Roman Kubiak, partner at Hugh James, takes a look at some of the most notable cases in the contentious trusts and probate field over the last few months.
Court of Appeal affirms first instance decision upholding validity of will despite contemporaneous evidence of cognitive impairment and failings by solicitor to follow the ‘golden rule’
Eva Burns died in 2010 aged 89, leaving a last will dated 26 July 2005 under which she sought to divide her estate, including her half share in her home, equally between her two sons, Anthony and Colin.
Colin owned the other half of the home, it having been transferred to him in 1982. Under an earlier will dated 8 May 2003, Mrs Burns had left her half share of the home to Anthony. The total amount in dispute was, therefore, the half share of the home, which was valued at £26k.
Anthony sought to set aside the 2005 will on the basis that Mrs Burns lacked testamentary capacity and knowledge and approval of the will.
In support of his claim, Anthony put forward the following evidence:
1. Witness evidence from family members.
2. Medical evidence, most notably a series of Mini-Mental State Examinations (MMSEs) and an occupational therapy assessment known as a Cape Assessment. Mrs Burns’s scores of 19/30 and 20/30 on her MMSEs, coupled with the Cape Assessment, led the independent expert in the case to conclude that Mrs Burns was ‘poorly orientated as to where she was in time and place, had poor recall (short term memory) and that she had problems with analysis and simple task planning’.
3. That the solicitor who prepared the will had taken instructions in writing, rather than in person; had made no attempt to identify whether the will met Mrs Burns’s requirements or the extent to which it differed from her 2003 will; and that he failed to follow the ‘golden rule’ as laid out in Kenward v Adams (1975) The Times (29 Nov).
Despite this, the judge at first instance held that the 2005 will was valid. In doing so, he found that:
1. the witness evidence of family members lacked impartiality;
2. little weight ought to be placed on the MMSEs and the Cape Assessment on the basis that they were not carried out to assess Mrs Burns’s testamentary capacity;
3. the written instructions for the 2005 will, received by the solicitor the previous year, were coherent and that Mrs Burns took independent steps to obtain papers from her previous solicitor; and
4. whilst the solicitor failed to follow the ‘golden rule’, his experience in drafting wills meant that he ‘would probably have been alerted to one or any serious question on Mrs Burns’s capacity’.
Anthony appealed the decision on the basis that:
1. the judge had failed to give appropriate weight to the medical evidence;
2. the judge had failed to acknowledge the extent of the solicitor’s failings; and
3. the judge erred in law, in particular in failing to consider that the burden of proof had switched to the propounder of the 2005 will, Colin.
The Court of Appeal upheld the first instance decision, finding the following.
1. The judge had given appropriate weight to the medical evidence.
2. Whilst the solicitor had failed to follow the ‘golden rule’, that rule was not a ‘touchstone of validity’ and that the solicitor was clearly very experienced, had read the will over to Mrs Burns, and had reached the conclusion that she had capacity and knew and approved of its content. Thus, and despite the fact that the instructions were sent in the previous year, the will was valid under the rule in Parker v Felgate (1883) 8 PD 171.
3. Whilst doubts were raised about the first instance judge’s conclusion, he was entitled to make the findings which he did and that, come what may, there was sufficient evidence to satisfy the burden of proof which fell on Colin.
High Court applies forfeiture rule in case of manslaughter but affirms that the rule does not apply to lifetime settlements
As many practitioners will know, the forfeiture rule (the rule) precludes a person from benefitting as a result of unlawfully killing another.
In Henderson, a son made an application to the court to modify the effect of the rule so that he could benefit under his mother’s 2006 will. Mrs Henderson had died as a result of injuries sustained in a severe assault by her son who pleaded guilty to her manslaughter.
The son suffered from a mental disorder and was therefore sentenced to be detained in hospital under section 37 of the Mental Health Act 1983.
The court has power under section 2 of the Forfeiture Act 1982 to modify the effect of the rule. However, it refused to do so in the instant case on the basis that the son had access to his own assets, was a discretionary beneficiary of lifetime settlements and in the light of his culpability, despite his mental health problems, for the serious offence.
The son also sought an order modifying the effect of the rule to ensure that family protection trusts settled by him and his mother, and of which both he and his mother were discretionary beneficiaries, would not be affected.
As such, the court was also asked to consider whether the son had acquired the benefit under those trusts by reason of the ‘unlawful killing’ of his mother.
