Daughter cut out of will loses to animal Charities

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Supreme Court landmark decision:

The long awaited judgment in the saga of Ilott v Mitson & Ors[i] is a landmark decision by the Supreme Court. The result overturns the previous Court of Appeal judgment, which itself had caused shockwaves. It appeared to give almost no weight to the clearly expressed views of the late Mrs Jackson who did not want her only child, Mrs Illott to benefit from her £500,000 estate. Instead, she left everything to the animal charities. In a decision that will attract considerable attention, the Supreme Court has largely upheld the wishes of Mrs Jackson, and made serious criticisms as to the confused state of the present law, which led to such prolonged proceedings.

Background

In 2004, Mrs Melita Jackson died leaving a Will giving most of her £500,000 estate to Animal Charities. She had one daughter, Heather Illott. They had been estranged for 26 years. Heather had left home aged 17 to live with her boyfriend. Mrs Jackson disapproved. Mrs Jackson had left a detailed letter for her executors, explaining her decision to exclude Heather from her Will and that she had made it clear to Heather that she would receive anything under the will.

By the time of the latest hearing, Heather was in her 50’s and her husband had been made redundant. They were in receipt of benefits of around £13,000 a year, and their annual income totalled £4,665. The Court of Appeal said Mrs Jackson had been “…unreasonable, capricious and harsh.”

The Court of Appeal Decision

Mrs Illott was awarded £143,000 to buy the rented home she lived in. A further £20,000 was granted as ‘additional income’. This was a substantial increase beyond the £50,000 granted on an earlier hearing by a District Judge. She succeeded on her application for an award for maintenance under the Inheritance (Provision for Family and Dependants) Act 1975 (“IPFD”). The Court of Appeal stated that it was applying the law as set out in the statute, including considering all relevant factors under s.3, such as:

  • Financial resources and needs of claimant;
  • Financial resources and needs of any other claimant;
  • Financial resources and needs of beneficiaries;
  • Obligations and responsibilities of deceased towards claimants and beneficiaries;
  • Size and nature of estate;
  • Disabilities of claimants and beneficiaries;
  • Any other matter

Supreme Court Judgment

The Supreme Court highlighted errors in the approach by the Court of Appeal. Their order was set aside and the District Judge’s order restored.

Lady Hale in her judgment reviews the history of the Act and preceding legislation. She comments on the unsatisfactory state of the law, giving as it does no guidance as to the weight of the factors to be taken into account in deciding whether an adult child is deserving or undeserving of reasonable maintenance. The approach under the Act invariably involves a value judgment, which may be problematic as there is a wide range of opinion among the public and the judiciary about the circumstances in which adult descendants ought or ought not to be able to make a claim on an estate which would otherwise go elsewhere.

For an applicant other than a spouse or partner, reasonable financial provision is limited to what it would be reasonable for her to receive for maintenance only. This is an objective standard, to be determined by the court. The limitation to maintenance provision represents a deliberate legislative choice and demonstrates the significance attached by English law to testamentary freedom. Maintenance cannot extend to any or everything which it would be desirable for the claimant to have, but is not limited to subsistence level. The level at which maintenance may be provided is clearly flexible and falls to be assessed on the facts of each case, as at the date of hearing.

Although maintenance is by definition the provision of income rather than capital, it may be provided by way of a lump sum. As to the first suggested error, the process suggested by the Court of Appeal is not warranted by the Act. The Act does not require the judge to fix some hypothetical standard of reasonable provision and then increase or discount it with reference to variable factors. All of the s.3 factors, so far as they are relevant, must be considered, and in light of them a single assessment of reasonable financial provision should be made.

The District Judge worked through each of the s.3 factors, and was entitled to take into account the nature of the relationship between Mrs Jackson and Mrs Ilott in reaching his conclusion. As to the second suggested error, the District Judge specifically addressed the impact on benefits twice. The Court of Appeal’s criticism that his award was of little or no value to Mrs Ilott was unjustified.

Reasonable financial provision can in principle include the provision of housing, but ordinarily by creating a life interest rather than a capital and inheritable sum, which possibility appeared not to have been considered by the Court of Appeal.

To the extent that the benefits means test was relevant, it was likely to apply also to the additional sum of £20,000 apparently awarded with a view to avoiding that test. The statement in the Court of Appeal that a claimant in receipt of benefits should be treated in the same way as a disabled claimant was problematic; what must have been meant was that receipt of means tested benefits is likely to be a relevant indication of a claimant’s financial position. Finally, the Court of Appeal’s order gave little weight to Mrs Jackson’s very clear wishes and the long period of estrangement. The Court of Appeal’s justification for this approach was that the charities had little expectation of benefit either.

Lady Hale said this approach should be treated with caution, given the importance of testamentary bequests for charities, and because the testator’s chosen beneficiaries, whether relatives, charities or otherwise, do not need to justify their claim either by need or by expectation.

COMMENT

Media comment had seized on the Court of Appeal decision, fearing that people’s wishes in their Will are not being followed. The Supreme Court judgment should now reassure those concerned that the courts were unduly interfering in the wishes of testators about who should inherit. The judgment provides more clarity for those involved who may object to a decision made by a relative to exclude them from the Will and also for those, executors and beneficiaries alike, involved in issues concerning “reasonable financial provision” when a challenge to a Will is being considered.

The Court has to decide whether the Will makes

“reasonable financial provision”

according to IPFD, for the adult child of the deceased. The trial judge is not exercising a discretion in reaching a decision, but making a value judgment based on an assessment of the statutory provisions which have to be taken in to account. It is solely the Act which sets out the factors for the exercise of the court’s decision.

  • Based on this judgment, people are still entitled to cut their children out of their Will if they wish. However, there will have to be good reason shown. How and why they are making other provision needs to be explained, and what their connection is to any particular charity to which they wish to leave their estate.

In view of the Supreme Court’s guidance on IPFD:

  • The upshot is likely to be that adult children who have been excluded may now be less encouraged than suggested by the Court of Appeal decision to dispute a Will by arguing that they have not been left reasonable financial provision.
  • The Court will still take in to account any accompanying letter of wishes. If anything, these may now be more important than before, and this case can be seen in the context of its own particular and quite unusual circumstances.

 


[i] https://www.supremecourt.uk/cases/docs/uksc-2015-0203-judgment.pdf

jpsykes23@outlook.com

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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Supreme Court: Malicious Claims Actionable – What do you think?

