Publication

A Round-up of Recent Wills and Trust Cases

Trust Quarterly Review 2010, 8(2), 24-30

Joseph Curl

A number of interesting matters have been ventilated in the Wills and Trusts Law Reports over recent editions.  S v S[1] and Jones v Kernott[2] were both disputes concerning beneficial shares in domestic property that arose in circumstances where a departed male partner sought to realise his interest in his former home about 15 years after he had moved out.  S v S considered the significance of the distinction between proprietary estoppel and common intention constructive trust, while in Jones v Kernott the “ambulatory” constructive trust referred to by Baroness Hale in Stack v Dowden was put to work in ways which may or may not have reflected what her ladyship had in mind.  Crossing the Irish Sea, Prendergast v Joyce[3] provides an instructive account of the scope of the equitable doctrine of undue influence when wielded by a personal representative seeking to set aside inter vivos dispositions.  A Will failed for want of testamentary capacity and knowledge and approval in Key v Key,[4] an authority most notable for Briggs J’s strong criticism of a solicitor’s failure to adhere to the “Golden Rule.”  Miskelly v Arnheim[5] saw a narrow approach to the rectification of a Will combined with a wide reading of the rule in Saunders v Vautier.[6]  Angus v Emmott[7] showed (on very unusual facts) what the Court may do where executors fall out with each other.  Finally, Centre v Van Rooyen[8] provides a comprehensive analysis of the fiduciary and other duties of protectors and appointors.

Distinguishing proprietary estoppel from constructive trust: does it still matter?

S v S involved a discussion of the remaining differences between proprietary estoppel and constructive trust.  It is often said that there are far more features held in common between the doctrines of proprietary estoppel and the common intention constructive trust than there are points of divergence.  Complete assimilation appeared to be in prospect a decade ago when Lord Walker found that:

“in the area of a joint enterprise for the acquisition of land (which may be, but is not necessarily, the matrimonial home) the two concepts [constructive trust and estoppel] coincide…the species of constructive trust based on “common intention”…is closely akin to, if not indistinguishable from, proprietary estoppel.”[9]

Whether there remained a difference or not, it seemed that it did not matter too much (at least in terms of disposal) which of the two categories was ultimately adopted. Lord Chadwick considered a few years later that:

“I think that the time has come to accept that there is no difference in outcome, in cases of this nature, whether the true analysis lies in constructive trust or in proprietary estoppel.”[10]

The differences between the doctrines are matters of some subtlety but two main points of distinction can nevertheless be identified.  Firstly, the common intention constructive trust depends upon a common understanding or agreement, while proprietary estoppel is based simply on the estopped party’s representations.  Secondly, a constructive trust inevitably results in a full ownership interest, whereas a proprietary estoppel claim is satisfied by the minimum equity to do justice.[11]  Lord Walker summarised the position recently in Stack v Dowden[12] at the very end of his judgment, involving at least a partial recantation of his former view expressed in Yaxley v Gotts.  His Lordship was clear that there remained a difference:

“Proprietary estoppel typically consists of asserting an equitable claim against the conscience of the “true” owner. The claim is a “mere equity”.  It is to be satisfied by the minimum award necessary to do justice…which may sometimes lead to no more than a monetary award.  A “common intention” constructive trust, by contrast, is identifying the true beneficial owner or owners, and the size of their beneficial interests.”[13]

Given the imprecision with which the representation (giving rise to an estoppel) or common understanding (in cases of constructive trust) is often expressed and the vagueness with which it is recalled in evidence, there will not always be a clear line demarcating a common understanding from a representation which is subsequently acted upon.  Does it matter?  Mr Justice Sumner’s decision in S v S shows that it can.  In S v S, the applicant was the ex husband of the respondent.  The respondent’s mother was an intervenor in the proceedings.  An application was made by the applicant to enforce an order he had obtained in 1989 giving him a deferred one-third interest in the former matrimonial home.  The respondent resisted on the basis that an oral agreement had been reached in 1993 whereby the applicant agreed to give up his interest in the property in exchange for the respondent giving up her right to receive maintenance payments.  Since 1996 the property had been occupied by the intervenor following an agreement (made without legal formalities) between the respondent and the intervenor that the intervenor would acquire one-half of the respondent’s interest in the property.  The intervenor contended that she had relied on an assurance she said had been made to her by the applicant in 1994 that he no longer had any interest in the property.

