Wills Publication - 2015

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A guide to the law and taxation of wills

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HERE’S TO THOSE WHO CHANGED THE WORLD

Dr Elisabeth Svendsen MBE Founder of The Donkey Sanctuary (by Mike Hollist)

WHAT WILL YOUR LEGACY BE?

Help protect and care for abused donkeys by remembering us in your will.

To receive a copy of our Leaving a Legacy guide ‘Your questions answered’ or to speak directly with our Legacy Team please contact 01395 578222 marie.wilson@thedonkeysanctuary.org.uk RETURN FORM TO:

Name: Mr/Mrs/Miss

THE DONKEY SANCTUARY Legacy Department (CD), Sidmouth, Devon, EX10 0NU.

Address

A charity registered with the Charity Commission for England and Wales No. 264818

Postcode Email

www.thedonkeysanctuary.org.uk/legacy 4

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Contents...

0

Private Client Review 2015 - The Formalities of a will......................... 10

4

February 2015....................................................................................................................... 86

What will 2016 bring for private client practitioners?.................................................................. 10

What is a business?......................................................................................................................... 86

Deeds of variation........................................................................................................................... 12

Inheritance (Provision for Family and Dependants) Act 1975................................................... 90

Non-contentious probate rules 1987............................................................................................ 12

Mistake............................................................................................................................................. 91

The residence nil rate band........................................................................................................... 12

Non est factum................................................................................................................................ 93

Case law.......................................................................................................................................... 12

Happy families!................................................................................................................................ 96

Continuing professional education.............................................................................................. 16

Quantification of equitable interests............................................................................................ 97

The future of the profession............................................................................................................ 16

1

November 2014.................................................................................................................. 20

Marley v. Rawlins [2014] UKSC 51.................................................................................................. 20

Forfeiture.......................................................................................................................................... 101

Gifts from clients.............................................................................................................................. 22

Can joint insurance policies be severed under the Inheritance (Provision for Family and

Income tax....................................................................................................................................... 24

Dependants) Act 1975?................................................................................................................. 102

Lasting powers of attorney............................................................................................................ 24

Valuation.......................................................................................................................................... 103 Trustees............................................................................................................................................. 103

5

March 2015............................................................................................................................. 100

Nuptial settlements......................................................................................................................... 100

Medical treatment.......................................................................................................................... 28

Standing to challenge a will.......................................................................................................... 30

2

December 2014.................................................................................................................. 34

Breach of trust.................................................................................................................................. 34

Quantification of equitable interests............................................................................................ 109

Capacity.......................................................................................................................................... 44

Damages for unlawful deprivation of liberty............................................................................... 111

Estoppel............................................................................................................................................ 52

7

May 2015.................................................................................................................................. 114

Capacity to make lifetime gifts..................................................................................................... 114

Quantification of equitable interests and equity of exoneration.............................................. 118

Damages for breach of trust......................................................................................................... 119

June 2015................................................................................................................................. 120

DMCs ................................................................................................................................................ 50 Should hearings be in private?...................................................................................................... 54

6

April 2015.................................................................................................................................. 106

Capacity to make lifetime gifts and undue influence............................................................... 106

3

January 2015......................................................................................................................... 66

Who should be appointed as deputy/Costs in the Court of Protection.................................. 66

In the matter of PMB, RS and DG v. JG [2014] EWCOP 42......................................................... 70

8

The law relating to the appointment of a deputy...................................................................... 70

Capacity to make a will................................................................................................................. 120

Lasting powers of attorney............................................................................................................ 77

Knowledge and approval of a will............................................................................................... 121

Joint attorneys and substitutes...................................................................................................... 80

Index linking of IOUs or charges – is it chargeable to income tax?.......................................... 122

Inheritance (Provision for Family and Dependants) Act 1975 and proprietary estoppel....... 82

Will a court approve a proposed action by trustees?................................................................ 123

Mistake as to the terms of a settlement....................................................................................... 124

If you require research undertaken to trace a missing beneficiary, or to establish legal succession in an intestate estate, please contact us: Centrex House,1 Simpson Parkway, Livingston, West Lothian, EH54 7BH Telephone: 01506 429900 Email: info@genealogyworldwide.co.uk *Our researchers/genealogist are professional and qualified in the SOLICITORS group Genealogy and Wills & Executry.

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Contents...

9

July 2015................................................................................................................................... 126

Equity of exoneration...................................................................................................................... 126

Proprietary estoppel....................................................................................................................... 127

Deeds of variation/rectification/consideration........................................................................... 128

10 August 2015............................................................................................................................ 132

BPR and furnished holiday lets....................................................................................................... 132

Privilege/specific gifts..................................................................................................................... 134

Is a scrip dividend income or capital?......................................................................................... 136

11 September 2015................................................................................................................. 138

Families falling out........................................................................................................................... 138

Inheritance (Provision for Family and Dependants) Act 1975................................................... 139

12 October 2015........................................................................................................................ 142

In the matter of H [2015] EWCOP 52............................................................................................. 142

RS (by her Ligation Friend the Official Solicitor) v. LCC and others [2015] EWCOP 56............ 143

Increased nil rate band where home inherited by descendants............................................. 145

Qualifying residential interest......................................................................................................... 145

Meaning of “inherited”................................................................................................................... 146

Meaning of “closely inherited”...................................................................................................... 146

Examples.......................................................................................................................................... 148

Bee a honey... Leave us some money Help us to keep the hives alive by leaving a donation.

Your donation will fund essential research, educational resources & raising awareness to help get Britain buzzing again.

Donate today

The British Beekeepers Association National Beekeeping Centre, Stoneleigh Park, Kenilworth, Warwickshire, CV8 2LG. Registered Charity No: 212025

6

Call: 02476 690 666 www.bbka.org.uk

Sylvia strikes back Medical Secretary gives something back to research and treatment

Sylvia’s friends remembered her for her kind heart, and her strong desire to help others. Even though she suffered lifelong poor health, while also caring for her critically ill mother.

But Sylvia did more than put on a brave face: she struck back against illness by working as a medical secretary, and following medical advances keenly. That’s how she found out that with conditions such as stroke, the right treatment and back-up can make all the difference when given promptly.

So it’s not surprising Sylvia decided that one of the best things she could do would be to strike back again, by supporting the work of the Stroke Association – and leave us a generous gift in her Will.

Today, we take time to remember her. Because Sylvia is still playing an important part in helping us create a future free of stroke, and turn around the lives of thousands of stroke survivors each year.

Call

Together we can conquer stroke.

020 7566 1505 email legacy@stroke.org.uk or visit stroke.org.uk/legacy

Registered office: Stroke Association House, 240 City Road, London EC1V 2PR. Registered as a Charity in England and Wales (No 211015) and in Scotland (SC037789). Also registered in Northern Ireland (XT33805), Isle of Man (No 945) and Jersey (NPO 369). Stroke Association is a Company Limited by Guarantee in England and Wales (No 61274)

7

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Private client review 2015 The Formalities of a will

When I was first asked to write a monthly review, I thought that it might be difficult to find new developments to write about every month. However, that has not proved to be the case. It always amazes me how many cases are reported in this field every month.

There were no major statutory changes coming into force in the private client area in 2015. However as usual there were many cases worthy of note.

There were several cases dealing with the cancellation of the registration of property and affairs lasting powers of attorney. It seems that if there is any evidence of misbehaviour by an attorney, the registration will be cancelled, and probably rightly so in the view of the writer.

Inevitably, there was some cases dealing with claims under the Inheritance( Provision for Family and Dependents) Act 1975, ind in particular, Ilott v. Mitson where an estranged daughter succeeded in a claim against the estate of her mother, and was given a much increased amount than was originally awarded on appeal to the Court of Appeal. There was some suggestion as a result of this case that it was not possible to cut out estranged children from your will, but the writer considers that she was entitled to something from her mother’s estate.

The question of quantification of equitable interests also arose. It is clear that the property is transferred into the joint names of cohabitees, there is a presumption that it is owned in equal shares, whereas if it is in sole names the first question is does the other party have an equitable interest in it, and if so, how it should be quantified.

As the writer expects readers are aware, the Mental Capacity Act has a new test of capacity which depends on your ability to make a decision – If you cannot make a decision. and that is due to some impairment or disturbance in the functioning of the mind or brain, then you lack capacity. However, whilst this test clearly applies to anything governed by the Mental Capacity Act, for example the granting of lasting powers of attorney, it does not apply for other purposes. There seems to be judicial disagreement as to whether this new test of ability to make decisions should become the test for the capacity to make wills and to make lifetime gifts. The writer considers that a Court of Appeal or Supreme Court decision is necessary to resolve this issue one way or the other.

10

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It was also made clear that for there to be a valid donatio mortis causa the donor must be close to death. It is not enough that the donor is seriously ill, and may die in the next few months.

As far as inheritance tax was concerned, It is clear that it will not be possible to obtain business property relief on a furnished holiday let on the grounds that it is a landholding or investment business, neither of which will qualify for business property relief What will 2016 bring for private client practitioners?

Deeds of variation.

The Revenue are considering whether the special IHT and CGT treatment should be abolished. The writer hopes not as many deeds of variation are neutral as far as inheritance tax is concerned and are done simply because what has happened under the will or intestacy rules is not appropriate for family circumstances. In addition, all that the deed of variation is doing is doing something the testator or testatrix could have done–the writer cannot see that this is abusive tax planning.

Non-contentious probate rules 1987.

Some readers may remember that there were proposals to update the Noncontentious probate rules of 1987. Nothing appears to have been done to implement these proposals, and it remains to be seen whether anything will be done in 2016.

The residence nil rate band.

This has been criticised on the ground that it only applies to people with children or grandchildren, and penalises those who do not have any children. In addition, the transferable residence nil rate band only applies to spouses or civil partners. It does not apply to cohabitees. Another political disadvantage maybe that it will not apply to many people living in London and the South East because of the limitation on the relief once the estate exceeds ÂŁ2 million. It would be much simpler to increase the nil rate band to ÂŁ500,000 for everyone. May be the Chancellor will announce this.

Case law.

As normal, there will be the usual cases dealing with capacity, knowledge and approval of wills, proprietary estoppel, the Inheritance (Provision for Family and Dependents) Act1975.

12

Leave a LEGACY of Hope for those with pancreatic cancer

A gift in your Will can help us: • Provide an expert, personalised

• Support innovative research,

support and information service,

focusing our funding where most

via telephone and email.

impact will be made on the disease.

• Fund our online Forum, providing

• Campaign to bring about positive

a safe place for patients and

change for patients, their families

their families to share stories and

and carers, through raising

experiences 24 hours a day.

awareness of pancreatic cancer.

Legacies@pancreaticcancer.org.uk www.pancreaticcancer.org.uk Registered charity no 1112708

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08/07/2015 16:36

The Psychiatry Research Trust Mental illness and brain disorders will affect everyone’s life at some time. One in four of us as direct sufferers.

Here at The Psychiatry Research Trust our sole aim is to raise funds for mental health and brain disease research being carried out at the internationally renowned Institute of Psychiatry, Psychology & Neuroscience (KCL), Bethlem and Maudsley hospitals. We aim to support research by young scientists in a wide range of mental health topics, including Alzheimer's and Motor Neurone Disease, Eating Disorders, Psychotic Illness, Addictions and Childhood Problems Our target is not just to find better treatments for sufferers but also to understand the underlying causes of mental illness and brain disease with the goal of finding means of preventions and cures for these illnesses.

For further information or to make a donation contact:

The Psychiatry Research Trust

PO 87, De Crespigny Park, Denmark Hill, London SE5 8AF Tel: 0207 703 6217 Web: www.psychiatryresearchtrust.co.uk Email: psychiatry_research_trust@kcl.ac.uk Donate on line at www.justgiving.com/psychiatryresearchtrust Registered Charity Number 284286

Over Over 40 40 people people in in the the UK UK lose lose their their sight sight each each day day The gift of sight is precious.

The gift of sight is precious.

Your Your gift gift today today and and aa legacy legacy when when the the time comes will help fund vital time comes will help fund vital research research into into the the causes causes of of blindness blindness and and treatments for for eye eye disease. disease. treatments Please Please make make a a donation donation today. today.

Tel: Tel: 0117 0117 929 929 0024 0024 Email: info@nerc.co.uk Email: info@nerc.co.uk www.nerc-charity.org.uk www.nerc-charity.org.uk National Eye Research Centre, National Eye Research Centre, Bristol Bristol Eye Eye Hospital, Hospital, Dept TSG, TSG, Lower Lower Maudlin Maudlin Street, Street, Bristol Bristol BS1 BS1 2LX. 2LX. Dept Charitable Incorporated Incorporated Organisation Organisation No: No: 1156134 1156134 Charitable

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25/10/2013 25/10/2013

www.iwdonkey-sanctuary.com

Please support our lovely donkeys!

Any legacies will be gratefully received and will go to the running of the Sanctuary and the welfare of the donkeys.

Your legacy will help us to provide a safe and secure home for over 93 neglected , retired or infirm donkeys.

The Isle of Wight Donkey Sanctuary

Donkey Heaven Since 1987

Lower Winstone Farm, St Johns Road Wroxall, ISLE OF WIGHT, PO38 3AA Office: 01983 852693 Email: info@iwdonkey-sanctuary.com

Reg Charity No.1001061

15

Continuing professional education.

Most solicitors will be aware that there is no longer any requirement to undertake 16 hours of continuing professional education. Instead, solicitors will have to sign a certificate of competence.

As a lecturer on continuing professional education courses for the last 12 years or so, from a personal point of view, I had considerable reservations how about the relaxation of the 16 hour requirement as clearly some delegates on courses I presented were only there because they had to be, although the writer always hoped that they were there because they wanted to be! However, I accept that there is a limited number of mainstream courses which you can do on any area, and that unless there are major developments in a particular area, it could be difficult to find a course you had not been on before - it was a common complaint by my wife who was a solicitor until her retirement a few years ago. It was clearly a nonsense to compel solicitors to attend courses they had already attended. The other extreme is to have some form of competence test every five years or so, but the writer doubts if this would have been acceptable to members of the profession! It remains to be seen what impact the proposals will have on courses, and if solicitors stop attending them, the courses will disappear.

Another issue may be the attitude of the professional indemnity insurers - they may impose requirements about attendance on courses.

The future of the profession.

The writer is very much a senior member of the profession, and has seen many changes since he started as an articled clerk. The biggest change is that it has become more of a business than a profession, and whilst we are all in the profession to make a living, I sometimes think that there is too much emphasis on billing targets.

There is a considerable amount of competition for private client work, but I am confident that high-street practices will survive as long as they provide a high-quality service at a reasonable price. I also think in that it is essential that the profession markets itself, and dispels the incorrect view that instructing a solicitor is going to be more expensive then instructing a non-solicitor; the reverse maybe the case.

Best wishes for 2016.

John Thurston. Š 2015 John Thurston

16

Sir John Mills left a legacy of helping blind people

Your legacy could help them too

As Senior Vice President of the Greater London Fund for the Blind, the late Sir John Mills did so much to help raise the funds vital to improving the lives of visually impaired people.

Having little sight himself, he knew only too well the problems that blind people can face - problems that we help to overcome through a wide range of services including rehabilitation, mobility training, counselling, home visits, recreation, employment and residential care.

You can help them, too, by leaving a legacy to the Greater London Fund for the Blind in your Will.

Your gift will help blind and partially sighted people from nursery school to nursing home.

Thank you.

GREATER LONDON FUND FOR THE BLIND 12 Whitehorse Mews (CC), 37 Westminster Bridge Road, London, SE1 7QD

T: 020 7620 2066 F: 020 7620 2016 E: info@glfb.org.uk W: www.glfb.org.uk Registered Charity No. 1074958 17

Sylvia strikes back Medical Secretary gives something back to research and treatment

Sylvia’s friends remembered her for her kind heart, and her strong desire to help others. Even though she suffered lifelong poor health, while also caring for her critically ill mother.

But Sylvia did more than put on a brave face: she struck back against illness by working as a medical secretary, and following medical advances keenly. That’s how she found out that with conditions such as stroke, the right treatment and back-up can make all the difference when given promptly.

So it’s not surprising Sylvia decided that one of the best things she could do would be to strike back again, by supporting the work of the Stroke Association – and leave us a generous gift in her Will.

Today, we take time to remember her. Because Sylvia is still playing an important part in helping us create a future free of stroke, and turn around the lives of thousands of stroke survivors each year.

Call

Together we can conquer stroke.

020 7566 1505 email legacy@stroke.org.uk or visit stroke.org.uk/legacy

Registered office: Stroke Association House, 240 City Road, London EC1V 2PR. Registered as a Charity in England and Wales (No 211015) and in Scotland (SC037789). Also registered in Northern Ireland (XT33805), Isle of Man (No 945) and Jersey (NPO 369). Stroke Association is a Company Limited by Guarantee in England and Wales (No 61274)

18

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Enrol now at

www.step.org/ADcertWPSG 19

Chapter 1 November 2014

Costs in contentious probate John Thurston, TEP, Solicitor, LL.B The case of Marley v. Rawlins is well known – husband and wife sign each other’s will.

Who should bear the cost of the proceedings up to the Supreme Court? The issue was complicated by a CFA, and the fact that the estate only amounted to about £70,000. This was the issue in the next case.

Marley v. Rawlins [2014] UKSC 51.

The question of who should bear the costs of the proceedings was also litigated.

The normal rule is that the losing party should recover all their costs from the other side, but there were good arguments against this because it was the mistake of the solicitors which caused the problem. However, if the challenge is reasonable, then the costs of everyone should come out of the estate. This would exhaust the estate, but Mr Marley would then be entitled to recover his losses from the solicitors’ insurers.

Lord Neuberger said:

“However, this is not a case where it could possibly be right to ignore the

position of the Solicitor. Indeed, there is, at least in terms of broad common

sense, considerable attraction in the notion that the Solicitor should bear all

the costs, in the sense that he was the person whose unfortunate error was

responsible for the litigation. On the other hand, as the insurers point out, (1) a

court should always be wary before making an order for costs against a third

party, (2) it would, at any rate on the face of it, be odd to require the Solicitor

to pay the respondents’ costs, given that he owed no duty to the respondents,

and (3) it was not the Solicitor’s fault that the respondents chose to fight the

case.”

The insurers were ordered to pay the costs of all the parties up to the Court of Appeal.

With regard to the proceedings before the Supreme Court, these were subject to a CFA. There was some argument about the interpretation of the CFA. Counsel were also entitled to a success fee. On the basis that counsel would disclaim the success 20

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We also campaign tirelessly for improvements in renal health care provision throughout the United Kingdom.

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fee, the insurers were ordered to pay (a) the respondents’ solicitors’ disbursements and (b) provided that both counsel for the respondents disclaim for all purposes the right to recover any uplift to which either of them would otherwise be entitled under their respective CFAs, counsels’ base fees, in relation to the further appeal to the Supreme Court.

If counsel were not prepared to provide such a disclaimer, the order would have been that the insurers pay the costs of these proceedings (a) of Mr Marley up to and including the Supreme Court, and (b) of the respondents up to and including the appeal to the Court of Appeal, and that there be no order for costs in the Supreme Court, save that the insurers pay the solicitors’ disbursements.

Gifts from clients John Thurston, TEP, Solicitor, LL.B Practice note on what you should do if asked to prepare a will when the client is leaving a gift for you, your family or colleagues – 10 October 2014.

It is in order to act as long as the gift is insignificant or proportionate. What is insignificant or proportionate?

The guidance provides: “An amount may be significant in itself, or as a proportion of the client’s net estate.

The SRA Guidance on the Drafting and Preparation of Wills does not provide any indication of a monetary amount which would be considered significant.

You should carefully consider any gift worth more than £500 to determine whether it may be considered significant in the particular circumstances.

You can assume that the following gifts would be considered significant:

1. anything worth more than one per cent of the client’s current estimated net

estate; and

2. anything that might become more valuable at some point, especially after the

death of the client, and anything that provides a benefit to an individual which

is more valuable than their relationship to the deceased reasonably justifies.

You should exercise great care if the proposed gift in question is a specific item or items which has an uncertain value, like a painting or piece of furniture. If you are in doubt, ask your COLP.”

22

Pain Relief Foundation RELIEVING CANCER AND OTHER PAIN THROUGH RESEARCH

CHRONIC PAIN DOES NOT KILL, BUT IT LEADS TO A LIFE-SENTENCE OF SUFFERING

Pain is a vital alarm bell to the brain – it tells us that something is wrong. When the damage has been treated, the pain has normally done its job and goes away. But then there is chronic pain, and that is very different. Here are some hard facts to consider: • 1:7 people in the UK suffers from chronic pain – desperately debilitating pain which does not go away.

• One in five chronic pain sufferers say that their pain is so bad that they just want to die • Pain stops sufferers enjoying activities like walking, shopping, sleeping, or playing with their children • Many thousands of chronic pain sufferers lose their jobs because the pain is so bad • A quarter of chronic pain sufferers are diagnosed with depression Many cancer charities and research organisations can’t fund work on cancer pain because their Trust Deeds specify only ‘research into the cause and cure of cancer’ and this, of course, excludes pain – so we do this work!!

The aim of the Foundation is finding causes, improving treatments and spreading the word. But research costs money, and there is an urgent need for more and more research. The Foundation receives no funding from the NHS or any Government body.

Its work relies entirely on donations; on the generosity of people like you.

LEAVE THE FOUNDATION A LEGACY IN YOUR WILL AND YOU WILL CONTINUE TO HELP SUFFERERS

You can even leave a donation today. Just send your gift to Pain Relief Foundation at the following address: Pain Relief Foundation, Clinical Sciences Centre, University Hospital Aintree, Lower Lane, Liverpool, L9 7AL

0151 529 5820

secretary@painreliedfoundation.org.uk

www.painrelieffoundation.co.uk Registed Charity: 1156227 23

Income tax John Thurston, TEP, Solicitor, LL.B How should scrip shares be treated for IHT puproses? For income tax purposes they are income. Should they not be treated as income for IHT purposes? This was the issue in the next case.

Gilchrist (as trustee of the J P Gilchrist 1993 Settlement) v. HMRC [2014] WTLR 1209.

The trustees of the settlement had elected to take scrip dividend shares, and had treated them as capital and paid a ten yearly IHT charge on that basis. Under the income tax legislation, the scrip shares were treated as income, and as a result of Pierce v. Wood [2010] WTLR 253, the trustees were of the opinion that the scrip dividend was income, and sought repayment of the IHT. It was held that the the deeming provisions did not mean that the scrip shares were income for other purposes, and so the claim for the return of the IHT failed.

Lasting powers of attorney John Thurston, TEP, Solicitor, LL.B Yet another case where the attorney under a property and affairs lasting power of attorney has been misbehaving.

Daughter uses the digital tool to produce a lasting power. Does having a digital tool make it easier for lay people to commit fraud?

Re-JL (Revocation of Lasting Power of Attorney), The Public Guardian v. AS (1) and Essex County Council (2) [2014] EWCOP 36.

The donor of a lasting power of attorney was born in 1938, and had been married three times. She was estranged from her third husband. She had two children from her third marriage, a daughter, AS, who was born in 1980, and was unemployed, and a son who was born in 1983. She had Alzheimer’s disease.

Her daughter had drawn up a lasting power of attorney using the digital tool appointing the daughter as her sole attorney, and a friend of the family had witnessed the donor’s signature, and was the certificate provider.

Essex County Council applied for the revocation and cancellation of the lasting power of attorney. Lush SJ summarised: the evidence in support:

24

Foundation for Liver Research

The Heartbeat Home for Horses Limited is a registered charity, whose aim is to care for horses who otherwise would face a very uncertain future.

1 in 10 people will suffer from some form of liver disease

Our aim is to provide a lifeline for these needy, homeless animals, allowing them to relax in comfortable surroundings in retirement, with lots of tender loving care.