The court held that the son’s interest in the trusts did not arise by reason of the killing but, instead, on the execution of the trusts, and so the rule did not apply. Therefore, the question of whether or not the son ought to benefit, as a discretionary beneficiary, was for the trustees of the trusts to determine.
Of course, had the trust been conditional or contingent upon the mother’s death and/or if the son had been the sole beneficiary absolutely entitled in the event of his mother’s death, it is likely that the rule would have applied.
High Court applies Brussels IV definition of ‘succession’ and holds that Israel was the appropriate forum for a claim to shares of a deceased businessman
The claim related to shares registered in the name of one of Israel’s most successful businessmen, Sami Shamoon, who passed away in 2009 and was reported to be worth $1 billion.
This was not the first claim against Mr Shamoon’s estate. Indeed, it seems that since his death there have been in excess of 300 applications to the Israeli courts.
The first claimant, Mr Winkler, who was also the beneficial owner of the second claimant company, asserted that Mr Shamoon had instructed the third defendant, Mr Winkler, to transfer 1 per cent of the shares in Ainsbury Properties Ltd and 12.5 per cent of the shares in Placido Investments Inc. to him. The shares were reportedly worth tens of millions of dollars.
The first and second defendants were the residuary beneficiaries under the deceased’s will and the deceased’s widow and daughter respectively.
The claimants therefore sought a declaration from the High Court against the first and second defendants that they were entitled to the shares and for the first and second defendants to take all necessary steps to ensure their transfer to the claimants.
In respect of the third defendant, a Swiss lawyer, the claimants claimed that he was negligent in failing to transfer the shares and so, if the claim against the first and second defendants failed, the third defendant ought to be held liable for the losses to the claimants.
Following attempted service of the claim form upon the defendants, the defendants applied for the following.
1. Under CPR 11, an order setting aside the claimants’ purported service of the claim form on the first defendant on the basis that she was not domiciled in the UK for the purposes of article 59 of the Brussels Regulation 44/2001 and was therefore not served at her ‘usual or last known residence’ (CPR 6.9(2)).
2. Alternatively, the first defendant, along with the second defendant who was domiciled in the UK, contended that the court did not have jurisdiction on the basis that:
a. the claim related to ‘succession’ and so fell outside the scope of article 1(2)(a) of the Brussels Regulation; and
b. under common law rules, the English courts did not have jurisdiction in any event and England was not the natural forum for the claim.
The third defendant, who was domiciled in Switzerland, also challenged the court’s jurisdiction on the basis that article 6(1) of the Lugano Convention 2007, under which the claimants sought to assert jurisdiction, was inapplicable to the facts of the case.
The claimants applied to dismiss the applications, arguing that the court did have jurisdiction to hear the claim. They further argued that the defendants had entered an ‘appearance’ within the meaning of article 24 of the Brussels Convention by acknowledging service and so had submitted to the court’s jurisdiction. In the alternative, they sought permission to serve the first defendant out of the jurisdiction.
In granting the defendants’ applications, the court held as follows.
1. The defendants had not submitted to the court’s jurisdiction and that the filing of acknowledgments of service, which specifically expressed an intention to challenge jurisdiction, did not constitute an ‘appearance’ under article 24 of the Brussels Regulation. Indeed, CPR 11.2 specifically requires a defendant to file an acknowledgment of service if they wish to challenge jurisdiction. As the judge pointed out:
‘[n]ational procedural rules must not be construed as compelling the defendant to enter an appearance, as this would be contrary to the objects of the [Brussels] Regulation’.
2. The claim clearly fell within the ‘succession’ exemption of article 1(2)(a). First, the claimants claimed to be entitled to succeed to the deceased’s estate. Secondly, the first and second defendants were not yet the owners of the shares as the estate had not been administered and so the claim ought properly to have been brought against the administrator. The fact that it had been brought against the residuary beneficiaries ‘did not alter the substance of the claim’.
In interpreting the meaning of ‘succession’ for the present purposes, the judge considered it necessary to ensure consistency with EU private international law generally. As such, he relied on the definition in article 3.1(a) of Regulation (EU) No 650/2012 (aka Brussels IV) which defines succession, for those purposes, as constituting ‘all forms of transfer of assets, rights and obligations by reason of death’.
3. In relying on rule 146 of Dicey, Morris & Collins, The Conflict of Laws (15th edition), the judge found that there was no ‘properly constituted representative’ of the estate in the UK, as the administrator had not been made a party to the claim. As such, the court did not have jurisdiction to hear the claim against the first and second defendants. Further, the estate was situated and administered in Israel, the main witnesses lived there and the alleged representations by the deceased had been made there.
