A Private Client Q & A with Francis Barlow QC

Seminar Notes

Thursday 13th October 2011

The Chancery Court Hotel, Holborn London

The Seminar Season 2011/12

www.tenoldsquare.com

The Ten Old Square Seminar Season 2011/12

A Private Client Q & A with Francis Barlow QC Thank you very much for coming along to our seminar this evening. We hold our seminars not only to showcase the talent at Ten Old Square, but also to say thank you to those who continue to support our Chambers through valued instructions. This evening’s seminar will take the form of a panel discussion with Francis Barlow QC fielding questions on topical private client issues including:-

What if anything will fill the void after Pitt v Holt and Futter v Futter?

Suing on behalf of an estate with no letters of administration

Is it no longer possible to disinherit an estranged child?

The other issue in Breakspear v Ackland

Euro Regulation of Succession and Wills. Ten Old Square has an enviable reputation for private client work, but don’t just take my word for it. We are recognised as a leading set by both the major directories.

The Legal 500 2011 says: At Ten Old Square, the ‘barristers are of a consistently high quality across the set’, and the clerks are ‘charming, helpful and responsive’. Francis Barlow QC is an ‘encyclopaedia of mainstream and obscure trust and probate law’ and a ‘brave and compelling advocate’

and the Chambers UK Directory 2011 said: “Reliability is the hallmark of Ten Old Square…. The set provides sound and sensible advice on all private client matters whether they be trusts, wills and probate or property related. Solicitors favour the barristers here as they are tired and tested – rather than any buccaneering nonsense, you know you are going to get considered and helpful advice from anyone you instruct here” (….and I am expecting even greater praise when the next edition is published in a few days’ time!) After the seminar there will be a reception in The Lounge, so do please join us for a drink and something to eat. You will earn 2 (SRA) CPD points for attending this seminar so please fill out the questionnaire at the back of this folder and let me have it back, at your convenience.

Keith Plowman 13th October 2011.

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EUROPEAN COMMISSION PROPOSED REGULATION ON SUCCESSION & WILLS

SUMMARY OF PROPOSALS 1. This draft EU Regulation, which will have the force of law in all EU countries

which sign up to it if and when it is eventually made, was first published in October 2009 and has been the subject of much negotiation and amendment consequent on the negotiations since.

2. The UK was in a position to opt out of being bound by the Regulation. It did

opt out, but could opt in again if the process of negotiation produces a more acceptable Regulation. The UK also continues to engage in the negotiations over the terms of the Regulation.

3. Succession is an area of the law where the divergence between the UK and

continental legal traditions is particularly pronounced, while on the other hand the UK has particularly large numbers of its citizens going off to live in other EU countries. There is thus particular difficulty in arriving at a Regulation which is acceptable to the UK, while the UK does have an interest in harmonisation and simplification of the rules of succession relating to cross-border estates.

4. The draft Regulation does not of course seek to impose a single law of

succession on all EU citizens. The main things which the draft Regulation would do are: (1) Determine which law of succession shall apply to the estate of a

deceased person (‘the applicable law’). (2) Determine which country’s courts will adjudicate disputes about the

succession. (3) Make the decisions of the adjudicating court enforceable in other EU

States. (4) Provide for European Certificates of Succession, which can be issued

by, eg, a notary, in one State and will be determinative of succession rights in the other States.

5. One of the difficulties in grappling with this draft is that it runs to 64 pages

and is in somewhat peculiar EU English, and it is often difficult to be certain of the exact potential consequences of particular provisions. I attempt to summarise the main points below. The 2009 text can be found on the EU Commission website at http://ec.europa.eu/justice/civil/family-matters/successions/index_en.htm.

though the text has been amended substantially since then.

6. The applicable law of succession is to be that of the State where the deceased had his ‘habitual residence’ at the time of his death, subject to the possibility of this being displaced by the choice of the law of some other State of which

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he was a national at the time of making his will. It is not proposed to attempt a definition of ‘habitual residence’, though some indications as to how it should be interpreted may be provided in a recital.

7. The applicable law will determine the succession to the entire estate

irrespective of where the assets are located. This means that immovable property would no longer be, as in for example current English and French conflict rules, subject to the law of succession of the lex situs even where the movable property is subject to some other law of succession.

8. The applicable law will govern testate and intestate succession, inheritance act

claims and the like, and forced heirship, but not joint tenancies. However, forced heirship will include “clawback”: i.e. the rules under which in many civil law countries persons who have received lifetime gifts from the deceased have to hand them back to make up the compulsory portions to which relatives of the deceased are entitled. The applicable law for this purpose means the internal succession laws of the State in question, not the conflict of laws rules of that State: i.e., no renvoi. On the other hand, where a State has more than one legal system within it, it is left to its own conflict of laws rules to determine which legal system applies.

9. The jurisdiction rules are a separate set from the applicable law rules.

Jurisdiction is given in the first place to the courts of the State where the deceased had his habitual residence at death. Where the applicable law is not the law of that State, the courts of that State may (my emphasis) after considering the matter decide that the courts of the State the law of which is the applicable law should be the appropriate forum. In the event of a dispute as to where a succession dispute should be tried, e.g. because there is a dispute as to which was the State of the deceased’s habitual residence at death, it will be determined by the court “first seised”, ie the one in which proceedings are first started, and the courts of any other States in which proceedings have been started must stay proceedings until the court first seised comes to a conclusion.

10. A judgement obtained in one State will be enforceable in all the others save in

very limited circumstances, such as the proceedings having been ones in which the Defendant was not properly notified of them, or there being some pre-existing decision incompatible with the judgement.

11. The main problems with the draft from a UK perspective are perhaps:

(1) “Clawback”: the possibility, e.g., that a lifetime gift made in the UK by a UK resident UK citizen who then goes to live in France and dies there could be clawed back under the French compulsory heirship rules.

(2) The possibility of a scramble to start proceedings when someone dies and there is potential dispute in the family, and for proceedings to be held up for years by obstructive commencement of proceedings in the wrong place. For example, a UK citizen who has gone to live in Italy, dies there, has made a will electing for English law to apply to his succession, and a faction in his family starts proceedings in Italy before anyone can start proceedings in England. The English courts would

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have to wait until the Italian courts had decided whether or not they should adjudicate the dispute.

(3) It is unclear to what extent the provisions for recognition of foreign judgments, authentic instruments and Certificates of Succession leaves room for the provisions of English law on grant of probate and administration of estates in respect of property situated in the UK.

Richard Wallington

Ten Old Square 18 October 2011

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THE “RULE” IN HASTINGS-BASS, MISTAKE AND

PITT v HOLT; FUTTER v FUTTER

What (if anything) will fill the void?

SUSANNAH MEADWAY

TEN OLD SQUARE

Thursday 13th October 2011

1. On 9th March 2011, the Court of Appeal delivered judgment in two appeals, Pitt v

Holt; Futter v Futter [2011] 2 All ER 450.

2. Essentially two legal issues were considered:

a. the so-called rule in Hastings-Bass; and

b. whether a voluntary transaction could be set aside on the basis of a tax

mistake.