Does this Landmark Decision “open the floodgates” to claims from aggrieved parties?

5:4 Decision – What would you decide? (Vote at the end)

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A 9 Member panel of the Supreme Court decided 5:4 that the tort of malicious prosecution extends to civil proceedings. The Supreme Court usually sits with a panel of 5, and more rarely, 7.  The “Brexit” decision of 24 January 2017 involving a full 11 member panel is thought to have been unique. That 9 members heard this case demonstrates its high importance.

It is also an extreme illustration of assets and liabilities, specifically legal proceedings, surviving the death of a principal party.

Willers v Joyce and another (in substitution for and in their capacity as executors of Albert Gubay (deceased)) [2016] UKSC 43 and [2016] UKSC 44.

Background

Mr Willers and Mr Gubay were business associates for over 20 years. Mr Willers was a director of Langstone Leisure Ltd, a company controlled by Mr Gubay. They fell out in 2009.

Mr Willers was sued by Langstone Leisure Ltd for alleged breaches of contractual and fiduciary duties when he was a director of the company. He defended the action and issued a third-party claim for an indemnity from Mr Gubay, on the basis that he had acted under Mr Gubay’s direction. Langstone discontinued its claim against Mr Willers shortly before trial.

Mr Willers brought proceedings against Mr Gubay for the malicious prosecution of the Langstone claim against him, contending that it had been part of a campaign to damage to his reputation, health and earnings. Mr Gubay’s defence was that there was no cause of action recognised in England &Wales for malicious prosecution of a civil suit (in contrast to criminal proceedings, where it is well established).

Precedent

Mr Willers’ claim was struck out. The Judge held that she was bound by the doctrine of precedent to follow a decision of the House of Lords in Gregory v Portsmouth City Council [2000] which reiterated that the tort of malicious prosecution did not extend to civil proceedings.

However, due to a recent conflicting decision of the justices sitting in their different capacity as members of the Judicial Committee of the Privy Council (JCPC) in an appeal from the Cayman Islands (Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd [2014]), Mr Willers was granted leave to appeal to the Supreme Court.

The High Court granted a leapfrog certificate so the scope of the tort of malicious prosecution could be resolved definitively, bypassing the Court of Appeal. As well as dealing with that issue, the court also addressed the status of Privy Council decisions in the doctrine of precedent.

The Supreme Court decision

The Supreme Court allowed Mr Willers’ appeal which can now go to trial, and held that the tort does apply to civil proceedings.

The dissenting minority of justices did not find sufficient support in historical case law, arguing that recognising the tort would be inconsistent with longstanding rules of law, and expressing concerns that the decision could spawn undesirable satellite litigation.

However, the majority held that it seemed instinctively unjust for a person who has suffered injury as a result of the malicious prosecution of civil proceedings against him to be left with no redress. Addressing the concerns about ‘satellite litigation’, the majority emphasised that to establish a claim for malicious prosecution of civil proceedings it must be proved that the original proceedings were not a bona fide use of the court’s process, e.g. where proceedings were wholly without foundation or where the party sought some extraneous benefit to which he had no right. This means that the claimant has a heavy burden to discharge, and as such successful claims are likely to be rare.

“Simple justice” dictated that Mr W’s claim for malicious prosecution should be sustainable in English law.

Lord Toulson gave the lead judgment, Lady Hale, Lord Kerr and Lord Wilson agreed. Lord Clarke delivered a concurring judgment. Lords Neuberger, Mance, Sumption and Reed dissented.

Broadly, the court approached the appeal by looking both at whether the historic cases supported the existence of a general tort of malicious prosecution and also at the policy considerations for and against permitting claims of this type. The majority recognized that the authorities stretching back to the 17th century were not conclusive, but they did show that the courts were willing to develop the tort to achieve justice in situations where a person has suffered injury as a result of the malicious use of legal process without any reasonable basis.

The minority’s conclusion however was that the tort had never applied in civil proceedings as such and the House of Lords had taken a firm stand against an extension to civil proceedings in Gregory. They were also unpersuaded that there was any general need to extend the tort as it would, in their view, create uncertainty, further anomalies and the potential undesirable practical consequences.

The policy arguments

  • Lord Toulson found the statement in Savile v Roberts (1698 12 Mod Rep 208) that

…if this injury be occasioned by a malicious prosecution, it is reason and justice that he should have an action to repair him the injury…”

to be obvious and compelling. He found that it would be instinctively unjust for there to be no recourse for a person who suffers injury as a result of malicious prosecution of civil proceedings.

  • The tort would not discourage those with valid claims
  • There is no evidence that the existing risk of indemnity costs faced by claimants pursuing improper claims has deterred the pursuit of legitimate claims
  • There is a public interest in avoiding unnecessary satellite litigation, but malicious prosecution isn’t a collateral attack on the outcome of the first proceedings
  • There might be an attack where, for example, the judge in the original proceedings refused to award indemnity costs, the malicious prosecution claim being an indirect means of challenging the judge’s refusal to penalise the claimant’s conduct
  • There is no duty of care between litigants, but a liability for maliciously instituting proceedings without reasonable or probable cause is “simple justice”
  • Anyone seeking to establish such a claim would have a heavy burden to discharge

The test to be applied

The court held that, to establish a claim for malicious prosecution, the claimant would have to prove: Proceedings had been brought against it without reasonable and probable cause. The party that brought those proceedings did so maliciously.

Guidance.

The first limb will be satisfied where the claimant does not have a proper case to put before the court; if the claimant did not believe its claim would succeed. On the second limb, a claim will be malicious if the claimant had deliberately misused the process of the court. This includes cases where it can be shown that the underlying claim was brought in the knowledge that it had no foundation: the proceedings were not a bona fide use of the court’s process.

Privy Council

The case is also of constitutional importance in deciding the extent to which Privy Council decisions made by a board formed solely of serving Supreme Court Justices and based on English law interpretation was legal precedence in England and Wales.

It was confirmed unanimously that a court should not normally follow a decision of the Privy Council if it is inconsistent with the decision of another court which would otherwise be binding on it. However, this should be subject to an exception. In an appeal to the Privy Council involving an issue of English law on which a previous decision of the House of Lords, Supreme Court or Court of Appeal is challenged, the members of the Privy Council can, if they think it appropriate, not only decide that the previous decision is wrong, but can also expressly direct that domestic courts should treat their decision as representing the law of England and Wales. This was considered expedient bearing in mind that the Privy Council panel normally consists of the same judges as the Supreme Court. This should increase the value of Privy Council judgments on English law.

