Analysis
Ernest Cotton (Mr Cotton) and Mary Cotton (Mrs Cotton) won about £107,000 on the National Lottery and made mirror image wills on 16 May 1997 that provided for the survivor to take the entire estate of the first to die and, on the death of the survivor, for it to pass equally to their three children, who were the claimant and defendants. When Mr Cotton died on 7 February 2008 there were two jointly-held accounts (respectively a deposit and current account) with the Coventry Building Society containing £49,186.98 and £2,622.08 (Accounts). Both were thenceforth owned legally and beneficially by Mrs Cotton. On 14 February 2008 the branch in Coventry transferred the accounts into the joint names of Mrs Cotton and the second defendant. At that time, as later accepted, the second defendant had acquired no beneficial interest; the accounts being held by the joint holders on trust for Mrs Cotton. Apart from interest, there were no payments into or withdrawals from the deposit account, and the only payments into and withdrawals from the current account were made by Mrs Cotton. The claimant, who had a drinking problem, fell out with her mother and siblings as a result of an abusive telephone call she made to Mrs Cotton on 16 June 2008. Thereafter, Mrs Cotton was determined that the claimant should not inherit anything on her death but, in the event, did not change her will before she died on 7 August 2008. However, there was evidence (supported by the first defendant) that Mrs Cotton told the second defendant that she wished her to have the funds or at least have them on her death. The second defendant withdrew the funds from the accounts on 27 November 2008. In the dispute that followed, there were subsidiary issues relating to the ownership of certain jewellery and the amount of expenditure on a residential property but the principal issue related to the beneficial ownership of the balances standing to the credit of the accounts. The claimant asserted that Mrs Cotton remained the sole beneficial owner at the date of her death with the result that it formed part of her estate and fell to be distributed in accordance with her last will. The second defendant (supported by the first defendant) claimed that the statements made by Mrs Cotton had the effect of making an immediate lifetime gift to her or, at its lowest, vested in her a beneficial interest so that on Mrs Cotton’s death the entire legal and beneficial ownership of the money in the accounts passed to her by way of survivorship.
Held (dismissing the claim)
Technically, the joint-account holders had the benefit of a chose in action, namely the benefit of debts owed by the building society. Originally, when Mrs Cotton transferred the accounts into joint names of herself and the second defendant, this was for the convenience of administration as beneficial ownership was retained by Mrs Cotton. Subsequently, the statements of June 2008 could have four possible results:
(i) an immediate lifetime gift into the sole beneficial name of the second defendant;
(ii) an immediate lifetime gift into the joint beneficial names of Mrs Cotton and the second defendant;
(iii) a declaration by Mrs Cotton of trust whereby she and the second defendant became joint beneficial owners with the right of survivorship so that on the death of Mrs Cotton the entire interest passed to the second defendant;
(iv) a declaration by Mrs Cotton of intention (which in the event was not fulfilled) that the claimant should not inherit on her death as she would change her will to provide for the money to be inherited by the second defendant. As to the first possible result, the defendants had with the benefit of hindsight firmed up Mrs Cotton’s statements of intention into the making of an immediate lifetime gift which was not justified by the evidence and was therefore rejected. The second possible result did not arise as neither side to the dispute contended for this possibility. As to the third possible result, the evidence as to Mrs Cotton’s statements was to the effect that she intended the money in the Accounts should on her death be owned beneficially as well as legally by the second defendant. Although this was not a disposition of an equitable interest within the meaning of s53(1)(c) of the Law of Property Act 1925 nevertheless it amounted to an informal declaration of trust whereby Mrs Cotton and the second defendant as trustees agreed to hold the money in the accounts on trust for themselves beneficially with the result that on Mrs Cotton’s death the title passed to the second defendant by survivorship and did not form part of the estate of Mrs Cotton. As a result of this finding, the matter was not dealt with in default by the fourth possible result.
Judgment Morgan J: [1] The three parties to this dispute are two sisters and a brother. They are the children of Mr Ernest Cotton and Mrs Mary Cotton. Ernest Cotton died on 7 February 2008, in his early 80s, and his wife, Mary Cotton, died on 7 August 2008, aged around 75. The three siblings …Continue reading "Drakeford v Cotton & anr [2012] EWHC 1414 (Ch)"