Sherborne Corporate Services Ltd & Ors v Positive Approach Services Ltd & Ors

The claim arose under a Deed of Acknowledgement and Satisfaction of a Debt dated 1 December 2010 by which Mr Williams acknowledged a £1,000,000 contribution to a Guernsey occupational pension plan and confirmed an in-specie transfer to discharge that debt of nine A shares in Positive Approach Services Limited. The claimants sought the £1m in the primary instance and alternative relief for declarations or specific performance of the alleged share transfer. The defendants counterclaimed for rescission and damages for alleged misrepresentation and illegality.

The court rejected the defendants' case on express misrepresentations because the only witnesses said the brochure and oral explanations were limited and accurate as to QROPS benefits, and the defendants did not give evidence to support their pleaded factual account. On the narrower issues of implied representations and alleged lack of trustee powers or regulatory licence, the court accepted expert evidence on Seychelles and Guernsey law:

• under the International Business Companies Act 1994 (Seychelles) and subsequent legislation, the phrase "trust business" did not prevent the Seychelles companies from acting as trustees in the sense alleged by the defendants;
• under Guernsey law the Regulation of Fiduciaries (Bailiwick of Guernsey) Law 2000 did not, on the facts pleaded, render the trustees' acts void and did not of itself affect civil liability; the trustees in issue were not shown to have required a Guernsey fiduciary licence because they did not administer the plan "in or from" the Bailiwick and had not been paid for the role.

Accordingly the claim succeeded for the primary monetary relief and the counterclaim was dismissed.

Background and parties: The claim concerned a Deed by which Mr Kenneth Williams acknowledged owing £1,000,000 to the Interim Executives (Guernsey) Limited Occupational Pension Plan and confirmed that nine A shares in Positive Approach Services Limited (PAS) had been transferred in-specie to the Plan on 21 June 2010. The trustees and related companies (claimants) alleged the obligations were not in fact performed and sought the £1,000,000, alternatively declarations and orders to secure specific performance, plus charges, interest and costs. The defendants alleged that they had been induced into the agreement by express and implied misrepresentations and that the trustees lacked capacity or regulatory authority to act, seeking rescission, re-transfer of shares and damages.

Procedural posture and evidence: This was a first instance trial before Richard Spearman Q.C. The defendants did not attend trial and were unrepresented. The claimants relied upon factual witness statements, documentary evidence (including letters, share certificates and board minutes), and three expert reports on Seychelles law, Guernsey law and QROPS tax issues.

Issues framed by the court:

• Whether express or implied misrepresentations were made and relied upon by Mr Williams;
• Whether the alleged in-specie transfer of nine shares discharged the £1m obligation or whether the contribution remained payable in cash;
• Whether the trustee companies had capacity under Seychelles law (the effect of the phrase "trust business" in their memoranda) and whether they required a Guernsey fiduciary licence under the 2000 Law;
• Whether alleged irregularities in share documentation (including backdating) undermined the claimant’s case;
• Appropriate remedies and costs.

Court's reasoning and findings:

• The court found the defendants' factual account unsupported: they did not attend to give evidence and contemporaneous documents supported the claimants' position that the Plan accepted the in-specie transfer documentation and valuation documents were provided. Where the defendants alleged express representations, the court accepted the evidence of Mr Everett that any oral representations were limited and qualified and that clients were told to obtain independent tax advice. The brochure and accompanying explanations were read in context and did not assert that ownership of PAS would change the company’s corporation tax liabilities.
• Even if certain company documents had been backdated, the court accepted that the documented intention at all material times was to transfer sole ownership to the Plan; in any event, defects in an in-specie transfer would not absolve Mr Williams of the monetary obligation to pay £1m.
• On the Seychelles law point, the court accepted the claimant’s expert that in context the exclusion of "trust business" was intended to regulate the provision of corporate trust services (formation, registration and administration) rather than to deny an IBC any ability to act as trustee; subsequent Seychelles legislation supported that interpretation. Section 10(1) of the International Business Companies Act 1994 also protects third parties dealing with companies from internal capacity challenges.
• On the Guernsey point, the claimant’s expert concluded that the trustees did not require a Guernsey fiduciary licence on the pleaded facts (not acting in or from the Bailiwick and not receiving consideration), and that even if an offence had been committed that would not of itself affect civil liability.
• As a result the court concluded the defendants had not established misrepresentation or illegality sufficient to defeat the claim and entered judgment for the claimants for the primary monetary relief sought, dismissing the counterclaim.

The court invited submissions on interest, scheme charges and detailed costs and on drafting of the final order, and indicated the claimants should serve further written submissions and the draft order.

The claim succeeds and the counterclaim is dismissed. The court rejected the defendants' pleaded express and implied misrepresentations for lack of persuasive evidence and on the facts; expert evidence on Seychelles and Guernsey law established that the trustees’ capacity and licensing contentions did not prevent enforcement of the Deed or affect civil liability. The court therefore ordered judgment for the claimants for the primary monetary relief (the £1,000,000) and left interest, scheme charges and costs to be determined on further argument.