Roman Kubiak takes a look at some more notable recent cases in the contentious trusts and probate field that you may have missed.

Davies v Davies [2016] EWCA Civ 463

Court of Appeal reduces award to daughter in proprietary estoppel case from £1.3m to £500,000

This case is, by now, familiar to many practitioners as this most recent decision represents the fourth time the matter has appeared before the courts.

For those who may be unfamiliar with the background, this case originally came to the courts in 2012 when, following an altercation, Mr Tegwyn and Mrs Mary Davies issued proceedings to evict their daughter, Eirian Davies, from Henllan Farm. Eirian accordingly counterclaimed for an interest in the farm, land and business on the basis of a proprietary estoppel.

Eirian had worked on her parents’ farm, Henllan Farm, helping to develop their prize-winning herd of cattle for a substantial part of the last 30 or so years. She claimed that her parents had made various promises that she would inherit the farm after their days, that she would become a partner in the dairy business and that she could live in the farmhouse rent-free for life.

In reliance upon those promises, Eirian’s claim was that she regularly worked long hours, carrying out hard manual labour for little pay.

Over the years, Eirian and her parents fell out numerous times, often resulting in Eirian leaving, and then returning, to the farm.

The court ordered a split trial on the two issues of liability (whether Eirian could demonstrate that an estoppel arose) and quantum (if liability could be shown then what was the value of Eirian’s interest).

On the first issue ([2013] EWHC 2623 (Ch)), HH Judge Jarman QC held that an estoppel had arisen. Mr and Mrs Davies appealed that decision, but were unsuccessful ([2014] EWCA Civ 568).

On the second issue, again at first instance before HH Judge Jarman QC ([2015] EWHC 015 (Ch)), Eirian was awarded £1.3m, roughly equating to a one-third share of the net farm value and business.

In the case’s most recent outing, Mr and Mrs Davies, again, appealed and the Court of Appeal reduced Eirian’s award to £500k. Handing down the decision, Lord Justice Lewison held that the reasons for reducing the award were as follows:

1. the judge had applied ‘far too broad a brush and failed to analyse the facts that he found with sufficient rigour’;

2. he had failed to explain properly the amount of the award;

3. he failed to explain which expectation out of the many he found he regarded as the starting point; and

4. the judge placed an incorrect value on Eirian’s detrimental reliance.

Indeed, Lord Justice Lewison criticised the lack of an explanation for the original award.

Dealing with expectation, he found that as Eirian had, on numerous occasions, left the farm then, unless there was ‘something said or done to rekindle that expectation’, equity could not intervene to protect her in respect of each individual expectation.

He distinguished what he held to be ‘sometimes mutually incompatible’ expectations in the instance case from other notable cases such as Gillett v Holt [2001] Ch 210 and Thorner v Major [2009] UKHL 18.

As to detrimental reliance suffered, Lord Justice Lewison held that the judge at first instance failed to analyse properly the offer of £350k made on behalf of Mr and Mrs Davies.

He held that any award based on expectation should be a modest one as, in his view, the period in which any expectation could reasonably have arisen and for which equity could assist, was from 2009 to 2012.

In relation to Eirian’s non-financial detrimental reliance, Lord Justice Lewison held that the effect of the termination of the relationship between Eirian on the one part, and her parents on the other, was such that Eirian is now ‘free to do all that which the judge said that she had given up’.

He accordingly increased Mr and Mrs Davies’s offer of £350k to £500k.

This case is therefore less a note of caution to practitioners, and more so one for the judiciary. Whilst it appears to highlight the discretion afforded to the courts when quantifying a claim by reason of proprietary estoppel, it confirms that where such discretion is exercised without a detailed explanation, it is more likely to be scrutinised on appeal.

However, this may not be the last of matters as a petition appealing the Court of Appeal decision has been lodged with the Supreme Court, so watch this space.

Lloyd v Jones and others [2016] EWHC 1308 (Ch)

High Court upholds will of testator who had dementia and suffered with delusions of aliens and Saddam Hussein

The testator, Mrs Harris, died widowed with two children, Sian and John. Her estate at death was valued at c.£600,000, the vast majority of which pertained to a farm worth £575k. She also had a share in a farming business partnership which she ran with her son, John, and John’s wife, Katherine.

Mrs Harris executed a will on 26 February 2005 which had been prepared by her niece, Dr Parry Jones, who was also Mrs Harris’s GP. That will provided a gift of £10k to Sian, with the residue of the estate to be divided equally between John and Katherine, or the survivor of them.

Sian challenged the validity of the will on the following grounds:

1. lack of testamentary capacity; and

2. lack of knowledge and approval.

Sian asserted that as Mrs Harris had been suffering from delusions, dementia, aggression, confusion and forgetfulness since May 2004, her will ought to be set aside. According to Sian’s evidence, Mrs Harris had talked of aliens landing at the farm, poisoning the water supply and invading the farm, and of Saddam Hussein having broken in.

