The Perils Of Disorganisation ' Who's The Winner?

• Published date: 07 June 2023
• Subject Matter: Finance and Banking, Financial Services
• Law Firm: Withers LLP
• Author: Ms Alexandra Dix

A recent High Court case¹ highlights the dangers of trying to arrange your affairs in a tax efficient way, but then failing to stick by those plans.

Mr Dines was a 'shrewd' (in the judge's words) businessman but 'hopelessly disorganised' with his paperwork - leading to a bitter fight between his children and second wife in Court over properties worth more than '1m.

Background

Graham Dines had two children, Louise and Elliot, with his first wife. Graham had several affairs and, in 1992, met Helen, who became his second wife.

Graham ran a property investment business, Provincial Equity Finance Limited ('PEF'). PEF purchased flats in Bath and Bournemouth, which it then let or sold. Initially, these flats were bought in PEF's name but in the late 2000s, Graham decided to buy properties in his own, Helen's and/or Elliott's names. It appears he thought that if a vendor knew that the purchaser was a company, the vendor would assume it was a property business (which it was!) and demand a higher price. PEF paid tax on the rental income and included the properties in its accounts.

Graham had three bank accounts which he used for business and personal purposes - PEF did not have its own bank account.

In 2008, Graham gave instructions for a new Will (his fourth in five years). He named Elliot, Louise, Mr Arad and his previous business partner, Mr Young, as executors. He wanted Helen to have their home, '100,000 and his pension rights. He left Elliot and Louise his shareholding in PEF, some other property investments and residue.

Graham told his solicitor that Helen had properties in her name which she held on trust for PEF - but he said that there weren't any documents to support this. He said that PEF paid for the flats and they were in Helen's name simply for tax reasons.

In April 2016, Graham and Helen went on a cruise from Florida to Southampton. While on a stop in Lisbon, Graham had a fall and fell into a coma.

Ten days later, Helen transferred '130,000 from one of Graham's bank accounts to herself.

Graham passed away on 5 June 2016.

PEF (now controlled by Louise and Elliot) claimed that it owned 12 flats which were registered in Helen's name (or Helen's and Graham's joint names). It also wanted Helen to account for the '130,000 withdrawal.

Do the flats and money belong to PEF?

PEF's only argument was that it paid for the properties, so Helen held them on resulting trust for the company.²

To make out its case, PEF had to show that the money in the accounts was...