Last updateTue, 24 Feb 2015 5pm

5 Stone Buildings

5 Stone Buildings

Ruth Hughes explores the notion of ‘doing the right thing’ in a will

Re Jones [2016] was a case riven with tragedy, but with a relatively happy ending.

David Rees QC, Eliza Eagling, Bryony Cove and Adam Carvalho discuss a key pensions case which resulted in a taxpayer victory

The case of HMRC v Parry [2017] related to two decisions made by Mrs Rachel Staveley in relation to her pension fund shortly before her death in December 2006. In November 2006 Mrs Staveley transferred her funds from one registered pension scheme (the s32 scheme) into another (the AXA PPP). At the time of the transfer, Mrs Staveley wrongly believed that if she left her pension in the s32 scheme, there was a risk any surplus on the fund would revert to her ex-husband on her death. The second decision made by Mrs Staveley was that she omitted to take any lifetime benefits from the AXA PPP.

Can beneficiaries demand the disclosure of trust accounts? Mathew Roper explains

The right of a beneficiary to monitor and protect its interest by obtaining accounts from its trustee is central to the existence of a trust. Accordingly, prior to the Privy Council’s decision in Schmidt v Rosewood Trust Ltd [2003] a beneficiary was thought to have a proprietary right to disclosure of trust accounts or, more accurately the right to obtain inspection and/or the production of copies on demand (see Re Cowin [1886]; O’Rourke v Darbishire [1886]; and Re Londonderry’s Settlement [1965]). If the trustee failed to give effect to that right, the court would order disclosure and normally make the defaulting trustee personally liable for the costs of the proceedings. Indeed, in contrast to the similar proprietary right of a beneficiary to disclosure of trust documents (which was subject to various exceptions formulated in Re Londonderry’s Settlement and later cases), the court spoke of a beneficiary’s right to disclosure of trust accounts in unqualified terms: ‘Every beneficiary is entitled to see the trust accounts, whether his interest is in possession or not’ (per Millett LJ in Armitage v Nurse [1997]).

Alexander Drapkin discusses a recent case which indicates the factors the court takes into account in a dispute over where a body should be buried

The case of Anstey v Mundle [2016] concerned a dispute between one of Mr Carty’s daughters, Valerie, and on the other side another of Mr Carty’s daughters, Sonia, and one of his nieces, Cynthia. Mr Carty had died and the parties could not agree about how to dispose of his body. Valerie contended that Mr Carty’s body should be buried in England and the defendants argued that his body should be transported to Jamaica and interred there beside his mother.

The Court of Appeal judgment in Ilott v Mitson highlights the problem of quantifying reasonable financial provision for the adult child under s2 of the I(PFD)A 1975. Miranda Allardice explains

The issue of quantum in the case of Ilott v Mitson [2015] has been determined by the Court of Appeal. The original tribunal had awarded the able-bodied adult daughter £50,000 from the estate of her estranged mother. The remainder of the £486,000 had passed to animal charities. This award was upheld by Parker J. Mrs Ilott’s appeal was allowed by the Court of Appeal, with Arden LJ giving the leading judgment. Mrs Ilott received the sum of £143,000 to buy her housing association property (at a discount), and a further £20,000 for living costs. The £20,000 was expressed as an option to be exercisable more than once, provided the sum of £20,000 was not exceeded. This ‘fine tuning’ of the provision was with an eye to preserving the Ilotts’ state benefits.

Sarah Haren explores the lessons from Graham-York v York [2015] on the quantification of beneficial interests in the family home

The Court of Appeal’s decision in Graham-York v York [2015] treads the familiar ground of the quantification of beneficial interests in the family or quasi-matrimonial home, but sheds light on two particular aspects, namely; what factors are relevant when examining the parties’ ‘whole course of dealing between them in relation to a property’ (Oxley v Hiscock [2004])and how the burden of a mortgage should be allocated between the shares of two beneficial owners.

