COURT OF APPEAL
TRUSTS – INVESTMENT PORTFOLIO – VESTING OF TRUST ASSET – LEGAL OR BENEFICIAL OWNER – RESULTING TRUSTS – IMPACT OF STRUCTURE ON CAPITAL GAINS AND INHERITANCE TAX
The Plaintiffs moved with their children from the UK to New Zealand in 2001. They purchased a home there and brought with them certain assets. However, two substantial investment portfolios remained with Rathbone Brothers Plc and Merrill Lynch in their London offices (respectively, the “Rathbone Portfolio” and the “Merrill Portfolio”).
In 2004, having lived in New Zealand for three years, the Plaintiffs and their children all acquired New Zealand citizenship. The Plaintiffs were then introduced to G.C., a New Zealand lawyer, whom they ultimately instructed to advise them in regards to the management of the family’s investments. G.C. advised the Plaintiffs, in order to avoid certain New Zealand tax liabilities on their worldwide assets, they would need to ‘ring-fence’ those assets offshore. He suggested using an offshore vehicle into which assets neither brought into New Zealand, nor originating in New Zealand, could be placed. Hexagon Investment Limited (“HIL”), a Cayman Islands company, was subsequently formed for this purpose.