Charles Holbech

March 9, 2013 • Inheritance Act Claims • 2948

Tips to avoid succession claims

NOTE: This article was published in March 2013 and reflects the law as it stands on the date of publication and not at any later date.

Want of knowledge and approval

The test

(1) The testator must know and approve of the contents of the Will, in in the sense he knows what is in the Will, and accepts that the Will sets out his testamentary intentions (Gill v Woodall [2010] EWCA Civ 1430 para. 71).

(2) Proof of testamentary capacity and of due execution gives rise to a presumption of knowledge and approval.

(3) However, where there are “suspicious circumstances” that the testator may not have known or approved of the Will, the burden will fall upon those who seek to uphold the Will to satisfy the court, on the balance of probabilities, that the testator knew and approved of the Will.

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September 19, 2012 • Trusts • 5200

Duties of trustees with regard to investments

NOTE: This article was published in September 2012 and reflects the law as it stands on the date of publication and not at any later date.

Duties of trustees with regard to investments

Trustee Act 2000

Trustees owe specific duties, with regard to investments, under the Trustee Act 2000.

A general power of investment is conferred by the Trustee Act 2000 on trustees (s. 3). Subject to complying with “standard investment criteria” and obtaining and considering proper advice, a trustee may make any kind of investment that he could make if he were absolutely entitled to the assets of the trust (s. 3(1)). The general, statutory power of investment can, however, be excluded or restricted.

Trustees must:

(a) in exercising any power of investment (whether express or statutory) have regard to the “standard investment criteria” (s. 4(1));

(b) from time to time review the investments of the trust and consider whether, having regard to the standard investment criteria, they should be varied (s. 4(2));

(c) obtain and consider proper advice, having regard to the standard investment criteria, before exercising any power of investment, and in reviewing investments, unless it is reasonably considered unnecessary or inappropriate (s. 5).

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September 19, 2012 • Trusts • 4281

Trustees duties to provide documents

NOTE: This article was published in September 2012 and reflects the law as it stands on the date of publication and not at any later date.

Duty to provide information and documentation

(a) Duty to inform beneficiaries of interests

Firstly, there is a duty to inform a beneficiary, without demand, of the existence and terms of the trust (Hawkesley v May [1956] 1 QB 304) unless, perhaps, the trustees reasonably believe that the beneficiary has no reasonable prospect of obtaining a vested interest. In the case of a discretionary beneficiary, the trustees should take reasonable steps to make the discretionary beneficiary aware of his status. This enables the beneficiary to put his case to the trustees that they should exercise their discretion in his favour. In any case, the trustees are only obliged to make reasonable efforts to locate and inform the beneficiaries. The beneficiaries are entitled to know the names and addresses of the trustees (Murphy v Murphy [1999] 1 WLR 282).

There is a duty to inform the beneficiaries of the general nature of their interests, and of any conditions attached thereto. However, there is no duty to give advice to the beneficiaries as to the legal implications or effect of their interests (Hamar v Pensions Ombudsman [1996] PLR 1, 10-11). Nor is there any obligation to inform the beneficiaries of a breach of trust.

There is no overriding duty of disclosure to a beneficiary who is a child. However, a proper consideration of the exercise of powers of maintenance or advancement may require communication with the parents.

If the failure to provide information has caused loss to the beneficiary, then he may claim equitable compensation, or apply to have the trustees removed.

It is probably ineffective for the settlor to seek to exclude the duty to inform beneficiaries.

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September 18, 2012 • Wills • 4730

Negligence in context of Wills

NOTE: This article was published in September 2012 and reflects the law as it stands on the date of publication and not at any later date.

White v Jones

The starting point for liability to beneficiaries for loss caused by negligence, pursuant to a retainer to prepare a Will, is the House of Lords decision in White v Jones [1995] 2 AC 207. In White v Jones the testator quarrelled with his two daughters, and executed a Will cutting them out of his estate. He was then reconciled with his daughters. On 17 July 1986 the defendant firm of solicitors received a letter from the testator asking them to prepare a new Will to include legacies of £9,000 each to his daughters. The testator died on 14 September 1986, without the new Will having been put in place (59 days after receipt of the letter of instruction). The defendant firm of solicitors were guilty of negligent delay.

The issue was whether the negligent solicitors owed a direct duty of care in tort to the daughters as disappointed beneficiaries who, but for the solicitor’s negligent delay in preparing the Will for execution, would have received legacies of £9,000 each. The argument against liability was that the solicitors’ only duty was to the testator pursuant the solicitor-client retainer, i.e. in contract. The daughters’ claim was for pure financial loss in respect of a lost expectation of benefit under a Will. Such a claim could, on previous authority, only be made in contract, not in tort. However, there was no contractual relationship between the firm of solicitors and the daughters.

