CHANCERY DIVISION

Re Clore (deceased) (No 2) Official Solicitor v Clore and others

See annotated version at [1984] STC 609

COUNSEL: Richard McCombe for the Official Solicitor.

Peter Millett QC and Alan Moses for the Commissioners of Inland Revenue.

Gavin Lightman QC and J P Whittaker for the trustees of the Orpheus Foundation.

SOLICITORS: Freshfields (for the Official Solicitor); Solicitor of Inland Revenue; S J Berwin & Co (for the trustees of the Orpheus Foundation).

JUDGE: Nourse J

DATE: 10, 11, 12, 16 OCTOBER 1984

Cur adv vult

16 October. The following judgment was delivered.

NOURSE J. The late Sir Charles Clore, who was born in 1904 and died in 1979, was a man of remarkable achievements. The sixth of the 11 children of a Jewish refugee from Czarist Lithuania, by the late 1950s he had, through exceptional business acumen and hard work, achieved vast riches and a unique reputation as the pioneer of the company takeover. It is difficult for anyone who did not live through those times to understand the originality of his ideas. His influence on financial and commercial practices was incalculable.

In 1959 he failed in an attempt to acquire control of Watneys. It was his most celebrated, if not quite his only, failure in the field. From 1960 onwards, and apart from his property interests, his main concern was with the many and diverse activities of the companies controlled by Sears Holdings Ltd whose assets in 1960 were worth more than £70m, an enormous figure for the time. The centre of his business activities was 22 Park Street, W1 in the same street as his London home at No 95. In 1959, having previously owned a house and a 500-acre farm at Checkendon in Berkshire, he bought a substantial country house and an estate of about 2,000 acres at Stype, on the borders of that county and Wiltshire. In 1961 he bought an even larger estate in Herefordshire known as the Guy’s Estate, but he did not live there. As the years went by he became increasingly engaged in the pursuits of a wealthy country gentleman. He took a keen interest in the farming activities which he carried on over the whole of the Stype Estate and the untenanted parts of the Guy’s Estate. He was an enthusiastic shot and regularly invited others to shoot with him in both places. His colours became well known on the turf in England, Ireland and France, his most notable success in England being when Valoris, ridden by Lester Piggott, won the Oaks in 1966. In 1971 he received the accolade of knighthood.

Sir Charles had divorced his wife, Francine, in 1957. They had two children, Alan born in 1944 and Vivien, now Mrs Duffield, born in 1946. He did not remarry. Although consumed with business and other interests, he was never a recluse. He was by inclination both social and sociable, being equally content to be host or guest. He enjoyed the company of both men and women. He had many friends, some of whom were close to him, and a multitude of acquaintances. He was an indefatigable traveller on both business and pleasure. He did not often write letters, and I have seen no evidence of any interest in literature or music. He had a valuable collection of paintings and objets d’art. In his last two or three years the pattern of his life was greatly altered. Able, restless, cerebral without being intellectual or cultured, dutiful in religion but not spiritual, sometimes on the edge of loneliness or boredom, the impression with which the evidence had left me is of a final period of unhappiness and doubts.

Although Sir Charles had made extremely generous provision for his family and charity, he remained a man of immense personal wealth. Towards the end of his life, particularly from 1974 onwards, his advisers were more or less continuously engaged in considering methods of avoiding or reducing the burden of taxes for which he was both currently and prospectively liable. The only hope was for him to live abroad. From about the end of the 1960s he made a regular practice of going abroad for a combined holiday and business trip in about February of each year. Often before he went he would tell his advisers that he might become non-resident and would delay his return until after the budget. This went on year after year. But in each year until 1977 he always came back. In that year, finally oppressed by the facts that the top rate of tax on unearned income was 98 p in the pound and that he could not sell securities without incurring substantial charges for capital gains tax, he did not return. He did not come to this country again until June 1978, by which time he had put in hand the sale of his homes in Park Street and at Stype and had acquired a large apartment in Monte Carlo. On 26 July 1979 he died in London, leaving free and settled estate worth more, perhaps substantially more, than £80m. He left a Monaco will by which he left all his property there to Mrs Duffield, and a general will whose effect was to leave all his other property to charity. He remained a United Kingdom citizen. It is now accepted by the Revenue that Sir Charles was neither resident nor ordinarily resident in the United Kingdom after 13 February 1977. The question which I have to decide is whether in June 1978 or later he acquired a domicile of choice in Monaco or whether he remained domiciled in England.