3. At the time of the appeals, the generally accepted formulation of the rule in Hastings-

Bass was as follows:

"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 that

discretion, but the effect of the exercise is different from that which they intended, the

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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

have taken into account".1

4. This rule was derived from the Court of Appeal decision Re Hastings-Bass [1975] 1

Ch 25, as interpreted in Mettoy Pensions Trustees Ltd v Evans [1991] 2 All ER 513,

and had latterly been used increasingly to enable trustees to unravel acts done by

them in exercise of their powers which had had unexpected and undesirable tax

consequences.2 All that the trustees had to do to enable the act to be undone was to

show that what they had done had had some unappreciated tax consequence, and had

they appreciated that tax consequence they would not have done what they did.

5. The usual result of the rule applying was to render the act void ab initio, i.e. as if it

had never happened, and not merely voidable. In at least one case, however, it had

been held that the rule rendered the action merely voidable, so as having effect until it

was set aside, and subject to equitable defences such as laches and acquiescence.3

6. The rule in Hastings-Bass was invoked at first instance in Pitt v Holt [2010] 2 All ER

774. In this case a receiver, acting for P under the authority of the Court of Protection,

settled P’s personal injury compensation on broad discretionary trusts for P’s benefit.

It was not appreciated that this settlement triggered an immediate IHT charge

1 See Sieff v Fox [2005] 3 All ER 693, para [119], described by Lloyd LJ (sitting as a first instance judge in the case) as “the best formulation of the principle”. 2 E.g. Green v Cobham [2002] STC 820; Abacus Trust Co (Isle of Man) Ltd v NSPCC [2001] STC 1344; Re Burrell [2005] STC 569. 3See Abacus Trust Co (Isle of Man) Ltd v Barr [2003] Ch 409. That case also departed from the general orthodoxy attached to the rule in that Lightman J held that for the rule to apply the trustees’ failure to take into account a relevant consideration had to be as a result of a breach of their fiduciary duty.

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whereas if the trusts had been structured a little differently as disabled trusts within

IHTA 1984 s. 89, this IHT liability would have been avoided. Robert Englehart QC

sitting as a deputy judge of the Chancery Division acceded to the application for the

settlement to be set aside on the grounds that the receiver acted as a trustee in making

the settlement, and under the rule in Hastings-Bass the settlement could be set aside

as the receiver had failed to take into account the IHT liability.

7. Similarly, the rule was successfully invoked at first instance in Futter v Futter (No. 3)

[2010] STC 982. In this case, trustees of a settlement which had been non-resident

made capital payments to beneficiaries in the mistaken belief that the beneficiaries

would be able to offset their personal losses against the stockpiled gains of the

settlement and so avoid capital gains tax. On the basis of the rule in Hastings-Bass,

Norris J declared the capital payments to be void since the trustees had failed to take

into account the capital gains tax charges which would arise.

8. In both Pitt v Holt and Futter v Futter, HMRC were parties and they appealed against

the first instance decisions to the Court of Appeal, thus giving that Court its first

opportunity post-1975 to consider the rule in Hastings-Bass in detail. Their broad

conclusion was that the law had taken a “serious wrong turn” and that the so-called

‘rule’ in Hastings-Bass was inconsistent with the actual ratio decidendi of Re

Hastings-Bass4, being derived from mere obiter dicta made by Buckley LJ which

went beyond the ratio.

4 In Re Hastings-Bass, trustees had exercised a power of advancement for the benefit of a beneficiary by settling capital upon trust for him for life, but with remainder trusts which were void for perpetuity. HMRC argued that the whole exercise was ineffective, but the Court of Appeal held that just because some aspects of the advancement could not take effect, it did not follow that the whole was ineffective if the effective part could reasonably be regarded as being for the benefit of the person to be advanced and so within the scope of the power of advancement.

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9. Following Pitt v Holt; Futter v Futter in the Court of Appeal, there is no longer any

distinct rule to apply where a trustees’ act in exercise of their discretion is said to

have been vitiated by their failure to take into account a relevant matter, or their

taking something irrelevant into account. Instead, there is an “approach” which Lloyd

LJ summarised as follows (at para [222]):

“The trustees' act is not void; it may be voidable. To be voidable it must be shown to

have been done in breach of a fiduciary duty of the trustees. The duty to take relevant,

and no irrelevant, matters into account is a fiduciary duty. Relevant matters may

include fiscal consequences of the act in question. However, if the trustees fulfil their

duty of skill and care by seeking professional advice (whether in general or in

specific terms) from a proper source, and act on the advice so obtained, then (in the

absence of any other basis for a challenge) they do not commit a breach of trust even

if, because of inadequacies of the advice given, they act under a mistake as to a

relevant matter, such as tax consequences. In the absence of a breach of trust, the

trustees' act is not voidable. Even if it is voidable, it cannot be avoided unless a

beneficiary seeks to have it avoided, and a claim to that effect will be subject to the

discretion of the court and to the usual range of equitable defences.”

10. So in accordance with this approach, it will have to be shown that the trustees’ failure

to consider a relevant consideration was as a result of a breach of trust. Whereas this

may be possible where the trustees have not sought professional advice (so are in

breach of their duty of skill and care), it may not be possible where they have sought

professional advice since then they will have fulfilled their duty of skill and care5.

5 This duty may be the statutory duty of care of TA 2000 s. 1, or the common law duty recognised in Speight v Gaunt (1883) 9 App Cas 1. Interestingly, Millet LJ has opined that a trustee’s duty to use proper skill and care is not a fiduciary duty at all, but an equitable duty developed alongside the common law tortious duty of care. It arises from the fact that a trustee has assumed responsibility for

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11. Where does this approach come from if not from Re Hastings-Bass? It seems to be

derived from a beneficiary's fundamental right to have the trust duly administered in

accordance with the provisions of the trust instrument and the general law. At para

[99], Lloyd LJ said this:

“if an exercise by trustees of a discretionary power is within the terms of the power,

but the trustees have in some way breached their duties in respect of that exercise,

then (unless it is a case of a fraud on the power) the trustees' act is not void but it may

be voidable at the instance of a beneficiary who is adversely affected. The interest of

a beneficiary in the trust property continues until it is brought to an end by an act of

the trustees done in accordance with the terms of the trust (or the general law). This is

an incident of the beneficiary's right to have the trust duly administered in accordance

with the provisions of the trust instrument and the general law: see Target Holdings v

Redferns (a firm) [1995] 3 All ER 785 at 793, [1996] AC 421 at 434. If the act of the

trustees which purports to alter or bring to an end the interest of a beneficiary is

affected by a breach of fiduciary duty, then the beneficiary is entitled to restrain the

trustees from acting on it, and to have it set aside, subject always to equitable

defences and discretionary factors.”

12. Thus the new approach seems to be no more than an application of the principle that a

beneficiary is entitled to have the trust duly administered in accordance with the

provisions of the trust instrument and the general law, and if it is not - in other words,

if the trustee commits a breach of trust - a possible remedy, instead of equitable

compensation and/or account, may be the setting aside of the action affected by the

breach.

the trust property and by such assumption has rendered himself liable for the careless performance of what he has undertaken to do. See Bristol and West Building Society v Mothew (t/a Stapley & Co) [1998] 1 Ch 16–18, CA.

