[2008]JRC165
royal court
(Samedi Division)
25th September 2008
Before : |
Sir Philip Bailhache, Kt., Bailiff and Jurats Le Breton, and Le Cornu. |
IN THE MATTER OF THE REPRESENTATION OF BARCLAYS WEALTH TRUSTEES (JERSEY) LIMITED.
AND IN THE MATTER OF LDC WILMOTT STREET MANAGEMENT LIMITED AND IN THE INHERRENT JURISDICTION OF THE COURT.
Advocate M. J. Thompson for the Representor.
judgment
The bailiff:
1. This is a representation by Barclays Wealth Trustees Limited (to which we will refer as "Barclays") seeking the rectification of two declarations of trust dated 5th September, 2008.
2. The background to the application may be shortly stated. Barclays administered a company registered in Jersey called Wilmott Street Limited. The beneficial owner of Wilmott Street Limited was another company and that other company was beneficially owned by Mr George Downing. Wilmott Street Limited owned a property in Manchester which was rented out to Unite Group Plc ("Unite") which provides student accommodation in the United Kingdom. The property was being developed and the holding company of Unite entered into an option agreement to acquire the shares in Wilmott Street Limited. The option was exercised in October 2007, but there was a delayed completion so that completion was to take place either ten working days after practical completion of the development had been certified or, if later, ten working days after the last of certain necessary consents had been obtained.
3. For fiscal reasons Unite requested that a management company be incorporated so as to sit between Wilmott Street Limited and the underlying student tenancies. It was to take over the leasehold of the site and to operate as a management company between Wilmott Street Limited and the tenants. It was agreed that Barclays would arrange to incorporate the new management company. One of the terms of the share sale agreement was that the new management company was to be a wholly owned subsidiary of Wilmott Street Limited.
4. On 4th August, 2008, Barclays was instructed to arrange for the incorporation of the new management company for Wilmott Street Limited. In accordance with those instructions, LDC Wilmott Street Management Limited (to which we will refer to as "the management company") was incorporated. Barclays then procured two of its nominee companies; Walbrook Nominees No. 1 Limited and Walbrook Nominees No. 2 Limited to apply for the requisite consent from the Jersey Financial Services Commission to issue 10,000 shares of £1. One share in the management company was subsequently issued to each of the nominee companies. Declarations of trust were then issued to declare for whom the nominee companies were holding the shares on trust. The name of Mr Downing was inserted. Counsel for Barclays has submitted that this was an error and that the name Wilmott Street Limited should have been placed on the declarations of trust. The error would cause adverse tax consequences if it were not to be rectified.
5. The relevant principles of law to be applied by the Court in an application of this kind were set out conveniently in Re the R. E. Sesemann Will Trust [2005] JLR 421. There are three requirements:-
(i) The Court must be satisfied by sufficient evidence that a genuine mistake has been made so that the document does not carry out the true intention of the party or parties.
(ii) There must be full and frank disclosure.
(iii) There should be no other practical remedy; the remedy of rectification remains a discretionary remedy.
6. These principles have since been applied in a number of cases. It is to be noted that in Re Moody Jersey "A" Settlement [1990] JLR 264 the Court held that there is no rule that an application for rectification will not be allowed if its purpose is to save tax.
7. We turn to consider each of the considerations laid down in Re the R. E. Sesemann Will Trust. An affidavit sworn by a director of Barclays, Paul Martin Sinel, has been place before us. Attached to that affidavit is a copy of an email from the firm of Manchester lawyers DLA Piper who were acting for Mr Downing and who wrote to their client on 4th August, 2008. That email makes it clear that the management company was to be wholly owned by Wilmott Street Limited. DLA Piper stated "The management company must be 100% owned by Wilmott Street Limited." Mr Thompson has placed before the Court a copy of a letter written by Mr Downing stating that it was never his intention that the shares in the management company should be held to his order. We are satisfied that a genuine mistake was made in the drafting of the declarations of trust or in the instructions given to the draftsman of those declarations.
8. We return to the second question which is whether full and frank disclosure has been made and we are satisfied that the answer to that question is in the affirmative.
9. Thirdly, we turn to consider whether there is any other practical remedy available to Barclays. We are satisfied that there is no other effective remedy because only an order for rectification will operate retrospectively so as to reflect the true intention of Barclays on executing the declarations of trust.
10. We accordingly exercise our discretion to order the rectification of the declarations of trust as set out in the draft order placed before us by counsel for Barclays.
Authorities
Re the R. E. Sesemann Will Trust [2005] JLR 421.
Re Moody Jersey "A" Settlement [1990] JLR 264.