In the five years since Sir Charles’ death his estate and certain related matters have been the subject of much litigation both here and in the Royal Court of Jersey. I do not propose to go over this ground, an understanding of a good part of which can be collected from IRC v Stype Investments ( Jersey) Ltd, Re Clore (decd ) [1982] STC 625, [1982] Ch 456. The effect of that decision was to confirm the Official Solicitor as the administrator ad colligenda bona of Sir Charles’ English estate, including the proceeds of sale of the Guy’s Estate, and to hold Stype Investments to be an executor de son tort in regard to the English estate. By an originating summons issued on 29 October 1982 and subsequently amended the Official Solicitor sought the directions of the court as to whether he should or should not take certain steps as administrator of the estate. He also raised the question of Sir Charles’ domicile, it having been clear throughout that the outcome of that question would depend on the right of the Revenue to claim capital transfer tax on Sir Charles’ free estate situated outside the United Kingdom and also on the assets of a Jersey settlement known as the personal settlement which he had made on 20 February 1979 and by which he reserved a life interest to himself with remainder to charity. If, but only if, he remained domiciled in England on the material dates, then that estate and those assets will be subject to tax. By an order of Warner J made on 16 November 1983 it was ordered that an issue be tried between the parties to the originating summons to determine whether Sir Charles was or was not domiciled in the United Kingdom at the date of his death and on 20 February 1979. By reason of s 45 of the Finance Act 1975, which provides for a person not domiciled in the United Kingdom to be treated for the purposes of capital transfer tax as if he was, the issue raises further questions to which I do not refer at this stage. I shall in the first instance decide whether Sir Charles was actually domiciled in England on either or both of the material dates. I am not concerned with the extent to which the Revenue will be able to enforce any claim for tax which they may have.

The parties to the issue, apart from the Official Solicitor himself, are Mr Alan Clore, Mrs Duffield, the three individuals named as the executors of Sir Charles’ general will (one of whom was also named as the executor of his Monaco will), another Jersey company called Stype Trustees (Jersey) Ltd, the Commissioners of Inland Revenue and the three trustees of a charitable trust constituted by Mrs Duffield and known as the Orpheus Foundation to which she has assigned her interest in any property as to which Sir Charles may be held to have died intestate. The Revenue are the plaintiffs in the issue, and counsel for the Commissioners of Inland Revenue has argued the case on their behalf. They claim that Sir Charles was domiciled in England on both the material dates. Defences in the issue have been put in by Stype Trustees and the trustees of the Orpheus Foundation. The effect of each of those defences is to put the Crown to proof of its claim. Neither of them makes a positive case for a Monagesque or any other domicile. Stype Trustees has taken no further part in the proceedings. However, the trustees of the Orpheus Foundation have been represented by counsel, albeit with instructions only to draw the court’s attention to those parts of the evidence which point towards a domicile in Monaco.