In addition, Sian argued that Mrs Harris had glaucoma and was unable to read without a magnifying glass, which she did not have when she had allegedly executed her will and that the will had not been read to her.

The court heard evidence from numerous witnesses as well as considering the medical records and reports prepared by a psychiatric expert instructed by Sian.

A number of the witnesses had disagreed with Sian that Mrs Harris required a magnifying glass to read and the court accepted that evidence and, therefore, held that Mrs Harris was able to read the will.

The court also held that the will reflected Mrs Harris’s intentions.

Whilst the court concluded that Mrs Harris was suffering from dementia at the time that the will was executed, it was satisfied on the evidence, particularly by that of the non-family members, that Mrs Harris ‘retained capacity to understand, and did understand, the matters essential to an effective testamentary disposition’ and that her level of understanding at the time the will was made was such that she would have understood the clear and simple provisions of the will.

In relation to the delusions, the judge held that whilst Mrs Harris had, at times, suffered from delusions, crucially as the delusions did not affect the dispositions made in her will they were not relevant and did not go to her capacity to give instructions for and execute her will.

Presumably, therefore, had the delusions related specifically to Sian the court may well have taken a different view.

Herring and another v Shorts Financial Services LLP [2016] EW Misc B12 (CC) (9 May 2016)

Court concludes that solicitor owed duty of care to beneficiaries of will

In April 2011, the deceased, a Mrs Shemwell, inherited £300k from her sister’s estate and sought advice from her financial advisor, Mr Sully, on ways to mitigate inheritance tax. On the financial advisor’s advice, in August 2011 the deceased settled two trusts in favour of the claimants. The first was a discretionary trust into which the deceased settled £175k (being the balance remaining of her available nil-rate band) on trust for the claimants. The second was a loan trust for £125k which, again, named the claimants as the sole discretionary beneficiaries.

On 21 October 2011, Mrs Shemwell gave instructions to her solicitor to prepare a will. Mrs Shemwell instructed her solicitor that she wished for the claimants to receive the total sum of £200k each from her estate, to include the benefit which they would receive under the two trusts.

Mr Sully was also present at the very start of the meeting with the solicitor, although only stayed for approximately 10 minutes. He brought with him an aide-memoire in which, amongst other things, was noted the claimants’ names and, beside each, the figure of £146,472. Mr Sully left this with the solicitor.

The figures in fact represented the valuation of the assets in the loan trusts.

On the basis of the aide-memoire , the solicitor prepared the will, dated 8 November 2011, under which the claimants each received a legacy of £54k, with the residue of the estate being left to three charities. This was on the mistaken assumption that the claimants would be absolutely entitled to the figures referred to in the aide-memoire , thus bringing their total benefit to a little over £200k.

In fact, the effect of the loan trust was such that the capital ‘loaned’ to the trust reverted to Mrs Shemwell’s estate on her death, and therefore passed to the residuary beneficiaries. There was some dispute at the trial as to precisely what was told to the solicitor by the financial adviser at the meeting.

The claimants therefore issued proceedings against the financial adviser for professional negligence, relying on the principles established in White v Jones [1995] 2 AC 207, namely that the financial adviser had ‘assumed responsibility’ for the claimant beneficiaries, and Carr-Glynn v Frearsons [1999] Ch 326, on the basis that the financial advice was ‘part of the will making process’ so as to render the financial adviser liable to the claimants for their loss.

In fact, the solicitor was also added as a party to the claim, but that claim was settled between him and the claimants before trial. The only matter for the court to address was the question of the financial adviser’s liability or otherwise.

In the event, the court made the following key findings of fact:

1. the financial adviser had explained accurately the workings of the loan trust to the deceased;

2. whilst the financial adviser was in a position to explain the workings of the trust at the meeting at which the terms of the will were discussed, he was not asked to do so; and

3. the financial adviser had no knowledge of the terms of the will.

Those key findings of fact led HH Judge Behrens to conclude that the financial adviser owed no duty of care to the claimants. Distinguishing it from White and Carr-Glynn , the judge felt that, in the light of the above, there was no assumption of responsibility and that the financial adviser was not part of the will-making process.

Crucially, however, in what has been picked up in much of the legal press, the judge felt compelled to comment that the solicitor was ‘in breach of his duty to Mrs Shemwell and the Claimants’ and that it was negligent of the solicitor to draft the will ‘based solely on the material in the aide-memoire and [a] short conversation’.

This case is therefore a timely reminder of the importance for practitioners to ensure that a will reflects a testator’s true intentions. Whilst some have criticised the financial adviser and commented that a solicitor ought to be able to rely on professional advice, the key is that in the present case, the correct advice was found to have been given to the deceased. Where the solicitor failed was:

1. in not clarifying the advice when he had the opportunity to do so at the meeting;

2. in relying on an aide-memoire which did not set out in any details the workings of the loan trust; and

3. in any event, in not drafting a suitable clause to ensure that the claimants received the total amount intended by the deceased, instead opting to draft a straightforward pecuniary legacy.