Despite the absence of any contractual relationship between the solicitor and the beneficiaries, the daughters were awarded a cause of action in tort to recover damages equal to the value of the legacies to which they would have been entitled under the Will (£18,000).

The rationale is set out in Lord Goff’s judgment. The assumption of responsibility by the solicitor towards his client extended to the intended beneficiary who (as the solicitor could reasonably foresee) might, as a result of the solicitor’s negligence, be deprived of his intended legacy in circumstances in which neither the testator nor his estate will have a remedy against the solicitor.

The essence of the duty to the beneficiaries is the duty of the solicitor to ensure that effect is given to the testator’s intentions to benefit third parties, i.e. potential beneficiaries (per Chadwick L.J. said in Carr-Glynn v Frearsons [1999] Ch 326, at 337E). Therefore, there will only be a breach of duty in tort to the claimant beneficiaries, if there is also a breach of the retainer with the testator. Continue Reading
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September 18, 2012 • Trusts • 8212

Defences To Claims For Breach Of Trust

NOTE: This article was published in September 2012 and reflects the law as it stands on the date of publication and not at any later date.

Beneficiaries’ consent or acquiescence

It will be a defence to a claim for breach of trust that the claimant beneficiary has consented to, or concurred in, the breach. However, there are a number of conditions:

(1) The beneficiary must have been of full age and capacity.

(2) The beneficiary must have freely given consent and be free of undue influence (Re Pauling’s Settlement Trusts [1964] Ch 303).

(3) The beneficiary must have give an informed consent. He must have had full knowledge of the facts, and known what he was doing and the legal effect thereof. However, if, having given his concurrence, he should subsequently turn round and sue the trustees, it is not necessary that he should know that what he is concurring or acquiescing in is a breach of trust, provided that he fully understood what he is concurring in (Re Pauling’s Settlement Trusts [1961] 3 All ER 713, at 730). The court has to consider all the circumstances in which the concurrence of the beneficiary was given with a view to seeing whether it is fair and equitable that he should be entitled to proceed with the claim. The trustees must put the beneficiary fully in the picture and not withhold crucial information.

(4) It is not necessary that the consenting beneficiary has benefited from the breach of trust, although that may be significant (Fletcher v Collis [1905] 2 Ch 24).

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July 22, 2012 • Settlements • 2494

Rectification of Settlements
NOTE: This article was published in July 2012 and reflects the law as it stands on the date of publication and not at any later date.

Intention of settlor

A settlement is, in one sense, a bilateral transaction in that involves two parties: (a) the settlor; and (b) the trustees. However, in order to rectify a settlement, it is not generally necessary to show that there is a common mistake, shared by both the settlor and the trustees.

Assuming that there is no bargain between the settlor and the trustees (as in the case of an ante-nuptial marriage settlement) it is only necessary to show that the settlor is mistaken as to the terms of the settlement. A voluntary settlement can be rectified where, by mistake, it fails to express the real intention of the settlor.

The irrelevance of the trustees’ intentions was established by Re Butlin’s Settlement Trust [1976] 1 Ch 251. In that case the settlor, Sir Billy Butlin, executed a voluntary settlement which was intended to include a clause giving the majority of the trustees the power to bind the minority in the exercise of their dispositive powers. In fact, by reason of a draftsman’s error, the clause conferring the power to act by a majority only applied in limited circumstances. The settlor sought rectification some 28 years after execution of the settlement.

There were five original trustees. Only one of the five (the settlor’s solicitor) knew what the settlor intended. Another trustee (the wife of the settlor) opposed the application without giving reasons. Was it fatal to the application for rectification that not all of the trustees shared, or were aware of, the settlor’s mistake?

Brightman J held that it was not fatal. A settlor may seek rectification by proving that the settlement does not express his true intention: in the absence of a bargain between the settlor and the trustees, it is not necessary for the settlor to prove that the settlement does not express the true intention of the trustees (262F-G).

However, the Court has a discretion as to whether to order rectification, even if the settlor was mistaken. It could, for instance, decline to rectify a settlement against the will of a protesting trustee who objects to rectification:
- if the effect would be to give the majority of trustees a power to compel a protesting trustee, who was ignorant of the settlor’s intention when he took office, to concur in conduct of which he might strongly disapprove; or
- if the effect would be to exclude a minority trustee, particularly of a discretionary trust, from an effective say in the trusteeship where the trustee is the parent of named beneficiaries.
However, in Re Butlin’s Settlement Trust, the only objection was by the settlor’s wife, and she had not seen fit to swear an affidavit giving her reasons for opposing rectification. It was, therefore, impossible to tell whether she had any valid objection. The settlement was, therefore, rectified so as to accord with the settlor’s intentions.