Landmark Decision

The decision means that any claimant bringing unfounded proceedings for malicious reasons now faces additional potential sanctions (being sued for damages for Malicious Prosecution) on top of the usual costs and other risks. While this is a landmark decision, the issue before the court was whether this type of claim was sustainable in principle, do there has been no specific award as yet.

  • It is suggested that the decision is an overdue recognition that where there is a wrong, as a matter of principle and policy, it would be unjust to leave the claimant without a remedy for the damage caused.
  • An anomalous contradiction between civil and criminal and law has been resolved and a gap in the law filled.
  • The specifics of Malicious Prosecution, its precise boundaries, causation and the types of loss that can be recovered will be the subject of developing case law.
  • It remains to be seen how far the tort will evolve, although it is likely that successful claims will be rare, and there will be no “opening of the floodgates”.
  • There is already a tort of “abuse of process” (the abuse of civil proceedings for a predominant purpose other than that for which they were designed). The tort is rarely invoked.
  • Distinct from the tort, “abuse of process” is also a ground for striking out a claim under CPR 3.4(2)(b).
  • There already exist related torts offering protection from malicious prosecution, including defamation, malicious falsehood, conspiracy and misfeasance in public office.
  • Reflecting Lord Neuberger’s concern that it could have a chilling effect on the bringing, prosecuting or defending of civil proceedings, judges will take in to account the risk of defendants threatening malicious prosecution claims in order to deter genuine claimants.
  • The heavy burden of satisfying the test to establish a successful claim is referred to above, and emphasized in the judgment.

link to the judgment: http://bit.ly/2eFrgAl

jpsykes23@outlook.com

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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Inheritance Dispute: Early Neutral Evaluation

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Early Neutral Evaluation – Read my piece in the link below on:

Probate and Inheritance Disputes – Court Approves application for Early Neutral Evaluation.

http://www.luptonfawcett.com/blog/inheritance-disputeearly-neutral-evaluation/

 

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What price Justice? Magna Carta invoked after 8 centuries

Court fees rocket by up to 622% (e.g. from £1,315 to £9,500)

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UK Government celebrates this year’s 800th anniversary of Magna Carta by

  • increasing Court fees at a stroke by up to 622%
  • reducing access to Justice for all but a privileged few and big business
  • damaging our legal system
  • for commercial cases, making England a profoundly uncompetitive place to resolve foreign disputes, to the delight of our competitors.

The Ministry of Justice is imposing plans to raise revenue from the courts system by introducing a new structure for fees for bringing money claims over the value of £10,000. The announcement can be found here, with the fee hike starting on 9 March 2015 (subject to approval by the House of Lords this week):  

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/396887/cm8971-enhance-fees-response.pdf 

Under the new scheme a levy of 5% is charged to issue a money claim of more than £10,000.

The fee increases for money claims mean:

  1. The fee for claims from £1 to £9,999 will remain unchanged.
  2. The fee for claims from £10,000 to £199,999 will be 5% of the claim.
  3. The fee for claims £200,000 and above will be fixed at £10,000.
  4. There will be a 10% discount on fees for claims from £10,000 – £99,999 filed electronically.
  5. A fee to issue a £190,000 legal claim is currently £1,315. From 9 March 2015 this fee is now £9,500, which represents a rise of over 622%.*

The changes are opposed by a wide array of consumers groups, business, lawyers and judges who condemn the changes as unconstitutional, a threat to access to justice, and ill conceived. An application for Judicial Review to challenge the new fees is being prepared.

Statue of Justice Old Bailey

The Civil Justice Council

Representing Judges, says the effects of implementing such major increases could be dramatic in terms of:

  • acting as a barrier to entry to the justice system through pricing many court users out of the courts;
  • reducing access to justice for those litigants for whom court fees form a significant cost element of the overall process;
  • making alternatives to the civil process a far more attractive proposition, undermining the very intention behind the court fee increase and so risking significantly reduced fee income, critical to funding the courts and the justice system;   
  • having a disproportionately adverse effect on some groups e.g. small and medium enterprises, low income individuals; and
  • undermining equality before the law. 

The Law Society has collected case studies from solicitors showing what impact the increased fees would have on ordinary people seeking justice. 

  • Claimants suffering from serious personal injury or clinical negligence will be deterred from claiming compensation, with catastrophic results for them individually, society at large, and the public finances.
  • One case study found that a young girl with brain damage due to a failure by doctors to diagnose meningitis as a toddler will now require £10,000 to mount any fight for a secure financial settlement. That is even before the work involved and cost of obtaining the medical records and obtaining reports from medical expert witnesses
  • The development of case law will b e impeded.
  • Civil Justice isn’t just for those people who bring cases to court, it effects everybody in terms of the Rule of Law – where wrong doers are held to account. This is a Public Good, which is being undermined.
  • Some SMEs are forced to begin legal proceedings when buyers delay payment, as these actions can have a devastating impact on the cash flow of the business.
  • Similarly, a pensioner with limited financial means could be forced to begin legal proceedings against a financial adviser who gave them bad advice, leaving them with little to no funds in their retirement.
  • One concerned a pensioner with a claim against a financial adviser for the loss of his entire pension fund, for which the fee for applying to begin court proceedings will increase from £910 to £5,000
  • Few people can afford the extra £8,000 court fee  they would need to make a £190,000 claim, particularly if they are elderly or have been out of thoure workforce for some time due to personal injury. Such fee increases can actually be prohibitive, and this will deter people from starting claims altogether, thereby denying them access to justice.

http://www.lawsociety.org.uk/policy-campaigns/parliamentary-briefings/documents/Court-fees-joint-parliamentary-briefing/

I am also concerned about the evidence base that the MoJ used to come to its decision to increase court fees. The department claims that 90% of money claims will not be affected, but it is clear to me that the potential impact is much more serious than anticipated.

 A further debate will be held in the Lords this week, and subject to clearing that hurdle the fees will come into force on 9 March.

Law Society president Andrew Caplen said:

‘The government appears to be on a mission to turn the courts into a profit centre, amounting to a flat tax on those seeking justice. People whose lives have been turned upside down by life-changing injuries suffered through no fault of their own may no longer be able to afford to access the courts to seek compensation to fund their care. 