It was submitted by the respondent that as a consequence of their oral agreement in 1993 the applicant was estopped from denying that the respondent was entitled to a 100 per cent interest in the property.  Alternatively, the respondent submitted that the applicant held his interest on constructive trust for the respondent.  These points were also relied on by the intervenor, who further submitted that she had acquired an equitable interest as a result of the applicant’s assurance to her and her subsequent detrimental reliance.  The applicant’s position was straightforward: he flatly denied that there had been any conversation or agreement of the kinds alleged by the respondent and the intervenor.

Sumner J found that on the balance of probabilities there had been an agreement between the applicant and the respondent of the sort contended for by the respondent.  Similarly, it was held that the applicant had represented to the intervenor that the applicant had no interest in the property.  Given the overlap between constructive trust and proprietary estoppel, it might superficially have appeared that it would largely be a matter of legal semantics whether Sumner J chose to resolve the matter by reference to constructive trust or proprietary estoppel.  But this was not the case: the deputy judge considered that it mattered a great deal.  This was because the judge considered that the absence of writing in the agreement between the applicant and the respondent meant that the agreement between the applicant and the respondent fell foul of the writing requirement in section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989.  While there was a specific saving for constructive trusts in section 2(5), Sumner J considered that merely having the benefit of a proprietary estoppel did not enable a party to avoid the statutory requirement for writing.  This point has been raised before in Yaxley v Gotts and most recently by the House of Lords in Yeoman’s Row Management Ltd v Cobbe,[14] albeit that both those cases were within a commercial (rather than a domestic) context. Lord Scott remarked in Cobbe that:

“proprietary estoppel cannot be prayed in aid in order to render enforceable an agreement that statute has declared to be void.  The proposition that an owner of land can be estopped from asserting that an agreement is void for want of compliance with the requirements of section 2 is, in my opinion, unacceptable.  The assertion is no more than the statute provides.  Equity can surely not contradict the statute.”[15]

The judge found that the respondent had proved a proprietary estoppel.  But unless she also proved that this estoppel gave rise to a constructive trust, she would be unable to fend off the application because the parties had not complied with section 2(1) of the 1989 Act.  Sumner J found on the facts of S v S that the respondent had successfully proved that her proprietary estoppel also gave rise to a constructive trust because it had been based on an agreement rather than merely a representation.  This meant that the respondent could succeed in rebutting the applicant’s claim, notwithstanding that the arrangement was not in writing.

The type of approach taken to the 1989 Act by Sumner J in S v S has come in for criticism.  In a recent essay, Paul Matthews points out that a proprietary estoppel does not purport to give effect to a void contract in avoidance of the writing requirement in the 1989 Act.  Instead, proprietary estoppel is concerned with satisfying the equity that has arisen as a consequence of reliance upon a representation, rather than any void contract surrounding the estoppel.  Matthews argues that:

“the cause of action is not contract at all, and it is unnecessary to resort to section 2(5), and to squeeze the proprietary estoppel into a constructive trust framework in order to escape the requirements of section 2. They simply never attach in the first place.”[16]

The implications of the “ambulatory” constructive trust

Jones v Kernott[17] is an interesting case because the judgment of Mr Nicholas Strauss QC (sitting as a deputy judge of the Chancery Division) seems to be the first reported discussion referring directly to the “ambulatory constructive trust” mentioned to by Baroness Hale in Stack v Dowden.  It will be recalled that Baroness Hale found that:

“The fact that the ownership of the beneficial interest in a home is determined at the date of acquisition does not mean that it cannot alter thereafter.  My noble and learned friend Lord Hoffmann suggested during argument that the trust which arises at the date of acquisition, whether resulting or constructive, is of an ambulatory nature.  That elegant characterisation does not justify a departure from the application of established legal principles any more than such a departure is justified at the time of acquisition.  It seems to me that “compelling evidence”, to use Lord Hope’s expression in para 11, is required before one can infer that, subsequent to the acquisition of the home, the parties intended a change in the shares in which the beneficial ownership is held.  Such evidence would normally involve discussions, statements or actions, subsequent to the acquisition, from which an agreement or common understanding as to such a change can properly be inferred.”[18]