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13. So this new approach involves identifying a relevant breach of trust. But whereas

Lloyd LJ clearly recognises that trustees are under a “duty to take relevant, and no

irrelevant, matters into account” and that fiscal considerations will often be among

the relevant matters to take into account6, a failure to take such considerations into

account will not be a breach of trust for these purposes unless that failure is as a result

of a further breach of trust, such as the failure to exercise due skill and care.7

14. Since an allegation of breach of trust will now be essential to found the jurisdiction,

an application to the Court to have a trustees’ action set aside will now generally be a

‘hostile’ action by a beneficiary against the trustees. The consequence of the

beneficiary showing a breach of trust will then be that the action will be merely

voidable, as opposed to void, and so subject to equitable and change of position

defences.

15. The Court of Appeal came to their conclusion notwithstanding that they recognised

that it would reduce significantly the protection previously afforded to beneficiaries

by the rule in Hastings-Bass (see para [128]). It may reduce the protection even more

than they contemplated though. It will be in an extremely rare case that a beneficiary

who cannot get a trustee action set aside because the trustee has acted with skill and

care can instead successfully sue the trustee for equitable compensation. This lack of

success might not just be as a result of an exoneration clause (as Lloyd LJ remarked),

but also because, as the Court of Appeal held in Pitt v Holt; Futter v Futter, such a

6 Lloyd LJ clearly identifies this as a fiduciary duty at paras [107], [127], [222]. 7 This approach bears a superficial resemblance to Lightman J’s approach in Abacus Trust Co (Isle of Man) Ltd v Barr [2003] Ch 409 that there had to be a breach of trust for the rule to apply. But since he had decided that in the case before him the trustees had taken into account all relevant considerations (albeit that they had got one, i.e. the settlor’s wishes, wrong) he needed to find a different breach of trust in order to set the trustees’ action aside.

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trustee has not committed a breach of trust in the first place. Further, if the

beneficiaries cannot sue the trustees, there are conceptual problems for them suing

the trustees’ professional advisers (think White v Jones [1995] 2 AC 207). It will be

for the trustees, if they have suffered the loss, to take the initiative and sue the

professionals.

16. On the second issue (relevant to Pitt v Holt where as an alternative basis of claim the

receiver asked for the settlement to be set aside on the grounds that a serious tax

mistake had been made), the Court of Appeal held that for the equitable jurisdiction

to set aside a voluntary disposition for mistake to be invoked, there must be a mistake

on the part of the donor either as to the legal effect of the disposition or as to an

existing fact which is basic to the transaction. Moreover the mistake must be of so

serious a character as to render it unjust on the part of the donee to retain the property

given to him (the so-called Ogilvie v Littleboy ((1897) 13 TLR 399) test). The fact

that the transaction gives rise to unforeseen fiscal liabilities is a consequence, not an

effect, for this purpose, and is not sufficient to bring the jurisdiction into play.

17. The Court of Appeal decision is not, though, an end to these matters. On 1st August

2011, the Supreme Court granted permission to appeal in both Pitt v Holt and Futter v

Futter. It is expected that the Supreme Court will hear the appeals before the end of

next year.

Susannah Meadway 10 Old Square Lincoln’s Inn

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‘Incurably a nullity’

Suing on behalf of intestate estates without letters of administration

Millburn-Snell v Evans [2011] EWCA Civ 577

CPR 19.8(1)

1. This is an interesting judgement. It touches upon a number of procedural principles

that can profit from a more in depth consideration.

BACKGROUND

2. The claim in itself was straightforward. It was alleged that the Deceased (Mr

Millburn) and Mr Evans had been business partners and that the Deceased had

acquired a 50% beneficial interest in a property called Willow Farm and associated

riding school. The case was founded on proprietary estoppel and there were some 19

examples of work done by the Deceased in reliance on assurances given to him.

3. Where it gets interesting is paragraph 1 of the Particulars of Claim which states:

The Claimants are the personal representatives of Mr Timothy Eric James

Millburn (Deceased) who died on 7 March 2007 and are entitled to bring this

claim on behalf of his estate

4. I should note as Rimer LJ does in his judgement that the pleadings are signed by

Counsel and supported by a statement of truth. There is no reference to the letters of

administration. The defendant puts the claimants to proof of this paragraph, which is

not in and of itself that uncommon.

5. The claim proceeded by further information, witness statements, disclosure and an

order for expert evidence and the trial date was fixed for the 7 June 2010. A grant of

letters of administration was not included in the claimants’ disclosure by list.

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6. On 28 May 2010 (which was five clear working days before the trial) the defendant

asked the claimants’ solicitors to produce a certified copy of the grant of probate (for

which, read letters of administration). The claimants’ solicitors’ faxed reply on the

same day is worth quoting at length:

The right of the Claimants to act as Personal Representatives has never been

challenged by you. No Grant of Probate was taken out. It is permissible for

persons to act as Personal Representatives either for or against a Trustee etc

and we can find nothing in the rules (particularly CPR 19) that prevents an

action continuing. CPR 19.8 merely requires that if a Defendant dies then the

Claimant should apply for a person to be appointed and that seems to be the

extent of the rule. This was a matter that we canvassed with Counsel long ago

who concurred that it was suitable to pursue the claim in the form “Personal

Representatives of the Deceased”.

The three Claimants are the only children of the Deceased. They are the only

persons entitled to make the claim. If the claim is successful the Court can

direct that Probate should be applied for…

7. Rimer LJ refers to this as an ‘unimpressive reply’. The defendant’s solicitors applied

to strike the claim out on the grounds that the claimants had neither sought nor

obtained letters of administration yet were purporting to sue as personal

representatives of their father’s estate.

8. The strike-out application came before His Honour Judge Langan QC sitting as a

High Court judge in the Leeds District Registry on the Friday before the Monday on

which the trial was due to start.

THE APPLICATION BEFORE HHJ LANGAN QC

9. The claimants, the respondents to the application, had two main arguments before

HHJ Langan QC. The second was an argument based on acquiescence and was given

short shrift. The primary argument was based on CPR 19.8 and in particular on

19.8(1):

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Death

19.8

(1) Where a person who had an interest in a claim has died and that person

has no personal representative the court may order –

(a) the claim to proceed in the absence of a person representing the estate of

the deceased; or

(b) a person to be appointed to represent the estate of the deceased.

(2) Where a defendant against whom a claim could have been brought has

died and –

(a) a grant of probate or administration has been made, the claim must be

brought against the persons who are the personal representatives of the

deceased;

(b) a grant of probate or administration has not been made –

(i) the claim must be brought against ‘the estate of’ the deceased; and

(ii) the claimant must apply to the court for an order appointing a person to

represent the estate of the deceased in the claim.

(3) A claim shall be treated as having been brought against ‘the estate of’ the

deceased in accordance with paragraph (2)(b)(i) where –

(a) the claim is brought against the ‘personal representatives’ of the deceased

but a grant of probate or administration has not been made; or

(b) the person against whom the claim was brought was dead when the claim

was started.

(4) Before making an order under this rule, the court may direct notice of the

application to be given to any other person with an interest in the claim.

(5) Where an order has been made under paragraphs (1) or (2)(b)(ii) any

judgment or order made or given in the claim is binding on the estate of the

deceased.

10. The Judge held that - subject to any help that might be derived from the CPR - there

was no doubt that the claim should be struck out as a nullity. Even if the claimants

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had subsequently obtained a grant of administration, such a grant would not have

related back to validate the proceedings. The Judge derived support for his view from

a number of cases, particularly Ingall v Moran [1944] KB 160.

