Analysis
Sir Malcolm Arnold (Sir Malcolm) was married twice and had two children by his first wife, Robert Malcolm Arnold (Mr Arnold) and Katherine Louise Arnold (Miss Arnold). In June 1976, after separating from his second wife, Sir Malcolm moved to a flat in Dun Laoghaire and, in the following month, sent several boxes to Miss Arnold containing (inter alia) books, paintings, sculptures and the manuscripts of various of his compositions. At the same time he sent a postcard to Mr Arnold on which he had written ‘All the books, pictures, sculptures etc are for you and Katherine to share and keep, or sell if you like! Dad’. Subsequently, Sir Malcolm acquired a flat in Hampstead but, on account of psychiatric problems, no longer lived there by 1980. A receiver was appointed by the Court of Protection and, when it was decided to sell the flat, many of the contents – including some of Sir Malcolm’s manuscripts – were removed by Miss Arnold for safe keeping. In due course many of these were placed with the Royal College of Music (RCM). In 1984 the court engaged Anthony John Day (Mr Day) as Sir Malcolm’s housekeeper, chauffeur and carer. Mr Day remained the carer for the rest of his lifetime and, in October 1986, when Sir Malcolm was restored to the management of his own affairs, the receivership was brought to an end by an order of the court. Subsequently, an account holding money belonging to Sir Malcolm was opened in his and Mr Day’s joint names with Barclays Bank, each having several authority to sign cheques. Mr Day was made a signatory so that he could use the account as part of his management of Sir Malcolm’s affairs. On 28 June 1990 Sir Malcolm created an enduring power of attorney (EPA) appointing Mr Day as his attorney and by his will dated 25 July 1990, after appointing Mr Arnold and Mr Day (together with Mr Harris) as executors, Sir Malcolm gave to Mr Day his house (free of tax and of mortgage) and such of his ‘household goods and possessions as are not otherwise dealt with hereunder together with my motor car and a sum of £10,000 (including any manuscripts scores and musical literary or other written material…)’. The net residuary estate was divisible as to one half in favour of Mr Arnold and Miss Arnold and as to the other half in favour of Mr Day. From 1994 and in each of the following four years Sir Malcolm made use of his annual exemption from inheritance tax to gift £3,000 to Mr Day and, following advice to make use of his normal expenditure out of income exemption, from 1999 and in each year thereafter Sir Malcolm gifted initially £6,000 increasing to £9,000 per year to Mr Day. Cheques, prepared by Sir Malcolm’s bookkeeper, were signed by Mr Day. However, on 8 February 2002, the EPA was registered with the court. The total, of five gifts made after registration, amounted to £36,000. Sir Malcolm died on 23 September 2006 and the will was proved on 13 February 2008. Mr Arnold and Miss Arnold challenged all of Sir Malcolm’s gifts to Mr Day and claimed ownership of Sir Malcolm’s manuscripts of musical compositions. Following the trial, on 7 March 2012, it was held that Mr Day was not liable to account to the estate for the payments of £36,000 and that none of Sir Malcolm’s manuscripts had been given to Mr Arnold and Miss Arnold; rather by an imperfect gift Sir Malcolm had given the manuscripts to Mr Day during his lifetime, such gift becoming complete on Mr Day becoming an executor on Sir Malcolm’s death. No manuscripts, it was held, passed under the will. Mr Arnold and Miss Arnold appealed.
Held (by a majority dismissing the first appeal and allowing in part the second appeal:
- (1) It had been argued that Mr Day could not in his capacity as an attorney under the EPA make lifetime gifts to himself, alternatively in his capacity as a fiduciary of the money held in the bank account retain the lifetime gifts as his interest conflicted with his duty. Moreover, even if Sir Malcolm consented to the making of the gifts, the effect of s7(1)(c) of the Enduring Powers of Attorney Act 1985, after registration of an EPA, was that such consent could only come from the court. This was rejected by the majority (Lloyd and McFarland, LJJ). Section 7 was only concerned with the scope and effect of an EPA. It was not intended to have a wider effect so as to regulate any other subsisting agency relationship such as the authority of a bank mandate in this case. Consequently, it remained open to Mr Day to operate the bank account after registration of the EPA in the same way as he had done before registration. He could not use it to benefit himself without the full, free and informed consent of Sir Malcolm but, if he had that consent, the lifetime gifts made by drawing cheques on the joint account were not invalidated by the effect of s7(1)(c), even though made after registration of the EPA. On the question of consent, the judge had been satisfied on the evidence that each of the annual lifetime gifts was made with Sir Malcolm’s consent and there was no basis to interfere with this finding of fact.
- Rix LJ (dissenting) expressed the view that it was implicit in the whole structure of the 1985 Act that the donor of an EPA could not, after registration, create another agency or give a new power of attorney, in whatever form, at any time in the future and it followed that what was so of the future applied as well to the past so that any previous authority granted could not be maintained as if there had no system of regulation supervised by the court.
- (2) A chattel, such as a manuscript, could be made the subject of a lifetime gift either by a deed of gift, declaration of trust or by delivery of possession. The despatch of the boxes together with their contents which Sir Malcolm sent to Miss Arnold in July 1976 was a unilateral act of delivery of possession, which Miss Arnold did not reject, and Sir Malcolm’s intention (objectively assessed by reference to the wording of the postcard sent to Mr Arnold) was to make a lifetime gift to Miss Arnold and Mr Arnold. Moreover, subsequent conduct did not show either that Miss Arnold did not regard herself as owning the manuscripts which had been delivered to her or that she had made a clear and unequivocal representation to the court by conduct or silence to the effect that they still belonged to Sir Malcolm so as to estop her from claiming their ownership. There was nothing in the circumstances of the delivery to suggest that Sir Malcolm drew a distinction between different parts of the contents of the boxes and no case had been made out that Sir Malcolm was under any mistake or misapprehension as to those contents. Accordingly, the only reasonable reading of the word ‘etc’ on the postcard, being an abbreviation for the word ‘etcetera’ and meaning ‘the rest’, was that it referred to everything else in the boxes besides the books, pictures, sculptures. However, Miss Arnold and Mr Arnold did not own those manuscripts that were removed from Sir Malcolm’s flat in 1980 and subsequently placed for safekeeping with RCM. Sir Malcolm had signed a letter addressed to Mr Day dated 5 August 1998 in which he referred to the gift by his will of any manuscripts, scores and musical literary or other written material. He then expressed the wish that Mr Day should receive these papers as a lifetime gift from him. That letter could not take effect as an immediate gift of the manuscripts then at the RCM because there was no delivery of possession. However, it was accepted on behalf of Miss Arnold and Mr Arnold that the lack of delivery was remedied when Mr Day took a grant of probate because of the principle of Strong v Bird (1874) LR 18 Eq 315. Their appeal, that the gift remained incomplete until an identifying list, contemplated in the letter, was drawn up and signed, was dismissed. If, otherwise, the manuscripts would have passed to Mr Day because, on its true construction, the words in brackets ‘(including any manuscripts scores and musical literary or other written material…)’ should be treated as an addition to the earlier words of gift that referred to such of his household goods and possessions as were not otherwise dealt with under the will.
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