Richard David Ernest Hopes & Anor. v Kate Burton & Ors.
[2022] EWHC 2770 (Ch)
Amarjit Bhaur & Ors v Equity First Trustees (Nevis) Limited & Ors
18 May 2023
[2023] EWCA Civ 534
Court of Appeal
The Bhaur family tried to use a complicated tax plan to avoid paying inheritance tax. It failed, and they tried to get their money back. The court said no, because they knew the plan was risky and tried to trick the tax authorities. Even though they might lose a lot of money, the court decided they shouldn't get help because they knowingly took a big risk.
Key Facts
- •Appeal concerns the equitable jurisdiction to set aside a voluntary disposition of assets due to mistake within a failed inheritance tax avoidance scheme.
- •Appellants (Bhaur family) sought to set aside the disposition of assets transferred to an employee benefit trust (EBT).
- •The scheme, devised by solicitor James O'Toole, aimed to avoid inheritance tax but was deemed tax evasion by the Judge.
- •The Judge found the Appellants knew the scheme was a sham designed to mislead HMRC.
- •The scheme involved transferring assets to offshore trusts and ultimately to the NSPCC.
- •HMRC challenged the scheme, leading to the Appellants' claim to set aside the initial disposition for mistake.
Legal Principles
Equitable jurisdiction to set aside voluntary dispositions requires a mistake of a relevant type, sufficiently serious to render it unjust for the donee to retain the property.
Pitt v Holt [2013] 2 AC 108
Distinction between mistake and misprediction: Mistake relates to past or present facts, misprediction to future events. Equity intervenes for mistake, not misprediction.
Pitt v Holt [2013] 2 AC 108; Goff & Jones, The Law of Unjust Enrichment
Even with a relevant mistake, relief may be refused if the donor deliberately ran the risk of being wrong.
Pitt v Holt [2013] 2 AC 108
The gravity of the mistake and its consequences are relevant to determining injustice or unconscionability. The court considers the justice of the case.
Pitt v Holt [2013] 2 AC 108
Artificial tax avoidance schemes may lead to refusal of equitable relief due to public policy concerns.
Pitt v Holt [2013] 2 AC 108; Dukeries Healthcare Limited v Bay Trust International Limited [2021] EWHC 2086 (Ch)
A mistaken belief in the honesty of an advisor is generally not a sufficient basis for setting aside a gratuitous disposal.
Case Law analysis within the judgment
Outcomes
Appeal dismissed.
The Appellants' belief about the tax consequences was a misprediction, not a mistake. Even if a mistake, they knowingly ran the risk of the scheme failing. Their complicity in the scheme's dishonest nature, designed to mislead HMRC, further justified the refusal of relief. The scheme was deemed an artificial tax avoidance scheme, and public policy considerations weighed against granting relief.