Divorce case Arif v Anwar and Rehan [2015] raises interesting points on beneficial ownership and also costs, as Penelope Reed QC and Nicholas Fairbank report

In Sofia Arif v Arif Anwar, Raziz Rehan [2015] Norris J, a judge of the Chancery Division, was drafted in to hear a divorce case. It made a great deal of sense as the application by Sofia Arif (the wife) for provision on her divorce ultimately boiled down to whether there would be any surplus funds after Arif Anwar’s (the husband’s) bankruptcy. That in turn depended on what assets he owned and in that regard his eldest son Raziz Rehan (the son) claimed a beneficial interest in a substantial property in Burkes Road, Beaconsfield (Burkes Road) which had been the matrimonial home.

Re Gladys Meek [2014] has lessons on safeguarding the mentally incapable from loss. Sam Chandler analyses the case.

Best read in conjunction with the earlier decision of Senior Judge Lush in Re GM: MJ and JM v The Public Guardian [2013] this memorable judgment provides useful guidance on the court’s approach in statutory will applications. It also provides much needed commentary on the workings of the security bond system designed to protect the mentally incapable from loss caused by their defaulting deputies.

Mark Herbert QC discusses the implications of Shergill v Khaira

In Shergill v Khaira the Supreme Court has given an important ruling on the courts’ jurisdiction to make findings about religious doctrines and practices. To quote from the court’s own press summary:

Hugh Cumber finds Parry v HMRC provides welcome clarity of the circumstances in which IHT can arise in pension schemes

Some of the circumstances in which a charge to IHT may arise in relation to pension schemes were recently considered by the First Tier Tribunal in the case of Parry v HMRC [2014]. This case was an appeal by the executors of the estate of Mrs Rachel Staveley against two assessments to IHT relating to two alleged transfers of value made by Mrs Staveley. The alleged transfers arose from Mrs Staveley’s dealings with two pension schemes in October 2006 immediately prior to her death in December 2006:

Miranda Allardice and Ruth Hughes consider the problem of provision for the adult child under s2 of I(PFD)A 1975

The decision as to quantum in Ilott v Mitson was handed down on the 3 March 2014. The purpose of this article is to assist private client practitioners who are engaged in drafting a will for the parent of independent, but poor, adult children and considering the impact of a claimant’s entitlement to state benefits on a claim under the 1975 Act.

Ruth Hughes looks at the lessons from Re Theodore; Zarrinkhat v Kamal, which concerned a claim by an adult under the 1975 Act

The case of Re Theodore ; Zarrinkhat v Kamal [2013] concerned the estate of Mrs Theodore. She left Iran in the late 1950s and originally moved to Germany. In 1960 Mrs Theodore returned to Iran while her daughter Haydeh was cared for by foster parents in Germany. Haydeh moved back to Iran in 1967 to live with her parents and her brother Fariborz. The family then moved to Italy, where Mrs Theodore’s marriage broke down. She divorced in 1978 and settled in England. Eventually she was able to sell her property in Iran and remit the proceeds to England. She married again (her husband died in 2004) and owned property in London. Haydeh moved to Germany in 1980 and Fariborz settled in the US. Both Haydeh and Fariborz were in their mid-50s at the time of the claim. The only relative that Mrs Theodore saw regularly was her niece Yasmin when Yasmin’s partner (a diplomat) was resident in London.

Ruth Hughes considers the requirements of actual occupation and the level of involvement in a mortgage grant that will prevent a co-owner from claiming priority over the mortgagee

The scheme of the Land Registration Acts is to hide certain minor interests in land (including beneficial ownership) behind the register so that the purchase is unconcerned with these interests and will not be fixed with notice of them. In some limited circumstances these minor interests take priority despite a registered transfer of the estate. One of these situations is where a person in actual occupation of the land has an otherwise unprotected interest. A situation that arises commonly in practice is where a home is owned by one party but there is an informal trust arrangement between the parties, for example a common intention constructive trust (see Oxley v Hiscock [2004] cf.Stack v Dowden [2007] and Jones v Kernott [2012]). Where the land is owned by two legal owners, their charge will overreach the co-owners’ beneficial interests and transfer these to the equity of redemption (see City of London Building Society v Flegg [1988], ss42(1)(b) and 44 of the LRA 2002 and s58(3) of the LRA 1925). However, overreaching will not occur when there is only one legal owner (see Williams & Glyn’s Bank v Boland [1980]).