THE RULE IN INGALL V MORAN

11. In Ingall v Moran, the son of the plaintiff was killed when his motorcycle was struck

by a lorry driven by a Canadian soldier on 19 September 1941. The writ was issued

on 17 September 1942 and purported to be a representative action by the plaintiff as

administrator of his deceased son’s estate. The reason for doing this is that the

limitation period under s. 21 (1) Limitation Act 1939 was only one year. Letters of

administration were actually taken out on 13 November 1942.

12. The plaintiff relied on the argument that the grant of letters of administration ‘related

back’ to the death of the intestate. This was rejected by the Court of Appeal who held

that the claim was never properly constituted (per Scott LJ at 164-166):

As the writ was issued on September 17, 1942, and there was no grant till

November, it follows, necessarily, that at the time of writ issued the plaintiff

had no shadow of title to his son’s surviving chose in action… Such an action

was, in my opinion, incapable of conversion by amendment into a valid

action… The old writ was, in truth, incurably a nullity. It was born dead and

could not be revived… if the action and the pleadings were bad, there was no

valid action before the learned judge to try and it is our duty to say so… If the

writ was bad when issued, the action was never commenced

13. Luxmore LJ spoke in similar terms (at 169):

[the plaintiff’s action] was incompetent at the date when the writ was issued,

and that the doctrine of relation back of an administrator’s title to his

intestate’s property to the date of the intestate’s death when the grant has

been obtained cannot be invoked so as to render an action competent which

was competent when the writ was issued.

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14. Goddard LJ was more succinct, stating inter alia (at 172): ‘this action was, and

always remained, incompetent’.

15. Ingall v Moran has been criticised but never overturned. The Judge adopted this case

and turned to consider the effect, if any, of the CPR.

HHJ LANGAN QC’S CONSIDERATION OF CPR 19.8

16. Turning to CPR 19.8, the Judge noted that over the years the White Book had

expressed uncertainty over whether 19.8 could cure a situation such as this. The 2000

edition suggested it could not but the 2009 and 2010 editions suggested it could. The

original 2011 edition also suggested that it would work in these circumstances.

17. The Judge concluded that ‘a person who had an interest in the claim’ is to be

contrasted with the position in CPR 19.8 (2) which expressly deals with a situation in

which a claim has not been brought. He agreed with the defendant that it would not be

right to give the ‘ambiguous language’ of CPR 19.8 (1) a construction which would

overturn the Ingall v Moran cases. Therefore he struck out the claim, although he

granted permission to appeal. He also ordered that the claimants pay the costs of the

application and half the costs of the case.

THE APPEAL

18. The appeal came before Rimer LJ, Hooper LJ and Lord Neuberger MR. Rimer LJ

gave the first judgement and also gave permission for the defendant to cross-appeal

on costs.

19. By the time of the appeal, one of the sisters had in fact been granted letters of

administration. There were no limitation issues and so the claim could have been

brought again.

20. It was agreed at the appeal that subject to the effect of the CPR, the claimants’ claim

was a nullity. Rimer LJ used Ingall v Moran to illustrate this, quoting from Scott LJ

and Luxmore LJ. Again, the distinction must be drawn between an executor who

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derives his title to sue from the will and an executor who derives his title solely from

the grant of administration.

21. Addressing 19.8 Rimer LJ focussed on the meaning of ‘interest in a claim’ as an

interest in the current proceedings. As Rimer LJ points out, there is a not unreasonable

view that:

‘the Deceased could not during his life have had any ‘interest [in the current

proceedings]’ because, by the time of their issue, he was dead. The most that

might be said was that during his life he had an interest in a cause of action

that, following his death, became the subject of the claim that the claimants

issued.’

22. The appellant submitted before the court that this was a sufficient interest. Reliance

was placed on Lean v Alston [1947] KB 467.

THE RULE IN LEAN V ALSTON

23. The plaintiff, Lean, was a pillion rider on a motorcycle driven by Hawkins. The

motorcycle collided with a car driven by the defendant, Alston. Lean was injured and

Hawkins was killed. Hawkins died intestate and his widow refused to take out a grant

of administration. Lean sued Alston, who wanted to serve a third party notice on a

representative of Hawkins’s estate. Hayden agreed to act as such a representative if

indemnified as to costs.

24. Lean's argument was that RSC Ord 16, r. 46 had no application because as between

Alston and Hawkins's widow or his estate there was no cause or matter pending: in

other words, the rule only enabled the appointment of a representative of a party who

had died. RSC Ord 16, r. 46 read, so far as applicable:

If in any cause, matter or other proceeding it shall appear to the court or a

judge that any deceased person who was interested in the matter in question

has no legal personal representative, the court or judge may proceed in the

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absence of any person representing the estate of the deceased person, or may

appoint some person to represent his estate for all the purposes of the cause,

matter or other proceeding ….

25. RSC Ord 16, r. 46 was replaced by RSC Ord 15, r. 15(1) which was in turn replaced

by CPR 19.8 (1). Lean’s argument was rejected. Scott LJ (the same who had given

judgement in Ingall v Moran) explained that the rule was but one application of the

inherent power of the Court of Chancery:

‘the Court of Chancery and its successor, the Chancery Division, always had

the power to appoint a person to represent any particular interest in any

proceeding where it thought right to make that appointment’

26. Rimer LJ accepted that CPR 19.8 (1) was a modern expression of the rule considered

in Lean v Alston. Therefore, he accepted that the phrase ‘a person who had an interest

in a claim has died’ did not refer exclusively to a deceased person who was formerly

a party to a claim. For myself, I think Lean v Alston would work more comfortably

under 19.8 (2). ‘Defendant’ is apt to include a Part 20 defendant.

RIMER LJ’S CONCLUSIONS

27. Where did this get the claimants? Not very far. Rimer LJ was prepared to accept all of

this, but did not see how it helped the claimants:

In my judgement the flaw in their case is exposed by the decision in Ingall.

What that case decided, by a decision binding upon us, is that a claim

purportedly brought on behalf of an intestate’s estate by a claimant without a

grant is an incurable nullity. Subject only to whatever Part 19.8 (1) may

empower, it follows that the claim the appellants issued was equally an

incurable nullity. The logic of Mr Oakley’s submission is however that the

force of Part 19.8 (1) is to confer a jurisdiction upon the court to turn such a

nullity into valid proceedings which may be pursued to judgement.

28. Somewhat unsurprisingly, Rimer LJ rejects this:

8

Part 19.8(1) does not, in my view, have any role to play in the way of

correcting deficiencies in the manner in which proceedings have been

instituted. It certainly says nothing express to that effect and I see no reason to

read it as implicitly creating any such jurisdiction. It is, I consider, concerned

exclusively with giving directions for the forward prosecution towards trial

of validly instituted proceedings when a relevant death requires their giving.

In the typical case, that death will occur during their currency and will usually

be of a party. More unusually, it may have preceded them. But on any basis it

appears to me clear that it is no part of the function of Part 19.8(1) to cure

nullities and give life to proceedings such as the present which were born

dead and incapable of being revived. In ordinary circumstances there is no

reason why anyone with a legitimate interest in bringing a claim on behalf of

an intestate's estate should not first obtain a grant of administration and so

clothe himself with a title to sue. I am unable to interpret Part 19.8(1) as

providing an optional alternative to such ordinary course. I would dismiss the

appeal on the Part 19.8(1) issue.

