Trust & Estate Disputes Update - July 2010

Written by Katie Mundy

All the latest cases and articles including comment on the new will writing code recently published by the Institute of Professional Will writers.

Cases

Roberts v Gill & Co [2010] UKSC 22 (SC)

This case, which was recently heard in the Supreme Court, looked at section 35 Limitation Act 1980 and involved a dispute between two brothers (J and M) regarding their grandmother’s two farms.

Their grandmother left a Will leaving one property to each of her grandsons.  It was a provision of the Will that J was to pay all of the inheritance tax payable on the estate.  In the alternative both properties would fall into residue and be divided equally between the two brothers and their aunt.

It was in J’s interest to meet the IHT payment himself.  He instructed two different firms to deal with the administration of the estate with assent and sale of the farm.  An initial IHT payment was made and probate granted in 1996.

The final payment of IHT was never paid by J and in 2000 M successfully applied for J to be replaced as administrator by a solicitor.  M then began proceedings in his personal capacity against the solicitors who had acted for J.  He claimed that there was a breach of duty of care owed to him as beneficiary as there was now insufficient money to pay pecuniary legacies or meet the outstanding IHT due.

The problem with his claim was that the solicitors advised the executor in this case and therefore owed a duty of care to the estate not to the beneficiaries.  In 2006 (three years after the expiry of the limitation period) M then wanted to amend his claim to continue both in his personal capacity and on behalf of the estate.

There were two problems with this: firstly a beneficiary may only bring a claim on behalf of an estate where ‘special circumstances’ exist.  Secondly a claim on behalf of the estate was time- barred.

The Supreme Court held that there were no special circumstances; the Court of Appeal held that there were special circumstances but that the claim was out of time.  The appeal against this decision was dismissed.  It was held that the Court of Appeal was correct to hold that the action was time barred.

This case is looked at in Solicitors Journal 24 May 2010 vol 144 no 20, page 4.

LINK to judgment

De Wind v Wedge [2010] WTLR 795;  [2008] EWCH 514 (Ch)

This case considers gifts, presumed undue influence and the relationship of trust and confidence.  It also looks at whether the provision of legal advice is sufficient to refute the presumption.

In this action the claimant and defendant were the daughter and son of the deceased respectively.

The defendant was granted a general power of attorney for his mother.  The defendant had purchased a house (‘the replacement house’) which his aunt lived in and his mother moved to this house and lived there with her sister, his aunt, until her death.   Following her move to the replacement house, the defendant sold his mother’s house (‘mother’s house’) and the proceeds of sale went directly to the defendant.

The claimant obtained letters of administration on her mother’s death and asked for an account of the proceeds of sale of her mother’s house from the defendant.  The defendant denied any claim by the estate in respect of this on the grounds that the proceeds of sale from the mother’s house were a gift.

The claimant refuted such a gift had been made and in her evidence she stated that her mother had been led to believe that the replacement house had been purchased for a higher figure than was the case.  Her mother had also believed that the replacement house would be held in her own name once she moved into it and that the proceeds of sale on the mother’s house were to reimburse the defendant for what he had paid for the replacement house.

The claimant alleged presumed undue influence based on the above misconception.  Undue influence is only presumed where there is a relationship of trust and confidence.  If such a relationship exists, and a transaction is questioned, then the onus shifts to the defendant to prove that they did not exert any undue influence upon the person in relation to the transaction(s).  One way to evidence this would be to show that upon entering the transaction the giver obtained independent legal advice regarding the transaction(s).

On the facts, it was clear that a relationship of trust and confidence existed between the deceased and the defendant.  The court acknowledged that the deceased had not sought her own independent legal advice in relation to the transaction and therefore this called for explanation from the defendant.

Evidence was given by the defendant that the deceased had given him power of attorney because she trusted him to the exclusion of the claimant.  A further important part of the background of this case was the claimant’s financial history and the fact that she had received payments from various family members including the defendant who had loaned her £70,000 for a business which then failed. The defendant received no repayment of this.

The court preferred the defendant’s side of events taking into account all of the circumstances and the action was dismissed.

LINK to judgment

Articles

OFT Approves ‘Toothless’ Will-Writing Code

Jonathan Rayner
Law Society Gazette, 7 June 2010

http://www.lawgazette.co.uk/news/oft-approves-toothless-will-writing-code

This article highlights the concerns of probate solicitors who warn that the Institute of Professional Will Writers (IPW) Code of Practice approved by the Office of Fair trading (OFT) on 1 June 2010, lacks serious sanctions and fails to protect clients long-term.

This has also been commented on by STEP – Society of Trust and Estate Practitioners here:
http://www.stepjournal.org/news/news/caution_over_will-_writers.aspx

This is a link to the Office of Fair Trading press release regarding the new code of practice:
http://www.oft.gov.uk/news-and-updates/press/2010/56-10

Update:  Wills and Probate

Helen Bryant
Solicitors Journal 2010 154 (20) 29 – 30

This article considers:

i) The courts differing approaches to the exercise of power under s.50 Administration of Justice Act 1985 to replace personal representatives.

In particular it looks at Kershaw v Micklethwaite and ors [2010] EWCH 506 (Ch) where the court held that ‘friction or hostility between an executor and a beneficiary is not a sufficient reason for removing the executor’.

In contrast in Angus v Emmot  [2010] EWCH 154  the High Court removed all three executors and appointed a professional solicitor in their place.  Here the dispute was an internal one between the executors and the court did not see how this could be resolved adequately for the administration to take place in the appropriate manner.

ii) The Chancery Division ruling on Hinten & Hayes v Leigh & Reeve [2009] EWCH 2658 and in Key v Key [2010] EWCH 408 on testamentary capacity for Will revocation.

In particular the article considers what major life events could be classed as impacting upon a testator’s capacity.  This follows the decision in Key where the testator was recently bereaved.

iii) Chadwick v HMRC [2010] UKUT 82 is also considered and looks at the starting point of the valuation of a deceased’s house for the purposes of IHT.  Here two independent valuers valued the property at £250,000 for probate purposes.  In 2002 the property was purchased by the deceased for £268,450 and HMRC looked at this valuation as the starting point.

It was held that HMRC were incorrect to do so and the 2002 purchase price was deemed  irrelevant.

Katie Mundy

Cripps Harries Hall LLP

July 2010