Unfortunately that is likely to include someone you know and love and you may have already experienced the distress and heartache of someone who has faced the pain of liver disease.

• Heartbeat horses are often large, 16hh+ - it can be difficult to find a retirement home for them

Our scientists are working to improve methods of diagnosis and treatment for a variety of liver conditions including liver cancer, alcoholic liver disease, fatty liver disease and viral hepatitis. Earlier diagnosis often means that treatments will have a better chance of success; newer treatments will hopefully be more effective and with less side effects. We would love to cure liver disease but for now we have a more immediate aim - to improve diagnosis and treatments for those affected.

• Heartbeat Horses are NOT re-educated, or re-homed, or adopted • Heartbeat Horses retire to enjoy a good quality of life • Heartbeat will not put a healthy horse to sleep • We need to expand, due to the long waiting list of horses waiting to retire, or worse • We have CCTV in the stables, to monitor horses who are unwell

The Foundation depends on donations to fund this research.

A donation in your Will helps us continue our work.

Many of Heartbeat guests would not be alive today, if they had not been able to retire to the Heartbeat Home for Horses.

Help us fight liver disease Foundation for Liver Research Institute of Hepatology, Harold Samuel House 69 –75 Chenies Mews London WC1E 6HX Tel: 020 7255 9830 www.liver-research.org.uk http://www.facebook.com/F4LiverResearch @F4LIverResearch

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Loving is easy, caring costs It costs over £12,000 a day to care for all the animals at our centres.

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Visit www.nawt.org.uk call 0208 950 0177 option 1 email headoffice@nawt.org.uk 25 NAWT Legacy Ad Dog.indd 1

21/10/2014 11:21

“(a) Essex County Council reported its concerns to the OPG on 24 April 2014.

(b) Copies of JL’s bank statements revealed that there had been a number of

excessive and uncharacteristic withdrawals from her funds.

(c) From 18 January to 9 April 2014 there had been twenty-five cheque

withdrawals ‘paid to cash’ totalling £4,290. These payments averaged

£171 and were withdrawn every few days.

(d) Over the same period JL’s only capital asset other than her home had

halved in value to £10,669 and, at the current level of expenditure, her

funds would be entirely depleted within nine months.

(e) The investigator at the OPG spoke over the phone to JL’s social worker,

Sharon Morris, who stated that a man, who had recently been released

from prison, had offered JL £100 to perform a sexual act for him.

(f) JL had told Sharon Morris that her attorney kept her so short of money that

she considered prostitution as the only way of resolving the problem.

(g) In particular, JL said she needed the money so that she could pay the

train fare from Sheffield for her son to visit her (£100) and to compensate him for the overtime he would otherwise have earned but for the

visit (£80).

(h) AS, on the other hand, claimed she gave her mother £600 a month

spending money.

(i)

JL was paying £32 a month for her daughter’s T-Mobile phone contract, but many other bills were left unpaid and she owed £946 to Npower.

A Court of Protection General Visitor, Emma Farrar, visited JL on 22 May 2014

and in her report of the visit said:

“The visitor does not believe the donor has capacity to understand the

concerns, revoke or make a new LPA. She is totally reliant on the attorney

and seems to be led by whatever she says. She didn’t want to meet with or talk

to the visitor without her daughter present and was quite defensive throughout

the meeting and rejected any suggestion that the attorney may not be using

her funds appropriately.”

On 10 June 2014 I made an order:

(a) suspending AS’s appointment as attorney; (b) appointing Essex County

Council as interim deputy for property and affairs; (c) requiring the Public

26

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Please help me get better Not only do we treat more hedgehogs than any other wildlife hospital, but our caring team saves lives every day.

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27

Email: pet-rescue@tiscali.co.uk

Guardian to serve the papers on AS straightaway; and (d) inviting AS to

respond to the application by 14 July 2014.”

The daughter admitted that she had failed to keep accounts and that she had not read the declaration in Part C of the prescribed form which makes it clear that an attorney is under a duty to keep accounts and financial records and produce them to the Office of the Public Guardian and/or to the Court of Protection on request.

It was held that the attorney had behaved in a way that contravened authority and was not in the best interests of the donor, and that she lacked capacity to revoke the lasting power herself. It was held that it should be revoked, and that the authorised officer for property and affairs deputyships of Essex County Council should be her substantive deputy. He was already acting as interim deputy, and the donor had expressed a preference that he should continue to manage funds.

Medical treatment John Thurston, TEP, Solicitor, LL.B More and more casea about medical treatment seem to be coming before the Court of Protection. The next case is very sad – a young lady suffers from anorexia nervosa, and also has an alcohol problem. Should she be force fed?

A NHS Foundation Trust v. Ms X (By her Litigation Friend, the Official Solicitor) [2014] EWCOP 35.

Ms X is a young woman who suffers from anorexia nervosa, and also from an alcohol dependence syndrome which has caused chronic and now ‘end stage’ irreversible liver disease, cirrhosis. The combination of these two illnesses is unusual, and makes them very difficult to treat. She had been repeatedly admitted to hospital, and force-fed. However, on her release she had invariably sought refuge in alcohol, and had also sought to undo any weight gain achieved whilst she was in hospital so that again she needed to be readmitted. The doctors who had treated her in recent years considered that it was technically inappropriate, counter-productive and increasingly unethical to force feed her.

The Trust sought declarations:

(I)

It was not in the best interests of Ms X to be subject to further compulsory

detention and treatment of her anorexia nervosa, whether under the

Mental Health Act 1983 or otherwise, notwithstanding that such treatment

may prolong her life.

28

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Send to: Natalie Farr, Freepost BLUE CROSS FOR PETS Or please call 0300 777 1757 and quote L673 Email: legacy@bluecross.org.uk

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Sick, injured and homeless pets have relied on us since 1897. Thousands of abandoned or unwanted, ill or injured pets turn to us for help every year. Our doors are always open to them, and with your support, they always will be.

A gift in your Will can help secure the future for thousands of pets. If you need us, we can also be there for your special friend.

If pets have a place in your heart, please find a place for them in your Will.

Thank you for your continued support.

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Don’t face sight loss alone.

Focus Birmingham relies on the support of selfless legacy givers, who choose to leave us a donation in their will. Such support enables us to continue providing essential services to those receiving the devastating news of incurable sight loss.

We strive to help as many as we can remain independent and avoid the physical isolation and decline in good mental health often associated with a sight loss diagnosis. We support people with other disabilities too.

Our vision and values are to ensure that no one living in Birmingham and the surrounding areas face sight loss alone and are able to access our professional advice and support. We offer practical support and rehabilitation to ensure independence. Specialist counselling to strengthen emotional well-being. Peer support and social/leisure opportunities to help combat isolation. We also offer valuable IT solutions to visually impaired children to ensure they reach their potential in those vital early years.

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www.focusbirmingham.org.uk 29

(II) It is in her best interests, and shall be lawful, for her treating clinicians

not to provide Ms X with nutrition and hydration with which she does

not comply.

Ms X had made it clear that she supported the application.

It was held that she did not have capacity to make decisions about the anorexia nervosa, but that she did have capacity to make decisions about her alcohol dependence.

Ms X had also made an advance decision in relation to the future treatment of her liver disease and it was held that she did have capacity to make that decision, and that it complied with section 24 of the Mental Capacity Act 2005.

Cobb J stated that he was naturally steered to exercise his judgement in a manner which attaches the highest (even if not absolute) priority to the preservation and sanctity of life. However, in view of the unanimous medical advice that the declarations were in the best interests of Ms X, he was prepared to make them.

Standing to challenge a will John Thurston, TEP, Solicitor, LL.B It is clear that a benefciary under a previous will or a relative who would take under the intestcy rules if a will is invalid can challenge a will. Who else can?

Randall v. Randall [2014] EWHC 3134 (Ch).

The claimant and the defendant had been married but were divorced. A consent order had been made in the divorce proceedings which provided that:

‘in the event that the defendant receives hereafter any property and/or

monies from her mother by way of inter vivos gifts and/or inheritance,

the defendant shall retain the first £100,000 of the sum of any such gifts and/or

inheritance and the balance shall be divided equally between the defendant

and the claimant.’

The mother of the defendant executed a will under which the defendant only received a legacy of £100,000, the remainder of the estate going to other beneficiaries.

The claimant wanted to challenge the validity of the will on the grounds of noncompliance with section 9 of the Wills Act 1837. The issue was whether he had sufficient interest in the estate of the mother to challenge the will.

30

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Hoopers have over 90 years of experience working alongside the legal profession in this highly specialised field. So if you need to resolve a case of intestacy, connect with Hoopers.

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31 HOP1401032_Full_Page_Running_277x190_AW.indd 1

30/09/2015 10:28

It was held that it was a substantive issue rather than a procedural issue, and that the claimant did not have a sufficient interest in the estate to challenge the will.

Deputy Master Collaco Moraes said:

“In my judgment, on a proper analysis of the authorities, whether a person has

an interest in the estate is to be determined by reference to the touchstones

of: (1) whether they are personal representatives, (2) the grant of

representation, and (3) the entitlement to a distribution of the estate. The court

is concerned with identifying ‘an interest in the estate’, and not whether

someone is ‘interested’ in the estate. Just as a creditor of an estate, while

interested in the estate, has no interest in the estate, so in my judgment a

creditor of a beneficiary of the estate has no interest in the estate, though he is

possibly interested in the estate.

While it is not necessary for my decision, in my judgment to construe an ‘interest in the estate’ to include a claim by a creditor of a beneficiary of an estate will widen the gateway to an extent that would render the requirement of little if any value.”

32

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thesolicitorsgroup.com

Chapter 2 December 2014

Breach of trust John Thurston, TEP, Solicitor, LL.B Two cases where trustees are sued - clearly lay trustees should seek insurance!

Cotton & Anor v. Brudenell-Bruce & Ors [2014] EWCA Civ 1312.

The issue in this case is whether trustees had acted properly in selling Tottenham House, the principal asset of the Savernake Estate. On the facts, it was held that they had.

Vos LJ said: “The legal background In Public Trustee v. Cooper [2001] WTLR 901, Hart J repeated Robert Walker J’s now well-known categorisation of cases in which trustees may seek the approval of the court. These proceedings fell into the second of Robert Walker J’s categories (see page 923 in Cooper), namely where there is no real doubt as to the nature of the trustees’ powers and the trustees have decided how they want to exercise them “but, because the decision is particularly momentous, the trustees wish to obtain the blessing of the court for the action”. In Cooper, Hart J said at page 925 that the duties of the court in a category 2 case depended on the circumstances of each case, but that in that case, it had to be satisfied, after a scrupulous consideration of the evidence, of three matters as follows:

i) That the trustees had in fact formed the opinion that they should act in the

particular way relevant to that case;

ii) That the opinion of the trustees was one which a reasonable body of

trustees properly instructed as to the meaning of the relevant clause could properly have arrived at;

iii) That the opinion was not vitiated by any conflict of interest under which

any of the trustees was labouring.

34

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In Richard v. Mackay 4th March 1987, (1987) 11 TruLI 23 (but also later reported at [2008] WTLR 1667), Millett J said this as to the approval of the court at page 1671:

“Where, however, the transaction is proposed to be carried out by the

trustees in the exercise of their own discretion, entirely out of court, the trustees

retaining their discretion and merely seeking the authorisation of the court for

their own protection, then in my judgment the question that the court asks itself

is quite different. It is concerned to ensure that the proposed exercise of the

trustees’ powers is lawful and within the power and that it does not infringe

the trustees’ duty to act as ordinary reasonable and prudent trustees might

act, but it requires only to be satisfied that the trustees can properly form the

view that the proposed transaction is for the benefit of beneficiaries or the trust

estate. …It must be borne in mind that one consequence of authorising the

trustees to exercise a power is to deprive the beneficiaries of any opportunity of

alleging that it constitutes a breach of trust and seeking compensation for any

loss which may flow from that wrong. Accordingly, the court will act with

caution in such a case…”

In Marley v. Mutual Security Merchant Bank [1991] 3 All ER 198, Lord Oliver expressed the test somewhat differently at page 203:

“The question whether the trustee has demonstrated that the contract

submitted for approval is in the best interests of the beneficiaries reduces, in

such a case as this, to whether the trustee can satisfy the court that it has taken

all the necessary steps to obtain the best price that would be taken by a

reasonably diligent professional trustee. The question may equally well be

expressed as whether the trustee has shown that it has fully discharged its

duty. That question may appear to be very similar to the question whether to

enter into the contract without taking further steps and without seeking the

directions of the court would justify an action by the beneficiaries for

misconduct justifying the removal of the trustee. Nevertheless there is an

essential distinction in that, in such an action, the beneficiaries would be

required to assume the positive burden of demonstrating a breach of

fiduciary duty. A failure to do so does not demonstrate the converse, namely

that the transaction proposed, because not proved to be a breach of fiduciary

duty, is therefore one which is in the interest of the beneficiaries”. … At pages

209-210, Lord Oliver dealt with the argument that a “bird in the hand was

worth two in the bush” as follows, though his treatment was peculiarly particular

to the facts of that case:- “In the Court of Appeal, Rowe P regarded it as

doubtful whether the respondent, having entered into the conditional contract,

could even investigate an alternative offer, but regarded that offer in any 36

CELEBRATING OVER 100 YEARS OF CARE FOR MEMBERS OF THE ENTERTAINMENT PROFESSION Patron: HM The Queen · Est 1908 Registered Charity No. 206451

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PLEASE REMEMBER THE ENTERTAINMENT INDUSTRY IN YOUR WILLS AND LEGACIES Members of the entertainment profession have given us so very much enjoyment a camera, or behind it, as well as all those who have spent their lives working over so many years; many working tirelessly throughout their careers raising in the numerous support industries dedicated to entertainment funds for others, so please give whatever you can back to them.

The Royal Variety Charity owns and manages its own residential and nursing Most performers/ actors/ comedians/ musicians live their life for their passion, care home for entertainers, Brinsworth House in Twickenham, and also offers living from job to job, sometimes going for months without work and most make a nationwide grant scheme to assist those living in their own homes wherever little or no plans should they fall sick or reach old age. they reside in the UK. The Royal Variety Charity is the oldest and most prestigious of all entertainment Every pound is so gratefully welcomed and will help us to ensure that we charities; established in 1908 and with Her Majesty The Queen as its sole patron. maintain a high standard of care for our many residents and dependents around the UK. The Royal Variety Charity assists those who've worked professionally in the entertainment industry and are in need of help. The charity strives to support all those, both young and old, who've worked on the stage, in the wings, in front of THANK YOU SO MUCH FOR YOUR SUPPORT

When mentioning legacy giving to your clients, you don’t need to make a song and dance about it.

Just a little explanation of the options will do. After all it’s something many of your clients will care a lot about.

75% will have supported a charity in their lifetime. So please introduce it into the conversation when writing their Will. rememberacharity.org.uk Remember A Charity is part of the Institute of Fundraising, a registered charity in England and Wales (no.1079573) and in Scotland (no. SC038971).

37

event as unworthy of serious consideration because the respondent had

no knowledge of the financial stability of the proposed purchaser and

because, in postponing conclusion of the conditional contract whilst the matter

was investigated, the respondent risked losing the ‘bird in the hand’. … What

the Court of Appeal appears to have overlooked entirely was that, having

regard to the course which it was proposed to take as regards the obviously

unsatisfactory features of the conditional contract - that is to say the treatment

of moneys falling due to the estate up to the closing date and in the interest-

free postponement of a substantial part of the consideration - the ‘bird in

the hand’ argument ceased to have any validity at all, for the effect of the

order proposed and finally made was that the respondent had, in any event,

to reject the conditional contract as it stood and to negotiate fresh terms with

the purchaser if it proved willing to consider them.

Hart J in X v. A [2006] 1 WLR 741 cited Millett J in Richard v. Mackay supra and emphasised the need for the court to act cautiously as follows at paragraph 30:

“I would add that an additional reason for caution is that for procedural and

other practical reasons the adversely affected beneficiaries are likely to be at

a relevant disadvantage in such proceedings (assuming even that they have

been made parties, which will not always be the case) as compared with the

position they might be in if pursuing a hostile action after the event either

against the trustees for breach of trust or designed simply to set aside the

transaction as flawed. In particular the extent to which it is possible, or (while

future discretions remain to be exercised) politic, to obtain full disclosure of all

relevant deliberations of the trustees, or to subject evidence to cross-

examination, is likely to differ in the two types of proceedings”.

In Tamlin v. Edgar [2011] EWHC 3949 (Ch), Sir Andrew Morritt cited the previous authorities and continued by emphasising the need for full disclosure by the trustees at paragraph 25:

“ … The very fact that the decision of the trust is momentous, taking that word

from the description of the second category, and that the decision is that of

the trustees, not of the court, makes it all the more important that the court is

put in possession of all relevant facts so that it may be satisfied that the decision

of the trustees is both proper and for the benefit of the appointees and

advancees. It is not enough that they were within the class of beneficiary and

the relevant disposition within the scope of the power. It must be demonstrated

that the exercise of their discretion is untainted by any collateral purpose such

as might engage the doctrine misleadingly called a fraud on the power. They

38

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39

must satisfy the court that they considered and properly considered their

proposals to be for the benefit of the advancees or appointees. All this requires

the full and frank disclosure to the court of all relevant facts and documents.

The court is not a rubber stamp and parties and their advisors must be astute

not to appear to treat them as such. The further evidence adduced since the

first hearing of this application satisfies me on all those points but without it it is

likely that I would have rejected this application”.

Both sides originally relied on the judgment of Briggs J in Jones v. Firkin-Flood [2008] EWHC 2417 (Ch) at paragraph 281 concerning the circumstances in which a finding that trustees are unfit to act might affect the court approval of their actions. It is worth reciting his dictum in full, even though the relevance of the removal action to these appeals has now significantly reduced:

“I am fortified in reaching my conclusion that I ought not to confirm or bless

the provisional resolution by my perception, which I have already described in

detail, that the Trustees had by their conduct prior to February 2008

demonstrated their collective and individual unfitness to be Trustees of this

trust. It is most unusual for the court to be invited to bless a discretionary

decision by trustees against such an unpromising background. Furthermore, it

seems to me that the relatively limited role which the court has hitherto chosen

to adopt in category (2) cases (within the Public Trustee v. Cooper analysis)

may well have been developed in the context of decisions by trustees whose

general fitness was not in dispute. For that reason I would add to the category

of cases in which the court may feel insufficiently certain about the propriety of

a proposed discretionary decision that it declines to bless it, without at the

same time prohibiting it, a case just like the present, where the trustees have

demonstrated a general unfitness to act, by conduct prior to the taking of the

decision in question”.”

The next case, which is again dealing with the Savernake Estate, illustrates that being a trustee can be a very difficult business, particularly when the trustees fall out with a major beneficiary.

This is what happened in the next case, and the trustees were held liable for loss of rent on two properties.

A lay trustee had submitted invoices for various amounts. It was accepted that he was not entitled to be paid anything, and the judge was not prepared to exercise his discretion and order that he should receive some remuneration.

40

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If the judge had been prepared to order that the lay trustee should be paid, the hourly rate would have been ÂŁ25.

It was also ordered that the lay trustee should be removed as a trustee.

The Earl of Cardigan v. John Moore and others [2014] EWHC 3679 (Ch).

Yet another case concerning the Savernake estate. John Moore was the senior clerk and practice manager in barristers chambers, and he had been a friend of Lord Cardigan for about 30 years. Mr Cotton was a chartered accountant, and a partner in a firm of accountants. Both Mr Moore and Mr Cotton were appointed as trustees.

A stable block was part of the trust assets, but had fallen into disrepair. It was held that the trustees should have done more to preserve the property by the use of tarpaulins and plastic sheets. However, it was held that it was not apparent that reinstatement work would increase the value of the property, let alone by anything like as much as the cost of repair.

Sturmie House was part of the trust assets, and was let. When the tenant vacated the property, a pipe burst which cause serious damage to the property. There was considerable delay sorting out an insurance claim, and repairing the property. It was held that the trustees should have been able to relet the property by April 2013 about 18 months before it was actually relet. Accordingly, the trustees were liable for loss of rent.

Lord Charles Brudenell-Bruce had occupied Little Lye Hill Cottage for many years without paying a market rent. It was held that Lord Cardigan had acquiesced in this until October 2013 after which the trustees should have sought a market rent. The trustees were therefore liable for loss of rent.

There were also allegations about breach of trust to do with herbage and shooting rights, but the judge held that he could not make any findings about this.

Mr Moore had submitted invoices to the trust for work he had done in his capacity as a trustee. It was accepted that as he was a lay person he had no right to be paid, and it was ordered that he should repay all the monies that he had received. He had charged an hourly rate of ÂŁ150, but the judge said that if he had been minded to make an order that Mr Moore should be remunerated, the hourly rate would have been ÂŁ25.

There was also a challenge to the charges made by Mr Cotton, but this was referred to the Chancery master.

42

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Lord Cardigan was only entitled to 49% of the trust assets, and it was argued that the compensation should be restricted to 49% of total. This was rejected as they were other beneficiaries apart from Lord Cardigan.

It was also ordered that Mr Moore should be removed as a trustee.

Capacity John Thurston, TEP, Solicitor, LL.B The next case is concerned with whether a young woman has capacity to conduct litigation, make decisions about her care, contact with others, where she should live and sexual relations.

Sexual relalions – she did have an understanding of what was involved, the health risks and that it could result in pregancy. However, she might not be able to say no.

It was held that the question of capacity to consent to sexual relations was act specific, rather than person specific – if it was person specific, impossible to police!

Derbyshire County Council v. AC [2014] EWCOP 38.

AC had sisgnificant learning disabilities, and had been assessed as having an IQ of 53. She was prone to aggressive behaviour, and could be violent. She lived for most of the week with her parents, and had a good relationship with her father. However, her mother was hostile to social workers believing that AC did not need any help.

She was also able to do some actions on her own, for example she could understand a bus timetable. Various questions were litigated.

Cobb J held: “Capacity: Litigation: On the evidence filed, and tested before the court, there is no question in my mind that AC lacks the capacity to litigate these proceedings. She does not have the ability, in my judgment, to recognise the difficulties within litigation of this kind, obtain, receive, understand and retain relevant information (including advice) relevant to it.

Capacity: Care: It is acknowledged by DT and Dr. Milne that AC struggles with the conceptual aspects of the proposed package of care for her. She cannot grasp the abstract notions around her therapeutic need; she is unable to describe her own care needs in any meaningful respect. It is not contentious, on the evidence, that AC lacks capacity to make decisions about her care and therapeutic needs. I do not propose to elucidate the evidence further, which – for the avoidance of doubt – I unreservedly accept.

44

Victoria and Albert Museum

The world’s greatest museum of art and design

The V&A is the world’s greatest museum of art and design. It is a charity that receives some government funding, but we depend on the generosity of supporters to satisfy our mission to enrich people’s lives and inspire and inform the millions of visitors who enter our doors each year.

All legacies, regardless of size, will be invested in the V&A’s FutureFund, our endowment fund to safeguard the work of the Museum for future generations.

This will help support our work across: -

Collections and conservation

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New acquisitions

If you wish to help the V&A fulfil its mission and protect our heritage, you may wish to consider a gift in your Will, once family and friends are provided for. For more information, please click here and request a legacy booklet. Alternatively, please contact Susan Hughes, Legacies Manager at legacy@vam.ac.uk or 020 7942 2716

Animals in Distress is a local animal welfare charity and Rescue Centre that cares for and rehomes over 600 cats, dogs, rabbits and guinea pigs in South Devon every year.

We are passionate about the welfare of the animals in our charge and always treat them with dignity and kindness. We are committed to keeping them healthy and secure until they are in their new, forever homes.