‘As well as affecting those who have been injured, the increases may leave small and medium-sized businesses saddled with debts they are due but unable to afford to recover.’

The fees are designed to raise £120m a year to help the government cover the cost of funding the court service in England and Wales.

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Magna Carta

Objectors to the fee increase are applying for Judicial Review of the decision,  contending that it is unconstitutional. Magna Carta, or Great Charter, was an attempt by England’s Barons to limit the Crown’s power. It was signed by King John on 15 June 1215 at Runnymede. Many of the clauses dealt with specific issues and grievances raised by the Barons. However, Magna Carta described vital legal principles, including that no ‘freeman’ could be punished except by lawful judgment of his peers, or by the law of the land.

Clause 29 of Magna Carta states:

‘We will sell to no man, we will not deny or defer to any man either Justice or Right.’ 

Lord Denning described Magna Carta as

the greatest constitutional document of all times – the foundation of the freedom of the individual against the arbitrary authority of the despot.

In this anniversary year, Magna Carta is relevant in the 21st century.  In a 2009 committee debate, Tom Brake, Liberal Democrat MP for Carshalton and Wallington, raised this argument in relation to a number of statutory instruments which introduced a change from partial to full recovery of court costs in civil proceedings:

We are now proposing to sell justice to people and make a profit out of it, because the objective behind full cost recovery is to charge so much in cases where there is no fee remission that we make enough profit to pay for fee remission

The rule of law is a public good, to the extent that it affects those people who do not go to court because, hopefully, they follow the rule of law, as well as those who do go to court. If people feel that justice in this country is only available to people on benefits and those with lots of money, we are cutting out a lot of people from the rule of law.

A Tax On Justice

Making the swingeing changes proposed amounts to selling justice, contrary to Clause 29 of Magna Carta.

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Furthermore, the proposals for enhanced fee charging in commercial proceedings will substantially undermine England and particularly London’s attractiveness as a centre for international litigation. Research conducted for the Ministry of Justice by the Centre for Commercial Law Studies at Queen Mary shows that the proposed fees would make court fees in London the most expensive in the world. The only jurisdiction that charges issue fees comparable to those proposed is the Dubai International Financial Centre.

For example in the courts of New York, (London’s strongest competitor), it costs as little as $400 to issue a claim. Foreign attorneys will not be slow to seize on any significant disparity in court fees to the cost of the United Kingdom economy, as the UK Government negates Magna Carta.

Whilst there are other alternatives to a state funded court system for resolving legal disputes, (such as Alternative Dispute Resolution, the pilot scheme for  adjudication of professional negligence claims, and the newly proposed online “low value” [up to £25,000] ebay type civil dispute court) these are either substantially dependent for their effectiveness  on the traditional civil court being readily accessible as a fall back, or a pale shadow of what we have assumed to be due process and natural justice providing remedies to right wrongs.

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Personal Pensions safer from creditors

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On 17 December 2014 Mr Robert Englehart QC sitting as Deputy Judge of the High Court delivered judgment in Horton v Henry[i]. He decided that uncrystallised pensions benefits can be protected from creditors. The judge declined to follow the previous decision, of Raithatha v Williamson[ii]. Instead he held that a trustee in bankruptcy could not gain access to pensions benefits that were not already in payment.

BACKGROUND

In Horton v Henry, Mr Henry’s trustee in bankruptcy was applying for an income payments order (“IPO”) against Mr Henry’s pensions policies that had not yet vested. The bankrupt had refused to crystallise them. The trustee was seeking an order requiring Mr Henry to draw down his:

  • 25% lump sum from his self-invested personal pension (“SIPP”);
  • 36 monthly payments in flexible drawdown
  • the annuity value of his personal pensions.
  • the trustee also sought the right to vary the IPO in future, after the new pensions access provisions apply.

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DECISION

The Judge declined to make an Income Payments Order over an uncrystallised pension compelling a bankrupt of pensionable age to draw down his pension. He considered that, contrary to the reasoning in Raithatha, there was no power vested in the court pursuant to section 310 of the Insolvency Act 1986 to make an income payments order in respect of an uncrystallised pension not yet in payment. The Judge said:

‘…I have most anxiously considered the decision in Raithatha but I have, albeit with considerable reluctance, come to a different conclusion. Mr Henry is not entitled to payment under his pensions “merely by asking for payment”. There is a considerable variety of options open to him. It would only be after he had made elections that any payment would be due to him. Only then would he become entitled to any payment. I do not consider that there is any power in the court under s310 or in the trustee to require Mr Henry to elect in any particular way…’

Raithatha v Wiliamson had decided that an order could be made. That case was subject to criticism, but was not appealed because the case settled.

The Judge explained:

‘…I regret having had to reach a different conclusion from that reached in Raithatha. But it is to be hoped that the Court of Appeal will soon have the opportunity of considering which of these two first instance decisions is correct….’

It is understood that permission to appeal has been granted, and the Court of Appeal is likely to hear the appeal in the Spring 2015, which will provide an opportunity to resolve which of the conflicting approaches is correct.

IMPLICATIONS

  • Pending clarification from the Court of Appeal, a trustee in bankruptcy can’t compel a bankrupt to draw down a pension not in payment.
  • However, if a bankrupt’s pension is in payment, a trustee in bankruptcy is still entitled to seek an IPO where appropriate.

[i] [2014] EWHC 4209 (Ch); [2014] WLR (D) 551;

http://www.taxbar.com/Henry_v_Horton.pdf.pdf

[ii] [2012] 1 WLR 3559

 

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INHERITANCE DISPUTES: NO WILL? NEW INTESTACY RULES APPLY

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The Inheritance and Trustees’ Powers Act 2014

For anyone who dies without a Will after 1st October 2014, new rules apply. Up to two thirds of adults don’t have a Will, and thousands of people die “intestate” every year. The Inheritance and Trustees’ Powers Act 2014 (“ITPA 2014”) follows a six year investigation by the Law Commission.

Many people don’t get round to making a Will, are put off, or don’t know that key events in life like getting married or a civil partnership can revoke an existing Will. The intestacy rules then apply. These fix the distribution of a deceased’s estate once debts and liabilities, funeral expenses and costs of the administration of the estate have been paid

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KEY CHANGES

(References to “spouses” and “marriage” include same-sex spouses and civil partners respectively).

a/ If you are survived by a spouse and children

The spouse takes all the assets in joint names, all your personal possessions, the first £250,000 outright, and half the remainder. The other half of the remainder goes to the children equally at 18.