29. Rimer LJ concluded with a rather intriguing costs judgement. He first allowed the

cross-appeal and ordered the claimants to pay of the defendant’s costs of the action

‘so far as they have been wasted’. The purpose of that additional comment was the

idea that since one of the sisters had in fact obtained a grant, valid proceedings would

probably now be brought. Much of the work had already been done1 and could

effectively be adopted in the new action. Therefore Rimer LJ proposed an order in

these terms:

If within two months the (or one or more of the) appellants issue a like claim

form against the defendant, all steps that were taken in the old claim

subsequent to its issue shall be deemed to be steps taken in the new claim and

the costs of such steps shall (subject to the wasted costs provision to which I

shall come) similarly be deemed to be incurred in the new claim. The costs of

the new claim will be costs in the claim, but the appellants must pay the

1 The strike-out application had been heard one business-day before the opening of the trial.

9

defendant all costs incurred by her that have been wasted by reason that the

first claim was a nullity. The assessment of any such wasted costs will

necessarily have to be the subject of a detailed assessment following the trial

of any new claim or pursuant to any further order in the meantime. If no new

claim is commenced within two months, the appellants will simply be ordered

to pay the defendant her costs of the struck out claim.

30. Hooper LJ agreed without adding anything and Lord Neuberger MR agreed, stating:

Arguments such as that which the defendant successfully raised before the

judge in this case are never very attractive, and one of the purposes of the

CPR is to rid the law of unnecessary technical procedural rules which can

operate as traps for litigants. However, whatever one's views of the value of

the principle applied and approved in Ingall v. Moran [1944] KB 160, it is a

well-established principle, and, once one concludes that it has not been

abrogated by CPR Part 19.8, it was the judge's duty to follow it, as it is the

duty of this court, at least in the absence of any powerful contrary reason. The

need for consistency, clarity and adherence to the established principles is

much greater than the avoidance of a technical rule, particularly one which

has a discernible purpose, namely to ensure that an action is brought by an

appropriate claimant.

THE ELEPHANT IN THE ROOM

31. Before considering CPR 19.8, Rimer LJ discussed CPR 17.4 and the judgement of

Arden LJ in Haq v Singh and another [2001] EWCA Civ 957. Technically, the

discussion must be considered obiter because in Millburn-Snell the limitation period

had not expired. However, it raises certain interesting issues which go to the heart of

the decision in Millburn-Snell.

32. In Haq a discharged bankrupt brought a claim for damages in 1993. The relevant

cause of action had (upon her bankruptcy) vested and remained in her trustee. An

amended defence served in 2000 asserted her lack of capacity to sue, whereupon she

obtained an assignment from her trustee of the cause of action. The issue was whether

10

the judge was right to permit her to amend to plead the assignment. He had so held on

the basis that before the assignment she had no capacity to sue, whereas after the

assignment she had the capacity to sue as the trustee's assignee and therefore the case

was within Part 17.4(4). The Court of Appeal allowed the defendants' appeal, holding

that since both before and after the assignment the claimant was suing in a personal

capacity, her capacity had not altered and so she was not entitled to amend. In doing

so Arden LJ expressed the obiter view that:

' The new rule can clearly be used where a party has brought a claim both as

a dependant and as an administrator before obtaining letters of

administration, and later an amendment is sought to be made to alter the

capacity in which the claimant has brought the proceedings (which can only

be in a personal capacity) to plead newly granted letters of administration. It

would be odd if the rule could not be used where the claim had only ever

been made by the claimant as administrator. Mr Evans' primary submission

is that that situation is not covered by the rules and that the decision

in Ingall v Moran [1944] 1 All ER 97 has not been negatived. While that

situation does not arise for decision in this case, my view is that the court

does have jurisdiction under CPR 17.4 in this situation since, before the

application for permission to amend, the claimant can only be suing in

individual capacity whatever the statement of case may say. Although the

court is dealing with an application to amend a statement of case, in my

judgment its jurisdiction is not restricted by the label which has been given

to the party in the statement of case.

The effect of CPR r 17.4(4) is therefore to remove the effect of Ingall v.

Moran [1944] 1 KB 160, the technicalities of which Singleton LJ in Finnegan

v. Cementation Co Ltd [1953] 1 QB 688, 699 described as a “blot upon the

administration of the law.”

33. It is notable that Rimer LJ only quotes the second of those paragraphs in Millburn-

Snell. Pill LJ expressed similar views:

‘The effect of the introduction of that rule [17.4(4)] in the Rules of the

Supreme Court, as the editors of the Supreme Court Practice 1999 put it in vol

11

1, at p 386, para 20/8/18, was to negative earlier cases cited in the note. I

mention only two of them: Ingall v Moran [1944] 1 KB 160 and Finnegan v

Cementation Co Ltd [1953] 1 QB 688, both decisions of this court’

34. Rimer LJ is rather dismissive of these comments:

‘For myself, I respectfully question the correctness of that assessment of the

effect of Part 17.4(4). First, it is not easy to see how a claim which,

as Ingall explained, is born dead and is a nullity can be given life by an

amendment. Second, I am not confident that it was the Ingall principle pure

and simple that was the 'blot' to which Singleton LJ was referring. He was,

as I read Finnegan (see [1953] 1 QB 688, at 699), referring rather to the

apparent injustice of the instant case (like Hilton, supra) in which a plaintiff

who could have sued in her personal capacity under the Fatal Accidents Acts

found herself barred by time from suing at all because she had mistakenly

sued in time exclusively as administratrix when she had no capacity to do so.

Third, as is pointed out in Executors, Administrators and Probate, Williams,

Mortimer and Sunnucks, 19th Edition, 2008, in Note 68 to paragraph 8-10,

Part 17.4 applies only where a period of limitation has expired and:

'Clearly, it would be an extraordinary result if proceedings could be saved

by amendment where a limitation period has expired, but not where such a

period had not expired. However, it is not clear on what statutory authority

an amendment in the latter case is permitted and, without such authority, it

is difficult to see how the earlier authorities (see fn. 65 above [which

includes Ingall, Hilton and Finnegan]) can be ignored particularly as they

deal with substantive rather than procedural law. Certainly the somewhat

ambiguous words at the end of s. 35(7) of the Limitation Act 1980 would not

seem sufficient for this purpose. … It may be, therefore, that the true effect of

CPR r. 17.4(4) is much more limited than the Court of Appeal

in Haq suggests…'.

20. Having expressed my doubts about those observations in Haq, I

regard it as unnecessary to say more about them. The judge was, I consider,

right to regard Haq as providing no guidance for the purposes of the

application before him. First, at the time of the application, the claimants

12

had not obtained a grant and so no amendment application was before him.

Second, no limitation period had expired and Part 17.4(4) applies only

where one has. Mr Oakley expressly disavowed any reliance on Haq.

35. What then, is the elephant in the room? Although this is not a case about CPR 17.4, it

is interesting indeed that the Court of Appeal in Millburn-Snell makes no reference at

all to the discussion of Ingall v Moran in Roberts v Gill [2011] 1 AC 240.