Positive about Dyslexia The British Dyslexia Association (BDA) is a national charity and our vision is a dyslexia friendly society that enables the one in ten people with dyslexia to reach their full potential.

Animals in Distress receives no government funding thus relies on the generosity of supporters to care for the animals who are in such desperate need.

Leaving a legacy to the BDA, however large or small, will ensure that we can continue to deliver vital projects and support and continue to help change lives for the better.

One third of Animals in Distress’ work is funded by gifts left in Wills. Without the incredible generosity of our legacy supporters we simply wouldn’t be able to provide the animals with the care and accommodation that they need and deserve.

If you would like to discuss ways in which a gift in your Will could make a difference, please call Phil Wormley at the BDA on 0333 405 4588, philw@bdadyslexia.org.uk visit us online: www.bdadyslexia.org.uk or write to us at:

For more information about how you can remember Animals in Distress in your Will, please contact Katie Swan on 01803 812121 or katie@animalsindistress.uk.com

Phil Wormley, Room 2015 SGWPB, Unit 8, Bracknell Beeches, Old Bracknell Lane, Bracknell, RG12 7BW.

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45

Registered Charity No. 289243

Capacity: Contact with others: AC has had a number of physically and sexually abusive relationships over several years. I accept DT’s 2013 assessment that AC shows very limited understanding of the seriousness of the situations in which she has placed herself notwithstanding (as I accept) that professionals have attempted to educate AC about the risks of associating with dangerous individuals; the year-old assessment has sadly been supplemented by more recent events. These relationships have not, I am satisfied, simply been the product of unwise choices; AC has no real understanding of the consequences of decision-making in this respect; she has limited concept of time, and cannot therefore process whether something has happened in the recent past or some time ago. She struggles with the concept of the future.

I find, without reservation, that AC lacks capacity in this regard.

Capacity: Sexual Relations. Dr. Richard Cant assessed AC’s capacity to make decisions about sexual relations. He was of the view that although AC has an impairment of the mind, she “demonstrates a good understanding and retention of information relating to conventional sexual relationships. She is able to weigh this up and communicate her decisions. [AC] is also able to demonstrate a reasonable understanding of consent and abuse.” Dr. Cant went on to advise: “[AC]’s ability to consent may however be compromised in complex situations wherein her emotional state will become more influential than times when she is able to reflect and consider theoretical situations. Indeed it remains uncertain if [AC] is able to use her knowledge and experience of potentially abusive relationships if she is herself within a relationship in which he consent may become suspect (i.e. relationships that involve grooming for longer term exploitative purposes)”....

Dr. Milne commented that AC had a very limited understanding of sexual relations.

Although AC was able to discuss with Dr. Milne the basic mechanics of sexual intercourse, and that she understands that pregnancy can result from intercourse (and that sexually transmitted disease is a risk), nonetheless she had been unable to demonstrate that she would be able to refuse to have sexual relations if she did not want this to happen.

In Local Authority X v. MM, KM [2007] EWHC 2003 (Fam) Munby J added: “So capacity to consent to sexual intercourse depends upon a person having sufficient knowledge and understanding of the nature and character the sexual nature and character of the act of sexual intercourse, and of the reasonably foreseeable consequences of sexual intercourse, to have the capacity to choose whether or not to engage in it, the capacity to decide whether to give or withhold

46

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consent to sexual intercourse: see X City Council v MB, NB and MAB (by his litigation friend the Official Solicitor) [2006] EWHC 168 (Fam), [2006] 2 FLR 968, at para [84]. It does not depend upon an understanding of the consequences of sexual intercourse with a particular person. Put shortly, capacity to consent to sexual relations is issue specific; it is not person (partner) specific”.

Capacity: Choice of residence. In considering this question, I first consider what is the ‘relevant information’ which would inform whether AC has the capacity to make a decision about residence. Mr. McKendrick suggests that the relevant information would be limited to consideration of the following factors:

i)

That she will live with other people;

ii)

That she will not live with her parents;

iii)

That she will be supported by workers;

iv) The location of Pennine House;

v)

That she had considered the age and gender of the fellow residents; That she will need to abide by house rules.

It may be helpful if I indicate that I accept Mr. McKendrick’s list in [§37 above], but would add additional ‘relevant information’ as:

i)

whether the placement is envisaged as long-term or as a short term

placement, and

3.

in general terms, that one of the residential options has a therapeutic

component.

It is acknowledged that while AC understands the various options which have been presented to her, and can sufficiently well retain that information, she is unable to weigh the pros and cons of any of the residential options. DT is of the view that AC cannot consider the relevant factors “she will focus on one specific incident to the exclusion of all others even if the focus is unrelated to the topic or decision to be made” (September 2013 report).

Having reviewed the material, and these arguments, carefully I conclude that there is value to AC and those working with her that I should make the interim declaration of incapacity in relation to AC’s choice of residence as contended for

by Mr. Wenban-Smith. I do so largely for the reasons which he has set out and which I have summarised at [§44] above. AC’s co-operation with the planned move is far

48

95 1920-2015

years ago we began caring for ex-service personnel... we still do.

Help us to continue our work.

Founded in 1920 for the ‘comfort, cheer and entertainment’ of ex-servicemen wounded in WWI, The Not Forgotten Association continues to help and support serving and ex-service men and women with injuries or disabilities of any kind.

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Every contribution will help us to ensure that those who have served their country and are now suffering from injury, disability or illness are not forgotten.

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Charity No 1150541 © Giles Price

From Comradeship to Challenge™ 49

from assured, and for her benefit, and for those who seek to secure this outcome, I consider that I should offer judicial clarity.

Best interests: I am satisfied on the evidence before me that it is in AC’s best interests that she should move to, and reside at, Pennine House; I am of the view that AC requires a residential establishment with therapeutic component. She should be given the maximum chance to develop independent living skills, which will be achievable there. Moreover, such a move of course accords with her current wishes (section 4(6) MCA 2005) and those of her father (section 4(7) MCA 2005). I propose to direct that the Local Authority shall file and serve a detailed care plan consistent with the principles established by Baker J in A Local Authority v TZ (No. 2) [2014] EWCOP 973, setting out how it will lawfully manage AC’s right to respect for a private life, consistent with the court’s declarations, that she lacks capacity to make decisions in respect of contact with other people, but has capacity to enter into sexual relations.”

DMCs John Thurston, TEP, Solicitor, LL.B Another case where there was an allegation that there had been a dmc.

King v. Dubrey and others [2014] WTLR 1411.LN D was an animal lover, and had left a will leaving the residue of her estate to animal charities. D was elderly, and frightened of having to go and live in a home. K, her nephew, who had been imprisoned for offences under the Companies Act, agreed to move in with her and look after her. D had on anumber of occasions told K that on her death the property would be his. She did sign a will to that effect, but it was not properly witnessed. She did give K the deeds saying that this will be yours when I go.

It was held that this was a valid dmc.

It was also held that D was maintaining K, and so he could claim under the Inheritance (Provision for Famliy and Dependants) Act 1975, However, no award was made under this head because the claim to the dmc had succeeded.

Charles Hollander QC said:

“It is apparent from Sen that unregistered land can be the subject of a DMC.

What is required in the case of property which is not capable of physical

delivery is for the Donor to part with dominion over the essential ‘indicia of

title’:...

50

Ensure a brighter future Remember Age UK London in your Will

Age UK London works to identify, voice and act on the issues our older people living in London tell us impact on the quality of their lives.

If we don’t take steps now to improve the needs, rights and status of the 2.1 million older people in the capital, our children will still be doing so as they age.

You can help us to ensure that the future is brighter for our older people as well as for younger generations by remembering Age UK London in your will.

Age UK London - First Floor - 21 St Georges Road - London SE1 6ES - 020 7820 6770 Contact Sam Mauger on SMauger@ageuklondon.org.uk w: www.ageuk.org.uk/london Twitter: @ageuklondon You can donate online at: www.justgiving.com/ageuklondon

51

Registered charity no. 1092098

To find a DMC the court must further be satisfied that June had capacity to make it.

In a case where the effect of the alleged gift is to give away substantially the whole of a person’s estate and defeat his testamentary dispositions the test for capacity is the same as that can make a well. The donor must understand the extent of the property to be disposed of and the claims of all potential donees.”

Estoppel John Thurston, TEP, Solicitor, LL.B If A promises B that B will have a home for life, what detriment is required before B can enforce the promise?

This was the issue in the next case.

It is clearly wider than financial detriement.

Southwell v. Blackburn [2014] EWCA Civ 1347.

S and B set up home together in a house owned by S. S paid all the expenses. B was recently divorced, but had obtained a secure tenancy of a house. When the relationship broke down, B claimed an interest in the house under a constructive trust. This was rejected by the judge at first instance, but he held that S had promised B that she would have a home for life, and awarded her £28.500. S appealed, but was unsuccessful.

On the question of detriment, Tomlinson LJ said: “I turn then to the second ground, detriment. The requirement of detriment was discussed by Robert Walker LJ In Gillett v Holt, above, at page 232, where he said:

“The overwhelming weight of authority shows that detriment is required. But the

authorities also show that it is not a narrow or technical concept. The

detriment need not consist of the expenditure of money or other quantifiable

financial detriment, so long as it is something substantial. The requirement must

be approached as part of a broad inquiry as to whether repudiation of an

assurance is or is not unconscionable in all the circumstances.

There are some helpful observations about the requirement for detriment in the

judgment of Slade LJ in Jones v Watkins 26 November 1987. There must be

sufficient causal link between the assurance relied on and the detriment

asserted. The issue of detriment must be judged at the moment when the

person who has given the assurance seeks to go back on it. Whether the

52

Do you have the will to beat Prostate disease?

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Children only get one chance at childhood... ...you can make sure it’s one free from abuse and neglect.

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detriment is sufficiently substantial is to be tested by whether it would be unjust

or inequitable to allow the assurance to be disregarded – that is, again, the

essential test of unconscionability. The detriment alleged must be pleaded and

proved.””

Should hearings be in private?

John Thurston, TEP, Solicitor, LL.B The next case is an application for the approval of a variation of a settlement under Variation of Trusts Act 1958. The variation was approved.

However, the main issue was whether hearing should be in private.

The parents of the children affected did not want them to know how wealthy family was – might lead them astray.

V v.T and A [2014] EWHC 3432 (Ch).

This was an application for the approval of an arrangement proposed to be entered into in relation to an existing trust under the Variation of Trusts Act 1958. The arrangement was approved, but the case is reported because the parties wanted the hearing to be held in private. Morgan J refused the application, but directed that the names of the parties should not be reported. The reason for this was that the parents of children beneficiaries within the settlement did not want them to be aware of the family’s wealth.

Morgan J said:

“Rule 39.2 is to be applied against the background of long established

common law rules as to the fundamental principle of open justice and against

the background of Articles 6, 8 and 10 of the Convention, set out in schedule

1 to the Human Rights Act 1998, coupled with section 12 of that Act dealing

with freedom of expression. These rules have been the subject of a large

number of highly relevant decisions over the decades. One can trace the

authorities from the leading case of Scott v Scott [1913] AC 417 through R

v Legal Aid Board ex parte Kaim Todner [1999] QB 966 (see, in particular, at

977) to a fairly recent discussion of the principles in Global Torch Ltd v Apex

Global Management Ltd [2013] 1 WLR 2993, a case which concerned

proceedings in the Companies Court. The authorities establish the following

general propositions:

54

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55

(1) There are two dimensions to open justice. The first is that the public are

entitled to attend court proceedings to see what is going on. The second

dimension is the right of the media to report the court proceedings to the public. The media should not be discouraged from publishing fair and accurate reports of court proceedings. In reality, very few members of the public attend court hearings so that the scrutiny of court proceedings is performed by the media acting on behalf of the public.

(2) The hearing of cases in open court deters inappropriate behaviour by the

court. It maintains public confidence in the administration of justice. It

enables the public to know that justice is being administered impartially. It makes uninformed or inaccurate comment about the proceedings less likely.

(3) Court hearings taking place in public enable information to become

available to the public in a democracy. What goes on in the courts is inherently of legitimate interest, and real importance, to the public.

(4) The fact that a hearing in open court may be painful, humiliating and a

deterrent either to a party or to a witness is not normally a proper basis for

departing from the open justice principle. The interest protected by the open justice principle is the public interest in the administration of justice rather than the private welfare of those involved in court proceedings.

Guidance as to how to apply these principles in practice was given in Practice Guidance (Interim Non-Disclosure Orders [2012] 1 WLR 1003 at [9] – [15], as follows (for convenience, I have removed the many references to cases other than Scott v Scott): “Open justice

9 Open justice is a fundamental principle. The general rule is that hearings

are carried out in, and judgments and orders are, public: see article

6.1 of the Convention, CPR r 39.2 and Scott v Scott [1913] AC 417. This applies to applications for interim non-disclosure orders … .

10 Derogations from the general principle can only be justified in exceptional

circumstances, when they are strictly necessary as measures to secure the proper administration of justice. They are wholly exceptional … .

Derogations should, where justified, be no more than strictly necessary to

achieve their purpose.

56

57

11 The grant of derogations is not a question of discretion. It is a matter of

obligation and the court is under a duty to either grant the derogation or

refuse it when it has applied the relevant test … .

12 There is no general exception to open justice where privacy or

confidentiality is in issue. Applications will only be heard in private if and

to the extent that the court is satisfied that by nothing short of the

exclusion of the public can justice be done. Exclusions must be no more than the minimum strictly necessary to ensure justice is done and parties are expected to consider before applying for such an exclusion whether something short of exclusion can meet their concerns, as will normally be the case … . Anonymity will only be granted where it is strictly necessary, and then only to that extent.

13 The burden of establishing any derogation from the general principle lies

on the person seeking it. It must be established by clear and cogent

evidence … .

14 When considering the imposition of any derogation from open justice, the

court will have regard to the respective and sometimes competing Convention rights of the parties as well as the general public interest in open justice and in the public reporting of court proceedings. It will also adopt procedures which seek to ensure that any ultimate vindication of article 8 of the Convention, where that is engaged, is not undermined by the way in which the court has processed an interim application. On

the other hand, the principle of open justice requires that any restrictions

are the least that can be imposed consistent with the protection to which the party relying on their article 8 Convention right is entitled. …

15 It will only be in the rarest cases that an interim non-disclosure order

containing a prohibition on reporting the fact of proceedings (a

super-injunction) will be justified on grounds of strict necessity, ie, anti-

tipping-off situations, where short-term secrecy is required to ensure the

applicant can notify the respondent that the order is made … . It is then only in truly exceptional circumstances that such an order should be granted for a longer period … .”

Reporting and other restrictions To answer that question, I need to consider the circumstances in which a court may impose reporting restrictions on a case that has been heard in open court. It has long been recognised that the court has an inherent power to impose such restrictions

58

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59

and, more recently, it has been stated that such a power is conferred by the provisions of the Human Rights Act 1998: see Re S (A Child) (Identification: Restrictions on Publication) [2005] 1 AC 593 at [22] – [23] and Re Guardian News and Media Ltd [2010] 2 AC 697 at [30]. The principles as to when it is appropriate to impose reporting restrictions are summarised in H v News Group Newspapers Ltd Practice Note [2011] 1 WLR 1645 by Lord Neuberger of Abbotsbury MR at [21] – [22], as follows:

“21 In a case such as this, where the protection sought by the claimant is

an anonymity order or other restraint on publication of details of a case which are normally in the public domain, certain principles were

identified by the judge, and which, together with principles contained in

valuable written observations to which I have referred, I would summarise

as follows:

(1) The general rule is that the names of the parties to an action are included

in orders and judgments of the court.

(2) There is no general exception for cases where private matters are in issue.

(3) An order for anonymity or any other order restraining the publication of

the normally reportable details of a case is a derogation from the principle of open justice and an interference with the article 10 rights of the public

at large.

(4) Accordingly, where the court is asked to make any such order, it should

only do so after closely scrutinising the application, and considering whether a degree of restraint on publication is necessary, and, if it is, whether there is any less restrictive or more acceptable alternative than that which is sought.

(5) Where the court is asked to restrain the publication of the names of the

parties and/or the subject matter of the claim, on the ground that

such restraint is necessary under article 8, the question is whether there

is sufficient general, public interest in publishing a report of the

proceedings which identifies a party and/or the normally reportable

details to justify any resulting curtailment of his right and his family’s right to respect for their private and family life.

(6) On any such application, no special treatment should be accorded to

public figures or celebrities: in principle, they are entitled to the same

protection as others, no more and no less.

60

Disability, not dependency.

When Joel’s parents first learned of his cerebral palsy they were sick with worry about what his future might hold. Now, thanks to Jewish Blind & Disabled, they all enjoy Joel’s independent life in his own mobility apartment with 24/7 on site support.

leave the legacy of independence to people like joel.

eNABLeD Please remember us in your will. visit www.jbD.org or call 020 8371 6611 Registered Charity No. 259480

Charity Begins at home, and justice begins next door.

Charles Dickens THE BARRISTERS' BENEVOLENT ASSOCIATION

THE BARRISTERS' BENEVOLENT ASSOCIATION 14 Gray's Inn Square London WC1R 5JP Tel: 020 7242 4761 Fax: 020 7831 5366 www.the-bba.com Registered Charity No: 1106768 Company limited by guarantee: 5284271

The Barristers’ Benevolent Association exists to support, help and comfort those members of the Bar in England and Wales and their families and dependants who are in need, in distress or in difficulties. During the recent past we have helped barristers and their families in every circuit, often saving not only dignity but careers.

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We are not nearly as well-known in the profession as we would like, and there are possibly people who qualify for our help but aren’t aware of our existence… we also feel that there are other people who would be willing to contribute to the welfare of their less fortunate colleagues but who are also unaware of us.

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61

(7) An order for anonymity or for reporting restrictions should not be made

simply because the parties consent: parties cannot waive the rights of the

public.

(8) An anonymity order or any other order restraining publication made by

a judge at an interlocutory stage of an injunction application does not last for the duration of the proceedings but must be reviewed at the return date.

(9) Whether or not an anonymity order or an order restraining publication

of normally reportable details is made, then, at least where a judgment is or would normally be given, a publicly available judgment should

normally be given, and a copy of the consequential court order should

also be publicly available, although some editing of the judgment or order

may be necessary.

(10) Notice of any hearing should be given to the defendant unless there is a

good reason not to do so, in which case the court should be told of the

absence of notice and the reason for it, and should be satisfied that the

reason is a good one.

22 Where, as here, the basis for any claimed restriction on publication

ultimately rests on a judicial assessment, it is therefore essential that

(a) the judge is first satisfied that the facts and circumstances of the case

are sufficiently strong to justify encroaching on the open justice rule

by restricting the extent to which the proceedings can be reported, and (b) if so, the judge ensures that the restrictions on publication are fashioned so as to satisfy the need for the encroachment in a way which minimises the extent of any restrictions.��’ Listing in the future Finally, I wish to comment on the future listing of applications under the 1958 Act. If the parties intend to apply at the hearing of the substantive application for an order that the application be heard in private, or that there be reporting restrictions or that any judgment should be anonymised, and they wish the substantive hearing to be listed without the names of the parties but with random initials only, then it is to be expected that Chancery Listing will accede to that request. In such a case, in addition to random initials, the listing should refer to the Variation of Trusts Act 1958 but will not state that the hearing is in private. This procedure should not be abused.

A request to Chancery Listing to list the case in this way should only be made where a party genuinely intends to argue at the substantive hearing that the court should

62

PART OF THE ‘REMEMBER A CHARITY’ CAMPAIGN

Multiple Sclerosis (MS) Trust • Spirella Building, Bridge Road, Letchworth Garden City, Herts SG6 4ET • Tel: 01462 476700 • Email: info@mstrust.org.uk • Website: www.mstrust.org.uk • Registered Charity No: 1088353 (England & Wales) MS is a cruel, life-long condition. It is most often diagnosed in young people in their twenties and thirties, just as they are making life choices about relationships, careers and having their own families. The impact of that diagnosis is terrifying. It can take away the ability to plan and can mean loss of independence, disability and isolation. We don’t know what causes MS and there is no cure. It is endlessly variable and totally unpredictable – and people live with it for many years.

As a small organisation the MS Trust focuses its efforts on making life better today for people with MS. We believe that the best outcomes will come from well informed people making decisions in partnership with their specialist health professionals. We enable and encourage this by offering a personalised information service to help people better understand their MS and by supporting specialist services in the UK; educating the health and social care professionals who work with MS, identifying the gaps in MS services and campaigning to ensure resources are in place.

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Support our work and give those living with Parkinson’s hope of a better future.

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Help the Homeless was founded in 1975. We started with two national appeals and, as a result of the careful management of funds; we have been able to give grants totalling almost £2million to date.

We are a cost efficient charity with very low overheads enabling us to distribute a large proportion of out funds to organisations nationwide that help some of the UK’s most deprived people come off the streets and into safe accommodation. The organisations we help vary from small groups to established residential or training facilities working with homeless people and helping them get back to being contributing members of society. For more information about us please see our website: www.help-the-homeless.org.uk Help the Homeless depends on the generosity of its supporters to continue working with the homeless charities. Any donation, contribution or legacy will be most gratefully received and put excellent use – please help us.

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63

sit in private or impose reporting restrictions or give an anonymised judgment. If the parties are in doubt as to whether it is appropriate to make such a request, they may apply to the court in writing in advance of the substantive hearing for a direction that the substantive hearing might be listed in the way described above. I have the authority of the Chancellor of the High Court to make the comments in this paragraph.

64

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thesolicitorsgroup.com

Chapter 3 January 2015

Who should be appointed as deputy/Costs in the Court of Protection John Thurston, TEP, Solicitor, LL.B Frequently there is no dispute about who should be appointed a deputy, but it does occasionally happen. This was the issue in the next case where Lush SJ listed some circumstances where it would not be appropriate to appoint a family member as deputy.

There was also an issue with regard to costs. Normally the costs of all parties in an application concerning the estate of a person lacking capacity will come out of the person’s assets, but the court has a discretion to make a different order.

Re BIM DM and AM v. MD [2014] EWCOP 39.

BIM was born in 1936, and had two sons by her first marriage, AD and MD. Her first husband had left her in 1963, and she married RM in 1977. She had made a will giving her husband a life interest in her share in the matrimonial home with remainder to her sons, the residue going to her husband but if he predeceased then to her sons.

BIM was diagnosed with Alzheimer’s disease, and RM was appointed her deputy. He did not notify the sons of the application, and when asked about this, stated that they had had no contact with the sons for many years and was unaware of their addresses.

RM had a stroke, and was no longer able to carry out his duties. He had executed a lasting power of attorney in favour of his brother, DM and his sister-in-law, AM. They applied to be appointed as deputy for BIM. MD ascertained that DM and AM had emptied the former matrimonial home including removing BIM’s furniture, photographs and jewellery. They had also granted an assured shorthold tenancy of the property to their son and daughter in law at a rent way below the market rent, and told the police that they owned the property.

MD and AD applied to be appointed as deputies. DM and AM did not attend the hearing.

66

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67

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MD and AD accepted that it would be best if a professional deputy was appointed.

It was ordered that two partners in a firm of solicitors should be appointed as deputies, and that DM and AM should pay the costs of the proceedings.

Lush SJ said:

“No one has an automatic right to be appointed as deputy. The court has a

discretion as to whom it appoints and, as I have said elsewhere, traditionally the

court has preferred to appoint a relative or friend as deputy (if it is satisfied that

it is in P’s best interests to do so), rather than someone who is a complete

stranger.