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July 18, 2012 • Trusts • 1978

Pitt v Holt and the rule in Hastings-Bass

NOTE: This article was published in July 2012 and reflects the law as it stands on the date of publication and not at any later date.

PITT v HOLT AND THE RULE IN HASTINGS-BASS

THE RULE IN HASTINGS-BASS

The so-called rule in Re Hastings-Bass [1975] Ch 75 was stated in the following terms in Sieff v Fox [2005] 1 WLR 3811, at [119]:

Where trustees act under a discretion given to them by the terms of the trust, in circumstances in which they are free to decide whether or not to exercise their discretion, but the effect of the exercise is different from that which they intended, the court will interfere with their action if it is clear that they would not have acted as they did had they not failed to take into account considerations which they ought to have taken into account, or taken into account considerations which they ought not to take into account.

There have been a line of cases, supposedly applying the rule in Hastings-Bass, involving mistakes by trustees. Many of the cases involved the exercise of discretionary powers of appointment or advancement by trustees who have failed to understand the consequences (usually the tax consequences) of the appointment. The appointment has given rise to an unforeseen tax liability.

The trustees would apply to the court to set aside the appointment on the basis that they had, mistakenly, failed to take into account a relevant consideration, e.g. the tax effect of the appointment; and, if they had taken that consideration into account, they would not have acted as they did. This was a convenient way of avoiding a large tax liability, and a possible consequent negligence claim against the trustees’ advisers.

It was irrelevant to such a claim that the trustees were not at fault. They often took and acted upon apparently competent tax advice. However, if that advice was wrong, and they would have acted differently if they had received the correct tax advice, the appointment could be set aside.

The so-called rule was reviewed by the Court of Appeal in two conjoined appeals: Pitt v Holt and Futter v Futter [2011] EWCA Civ 197. It was held that there was no such rule.

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July 18, 2012 • Probate • 2307

Contentious Probate

NOTE: This article was published in July 2012 and reflects the law as it stands on the date of publication and not at any later date.

UNDUE INFLUENCE

It is particularly difficult to set aside a Will on the grounds of undue influence. Undue influence will usually be difficult to establish for a number of reasons:

(a) there is no presumption of undue influence, as there is in the case of a lifetime transaction, which calls for explanation, between parties in a relationship of trust and confidence;

(b) the party alleging undue influence must prove that undue influence was actually exerted: motive and opportunity are in themselves insufficient;

(c) even if undue influence was brought to bear, it must be proved that the testator would not have executed the Will, if the undue influence had not been exerted

(d) it is not sufficient to prove influence or persuasion: the influence must be undue, amounting to coercion overbearing the will of the testator;

(e) there is normally no direct evidence that coercion was actually exercised, only a suspicion that it may have occurred; and

(f) there is normally an alternative, innocent explanation for the Will, consistent with the testator acting of their own free will.

Influence in the form of advice, suggestion or persuasion is not undue. The claimant must establish coercion (Gill v Woodall [2009] EWHC B34 (Ch), at para. 489). Influence must have been brought to bear on the testator to make a Will that the testator did not wish to make.

In most cases, there will be no direct evidence of coercion. The person, alleged to have exercised undue influence, will not usually have left a letter behind threatening to break off all contact with the testator unless the testator leaves them everything.

It is, however, possible to establish a case of undue influence even where there is no direct evidence of coercion. Undue influence can be inferred from the surrounding circumstances. Such claims do occasionally succeed.

In Edwards v Edwards [2007] WTLR 1387 the testatrix (T) made a Will in favour of one of her sons (S), excluding her other son, with whom she had a good relationship. Under her previous Will she had left her residuary estate equally between her two sons. T was frail and vulnerable. She was afraid of S, who was a heavy drinker. T made the Will at home, where she had been taken by S against medical advice. S prevented the other son from visiting. S, therefore, had the opportunity to influence his mother. He also had a motive: he was fearful of being evicted from the house where he lived with T. T had also made a number of surprising and false accusations against her other son. The only plausible explanation was that S had exercised undue influence over T by poisoning her mind against the other son. All other possible explanations were implausible. It was to be inferred that S had made deliberately untruthful accusations against his brother which had the effect that the testatrix’s judgment was overborne.

However, it is only in a rare case that it will be possible to infer coercion from circumstantial evidence. In Carapeto v Good [2002] EHWC 640 the testatrix made a Will in favour of her housekeeper. The circumstances gave rise to a “legitimate suspicion” that undue influence may have been exercised. The housekeeper was present when instructions for the Will were given to the solicitor, and had probably arranged for the solicitor to be present. However, the Court rejected the claim of undue influence because the circumstances were “also consistent with a perfectly innocent explanation”, i.e. that the testatrix (who was an intelligent and independent woman) had genuinely wanted to benefit her housekeeper (who had lived with and cared for the testatrix for many years).