Michael O’Sullivan reviews the case of Re JC [2012], which clarifies the current position with statutory wills and adoption

The case Re JC [2012] involved an application for a statutory will that was made by D, who was the biological daughter of JC but who had been put up for adoption by her biological mother and adopted by different parents. The case vividly illustrates that the court’s present jurisdiction under the Mental Capacity Act 2005 does not allow it to make a will on an objective fair basis. Instead the court has to apply the ‘best interests’ approach. Re JC, however, shows that applying the ‘best interests’ test in the context of a statutory will application is often difficult and that the Act is not ideally suited to task.

Curtis v Pulbrook clarifies how the court treats imperfect gifts, as Tracey Angus reports

The decision of Briggs J in Curtis v Pulbrook [2011] clears up some of the uncertainty as to when the court will treat a gift that is imperfect at law as effective in equity that arose following the Court of Appeal’s decision in Pennington v Waine [2002]. 

Khan v Crossland reveals flaws in the current method of passing over executors, as Michael O’Sullivan discusses

The decision in Khan v Crossland was made by HHJ Behrens sitting as a judge of the Chancery Division. The case concerned an application by the stepson of Dennis Griffiths (the deceased) to remove executors appointed by the deceased’s will. Because no grant of probate had been issued at the time when the dispute arose, the application was commenced under s116 of the Supreme Court Act 1981. That statute has subsequently been renamed the Senior Courts Act 1981. It will be referred to as s116 SCA. The case is of interest because the judge had to consider conflicting first-instance High Court decisions on the correct test to apply under the section. 

Austin v Woodward clarifies the limits of ‘clerical error’ as a ground for rectification, as Michael O’Sullivan explains

The case of Austin v Woodward & anor [2011] concerned an application for rectification of a will under s20 of the Administration of Justice Act 1982. The case is of interest because it examines the limits of the concept of the ‘clerical error’ and restates the test applied by the court when considering whether to extend the time limit for making a rectification application.

Shân Warnock-Smith QC examines the partitioning of ‘Freeston’ trusts in the recent case of Southgate v Sutton

On the ‘no bus for ages then all coming at once’ principle, the scope of s57 of the Trustee Act 1925 in England and Wales, and of its international equivalents, has recently come under the judicial microscope on several occasions, each of which has arisen out of the same (or similar) legal and factual context. In a number of instances it has proved either necessary or highly desirable to separate the interests of a beneficiary or class of beneficiaries (often for specific reasons of US tax, although there are a number of other circumstances that may also lead the parties down the road to partition). Friction between classes of beneficiaries or between one class of beneficiaries and the trustees is often best resolved by hiving the dissident group off into a separate settlement or sub-trust. However, the US tax example is probably the most useful illustration for present purposes, both because it was the central driver in the most recent English case on the subject and because it is such an extreme one. It is not unusual to find the US advisers telling us in a particular case that the US beneficiaries are at peril of losing the entirety of their interests by reason of the workings of the US accumulation distribution rules.

The court’s approach in Smith v Cooper sheds light on presumed undue influence in the case of cohabitation, as Anna Clarke relays

In June 2010 the Court of Appeal gave judgment in an appeal from HHJ Darroch in the Norwich County Court. This was another presumed undue influence case but it has added interest for parties and practitioners seeking to ‘unravel’ the consequences of undue influence in the context of cohabitation and personal relationships.