However, there are some circumstances in which the court would not contemplate appointing a family member as a deputy. These include following situations, though the list is not exhaustive:

(a) the proposed deputy has physically, emotionally or financially abused P;

(b) there is a need to investigate dealings with P’s assets prior to the matter

being brought to the court’s attention, and the proposed deputy’s conduct

is the subject of that investigation;

(c) there is a conflict of interests;

(d) P is being subjected to undue influence;

(e) the proposed deputy has an unsatisfactory track record in managing his or

(f)

her own financial affairs; and there is ongoing friction between various family members, which is likely to interfere with the proper administration of P’s affairs. ….

I agree with Miss Cooper. The applicants should pay their own costs in view of:

(a) the fact that they have not succeeded in their application;

(b) their failure to respond to the objection and to the court’s order; and

(c) their conduct both before and during the proceedings.

If they had withdrawn their application after receiving the court’s order of 19 August 2014, or even after receiving Christine Cooper’s position statement, there would have been no need for an attended hearing.

The respondent’s costs are to be assessed on the standard basis and paid from BIM’s estate.”

68

I want to help provide a safety net for future seafarers and their families.”

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As an island nation, we rely on seafarers who risk their lives, put food on our plates and carry vital supplies to and from our shores.

Leave a lasting legacy to our seafarers By leaving a gift to Seafarers UK in your Will, you will help to support seafarers and their families, who find themselves in need of essential support at difficult times. Last year we gave grants totalling £2.5million to over 70 maritime welfare charities. Seafarers UK receives no government funding and

is heavily dependent on public donations and legacies to maintain its grant-making programme. Please help us to continue supporting those who risk so much for our island nation by leaving Seafarers UK a gift in your Will.

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69

In the matter of PMB, RS and DG v. JG [2014] EWCOP 42.

This case is a dispute between siblings as to who should be appointed as deputy for mother. The decision depends very much on its facts, but Lush SJ said: The law relating to the appointment of a deputy

17. Sections 1 to 4 of the Mental Capacity Act 2005 provide that, once it has

been established that a person lacks capacity to make a particular decision

at a particular time (such a person is referred to as ‘P’ in the Act), then any

act done or any decision made by someone else on P’s behalf must be

done or made in her best interests.

18. The Act does not define ‘best interests’, but section 4 provides a checklist

of factors that anyone making the decision on P’s behalf must consider

when establishing what is in her best interests. These are:

(a) to consider whether it is likely that P will have capacity in relation to

the matter in question at some time in the future (s 4(3));

(b) so far as reasonably practicable, to permit and encourage P to

participate, or to improve her ability to participate, as fully as possible in

any act done for her and any decision affecting her (s 4(4));

to consider, so far as is reasonably ascertainable, P’s past and present

(c)

wishes and feelings (and, in particular, any relevant written statement

made by her when she had capacity) (s 4(6)(a));

(d) to consider, so far as is reasonably ascertainable, the beliefs and values

that would be likely to influence P’s decision if she had capacity (s 4(6)

(b));

(e) to consider, so far as is reasonably ascertainable, the other factors that

P would be likely to consider if she were able to do so (s 4(6)(c)); and

to take into account, if it is practicable and appropriate to consult

(f)

them, the views of anyone engaged in caring for P or interested in her

welfare, as to what would be in her best interests and, in particular, as

to the matters mentioned in section 4(6): (s 4(7)).

19. If someone lacks capacity in relation to matters concerning her property

and affairs or personal welfare, the Court of Protection may make any

decision on her behalf, or appoint a deputy to make decisions on her behalf

in relation to those matters (section 16(2)).

70

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05/10/2015

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20. When it appoints a deputy, the Court of Protection exercises discretion and it

must exercise this discretion judicially and in P’s best interests. The court

would prefer the appointment of a family member, if possible, for the

following reasons:

(a) in order to respect P’s Article 8 right to private and family life and for a

(b) a relative will usually be familiar with P’s affairs, and her wishes and her

number of practical reasons that flow from that;

ways of communicating her likes and dislikes;

(c) someone who already has a close personal knowledge of P is also

likely to be better able to meet the obligation of a deputy to consult

with her, and to permit and encourage her to participate, or to improve

her ability to participate, as fully as possible in any act done for er and

any decision affecting her; and

(d) because professionals charge for their services, the appointment of a

family member is generally preferred for reasons of economy.

21. Simply preferring family members would, of course, have the effect of

negating the court’s overall discretion in deciding who or who not to

appoint. Accordingly, the court takes into account a wide range of other

relevant considerations. These include:

(a) the applicant’s own financial track record;

(b) whether there are any county court judgments recorded against them;

(c) his or her criminal record;

(d) the size and complexity of P’s estate;

(e) the degree of contact the applicant has with P;

(f)

(g) P’s own wishes and feelings on the matter, so far as they are

any particular ethnic or religious considerations;

ascertainable;

(h) the ability of the applicant to interact successfully with P and his carers;

(i)

any conflicts of interest;

(j)

any special qualities of the applicant;

(k)

any special features of the case;

72

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?

Who inherits Cousins?

?

Partner

Aunts or Uncles?

?

Nephew or Niece

Treasury?

?

Half-­‐blood siblings

Adopted children?

? ?

Family Family Lines Lines Research Research

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(l)

whether there are any matters to be investigated, such as alleged

fraud or financial abuse; and

(m) the expense involved in managing P’s property and affairs.

22. There are some circumstances, however, in which the court would not

consider appointing a family member as a deputy. These include following

situations, and the list is not exhaustive:

(a) the proposed deputy has physically, emotionally or financially

abused P;

(b) there is a need to investigate dealings with P’s assets prior to the matter

being brought to the court’s attention, and the proposed deputy’s

conduct is the subject of that investigation;

(c) there is a conflict of interests;

(d) P is being subjected to undue influence;

(e) the proposed deputy has an unsatisfactory track record in managing

(f)

his or her own financial affairs; there is ongoing friction between various family members, which is likely to interfere with the proper administration of P’s affairs; and

(g) cases in which there has been a substantial damages award for

personal injury and there are various factors that militate against the

appointment of a family member. One such factor is that the insurance

company which provides the court’s security bonds is unwilling to give

security of more than £1 million to a non-professional deputy.

Decision

23. I shall deal first with JG’s submissions:

(a) I do not accept that the application has been made maliciously

and with the intention of excluding him from participating in his

mother’s affairs. His mother has assets that need to be managed and

she is mentally incapable of managing them herself. In the absence of

a Lasting Power of Attorney, someone had to apply to the court for the

appointment of a deputy. The application was entirely appropriate and

it was made with the assistance of PMB’s solicitors.

(b) I do not accept, in the context in which he raised it, that “deputyship

encompasses more than just financial matters.” His sisters have applied

74

to be appointed as their mother’s deputies for property and affairs.

They have not applied for permission to be appointed as her deputies

for the purpose of making personal welfare decisions which she is

incapable of making.

(c) A joint appointment of him and his sisters would be unworkable, and he

knows it. Every decision, however minor, would become a bone of

contention.

(d) His criticism of the quality of care his youngest sister was providing for

their mother at home (even if it was justified) is water under the bridge.

Their mother has been living in a nursing home since February this year.

(e) His remarks about the disposal of various items of sentimental value in

his mother’s home were disingenuous because, as he was aware, his

mother had already given him all the old family photographs.

(f)

His refusal to accept the applicants’ offer to provide him with a copy of

their annual report to the Office of the Public Guardian was

unreasonable, essentially because he perceived it as a climb-down or

a loss of face on his part, rather than as a means of resolving deadlock

with speed and certainty.

(g) PMB’s estate is modest and not only is it unnecessary, but also it would

be disproportionate in terms of costs, to appoint a panel deputy. At

the hearing, I suggested to JG that I would possibly consider appointing

a panel deputy if he were willing to pay the panel deputy’s costs,

which I estimated would be roughly £2,000 to £3,000 a year, but he was

not prepared to accept the offer.

24. In my judgment, there has been no effective challenge to the applicants’

competence or integrity and I am satisfied with their general response to the objections that JG levelled against them.

25. There is no evidence that any hostility between the applicants and JG will

impede the proper administration of PMB’s estate.

26. There is relatively little for the deputies to do, other than:

(a) claim all the benefits to which their mother is entitled; (b) receive and manage her income, having resort to capital

whenever necessary;

(c) make sure her nursing home bills are paid on time; and

75

(d) see that provision is made for new clothes and any additional comforts

27. Insofar as one can identify any factors of magnetic importance in this case,

that she may require from time to time.

they are as follows:

(a) geographical proximity. DG lives locally and visits her mother every

Sunday. RS visits about once a month. The evidence is that JG has had

very limited contact with his mother since he returned to England three

years ago.

(b) the views others who are interested in her welfare as to what is in PMB’s

best interests. Her other two children, KH in Australia and MG in Devon,

both support the application.

(c) PMB’s own wishes and feelings as far as they can be ascertained

and, in particular, any written statement she made while she still had

capacity. PMB clearly has confidence and trust in DG and appointed

her to be the sole executrix of her will. While she still had capacity, she

also transferred one of her accounts into joint names with DG to

facilitate access to her funds, should it be necessary.

28. There are safeguards built into the system, which should allay any

concerns that JG has about the court appointing the applicants as

deputies:

(a) a joint appointment means that both deputies must act together.

This ensures that one of the deputies cannot go on a frolic of her own in

terms of contravening her authority or failing to act in PMB’s best

interests.

(b) they will be required to report annually to the Public Guardian, who has

a statutory duty to supervise deputies appointed by the court pursuant

to section 58(1)(c) of the Mental Capacity Act 2005. The report is due

on the anniversary of the court order appointing the deputies.

(c) they will be required to give security. In this case the level of security will

be set at £21,000, which will involve the payment from PMB’s estate of a

single, one-off premium of £98, rather than having to pay ongoing

annual premiums.

29. Having regard to all the circumstances, therefore, I am satisfied that it would

be in PMB’s best interests to appoint the applicants as her joint deputies, and

I dismiss the respondent’s objection.

76

30. I look forward to Michael Overend’s submissions regarding the costs of these

proceedings.”

Lasting powers of attorney.

Cancellation of registration.

Another case where there was an application to cancel registration of a property and affairs lasting power of attorney.

Re PC The Public Guardian v. AC and JC [2014] EWCOP 41.

PC was born in 1936, and had two sons, AC, who was born in 1961, and was a private hire driver, and JC who was born in 1962 and was a company director and independent financial adviser. She had been a primary school teacher, and her husband, who was also a teacher, had died in 1983. She still owned a house, which was worth in the region of £360,000.

Since 2009 PC had lived in residential care. On 8 June 2009 she executed a property and affairs lasting power of attorney in which she appointed her sons jointly and severally to be her attorneys. Her general practitioner witnessed her signature, and was the certificate provider. The power was duly registered on 12 August 2009 by the Office of the Public Guardian.

There was a complaint by the care home in which PC was resident, and another care home in which she had been resident about non-payment of care home fees.

Lush SJ said:

“Having reviewed the information produced by the attorneys, Rachel Bloore

filed a witness statement on 25 September, in which she said as follows:

“The income for the period (from 12 August 2009, when the LPA was registered, to the date of the court order’s on 10 June 2014) totalled £328,079.15 and expenditure for the period totalled £327,761.12.

Direct debits and standing orders totalled £178,168.47. Of this amount I am satisfied that a total of £158,894.65 has been spent on care home fees. Of the remaining £19,273.82 a total of £8,273.82 has been spent on utility bills and insurance while £11,000 was paid to the attorneys in standing orders, as described by the attorneys during the Public Guardian’s investigation, for ‘inheritance tax purposes’.

Card payments for the period totalled £32,924.34. Of this the attorneys have

provided receipts for payments totalling £474.01. I am satisfied that payments of

£8,000.00 to BUPA were care fee payments. The attorneys have not provided

77

proof of expenditure for the remaining £24,450.33, nor have they provided

receipts. Card payments included – Enterprise Rental £10,503.11; £3,000 to

Civvals Ltd (chartered accountants and business advisers); £980.44 to Ziani Ltd

(restaurant); £982.86 to JBW Ltd (Judicial Services Group) and £600.00 to Lloyds

TSB. Other payments include Domain Hosting websites, Companies House,

Vodafone, restaurants and ticket sales (entertainment).

Cash withdrawals for the period totalled £26,173.89, made up from £20,183.89 in

ATM withdrawals and £5,990.00 in branch withdrawals. The attorneys have

provided only one receipt which confirms payment in cash for £270.00 at John

Lewis. This expenditure was for a fridge freezer for (address of PC’s house).

During the Public Guardian’s investigation (the care home) confirmed that PC

received £1,000.00 in personal allowance. Therefore a total of £24,903.89 in

cash withdrawals has not been accounted for.

Cheque payments for the period totalled £64,426.20. No evidence or

explanations have been provided to explain this expenditure. Payments made

in branch during the period totalled £10,900.00. Of this amount £5,400.00 was

referenced ‘Mrs PC’, £1,500.00 referenced ‘Mr JC’ and £3,000.00 was

referenced ‘(name of JC’s company)” No evidence or explanations have

been provided for these payments.

A CHAPS payment of £15,023.00 was made on 11 September 2009 to JC. During

the course of the Public Guardian’s investigations the attorneys confirmed

that this was a gift to AC to fund his son’s university fees. At the time that this gift

was made, PC’s care fees were in debt by £11,671.71. The balance on the

current account was reduced to £1,026.20.

The attorneys have provided invoices totalling £1,099.98 as evidence of

expenditure from PC’s funds since 12th August 2009. Not all the invoices can

be matched to transactions on the account and it has not been explained

how payment was made. Although taking these receipts into consideration,

direct debits for utilities, payments for care fees and personal allowance, a total

of £150,347.45 remains either unaccounted for or has been gifted to the

attorneys.

It is the Public Guardian’s position that the attorneys have not satisfactorily

accounted for their management of PC’s financial affairs. Furthermore, the

attorneys have not acted in PC’s best interests by gifting themselves funds that

should have been used to pay her care fees.

78

1.

Therefore the Public Guardian seeks an order under section 22(4)(b)

of the Mental Capacity Act 2005 to revoke the LPA made by PC and

an order directing that a panel deputy is invited to make an application

for appointment as deputy to investigate and report as to the past

management of PC’s affairs and be empowered to take such steps as are

necessary to restore her estate to its correct level.”

16. The respondents did not file a response to Rachel Bloore’s witness

statement until the hearing itself, when JC handed in a witness statement

that he had signed on 29 October 2014, but none of the exhibits to which

the witness statement referred. He said that they would be submitted later.

The hearing.

17. The hearing took place on 30 October 2014 and was attended by Fatima

Chandoo of the OPG and JC in person.

18. JC’s witness statement and his presentation at the hearing were essentially

a diatribe against:

(a) BUPA, who had been the whistleblower in this case;

(b) PC’s previous care home; and

(c) Barclays Bank, Lloyds TSB, RBS, Aviva and Sainsbury’s who, he claims,

had ‘hijacked’ the name of his company in order to promote their

own financial services. He has been involved in protracted litigation

with them.

19. In response to the reference in Rachel Bloore’s statement that no

explanation had been given for cheque payments totalling £64,436.20, JC

said:

“The cheque payments relate to the payment of £15,000 to AC to cover

his son’s university costs. The balance of cheques was used to purchase

art. Several leading Royal Academy artists, including the sculptor of the

‘Battle of Britain’, Mr Paul Day, had work purchased. A series of desirable

prints were purchased. Works by Sir William Russell Flint RA, Robert Soden,

Fred Cumming and Bernard Dunstan RA have also been acquired. These

items are not included within the cash assets or investments. However,

discussions with Christie’s, Bonhams and Sotheby’s are under way.”

79

20. JC concluded his witness statement by saying that:

“When private pensions, state pensions and other benefits plus rental

income are taken into account we have ensured that our mother has

sufficient income to cover all care costs, etc. Her total income is £43,000

whereas her care costs are £36,000. This therefore permits her to be safe

and secure, at last receiving the care required and without being a

burden to the UK taxpayer/NHS.”

It was held that PC lacked capacity. AC did not participate in the hearing about whether the lasting power should be revoked, but JC did attend. He argued that it would have been “our professional duty not to take the opportunity structuring our mothers affairs.”

It was held that JC had contravened his authority, and had not acted in the best interests of his mother. The question also arose about whether it was only JC’s appointment that should be revoked, but it was held that AC had also contravened his authority and not acted in the best interests of his mother.

A member of the panel of deputies was invited to apply for appointment as deputy.

Joint attorneys and substitutes.

Can you appoint A and B as joint attorneys under a lasting power of attorney, and then to say that if A or B cannot act, then the survivor is to act jointly and severally with a substitute attorney?

Re Miles The Public Guardian v. Miles and Others [2014] EWCOP 40 The donor of a lasting power of attorney for property and financial affairs and a lasting power of attorney for health and welfare appointed her husband and her daughter to be her attorneys with her son as replacement attorney. She directed the attorneys to act jointly for some and severally or other decisions, and included the following provision in the property and financial affairs lasting power of attorney: “My attorneys may act jointly and severally save with regard to:

1.

any sale of my property at address (or any property which may

subsequently replace it); and

2.

any transaction in excess of £10,000

when all surviving attorneys who are capable of acting (whether originally

appointed or who have been appointed by and are acting in substitution)

shall act jointly insofar as there may be more than one of them able to do

80

so but in the event that there is only one of them capable of acting I

expressly re-appoint that attorney to act alone.

My replacement attorney shall only act in the event that both of my

originally nominated attorneys shall have died before me or are otherwise

unable or unwilling to act or the appointment of them fails for any other

reason.

In the event of any difficulty arising with the operation of the provisions

above then my attorneys should act jointly and severally and in the event

of any replacement attorney acting because of failure of the above

provisions my originally nominated attorneys who are still capable of

acting shall be reappointed to act with them insofar as it shall be possible

to do so and on a joint and several basis.�

11. The provision in section 4 of the LPA for health and welfare was broadly

similar:

“My attorneys may act jointly and severally save with regard to any

decision as to the withdrawal of life sustaining treatment when all surviving

attorneys who are capable of acting (whether originally appointed or

who have been appointed by and are acting in substitution) shall act

jointly insofar as there may be more than one of them able to do so but in

the event that there is only one of them capable of acting I expressly re-

appoint that attorney to act alone.

My replacement attorney shall only act in the event that both of my

originally nominated attorneys shall have died before me or are otherwise

unable or unwilling to act or the appointment of them fails for any other

reason and I also expressly re-appoint any originally nominated attorneys

who are still capable of acting and wish to do.

In the event of any difficulty arising with the operation of the provisions

above then my attorneys should act jointly and severally and in the event

of any replacement attorney acting because of failure of the above

provisions my originally nominated attorneys who are still capable of

acting shall be reappointed to act with them insofar as it shall be possible

to do so and on a joint and several basis.�

Lush SJ stated that the question that he was required to answer is whether the donor of a lasting power of attorney could appoint more than one attorney to act jointly with survivorship by explicitly reappointing the continuing attorney or attorneys.

81

Section 10 (4) of the Mental Capacity Act 2005 provides that the instrument appointing two or more persons to act as Davies of a lasting power of attorney ‘may appoint them to act: (a) jointly,

(b) jointly and severally, or

(c) jointly in respect of some matters and jointly and severally respect of

others.

The prescribed form does not provide for an original joint appointment. and then for a joint and several appointment of substitute attorneys. It is not possible in the same form to appoint A,B and C as joint attorneys, and then as substitutes A,B and C as joint and several attorneys.

It was held that the second and fourth paragraphs in the property and affairs power quoted above should be deleted.

It was suggested that the safest way of achieving the effect of joint attorneyship with survivorship would be for the donor to execute two lasting powers of attorney, the first appointing the attorneys to act jointly, and the second appointing them to act jointly and severally with a condition that the second lasting power of attorney should only come into operation if the first lasting power of attorney fails for any reason. The second LPA could also provide for the appointment of one or more replacement attorneys, if that is what the donor wishes.

Inheritance (Provision for Family and Dependants) Act 1975 and proprietary estoppel.

Wright v. Waters [2014] EWHC 3614 (Ch).

Mary Waters died on 29 December 2010 at the age of 80 leaving a net estate for probate purposes of £138,701. She had two children, Patricia Wright was born on 9 August 1950,and David Waters who was born 12 April 1954. Mary Waters made a will in 2009 making no provision for Patricia Wright or her children and grandchildren. The residue was left to David Waters and his wife Susan.

Patricia Wright claimed against her mother’s estate on the basis of proprietary estoppel and secondly under the Inheritance (Provision for Family and Dependence) Act 1975 on the basis that her mother’s will did not make reasonable financial provision for her. There was no doubt that she had financial and medical problems. It was clear there was considerable animosity between Patricia Wright and her brother.

Patricia claimed that she had worked in her parents shops for nothing, and the father and mother had told that she was working for her inheritance. She also alleged that

82

after the death of her father, her mother had sold a villa in Spain, and had told her that she would have her own house as she would receive half of her mother’s estate.

Mary Waters had given both Patricia and David £10,000 each, but it was clear that it was not intended to be a gift to them. This had caused an estrangement between daughter and mother. Patricia’s husband suffered a stroke in 2001, and Patricia wrote a letter to her mother which included the following:

“Further to my telephone call this morning I wish to formally advise you that I do

not wish to have any communication with you at all in the future.

As far as I am concerned I no longer have a mother, you are not fit to call

yourself that.

You could not care less that [Ken] is so seriously ill and could die at any moment

and even if he doesn’t that the likelihood is he will be so severely disabled he

may never come home.

All you care about is your son and his family. Well as far as I am concerned you

are welcome to each other – you won’t have anyone else.

You were right when you said it should have been you instead of my father – I

wish it had been.”

When Mary Waters made a will, she wrote a letter setting out her reasons for excluding her daughter Patricia:

“Having made my will I would like to add in this letter, to be opened on my

death that I do not wish my daughter Patricia or her daughter Victoria to inherit

any part of my estate. The reasons are:

1.

My daughter has already taken without my consent £10,000 of my savings.

2.

My daughter has been a constant source of trouble to me and my

husband for many years.

3.

There has been no contact for almost 9 years. She has shown no interest in

my welfare whatsoever.

I am sure my daughter will dispute these facts, but I am adamant that she has already had her just rewards and she will receive nothing more from me” Mary Waters was diagnosed with terminal cancer in September 2010 whilst she did not want Patricia Wright to be informed of her condition, she was so informed by Uncle George. Patricia did not make any attempt to contact her mother.

83

It was held that the claim under the 75 Act failed because of her conduct towards her mother. It was also held that the claim based on proprietary estoppel failed as the judge was not satisfied that there were sufficiently clear representations that were relied upon by Patricia Wright.

84

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thesolicitorsgroup.com

Chapter 4 February 2015

What is a business?

John Thurston, TEP, Solicitor, LL.B In order to obtain BPR, there must be a business. If you have a stud farm, in effect to qualify for APR, there must be a business. What constitutes a business? This was the issue in the next case, which is concerned with taper relief.

Blaney v. Commissioners for HMRC [2014] UKFTT 1001 (TC).

The question in the next case was whether Mr Blaney was carrying on a trade of horse breeding, or whether it was really a hobby. It was held that he was not in the trade of horse breeding, and could not claim taper relief at the rate applicable to business assets. The decision provides: “During the course of submissions we were referred briefly to the badges of trade.

We have considered the badges of trade in a little more detail for the purposes of this decision. They were summarised by Sir Nicolas Browne-Wilkinson VC in Marson v Morton 59 TC 381 at 391:

“The matters which are apparently treated as a badge of trading are as follows:

(1)

That the transaction in question was a one-off transaction. Although a

one-off transaction is in law capable of being an adventure in the nature

of trade, obviously the lack of repetition is a pointer which indicates there

might not here be trade but something else.