Previously, a surviving spouse would receive a statutory legacy of the first £250,000; any remaining amount would be split in two. Half went to the surviving spouse as a “life interest” reverting to the children on the surviving spouse’s death. The other half went to the surviving children immediately.

b/ If you are survived by a spouse but no children or grandchildren

The spouse takes the whole estate, even if your parents or brothers and sisters survive you. Extended family will no longer have an interest. Previously, the spouse had to share the remaining estate (after payment of a £450,000 legacy to the spouse) with the deceased’s parents (if living) or full siblings (and their descendants). Under ITPA 2014 the spouse receives the whole of the estate. Most would regard this as fairer to the spouse and usually what the deceased would have wished.

c/ If you don’t have a spouse but you do have children

The remaining rules are unchanged, so the children share the estate equally between them.

d/ If you don’t have a spouse and you don’t have children

Remaining family members inherit the whole estate (equally between them if there is more than one, e.g. you have two surviving parents) in the following order:

  1. parents
  2. brothers and sisters of the whole blood and the offspring of any predeceased
  3. brothers and sisters of the half blood and the offspring of any predeceased
  4. grandparents
  5. aunts and uncles of the whole blood and the offspring of any predeceased
  6. aunts and uncles of the half blood and the offspring of any predeceased and,
  7. finally, if there are none of the above then the estate goes to the Crown.

For someone whose parents were not married, if both names are on the birth certificate, then they are both parents for the purposes of inheritance.

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WINNERS & LOSERS

  • Children of wealthy families where a parent dies intestate will receive less under the new rules than before. Spouses are the main beneficiaries of an intestate’s estate under the new Act.
  • Where there are no children, other relatives of the intestate individual (like siblings, parents and cousins), will no longer automatically inherit part of their estate.

FAMILY PROVISION

Certain family members and dependents can apply to the court for a share (or larger share) of a deceased’s estate under the Inheritance (Provision for Family and Dependants) Act 1975 (“IPFD 1975”) where they can prove there is no “reasonable financial provision”.

Although making a Family Provision claim can make a difference, this depends on litigation, which can be expensive. It is preferable to consider any potential claims when making a Will because decisions taken then can stop such disputes arising once it’s too late.

The 2014 Act does make a number of amendments to IPFD 1975 permitting close family and dependants of the deceased to make a claim for provision from the estate where they have not been provided for.

Classes of claimant will be extended to include any person who was treated by the deceased as a child of the family, not only in relation to a marriage or civil partnership, but in relation to any family in which the deceased had a “parental role”.

Changes also apply where someone is treated as being “maintained” by the deceased. Previously, a person would be treated as being maintained by the deceased if the deceased was, otherwise than for full valuable consideration, making a substantial contribution towards that person’s reasonable needs. Now, the words

“otherwise than for full valuable consideration”

are deleted. This prevents a claim failing where there was some give and take economically in the household.

WHAT IS NOT COVERED

  • The intestacy rules don’t recognise a deceased person’s step-children, only their natural, adopted or illegitimate children.
  • Whilst the rules give some protection to married couples and civil partners, both partners or co-habitees should have a Will to ensure that their wishes are carried out.
  • Entitlement under the Intestacy Rules only applies to couples who are married or in a civil partnership. Other couples who are co-habiting have no protection. Anyone who is co-habiting with a partner who wants to provide for them on death must make a Will. If not, your estate passes to your relatives or, failing that, to the Crown – unless your partner can make a claim for financial provision to be made on the ground that they were financially dependent on you.

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MAKING A WILL OVERRIDES THE INTESTACY RULES

  1. People should still always make a Will rather than rely on the Intestacy Rules. These are only a fall back where there is no valid Will, and are inevitably rough and ready, often very different to what the deceased may have wanted or assumed would happen.
  2. Making a Will not only ensures that your wishes are complied with, but it can also help to minimise the tax burden when you die. In addition, Administration in an Intestacy can be slower and more expensive.
  3. For unmarried and co-habitating couples, having a Will is equally, if not more important, as the rules for an unmarried surviving partner are unchanged; under the current and the revised intestacy rules, they are not automatically entitled to any of the estate.
  4. Often a Will saves surviving relatives an enormous amount of time, expense, uncertainty and possible disputes and litigation.

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Paul Sykes is a Contentious Trust and Probate Specialist registered with ACTAPS

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Wills, Inheritance and Trust Disputes

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Wills, Inheritance and Trust Disputes have increased over recent years due to growing affluence, increased consumer rights awareness, the growth of more complex family structures and an ageing population.

However, by failing to make a will, almost two out of three Britons risk leaving a financial nightmare for family members when they die, warns the Law Society.

http://www.lawsociety.org.uk/news/press-releases/britons-with-no-will-should-act-fast-warns-law-society/

Research  from the Dying Matters Coalition revealed that only 36 per cent of British adults say they have written a will, while 83 per cent reported being uncomfortable discussing their dying wishes. The research coincided with Dying Awareness Week.

  • Those who die without a will die “Intestate”, and this can result in a complicated and long drawn-out battle for those left behind. When a person dies intestate, the State decides who inherits according to a set procedure. As such their friends, favourite charities and relatives may get nothing; dependants and co-habitees may have to apply to the court because their interest would otherwise be ignored.
  • A will is always fundamental, but this is critical for co-habitees who are not married or in a registered civil partnership. There is no provision for co-habitees, and “common law” partners are not recognised either. People with children or dependents will need to make it clear who will look after or provide for them.

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  • A badly drafted will can cause more problems than no will at all, so the Law Society advises against using unregulated will writers. All solicitors are subject to strict regulation to ensure that they deliver the best service to their clients, unlike unregulated will writers. Solicitors are unparalleled in the will writing market as only they have the breadth of training to consider wider implications and complex issues, including tax and family law.
  • Whether you are involved in a claim, or considering your options, it is important to get the best legal advice.  Disputes over a Will or Trust can be distressing for all concerned.  A sensitive and practical approach is required, to  resolve family and financial disputes on a pragmatic basis.  A non-adversarial approach should be tried out of court, involving pre-action protocols, Mediation / Alternative Dispute Resolution and deeds of variation.  However, court action may be needed.
  • We act for administrators, executors, trustees, beneficiaries and dependants regarding all aspects of contentious probate and trust matters. Our team have in-depth experience of problematic and high value disputes or difficulties following the death of a family member involving houses, businesses, partnerships, shareholdings, property, farms, land holdings and other assets, including property abroad.

