Kildrummy (Jersey) Ltd v Inland Revenue Commissioners: IHCS 1990

It was not possible in Scottish law for a man to grant a lease to a nominee for himself: (Lord Hope) ‘I have, as I have said, no difficulty in the concept by which the title to property and the beneficial interest are separated, the title being held by a nominee. There is no reason to doubt the efficacy of this arrangement where the property in question has some independent existence of its own… But I know of no case, and none was cited to us, where it has been held that a nominee may contract with his principal so as to create new rights and obligations involving no third party whatever which are to be held only upon his principal’s behalf. That seems to me to conflict with the principle that a man cannot contract with himself…. ‘ and ‘The whole basis of a contractual obligation is the agreement of two or more parties as to the act or thing to be done. This is as true of a lease as it is of any other kind of contract. It is impossible to conceive of a lease by a man in his own favour. The essence of a lease lies in the tenant’s right to exclusive possession of the subject let, and the landlord’s obligation to put and maintain him in that possession. I do not see how a man can contract with his own nominee to the effect that his own nominee is to be entitled to that exclusive possession against himself, this to be held for his own behoof. The truth of the matter is that the separate interests of landlord and tenant are incapable of creation by such an arrangement’ Lord Clyde: ‘But where the same person is both debtor and creditor in the same matter there can be no obligation created. It is in my view ineffective to enter into a contract with continuing mutual rights and obligations with oneself and it is whimsical to grant a lease of one’s own property to oneself (see Grey v Ellison ((1856) 1 Giff 438, 65 ER 990)). To attempt to grant a lease to a nominee for oneself seems to me a similarly barren exercise’. Lord Sutherland: ‘A contract of lease…involves the creation of mutual rights and obligations which can only be given any meaning if the contract is between two independent parties. [The nominees] had no interest of their own to enter into such a contract, any rights and obligations accruing thereunder being exercisable only as nominees for [the principals]. Under a normal lease the landlords cede occupation of the property to the tenants in return for certain obligations, but if the tenants are in fact mere nominees of the landlords the whole lease becomes a pure fiction. Accordingly, in the special circumstances of this case I am of the opinion that the purported lease is not a contract to which the law can give effect and must be treated as a nullity.’
References: [1990] STC 657
Judges: Lord President (Lord Hope) and Lords Sutherland and Clyde
This case cites:

  • Cited – Henderson v Astwood PC 1894
    A sale was undertaken by a mortgagee, ostensibly to a third party but in reality to his nominee. The land was conveyed by the mortgagee to his nominee, who executed a declaration that he held the land in trust for the mortgagee, and who subsequently . .
    ([1894] AC 150)
  • Cited – Greyv Ellison 1856
    A policy of insurance was created in which one department of an insurance company purported to effect a contract with another department of the same company. Although different individuals were parties to the contract, they all contracted as agents . .
    ((1856) 1 Giff 438, 65 ER 990)

This case is cited by:

  • Cited – Ingram and Another v Inland Revenue Commissioners ChD 23-May-1995
    Lady Ingram had first conveyed properties to her solicitor who on the next day let the properties back to her, and on the day after conveyed the freehold of the properties to her family.
    Held: The leases in favour of Lady Ingram, having been . .
    (Times 23-May-95, Gazette 14-Jun-95, Ind Summary 05-Jun-95, [1995] 4 All ER 334)
  • Cited – Ingram and Palmer-Tomkinson (Executors of the Estate of Lady Jane Lindsay Morgan Ingram Deceased) v Commissioners of Inland Revenue CA 28-Jul-1997
    The deceased had first conveyed property to her solicitor. Leases back were then created in her favour, and then the freeholds were conveyed at her direction to her children and grandchildren. They were potentially exempt transfers.
    Held: . .
    (Times 11-Sep-97, Gazette 10-Sep-97, , [1997] EWCA Civ 2212, [1997] 4 All ER 395, [1997] STC 1234)
  • Cited – Ingram and Another v Commissioners of Inland Revenue HL 10-Dec-1998
    To protect her estate from Inheritance Tax, the deceased gave land to her solicitor, but then took back a lease. The solicitor then conveyed the land on freehold on to members of her family.
    Held: The lease-back by the nominee was not void as . .
    (, , [1998] UKHL 47, [2001] AC 293, [[1999] 1 All ER 297, [1999] 2 WLR 90, (1999) STC 37)

These lists may be incomplete.
Last Update: 27 November 2020; Ref: scu.223755