(2)

Is the transaction in question in some way related to the trade which the

taxpayer otherwise carries on? For example, a one-off purchase of silver

cutlery by a general dealer is much more likely to be a trade transaction

than such a purchase by a retired colonel.

The nature of the subject matter may be a valuable pointer. Was the

(3)

transaction in a commodity of a kind which is normally the subject matter

of trade and which can only be turned to advantage by realisation, such

as referred to in the passage that the Chairman quoted from Reinhold?

For example, a large bulk of whisky or toilet paper is essentially a subject

matter of trade, not of enjoyment.

86

(4)

In some cases attention has been paid to the way in which the

transaction was carried through: was it carried through in a way typical of

the trade in a commodity of that nature?

What was the source of finance of the transaction? If the money was

(5)

borrowed that is some pointer towards an intention to buy the item with a

view to its resale in the short term; a fair pointer towards trade.

Was the item which was purchased resold as it stood or was work done on

(6)

it or relating to it for the purposes of resale? For example, the purchase of

second-hand machinery which was repaired or improved before resale. If

there was such work done, that is again a pointer towards the transaction

being in the nature of trade.

Was the item purchased resold in one lot as it was bought, or was it broken

(7)

down into saleable lots? If it was broken down it is again some indication

that it was a trading transaction, the purchase being with a view to resale

at profit by doing something in relation to the object bought.

(8)

What were the purchasers’ intentions as to resale at the time of purchase?

If there was an intention to hold the object indefinitely, albeit with an

intention to make a capital profit at the end of the day, that is a pointer

towards a pure investment as opposed to a trading deal. On the other

hand, if before the contract of purchase is made a contract for resale is

already in place, that is a very strong pointer towards a trading deal

rather than an investment. Similarly, an intention to resell in the short term

rather than the long term is some indication against concluding that the

transaction was by way of investment rather than by way of a deal.

However, as far as I can see, this is in no sense decisive by itself.

Did the item purchased provide enjoyment for the purchaser (for

(9)

example, a picture), or pride of possession, or produce income pending

resale? If it did, then that may indicate an intention to buy either for

personal satisfaction or to invest for income yield, rather than do a deal

purely for the purpose of making a profit on the turn. I will consider in a

moment the question whether, if there is no income produced or pride of

possession pending resale, that is a strong pointer in favour of it being a

trade rather than an investment.

87

17. The Vice Chancellor went on to describe the approach to be taken in

applying the badges of trade:

“I emphasise again that the matters I have mentioned are not a

comprehensive list and no single item is in any way decisive. I believe that

in order to reach a proper factual assessment in each case it is necessary to

stand back, having looked at those matters, and look at the whole

picture…” ...

62. It seems to us that the following badges of trade are particularly relevant to

the present circumstances (using the paragraph numbers in Marson v

Morton):

63. (1) Frequency of transactions. The larger the number of broodmares owned,

the more likely it is to be a trade. Mr Blaney did own 3 broodmares at

various stages during the relevant period and kept them on the Land. We

accept that breeding racehorses is precarious and can result in intermittent

sales. There is however no evidence of any sales of horses produced by

Mr Blaney’s broodmares. The only horse sale was a share in Twicken which

was not produced by Mr Blaney’s breeding activities.

64. (2) Relationship to other activities of the taxpayer. The activity of horse

breeding is not related in any way to a trade which Mr Blaney carries on. He

is a house builder with a love of horses and horse racing. It was not

suggested, nor could it have been, that his racing of horses amounted to

a trade. The activity of horse breeding was certainly related to Mr Blaney’s

general enjoyment of horses and horse racing. Having said that, HMRC have

accepted that in the 1980’s Mr Blaney may have been engaged in a trade

of horse breeding which gives some support to his case in relation to the

relevant period.

65. (3) Nature of the subject matter. An owner of horses will almost always

derive personal enjoyment from ownership. Mr Blaney accepted that he

derived personal enjoyment. However breeding horses can undoubtedly

amount to a trade in appropriate circumstances. As Mr Dunlop submitted,

conducting a trade does not need to involve drudgery.

66. (6) Work done on the asset. Supplementary work done on an asset prior to

sale may point towards trading. Certainly broodmares and foals require

considerable care and attention, including the services of a vet. We accept

also that racing the produce of a broodmare can increase the value of the

horse being raced, the mare and any other produce. In that sense racing

88

horses could in appropriate circumstances be viewed as part of a horse

breeding business. However we have no evidence as to which, if any foals

were subsequently raced by Mr Blaney.

67. (8) Purchaser’s intentions at the time of purchase. The intention to make a

profit on re-sale is an indicator of trading. Whilst there were no sales of horses,

we accept that Mr Blaney lived in hope that he would breed a winner.

It seems to us that this was highly speculative. Some trading might be highly

speculative but on the facts of this case it does not seem to us that Mr

Blaney’s intention to sell a successful horse is a significant factor.

68. (9) Enjoyment of the owner. In our view this is one of the most significant

factors for present purposes. Mr Blaney enjoyed owning and racing horses,

although the extent to which he raced horses in the relevant period was not

entirely clear. His enjoyment extended to breeding racehorses in the hope

that one day he would breed a big winner.

69. We must stand back and consider our findings of fact and the badges of

trade as a whole. Doing so, it seems to us that Mr Blaney’s principal

motivation was his love of horses and horse racing.

70. There may be circumstances where racing horses is part and parcel of the

activities of a horse breeder. The racing adds value to the trade of horse

breeding. Conversely breeding horses may be part and parcel of the activity

of horse racing. On the present facts the common thread is Mr Blaney’s love

of horses and horse racing and the personal enjoyment he gets from both

racing and breeding horses.

71. We have accepted Mr Blaney’s evidence in so far as it confirmed that he

had been breeding horses at the Land. However we are not satisfied that

the horse breeding was on anything other than a small scale. We do not

have any reliable evidence as to the scale of his horse racing activities,

but from the evidence we do have it was also on a small scale. Each activity

complemented the other but we do not consider that the horse breeding

amounted to a trade.

72. Looked at in the round we find that Mr Blaney’s activities were carried out for

personal enjoyment rather than by way of trade.

73. If there had been a trade, the next question would logically be whether that

trade was conducted on a commercial basis and with a view to the

realisation of profits as required by paragraph 22 Schedule A1 TCGA 1992.

89

74. Mr Donnelly for HMRC did not put his case either to Mr Blaney or in

submissions on the basis that any trade which might have existed was not

conducted on a commercial basis with a view to the realisation of profits.

There is a body of case law in other contexts which deal with those

concepts. We were not referred to that case law, or indeed to paragraph

22 Schedule A1 TCGA 1992. The closest the Respondents came to asserting

that any trade was not conducted on a commercial basis was the evidence

of Mr Wilson in cross-examination.

75. On the basis of what we have heard it seems unlikely that even if Mr Blaney

was carrying on a trade of horse breeding that such a trade was conducted

on a commercial basis with a view to the realisation of profits. However in

light of the way in which HMRC have put their case it would not be right for

us to make any such finding and we say nothing further on this aspect. Our

factual finding is that Mr Blaney was not carrying on a trade.�

Inheritance (Provision for Family and Dependants) Act 1975.

John Thurston, TEP, Solicitor, LL.B A person maintained by a deceased person up to the date of death can claim under the 1975 Act providing that he or she has not provided full consideration for their maintenance. The provision of free accommodation or accommodation at less than the market rent is maintenance, but if the person maintained is doing domestic chores, is this full consideration? This was the issue in the next case.

Gordon v. Legester [2014] WTLR 1675.

The claimant had come to England from Jamaica in 2002, and she had been employed as a carer. She maintained that she had lived with the deceased as husband and wife between 2004 and about 2007. In 2008 she had married another man, but the marriage did not last and she returned to live in the deceased’s house in the autumn of 2010. He died in February 2012. It was accepted that the claimant could not claim as a cohabitee under the Inheritance (Provision for Family and Dependants) Act 1975 as she had not lived with the deceased for two years up to date of his death.

It was held that the claimant had cooked for the deceased and cleaned the house.

It was also held that she did have a close relationship with the deceased. He had also provided her with free accommodation.

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It was argued that prior to the introduction of a cohabitee’s right of application, the courts had adopted a domestic rather than a commercial measure in order to decide if the claimant was being maintained by a deceased. This had been done to accommodate cohabitees who had no rights as such at that time. The judge rejected this argument.

It was held that the approach to be adopted is a common-sense one, which has regard to the nature of the relationship in which services were provided and which does not, therefore, necessarily equate to a commercial division. Even if the test was commercial, the judge was not persuaded that the work carried out by the claimant amounted to full consideration. It was also held that the deceased had assumed responsibility for the maintenance of the applicant.

It was held that the claimant was entitled to claim as a person maintained by the deceased.

It was held that the deceased owed a moral obligation to the claimant to ensure that she was sufficiently provided for and resettled in suitable accommodation. She was awarded a lump sum of £16,500 which was equivalent to 2 years rent that she was paying.

Mistake.

John Thurston, TEP, Solicitor, LL.B Will the courts set aside a transaction which has taxation consequences which are not foreseen? This is an issue which has been the subject of a Supreme Court decision, Futter and Anor v. Revenue & Customs [2013] UKSC 26.

The writer considers that the tax system is so complicated that it is only too easy for trustees and others to act in a way which they would not have done had they realised the taxation consequences, and that the courts and HMRC should be prepared to give relief. This was the issue in the next case.

Kennedy and others v. Kennedy and others [2014] EWHC 4129 (Ch).

The trustees of a settlement made in 2003 made an appointment out in 2008. Clause 2.1(c) stated:

“the remainder of the Trust Fund (other than the First Appointed Fund and

the Second Appointed Fund) shall henceforth be held upon trust for the Settlor

absolutely and free from all the trusts powers and provisions of the Settlement”

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This had disastrous CGT consequences. It appointed various shares to the settlor which was not intended.

Proceedings were commenced claiming (1) a declaration that the relevant shares were not appointed on the trusts of the October 2008; alternatively (2) an order setting aside clause 2.1(c) of the October 2008 Appointment; alternatively (3) rectification of the October 2008 Appointment by the addition of words excluding the relevant shares from the operation of clause 2.1(c).

HMRC initially served a defence, but later stated that they would not participate in the proceedings.

The Chancellor Sir Terence Etherton said:

“I am satisfied that this is a case in which the claimants are entitled to rescission

for equitable mistake. The principles applicable to rescission of a non-

contractual voluntary disposition for mistake were comprehensively set out in

the judgment of Lord Walker in Pitt v Holt [2013] UKSC 26, [2013] 2 AC 108, with

which the other members of the Supreme Court agreed. They may be

summarised as follows.

4.(1) There must be a distinct mistake as distinguished from mere ignorance

or inadvertence or what unjust enrichment scholars call a “misprediction�

relating to some possible future event. On the other hand, forgetfulness,

inadvertence or ignorance can lead to a false belief or assumption which

the court will recognise as a legally relevant mistake. Accordingly, although

mere ignorance, even if causative, is insufficient to found the cause of action,

the court, in carrying out its task of finding the facts, should not shrink from

drawing the inference of conscious belief or tacit assumption when there is

evidence to support such an inference.

(2) A mistake may still be a relevant mistake even if it was due to carelessness

on the part of the person making the voluntary disposition, unless the

circumstances are such as to show that he or she deliberately ran the risk, or

must be taken to have run the risk, of being wrong.

(3) The causative mistake must be sufficiently grave as to make it

unconscionable on the part of the donee to retain the property. That test will

normally be satisfied only when there is a mistake either as to the legal

character or nature of a transaction or as to some matter of fact or law

which is basic to the transaction. The gravity of the mistake must be assessed by

a close examination of the facts, including the circumstances of the mistake

and its consequences for the person who made the vitiated disposition.

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(4) The injustice (or unfairness or unconscionableness) of leaving a mistaken

disposition uncorrected must be evaluated objectively but with an intense

focus on the facts of the particular case. The court must consider in the round

the existence of a distinct mistake, its degree of centrality to the transaction in

question and the seriousness of its consequences, and make an evaluative

judgment whether it would be unconscionable, or unjust, to leave the mistake

uncorrected.”

Non est factum.

John Thurston, TEP, Solicitor, LL.B In the next case, there were various allegations. A defence of non est factum was raised – someone signs a document which is substantially different from what he or she thinks that she is signing.

Destine Estates Ltd and another v. Muir [2014] EWHC 4191 (Ch).

The facts of this case are complicated, there was a disputed loan deed and disputed charge deed. The defendants challenged the validity of these deeds on various grounds: Forgery.

On the facts, it was held that the defendants had signed the disputed loan deed, and that Mrs Miller had signed the disputed charge deed.

Misrepresentation.

It was held that the defendants had not been induced to sign the deeds by misrepresentation.

Non est factum.

Again, this allegation was rejected.

Newey J said: “Chitty on Contracts, 31st ed., says the following when introducing the defence of non est factum (at paragraph 5-102):

“The general rule is that a person is estopped by his or her deed, and

although there is no such estoppel in the case of ordinary signed documents,

a party of full age and understanding is normally bound by his signature to a

document, whether he reads or understands it or not. If, however, a party

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has been misled into executing a deed or signing a document essentially

different from that which he intended to execute or sign, he can plead non

est factum in an action against him. The deed or writing is completely void in

whosesoever hands it may come. In most of the cases in which non est

factum has been successfully pleaded, the mistake has been induced by

fraud. But the presence of fraud is probably not a necessary factor.”

82. Non est factum was considered by the House of Lords in Saunders v Anglia BS

[1971] AC 1004. It is apparent from the judgments in that case that, for the

defence of non est factum to succeed, it must be shown that there was a

radical difference between the document that was signed and what

the signatory thought he was signing (see e.g. 1017, 1021, 1026 and 1039).

Lord Wilberforce explained (at 1026):

“a document should be held to be void (as opposed to voidable) only

when the transaction which the document purports to effect is

essentially different in substance or in kind from the transaction intended.

Many other expressions, or adjectives, could be used – ‘basically’ or

‘radically’ or ‘fundamentally’.”

Lord Reid said (at 1016) that “there may be cases where this plea can

properly be applied in favour of a man of full capacity”, “particularly when

he was led to believe that the document which he signed was not one

which affected his legal rights”.”

Undue influence.

This allegation was also rejected.

Newey J said: “The law on undue influence was reviewed by the House of Lords in Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 798. It is apparent from that decision that undue influence can potentially be established by showing (a) a relationship of trust and confidence or ascendancy and (b) that the transaction in question calls for explanation. Thus, Lord Nicholls said (at paragraph 14):

“Proof that the complainant placed trust and confidence in the other party

in relation to the management of the complainant’s financial affairs,

coupled with a transaction which calls for explanation, will normally be

sufficient, failing evidence to the contrary, to discharge the burden of proof.”

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A little later, Lord Nicholls said (at paragraph 21):

“[T]here are two prerequisites to the evidential shift in the burden of proof

from the complainant to the other party. First, that the complainant reposed

trust and confidence in the other party, or the other party acquired

ascendancy over the complainant. Second, that the transaction is not

readily explicable by the relationship of the parties.”

In similar vein, Lord Scott observed (at paragraph 156):

“It is … the combination of relationship and the nature of the transaction that

gives rise to the presumption and, if the transaction is challenged, shifts the

onus to the transferee.”

The law on undue influence was reviewed by the House of Lords in Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 798. It is apparent from that decision that undue influence can potentially be established by showing (a) a relationship of trust and confidence or ascendancy and (b) that the transaction in question calls for explanation. Thus, Lord Nicholls said (at paragraph 14):

“Proof that the complainant placed trust and confidence in the other party

in relation to the management of the complainant’s financial affairs,

coupled with a transaction which calls for explanation, will normally be

sufficient, failing evidence to the contrary, to discharge the burden of proof.”

A little later, Lord Nicholls said (at paragraph 21):

“[T]here are two prerequisites to the evidential shift in the burden of proof

from the complainant to the other party. First, that the complainant reposed

trust and confidence in the other party, or the other party acquired

ascendancy over the complainant. Second, that the transaction is not

readily explicable by the relationship of the parties.”

In similar vein, Lord Scott observed (at paragraph 156):

“It is … the combination of relationship and the nature of the transaction that

gives rise to the presumption and, if the transaction is challenged, shifts the

onus to the transferee.””

Newey J also also held that the defendants were estopped from denying that they owed money to the claimants.

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Happy families!

John Thurston, TEP, Solicitor, LL.B Practitioners frequently encounter families who fall out over money. The next case is one such, and also makes the point that family members who are trustees may not be aware of their duties.

Watts v. Watts [2014] WTLR 1781.

In 1967 the father of the claimant and defendant created A settlement in favour of the claimant and the defendant and two other children for the benefit of his children and his grandchildren. In 1976 the trust fund was split into separate trust funds for each of the children. The defendant was a trustee of the claimant’s fund. Clause 4 allowed the trustees to pay all the capital to the claimant if they considered it to be to his advantage.

In 1998 the claimant was appointed as a trustee of his fund, and the trustees agreed to advance the entire trust fund to the claimant. He then signed a deed of gift giving the defendant £2 million. The defendant represented to the claimant that he would invest the money and his own money, and would make a gift each year to the claimant starting at £60,000 and increasing to £100,000 for life.

The claimant claimed that he had always been bullied by the defendant who was nine years older than him. He alleged that he had been coerced into signing the deed of gift as the defendant was a chartered accountant and professional investor, and he trusted him. The relationship between the claimant and the defendant was clearly a stormy one and sometimes violence was involved.

It was held:

1.

There was a contract between the plaintiff and the defendant, and the claimant was entitled to the arrears of income and repayment of his capital

subject to illegality.

2.

The defendant was liable for damages for deceit

3.

The defendant had failed to tell the claimant that he was going to invest the

money in high risk investments. This failure was fraudulent.

There was a breach of trust as the main object of the breaking up of the trust

4.

was unlawful tax evasion.

5.

There had been a breach of the self dealing.

6.

There was undue influence.

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7. On the present law, the contract was unenforceable due to the illegality as

both parties had intended to evade tax. However, the claimant could still

enforce claims for deceit and breach of trust as these were wrongful acts of the

defendant unconnected with the illegality.

Quantification of equitable interests.

John Thurston, TEP, Solicitor, LL.B The question of who owns what continues to be litigated in disputes between cohabitees. In an ideal world, there would be a written agreement or declaration of trust, but many cohabitees do not bother about such documentation.

O’Kelly v. Davies [2014] EWHC Civ 1606.

The appellant and the respondent met when they were in their mid-20s, and lived together in a rented flat in Swansea. There was a daughter of the relationship. The respondent spent most of his working life away from Swansea as he was employed in the construction industry. Ultimately, they purchased a house in Swansea, and that was vested in the sole name of the appellant, although the respondent paid all the expenses. The appellant gave misleading information that she was a single mother living on her own.

At first instance, it was held that there was no evidence of any agreement that the respondent should have an equitable interest in the house, but it was held that he had a half interest. It was also held that the claim by the respondent was not based on any illegality.

On appeal, the decision of the judge at first instance was confirmed.

There was some discussion about the difference between resulting and constructive trusts.

Pitchford LJ said:

“The next stage of the analysis is, it seems to me, an examination of the

principles upon which the House of Lords acted in Stack v Dowden. It was

recognised that in many domestic circumstances it was no longer appropriate

to adopt the resulting trust analysis. As Peter Gibson LJ had observed in Drake

v Whipp [1996] 1 FLR 826 at page 827 the presumption of a resulting trust made

a presumption as to the intention of the transferor in the absence of evidence

in rebuttal, while a constructive trust arose from a finding as to the “actual or

imputed” intention of the parties (Lord Walker at [2007] 2 AC 432, page 446).

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Lady Hale (page 455) drew attention to the developments in the law relating

to shared property described by Gray and Gray in Elements of Land Law, 4th

edition (2005) at page 864:

“In recent decades a new pragmatism has become apparent in the law

of trusts. English courts have eventually conceded that the classical theory

of resulting trusts, with its fixation on intentions presumed to have been

formulated contemporaneously with the acquisition of title, has substantially

broken down … Simultaneously the balance of emphasis in the law of trusts

has transferred from crude factors of money contribution (which are pre-

eminent in the resulting trust) towards more subtle factors of intentional bargain

(which are the foundational premise of the constructive trust) … But the

undoubted consequence is that the doctrine of resulting trust has conceded

much of its field of application to the constructive trust, which is nowadays fast

becoming the primary phenomenon in the area of implied trusts.” ...

At the conclusion of their judgment with which the majority agreed Lord Walker and Lady Hale summarised the present state of the law as follows:

“51 In summary, therefore, the following are the principles applicable in a case

such as this, where a family home is bought in the joint names of a cohabiting

couple who are both responsible for any mortgage, but without any express

declaration of their beneficial interests. (1) The starting point is that equity

follows the law and they are joint tenants both in law and in equity. (2) That

presumption can be displaced by showing (a) that the parties had a different

common intention at the time when they acquired the home, or (b) that they

later formed the common intention that their respective shares would change.

(3) Their common intention is to be deduced objectively from their conduct:

“the relevant intention of each party is the intention which was reasonably

understood by the other party to be manifested by that party’s words and

conduct notwithstanding that he did not consciously formulate that intention

in his own mind or even acted with some different intention which he did not

communicate to the other party”: Lord Diplock in Gissing v Gissing [1971] AC

886 , 906.

Examples of the sort of evidence which might be relevant to drawing such

inferences are given in Stack v Dowden [2007] 2 AC 432, para 69. (4) In those

cases where it is clear either (a) that the parties did not intend joint tenancy

at the outset, or (b) had changed their original intention, but it is not possible

to ascertain by direct evidence or by inference what their actual intention

was as to the shares in which they would own the property, “the answer is that 98

each is entitled to that share which the court considers fair having regard to

the whole course of dealing between them in relation to the property”:

Chadwick LJ in Oxley v Hiscock [2005] Fam 211, para 69. In our judgment, “the

whole course of dealing … in relation to the property” should be given a broad

meaning, enabling a similar range of factors to be taken into account as may

be relevant to ascertaining the parties’ actual intentions. (5) Each case will turn

on its own facts. Financial contributions are relevant but there are many other

factors which may enable the court to decide what shares were either

intended (as in case (3)) or fair (as in case (4)).

52 This case is not concerned with a family home which is put into the name of one party only. The starting point is different. The first issue is whether it was intended that the other party have any beneficial interest in the property at all. If he does, the second issue is what that interest is. There is no presumption of joint beneficial ownership. But their common intention has once again to be deduced objectively from their conduct. If the evidence shows a common intention to share beneficial ownership but does not show what shares were intended, the court will have to proceed as at para 51(4) and (5) above.””

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Chapter 5 March 2015

Nuptial settlements John Thurston, TEP, Solicitor, LL.B The divorce courts have wide powers to alter the terms of a nuptial settlement. What is a nuptial settlement?

This issue arose in the next case.

AB v. CB and another [2015] WTLR 1.

The husband and the wife met in 1999, and married in 2003. They had established a media consultancy company in which they each held a 50% shareholding. Initially, they lived in the house of the husband’s parents, who were very wealthy, but in 2004 a cottage was gifted to them by the parents. They renovated the property, and sold it some months later. The proceeds of sale were used to discharge various joint debts and everyday household expenses. Some money was lent to the media company, and £21,000 was spent on the renovation of a farmhouse which was their new home.

Title was held by the husband’s parents.

In April 2009 the property was transferred to trustees on an interest in possession trust for the benefit of the husband. There was a wide power of advancement in favour of beneficiaries who were the children and remoter descendants of the settlor, with an additional power to add persons as beneficiaries. The default beneficiary was the husband’s brother.

The couple adopted one child, and were on the verge of adopting another child when the marriage breakdown. The husband started a relationship with another lady, and a child was born as a result of that relationship. Although the wife did not disclose this, it was ascertained that she was now living with a man who was a retired army officer.