There have been three recent cases on undue influence and Wills.

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July 1, 2012 • Inheritance Act Claims • 2824

Family Provision – Adult children, spouses

NOTE: This article was published in July 2012 and reflects the law as it stands on the date of publication and not at any later date.

Adult children

There has been some uncertainty as to the requirements for a successful claim by an adult child. The classic position was that such claims were not likely to succeed in the absence of a moral obligation or “special circumstances”.

It was not enough to establish: (a) the mere fact of blood relationship and (b) necessitous circumstances (Re Coventry [1980] Ch 461). If those were the only two elements established, it was thought that the claim would fail. This was because no obligation is generally owed by a parent to an adult child (unless the child is disabled and/or there has been a continuing assumption of responsibility by the parent to the child and/or promises made by the parent which have been relied upon by the child). In layman’s terms, an adult child is expected to maintain himself.

However, there has been something of a retreat from the absolute position that an applicant must do more than establish necessity and relationship.

Firstly, it has been said that there is no special bar to claims by adult children. As Browne-Wilkinson J said in Re Dennis [1981] 2 All ER 140, at 145B:

The court now approaches claims made by a son on the same basis as claims made by any other applicant, though in the past it might be said that the court viewed such claims with some disfavour.

Secondly, the right approach is for the Court to apply the factors in s. 3 of the 1975 Act, rather than to ask whether the Claimant has only established necessity and relationship, or whether there are “special circumstances” or a “moral obligation” (terms which do not appear in s. 3). The Court should not put a “gloss” on the words in the 1975 Act.

Thirdly, the objection to claims by adult children, however needy, may only apply where the child has earning capacity. In Re Hancock [1998] 2 FLR 346 Butler-Sloss L.J. said (at 351F-G):

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February 25, 2012 • Probate, Trusts • 8736

Trusts and Probate claim concerning solicitors

NOTE: This article was published in February 2012 and reflects the law as it stands on the date of publication and not at any later date.

TRUSTS AND PROBATE CLAIM CONCERNING SOLICITORS

Introduction

A solicitor may be involved in the administration of a trust or estate:

(a) in the capacity of a professional trustee or personal representative; and/or

(b) as a solicitor advising the trustees or personal representatives.

In his capacity as trustee or personal representative, the solicitor will owe equitable duties to the beneficiaries of the estate or trust. He may be liable for a breach of trust, or devastavit.

In his capacity as a solicitor advising the trustees/ personal representatives, the solicitor will owe common law duties of care in contract and tort to the trustees/personal representatives and, perhaps, also directly to the beneficiaries.

Some breaches by trustees or personal representatives can be committed entirely innocently or inadvertently, e.g. where the trustees or personal representatives invest in assets in which they have no power to invest. In such a case, the trustees’ intentions and motives are irrelevant; it is also irrelevant whether they have been negligent.

The trustees/personal representatives may, however, have a claim in negligence against a solicitor who carelessly failed to advise them not to make the wrongful investment.

Trustees are also under a duty, under the Trustee Act 2000, and in equity, to exercise reasonable care and skill in their management of trust property. Clearly, they can only be liable, in this respect, if they have been “negligent”. If a solicitor advising them is responsible for their negligence, they may have a claim against the solicitor.

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« 1 2 3 4 5 »

Tips to avoid succession claims

Duties of trustees with regard to investments

Trustees duties to provide documents

Negligence in context of Wills

NOTE: This article was published in September 2012 and reflects the law as it stands on the date of publication and not at any later date.

White v Jones

Defences To Claims For Breach Of Trust

NOTE: This article was published in September 2012 and reflects the law as it stands on the date of publication and not at any later date.

Beneficiaries’ consent or acquiescence

Continue Reading

Rectification of Settlements

Intention of settlor

Pitt v Holt and the rule in Hastings-Bass

NOTE: This article was published in July 2012 and reflects the law as it stands on the date of publication and not at any later date.

PITT v HOLT AND THE RULE IN HASTINGS-BASS

THE RULE IN HASTINGS-BASS

Continue Reading

Contentious Probate

NOTE: This article was published in July 2012 and reflects the law as it stands on the date of publication and not at any later date.

UNDUE INFLUENCE

Family Provision – Adult children, spouses

NOTE: This article was published in July 2012 and reflects the law as it stands on the date of publication and not at any later date.

Adult children

Trusts and Probate claim concerning solicitors

NOTE: This article was published in February 2012 and reflects the law as it stands on the date of publication and not at any later date.

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