Although the other interested or potentially interested parties were duly given notice of the issue, none of them has put in a defence or appeared or been represented on the hearing of the issue. That is not perhaps surprising in the case of the three nominated executors. Nor is it surprising in the case of Mrs Duffield, who I was told is in favour of an English domicile and who has no doubt taken the view that her interest would be fully advanced by the Revenue. However, the absence of Mr Alan Clore is at first sight surprising. The position here is that a similar issue has been directed to be tried in the Royal Court of Jersey and the hearing fixed for Monday next, 22 October. In those proceedings Mr Alan Clore is the plaintiff in the issue and he is making a positive case for a Monagesque domicile. That might lead one to suppose that it would have been in his interest to make that case in these proceedings as well. However, his solicitors, having been kept informed of developments, made it clear both that he did not propose to be represented and that they considered that it was for those who were taking part to decide what evidence should be before the court. I shall say something more about the evidence presently, but I will say now that, for reasons into which I need not go, I can understand that the Jersey proceedings may be more important to Mr Alan Clore than these. It may well be that that is the reason for his not taking part over here. In any event, notwithstanding the limited nature of his instructions, counsel for the trustees of the Orpheus Foundation, has been of no less assistance to the court than he would have been if he had been instructed to make a positive case. In the circumstances the two opposing views have been fully and ably represented in argument, and I feel no difficulty in deciding the issue on the evidence before the court. That evidence consists of five affidavits by persons who knew Sir Charles well, on all of which counsel for the trustees of the Orpheus Foundation elected not to cross-examine, and a large amount of documentary material.

I was told by counsel for the Official Solicitor, who will, in the absence of the Revenue, be making a positive case in Jersey for an English domicile, that the whole of the evidence in these proceedings will be before the Royal Court. Although it appears that Mr Alan Clore is not putting in any affidavit evidence, it is not yet known whether he will seek to adduce oral evidence or to cross-examine any of the five deponents. It is therefore possible that the evidence in Jersey will be different in some respects from that in England. It is also possible, in theory at any rate, that the two courts will arrive at opposite conclusions. That prospect, although one which may to the uninitiated seem rather odd, I have to face with equanimity.

The approximate value of Sir Charles’ free estate in April 1983 was between £18m and £20m, consisting of assets worth between £1m and £2m in the United Kingdom, between £12m and £13m in Jersey and about £5dp1m in Monaco. There are also the proceeds of the Guy’s Estate retained in Jersey under an order of the Royal Court which in May 1984, together with interest, amounted to over £36m. The assets of the personal settlement are currently estimated to be worth £39m. The claim of the Revenue for capital transfer tax in respect of the free estate amounts to about £21m if Sir Charles was domiciled in England at his death and about £8dp9m if he was domiciled in Monaco. The claim in respect of the personal settlement amounts to about £44m and depends on Sir Charles having had an English domicile on 20 February 1979. That figure suggests that the settled assets may have been worth more at his death than they are now.

I must first decide what was Sir Charles’ domicile of origin. In other words, what was the domicile of his father, Mr Israel Clore (Israel), at the date of his birth on 26 December 1904? The principal evidence on this question has been given by Sir Charles’ younger brother, Mr David Clore (David), who is now aged 77. The material facts are these. Israel was born in 1870 at Kovno in Lithuania. It is believed that his marriage to his first wife, Yetta, took place at Riga in Latvia before their arrival in England in 1888. After a short initial period in Liverpool they moved to London where Israel set up his own business as a tailor making up garments at home which he then sold from a stall in Lambeth. They lived at a number of addresses in and around the East End. Their first child was born in 1892. By the time that David, their seventh child, was born the family had moved to Bethnal Green, a better neighbourhood than before, where Israel had a shop on the ground floor and the family lived together above it. Yetta died in 1909 and Israel married a second time in the following year. In 1915 the family moved to Willesden. Israel’s second wife died in 1919. He subsequently married Jenny, with whom he went to Palestine for a holiday in 1924. They were attracted to the country and eventually went there in 1930. Israel died there in 1933. By his last will dated 11 March 1930 Israel declared himself to be then of no fixed abode. That will was executed in London, I infer shortly before the departure for Palestine. After Israel’s death, the nominated executor having renounced probate, Sir Charles and another obtained a grant of administration with the will annexed as attorneys for Jenny. The Revenue’s affidavit, which was sworn by the two attorney administrators, stated that Israel died domiciled in England. On the other hand, David describes Israel and Jenny as having settled in Palestine.