In proceedings for ancillary relief, there were three issues to be decided:

1.

Was this a nuptial settlement? If so, it could be varied by court order.

2.

Was it a nuptial settlement for the whole of the property, or just for the life

interest given to her husband?

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3.

What award should be made in favour of the wife?

With regard to 1, there was evidence that the trust was to make provision for a home for the husband and the wife, and was therefore a nuptial settlement.

With regard to 2, it was held that the power of advancement meant that it was a nuptial settlement of the whole property, and not the life interest given to the husband.

With regard to 3, it was held that the wife was entitled to £23,000 which she had contributed to the property by way of improvements, and was also entitled to £7500 being one half of £15,000 the couple had lent to the company. As the trust was intended to ensure that the property remained part of the farm assets, it was held that the wife was entitled to a life interest in one half of the net value of the property less the £23,000. The judge took account of the fact that the wife was in a relationship with another man in making this award.

Forfeiture.

Unfortunately relatives sometime kill each other; it is quite a common occurrence.

If a relative is convicted of manslaughter, can they still take under the will or intestacy of the victim?

When will the court exercise its discretion, and grant relief against forfeiture?

These were the issues in the next case.

Chadwick v. Collinson and others [2015 WTLR 25.

The claimant and the deceased had lived together for about 10 years, and owned a property as joint tenants in equity. The claimant killed the deceased and the son of the relationship by stabbing them. There was evidence that he was suffering from mental illness, but he understood that what he had done was wrong. He was charged with murder, but a plea of guilty to manslaughter was accepted.

It was argued that the forfeiture rule only applies if someone was convicted of murder rather than manslaughter. It was held that this was not the case. As a result, the claimant could not take any assets which passed him by survivorship.

Section 2 (2) of the Forfeiture Act 1982 provides that where the forfeiture rule applies, the court may modify the effect of the rule but:

101

‘The court shall not make an order under this section modifying the effect of the forfeiture rule in any case unless it is satisfied that having regard to the conduct of the offender and the deceased and to such other circumstances as appear to the court to be material, the justice of the case requires the effect of the rule to be modified in that case.�

On the facts of this case, it was held that the forfeiture rule should not be modified because the claimant knew what he was doing, and that it was wrong. The judge also took into account the fact that most of the assets of the deceased had been inherited from her mother who had in her turn inherited them from her husband.

Can joint insurance policies be severed under the Inheritance (Provision for Family and Dependants) Act 1975?

If there is a claim under the 1975 Act, the court has power to retrospectively sever a joint tenancy, and treat the deceased’s half share as part of their estate for the purposes of a claim under the Act. Is a joint life policy payable on the first death a jointly owned asset?

The answer is probably not.

Whilst both parties are still around, it is probable that they are joint tenants of the policy.

However, when one dies, the joint tenancy ceases.

This was an issue in the next case.

Lim v. Walia [2015] WTLR 69.

Section 8 (1) of the Inheritance (Provision for Family and Dependants) Act 1975 provides that where a deceased person was immediately before his death beneficially entitled to a joint tenancy of any property, then... the court for the purpose of facilitating the making of financial provision for the applicant under this Act may order that the deceased severable share of the property, at the value thereof immediately before his death, shall to such extent as appears to the court to be just in all the circumstances of the case be treated for the purposes of this Act as part of the net estate of the deceased.

The deceased died on 25 March 2011 aged 38. She had married the defendant in 2003, and there was a daughter of the marriage. The marriage broke down, and the deceased moved to the Philippines where she had a son in July 2009. She was diagnosed with terminal cancer in February 2011.

102

In 2002 the deceased and the defendant had purchased a fixed term life insurance which provided that on the first death the survivor would be paid the sum insured, but on proof that one of the insured was suffering from a terminal illness, the payment would be made. In those circumstances, no death benefit was payable.

No claim was made for the terminal illness benefit.

The question arose as to whether the fixed term life insurance was a joint asset which could be severed under section 8 (1) of the 1975 Act. It was held that the terminal illness benefit was held on a joint tenancy. No claim had been made for the terminal illness benefit prior to the death of the deceased, and so its value was nil. The insurer was therefore justified in paying the death benefit to the defendant.

Valuation.

If you sell a house and some back land, how do you apportion the purchase price between the house and the land? This was the issue in the next case.

Oates & anr v. HMRC [2015] WTLR 89.

The appellants had sold their house together with a substantial piece of scrub land with development potential for ÂŁ725,000. The question arose as to how the proceeds should be apportioned between the house and the scrub land. The valuer from the Valuation Office Agency deducted the value of the house from the sale price. It was held that this was incorrect as there was marriage value which should be divided equally between the house and the land.

Trustees.

Fielden v. Christie-Miller [2015] EWHC 87 (Ch).

This case is concerned with the adequacy of pleadings, but two questions of substantive law arose:

1.

Can statements made by one trustee bind the other trustees if there is an

allegation of proprietary estoppel?

2.

Can trustees fetter their discretion?

With regard to 1, it was held that the normal principles of agency applied.

With regard to 2, the answer was yes.

103

Blackburne J said:

“In the case before me the question is whether it is sufficiently pleaded that Mr

Jodrell was the agent at all of his two co-trustees, in the sense either that

they had authorised him to make the representations in question on their behalf

(specifying how that authority arose), or they stood by knowing that he had

made the representations but acquiesced in them (specifying the

circumstances in which they stood by and acquiesced), or by their actions

(specifying what those actions were) they put Mr Jodrell in a position in which

he appeared to be authorised to make the representations on their joint

behalves. ...

I have come to the view that, as baldly stated by Mr Wilson, the non-fettering

principle does not operate to defeat Stephen’s equity if the ingredients of

the estoppel which he asserts are otherwise established. As Lewin points out in

the passage at 29-205 to which my attention was drawn, the principle is

confined to invalidating what would otherwise be a commitment on the part of

the donee to exercise (or not to exercise) the power in question in a given

way in the future. I do not see why this should prevent the court from granting

relief to a person claiming an estoppel (if he has otherwise established the

necessary ingredients). The relief in such a case might either be to accord to

him an interest in the land in question commensurate with the expectation

which the representation made to him has engendered or, as a minimum,

be such as to ensure that he suffers no detriment as a consequence of having

reasonably relied on the representation. The effect of so doing will not be (or

need not be) to compel the trustees to exercise their power in some given way

in the future but merely to disable them from exercising their power in respect of

the asset in question and then only to the extent that the court has declared

that the asset is to be applied in satisfaction of the equity which the claimant

has established. If, in the instant case, the court were to hold that Stephen

establishes a right to live rent-free in Home Farmhouse until the death of the

survivor of himself and his wife (which is one of the alternative declarations

which he seeks), the trustees would not be prevented from exercising their

power of appointment over that asset. Instead, the appointment would be

without prejudice to the rent-free right of occupation so declared. In short, the

estoppel, if established, operates as a disposal of that asset only to the extent

that the court permits and no more.�

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Chapter 6 April 2015

Capacity to make lifetime gifts and undue influence John Thurston, TEP, Solicitor, LL.B Readers will no doubt be familiar with the new test for capacity under the Mental Capacity Act 2005. It was litigated in the next case as to whether it should be the test for capacity to make lifetime gifts replacing Re Beaney [ 1978 ] 1 W L R 770 where the judge said:

“The degree or extent of understanding required in respect of any instrument

is relative to the particular transaction which it is to effect.... Thus, at one

extreme, if the subject matter and value of a gift are trivial in relation to the

donor’s other assets, a low degree of understanding will suffice. But, at the

other, if its effect is to dispose of the donor’s only asset of value and thus, for

practical purposes, to pre-empt the devolution of his estate under the [donor’s]

will or... intestacy, then the degree of understanding required is as high as that

required for a will, and the donor must understand the claims of all potential

donees and the extent of the property to be disposed of.”

The view of Stephen Morris QC sitting as a deputy judge in the next case was that it should not. He held that the donor did have capacity to make the a gift, but that it was tainted by undue influence.

In view of the differing judicial views, if practitioners are asking for a report from a person with the appropriate medical qualifications about whether someone has capacity to make a will or a lifetime gift, they should ask for confirmation both under the test in the Mental Capacity Act and the current tests that the client has capacity.

It needs a decision of the Court of Appeal or the Supreme Court to resolve the issue.

In the estate of Joyce Smith deceased, Kicks and Martin v. Leigh [2014] EWHC 3926 (Ch).SG JS had two children, Norma and Georgina, the defendant in these proceedings.

Norma predeceased leaving two children, Paul and Lisa, the claimants.

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At Christmas 2009 G and her husband came to Oxford to be with JS, and on 27 December 2009 took her to Kent where they lived. Within a fortnight JS was placed in a care home where she remained until her death. JS’s home in Oxford was sold in 2010, and the proceeds paid into the joint account of Georgina and her husband.

There were various procedural issues, and because Georgina had not complied with court orders, she had been debarred from participating in the proceedings.

It was alleged that JS did not have capacity to make the gift, or that it was tainted by undue influence.

The judge, Stephen Morris QC, also considered whether the test for capacity under the MCA 2005 should replace Re Beaney. It was held that it should not. The judge said:

“As indicated above, this is an issue which has given rise to differing judicial

views and I have not found it easy to resolve. Nevertheless in my judgment,

the correct approach to a post-MCA inter vivos gift is to apply the common law

principles in Re Beaney rather than those set out in s.2 and 3 MCA 2005.

40. First, the words in s.1(1) MCA 2005 “for the purposes of the Act” indicate

that the MCA test is a test to be applied in relation to matters specifically

arising under the Act. I refer to those matters in paragraph 34 above; they

do not include consideration, retrospectively, by a court in civil

proceedings of the capacity to make an inter vivos gift. This conclusion

is confirmed by paragraph 4.31 of the Code itself. On this issue, I prefer the

analysis in Scammell v Farmer to that in Fischer v Diffley and Bray v Pearce.

The wider view of these words taken at §90(a) in Bray v Pearce and

at §28 in Fischer v Diffley does not, in my judgment, sufficiently take

account of the very specific ambit of the MCA dealing with prospective

decision making for living persons and the role of the Court of Protection,

nor what is said specifically in paragraph 4.31 of the Code. So the starting

point is that s.3(1) does not apply and the common law principles still

apply. This is confirmed by the first sentence of the paragraph 4.33 of the

Code. Moreover, as regards Fischer v Diffley, I note that on this issue,

neither Local Authority X v MM nor Scammell v Farmer were cited nor

did the judge refer expressly to the Code. In my judgment his view (at §25)

that the statutory test is the starting point is inconsistent with both the

words of the MCA and the Code itself.

41. Secondly, nevertheless I am required to take account of the Code and

thus, to consider, whether, in accordance with the second sentence of

107

paragraph 4.33 of the Code, it is “appropriate” to adopt the s.3(1) test in

this case. I apply the considered analysis of that phrase by Munby J at §80

in Local Authority X v MM. Thus, in the context of capacity to make a gift,

I ask myself the question whether test in s.3(1) “merely encapsulates”

the principles expounded in Re Beaney. It is not clear to me that the s.3(1)

test does “merely encapsulate” the Re Beaney approach. Whilst I am

not saying that the statutory test is inconsistent with it, it does seem to me

to expand upon it, for example by identifying a number of specific

sub-categories of capacity, and by dealing expressly with short term

retention. Furthermore, it is very arguable, as I consider below, that the

approach to the burden of proof in s.1(2) is not the same as that under

the common law. (In this regard, I now note the detailed comparison

conducted by Nicholas Strauss QC at §§21-26 of his judgment in Walker v

Badmin: see postscript, paragraph 228 below). I should add this. If s.3(1)

does in fact merely encapsulate the common law principles, then it might

be said that it does not add to Re Beaney and that the latter should be

used in any event.”

It was held that it did not.

It was held that JS did have capacity to make the gift.

With regard to undue influence, the judge said:

41. First, there are two forms of undue influence - actual undue influence and

presumed undue influence. In the case of presumed undue influence,

the party alleging that a transaction should be set aside for undue

influence must establish two elements or “prerequisites”: the existence

of a relationship of trust and confidence, and a transaction which calls for

an explanation.

42. Secondly, as to the first pre-requisite, a relationship of trust and

confidence, in Etridge Lord Nicholls stated (at §8) that presumed undue

influence

“arises out of a relationship between two persons where one has acquired

over another a measure of influence or ascendancy, of which the

ascendant persons then takes unfair advantage.”

He continued (at §9) “The relationship between two individuals may be such that, without

more, one of them is disposed to agree to a course of action proposed by

108

the other. Typically this occurs when one person places trust in another to

look after his affairs and interests and the latter betrays this trust by

preferring his own interests. He abuses the influence he has acquired.”

Then (at §11):

“The principle is not confined to cases of abuse of trust and confidence. It

also includes, for instance, cases where a vulnerable person has been

exploited. .... Several expressions have been used in an endeavour

to encapsulate the essence: trust and confidence, reliance, dependence

or vulnerability on the one hand and ascendancy, domination or control

on the other. ...”

So, in summary, the relationship may be characterised in several ways: as one of trust and confidence or as one of ascendancy, where there is vulnerability and dependence on one side and ascendancy, domination or control on the other.

43. Thirdly as regards the second pre-requisite - a transaction calling for an

explanation - Lord Nicholls stated at §22

“Lindley LJ summarised this second prerequisite in the leading authority of

Allcard v Skinner 36 Ch D 145, where the donor parted with almost all

her property. Lindley LJ pointed out that where a gift of a small amount is

made to a person standing in a confidential relationship to the donor,

some proof of the exercise of undue influence must be given. The mere

existence of the influence is not enough. He continued, at p185 “But if the

gift is so large as not to be reasonably accounted for on the ground of

friendship, relationship, charity or other ordinary motives on which ordinary

men act, the burden is upon the donee to support the gift. In Bank of

Montreal v Stuart [1911] AC 120, 137 Lord Macnaghten used the phrase

“immoderate and irrational” to describe this concept”

It was held that the gift should be set aside because of undue influence.

Quantification of equitable interests The question of how you quantify equitable interests when a couple cohabit continues to exercise the courts.

One of the issues in the next case was whether a cohabitee should receive 25% of the net proceeds of sale after repayment of the mortgage or before. It was argued that the equity of exoneration applied – that it would be unjust to make

109

the cohabitee bear part of the mortgage. This was rejected by the judge at first instance on procedural grounds, but whilst confirming the decision of the judge at first instance, the Court of Appeal did not rule it out.

York v. York and others [2015] EWCA Civ 72.

The claimant lived with Norton York for 33 years, and had two children by him.

They lived together at 17 Marlborough Road London W4 which was vested in his sole name. She had been a singer either in groups led by Norton York or promoted by him. The relationship was dysfunctional, and she was vulnerable. Norton York could be violent, and the evidence was that she would do whatever he wanted.

The claimant had also had various businesses. There was evidence that she had contributed to the household expenses.

17 Marlborough Road was mortgaged, and the lender began possession proceedings. The judge at first instance had held that she could find an intention that the claimant should have a beneficial interest in the house, which was fixed at 25% after repayment of the mortgage. This was confirmed by the Court of Appeal.

It was also alleged that an equity of exoneration was available to the claimant, which would mean that she received 25% of the proceeds of sale before deduction of the mortgage. The judge at first instance had rejected this mainly for procedural reasons, but the Court of Appeal whilst confirming the decision of the judge at first instance did not rule it out.

Practice note on what you should do if asked to prepare a will when the client is leaving a gift for you, your family or colleagues – December 2014.

The Law Society has updated its guidance about when it is in order to accept a gift from a client without the client having the benefit of independent legal advice. It is in order to accept such a gift provided that it is insignificant, and the guidance provides some pointers in deciding if a gift is insignificant.

Is it in order to draft will for a close family member benefiting the draughtsman?

The guidance provides: ‘You will normally be able to prepare a will in your own time without charge for a family member, even if it benefits you or a family member, if the benefits received are not disproportionate and the COLP has noted any compliance concerns that may arise, in your firm’s records.

If you use any of the firms time or resources, such as precedents, in preparing the will, you may want to check with the firm’s COLP.’

110

Damages for unlawful deprivation of liberty What should be the damages for unlawful deprivation of liberty?

This was one of the issues in the next case - £3,000 to £4,000 per month.

Essex CC v. RF and others [2015] EWCOP 1.

P was a retired civil servant who has lived in the same house for fifty years, latterly on his own apart from his cat, Fluffy. He was described as a very generous and religious man. He suffered from dementia and other health issues. On 2 May 2013 following a safeguarding alert ECC removed him from his home, and he was placed in a care home. An urgent authorisation was not put into place until 27 June 2013, and a standard authorisation on 4July 2013 but was not renewed after it expired on 25 October 2013.

There were differing assessments of P’s capacity, and he wanted to return to his home. His friends considered that this should be done, but his family disagreed.

P had returned to his home, but it was clear that his detention in the care home was unlawful.

Lush SJ said:

“The terms I am asked to consider and if appropriate approve are as follows:

•

A declaration that ECC unlawfully deprived P of his liberty between at

least 2/5/13 and 4/7/13 and further between 15/8/13 and 7/7/14,

amounting to a period of approximately 13 months.

•

ECC to pay P £60,000 damages arising from P’s unlawful detention

•

ECC to waive any fees payable by P to the care home in which he was

detained for the period of his detention. I am told these fees will be

around £23,000 to £25,000.

•

ECC to exclude P’s damages award from means testing in relation to P

being required to pay a contribution to his community care costs.

•

The payment of all P’s costs, to be assessed on the standard basis. ...

In considering the level of compensation to which P is entitled there is a distinction between cases involving procedural breaches and those involving substantive breaches.

111

Procedural breaches occur where the authority’s failure to secure authorisation for the deprivation of liberty or provide a review of the detention would have made no difference to P’s living or care arrangements.

Substantive breaches occur where P would not have been detained if the authority had acted lawfully. Such breaches have more serious consequences for P. This case involves a substantive breach of P’s rights. Had it not been for the unlawful actions of ECC, P would have continued to live at home with the type of support that has now been put in place.

P was 90 years of age when he was unlawfully removed from his home. The deprivation of his liberty during this late stage of his life only serves to compound its poignancy.

I have been referred to two cases involving damages for unlawful detention:

•

London Borough of Hillingdon v Neary [2011] EWHC 3522 (COP) A period

of 12 months detention resulted in an award of £35,000.

The Local Authority and Mrs D [2013] EWCOP B34

•

No admissions of liability were made save for a 4 month period. Mrs D was offered £15000 plus her costs and Mr D £12,500 plus his costs. The judge approved the award although it was towards the lower end of the range if the award in the Neary case was taken as the bench mark.

Taking these cases into account the level of damages for the unlawful deprivation of an incapacitated person’s liberty is between £3000 and £4000 per month.

In this case P was unlawfully deprived of his liberty for a minimum of 13 months (which ECC concedes) and arguably 17 months.

The award that I am asked to approve places the level of damages at between £3500 and £4600 per month.

I bear in mind that in addition P will receive the other elements of the compromise agreement set out in paragraph 46 of this judgment. Those other elements provide P with further significant compensation and mark the seriousness of the case.

I am satisfied that the compromise agreement provides P with a fair and reasonable award in so far as a monetary award can compensate him for the loss of his liberty in the circumstances I have described above.

I approve the compromise agreement as set out at para 46 of this judgment and shall make an order accordingly.”

112

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thesolicitorsgroup.com

Chapter 7 May 2015

Capacity to make lifetime gifts John Thurston, TEP, Solicitor, LL.B Practitioners will no doubt be aware that the Mental Capacity Act Code leaves it open for judges to apply the test for capacity in the Mental Capacity Act as the test for capacity to make wills and lifetime gifts.

In the next case the judge discussed whether the new test for capacity under the Mental Capacity Act should become the test for capacity to make lifetime gifts replacing the test laid down in Re Beaney . His view was that the answer was no.

He also considered undue influence, and restated the requirements:

First, there are two forms of undue influence - actual undue influence and

presumed undue influence. In the case of presumed undue influence, the party

alleging that a transaction should be set aside for undue influence must

establish two elements or “prerequisites”: the existence of a relationship of trust

and confidence, and a transaction which calls for an explanation.

In the estate of Joyce Smith deceased, Kicks and Martin v. Leigh [2014] EWHC 3926 (Ch).SG JS had two children, Norma and Georgina, the defendant in these proceedings.

Norma predeceased leaving two children, Paul and Lisa, the claimants.

At Christmas 2009 G and her husband came to Oxford to be with JS, and on 27 December 2009 took her to Kent where they lived. Within a fortnight JS was placed in a care home where she remained until her death. JS’s home in Oxford was sold in 2010, and the proceeds paid into the joint account of Georgina and her husband.

There were various procedural issues, and because Georgina had not complied with court orders, she had been debarred from participating in the proceedings.

It was alleged that JS did not have capacity to make the gift, or that it was tainted by undue influence.

114

The judge, Stephen Morris QC, also considered whether the test for capacity under the MCA 2005 should replace Re Beaney. It was held that it should not. The judge said:

“As indicated above, this is an issue which has given rise to differing judicial

views and I have not found it easy to resolve. Nevertheless in my judgment,

the correct approach to a post-MCA inter vivos gift is to apply the common law

principles in Re Beaney rather than those set out in s.2 and 3 MCA 2005.

40. First, the words in s.1(1) MCA 2005 “for the purposes of the Act” indicate

that the MCA test is a test to be applied in relation to matters specifically

arising under the Act. I refer to those matters in paragraph 34 above; they

do not include consideration, retrospectively, by a court in civil

proceedings of the capacity to make an inter vivos gift. This conclusion

is confirmed by paragraph 4.31 of the Code itself. On this issue, I prefer the

analysis in Scammell v Farmer to that inFischer v Diffley and Bray v Pearce.

The wider view of these words taken at §90(a) in Bray v Pearce and

at §28 inFischer v Diffley does not, in my judgment, sufficiently take

account of the very specific ambit of the MCA dealing with prospective

decision making for living persons and the role of the Court of Protection,

nor what is said specifically in paragraph 4.31 of the Code. So the starting

point is that s.3(1) does not apply and the common law principles still

apply. This is confirmed by the first sentence of the paragraph 4.33 of the

Code. Moreover, as regards Fischer v Diffley, I note that on this issue,

neither Local Authority X v MM nor Scammell v Farmer were cited nor

did the judge refer expressly to the Code. In my judgment his view (at §25)

that the statutory test is the starting point is inconsistent with both the

words of the MCA and the Code itself.

5.

Secondly, nevertheless I am required to take account of the Code and

thus, to consider, whether, in accordance with the second sentence of

paragraph 4.33 of the Code, it is “appropriate” to adopt the s.3(1) test in

this case. I apply the considered analysis of that phrase by Munby J at §80

in Local Authority X v MM. Thus, in the context of capacity to make a gift,

I ask myself the question whether test in s.3(1) “merely encapsulates”

the principles expounded in Re Beaney. It is not clear to me that the s.3(1)

test does “merely encapsulate” the Re Beaney approach. Whilst I am

not saying that the statutory test is inconsistent with it, it does seem to me

to expand upon it, for example by identifying a number of specific

sub-categories of capacity, and by dealing expressly with short term

retention. Furthermore, it is very arguable, as I consider below, that the 115

approach to the burden of proof in s.1(2) is not the same as that under

the common law. (In this regard, I now note the detailed comparison

conducted by Nicholas Strauss QC at §§21-26 of his judgment in Walker v

Badmin: see postscript, paragraph 228 below). I should add this. If s.3(1)

does in fact merely encapsulate the common law principles, then it might

be said that it does not add to Re Beaney and that the latter should be

used in any event.”

It was held that it did not.

With regard to the burden of proof, it was held that if a party alleges incapacity, and there is sufficient doubt from which incapacity can be inferred, the burden of proof is then on those alleging capacity.