36. Rimer LJ undoubtedly felt able to ‘respectfully´ dismiss the comments of Arden and

Pill LJJ. It could be argued that even Rimer LJ needs to hesitate for a moment before

dismissing the very similar statements of Lord Collins and Lord Walker. In Roberts v

Gill, Lord Collins says in the second paragraph of his judgement:

The principal questions on this appeal relate to whether this is an appropriate

case for a representative (or derivative) claim, which was the focus of the

judge's decision, and to the interpretation and application of s 35 of the

Limitation Act 1980 and the rules of court which were enacted pursuant to it,

first in the Rules of the Supreme Court, and now in the Civil Procedure Rules.

The limitation issues were the main focus of the decision of the Court of

Appeal. Section 35 was enacted following recommendations of the Law

Reform Committee in 1977. It had two main objectives. The first was to

enable a Plaintiff to amend pleadings out of time so as to sue in another

capacity, in particular to reverse the effect of such decisions as Ingall v

Moran [1944] KB 160, [1944] 1 All ER 97, 113 LJKB 298, which created a

grave injustice where proceedings were instituted under the Law Reform

(Miscellaneous Provisions) Act 1934 prior to letters of administration being

taken out and the limitation period expired before proceedings were

instituted in a representative capacity: the grant did not date back to the date

of death, by then it was too late to issue fresh proceedings or to amend. The

second objective was to enable parties to be added out of time, in cases where

joinder of the new party was necessary if the Plaintiff's claim was to succeed,

for example where the Plaintiff was an equitable assignee and had omitted to

join the assignor prior to the expiry of the limitation period.

13

37. This is rather on point and it can only be assumed that Roberts v Gill was not cited

before the court in Millburn-Snell. Lord Collins returned to the theme later in his

judgement:

‘[RSC Ord 20, r. 5, the predecessor to 17.4(4)] gave effect to a

recommendation of the Law Reform Committee, enacted as s 35(7), to deal

with the anomaly that, where probate was granted to a person as executor,

leave to amend to make a claim on behalf of the estate could be given because

the title related back to the death, but where the Plaintiff was subsequently

granted letters of administration in such cases, the title related back to the

date of the grant, which would have been after the issue of the writ. This had

the effect of removing the grave injustice caused by such decisions as Ingall v

Moran [1944] KB 160, [1944] 1 All ER 97, 113 LJKB 298 (CA); Hilton v

Sutton Steam Laundry [1946] KB 65, [1945] 2 All ER 425, 115 LJKB 33

(CA); Burns v Campbell [1952] 1 KB 15, [1951] 2 All ER 965, [1951] 2 TLR

1007; Finnegan v Cementation Co Ltd [1953] 1 QB 688, [1953] 1 All ER

1130, [1953] 2 WLR 1015 (CA).

37. Lord Walker expressed his opinion in similar terms:

In the much-cited case of Mabro v Eagle, Star and British Dominions

Insurance Co Ltd [1932] 1 KB 485, 487, 101 LJKB 205, [1932] All ER Rep

411 Scrutton LJ said:

“In my experience the court has always refused to allow a party or a cause

of action to be added where, if it were allowed, the defence of the Statute of

Limitations would be defeated. The court has never treated it as just to

deprive a Defendant of a legal defence.”

The same uncompromising rule of practice was applied even in cases (such

as Ingall v Moran [1944] KB 160, [1944] 1 All ER 97, 113 LJKB 298

and Finnegan v Cementation Co Ltd [1953] 1 QB 688, [1953] 1 All ER

1130, [1953] 2 WLR 1015) where the result was to shut out a meritorious

claim, arising from a fatal accident, on what many would regard as a

technicality. Indeed in the latter case Singleton LJ (at p 699) described the

point as “a blot upon the administration of the law”.

14

[98] These hard cases turned on the technical but long-established

distinction between the position of an executor (whose standing relates back

to the deceased's death, and is merely confirmed by probate) and an

administrator (whose title depends on, and dates from, the grant of letters of

administration). That distinction has ceased to be relevant, for present

purposes, because of s 35(7) of the Limitation Act 1980 and CPR r 17.4(4)

(made pursuant to s 35(7)). Rule 17.4(4) (replacing the former RSC Ord 20 r

5(4)) provides “The court may allow an amendment to alter the capacity in

which a party claims if the new capacity is one which that party had when

the proceedings started or has since acquired.” Here it is the last four words

(added to Ord 20 r 5(4) in 1981) that made the important change.

38. Four questions arise:

a. Would Rimer LJ have been so dismissive of the opinions expressed in Haq v

Singh if Roberts v Gill had been cited before him?

b. Is Millburn-Snell therefore wrong?

c. If Millburn-Snell is not wrong, then is there a lacuna in the law whereby

invalidly constituted proceedings cannot be revived under CPR 19.8, but they

can be revived under CPR 17.4(4) after limitation has expired?

d. Are Arden LJ, Pill LJ, Lord Collins and Lord Walker all wrong?

39. I would suggest that Millburn-Snell is not wrong. Rimer LJ’s reasoning is sound. If

the claim is a nullity, then there is nothing upon which to amend. The question is:

does CPR 17.4 (4) do anything different? 17.4 reads:

Amendments to statements of case after the end of a relevant limitation period

17.4

(1) This rule applies where –

(a) a party applies to amend his statement of case in one of the ways mentioned in this

rule; and

15

(b) a period of limitation has expired under –

(i) the Limitation Act 1980;

(ii) the Foreign Limitation Periods Act 1984; or

(iii) any other enactment which allows such an amendment, or under which such an

amendment is allowed.

(2) The court may allow an amendment whose effect will be to add or substitute a

new claim, but only if the new claim arises out of the same facts or substantially the

same facts as a claim in respect of which the party applying for permission has

already claimed a remedy in the proceedings.

(3) The court may allow an amendment to correct a mistake as to the name of a party,

but only where the mistake was genuine and not one which would cause reasonable

doubt as to the identity of the party in question.

(4) The court may allow an amendment to alter the capacity in which a party claims if

the new capacity is one which that party had when the proceedings started or has

since acquired.

40. Before considering the effect of 17.4(4), it is worth noting that there might be a sound

reason to allow an invalidly constituted claim to be revived after the expiry of the

limitation period but not before. If the claim is invalidly constituted but still within the

limitation period then a new claim can be brought (as in Millburn-Snell itself). If they

are out of time, then there would be no other redress. On the other hand, this

interpretation would appear to deprive defendants of perfectly legitimate limitation

defences.

41. Lord Walker emphasised the last four words of CPR 17.4(4), ‘or has since acquired’.

Is this sufficient? I prefer the reasoning of Rimer LJ. If a claim is improperly

constituted, then it is improperly constituted. It is, to remember Scott LJ, ‘incurably a

nullity’. In a broad sense, there is nothing on which to base the amendment, at least in

a case such as Millburn-Snell. There is no ‘party’ who can change their capacity. It

would be surprising if 17.4(4) allowed the resurrection of dead claims when 19.8(1)

did not.

16

CONCLUSION

42. There are three quick conclusions to be drawn from Millburn-Snell:

a. Do not sue on behalf of an intestate estate without a grant. That would appear

to be rather obvious but I should note that this appears to have been a not

uncommon practice on circuit: to issue and then apply for an order under CPR

19.8).

b. Get a grant.

c. It may still be open to try to change capacity after limitation has expired in

order to validate one’s proceedings. This has not been tested however, and I

would not advise issuing, waiting for limitation to expire and then applying to

change capacity.

Leon Pickering

Ten Old Square

October 2011

1

TEN OLD SQUARE PRIVATE CLIENT SEMINAR

Q & A WITH FRANCIS BARLOW QC

13th October 2011

Is it no longer possible to disinherit an estranged child?