4. The first defendant had been resident in Israel since 2009.
5. Whilst it was academic, in any event, permission would not have been granted to serve the first defendant outside of the jurisdiction as the claim did not fall within the jurisdictional gateway prescribed under CPR PD 6B, paragraph 3.1(3).
6. Given the findings at (2) and (3) above, the court did not have jurisdiction to hear the claim against the third defendant. Further, and in any event, the finding would not risk an ‘irreconcilable judgment’ and need not, therefore, be heard by the court.
It is unclear whether the decision will be appealed, although the judge accounted for that possibility at paragraph 13 of his judgment. That said, in the event that it is, it would be interesting to see the Court of Appeal’s view as to whether, in fact, the claim fell within the ‘succession’ exemption. Strictly speaking, the claimants’ cause of action appears to have arisen not by ‘reason of death’, but by reason of the failed transfer of shares during the deceased’s lifetime.
Central London County Court dismisses widow’s claim for reasonable financial provision
In what is believed to be a first, a widow’s claim for reasonable financial provision has been dismissed by the court.
Ian Wooldridge, a successful businessman in the construction industry, died in a helicopter crash in Northern Ireland. The subsequent claim by his widow has received much media attention.
By his homemade will, the deceased left the matrimonial home, worth £4.25m at the date of the hearing, and life assurance policies worth £1.6m, to Mrs Wooldridge. He left the remainder of his estate, being his business interests, to his children, Charlie and Rhett.
In addition, Mrs Wooldridge, Charlie and Rhett had also received £1.985m, £315k and £200k respectively in compensation for the crash.
Mrs Wooldridge reportedly sought an additional £372k per year from the estate to fund the lifestyle to which she had become accustomed.
In dismissing the claim, Judge Karen Walden-Smith held that Mrs Wooldridge had received reasonable provision from the estate and that any further provision would likely impact upon the profitability of the businesses and, therefore, affect Charlie and Rhett.
Whilst spouses are entitled to claim the higher standard of financial provision, namely ‘such financial provision as it would be reasonable in all the circumstances of the case, whether or not that provision is required for his or her maintenance’, and whilst the court can consider what the applicant would receive on divorce (known as the ‘divorce standard’), the starting point for the court is to consider the section 3 factors.
It was held that Mrs Wooldridge had more than sufficient assets for her maintenance. Whilst the decision is not binding, it is a telling reminder to practitioners of the approach that the courts take to claims under the Inheritance Act and that each case is determined on its own facts.
Court authorises variation of trusts to extend perpetuity period without requiring participation of wider class of beneficiaries
The Variation of Trusts Act 1958 allows the court to vary trusts on behalf of those who are unable to do so themselves. In doing so, the court often expects all beneficiaries who may be affected by the proposed variation to be joined in as parties to the proposed application. However, it does have discretion to make an order under the act with representation of all such beneficiaries.
In the instant case, the trustees applied for, and received, an order extending the perpetuity period of the trusts in question to 125 years from the date of the order.
By reason of the powers of appointment under the trusts which, themselves, were primarily for the benefit of a core class of beneficiaries (the ‘core class’), the trustees could theoretically appoint the funds to a wider remote class of beneficiaries (the ‘wider class’). However, it was noted that this would be extremely unlikely and would only arise ‘in the event of some family catastrophe’.
The court would usually expect all adult potential beneficiaries to consent, and approve the variation on behalf of all unborn and unascertained beneficiaries. As the only people likely to benefit were the core class, and given that it would be disproportionate to involve the wider class, the trustees proposed a temporary release of their powers of appointment in respect of the wider class. That would avoid the need for the trustees either to seek the consent of the members of the wider class for the variation, or to ask the court to approve it on their behalf.
The trustees proposed a revocation of the release immediately after the variation took effect to bring the wider class ‘back in’ as potential beneficiaries.
Mr Justice Warren, sitting in the High Court, approved the variation on the basis and in the terms proposed. In doing so, he cited Re Christie Miller’s Marriage Settlement Trusts  1 All E R 855 in which Mr Justice Wilberforce, as he then was, adopted a similar procedure. Counsel in that case were Lord Brightman (then Mr Brightman) and Mr Wolfe, ‘a well-known and established practitioner who did not become a judicial office holder’. As such, Mr Justice Warren was confident that: ‘This array of luminaries of the Chancery world perhaps gives the decision particular authority.’
This almost Denning-esque workaround provides a very pragmatic solution for what could have been an otherwise costly and cumbersome process.