have explained what was going on, namely Selim Dangoor, Albert and Niazi, are all dead, whereas Doreen, who is still alive, played no active role in the transaction and merely acted as a contact-point or postbox. The implication is that she would be unable to provide any evidence which might help the Court to resolve the question. Robert, too, was involved in only peripheral or ministerial capacities and has no knowledge of the arrangements between his father and his uncles.
111. This picture is in my judgment a false one. The contemporary documentary record makes it abundantly clear that Doreen was a protagonist in the matter from the very beginning. It was she who telephoned Mr Khakria in January 1998 to discuss the possibility of the formation of a new trust by Selim Dangoor, and who supplied him with the necessary information to advise on the implications for the beneficiaries. The correspondence then continues with her, and she is the person whose approval was sought for changes in the draft trust deed. She was present at the crucial meeting on 12 May 1998, and it was she who wrote to Mr Cuttiford on 12 June seeking confirmation that the approval of the shareholders had been obtained and that the transaction had been completed to Walbrook's satisfaction. It was again she who wrote to Walbrook on 9 September 1998, asking for the stock transfer form from Interlands to be sent to her so that she could arrange for it to be signed, and it was she who returned the completed form to Walbrook on 21 October. Finally, on 27 October it was Doreen to whom Walbrook wrote confirming that the transaction had been completed. I find this active involvement impossible to reconcile with the passive and secondary role which Robert sought to assign to her. It is perhaps revealing that at one point in his cross-examination, while not accepting that his mother was "quite a forceful personality", he did say "She will put her view forward".
112. I am equally unable to accept that Robert's own role in the matter was as limited as he seeks to make out. It is obvious from the documentary record that he was actively involved from at least February 1998 onwards, and he too attended the meeting on 12 May. He appears to have been the primary channel of communication with Niazi (see, for example, Mr Khakria's letter of 25 February 1998 to Doreen, and the action note at the foot of Mr Taylor's note of the meeting on 12 May). Robert is a chartered accountant, and it seems to me entirely plausible that he was involved in the tax-planning aspect of the matter, as well as points of trust drafting.

David Dangoor

113. It will be remembered that David Dangoor is the eldest son of Naim Dangoor, and a first cousin of Robert Dangoor. He was at all material times a director of Monopro Limited, and also a director of BCIL. I have already referred to Mr Buzzoni's evidence that David Dangoor was the person with whom he had detailed discussions, and who in substance provided him with instructions on behalf of Walbrook. Mr Buzzoni was unable to think of any transaction or matter in relation to Berkeley Court upon which he had been asked to advise in which David Dangoor was not involved.
114. Despite this intimate involvement in the affairs of Berkeley Court, David Dangoor's initial witness statements in December 2006 and May 2007 were very short and gave no indication that he had any relevant evidence to give in relation to the Sharet Trust issues. Like Robert Dangoor, however, he was prompted by the evidence filed on behalf of the Fattals after the case management conference in September 2007 to provide a further last-minute witness statement, his third, which is dated 8 October 2007. In his case, what prompted it was Mr Buzzoni's attendance note of 7 December 1998 recording his telephone conversation with David Dangoor, and including the information that after Selim Dangoor's death Interlands had sold its interest in Baker Street Limited to the Sharet Trust: see paragraph 85 above. David Dangoor's response to this, in his third witness statement, was as follows:

"I … want to make clear that I knew and know very little about the transfer of Interlands' interest in BSL to the Sharet Trust. I had no involvement in the transfer whatever, and other than what can be deduced from the documents and what I set out in the following paragraph, I knew and know nothing further about the transfer.

3. Sometime between the re-organisation in 1995 and 1997, I recall my uncle Selim Dangoor (who lived in Sweden) telling me that he considered that my uncle Albert had a stake in the Interlands share of Berkeley Court. I also recall him telling me in 1997 that he intended transferring the Interlands share to his sister's, Doreen's … family. A little later (I cannot now remember when) my uncle Albert told me that his brother, Niazi (who lived in Israel), was setting up a trust to receive the share. I have seen from the postscript to the notes of the meeting on 12 May 1998 that Interlands' proposed transfer was referred to in a meeting between Walbrook and me after 12 May 1998 and that I made the point that the money in the Berkeley Court members' account would also need to be transferred and that the approval of the other members may be required. What is set out in this paragraph is the extent of my involvement in the matter and my knowledge of it. The affairs of my uncles Selim and Albert were none of my business, and I did not presume to ask about them.