Georgia Bedworth

1. It is thought to be one of the fundamental tenets of English law that an English

testator has freedom of testamentary disposition. That freedom of testamentary

disposition is not, however, absolute. The Inheritance (Provision for Family and

Dependants) Act 1975 (“the 1975 Act”) gives the Court power on application by

certain classes of claimant, to interfere with the dispositions made by the deceased on

the ground that his will or the law of intestacy has not made reasonable financial

provision for the applicant.

2. Notwithstanding the jurisdiction under the 1975 Act, the starting point remains that

the testator does have the freedom to give his estate to whomsoever he chooses. As

Oliver J said in Re Coventry [1980] Ch 461

“Subject to the court’s powers under the 1975 Act and to fiscal demands, an

Englishman still remains at liberty at his death to dispose of his own property in

whatever way he pleases or, if he chooses to do so, to leave that disposition to be

regulated by the laws of intestate succession. In order to enable the court to interfere

with and reform those dispositions it must, in my judgment, be shown not that the

deceased acted unreasonably but that, looked at objectively his disposition or lack of

disposition produces an unreasonable result in that it does not make any or any

greater provision for the applicant and that means, in the case of an applicant other

than a spouse for that applicant’s maintenance”

3. However, the decision of the Court of Appeal in Illott v Mitson [2011] EWCA Civ

346; [2011] 2 FCR 1 calls that basic starting point into question.

2

Outline of the Jurisdiction under the 1975 Act

4. The scope of the jurisdiction under the 1975 Act is well known. Certain classes of

applicant may make a claim that the disposition of the estate was not such as to make

reasonable financial provision for the Applicant. In the case of applications by a

spouse of the deceased, the Court assesses whether the provision was reasonable

whether or not such provision is required for the spouse’s maintenance. In all other

cases, “reasonable financial provision” is assessed at the maintenance standard. The

Court’s approach is objective. The Court cannot re-write the Deceased’s will because

it considers that the Deceased has behaved unreasonably in excluding the applicant.

Nor is the Court able to make financial provision for an applicant because it would

have been reasonable for the Deceased to make some provision for him. The Court

must be satisfied that in all of the circumstances, considered objectively, the result is

unreasonable.

5. Section 3(1) sets out the factors that the Court must take into account:

(a) The financial needs and resources that the Claimant has or is likely to have in the foreseeable future

(b) The financial needs and resources of any other applicant under the Act (c) The financial needs and financial resources that any beneficiary of the estate has

or will have in the foreseeable future (d) Any obligations or responsibilities of the Deceased towards any applicant or any

beneficiary of the estate (e) The size and nature of the net estate (f) Any physical or mental disability of the Claimant or any beneficiary of the estate (g) Any other matter including conduct of the applicant or any other person which in

the circumstances of the case the court may consider relevant.

6. The court approaches applications under the 1975 Act in two stages. At the first

stage, the Court must consider whether or not the disposition of the estate was such to

make reasonable financial provision for the applicant. At the second stage, the Court

must consider whether any provision should be made and what the level of that

provision should be. The statutory factors must be considered at both stages of the

3

exercise. No factor is more important than another: it is a matter for the court to

balance the factors when reaching its decision.

Claims by Adult Children

7. Claims by adult children who are not dependent on the Deceased, have long been

regarded as more difficult than claims by other classes of applicant. It used to be

considered that an adult child would not succeed unless he could show a moral

obligation on the part of the Deceased to make provision for him. In Re Hancock

[1998] 2 FLR 436 Butler-Sloss LJ made it clear that this was not the case. An adult

child, like any other applicant, simply had to prove his case.

8. However, the belief that an application by an adult child is more difficult did have

some justification. The courts have repeatedly stated that the fact that the child is in

necessitous circumstances and that the estate is available to make provision to relieve

that need is not enough. In Re Hancock itself, Butler-Sloss LJ stated that if the child

were capable of supporting himself something more would be required before the

Court would interfere with the disposition of the Deceased’s estate.

9. One material circumstance is the relationship between the child and the Deceased.

Estrangement between the child and the parent might be thought to be a factor which

would weigh heavily against provision being made. This was certainly the case

in Garland v Morris [2007] 2 FLR 528. A child who has been estranged from the

Deceased, without any expectation of inheritance from him, could not expect to

successfully argue that the dispositions of the estate should be varied in his favour,

even if he were in significant financial need. Or could he?

Illott v Mitson: The Facts

10. The Deceased had one daughter, Heather. When Heather was 17, she commenced a

relationship with a man of whom the Deceased disapproved. The daughter then ran

away from home and began to live with her boyfriend. She later married him and

they had five children together.

11. The Deceased remained estranged from her daughter for almost the whole of the next

26 years until her death. Although there were a few of attempts at reconciliation

4

(none of which were initiated by the daughter) these were both unsuccessful and

short-lived. The District Judge found that one of the reasons for this was that the

Deceased had an unreasonable attitude towards the daughter and her relationship with

her husband. However, the daughter was not entirely innocent. The daughter had no

expectations of inheritance from her mother’s estate. The Deceased left a letter

explaining why she had excluded her daughter from her estate and when the Deceased

died in 2004, leaving an estate of £486,000, she left the whole of her residuary estate

after a few pecuniary legacies to specific animal charities: the Blue Cross, the RSPCA

and RSPB. The Deceased had had no particular affinity with these charities during

her lifetime nor, apparently, any particular love of animals or birds.

12. The daughter and her husband had decided that the daughter should be a full time wife

and mother. She had not worked since the birth of her first child in 1984. She and

her husband lived in rented accommodation and their income mainly derived from

state benefits, although the husband worked part time as a supporting actor. They had

very limited financial resources. The daughter made a claim against the estate under

the 1975 Act that the Deceased’s will did not make reasonable provision for her

maintenance.

The Decisions

13. At first instance, the claim came before District Judge Million. He held that the

disposition of the estate did not make reasonable financial provision for the daughter.

He held that the Deceased had been harsh in her assessment of her daughter. He

seemed to give little weight to the fact of the estrangement. He also took the view

that the daughter was entitled to make the “lifestyle choices” that she had. Although

the fact that she had made those choices did not justify no provision being made for

her, he held that this did have an impact on the level of provision that should be made.

He awarded the daughter £50,000 out of the Deceased’s estate.

14. The daughter appealed the quantum of the award. The charities (who up until that

point had considered that the cost of an appeal would be disproportionate) cross-

appealed. The charities contended that the District Judge had misdirected himself and

had reached a decision which was plainly wrong. Eleanor King J allowed the

charities’ cross-appeal. She held that the District Judge had asked himself whether the

5

Deceased had acted unreasonably in excluding her daughter from her estate. The

appropriate question was whether or not, taking all of the factors into account, the

Deceased had produced an unreasonable result. Eleanor King J went on to say that, in

any event, the District Judge was plainly wrong in that he had failed to stand back

and look at all of the section 3 factors and consider whether or not the disposition of

the estate was unreasonable. Eleanor King J then considered the factors and held that

the disposition of the estate did not produce an unreasonable result.

15. The daughter appealed. The Court of Appeal reversed the decision of Eleanor King J.

First, they stated that the District Judge had asked himself the correct question.

