Hamilton v Hamilton & Anor

A foreign foundation’s separate legal personality and beneficial ownership are determined by the law under which it was established. The law governing transfers of assets to it is a separate question. A transfer by an English resident may be governed by English law where England has the closest connection with the transfer. The founder’s extensive control or reserved benefit does not itself invalidate a Liechtenstein foundation or establish a resulting trust. A sham requires a common intention among all relevant parties to create rights and obligations different from those appearing. Alleged tax evasion must be proved with care where the person accused is dead and unable to answer.

Alan Hamilton claimed that assets transferred by his late father, David Hamilton, to the Liechtenstein Rainbow Foundation remained part of David’s estate. He alleged that the foundation was a nominee, a resulting trust or a sham, and alternatively that it was void under Liechtenstein law because it had been established to evade United Kingdom tax. The claim concerned the unequal distribution of the foundation’s assets between Alan and his sister, Carolyn, who was an executor and trustee under David’s will.

The central issues were David’s intention, the validity and operation of Rainbow, the applicable law, and whether the assets had been effectively transferred away from David.

1. Tax-evasion case. The allegation that David established Rainbow principally to evade tax required clear and convincing evidence. The evidence showed that Rainbow was intended to provide offshore wealth for David and his family, including an emergency fund. Any tax evasion was incidental and was not the driving purpose. The amended case therefore failed.
2. Operation of Rainbow. The evidence did not establish that the board was a mere cipher or that David dealt with the assets wholly without reference to the foundation’s governance arrangements. In the absence of a challenge to the foundation or evidence from those responsible for it, a rebuttable presumption of regularity applied. The mandate arrangements and David’s extensive control did not alter that conclusion.
3. Choice of law. The court applied the three-stage conflict-of-laws enquiry in a broad and internationalist manner. The validity of Rainbow was governed by Liechtenstein law, as the law of the place where it was established and registered. The transfers of money into Rainbow were governed by English law, having their closest connection with England.
4. Validity and ownership. Under Liechtenstein law, David intended to establish a separate legal person and Rainbow became the beneficial owner of the transferred assets. The foundation’s full or virtually full control by David, and his extensive rights to benefit, did not establish Mentalreservation or invalidate the foundation.
5. English-law claims. Any resulting-trust presumption was rebutted by David’s intention to transfer beneficial ownership to Rainbow. Rainbow was not a nominee. The circumstances differed materially from Prest v Prest. Nor was there a sham: applying Snook v London and West Riding Investments Ltd, all relevant parties would have needed a common intention to create different legal rights and obligations, which was absent.
6. Disposition. Alan’s primary and amended cases failed. The action was dismissed. It was unnecessary to decide whether Alan had standing to bring a derivative claim.

First-instance decision. No appellate history was stated in the judgment.