Butler & anr v Butler & anr [2016] EWHC 1793 (Ch)

Analysis

The parties were siblings who jointly owned 502 items of 17th century Chinese porcelain gifted to them by their father between 1987 and 1993 (the Butler Family Collection (the BFC)).

In 2012 the defendants and their father formed a partnership to own and merchandise another 208 such items (formerly owned by their father).

After their father’s death disagreement arose as to what should become of the BFC. The claimants sought to have it distributed. The defendants wished to keep it in tact and made available for scholarly study and exhibition and to exploit certain items commercially by merchandising.

The claimants issued a CPR Part 8 claim against the defendants seeking an order for division on the basis that the siblings take turns in selecting a pot until there are none left in the BFC. The legal foundation for the order sought being s188 of the Law of Property Act 1925.

The defendants opposed the claim. First they contended that the first defendant had been opposed to a sale of two items from the BFC in 1995 and 1996 and had not been paid his quarter share of the net proceeds of sale. Accordingly he had an interest in the BFC exceeding one quarter which when aggregated with the second defendant’s share, resulted in the claimants having an interest falling short of a moiety. Consequently the claimants had no standing to bring a claim pursuant to s188.

In the alternative they contended that the BFC should be kept as a collection or that the first defendant should be permitted to buy out the claimants’ interest in the BFC or part thereof on specified terms on the basis that (i) an in specie division would have a devastating effect on the academic and cultural importance of the BFC, (ii) such a division would cause a diminution in value of the entire BFC and additional adverse impact on the defendants’ interests in the items they owned outside of the BFC forming part of a wider collection, (iii) there was scope for catering for the claimants’ financial motivation in other ways than by division in specie, (iv) an in specie division would trigger significant CGT liabilities and (v) the intentions of the original gift and the father’s wishes.

Held, granting the order sought by the claimants:

1. 1. The claimants were interested in a moiety of the BFC and therefore had standing to apply for an order under s188.
2. 1.1. There was no dispute that moiety meant ‘half share’ in the context of s188.
3. 1.2. The gifts of the BFC were of individual items and not a collection. The designation of the gift as the BFC was secondary to the purpose of the gift, which was to pass valuable assets taxable on death to children in equal shares in a tax efficient manner. Each sibling acquired a one-quarter share in each item rather than in the BFC as a whole.
4. 1.3. Even if the gift was a collection, where some co-owners dealt with co-owned items, co-ownership in different proportions reflecting those dealings may be one possible outcome. However the more usual remedy would be to trace the assets or to trace into the substituted assets.
5. 1.4. In any event, the first defendant knew of the proposed sale of items in 1995 and 1996 but did not oppose the sale and knew of but chose not to present cheques representing his share of the proceeds. It was now far too late for the first defendant to take issue with the sales or to claim an enhanced proportionate interest.
6. 2. Parliament enacted s188 to assist the courts in doing justice as between co-owners unable to agree between themselves what is to become of jointly owned property. Parliament recognised that for co-owners valuation or commercial interests might not be the only or the appropriate criteria for doing justice. Beyond that the only fetter on the court’s power to make any order it thought fit was the word ‘division’. Moreover the criteria for deciding upon a division were very wide. Consequently the court was empowered to take a flexible case-by-case approach aiming to deliver justice according to the particular circumstances of the case.
7. 3. The proposal that the court should decline to make any order was rejected; s188 exists for the purpose of providing a remedy to co-owners interested in a moiety or upwards. Here the parties were in deadlock as to what to do with and about the BFC and relations between the parties were sour if not acrimonious. These were compelling reasons for making an order.
8. 4. The appropriate order was that sought by the claimants. The BFC was readily divisible between the parties and there was no evidence that the proposed selection process would produce an unjust result whether by reference to value of otherwise.
9. 5. The defendants’ pre-emption proposal was insufficiently specific to form the basis of a workable court order and, in any event, would preserve the deadlock and do nothing to abate the disharmony between the siblings for a further period of up to two years. The court would not make an order entitling the defendants to purchase all or some of the items that would otherwise go to the claimants on an in specie division.
10. 5.1. Whilst it was accepted that the removal of some of the items from the BFC would be likely to have a material effect on the BFC, the division of the BFC would not be destructive in the literal sense as in the case of a motorcar. Further the Court was not in a position to prefer the defendants’ expert evidence over or reject the claimants’ expert evidence that careful selection by the defendants to complement their similar items outside the BFC would enable them to own and control a unique and unrivalled collection for academic and cultural appreciation and for exhibition.
11. 5.2. The evidence as to value was very general in nature. It did not indicate that division by selection as proposed by the claimants would be likely to work monetary injustice. That the halo effect conferred by provenance would be partly lost to the moiety of the BFC retained by the defendants was likely but they had no interest in selling and monetary value was not a priority for them. Should they change their view, they could liaise with their siblings about acting in concert to maximise their return. That the division might diminish the halo effect attached to their wider collection was not a relevant consideration.
12. 5.3. The proposition that the claimants’ motivation was solely or primarily financial was rejected. Addressing the claimants’ financial motives in other ways by court order was complex. The scheme proposed by the defendants would involve a buy in, up to an as yet unspecified monetary limit which may not equal the value of the claimants’ moiety. Further the first defendant was not in a position now, nor possibly within the two-year time limit proposed, to put himself forward as an able buyer.
13. 5.4. CGT was not a factor which should influence the decision reached. It was not a new tax. It existed at the time of the original gift and it may be assumed that the Deed, which was intended to be tax efficient from the donor’s standpoint, was not entered into other than on the basis that the donees would have to make their own tax plans or put up with an CGT or other tax consequences.
14. 5.5. There was nothing in the deed of gift to suggest that the intention of the original gift was to encourage of bring about the preservation of the BFC as such for an enduring period. The father’s wishes were of no legal significance.
15. 6. [OBITER] Should it have been necessary to decide the point, the court preferred the defendants’ position that s188 was wide enough to enable a court intent upon making an order as between co-owners not to be forced to make either no order or an incomplete order thereby leaving one or more chattels unaddressed and possibly causing on-going expense to the co-owners and therefore wide enough to include making an order for sale. Whether such an order should permit a co-owner to have conduct of the sale or to be a purchaser or permit a combination of division between co-owners and sale would be fact sensitive.

JUDGMENT I direct that pursuant to CPR APD.6 para 6.1 no tape recording shall be made of this judgment and that copies of this version shall stand as authentic and be treated as the official transcript. HHJ BARKER QC: The Proceedings [1] The parties are siblings. They have been referred to throughout by their forenames, …

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