Burnard v Burnard

Abstract

Will – Mistake. The Chancery Division considered the true construction of a will and determined what assets formed part of the deceased’s estate. Applying settled law, there appeared to be a powerful argument that there was a clerical error in naming the wrong company in the will. Further, a claim by the deceased’s widow that a declaration of trust and a transfer allegedly made by the deceased to the benefit of his son were a sham was rejected.

Summary

The judgment is available at: [2014] EWHC 340 (Ch)

The deceased died in September 2007, aged 76. The claimant, S, was the deceased’s second wife and the executrix of his estate. The first three defendants (G, P and D) were the deceased’s sons by his first marriage. The case concerned three companies: (i) Grangeway; (ii) Properties; and (iii) Rhapsody. Rhapsody owned another company, Malva Rosea. By cl 2 of the will, the deceased bequeathed his shares in Properties to his three sons in equal shares. By cl 3 of the will, he gave his residuary estate to S. It was common ground between the parties that the deceased had never had any interest either as a director, shareholder, employee or investor in Properties. In 1993, the deceased had transferred 4,000 shares in Grangeway, which he had controlled, to S. The defendants contended that S had transferred those shares back to the deceased. The deceased also owned a number of investment properties, including: 27, 29, and 31A Station Road and 31 King Street. In September 1993, the deceased executed a declaration of trust (the 1993 declaration of trust), in which he declared that he held 31 Station Road on trust for Grangeway. In the 1993 declaration of trust, the deceased declared that he held 27 and 29 Station Road on trust for Grangeway. In 2007, he executed a transfer of 31 Station Road in favour of P on form ‘TR1’ (the 2007 transfer). S did not accept that either the 1993 declaration of trust or the 2007 transfer were genuine. She challenged them on the ground of capacity and undue influence, and that there had been no consideration for the alleged transfers. She also disputed transfers of shares in Grangeway to the first three defendants in 2007. The defendants contended that both the 1993 declaration of trust and the 2007 transfer were valid and enforceable. Insofar as the 2007 transfer referred to consideration, that was a mistake, as it had never been intended that any money should change hands. S applied for reasonable provision out of the deceased’s estate. The first three defendants contended that the will contained a mistake, in that cl 2 should have referred to ‘Grangeway’ and not ‘Properties’. Accordingly, they sought rectification of the will.

The preliminary issues for consideration were: (i) whether the reference to Properties in the will was a mistake and whether the will should be interpreted as a reference to Grangeway; (ii) whether the 1993 declaration of trust and the 2007 transfer had been validly executed and whether the deceased had intended to sell 31 Station Road to P for consideration; (iii) whether the 1993 declaration of trust and the 2007 transfer amounted to a sham; (iv) whether the deceased had lacked capacity to execute the 1993 declaration of trust and the 2007 transfer; and (v) whether S had transferred her 4,000 shares in Grangeway back to the deceased in 1998. A question arose as to whether the deceased had held 27, 29 Station Road on trust for Grangeway.

The court ruled:

(1) It was settled law that, when interpreting a contract, the court was concerned to find the intention of the party or parties, and it did that by identifying the meaning of the relevant words, in the light of:(i) the natural and ordinary meaning of those words; (ii) the overall purpose of the document; (iii) any other provisions of the document; (iv) the facts known or assumed by the parties at the time that the document was executed; and (v) common sense, but ignoring subjective evidence of any party’s intentions (see [63] of the judgment).

In the instant case, the will was ambiguous in the light of surrounding circumstances. In those circumstances, extrinsic evidence was admissible, including evidence of the deceased’s intention as to what he had meant. On the true construction of the will, the reference to Properties was plainly a mistake and should be interpreted as a reference to Grangeway. In the light of authority, there appeared to be a powerful argument that there was a clerical error in naming the wrong company. In the circumstances, it was not necessary to consider the claim for rectification (see [64], [66] of the judgment).

Marley v Rawlings [2014] 1 All ER 807 applied.

(2) On the balance of probabilities, the 1993 declaration of trust had been validly executed. On the facts, the 2007 transfer had been signed by the deceased. The court was satisfied that the deceased had not intended to sell 31 Station Road to P for consideration. The deceased had intended to give 31 Station Road to P (see [125], [127], [132], [138] of the judgment).

Both the declaration of trust and the 2007 transfer were valid documents. It followed that the deceased held 31A Station Road on trust for Grangeway. In the light of the conclusions on the 1993 declaration of trust, the deceased had held 27 and 29 Station Road on trust for Grangeway. Other orders were made (see [143]-[148] of the judgment).

(3) In order to establish a sham it had to be established that there was an intention not to create a trust, but to give a false impression to third parties and ultimately the court. Subsequent acts of the parties in disregarding the acts were admissible (see [76] of the judgment).

In order to establish that the trust was a sham, S had had to establish that the deceased had had no intention in 1993 that 27, 29 and 31A Station Road were to be held on trust for Grangeway. The evidence did not establish that the deceased had had no intention in 1993 that the declaration of trust did not mean what it said (see [128], [131], [132] of the judgment).

It followed that the claim that the 1993 declaration of trust and the 2007 transfer were a sham would be rejected (see [131] of the judgment).

Minwalla v Minwalla [2005] All ER (D) 18 (Feb) applied.

(4) There was no fixed standard of mental capacity required for all transactions. What was required was that the party in question should have a general understanding of the nature of the transaction (see [133] of the judgment).

There was no suggestion that the deceased had lacked capacity to execute a deed at any time earlier than September 2007. In all the circumstances, the deceased had understood that the effect of the 2007 transfer had been to transfer ownership to P. Furthermore, on the evidence, the allegation of undue influence failed (see [133], [135], [137] of the judgment).

S had not satisfied the court that the deceased had lacked capacity (see [135] of the judgment).

Beaney, Re [1978] 2 All ER 595 applied; Royal Bank of Scotland v Etridge (No 2) and other appeals, Barclays Bank plc v Coleman, Bank of Scotland v Bennett, Kenyon-Brown v Desmond Banks & Co (a firm) [2001] 4 All ER 449 applied.

(5) In the absence of any reliable evidence that S had transferred the 4,000 shares in Grangeway back to the deceased, she remained a shareholder of that company and that 4,000 shares remained with her (see [153], [154] of the judgment).

 All content provided by LexisNexis.