Herring v Shorts

Analysis

The deceased (J) died on 2 June 2012, a widow with no children or close relatives. On 8 November 2011 J executed a will (the will) drafted by a solicitor (W). She made a number of pecuniary legacies including legacies of £54,000 each in favour of the claimants.

An employee of the defendant, (S), had been J’s financial advisor since 2000. In 2011, prior to executing the will and acting on S’ advice, J formed two trusts in the claimants’ favour to mitigate inheritance tax payable on her death. One was a discretionary trust naming the claimants sole discretionary beneficiaries into which was invested £175,000, the other was a loan trust into which £125,000 was invested. S explained the workings of the loan trust to J at a meeting in July 2011 and by a letter sent in August 2011.

J then gave W instructions for the will at a meeting at her home in October 2011. S also attended with a document containing an up to date valuation of the assets subject of the trust and an aide-memoire indicating what was held under the trusts. S left the meeting shortly after W’s arrival, and W took instructions for the will. Initially J wanted to increase the amount that the claimants would receive to £175,000, then later, increased this again to £200,000.

In drafting the will, W made no enquiries as to the terms or nature of the trusts. Instead he included legacies of £54,000 for each of the claimants in the will. He did not devise a formula to ensure that they each received £200,000 and did not check that under the trusts the money held on trust would pass to them on J’s death.

On J’s death, the claimants did not receive the £200,000 that had been intended. They received the legacies and the money in discretionary trusts. They did not receive any part of the capital of the loan trust, which fell into the residuary estate.

In July and August 2012, S met with the claimants and stated that they were entitled to the whole of the trust funds whereas they were in fact only entitled to the sums under the ordinary discretionary trust. The sums under the loan trust reverted to the estate and passed as residue.

This was the claimants’ claim against the defendant for the shortfall. The claimants had initially instituted proceedings against W’s firm, but that claim had been compromised.

The claimants contended that S did not provide an adequate explanation of the trusts to J and that she did not understand that on her death the loan would form part of her estate and only capital growth would be available for the beneficiaries. The claimants also contended that a fair reading of the aide-memoire gave an incorrect indication as to the position under the trusts. Further, the 2012 meetings showed that S never understood how a loan trust worked.

Held:

1. 1) S explained the workings of a loan trust accurately to J. At the meeting in October 2011, S was in a position to explain the trusts to W, but was not asked to do so and was asked to leave by J before he could do so.
2. 2) S had no knowledge of the terms of the will or intended bequests.
3. 3) S’s poor advice in 2012 did not occur because he did not understand loan trusts but because he failed to check the trust documents and had forgotten about the loan trust.
4. 4) J did not rely on S in relation to making the will. She never discussed the terms with him and never asked for his advice regarding the will. While S knew that the claimants were beneficiaries under the 2011 trusts, he did not know that J intended to benefit them under her will. The aide-memoire was not misleading.
5. 5) S was in no sense part of the will making process. He was asked to leave before he could explain the nature of the trusts and if W had contacted him before drafting the will, S would have provided the explanation.
6. 6) W was in breach of his duty to J and the claimants. He should have made sufficient enquiries to satisfy himself that the relevant trust money would pass to the claimants or should have devised a form of words to ensure that the claimants each received the £200,000 intended. It was negligent to draft the will solely on the material in the aide-memoire and the short conversation. But the fact the claimants compromised their claim against W cannot affect the question of whether S owed a duty of care.
7. 7) This case is distinguishable from White v Jones [1995] 2 AC 207 and Carr-Glynn v Frearsons [1999] Ch 326. S was not instructed in the will making process. It would involve a considerable extension to the principle in White v Jones to impose a duty of care in this case (referred to Customs and Excise v Barclays [2007] 1 AC 181).

8) S did not owe a duty of care to the claimants. He did not assume responsibility for an unknown amount to unknown beneficiaries and was not sufficiently proximate. It would not be fair, just and reasonable to impose a duty on him. Claim dismissed.

HHJ BEHRENS: 1. Introduction [1] Mrs Shemwell died on 2 June 2012 aged 86. She was a widow who had no children or other close relations. She was also relatively wealthy with an estate worth approximately £2 million. [2] On 8 November 2011 she executed a will (the 2011 will) which was drafted for her …

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