It was held that JS did have capacity to make the gift.

With regard to undue influence, the judge said:

“(2) The Law on Undue Influence

40. As regards the relevant legal principles applicable to undue influence,

the position can be stated more simply. The leading authority is the

decision of the House of Lords in Royal Bank of Scotland plc v. Etridge (No

2) [2002] 2 AC 773, and in particular the speech of Lord Nicholls at §§6 to

25. I also refer to the decision of the Court of Appeal inHammond v

Osborn [2002] WTLR 1126 and the recent judgment of Sir William

Blackburne in Hart v Burbidge [2013] EWHC 1628 (Ch) where he

comprehensively summarised the principles at §§37 to 51. The position can

be stated as follows.

41. First, there are two forms of undue influence - actual undue influence and

presumed undue influence. In the case of presumed undue influence,

the party alleging that a transaction should be set aside for undue

influence must establish two elements or “prerequisites”: the existence

of a relationship of trust and confidence, and a transaction which calls for

an explanation.

42. Secondly, as to the first pre-requisite, a relationship of trust and

confidence, in Etridge Lord Nicholls stated (at §8) that presumed undue

influence

“arises out of a relationship between two persons where one has acquired

over another a measure of influence or ascendancy, of which the

ascendant persons then takes unfair advantage.”

116

He continued (at §9)

“The relationship between two individuals may be such that, without

more, one of them is disposed to agree to a course of action proposed by

the other. Typically this occurs when one person places trust in another to

look after his affairs and interests and the latter betrays this trust by

preferring his own interests. He abuses the influence he has acquired.”

Then (at §11):

“The principle is not confined to cases of abuse of trust and confidence. It

also includes, for instance, cases where a vulnerable person has been

exploited. .... Several expressions have been used in an endeavour

to encapsulate the essence: trust and confidence, reliance, dependence

or vulnerability on the one hand and ascendancy, domination or control

on the other. ...”

So, in summary, the relationship may be characterised in several ways: as one of trust and confidence or as one of ascendancy, where there is vulnerability and dependence on one side and ascendancy, domination or control on the other.

43. Thirdly as regards the second pre-requisite - a transaction calling for an

explanation - Lord Nicholls stated at §22

“Lindley LJ summarised this second prerequisite in the leading authority of

Allcard v Skinner 36 Ch D 145, where the donor parted with almost all

her property. Lindley LJ pointed out that where a gift of a small amount is

made to a person standing in a confidential relationship to the donor,

some proof of the exercise of undue influence must be given. The mere

existence of the influence is not enough. He continued, at p185 “But if the

gift is so large as not to be reasonably accounted for on the ground of

friendship, relationship, charity or other ordinary motives on which ordinary

men act, the burden is upon the donee to support the gift. In Bank

of Montreal v Stuart [1911] AC 120, 137 Lord Macnaghten used the phrase

“immoderate and irrational” to describe this concept”

In Hammond v Osborn, the Court of Appeal held that the defendants had been correct to concede that the transaction called for an explanation (and thus the presumption of undue influence arose) in circumstances where a deceased man had made of gift of nearly £300,000 representing almost 92% of his assets and “practically all of his free capital”: per Sir Martin Nourse §25 and Ward LJ at §§35 and 39.

117

21. Fourthly, once the claimant establishes these two prerequisites, the

presumption of undue influence arises and the evidential burden then

shifts to the defendant to produce evidence to counter the inference:

Etridge per Lord Nicholls at §§14 and 21. The defendant has to show that

the gift or transaction was made free of this influence and “only after full,

free and informed thought about it” (per Sir Martin Nourse in Hammond

v Osborn at §25). One of the ways in which the donee may commonly

do this is by establishing that the donor had received advice from an

independent person as to the nature and effect of the transaction. Whilst

such advice is not always necessary nor indeed sufficient, its absence is a

relevant factor: per Lord Nicholls in Etridge at §20 and Hammond v Osborn

§§27, 28.”

It was held that the gift should be set aside because of undue influence.

Quantification of equitable interests and equity of exoneration.

Readers will not doubt be familiar with Stack v. Dowden and Jones v. Kernott. The next case is another case where Jones v. Kernott was applied.

A cohabitee was given 25% of proceeds of sale after payment of the mortgage. This was confirmed by Court of Appeal.

It was argued argued late in the day that an equity of exoneration applied, and that she should receive 25% of the gross proceeds. The idea behind equity of exoneration is that it would be unjust for a person’s equitable interest to be encumbered in some way The Court of Appeal did not rule it out, but the claim was rejected for procedural reasons.

York v. York and others [2015] EWCA Civ 72.SG The claimant lived with Norton York for 33 years, and had two children by him.

They lived together at 17 Marlborough Road London W4 which was vested in his sole name. She had been a singer either in groups led by Norton York or promoted by him. The relationship was dysfunctional, and she was vulnerable. Norton York could be violent, and the evidence was that she would do whatever he wanted.

The claimant had also had various businesses. There was evidence that she had contributed to the household expenses.

17 Marlborough Road was mortgaged, and the lender began possession proceedings. The judge at first instance had held that she could find an intention that

118

the claimant should have a beneficial interest in the house, which was fixed at 25% after repayment of the mortgage. This was confirmed by the Court of Appeal.

It was also alleged that an equity of exoneration was available to the claimant, which would mean that she received 25% of the proceeds of sale before deduction of the mortgage. The judge at first instance had rejected this mainly for procedural reasons, but the Court of Appeal whilst confirming the decision of the judge at first instance did not rule it out.

Damages for breach of trust.

Readers may recall the next case. It is concerned with lenders trying to recover all their losses from a firm of solicitors when the real cause was lending too much. The case has eventually reached the Supreme Court where the answer was that the lenders could not recover all their losses.

AIB Group (UK) plc v. Mark Redler & Co solicitors [2015] WTLR 187.

The Supreme Court has dismissed the appeal.

It was held that the if there was a breach of trust, the aim of any remedy was to put the beneficiary back into the position they would have been had it not been for the breach. A beneficiary was not entitled to be compensated for a loss he would have suffered had there been no breach.

Traditional trusts and commercial trusts must be viewed differently. Commercial trusts arise out of contract, and the contract must determine the damages.

119

Chapter 8 June 2015

Capacity to make a will John Thurston, TEP, Solicitor, LL.B Increasingly, practitioners are faced with claims that a will they have prepared is invalid because the testator or testatrix lacked capacity. No doubt every practitioner is familiar with the test for capacity to make a will laID down in Banks v. Goodfellow, and also the new test for capacity under the Mental Capacity Act 2005. It is suggested in the Mental Capacity Act Code that this new test could become the test for capacity for absolutely everything. In the next case, the judge held that Banks Goodfellow was still good law, and has not been superseded by this new test for capacity. Under this, a person lacks capacity in relation to the matter if they cannot make a decision, and that is to some impairment or disturbance in the functioning of the mind or brain. He was of the opinion that the two tests were substantially different. One major difference is that under Banks v. Goodfellow, there is a presumption that the testator or testatrix had capacity, but if a doubt is raised about the capacity of the testator or testatrix, then the burden of proof shifts to those who want to obtain probate of the will to prove that the deceased had capacity.

Under the Mental Capacity Act, there is a presumption that everyone has capacity.

There does appear to be some disagreement about whether the Mental Capacity Act test for capacity has replaced Banks v Goodfellow, and it probably needs a Court of Appeal all Supreme Court to decide the issue.

Another issue in the next case was whether it was desirable to cut out the relatives of a testator or testatrix. As far as the writer is concerned, clients should always be advised that cutting out close relatives may very well cause the will to be challenged.

Walker and anr v. Badmin and ors [2015] WTLR 493 The testatrix was diagnosed with a terminal malignant brain tumour. She had left her husband to live with Michael Badmin (MB) who was 23 years her junior. There were two daughters of the marriage. She made a will under which MB was a major beneficiary. The will was made by Cooperative Will Writing Services who initially

120

asked three superficial questions to determine if she had capacity, and did not suggest obtaining a medical report, although they were aware of her condition. It was held that she did have capacity to make the will.

Nicholas Strauss QC discussed whether the test for capacity under the MCA should become the test for capacity to make wills, and decided that it should not. He said:

“Under the MCA there is a presumption that everyone has capacity. With

wills the established law is that if a will appears to be rational on the face of it,

there is a presumption that the testator had capacity to make the will. However,

if a doubt is raised about the capacity of the testator, then the burden of proof

is then on those who want to obtain a grant of probate.

The MCA requires that a person should be able to understand all the

information relevant to making a decision. This is perhaps more than the

common law test requires.

The MCA requires that a person should be able to understand the reasonably

foreseeable consequences of the choices open to him. Again, perhaps this is

more than the common law requires.

The MCA is designed to deal with whether a living person can make decisions.�

Knowledge and approval of a will Another common ground for challenging the validity of a will is to allege that the deceased did not know and approve of the contents of the will.

The next case is concerned with whether T knew and approved of the contents of a will made in 2013. It was accepted that T had capacity when he made the will, and there had been compliance with s 9 Wills Act. Normally there is then a presumption that T knew and approved of the contents.

The Judge said the correct approach in the first instance was to apply a single stage test which required her to ask did T understand (a) what was in the 2013 Will when he signed it and (b) what its effect would be? A second stage test could then be applied as a cross check. The second stage test was to see whether there was anything which excited the suspicion of the court, when the onus would then be on the propounders of the will to displace the suspicion.

On the facts held 2013 will was valid.

Sharp v. Hutchins [2015] EWHC 1240 (Ch)

121

The testator was a bachelor, who lived on his own after the death of his sister. He liked a drink and was a smoker. His date of death was given as 5 May 2013 which was the day when the police discovered his body, but there was evidence that he had died some time before then. His death was due to a spontaneous intracranial haemorrhage.

He made a will in 2011 benefitting the defendant and two other beneficiaries, and a will in 2013 benefitting the claimant.

At the trial it was agreed that the testator had capacity when he made both wills, and that both had been executed in accordance with s 9 Wills Act 1837. The only issue was knowledge and approval of the 2013 will.

Lesley Anderson QC sitting as a deputy High Court judge reviewed previous cases.

Normally, if on proof that a testator had capacity, and compliance with the formal requirements for will, there is a presumption that the testator knew and approved of the contents. She stated that she was satisfied that the correct approach in the first instance was to apply a single stage test which required her to ask did Mr Butcher understand (a) what was in the 2013 Will when he signed it and (b) what its effect would be? A second stage test could then be applied as a cross check. The second stage test was to see whether there was anything which excited the suspicion of the court, when the onus would then be on the propounders of the will to displace the suspicion.

The claimant was a self employed builder who had helped the testator. He had a son who boxed for England, and would talk to the testator about his son, boxing, sport, the weather etc.

On the facts, it was held that the testator did know and approve of the 2013 will

Index linking of IOUs or charges – is it chargeable to income tax?

Practitioners will no doubt be familiar with nil rate band discretionary trusts coupled with the power to take an IOU or impose a charge to satisfy the legacy. Frequently these charges were linked to CPI or RPI. When the surviving spouse dies, if the trustees claim the increase in value because of the linking, the estate of the survivor will be reduced as far as IHT is concerned. Are the trustees then liable for income tax on the increase in value? Although the next case is not concerned with NRB discretionary trusts, it suggests that the increase in interest.

122

Trustees winding up a nil rate band discretionary trust, and claiming the increase in value because of the linking of the charge or IOU to CPI or RPI should complete a tax return, and submit it to HMRC. If HMRC charge income tax at 45% on the increase of the grounds that it is really interest, they should try to find a member or members of the class of beneficiaries who do not have much in the way of income, and pay this interest out to them. They will be able to recover at least part of the income tax paid by the trustees.

Pike v. HMRC [2015] WTLR 475 The tax payer was issued with loan stock with a right to a premium on redemption of 7.25% pa accruing on a daily basis until redemption.

It was held that the true nature of the payment was interest.

Will a court approve a proposed action by trustees?

Trustees often have wide powers to break up settlements. This can be a momentous decision seriously affecting the default beneficiaries.

This was the issue in the next case.

Does the court have power to sanction such a decision?

The answer is yes, but the court will not rubber stamp it.

It must be satisfied that is it is in the best interests of the trust.

Tamlin & anr v. Edgar & Ors [2015] WTLR 485 The trustees were trustees of a childrens’ settlement and the Lower Green Farm Trust.

The trustees had wide powers of advancement, and wanted to exercise these powers so as to terminate the trusts. They sought the approval of the court.

It was clear that the application came within the second category described by Hart J in Public Trustee v. Cooper [2001] WTLR 901:

“The second category is where the issue is whether the proposed course of

action is a proper exercises of the trustees’ powers where there is no real doubt

as to the nature of the trustees’ powers and the trustees have decided how

they want to exercise them but, because the decision is particularly

momentous, the trustees wish to obtain the blessing of the court for the action

on which they have resolved and which is within their powers.”

123

Initially the judge was not satisfied on the evidence that it was right to make the declaration, but after further evidence was produced was satisfied.

Mistake as to the terms of a settlement A settlor is mistaken as to the terms of a discretionary trust. He thinks that whilst he cannot benefit, his wife can. This is incorrect. They were dependant on the assets in the settlement for income to maintain their standard of living.

There is an unopposed application to set it aside.

The judge makes the point that he cannot rubber stamp such an application.

However, he holds that settlor has made a grave mistake, and that it would be unconscionable not to set it aside.

Wright & anr v. National Westminster Bank plc [2015] WTLR 547 RW signed a discretionary trust which provided that neither he nor his spouse could be beneficiaries and could not be added as beneficiaries. He was told that the income could not be paid to him, but that it could be paid to his wife. There was an unopposed application to set aside the settlement.

Norris J made the point that the mere fact that everyone was agreed that the transaction should be set aside did not necessarily justify the judge making such and order. However, he was satisfied that a grave mistake had been made, and that it would be unconscionable for the settlement not to be set aside. He made an order accordingly.

124

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Chapter 8 July 2015

Equity of exoneration John Thurston, TEP, Solicitor, LL.B What is the equity of exoneration?

If I mortgage my house to secure monies owed by my child, I am regarded as a guarantor, and I am entitled to be exonerated by my child. So the child is under an obligation to repay me.

It can also apply to couples who are co-owners of the family home.

If husband and wife borrow money on the security of the family home of which they are co-owners, and one is made bankrupt, the other may be entitled to this equity of exoneration.

This means that they may have a proprietary interest in the share of the one who is made bankrupt in preference to the trustee in bankruptcy.

This is an equitable doctrine which suddenly seems to have surfaced as far as the writer is concerned.

Cadlock v. Dunn & Anor [2015] EWHC 1318 (Ch).

Mr and Mrs Dunn purchased the matrimonial home in May 1985, and became legal and beneficial joint tenants. Mr Dunn was twice made bankrupt, which had the effect of severing the equitable joint tenancy. After his first bankruptcy, they borrowed money which was paid to Mr Dunn’s trustee in bankruptcy in exchange for the transfer or release of his interest. After the presentation of the second bankruptcy petition by HMRC, Mr and Mrs Dunn borrowed £196,500 and executed a charge in favour of the lenders.

The charge was ineffective as far as Mr Dunn’s interest was concerned, but had the effect of creating an equitable charge over the whole of Mrs Dunn’s beneficial half share in the property for the full amount of the loan.

It was argued that Mrs Dunn was entitled to an equity of exoneration.

126

Behrens J said:

“For convenience I repeat the formulation of the law in Halsbury Laws:

A person who mortgages his property to secure the debt of another stands

in the relation of guarantor towards the person whose debt is thus secured, and

is entitled to be exonerated by the principal debtor. This principle also applies

where jointly owned property is charged to secure the indebtedness of one co-

owner. ...

For my part therefore I would hold that DJ Morgan was correct to find that

Mrs Dunn was entitled to the equity of exoneration but I would limit the equity of

exoneration to the sums loaned in respect of the acquisition of Mr Dunn’s half

share plus interest.

It is clear from paragraph 23 of Morgan J’s judgment in Day that Mrs Dunn is

effectively in the position of a surety for Mr Dunn’s debt. She is not only entitled

to be indemnified by Mr Dunn but she is also entitled to a proprietary right over

Mr Dunn’s share of the property.

Proprietary estoppel John Thurston, TEP, Solicitor, LL.B Yet another case where the doctrine of proprietary estoppel was applied.

Parents make promises to a child that farm will be left to him. He acts to his detriment relying on the promises.

These cases are very sad as they concern families falling out and never speaking to each other again.

Davies v.Davies and ors [2015] EWHC 1384 (Ch).

Mr and Mrs Davies owned a farm in Wales, and had five children. One of those children, James, alleged that promises has been made at various times that the farm would be left to him, and that he acted to his detriment by working on the farm for low wages, had ploughed profits into the farm by carrying out improvements costing in the region of £177,000 over the years and had given up the idea of a career in the police force. The parents fell out with Cindi, the wife of James, and in 1999 they made wills giving the farm to James until he reached the age of 60 or predeceased, and subject to that to sell farm and divide the proceeds equally between the other children and the children of James. There were independent witnesses who supported James’ version of events.

127

It was held that the doctrine of proprietary estoppel applied, and that James was entitled to the farm but not to a bungalow occupied by his mother. James was making monthly payments to his mother and it was held that he should continue to make those payments.

Deeds of variation/rectification/consideration John Thurston, TEP, Solicitor, LL.B Readers will no doubt be aware that HMRC is looking at deeds of variation. Some may be old enough to remember that these were threatened some years ago, but the threat was never implemented. HMRC obviously want to stop deeds of variation which save IHT, but many deeds of variation have been executed not to save IHT, but to rearrange beneficial interests to make them more appropriate for family circumstances. This is very much the case now since the introduction of the transferable nil rate band. In the opinion of the writer, it would be wrong to penalise such deeds of variation. In addition, what is wrong with a deed of variation which does save IHT when the testator or testatrix could have made a will in the same terms?

The next case is an application for rectification of a deed of variation which did not include the election. The judge set out the law with regard to rectification, and stated that there must be an issue between the parties. On the facts of this case he was satisfied that there was an issue and ordered the deed to be rectified so as to include the election.

HMRC had been notified of the application for rectification, and objected on the ground that there was consideration for the deed, and therefore there was no special treatment for IHT. They relied on an attendance note prepared by the solicitor who had drafted the deed. The will of the deceased divided his estate equally between his three children and his widow. The deed of variation gave everything to his widow so no IHT was payable.

The attendance note stated that widow would give as much as she could afford to children and the hope was that she would live for seven years.

Counsel for executors argued that this was different from a previous case, Lau, where there was a clear agreement to give children ÂŁ1m each. Here there was some vague intention the widow would give assets to children. The judge said it was for the First Tier Tax Tribunal to rule on this.

128

Vaughan-Jones and anr v. Vaughan-Jones and ors [2015] EWHC1086 {Ch).

The deceases died in 2007 leaving a will dividing his estate between his widow and his three children, and a deed of variation was executed so as to pass the whole estate to the widow. No election was included in the deed of variation. Application was made to the court to rectify the deed.

Hodge J said:

“I am satisfied that the relevant law on this subject is accurately summarised at

paragraph 3 -169 of ‘’Hodge on Rectification,’’ first edition, (2010):

“”The court cannot rectify a document merely because it fails to achieve the

fiscal objectives of the parties to it, or (if the document is of a unilateral nature)

of the grantor or covenantor. A mere misapprehension as to the tax

consequences of executing a particular document will not justify an order for

its rectification. The specific intention of the parties (or the grantor or

covenantor) as to how the objective was to be achieved must be shown if the

court is to order rectification. The court will order the rectification of a

document only if it is satisfied that: (1) it does not give effect to the true

agreement or arrangement between the parties, or the true intention of

the grantor or covenantor; and (2) there is an issue, capable of being

contested between the parties, or between the covenantor or grantor (on the

one hand) and the person he intended to benefit (on the other); it being

irrelevant, first, that rectification of the document is sought, or event consented

to, by all of them; and, second, that rectification is desired because it has

beneficial fiscal consequences. Conversely, the court will not order rectification

of a document as between the parties, or as between the grantor or

covenantor and an intended beneficiary, if their rights will be unaffected, and if

the only effect of the order will be to secure a fiscal benefit.””

The need for there to be an issue between the parties before rectification can be ordered derives from the difficult decision of the Court of Appeal in the earlier case of Whiteside v Whiteside [1950] Ch 65. The need for there to be an issue between the parties was considered by Rimer J in Wills v Gibbs at paragraph 27. There, he observed that, in the absence of rectification, the deed was a lifetime potentially exempt transfer by the beneficiary. If he were to die within seven years, the transfer would result in at least significant, and possibly substantial, Inheritance Tax becoming payable. If the deed was varied as asked, the effect would be that it would not itself be a taxable disposition. An immediate issue which arose between the beneficiary (on the one hand) and the executors (on the other) was the extent to which, under 129

the unrectified deed, the beneficiary could insist on all the property comprised within the gift being transferred to him immediately, without awaiting the expiry of the seven year period. That was because all the assets subject to the deed were currently held by the executors, and, that being so, they would retain a concurrent liability for any Inheritance Tax payable in consequence of the transfer. They would therefore need to retain the assets by way of security against any Inheritance Tax which might prove to be payable on the Deed of Variation in the event of the original beneficiary dying within the seven years; whereas they would have no such need if the deed was rectified as sought. There was also said to be a contingent issue between the two beneficiaries - the original and the substituted - as to whether it would be one or other of their personal representatives who should bear the Inheritance Tax payable in the event of the death of one of them within seven years of the Deed of Variation.”

On the facts of this case, it was held that there was an issue between the parties, and the judge ordered that the deed of variation should be rectified so as to include the election.

HMRC had been notified of the application, and had objected on the ground that the deed of variation was ineffective as far as IHT was concerned because there was consideration for it in money of money’s worth. They relied on the Lau case and an attendance note prepared by the solicitor who had drafted the deed:

“”I [that is Mr Evans] also told the two executors that I had not prepared a

Deed of Family Arrangement prior to probate before. However I do not

believe that they actually need the consent of the executors to the deed. The

four beneficiaries are deciding that Mrs Jones will receive the residue of

the estate, which is in excess of £500,000 in cash, plus some property. In effect,

the other three are losing out on a short-term basis, but the plan is to pay as

little Inheritance Tax as possible at this stage and for Mrs Jones to transfer as

much as she can and survive seven years. It does not matter a great deal as

far as the agricultural properties are concerned, but she should of course get

rid of as much cash as she can. While speaking to John last week, I do not

believe that his mother is short of income, so she can give away a great deal

of capital. The Deed of Family Arrangement must be signed next week as it

must be in effect less than two years after death. Told John that I may well call

and see his mother next Wednesday as I am in the Towyn area anyway. He is

seeing his brother, Richard, this weekend and I gave John my card so that

Richard could telephone me next week if he wants to discuss anything.””

130

Counsel for the executors argued that “”any consideration in money or money’’s worth”” is a technical expression which requires a bargain which is sufficiently definite. He submitted that it did not include a generalised intention to give sums of an indefinite amount at an indefinite time in the future, which gives rise to no legally enforceable obligation, and where the widow could, without adverse consequences to herself, change her mind at any time. The judge accepted this, but the order was qualified to make it clear that the court was not expressing opinion upon whether the requirements of section 142(3) of the Inheritance Tax Act are satisfied in relation to the Deed of Variation as rectified.

131

Chapter 9 August 2015

BPR and furnished holiday lets.

John Thurston, TEP, Solicitor, LL.B There was a time when HMRC would have accepted a claim for business property relief in respect of a furnished holiday let. However, this is not the case any more.