4. If I did describe the transaction to Mark Buzzoni on 7 December 1998 as a sale by Interlands to the Sharet Trust (which I simply can't remember), that was not because I knew that to be the nature of the transaction, but simply a loose way of describing the fact that a transfer had been effected by Interlands to the Sharet Trust, the details of which I did not, and do not, know."

115. I begin by observing that it is in the highest degree unlikely that an experienced businessman like David Dangoor should have had any difficulty in distinguishing between a sale and a voluntary transfer, or that he should have described to Mr Buzzoni as a sale a transaction which was nothing of the sort. This point was naturally put to David Dangoor in cross-examination by Mr Bompas, and in answer he accepted it was possible that he had used the word "sale". He said it was "certainly possible, because at one time there had been talk of arranging it as a sale". A little later, it was put to him that he had been copied into Mr Buzzoni's letter of 7 December 1998 to Walbrook, which again recorded Mr Buzzoni's understanding from him that there had been a sale and asked for relevant details. It was suggested that if he had considered the reference to a sale to be wrong, he would have intervened and informed Walbrook accordingly. David Dangoor's reply to this was as follows:

"I think that's totally wrong and I'll give you two reasons. Firstly, I may be astute and careful, if you say so. I'm also harassedly busy and so I certainly don't go picking at words in people's letters, but in this case I'm saying again that the word "sale" would be totally neutral to me. … It was of no consequence what word he used. It may be that I thought there was a sale at that time because I didn't care what there was at the time."

116. I am afraid that I find this evidence simply incredible. The suggestion that David Dangoor was unable, or unwilling, to distinguish between a sale and a voluntary transfer is in my judgment absurd, and the reason why he raised no objection is that, as he well knew, a sale had taken place. I have no doubt that Mr Buzzoni's attendance note is accurate, and that he was indeed informed by David Dangoor that Interlands had sold its interest in Baker Street Limited to the Sharet Trust. It is true that this was not quite accurate if the sale was in fact to Niazi, but the inaccuracy is not a very significant one if the true position is that Niazi had agreed to buy Interlands' interest and then directed Interlands to transfer it to the Sharet Trust. I find it far easier to believe that David Dangoor knew about the sale, and slightly misdescribed, or elided, the arrangements made for its completion, than that he unaccountably described as a sale a transaction which was in fact a gift.
117. As in the case of Robert Dangoor, my conclusion on this point means that I have the gravest doubts about David Dangoor's credibility in relation to other matters. For example, David Dangoor was at pains on a number of occasions during his oral evidence to emphasise his reluctance to get involved in the establishment of the Sharet Trust, and he said "what I really never wanted was to be the crutch for any one of the four parties apart from the Delta Trust". There may be some truth in this, but I find it difficult to reconcile with his co-ordinating role through Monopro and the evidence of Mr Buzzoni about his active involvement in all fiscal matters involving Berkeley Court. I think it is revealing that he was prepared to accept in his oral evidence that there had been talk of arranging the transaction as a sale, and when he was given an opportunity to revert to this topic in re-examination he said this:

"I have a recollection of there being a variety of routes being thrown about mainly in conversation, whether it be from my aunt or my uncle or Walbrook, and whether it was sometimes asking me, for instance, about general rules that apply in case of settling on trust and so on, and I tended to bat them off and say: Mark Buzzoni, Robert Taylor, Nick Cuttiford, they're the ones who know."

The re-examination then continued:

"Q. But there was talk of arranging this transaction as a sale in that way that you have just described, so that means a sale and purchase. A purchase by whom?

A. I'm thinking of Sharet. What's in my mind is Sharet.

Q. Sharet Trust buying?

A. Yes."

118. In a further revealing passage of cross-examination, David Dangoor said his understanding had always been that Niazi had no children of his own, was in his eighties and had long ago given his money away to charity. He led a simple life, and as a man of modest means would have been unable to purchase Interlands' share. The answer then went on, almost in a stream of consciousness:

"… So then I said to myself: Well, is it possible that someone else had the means? And I said to myself: Well, it's possible that someone would like Niazi to appear as the settlor of the property … Niazi didn't have the money – so maybe someone furnished him with the money, well they furnished him with the money I presume so that he would appear to be the settlor."

David Dangoor sought to discount this possibility on the basis that, if this is indeed what happened, one would expect to see far more references to Niazi than the documentation discloses. I do not agree, not least because I am far from satisfied that all the relevant documents have been disclosed. I have a shrewd suspicion that David Dangoor's musings on this point represent the nearest approximation to the truth that I heard in any of the evidence for the non-Fattal defendants.

