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Trusts and Estates Law and Tax Journal: October 2015

Geoffrey Shindler reflects on the many dangers to note in our professional lives

We are surrounded by danger. There is no need to go to the Middle East or the depths of the Amazon rainforest or the bleakness of Siberia or the North Pole. Danger lurks on our desk and the laptop/computer that is in front of us. What do you regard as the most dangerous part of your professional life?

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.

Lucie Sleeman sets out how the Office of the Public Guardian is affected by recent developments in mental capacity law

We actively encourage clients to appoint trusted individuals under a lasting power of attorney (LPA) to ensure their affairs can be managed seamlessly and without delay in the event of a loss of capacity. We go to great lengths to satisfy ourselves that clients fully understand the consequences of the authority they are granting and the way in which the powers conferred under the document may be used in the future. The documents are there to prevent a costly application to the court for a deputy to be appointed and they are marketed to the clients we look after in our profession as insurance policies for an uncertain future. But is the way in which these documents can serve the donor’s wishes changing? Are we heading towards an era of freedom in which the donor can openly stipulate the way in which their affairs are managed if they become incapacitated? Are the drafting restrictions in the prescribed LPA forms soon to be lifted? Has the Public Guardian’s whim finally been restrained?

William Batstone examines Davies v Davies [2015], in which a farmer’s son secured the freehold of the farm that his father had encouraged him to make his life’s work by promises that it would eventually be his

There is a well-established line of authority that an inherently revocable promise about future inheritance of farms and farmland will be rendered irrevocable by the promisee’s reasonable detrimental reliance on the promise to the extent that an equity arises which is to be satisfied by fulfilling the expectation or, if appropriate, by satisfying the equity in a more limited way. Those cases include Gillet v Holt [2000], Thorner v Major [2009], Suggitt v Suggitt [2012], Davies v Davies [2014], and Seward v Seward [2014]. The trend of the more recent of those cases has been to the effect that the claimant’s expectations will be fulfilled even where there is only a loose correlation between expectation and detriment and that it is only if the former is extravagant or out of all proportion to the latter that the equity will be satisfied in a more limited way than by fulfilling the expectation. This claimant-friendly environment may be reviewed by the Court of Appeal in the appeal in the Davies v Davies [2014] case, in which the claimant was dubbed by the press the Cowshed Cinderella, and may be subject to change. The other Davies v Davies case saw the orthodox application of the principles of proprietary estoppel to the facts found by the judge, but one unusual feature undoubtedly contributed to James Davies being granted relief which matched his expectations.

Is a sub-trust a disposition for the purposes of s53(1)(c) of the Law of Property Act 1925? Mark Pawlowski and James Brown assess the current position

Suppose a legal owner (A) declares themselves a trustee of property in favour of an intermediate trustee (B) who (in turn) declares themselves a trustee for a beneficiary (C). Does the sub-trust in favour of C trigger a requirement of signed writing under s53(1)(c) of the Law of Property Act 1925? That section, as we know, applies to dispositions of subsisting equitable interests so the question is whether a declaration of a sub-trust falls to be characterised as effecting a ‘disposition’ of B’s equitable interest under the head trust. Surprisingly, there is no easy answer to this question.

Laytons

Simrun Garcha discusses the implications of Credit Agricole Corporation and Investment Bank v Papadimitriou [2015]

The Privy Council’s recent decision in Credit Agricole and Investment Bank v Papadimitriou [2015], a case which concerned the fraudulent sale of a valuable collection of art-deco furniture, highlights the importance of financial institutions having stringent anti-money laundering procedures in place and ensuring they are able show the procedures followed and inquiries made in transactions are appropriate in circumstances where a third party brings an action against the institution for losses incurred.

Brabners LLP

Peter O’Rourke looks at current compliance for financial institutions

It crept up on us like a dust bowl sand storm, swept us up and tossed us around like a Texan tornado before dropping us back at our desks confused and bewildered as if in a dream. How could it be that a simple family trust with UK trustees and a relatively modest portfolio of investments, managed on a discretionary basis by local stockbrokers, could be caught by a strange sounding piece of US tax legislation, even though it has no connection whatsoever with the US! Not only that but it has to deal, and comply, with the taxman, in America!!