It is perhaps a moot question whether Israel died domiciled in England or in Palestine, but it is not one which matters. I am satisfied that Israel had acquired a domicile of choice in England before Sir Charles was born. David has said that before 1924 he had never heard his father express any wish to live in any other country than England. He believes that when his parents came to England they did so with the intention of settling here permanently, a belief reinforced by the fact that Yetta never followed her family to the United States of America and that Israel had a brother who came to England at about the same time, subsequently living here permanently and dying here. This belief is further reinforced by the circumstances of their coming. I can only infer that they came as permanent refugees from a harsh and oppressive regime of long standing which before 1914 had seemed to be impregnable. They came here as young people to make their lives here. Doubtless they valued the liberal and humanitarian traditions which enabled them to do so in freedom and ultimately with a small prosperity. At some time Israel became a naturalised British subject. I am satisfied that by the turn of the century Israel and Yetta looked on this country as their permanent home and that he continued to do so at least until 1924. In my judgment Sir Charles’ domicile of origin was English. I must now decide whether he abandoned that domicile and acquired a domicile of choice in Monaco in June 1978 or at some later date.

Although the evidence on this question is in both the literal and metaphorical senses voluminous, it is neither necessary nor desirable that I should rehearse it in detail. In the end I have to view it as a whole. Unless I find evidence which satisfies the conscience of the court (see In the Estate of Fuld (decd ) (No 3), Hartley v Fuld [1968]P 675 at 686) or, as it is sometimes put, convincing evidence, that Sir Charles formed a settled intention to reside permanently in Monaco, I must hold that he remained domiciled in England.

I will start by referring to three important areas where the evidence supports the acquisition of a domicile in Monaco. First, the professional advice which Sir Charles received was given not solely with the immediate objective of his acquiring a non-resident status for income and capital gain tax purposes, but with the long-term objective of his acquiring a foreign domicile. Further, unless the operation was to be at least partially counter-productive, it was essential that the new country should be one where no tax was payable. Monaco was chosen because it was the only tax haven with which Sir Charles was familiar and the only one which could have been acceptable to him.

Second, after Sir Charles had finally decided in the autumn of 1977 to go ahead, he did in the main follow the advice which he had received and he started making arrangements to sever his more important connections with this country. Thus, in December 1977 he retired as chairman of Sears Holdings, although he insisted on remaining a director and was appointed life president of the company at the annual general meeting in June 1978. By the end of March 1978 instructions had been given for the sale of his two residences, Stype Grange and 95 Park Street. By that time both houses had become uninhabitable, Stype Grange being empty and 95 Park Street being used virtually as a warehouse for storing the furniture and effects from both houses. 95 Park Street was sold in August 1978 and the sale completed in the following month. Stype Grange and its estate were put up for sale by auction in July but failed to reach the reserve. It was thought that a purchaser had been found in the spring of 1979, but that had fallen through by July and the property was then transferred to Stype Investments as a bare trustee for Sir Charles. Meanwhile, on 5 April 1978, he had been redesignated as resident in Monaco for exchange control purposes and in August of that year he was provisionally regarded by the Revenue as having been neither resident nor ordinarily resident in the United Kingdom since 13 February 1977. Steps were then taken to transfer a substantial part of his United Kingdom assets to Jersey through the medium of Stype Investments. Initially the entire share capital of that company was beneficially owned by Sir Charles, but he transferred the shares to the trustees of the personal settlement on the day following its creation. On 25 May 1979 Stype Investments, which then held the Guy’s Estate as a bare nominee for Sir Charles, sold it to the Prudential Assurance Co Ltd for completion on 28 September, but with some at least of the shooting rights reserved until 1 February 1980. Those were the steps taken by Sir Charles to sever his more important connections with England. I might add that in April 1978 he ceased to be a full member of the Carlton Club and became an overseas member. In June 1979 he gave notice of resignation of his membership of Lloyds as from the end of that year.

Third, again following the advice which he had received, Sir Charles did take steps to associated himself with Monaco. The first of these was the acquisition of a carte de sejour in January 1975. It had been his habit over a number of years to spend two or three weeks each year in Monte Carlo during the summer and occasionally a week or two there at some other time, e g over Christmas. Between the beginning of 1975 and 13 February 1977 he was there for between four and five weeks in all. Between the latter date and his death he spent about a fifth of his time there. By the end of 1977 he had made up his mind to acquire a property in Monte Carlo and had spent some time searching for something appropriate. Early in the next year an apartment became available which, after much consideration and negotiation, he bought in June. He spent considerable sums of money on it by way of decoration and improvement, having effectively gutted it in the process. He also purchased the adjoining apartment in order to provide further accommodation. The figures suggest that the then sterling equivalent of the cost, including improvements, was in excess of £2m. The apartment was not ready for occupation until about the beginning of April 1979. Before that Sir Charles had stayed at the Hotel de Paris where a suite had always been available for him. He then moved some of his furniture, together with valuable objets d’art and paintings, from England, although the majority remained in store here until July 1979. At that stage most of them were acquired by Stype Investments as part of the transfer of assets to Jersey. On 4 April 1979 he made his Monaco will.

If the evidence in these three important areas had stood alone, it might have been enough to satisfy me that Sir Charles had by June 1978 formed a settled intention to reside permanently in Monaco. I say that in full recognition of other important facts which support the contrary view, in particular his retention of many links with England, which are too numerous to mention, and his continuing interest, even after he had acquired the Monte Carlo apartment, in acquiring other residences in Israel (where he had had the use of a flat since 1965), France, the United States of America and Switzerland. After all, in these days of air travel and sophisticated systems of communication it is not unusual for wealthy people to own several properties and to have business and sporting interests in several parts of the world. Furthermore, if the evidence is there, particularly perhaps where the motive is the avoidance of taxes, the necessary intention will not be held to be missing merely because the period of actual residence is a short one.

In order to see whether Sir Charles did have the necessary intention I must now introduce the evidence of four others who knew him well. They are Janet Marchioness of Milford Haven, a friend of many years and a close one from 1970, Mr Jarvis Astaire, a personal friend who was also associated with him in a number of business ventures, Mr W E M Townsend, who joined Sir Charles’ staff at 22 Park Street in 1960 as an assistant accountant and became his personal assistant during the last five and a half years of his life, and Mr Leonard Sainer, Sir Charles’ trusted solicitor for nearly 50 years, his closest confidant and possibly his closest friend for the last 20 years of his life. I need not go through their evidence in detail. Much of it, in particular Mr Sainer’s, has already been incorporated in the narrative. All their evidence is to the effect that Sir Charles did not form, or cannot have formed, an intention to live permanently in Monaco. Specific references need be made only to those parts of their evidence which directly relate to Sir Charles’ intentions.

Lady Milford Haven has said that in the two years before his death Sir Charles was unwell and that he was unhappy in Monaco and often said that he would really like to return to England permanently and accept the tax consequences. Mr Astaire, who spent a weekend in the new Monaco apartment at the end of May 1979, asked him on that occasion and on at least one occasion previously why he had decided to go there when all his interests were elsewhere. Sir Charles told Mr Astaire that he did not know and that he was certainly thinking of changing his mind and returning to live in England regardless of the tax consequences. Mr Astaire has added his belief that Sir Charles was by that time becoming very bored with being away from his lifelong interests and he believed that he meant what he said and that it would not have taken much for him if he had lived to, in fact, return to England. Sir Charles did not feel at home in Monaco. Mr Townsend has said that when Sir Charles returned to England in June 1978 after his first period of exile he seemed to him to be a sad man. He still called London home and in the last year or so when he was coming to London he would telephone him and say he would be home on such and such a day. On several occasions during 1978 and 1979 when they had been talking about the arrangements which had been made for Sir Charles to become non-resident he said that he could always undo what he had done. Mr Townsend’s belief is that he always had in mind coming back to live in England. He considered it significant that he did not in fact sell the Stype Estate, so that it would have been available for him if he had decided to return. Even before Sir Charles’ final illness, Mr Townsend was by no means certain that he was going to see his tax exile through and, had he survived that illness, he would not have been surprised if he had decided that enough was enough and had returned to England for good. Mr Sainer has said that Sir Charles was constantly on the move and was always changing his mind about where he wanted to settle and that after leaving England in February 1977 he never settled in any one place. He has expressed a personal opinion that Sir Charles did not in fact acquire a domicile of choice in Monaco.