119. David Dangoor said that he had never met Niazi, but recalled that he had been mentioned by Albert at one stage as being the person whom they were considering being the settlor of the Sharet Trust because he lived in Israel. He denied, however, that Albert had conveyed to him that Niazi would simply be a front-man for somebody else. This evidence does not take matters much further, but does in my judgment provide some support for the proposition that Niazi's residence in Israel was perceived as having some fiscal advantage, and that this is the reason why he was introduced as the settlor, or apparent settlor. David Dangoor also accepted that he had been present at a meeting with Walbrook on 12 May 1998, but had little recollection of what was discussed. He professed to be unable to remember whether Niazi's name was mentioned on this occasion, and thought that the plan for the transfer of Interlands' interest to the Sharet Trust would only have been discussed with him in its barest detail. His concern as co-ordinator acting on behalf of all the beneficiaries was to ensure that Walbrook should obtain written confirmation from all the trusts interested in Berkeley Court and that the appropriate share of the money in the members' accounts should also be transferred. He estimated that the total value of Interlands' one quarter share in 1998 would have been in the region of £1.5 million.
120. In view of the substantial value of Interlands' share, it seems to me inherently unlikely that Selim Dangoor would have wished to settle it outside his own family without receiving something in return. It is striking to note in this connection how many explanations were put forward by Robert and David Dangoor, in their last-minute witness statements and oral evidence, for this apparent generosity on the part of their uncle. First, there was a very close relationship between Selim and Doreen. Secondly, there was also a special relationship between Selim and Albert, both socially and in business. Thirdly, Selim considered that Albert "had a stake" in the Interlands share and treated him as at least morally a part-owner of it. Fourthly, Selim's own children were in any event well provided for. Fifthly, Selim espoused the view that it was not a good idea to put too much money into the hands of your children, as it could often do more harm than good. In my view there is a considerable element of over-explanation here, and I treat all of these reasons with considerable scepticism. They appeared in evidence too late in the day to carry conviction, and in my judgment they do not provide a satisfactory explanation, either singly or cumulatively, for Selim's having made a gift of property worth some £1.5 million to Albert and Doreen's family.