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J Paul Sykes is one of fewer than 500 Solicitors and Barristers with the necessary experience and skill to be appointed a Member of “ACTAPS”, the Association of Contentious Trusts and Probate Specialist, set up in 1997.

We support the voluntary code of the Association of Contentious Trust & Probate Specialists

http://www.actaps.com/

We advise and act in disputes including:

1. DISPUTED WILLS

Common reasons for a Will dispute include:

  • Invalid procedure:

For a Will to be valid it must be in writing, signed and witnessed in the correct manner.  This may be a problem with homemade Wills.  A correctly drafted Will should revoke earlier Wills, but this needs to be expressly set out.

  • Undue Influence:

The Will must be made voluntarily.  If the deceased was pressured or coerced into making a Will, it may be deemed as invalid.

  • Mental Capacity:

For a Will to be valid the person making the Will must have sufficient mental capacity at the time the Will was signed.

  • Knowledge, approval, fraud and forgery:

If someone is tricked into signing a Will or there has been some other fraudulent activity then the Will may be deemed invalid.

  • Negligent drafting:

The Will does not reflect the wishes of the deceased because it was drafted negligently or contrary to the instructions of the deceased.  Even if a Will is valid, you may be able to claim against the solicitor or other professional if they drafted the Will negligently.

We advise on all issues that could give the right to seek a declaration that a Will is invalid and should be disregarded completely.

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2. CONTENTIOUS PROBATE 

“Contentious Probate” – The legal term for a dispute regarding inheritance or the administration of a deceased’s Estate.  This can include disputes about a Will or a dispute regarding Probate.

“Probate” – The process of managing the affairs of a deceased person. When someone dies an application is made to the Probate Registry to get permission to deal with their affairs.

“Grant of Probate” -Issued by the Probate Registry where there is a Will, authorising the Executors or Personal Representatives to administer the deceased’s Estate.

“Grant of Letters of Administration” -Issued by the Probate Registry where there is no Will, authorising the Administrators or Personal Representatives to administer the deceased’s Estate.

Although the majority of Estates are administered without disputes arising, where there are problems we can advise on the law as to who should have control of an Estate and how it should be divided and managed.

It is important for clients to seek legal advice promptly so as to preserve the assets of the Estate, for example through lodging a caveat.  Speed is essential as some statutory claims require the issue of court proceedings within six months.

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3. TESTAMENTARY CAPACITY 

For a Will to be valid, the person making the Will (“Testator”) must have sufficient mental capacity at the time the Will was signed.

We are experienced in making challenges to, or upholding the validity of a Will.  This is an involved area of law and detailed, careful preparation is essential.  So too is a clear understanding of the criteria that Courts apply and the evidence available.  Thorough research and obtaining sufficient evidence to pursue the claim is required to prove the position, for example on issues regarding the deceased’s lack of capacity, coercion, or undue influence by another.

4. DISPUTES INVOLVING TRUSTS

A Trust is a legal relationship where someone (“the Settlor”) settles or transfers assets to another individual or a company (“Trustees”).  The Trustees hold and manage these assets for the beneficiaries of the Trust, chosen by the Settlor.  A Trust can be established during your lifetime or following your death.

Trustees have serious statutory and common law obligations, they must:

  • act with reasonable care and skill;
  • act impartially and fairly;
  • administer the Trust in accordance with its terms;
  • act jointly if more than one;
  • be ready with the accounts when due;
  • must not cause loss to the Trust due to any conflict of interest.

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5. CLAIMS FOR REMOVAL OF OR SANCTIONS AGAINST EXECUTORS, ADMINISTRATORS, TRUSTEES

A claim for breach of Trust may arise where it is alleged that the Trustees have failed to comply with their duties and the Trust and beneficiaries have suffered consequential loss. Such claims can have serious consequences for all involved.  It is essential to ensure advice is sought at the earliest stage.

6. DISAPPOINTED BENEFICIARIES 

Although in making a Will the Testator can dispose of their assets as they wish, this is subject to a number of potential restrictions including claims under the Inheritance (Provision for family and Dependants) Act 1975.  Such claims may be pursued by family and dependants where the terms of a Will (or the rules of intestacy where there is no Will) fail to make reasonable financial provision for the complainant.  Often such claims are pursued together with other equitable remedies e.g. proprietary estoppel, resulting and constructive trusts.

It may be argued that insufficient provision has been made for those left behind. The Courts will, where the legal criteria is satisfied, make an award for reasonable provision for dependents from the Estate.

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7. INHERITANCE ACT CLAIMS

Any individual who depends on you financially or whom you have maintained at the time of your death may have a claim against your estate if you have not left them anything in your Will or made no other financial provision for them.

Can I claim under the Inheritance Act?

To find out if you can make a claim under the Inheritance Act, it is important to take professional advice as soon as possible.  If you have not been properly provided for in a Will when you should have been, you may have a valid claim.  You will need to show that you are:

  • A husband, wife, civil partner or cohabitee of the deceased.
  • A former husband, wife or civil partner of the deceased who was
  • receiving maintenance and has not remarried/entered into a new civil partnership.
  • A child of the deceased.
  • Any person who was treated as a ‘child of the family’ of the deceased.
  • Any person who was partly or wholly maintained by the deceased immediately before the death.

AND, that it is within 6 months of the date of Grant of Representation. This is a document issued by the Court which gives permission to those named in the grant to distribute the deceased’s estate.

8. PROMISSORY ESTOPPEL AND PROPRIETARY ESTOPPEL

These are Rules of Equity, where a person is prevented from denying that a certain state of affairs exists, having previously stated that it does.

“promissory estoppel”:  if an individual states that their strict legal rights will not be insisted upon, they cannot later try to assert them if a third party has relied on that declaration to their detriment.

“proprietary estoppel”: if an individual permits or persuades a third party to act to their detriment in respect of land, the first party will be “estopped” from backing out or refusing to grant something that they encouraged the other person to expect.