I have said that Sir Charles did not often write letters. However, there is one which he dictated from abroad in December 1977, to which I should refer. A Mr Edward Footring had written congratulating him both on the way in which the press had dealt with his relinquishment of the chairmanship of Sears Holdings and on his services to the company. He had gone on to express respectful disapproval of Sir Charles’ plans to live abroad, stating that he had done enough for his family and for charity and that he was entitled to live where and how he liked and not wander the world simply to save some tax for posterity. To that Sir Charles replied as follows:

“I do appreciate more than I can say your extremely kind and touching letter and the advice you give me. In my heart of hearts I know you are right, but as I have stayed away so long I shall see the year through. At the same time I have already decided on a plan and will see how things work out when I return in April.”

Although it is right that I should quote this letter, if only for its scarcity value, I do not think it carries the matter much further. It certainly shows that Sir Charles was by then resolved to acquire a non-resident status, and it could suggest that the plan on which he had decided was tentative. On the other hand, the plan itself is a matter of conjecture. I should add that there are a number of other documents, some of them official, which are either signed by Sir Charles or contain statements made on his instructions, but again none of them appears to me to carry the matter any further.

How, then, if I view the evidence as a whole, does the case stand? I find that there is not sufficient evidence to satisfy the conscience of the court or, to put it in the other way, that there is not convincing evidence that Sir Charles ever formed a settled intention to reside permanently in Monaco. At one time during the argument I thought that this might turn out to be a case like Bell v Kennedy (1868) LR 1 Sc & Div 307 where the propositus had clearly abandoned Jamaica, his country of origin, but had not decided in which of several other countries he was going to settle. On consideration, I am far from satisfied that Sir Charles ever reached the point of abandoning England. That view of his intentions is entirely inconsistent with what he said to Lady Milford Haven, Mr Astaire and Mr Townsend, and at this stage the many links which he retained with this country are significant. Counsel for the trustees of the Orpheus Foundation submitted, correctly, that a recognition in the propositus that he may one day return to live in his country of origin is not in itself a bar to the acquisition of a domicile of choice. He said that Sir Charles was only expressing such a recognition. But that submission presupposes that he had formed the necessary intention in the first place. I do not believe that he ever did. I think that everything was still in an experimental stage. Being of the make-up and disposition previously described, he could not, in my view, have committed himself to a way of life which would keep him out of England for all but 90 days in the year. Even if he had, I do not think that he had committed himself to Monaco. He had had his apartment there for such a short time. At this stage his continuing interest in acquiring other residences is significant, even though he did not in the end acquire any. In this connection I only refer in detail to France. During the last two and a half years of his life he spent more time in Paris than in any other place. It is, I think, clear that if he had had to live abroad his first choice would have been Paris, with its varied social life, its good airline communications and its accessibility to the best French racecourses. During his last period he had a more or less permanent suite at the Plaza Athenée Hotel and he looked at at least 3 apartments in that city. There is, in the evidence of Mr Sainer, what may be a significant passage. Having referred to an apartment which both of them visited in 1978, and having been unable to recall the reason why Sir Charles did not proceed with it, Mr Sainer says that he had told him that he thought that it was essential that he should become resident in Monaco and that once that had been done, then, so far as French tax was concerned, he would be allowed to have a secondary residence in France. If the situation was reversed he could become liable to French taxation. It is possible that Sir Charles had it in mind to become resident in Monaco and then to acquire a residence in France, secondary in name but principal in fact. But whether that be right or wrong, this feature of the case, along with which I might put Sir Charles’ interest up to the very last in acquiring a more suitable residence in Israel, only goes to confirm the fluidity, perhaps the unpredictability, of his intentions.

In my judgment Sir Charles was domiciled in England both on 20 February 1979 and at his death on 26 July 1979, and I shall so declare. On that footing the question of a deemed domicile under s 45 of the Finance Act 1975 does not arise.

Declaration that Sir Charles was domiciled in England.