HMRC take the view that one of the incidences of owning property is to find tenants or occupiers for it, and is not evidence of trading. HMRC consider that a furnished holiday let is an investment or land holding business and as such does not qualify for business property relief. The writer considers that this argument is correct when applied to a large house subdivided into several flats where there is little turnover of tenants. However, a furnished holiday let where you will have a weekly or fortnightly turnover of occupants during the holiday season is somewhat different.

The next case is another example of the refusal of the claim to business property relief in respect of any furnished holiday let.

Green v. HMRC [2015] UKFTT 236 (FT).

The main issue in the next case was whether a furnished holiday let qualified for BPR. There were also procedural issues which are not relevant.

Judge Anne Redston said:

“30. The Property is divided into five units, each of which is available for holiday

letting on a self-catering basis. Two units are in the main house, and three – Flagstaff Cottage, the Garden House and the Boat House – are within

the curtilage of the main house. Each unit has a well-equipped kitchen

with a dishwasher, freezer, fridge , microwave and cooker, as well as crockery, cutlery, glassware, pans and utensils. The units share an outside laundry room with a washing machine, tumble drier and ironing board.

The Property has wifi but only a weak mobile phone signal.

31. At all relevant times, Mrs Green lived in Woodbridge, Suffolk. The Business

has a website through which bookings can be made. If a person wishes to stay at the Property, but does not use the website, he telephones Mrs Green in Woodbridge to see if the unit is available, and then completes a 132

Booking Form and sends it to Mrs Green. For the years 2009-2012, the Booking Form states that the price included “linen and towels, electricity and cots/highchairs” and went on to say “Please call our caretaker,

Glenda Sturman, on [number] if you have any queries regarding your

holiday arrangements.”

32. Guests are given a “Welcome Pack” which contains telephone numbers

for emergencies; information relating to activities, shops and markets and two pages of Tide Tables. It also includes the following information: (1)

The rubbish is collected early on Monday morning. The caretaker will

put out the rubbish on Sunday night.

(2)

The iron and ironing board are stored in the utility room.

(3)

The heating can be controlled by using the thermostats

(4)

If you do break, damage, lose something or spot a maintenance

problem please do not hesitate to call us on [Mrs Green’s

Woodbridge number], so we can arrange for repairs or replacements

as soon as possible.

(5)

Before departure, close the front door and make sure all windows

are shut, empty the fridge and check that the cooker and

microwave are left clean, ensure that all cooking and eating utensils

are clean and placed in cupboards ready for the next guests, and

leave the keys in the door where found.

The cottage is cleaned between guests but if it requires additional

(6)

cleaning beyond the normal changeover clean we will need to

make a charge from your housekeeping deposit.

In emergencies, if you have a property related problem, your first

(7)

point of contact is Glenda Sturman on [number].

(8)

If the lights go off, it could be that a light bulb has blown and tripped

the fuse box. A torch and spare light bulb are stored in the hall.”

33. During the period 2009-2012, the five units in the Property were let for a

total of between 650 and 700 nights a year.

34. On 2 February 2010, Bedfords Limited, a firm of estate agents in Kings Lynn,

valued the Property at £1.9m on a vacant possession basis.”

It was held that it did not qualify for BPR.

133

Privilege/specific gifts.

John Thurston, TEP, Solicitor, LL.B There were two issues in the next case:

1. If you are drafting a will with a specific gift of a house, are you under any

duty to check whether the testator or testatrix actually owns the property?

2. If you are administering an estate, what documents are privileged from

disclosure?

It is clear that a trustee cannot assert a claim for privilege against a beneficiary. If there is a joint retainer, one client cannot waive privilege. However, one personal representative can bind the other.

The second case is also about privilege.

There are wider issues in these cases It is quite common to be instructed by family members to deal with the administration of a parents estate.

What happens if they fall out?

It seems that they are all entitled to see the documents dealing with the administration of the estate.

If you are unsure, try to obtain agreement before disclosing documents.

If you re still unsure, you will have to see the directions of a judge.

Birdseye and Cooke v. Roythorne & Co and others [2015] WTLR 961.

Mr and Mrs Dring were the shareholders in Dring Bros Ltd, which acquired a farm, Manor Farm, of which Mrs Dring’s brother and his wife, Mrs Cooke, were tenant farmers to enable them to continue to live there. R prepared a codicil for Mr Dring with a specific gift of the farm to Mrs Cooke who died shortly after the death of Mr Dring. The claimants, who were Mrs Cooke’s daughters, sued the estate of Mr Dring, and this was compromised by Mrs Dring paying £300,000 to the claimants. The compromise specifically stated that the claimants could still sue R. They did alleging that R had been negligent in drafting the will and not investigating the title to Manor Farm.

The solicitors for the claimants had been given a copy of R’s file relating to the estate by the solicitors acting for D, one of the executors. P, the other executor, had offered to complete a statement with various documents attached to it.

134

It was held:

1. It is well established that trustees could not assert privilege against a

beneficiary. It was argued that the executors were in a similar position to

that of trustees. However, if a person had no more than an arguable case

that he was a beneficiary, this did not apply. On the facts of this case, it

was held that legal professional privilege did apply to communications between the executors and R.

2. It was well established that in the case of a joint retainer, a single

client could not waive privilege unilaterally. However, the act of one personal representative could bind the other. D had waived privilege by

authorising his solicitors to disclose R’s file to the solicitors acting for the

claimant. P had also shown that intention by offering to complete a statement with the documents attached.

Kousouros v. O’Halloran and Aresti [2015] WTLR 1023.

D owned a property in Islington in which he lived with K, his son. K alleged that D had transferred the property to him in 2001, but the transfer had not been registered. It was a term of the transfer that ÂŁ50,000 should be paid to his sister, A. D also executed a will in Cyprus dividing his estate equally between K and A. He died in 2007.

A instructed S to recover her share of the English estate. His assistant would deal with the administration of the estate. This became a joint retainer when the Cypriot executor also instructed S. In 2009 IHT was paid on the basis that the Islington property was part of the estate. S was granted letters of administration, and applied to be registered as the proprietor of the Islington property. S received a letter sent on behalf of K requesting that the property should be transferred to him. S ceased to act for A, and obtained repayment of the IHT paid on the property on the basis it was not part of the estate of D. S disclosed the letters to HMRC claimIng a refund of IHT. The question arose as to whether the letters were privileged from disclosure.

The Court of Appeal held:

1. When A had first instructed S, there was no question of any joint interest.

2. For a joint interest privilege to exist, it must have existed at the time the

communication came into existence.

3. It was unclear whether a person could assert privilege where there was

joint interest in the advice when the other person with an interest was not a party to the original relationship.

135

4. On the facts of this case, the privileged information had come into

existence before there was any question of a joint interest, and so was

privileged.

Is a scrip dividend income or capital?

John Thurston, TEP, Solicitor, LL.B In the next case it was held to be capital.

Seddon and others v. The Commissioners for HMRC [2015] WTLR 1103.

Five ordinary shares of £1 each were transferred to the trustees of a discretionary trust in 1999. In 2000 the trustees received a scrip dividend of preference shares in the company worth £1,382,750. They were sold two days after receipt. Just before the ten year anniversary, the trustees made a distribution worth £1,260,361 to certain beneficiaries.

Was the scrip dividend income or capital? There were conflicting previous authorities.

It was held that the scrip dividend was capital.

136

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thesolicitorsgroup.com

Chapter 10 September 2015

Families falling out.

John Thurston, TEP, Solicitor, LL.B Regrettably, practitioners often see families falling out, and siblings never speaking to each other again.

In the next case family members are living in a property, but fall out.

There is an application to the court for an order that one family member could buy the share of another family member.

The judge at first instance holds that she cannot make such an order, but does come up with an order which is confirmed on appeal.

Bagum v. Hafiz and another [2015] EWCA Civ 801.SG Mrs Bagum’s husband purchased the property the subject of the dispute in 2003. He died intestate in 2005, and the family entitled under the intestacy rules to his estate surrendered their interests to Mrs Bagum. She continued to live in the property with one of her daughters and her three sons. Her two eldest sons had made financial contributions to the property. They both married, and started families, but tensions between family members, in particular between the wives of two sons, resulted in one and his wife leaving. However, shortly before this son left, a declaration of trust had been executed stating that the property was owned by the three of them in equal shares.

A dispute arose as to the use, enjoyment or disposal of property, and Mrs Bagum sought an order for the purchase of the one third share the son who had left by the other son. The judge at first instance concluded that she had no jurisdiction to make such an order but she did make an order directing the trustees to sell on terms that the son left in the property should first have the opportunity to buy it for a price determined upon valuation evidence by the court, failing which (within six weeks of that determination) the property should be sold on the open market, with liberty for all the beneficial owners to bid.

This order was confirmed on appeal.

138

Inheritance (Provision for Family and Dependants) Act 1975.

John Thurston, TEP, Solicitor, LL.B The next case is one which has been in the headlines. Can parents cut out estranged children from their wills? The answer is clearly no. Some people consider that this wrong. In the view of the writer, when families drift apart, there is usually fault on both sides - it is rare for the all the blame to be on one family member.

Ilott v. Mitson [2015] EWCA Civ 797.

Arden LJ considered that the judge at first instance had made two errors:

1. He stated that he would limit the award because of the appellant’s lack

of expectancy and her ability to live within her means. He had not explained what effect that had on the award.

2. He did not calculate what effect the award would have on the

entitlement of the applicant to state benefits.

She said:

“The court is entitled to look at future as well as present needs. The appellant is

now in her 50s and has no pension.

I consider that the appellant’s resources, even with state benefits, are at such a

basic level that they outweigh the importance that would normally be

attached to the fact that the appellant is an adult child who had been living i

ndependently for so many years.

The first question which I have to decide is whether the current living standard is

sufficient. This is the correct test, and the court’s assessment should not be

motivated by a desire to provide an improved standard of living as opposed to

a desire to meet appropriate living needs. Nor on the other hand is the

court bound to limit maintenance to mere subsistence level. In my judgment,

the appellant’s present income is not reasonable financial provision for her

maintenance in the context of this application given the restrictions which, as

exemplified by Parker J’s findings, she has to impose on her own expenditure

and the lack of any provision to meet her future needs, for example when she

grows older or if she suffers any ill-health.

How in those circumstances should the court set about determining the amount

of an award if the effect of an award is to remove the state benefit?

139

In my judgment, what the court has to do is to balance the claims on the estate

fairly. There is no doubt that, if the claimant for whom reasonable financial

provision needs to be made is elderly or disabled and has extra living costs,

consideration would have to be given to meeting those. In my judgment, the

same applies to the case where a party has extra financial needs because she

relies on state benefits, which must be preserved. Ms Reed submits that the

provision of housing would not do this. I disagree. The provision of housing

would enable her both to receive a capitalised sum and to keep her tax

credits. If those benefits are not preserved then the result is that achieved by

DJ Million’s order in this case: there is little or no financial provision for

maintenance at all.

The claim of the appellant has to be balanced against that of the Charities but

since they do not rely on any competing need they are not prejudiced by what

may be a higher award than the court would otherwise need to make.

In my judgment, the right course is to make an award of the sum of £143,000,

the cost of acquiring the Property, plus the reasonable expenses of acquiring

it. That would remove the need to pay rent though some of that money may

be required for meeting the expenses that she will have as owner. As Ms

Stevens-Hoare submits, having the Property will enable her to raise capital (by

equity release) when she needs further income in the future.

In addition, I would add to the award a further sum to provide for a very small

additional income to supplement her state benefits without the necessity of an

equity release. If my Lords agree, I would provide that she has an option,

exercisable by notice in writing to the first and second respondents within two

months of the date of this order (or within such longer period as the appellant

and first and second respondents may agree) to receive a capital sum not

exceeding of £20,000 out of the estate for this purpose. According to the

current Duxbury tables in At a Glance for 2015/6, the sum £20,000 would if

invested give her £331 net income per year for the rest of her life. This is not a

large amount because of the factors which weigh against her claim,

particularly the fact that she is an adult child living independently, Mrs

Jackson’s testamentary wishes and to a small extent the appellant’s

estrangement from Mrs Jackson.

The option may be exercised in part more than once provided that the total

sum of £20,000 is not thereby exceeded. I have expressed the provision of a

capital sum as an option so that, if the award of a capital sum would result

in the loss of benefits, she can if she wishes take a lesser sum, or (as she may

140

prefer to do if she is advised that her benefits will not be prejudiced) she may

take the lesser sum and spend it, and then exercise the option for an amount or

amounts not exceeding the balance.�

It is very common in divorce proceedings for an order to be made barring the parties from applying against the estate of the other under the 1975 Act. If they then cohabit, can the survivor claim against the estate of the deceased on the ground that they were cohabiting as husband and wife up to the date of death of one?

That was the issue in the next case.

Chekov v. Fryer and anr [2015] EWHC 1642 (Ch).

The applicant had been married to the deceased, but they had divorced. In the divorce proceedings, the following order had been made:

‘Neither party shall be entitled to claim against the estate of the other under

the Inheritance (Provision for Family and Dependants) Act 1975 unless the

parties shall remarry.’

The applicant alleged that she was cohabiting with the deceased at the date of his death, although this was not accepted by the executors of the deceased. Could she claim as a cohabitee despite the order made in the divorce proceedings? As a preliminary point, it was held that she could.

This case raises the issue of whether the applicant could claim as a person maintained by the deceased if he had been making periodical payments to her under a court order made in the divorce. The answer is almost certainly no - it is not being paid voluntarily.

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Chapter 11 October 2015

In the matter of H [2015] EWCOP 52.

John Thurston, TEP, Solicitor, LL.B H was formally diagnosed as autistic when she was 5 and has cognitive functioning and adaptive skills in the extremely low range. In addition, she has almost unintelligible speech and very limited communication skills. She was cared for by devoted parents, but they were concerned about what would happen when both were dead. Application was made for the appointment of the parents as property and affairs and health and welfare deputies, and three successive deputies, A, B and C. A and B were aunts and younger than the mother. C was a paid carer.

John Friel of Counsel produced a draft of a proposed order:

“In the event that either or both of [H’s parents] are no longer able to make

decisions as H’s deputy, or in the event of both of them predeceasing H, then

the following shall be appointed:

(1) In order of priority to act as successor deputy replacing the incapacitated

or deceased current deputies as listed hereafter, A B and C.

(2) One or more of the above listed successor deputies will replace the

incapacitated or deceased current deputies, each or both of them, upon the following: (a) In the event of each or both of the deputies, namely [H’s parents]

dying, upon production of the death certificate by the surviving

deputy, with an accompanying letter to this court, sent within 28

days.

(b) In the event of one or both of the current deputies becoming

incapacitated, due notice shall be given either by the deputy who

is incapacitated, each or both of them providing written

confirmation that they no longer are able or wish to act as a deputy,

or alternatively on production of evidence in writing that he or she

are either or both incapacitated from the duty of deputy, or a report

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from a general practitioner or medical consultant. Such medical

evidence or due notice to be produced to this court as soon as

practical by way of a covering letter.

(c) In the event of any of the above listed successor deputies becoming

either incapacitated or dying, the last named successor deputy shall

be appointed by the same method as set out above.

(3) The authority of the deputies appointed as successors shall be in the same

terms as the appointment of [H’s parents] as obtained in the order of [date] made by Senior Judge Lush of this court.�

Lush SJ this to the advantages and disadvantages of making an order for successive deputies, but ultimately made such an order.

The next case is one where the court ordered an NHS foundation trust to prepare a report as to whether an 89 years old lady had capacity.

The trust objected mainly on various grounds, the first one being that the trust had no clinical involvement or knowledge of the lady.

The court confirmed the original order.

The judge also stated that the court has no power to order that the cost of the report should come out of public funds.

The judge recognised that this would impose a burden on the National Health Service and other bodies.

RS (by her Ligation Friend the Official Solicitor) v. LCC and others [2015] EWCOP 56.

RS was 89 years old and had been diagnosed with vascular dementia. She was in a nursing home, and was subject to a standard authorisation. There was a dispute between Lincolnshire County Council and the attorneys under a health and welfare last power of attorney as to whether she had capacity.

An order was made and section 49 of the Mental Capacity Act 2005 requiring Lincolnshire Partnership NHS Foundation Trust to prepare a report as to the capacity of RS. The Trust objected on the following grounds:

(1) The Trust has no clinical involvement or knowledge of P (other than the

information contained in the applicant’s enclosed letter). P is not a patient under the Mental Health Services of the Trust.

143

(2) There appears to be a clear dispute on capacity the outcome of which

may have a significant impact on P’s future care and welfare. Such a

dispute should properly be resolved by way of a jointly instructed

independent court expert. It is not appropriate to seek quasi expert

evidence through Section 49.

(3) A Section 49 Report is not a joint instruction and therefore can potentially

leave open a dispute in the event that the evidence is not accepted

by all parties. We understand that the first Respondent was not in

agreement that Section 49 is appropriate.

(4) The Trust’s consultants are not court experts: they do not have the

expertise in preparation of Medico Legal reports and should not be expected to do so, particularly where it is not in connection with a patient under their care.

(5) We understand a report in the proceedings has been prepared on a

private instruction by Dr Gonzalez (of the Trust). There is a potential

conflict of interests in seeking a further report from a consultant of the Trust.

(6) The request was a publicly funded body into proceedings of which it has

no involvement.

(7) Complying with the request places a significant and disproportionate

burden on limited NHS resources.

(8) A consultant would need to cancel clinics to make time to prepare the

report; putting vulnerable patients at risk.

(9) There is no provision for costs of the report in order to enable the Trust

to employ locum cover for the report author. The Trust is already under

significant pressure to reduce its locum cover.

(10) Even where locum cover can be sourced this can be detrimental to

patients if they are not able to see their usual consultant with whom they have built a trusting professional relationship. Consistency of care is an important factor in mental health care and should be maintained wherever possible.

The order was confirmed, but the judge commented that the court had no power to order payment of fees or expenses with regard to the report, and that this could impose a person upon any Trust or NHS body.

144

Increased nil rate band where home inherited by descendants.

John Thurston, TEP, Solicitor, LL.B “Spouse” includes civil partners.

The idea is that everyone should have a residence nil rate amount.

This will start in 2017-18 and will be £100,000 in that year.

Various conditions must be satisfied”

1. There must be a qualifying residential interest.

2. The interest in the home must go to descendants.

3. It must be closely inherited.

If when a person dies, there is no residence nil rate because the conditions are not satisfied, then it can be carried forward, but it can only be used by a spouse or civil partner of the deceased.

Qualifying residential interest.

1. An interest in a dwelling-house which has been the person’s residence at

a time when the person’s estate included that, or any other, interest in the dwelling-house.

2. Where a person’s estate immediately before the person’s death includes

residential property interests in just one dwelling-house, the person’s

interests in that dwelling-house are a qualifying residential interest in

relation to the person.

3. Where— (a) a person’s estate immediately before the person’s death includes

residential property interests in each of two or more dwelling-houses,

and

(b) the person’s personal representatives nominate one (and only one)

of those dwelling-houses,the person’s interests in the nominated

dwelling-house are a qualifying residential interest in relation to the

person.

A dwelling-house—

145

(a) includes any land occupied and enjoyed with it as its garden or

grounds, but

(b) does not include, in the case of any particular person, any trees or

underwood in relation to which an election is made under section

125 as it applies in relation to that person’s death.

4. If at any time when a person’s estate includes an interest in a dwelling-

house, the person— (a) resides in living accommodation which for the person is job-related,

and

(b) intends in due course to occupy the dwelling-house as the person’s

residence, this section applies as if the dwelling-house were at that

time occupied by the person as a residence.

Meaning of “inherited”

1. B inherits the property if there is a disposition of it (whether effected by will,

under the law relating to intestacy or otherwise) to B.

2. B inherits the property if—

(a) under the disposition B becomes beneficially entitled to an interest in

possession in the property, and that interest in possession is an

immediate post-death interest or a disabled person’s interest, or

(b) under the disposition the property becomes settled property—

(i) to which section 71A or 71D applies, and

(ii) held on trusts for the benefit of B.

3. Where the property forms part of D’s estate immediately before D’s

death as a result of the operation of section 102(3) of the Finance Act 1986 (gifts with reservation) in relation to a disposal of the property made

by D by way of gift, B inherits the property if B is the person to whom the disposal was made.

Meaning of “closely inherited”

1. In relation to a person’s death, something is “closely inherited” if it i

inherited for those purposes (see section 8J) by a lineal descendant of the person.

146

2. A person who is at any time a step-child of another person is to be

treated, at that and all subsequent times, as if the person was that other

person’s child.

3. An adopted person can the child of his natural parent of the person and

the adoptive parents. “adopted person” means— (a) an adopted person within the meaning of Chapter 4 of Part 1 of the

Adoption and Children Act 2002, or

(b) a person who would be an adopted person within the meaning of

that Chapter if, in section 66(1)(e) of that Act and section 38(1)(e)

of the Adoption Act 1976, the reference to the law of England and

Wales were a reference to the law of any part of the United

Kingdom.

4. A person who is at any time fostered by a foster parent is to be treated, at

that and all subsequent times, as if the person was the foster parent’s

child. “foster parent” means— (a) someone who is approved as a local authority foster parent in

accordance with regulations made by virtue of paragraph 12F of

Schedule 2 to the Children Act 1989,

(b) a foster parent with whom the person is placed by a voluntary

organisation under section 59(1)(a) that Act,

(c) someone who looks after the person in circumstances in which the

person is a privately fostered child as defined by section 66 of that Act, or

(d) someone who, under legislation having effect in Scotland or

Northern Ireland or any country or territory outside the United

Kingdom, is a foster parent corresponding to a foster parent within

paragraph (a) or (b).

5. Where— (a) an individual (“G”) is appointed (or is treated by law as having been

appointed) under section 5 of the Children Act 1989, or under

corresponding law having effect in Scotland or Northern Ireland or

147

any country or territory outside the United Kingdom, as guardian

(however styled) of another person, and

(b) the appointment takes effect at a time when the other person (“C”)

is under the age of 18 years,

C is to be treated, at all times after the appointment takes effect, as if C was G’s child.

6. Where one person is treated at any time as the child of another person,

that first person’s lineal descendants (even if born before that time)

are accordingly to be treated at that time (and all subsequent times) as

lineal descendants of that other person.

Example 1.

C is married to D. They own the matrimonial home worth £350,000 as tenants in common.

C dies leaving all his estate to D. It does not matter when C’s death occurred.

No IHT because of spouse exemption.

Brought forward allowance is 100% When D dies and leaves the matrimonial home to children, residential enhancement will be increased by 100%. Double standard nil rate band available.

Example 2.

A, who is married, dies in June 2017 leaving a house worth £300,000 to daughter D. Residue of £425,000 goes to son S. N% = 100%.

NV/100 = N% of the value of the interest transferred The residence nil rate band is £100,000.

The remainder of the estate - £200,000 + £425,000 = £625,000 will be subject to IHT. Deduct NRB £325,000 = £300,000 x 40% = £120,000.

Example 3.

As example 2, but house is worth £75,000.

Residence nil rate band is £75,000.

148

£25,000 or one quarter can be carried forward, but can only be used by a spouse of civil partner.

Remainder of estate £425,000 subject to IHT. Deduct NRB £325,000. IHT on £100,000 x 40% = £40,000.

When survivor dies, if residence nil rate band £125,000, it will be increased by one quarter. = £31250.

Example 4.

B dies in June 2017 leaving a house worth £300,000 to niece N. Residue of £425,000 goes to nephew M. 100% residence nil rate band can be carried forward, but can only be used by B’s spouse or civil partner.

Example 5.

E died in June 2014 leaving his half share in the matrimonial worth £162,500 to his children. The residue went to his wife, F. No IHT was payable when E died because half share within the nil rate band.

On F’s death standard nil rate increased by 50%. Double residence nil rate available.

149

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