9. NEGLIGENTLY DRAFTED WILLS, AND CLAIMS AGAINST EXECUTORS

Professional Negligence Claims could be considered against Will Writers, Solicitors and Banks acting as Trustees: there is a duty of care owed to those who may be adversely affected.

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10. DISPUTED POWERS OF ATTORNEY

A Power of Attorney is a legal document where the donor or “Principal” transfers the power to manage their financial affairs to another person, the “Attorney”.  A Power of Attorney can be used when it is easier for someone else to act, or where the donor is unable to do so.  An example would be where someone serving abroad in the Armed Services appoints a Parent as their Attorney to deal with their finances whilst they are away on duty.

“Lasting Power of Attorney”:

This is where an Attorney is appointed to act for you if and when you become mentally incapacitated.  A Lasting Power of Attorney has to be registered with the Court of Protection before it can be used.  A Lasting Power of Attorney replaced the previous “Enduring Power of Attorney” in October 2007.

The old system was vulnerable to abuse and fraud and often the requirement to register at the Court of Protection was ignored.  The new Lasting Power of Attorney avoids this problem, because the Power will not be valid until it is registered. Nevertheless, Enduring Powers of Attorney will be around for many years to come and disputes will continue.

If you object to someone taking over the affairs of a close relative, you may be able to prevent this.  Specific advise is necessary on the appropriate steps. This may include an application to the Court of Protection.  You may be able to remove someone who is abusing their position. All decisions will be made in the best interests of a vulnerable person.  Relevant factors may be the size of any assets involved, the previous wishes of the vulnerable person and the character of the person proposing to take over.

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11. Bereavement Counselling:

First reactions to the death of someone close – What happens to us when we lose someone? For most people, bereavement is the most psychologically distressing experience they will ever face. The death of a significant person is a devastating loss. Everyone experiences grief differently and there is no ‘normal’ or ‘right’ way to grieve. How we react will be influenced by many different things, including our age and personality, or cultural background and religious beliefs, our previous experiences of bereavement, our circumstances and how we cope with loss.

Bereavement counselling is available from a variety of sources, for example:

www.crusebereavementcare.org.uk/www.counselling-directory.org.uk/bereavement.html

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12. Digital Legacy

The Dying Matters Coalition research also revealed that 71 per cent of people said they have never thought about what would happen to their digital legacy, such as social media and online accounts, online photos and music, when they die. The Law Society encourages people to leave clear instructions about what should happen to their digital assets after their death. Having a list of all your online accounts, such as email, banking, investments and social networking sites will make it easier for family members to piece together your digital legacy, comply with your wishes and could save time and money. Not making your digital legacy clear could mean important or sentimental material – such as photographs on social networks – is never recovered.

 

Disputed Wills: Supreme Court’s New Commercial Contract Approach to Rectification

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In a recent landmark decision by the Supreme Court (the UK former House of Lords) the Law Lords unanimously rectified Mirror Wills on the grounds of clerical error.
They overturned the rulings of the High Court and Court of Appeal, where a stricter interpretation had applied historically. The new approach, including where relevant, applying Commercial Contract Law principles to interpretation has been welcomed as a victory for common sense and flexibility, giving effect to the clear intention of the Testators.
Facts
Mr and Mrs Rawlings were husband and wife who had made “Mirror Wills” in 1999, each leaving their estates to the other, with the survivor leaving their estate to Terry Marley, whom they treated as their adopted son. They had chosen to exclude from the Wills their two biological sons, Terry and Michael Rawlings.
Unfortunately, they had each signed the wrong Will. This meant that neither Will was valid. This wasn’t spotted when Mrs Rawlings died in 2003. After Mr Rawlings’ death in 2006 the discrepancy came to light.
The adopted son applied to the High Court for Mr Rawlings’ Will to be rectified. He claimed the couple clearly intended to leave their estates to him. The High Court ruled against him, deciding that the Wills were invalid. It was impossible to go behind that, therefore Mr and Mrs Rawlings’ estates passed to their estranged sons under the Intestacy Rules.
On a strict traditional approach, their “Wills” could not be rectified by the Court, because neither document satisfied the strict minimum criteria to qualify as a “Will” under s9 of the Wills Act 1837. The document didn’t have Mr Rawlings’ knowledge and approval, accordingly the law on rectification was not applicable. The Judge also held that even if the document could be construed as a “Will”, she was not able to rectify it under s20 of the Administration of Justice Act 1982, which permits rectification where there is a ‘clerical error’, as this was usually limited to typing errors.
Terry Marley’s appeal to the Court of Appeal failed. The Appeal Judges regretted that they had no choice and upheld Proudman J’s decision. In a highly anticipated judgment, the Supreme Court has now reversed the lower Courts’ decision and granted the appeal. Accordingly, the couple’s “adopted” son, Terry Marley, inherits as the couple intended
The Court held that a document does not have to be a valid “Will” within the legal definition, nor have the Testator’s knowledge and approval for it to be treated as a “Will” and subject to rectification.

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Supreme Court Decision
In a much wider interpretation than had tied the lower Courts’ hands, the Supreme Court found that the couple signing the other’s Will by mistake did constitute a “clerical error” under s.20 of the Administration of Justice Act 1982. It would be artificially restrictive to perpetuate a narrow interpretation. The Court held that the Will should be rectified to contain the true wording of the Will Mr Rawlings ought to have signed.
Whilst not decisive in this case, the judgment includes an important development to the law on interpretation of Wills, likely to have far-reaching implications for future cases. The Supreme Court held that if part of a Will is ambiguous and the true meaning has to be decided, the same approach can be adopted as when interpreting a commercial contract. This is to give effect to the intention of the parties (or party) involved. This comparison between Wills and construction of commercial contracts is a new development in the Law, where (except if s21 of the AJA 1982 applied), the intention is identified by interpreting the words used in the light of:

• their ordinary and natural meaning;
• the overall purpose of the document;
• any other provisions of the document;
• the facts known or assumed by the parties when the Will was executed; and
• common sense
• but, discounting subjective evidence of any party’s intentions

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Comment
Although Mr Rawlings’ remaining Estate amounted to approximately £70,000, the ramifications of the judgment are wide ranging. The scope for the Courts to rectify wills and codicils on the basis of clerical error has been extended. The decision adopts a common sense approach to implement the true wishes of the Testators, although it obviously also underlines the importance of adhering to the strict execution formalities under the Act, which may be questionable with the popularity of DIY Wills.
It remains to be seen to what extent this widening of ‘clerical error’ and the Contract Law innovation placing importance on the ‘intention’ of the Testator will impact interpretation of Wills in future.
Although there are concerns that broadening the scope of ‘clerical error’ could “open the floodgates” of litigation, the judgment was highly fact-specific regarding Mirror Wills. The Courts are experienced in resolving borderline cases and justice demanded that the previous artificially narrow interpretations should be relaxed. There was compelling evidence of the deceased’s’ intentions and future cases are likely to be decided on the individual facts. The courts endeavour to carry out Testators’ clear wishes and the decision in Lord Neuberger’s judgment is in line with that principle where everyone is entitled to dispose of their estate as they choose. It is to be hoped that this liberalizing of interpretation and rectification will throw off the restrictive shackles that led to Terry Marley having to pursue two appeals before Mr and Mrs Rawlings’ wishes were realised.

