Estera Trust (Jersey) Ltd v Singh & Ors

Estera Trust (Jersey) Ltd v Singh & Ors

The court refused to order the respondents to participate in a buy-out structure involving a Jersey NewCo designed solely to avoid tax for the petitioners. The scheme could reasonably be regarded as aggressive tax avoidance, exposes the respondents to risk of HMRC scrutiny, and constitutes an unjustified interference with their rights. There is no public interest in compelling such a structure, and the petitioners have alternative means to mitigate tax. The court has jurisdiction but declines to exercise its discretion in favour of the petitioners.

Parties
Petitioner: Estera Trust (Jersey) Limited; Petitioner: Herinder Singh; Respondent: Jasminder Singh; Respondent: Verite Trust Company Limited; Respondent: Jemma Trust Company Limited; Respondent: Edwardian Group Limited; Respondent: Jasminder Singh and Herinder Singh (as trustees of the English Trusts)
Jurisdiction
England and Wales
Judgment Date
26 July 2019
Procedural Posture
Minority Shareholder Petition (unfair Prejudice) / Post Trial Application for Variation of Buy Out Order
Outcome
Petitioners' application for a tax-motivated buy-out structure refused
Legal Topics
Unfair Prejudice, Shareholder Buy Out, Tax Avoidance, Court Discretion Under Companies Act 2006 S.996
Company Law Tax Law Unfair Prejudice Shareholder Buy Out Tax Avoidance Court Discretion Under Companies Act 2006 S.996

Case Brief

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Parties

Estera Trust (Jersey) Limited

Petitioner

Herinder Singh

Petitioner

Jasminder Singh

Respondent

Verite Trust Company Limited

Respondent

Jemma Trust Company Limited

Respondent

Edwardian Group Limited

Respondent

Jasminder Singh and Herinder Singh (as trustees of the English Trusts)

Respondent

Procedural Posture

Minority Shareholder Petition (unfair Prejudice) / Post Trial Application for Variation of Buy Out Order

Legal Issues

  1. 1 Whether the court should order a buy-out structure designed solely to avoid tax liability for the petitioners, against the wishes of the respondents
  2. 2 Whether the court has jurisdiction to vary the buy-out order to permit a transfer to a Jersey NewCo for tax purposes
  3. 3 Whether the proposed scheme constitutes aggressive tax avoidance and whether the court should compel unwilling parties to participate

Ratio Decidendi

The court refused to order the respondents to participate in a buy-out structure involving a Jersey NewCo designed solely to avoid tax for the petitioners. The scheme could reasonably be regarded as aggressive tax avoidance, exposes the respondents to risk of HMRC scrutiny, and constitutes an unjustified interference with their rights. There is no public interest in compelling such a structure, and the petitioners have alternative means to mitigate tax. The court has jurisdiction but declines to exercise its discretion in favour of the petitioners.

Court Disposition

Petitioners' application for a tax-motivated buy-out structure refused

Orders

  • Petitioners' application for variation of the buy-out order to permit transfer to Jersey NewCo is dismissed.
  • Buy-out to proceed as previously ordered, with short period allowed for petitioners to seek on-shoring clearance for the Lily Trust.