Jones v Kernott shows how subsequent events may alter earlier common intentions, even in the absence of any discussion or agreement at any point about how the property is to be held.  Patricia Jones and Leonard Kernott bought a property together (Badger Hall Avenue) in May 1985 and lived there until their relationship ended in October 1993.  Mr Kernott sought to realise his interest many years later.  He appealed from an order that he was only entitled to 10 per cent of the value of Badger Hall Avenue.  Ms Jones had contributed £6,000 of the £30,000 purchase price with the balance funded by an interest only mortgage.  An extension had been built and funded by Mr Kernott and had increased the value of Badger Hall Avenue to £44,000.  It was common ground that until October 1993 the parties held Badger Hall Avenue beneficially in equal shares.  However, when Mr Kernott left, he stopped contributing to the mortgage and other outgoings.  He bought himself another property elsewhere and took no further interest in Badger Hall Avenue, instead concentrating on his new property.

The principal issue was whether and to what extent the parties’ interests in the property had changed since 1993.  A 90:10 split in favour of Ms Jones had been awarded below on the basis of what was just and fair, having regard to Ms Jones’s payment of the deposit and her disproportionate contribution of 81.5 per cent of the total mortgage interest payments, together with the lack of assistance provided by Mr Kernott with the care of their children.  Mr Kernott submitted that the judge below had erred in failing to follow Stack v Dowden, in that he had strayed into the “forbidden territory” of fairness.

It was held that where property was put into joint names, Stack v Dowden provided that the strong presumption was that the parties intended that they should have a joint beneficial interest.  The Stack v Dowden orthodoxy was reiterated: only in very unusual cases would this presumption be displaced.  Where the presumption was displaced, the Court should consider what shares were intended and not impose what the Court considered fair.  Mr Nicholas Strauss QC considered that often there would be no evidence of intention and the court would attribute a common intention to the parties.  The beneficial interests at the time of purchase could subsequently change and the parties’ intentions might be ambulatory.[19]

The deputy judge rejected Mr Kernott’s arguments that consideration of fairness was “forbidden territory.”  It was held that to say that consideration of what is fair is not permitted is to suggest that fairness cannot have been part of the parties’ intentions.  This would lead to a practical difficulty in establishing what the parties must be taken, in light of their conduct, to have intended, because where there is no evidence it would be difficult to impute any intention to the parties other than that they intended that each should have a fair share.[20]  It was held in Jones v Kernott that Stack v Dowden had decided only that fairness could not contradict the common intentions of the parties, where these intentions could be determined.  Here the position was different because the parties’ intention could not be determined.  The deputy judge held that Lord Neuberger’s view in Stack v Dowden that fairness was forbidden territory constituted part of his dissent in the case.

On the facts of Jones v Kernott, it was held that the beneficial interests of Ms Jones and Mr Kernott were ambulatory in that they could be quantified at any given point but changed over time.  Given that the parties had no discernible intentions, it had been right for the judge below to have taken them to have intended what was fair and reasonable.  It was held that either the judge’s approach reflected the parties’ common intentions, or if this was a fiction it was justified because it was the only option available to the Court, once it was decided that the parties no longer intended equal beneficial ownership.[21]

It is submitted that “ambulatory” is perhaps not the best word to describe the sort of trust in Jones v Kernott.  Given that it appears that the beneficial shares do not have to be articulated until some event of crystallisation (which may be many years after purchase), such a constructive trust should perhaps be characterised as “suspended” rather than “ambulatory.”  It is clear from Jones v Kernott that the beneficial shares may remain unspecified until the circumstances require a reckoning up of the parties’ respective interests.  In the vast majority of cases concerning domestic property, such a reckoning will only be necessary if the parties separate and need to realise their assets.  There is an immediate tension between this implication of the “ambulatory” constructive trust and Baroness Hale’s remarks in Stack v Dowden that the parties intentions must be the same for all purposes:

“at any one time their interests must be the same for all purposes. They cannot at one and the same time intend, for example, a joint tenancy with survivorship should one of them die while they are still together, a tenancy in common in equal shares should they separate on amicable terms after the children have grown up, and a tenancy in common in unequal shares should they separate on acrimonious terms while the children are still with them.”[22]

Baroness Hale’s remarks seemed to have been made on the basis that the parties’ shares would be determined (at the latest) at the point of separation.  However, in Jones v Kernott, the shares continued to “ambulate” after the parties’ separation in 1993.  Indeed, all the relevant “ambulation” seems to have taken place after Ms Jones and Mr Kernott separated.  It seems to have been the fact of the separation that commenced the process of “ambulation.”