HASTINGS BASS: PROTECTION FOR TRUSTEES REDUCED

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The Court of Appeal handed down two decisions in July 2011 in favour of HMRC. The decisions substantially restrict protection for Trustees under the longstanding Rule in Re: Hastings Bass [1974] EWCA Civ 13.
The Court of Appeal heard both cases together, commenting that some of the case law evolving from Hastings Bass had been incorrect. HMRC’s Appeals against the application of the Rule was allowed in both Pitt v Holt and Futter v Futter [2011] EWCA Civ 197.

In both cases, the action taken by the Trustees/Fiduciaries had been as a result of professional advice, but there had been unexpected adverse tax consequences. Previously it was thought that where a Trustee or Fiduciary had exercised a discretion mistakenly which resulted in unintended consequences, especially where acting with professional advice the court would exercise discretion and interfere with the Trustees’ decision. This would arise by applying to the court to have their decision or act rendered void or voidable.

The Judiciary have over recent years expressed disapproval of the way that the Rule in re Hastings Bass was being so widely applied.

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The outcome is that it is less likely in future that Trustees will be able to avoid adverse consequences of the exercise of discretion by applying to the court for such problematic decisions to be set aside. Instead Trustees are more likely to be at risk of facing claims from Beneficiaries. In turn, the Trustees may have to face the more difficult prospect of considering a claim for professional negligence against their professional advisors.

The rationale is that in relying upon professional advice, Trustees are not in breach of their fiduciary duty if it turns out that the advice given to them was materially wrong. The Court of Appeal held that in such circumstances the Trustees’ decision taken in reliance on that advice is not void or voidable and cannot be interfered with or “corrected” by the court. As such, Trustees who follow advice in particular on tax from apparently competent advisors would not be regarded as being in breach of their duties.

Consideration was also given to the alternative ground of mistake, but it was held that the tests to qualify for the equitable remedy of mistake had not been fulfilled.

The result is that the Rule in Hastings Bass is restricted to pure Trust principles. Rather than Trustees applying to the court on an uncontested basis, in future it is likely to be for the Beneficiaries to challenge the Trustees’ actions if they wish to have them set aside.

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Trustees and professional advisors will note that in the leading Judgment of Lloyd LJ ( paragraph 220) he suggested that the Beneficiaries remedies

“….. lie not in the realms of equity, but by way of a claim for damages for professional negligence ….”.

It is understood that whilst the Court of Appeal refused the Trustees in Futter v Futter permission to appeal, permission may be sought from the Supreme Court.

J Paul Sykes LLB LLM
First Published July 2011

WHEN DIRECTORS FALL OUT

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BREAKING THE DEADLOCK

Managing Director exceeded his powers
Smith –v- Butler [2012] EWCA Civ 314
The Court of Appeal Civil Division on 15 March 2012 decided that the Managing Director had exceeded his authority in taking action against the Company Chairman by suspending him and excluding him from the premises.

Background
The Managing Director, Mr Butler was the minority shareholder. The only other shareholder was Mr Smith who held the majority and was Company Chairman. Both were Directors and the Board was completed by a third, the Group Finance Director. There was no Shareholders Agreement.

Mr Smith was intending to appoint a Chief Executive Officer to the Board and there were cross allegations between the shareholders of financial impropriety. The two other Directors then suspended Mr Smith, requiring him to leave the company premises and he was excluded from the business.

 

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HHJ Behrens sitting at the Chancery Division, Leeds District Registry held that this was in breach of the Articles of Association which required a quorum of two Directors, one of whom had to be Mr Smith. A quorum of two was also required for Shareholder meetings. Mr Smith had attempted to call a Shareholders meeting. However there was deadlock, because Mr Butler refused to attend.

Decision
The Court of Appeal upheld the Judge’s decision that the suspension of Mr Smith was invalid. The Chairman’s entitlement to an order under Section 306 of the Companies Act 2006 was also upheld. This permits the court to require a General Meeting to take place where it has become impractical to hold a meeting. There was no implied or actual authority for the Managing Director to suspend the Chairman. To resolve the log jam, under Section 306 (4) the court was entitled to deem that a single member at the meeting constituted a quorum. Because Mr Butler had no authority to direct the company to actively defend Mr Smith’s applications, Mr Butler was held liable to pay the company’s costs on an indemnity basis. This was because proceedings had been brought in the company’s name without authority.
The company could have avoided significant expense by filing a simple Defence confirming it would abide by the order made by the court.

Action Points
The decision helps clarify the powers of Managing Directors on which there is surprisingly little case law. The court was prepared to protect the balance of power as provided for in the Articles, which were unusual in that they specifically provided that Mr Smith as majority shareholder had to be one of a quorum of two. His entitlement to exercise his ordinary voting rights on a point and remove Directors was upheld.

This perhaps underlines the importance of also having a properly drawn up Shareholders Agreement in small companies/quasi partnerships. This would usually govern the relationship between the majority and minority shareholders.

Instead of taking the steps held to be unlawful, the route of redress for Mr Butler would have been by way of an unfair prejudice claim or a derivative action. Mr Butler had the right to seek relief from allegedly unfairly prejudicial conduct by the majority shareholder under Section 994 of the 2006 Act by presenting a Petition for an order that either he or the company purchase Mr Smith’s shares at fair value. Alternatively, Mr Butler could have brought a statutory derivative action against Mr Smith in accordance with Part 11 of the 2006 Act.

J Paul Sykes LLB LLM
First published 15 March 2012