Second, they held that there was no basis for interfering with the District Judge’s

decision on the basis that it was “plainly wrong”. The Court of Appeal considered

that it was a decision that he was entitled to reach in the circumstances.

The Court of Appeal’s Approach

16. One of the things that makes the decision in Illott v Mitson difficult to understand is

that the effect of the Court of Appeal’s decision is to overturn the decision of Eleanor

King J, which was eminently sensible. There was little to the daughter’s application

other than financial need and the fact that the Deceased was the applicant’s mother.

Eleanor King J said (in line with previous authority) that this was not enough. Black

LJ describes her decision as “impeccably reasoned”. If Eleanor King J had been

making the decision at first instance, there would have been no ground to interfere

with it. However, Eleanor King J was sitting in an appellate capacity. On one view,

the decision of the Court of Appeal was simply that Eleanor King J, exercising as she

was an appellate jurisdiction, was not entitled to interfere with the decision of the first

instance judge. However, the judgments go much further than that. The Court gave

guidance as to the approach that should be taken in a 1975 Act claim which will make

such decisions more difficult to appeal in future. Three particular points come out of

the decision.

17. First, despite the repeated assertion in the authorities that the fact that a child is in

financial need is not sufficient, this factor appears to have been given overriding

importance. There seems to have been some considerable force in the charities’

criticism that the decision was based solely on the fact that the daughter was in

6

financial need. The approach of Black LJ in this regard was to say that financial need

is never the only factor as necessarily the court sets this against the position of the

beneficiary and the size of the estate. Looked at from the point of view of the position

of the other beneficiaries, Mitson is not out of line with the other authorities on

estranged adult children. In Re Myers [2005] WTLR 851 an estranged daughter

received substantial provision in a case where the estate was sufficient to provide for

the needs of all parties. In contrast, in Re Garland, the estranged daughter got

nothing in a case where her sister, the sole beneficiary of the estate, had real need of

the money.

18. Second, the Court of Appeal emphasised that at the first stage the judge was

undertaking a “value judgment” not an exercise of discretion. What is remarkable is

the comment by Wall P that the judge is not required to undertake any balancing of

the various factors at this stage. The Court of Appeal stated that this value judgment

should not be lightly be interfered with. This seems to allow the judge to make a

subjective assessment of the Deceased’s reasons for excluding the applicant. If the

judge considers that the Deceased behaved unreasonably, that will form part of the

value judgment. This seems to be an introduction of the wrong question (has the

Deceased behaved unreasonably) by the back door. What is more concerning

however, is that this also allows the judge to disregard the fact of the estrangement

(whatever the reason for it) and give it little weight, without fear of interference from

an appellate court.

19. Third, although the judge has to take into account each of the section 3 factors in

making his value judgment, the judge does not need to stand back and identify which

particular factor led him to conclude that reasonable financial provision had not been

made. This makes the decision difficult to appeal.

20. Given the overriding importance given to financial need, and seemingly little or no

weight placed on the objective fact of the estrangement (whatever the reasons for it),

can a testator exclude an estranged child?

Georgia Bedworth

11th October 2011

1

TEN OLD SQUARE PRIVATE CLIENT SEMINAR Q & A WITH FRANCIS BARLOW QC

13th October 2011

The other issue in Breakspear v Ackland

Michael Waterworth

1. Breakspear v Ackland was decided by Briggs J in early 2008. The case is quite

well known. It is concerned a freestanding claim seeking disclosure of the

deceased Settlor's non-binding letter of wishes which was contemporaneous with

the (discretionary) settlement made in January 1995.

2. Briggs J allowed the claim for disclosure. He held that a letter of wishes existed in

order to assist in the trustees in hand inherently confidential process (exercising

their dispositive discretionary powers) and that a letter of wishes was itself

properly to be regarded as confidential, to the same extent and effect as the

process which it was intended to serve. The preservation, judicious relaxation or

abandonment of that confidence was a matter for the trustees or, in an

appropriate case, the court, to be exercised in accordance with what were judged

to be the best interests of the beneficiaries and the due administration of the trust.

The trustees and the court, when deciding whether to grant a request for

disclosure of a letter of wishes were exercising a discretion rather than

adjudicating on a proprietary right of beneficiaries to see trust documents.

3. However, although the trustees' decision not to disclose the letter of wishes had

been a proper exercise of their discretion at the time of their refusal, because they

intended to seek the court's sanction for a scheme of distribution of the trust fund

it was necessary to give disclosure of the letter of wishes in order to give the

claimant beneficiaries a proper opportunity to address the court on the question

of sanction, notwithstanding the risk of family division occasioned by disclosure.

2

4. But that was not the only issue before the court in Breakspear v Ackland. There

was a further claim to set aside the addition of a defendant ("Patricia") as a

beneficiary of the settlement by deed dated 9 March 1995 and other

appointments. This claim to set aside the March appointments arose out of

Patricia's participation, moments after becoming a trustee of the settlement, in

deeds of appointment successively including her among the class of beneficiaries

and, immediately thereafter, giving a reversionary interest in the income of the

trust fund to her, on the Settlor’s death.

5. It was common ground that, if the March appointments involved a breach of the

self-dealing rule by virtue of Patricia's participation in them as trustee, then they

were voidable at the claimants' election as of right. As Briggs J wanted out, the

court had no discretion either to relieve Patricia from the consequences of

liability to return her receipts, or to relieve the trust fund generally from the

“probably catastrophic consequences of the retrospective loss of the spouse

exemption” upon the Settlor’s death which would thereby result. He added: "The

remorseless rigour of the self-dealing rule, pour encourager les autres, renders

irrelevant any speculation by the court as to the reasons why the claimants

might wish to engage in such an apparently self-destructive exercise."

6. The Settlement incorporated a schedule containing what were described as

"Administrative Powers" (although these included a mixture of administrative

and dispositive powers). Paragraph 9 of the schedule under the heading "Power

to permit self-dealing" provided as follows:

"The trustees shall have power to enter into any transaction concerning the trust fund

notwithstanding that one or more of the trustees may be interested in the transaction

other than as one of the trustees and without any trustee who is so interested being liable

to account for any reasonable incidental profit provided that at least one of the trustees

who is not interested in the transaction other than as a trustee approves the transaction."

3

7. This may be compared with the STEP standard provisions which are often

incorporated (unread) into trust documents by reference. The STEP provisions

include this: “The powers of the Trustees may be used to benefit a Trustee (to the same

extent as if he were not a Trustee) provided that there is an Independent Trustee in

respect of whom there is no conflict of interest.”

8. Francis Barlow deployed a variety of arguments to avoid the imposition of the

self-dealing rule. One of these (raising the possibility of rectification) drew the

following comment from Briggs J:

”while I admire the ingenuity behind Mr Barlow's rectification argument, I have not

been persuaded by it. He drew support from first instance decisions which, to avoid

unintended adverse tax consequences, display a quite remarkable degree of imagination in

substituting for the defective machinery, alternative machinery of the type required by

statute, which achieves the intended fiscal effect...

“The trouble with this submission is that rectification would appear to achieve, by

something akin to magic, a precise reversal of the order of events actually intended and

implemented by the parties.”

9. There are two questions. First, how did the other issue in Breakspear v Ackland

resolve itself and, secondly, how might that resolution assist others who find

themselves in a similar position?

Michael Waterworth

12th October 2011