Conclusions

121. I will now draw the threads together and state my conclusions.
122. In my judgment the likelihood is, on the balance of probabilities, that Interlands did agree to sell its share in Baker Street Limited, together with its share of the members' accounts, to Niazi, and that Niazi then directed Interlands to complete the sale by transferring the assets in question to the Sharet Trust. The agreement was probably made, or at least finalised, between 12 and 18 May 1998. I do not know what purchase price was agreed, but I am satisfied on the balance of probabilities that a price was agreed, and that it was paid by Niazi to Interlands. I doubt whether Niazi had either the resources or the motivation to make the purchase and settlement on his own initiative, and I find that he was probably put in funds for the purpose, most likely by Albert and Doreen. This would help to explain William Fattal's unchallenged evidence of his conversation with Doreen in July 1998, when she told him that she and her husband had bought Selim's share and wanted to put it into a trust they had set up for their children called the Sharet Trust. I think it is likely that there was an intermediate plan that Albert and Doreen should buy Selim Dangoor's former share in the Joint Venture from Interlands and settle it on their children, but it was then decided that the settlement should be made by Niazi and that he should be the purchaser. The reason for the change was probably a fiscal one, and may have involved foreign tax considerations. I do not know why Doreen said what she did to William Fattal. On any view of the matter, it cannot have been an accurate statement of the position in July 1998. Possibly she wished to conceal the true position from Mr Fattal, or was embarrassed in some way about Niazi's involvement. However, the fact that she referred to a purchase of Interlands' share is in my judgment significant, and I rely upon it as one of the contemporary indications that a sale had indeed taken place. The other main contemporary indications are of course the note of the meeting on 12 May 1998, referring to Niazi's wish to acquire Interlands' share and transfer it to the Sharet Trust, and Mr Buzzoni's attendance note of his conversation with David Dangoor on 7 December 1998.
123. A further important point, to my mind, is that if Niazi was to be presented with any plausibility as the settlor of the Interlands share, he would clearly have to give full value for it; and the obvious way to achieve this would be by way of a sale. The sale was obviously a collusive one, in the sense that it took place between connected parties and formed part of what was probably an organised piece of tax planning. However, I see no reason to suppose on the evidence before me that it was in any way a sham. Indeed, effective tax planning depends on entering into transactions which are not shams, however artificial or tax-driven they may otherwise be. Thus when I say that Niazi was probably put in funds by Albert and Doreen to make the purchase, I do not mean to imply that this was a pretence. I do not know what the details were, and I cannot rule out the possibility that the necessary funds came from another source, but I am satisfied that in one way or another the necessary funds were made available to Niazi. As to the purchase price, I assume that it was intended to represent the full value of Interlands' quarter share in Berkeley Court and the related members' accounts. In his oral evidence David Dangoor estimated that the value of the quarter share in 1998 would have been around £1.5 million, while recognising that this was only a rough estimate and that the true figure could lie between (say) £1.4 million and £1.7 million. This evidence may be cross-checked by taking the difference between the 1995 purchase price of £8.6 million and the 1998 estimated value of £11.3 million for Berkeley Court itself, i.e. £2.7 million, adding the sum of the balances on the members' accounts as at 16 June 1998 (which comes to £2,854,156.20: see paragraph 78 above), and dividing the resulting total of £5,554,156 (ignoring pence) by four, which produces a figure of £1,388,539. That is near enough to the lower end of David Dangoor's estimated bracket.
124. In reaching the conclusion that there was a sale, I have not overlooked the fact that the original plan in January 1998 seems to have been that Selim Dangoor would be the settlor, and that no reciprocal settlement should be made by anybody for the benefit of himself or his immediate family: see Mr Khakria's letter of 22 January 1998 to Doreen. If no reciprocal settlement was to be made, it may well be that at this very early stage Selim Dangoor was indeed contemplating an outright gift into the new trust. However, the value of the property to be settled was evidently still undecided, because Mr Khakria's letter said only that "the settled property will comprise some or all of his 25% per cent shareholding in Baker Street Limited" (emphasis supplied). In any event, by 11 February 1998 it had clearly been decided that Niazi was to be the settlor, and by the meeting on 12 May at the latest it had also been decided that Niazi was to acquire the whole of the Interlands share before transferring it to the Sharet Trust. One of the reasons for these changes was no doubt the illness and subsequent death of Selim Dangoor on 26 April, but unfortunately this is one of the areas where there is a gaping hole in the evidence before me. I have heard no evidence from any member of Selim's branch of the family, including in particular his only son David E R Dangoor who was the President of Interlands. I do not even know what testamentary dispositions he made, or who his personal representatives are.
125. I am equally in the dark about the position of Interlands, both before and after Selim Dangoor's death. I have little doubt that Interlands could in practice be relied upon to do as Selim Dangoor wished during his lifetime, even to the extent of giving property away without receiving anything in return. However, the position may have been less straightforward after his death, and one possible reason for introducing a sale into the transaction might have been the need to provide Interlands with consideration for the disposal of its share. There is no evidence before me that Interlands had any assets apart from its share in Baker Street Limited and the associated members' accounts, and if it had indeed disposed of those assets by way of gift one might expect it to have been wound up. However, the available evidence indicates that Interlands is still in existence and in good standing with the authorities in the British Virgin Islands. This in turn suggests that it does still have assets, and lends some support to the inference that it received value for the transfer of its share to the Sharet Trust in 1998.
126. The burden of proof lies on the Fattal defendants to satisfy me, in terms of the preliminary issue, that there was a sale in 1998 by Interlands to Niazi of the beneficial interest held by Interlands in the membership rights of Baker Street Limited. For the reasons which I have given, I am satisfied to the civil standard of proof that the Fattal defendants have discharged this burden. It is in my view highly unsatisfactory that there should be so much mystery and uncertainty about a transaction which took place less than ten years ago, and in which professional people were involved. I cannot escape the impression that, for whatever reason, the non-Fattal defendants have done their best to keep the true position from the Court, and that Walbrook, through Mr Cuttiford, has also not provided the Court with all the assistance it could have done. I have had to try to piece together what happened from a few clues in the documentary record and the oral evidence of two witnesses (Robert Dangoor and William Dangoor) who I am satisfied knew much more than they were prepared to say. I have not heard any evidence from the two living people who on the face of it would be best able to explain what actually happened, namely Doreen and David E R Dangoor. No convincing reason has been put forward why either of them could not have given evidence on behalf of the non-Fattal defendants. In the circumstances, it seems to me that if I have misinterpreted the evidence and reached the wrong conclusion the non-Fattal defendants have only themselves to blame.