TC09562 - [2025] UKFTT 00762 (TC)

Mr Gammie submitted that, even if CPW continued to hold the Goodwill after the Agreements became effective, because it continued to own and carry on the Businesses, CPW should be treated as holding the Goodwill after that time on a bare trust for BBUK. As such, BBUK should be treated as owning the Goodwill for the purposes of corporation tax on chargeable gains pursuant to Section 60 of the TCGA 1992. He said that, in that event, the facts in this case would be analogous to those in Don King Productions Inc v Warren and others [2000] Ch 291 (“Don King”).

In Don King, the parties had entered into a partnership for the promotion of professional boxing in Europe and, on the dissolution of the partnership, a question arose as to the ownership of certain agreements for the management and promotion of professional boxers. Mr Warren had purported to assign these agreements to the partnership even though, as a matter of law, the agreements could not be assigned because they involved the rendering of personal services and, in some cases, contained an express prohibition on assignment. The Court of Appeal had held that, even though the benefit of the agreements could not be assigned in law, the only way to give effect to the evident intention of the parties was to treat Mr Warren as holding the agreements on trust for the partnership. Similarly, in this case, the evident intention of the parties was that the Goodwill would be assigned by CPW to BBUK and, if this was not possible in law, then it should be treated as taking place in equity.

Mr Brinsmead–Stockham said that the analogy with the facts in Don King was misconceived.

Leaving aside the fact that Don King related to a transfer of assets into a partnership, a key distinction was that the personal services contracts which were the relevant assets in Don King existed as assets in their own right. Their existence was not dependent on a relationship with a business. There was a barrier to the transfer of the contracts in law but that did not prevent the contracts from being transferable in equity. In contrast, in this case, it was not that there was a barrier to the transfer of goodwill in law. Nobody doubted that goodwill was an assignable asset. Instead, there was a general principle that goodwill could not be assigned without an accompanying transfer of the business to which it related, based on public policy and in order to avoid deception. There was no reason why the same principle would not apply in equity as well as law and there was no authority to suggest that it did not.

In addition, Mr Brinsmead–Stockham said that Don King was concerned with wholly commercial arrangements and therefore it was not surprising that the court was willing to intervene in equity. In contrast, in this case, the sole purpose of the arrangement was to avoid a tax liability and this was a further reason why a court should not be prepared to intervene by imposing a trust.

Mr Brinsmead–Stockham said that, in any event, the Respondents did not accept that the objective intention of the parties in entering into the Agreements was that, once the Agreements became effective, the Businesses would be carried on by BBUK and BBUK would own the Goodwill. In reality, viewed objectively, the intention was that it was CPW which would continue to carry on the Businesses on its own account and own the Goodwill and that BBUK would simply acquire a right to payments equal to a fixed percentage of the future gross revenues of the Businesses.

Finally, Mr Brinsmead–Stockham said that, even if he was wrong about equity intervening in this case, he did not accept that there would be a bare trust of the Goodwill for the purposes of Section 60 of the TCGA 1992. That was because, in order for a bare trust to exist for the purposes of that section, the equitable owner had to have the exclusive right to direct how the asset should be dealt with – see Section 60(2) of the TCGA 1992 – and, in this case, it was clear from clause 3.2 of the MSA that BBUK had no right to intervene in the management and operation of the Businesses.