Penelope Reed QC introduces an issue devoted to articles by the barristers of 5 Stone Buildings

The members of 5 Stone Buildings are delighted to be back writing for this edition of the Trusts and Estates Law & Tax Journal. Last year proved to be a fertile source of articles with members of chambers involved in litigation that hit the headlines, not just of the legal and technical journals, but also the national press.

Penelope Reed QC and William East look at the removal of trustees

When faced with trustees taking decisions they do not agree with, it is often the kneejerk reaction of disgruntled beneficiaries to seek to have the trustees removed. In cases where the conduct of the trustees amounts to a clear breach of trust, then it may not be too difficult to persuade the court to order removal. In cases that are not so obvious, however, an application to the court may prove to be frustrating, expensive and ultimately unsuccessful.

Ruth Hughes reviews case law to present the up-to-date position on presumed undue influence

Equity protects so that injustice may not be perpetrated. In the context of lifetime gifts, in some situations there will be a presumption of undue influence that may vitiate a transaction such that it can be set aside by the court. However, the presumption of undue influence can be rebutted by showing that the gift was made as a result of ‘full, free and informed thought about it’ (see Zamet v Hayman [1961]).

Re G (TJ) has valuable lessons on the role of substituted judgment in statutory wills and gifts, as David Rees outlines

The Court of Protection and its predecessors have long enjoyed jurisdiction to authorise gifts and settlements out of the property of persons who lack capacity (or ‘patients’ as they were known until 1 October 2007). Under the Mental Capacity Act 1959, the Court of Protection had authority to make provision from the patient’s estate for other persons or purposes for whom they might have been expected to provide if they were not mentally disordered. In 1970, the court’s jurisdiction was extended by s17 of the Administration of Justice Act 1969 to enable it to authorise the execution of a will for the patient. These powers were re-enacted by the Mental Health Act 1983 and were latterly to be found in ss95 and 96 of that Act.

Vinton v Fladgate Fielder gives some indication of the current approach of the courts towards negligent IHT planning, explains Michael O’Sullivan

Since the somewhat unsatisfactory decision of the Court of Appeal in Daniels v Thompson [2004] there has been confusion as to who has the right to sue where an inheritance tax planning transaction has gone wrong. In the recent case of Vinton v Fladgate Fielder [2010] the court had to consider such a situation. However, unfortunately the court considered the question in the context of an interlocutory application by the defendant and so it was not necessary for the court to arrive at any definitive conclusions. The judgment does, however, provide helpful clues as to how a court might approach a similar substantive case at trial.

Henry Legge examines some oft-overlooked points concerning international testators

In this article, I will focus on two particular problems that arise when you are dealing with a testator who is not dyed-in-the-wool English. The two provisions I am going to deal with can lay a convincing claim to being the aspects of the English law of succession that are more frequently ignored than any other. However, where they do apply they are both of great practical importance.

Jordan Holland analyses the Court of Protection’s obligations to enforce international orders after Re MN

Since the coming into force of the Mental Capacity Act 2005 (the 2005 Act) in October 2007 there has been a good deal of judicial discussion of the manner in which the statutory best-interests test is applied. However, perhaps somewhat surprisingly given that multi-jurisdictional estates are increasingly common, the judgment of Hedley J in Re MN [2010] is the first occasion on which the problematic provisions of schedule 3 of the 2005 Act, and their inter-relationship with the court’s enquiry into an incapacitated person’s best interests have been considered. Re MN gives helpful guidance on the court’s approach to its jurisdiction under the 2005 Act and the role of the best-interests test in cases where the court of a foreign jurisdiction has made orders affecting the person who is the subject of an application to the court. But, as this article will seek to show, the problematic nature of schedule 3 means that Re MN leaves at least as many questions unanswered as it answers.

The case of Kings v Bultitude has lessons for the failure of a residuary gift as well as casting light on a colourful part of church history, as Barbara Rich finds out

In early January 2008, Mrs Pamela Schroder died and left the residue of her estate: