In Sayers v Dixon [2025] EWHC 1886 (Ch) ('Sayers'), ICC Judge Barber heard an application, wherein (amongst other things) it was alleged that certain declarations of trust, were shams. Under the heading 'Legal Principles: Sham', ICC Judge Barber said, at paragraphs 38 to 47:

'38. In Snook v London and West Riding Investments Ltd [1967] 2 QB 786, Diplock LJ (at p 802) described a sham as:

‘acts done or documents executed by the parties to the ‘sham’ which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create.’

39. As put by Arden LJ in Stone (Inspector of Taxes) v Hitch [2001] EWCA Civ 63 at [66]:

‘The parties must have intended to create different rights and obligations from those appearing from (say) the relevant document, and in addition must have intended to give a false impression of those rights and obligations to third parties’

40. Where the declaration of trust is bilateral, there needs to be a common intention that the assets are to be held otherwise than as set out in the trusts (Shalson v Russo [2003] EWHC 163 at [187]-[190]), but a party who goes along with a sham neither knowing or caring what he is signing is to be taken as having the necessary intention: Midland Bank v Wyatt [1996] BPIR 288 at 291; Re Esteem Settlement 2003 JLR 188, cited with approval in A v A [2007] EWHC 99 at para [52].

41. A unilateral declaration of trust may be a sham, where the person making it does not intend in fact to divest themselves of their interest in the relevant asset but makes the declaration for the purpose of inducing third parties to believe that they do: Painter v Hutchinson [2007] EWHC 758.

42. The burden of proof is on the party alleging a sham. The standard of proof is the normal civil standard of balance of probabilities: Bhura v Bhura [2014] EWHC 727 (Fam) at [9].

43. The fact that a transaction is artificial does not necessarily make it a sham. However, the fact that a transaction is artificial is a factor that can properly be taken into account when deciding whether it is a sham: National Westminster Bank v Jones [2000] BPIR 1092 at 1102.

44. There is a presumption, even in the case of an artificial transaction, that the parties to what appear to be perfectly proper agreements on their face intend them to be effective, and that they intend to honour and enjoy their respective obligations and rights. That that is so is supported by the fact that an allegation of sham carries with it a degree of dishonesty, and the court should be slow (but not naively or unrealistically slow) to find dishonesty: National Westminster Bank v Jones [2000] BPIR 1092 at 1104.

45. In ascertaining whether a transaction or trust is a sham, evidence of subjective intention is admissible. The court may examine external evidence, including the parties’ explanations and circumstantial evidence, such as evidence of the subsequent conduct of the parties (Hitch v Stone [2001] EWCA Civ 63 at [65] and Midland Bank v Wyatt [1996] BPIR 288 at p 292) and whether the parties are ‘doing one thing and saying another’: Belvedere Court Management Limited v Frogmore Developments Limited [1997] QB 858 per Sir Thomas Bingham MR at 876D-F.

46. On the relevance of subsequent conduct, Neuberger J in National Westminster Bank v Jones [2000] BPIR 1092 explained at 1103:

‘AG Securities [1990] 1 AC 417 … established that, when considering whether a transaction is a sham, the court is not restricted to considering activities which took place before or at the time of the transaction: it is perfectly proper to consider how the parties subsequently acted. In AG Securities [1990] 1 AC 417 at 475E-F, Lord Jauncey said that the defendants contended that:

‘[A]lthough the subsequent actions of the parties may not be prayed in aid for the purposes of construing the agreements they may be looked at for the purpose of determining whether or not parts of the agreement are a sham in the sense that they were intended merely as “dressing up” and not as provisions to which any effect would be given.’

It is clear that Lord Jauncey accepted that contention, because he said at 476G: ‘When subsequent events are looked at the matter becomes even clearer’.

The same view was taken by Lord Oliver of Aylmerton (with whom Lord Ackner expressly agreed – see at 466E) at 469C:

‘[T]hough subsequent conduct is irrelevant as an aid to construction, it is certainly admissible as evidence on the question of whether the documents were or were not genuine documents giving effect to the parties’ true intentions.’

Lord Templeman (with whom Lord Ackner also agreed) concurred’.

A sham trust is void rather than voidable: Hitch v Stone (supra) at para [87]. Even if void, however, it stands until it is set aside.'[1].

In Sayers, at paragraph 216, ICC Judge Barber said:

'As made clear by Bhura v Bhura [2014] EWHC 727 (Fam) at 9 (i) and (ii), it is not a threshold requirement of establishing a sham that the parties should intend the transaction to be of no effect at all; simply that they should intend to give to third parties or to the court the appearance of creating between them legal rights and obligations different from the actual legal rights and obligations (if any) that they intend to create.' (words in bold are in italics in original).

Though ICC Judge Barber then said, in Sayers, at paragraph 217:

'Ultimately, however, in the context of this case, any debate on whether a given transaction may be found to have been a sham and to fall foul of s423 is largely academic.'

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