As to fairness, it is submitted that once it is accepted that the beneficial shares can remain unspecified and undetermined at all points until the property is to be realised, it is a short step to endorsing “fairness” as a key factor in determining those shares.  Mr Nicholas Strauss QC’s endorsement of fairness looks irresistible if it is accepted that there is no need for beneficial shares to be specified until they are crystallised by some event such as an end to the parties’ relationship.  Even if a party’s real view is that he or she does not consider that fairness should be a factor in determining the shares, how could he or she plead such a position in a Court exercising a conscience-based jurisdiction?  It is much more likely that the parties will both argue that the shares should be determined on the basis of fairness, but that they will have starkly divergent views on what constitutes a fair share.  In such a case, it will be left to the Court to determine the fair shares, which may well be a heavy burden.

[Postscript: Readers should note that since this article was published Jones v Kernott has been overturned by the Court of Appeal (see [2010] EWCA Civ 578)]

Equitable undue influence in an inter vivos disposition

To most readers of this journal, a reference to undue influence is likely to call to mind the doctrine of undue influence in the preparation of a will.  However, the application made by the personal representative of Monica Joyce on behalf of her estate in the Irish case of Prendergast v Joyce[23] concerned the quite different equitable doctrine of undue influence in an inter vivos transaction.  This equitable doctrine of undue influence is very different from the doctrine of the same name in probate law.  Undue influence in probate law means actual coercion and is never presumed.  In probate cases disclosing suspicious circumstances, the Courts prefer (following the decision in Wintle v Nye[24]) to find that the testator lacked knowledge and approval of the contents of the will, rather than to make the serious finding of undue influence.  In equity, the position is different.  Most significantly, equitable undue influence may be presumed when the parties to the transaction are in a relationship of trust and confidence.  There are certain sorts of relationship which automatically give rise to the presumption.  Such relationships include parent and child, solicitor and client or doctor and patient, but these categories are not exhaustive.  Where the presumption arises, the Court will set aside a disadvantageous lifetime transaction unless it is proved that it resulted from full, free and informed thought.

In Prendergast v Joyce, an application was made by the plaintiff as administrator of the estate of the late Monica Joyce to challenge a series of banking transactions undertaken by Mrs Joyce on 21 January 1998, which was just a week after Mrs Joyce had been widowed.  The defendant was a nephew of Mrs Joyce’s late husband.  The contentious transactions consisted of transfers of monies from accounts held in Mrs Joyce and her husband’s joint names into accounts held in the joint names of Mrs Joyce and the defendant.  The defendant claimed to have had a close relationship with Mr and Mrs Joyce and to have helped them with their petrol station business for many years.  There was evidence both from the defendant and from bank staff that Mrs Joyce’s husband had expressed a desire to give all his money to the defendant.  However, by his Will dated 15 August 1977, he had left his entire estate to Mrs Joyce absolutely.  There was evidence both from Mrs Joyce’s general practitioner and from a number of individuals who had known her personally as to her mental condition.  From 1995, Mrs Joyce’s doctor had concerns that she might be senile. In the doctor’s opinion it was doubtful whether Mrs Joyce was capable of understanding the impugned transactions on 21 January 1998.

It was submitted by the plaintiff administrator that there was a total failure of consideration in relation to the transfers and that the relationship between Mrs Joyce and the defendant combined with the substantial benefit obtained by the defendant gave rise to a presumption of undue influence that had not been rebutted.  The defendant submitted that the presumption did not arise because his relationship with Mrs Joyce was insufficiently close to give rise to a presumption and in any event there was no evidence of actual undue influence.

The plaintiff administrator succeeded in getting the transactions set aside on behalf of Mrs Joyce’s estate.  It was held by Mr Justice Gilligan that the categories of relationship giving rise to the presumption were not closed or rigid and whether the presumption arose depended on the circumstances of the case.  Factors would include age, position in life, state of health and the particular vulnerabilities of the donor.[25]  There was no need to show that any advantage had been taken of a donor.  The existence of a relevant relationship, together with the conferral of a substantial benefit were enough to give rise to a presumption without more.  This was a matter of public policy to prevent relationships being abused and there was no misconduct requirement.  The proximity of the funeral of Mrs Joyce’s late husband to the transactions, together with her progressive mental deterioration, were sufficient to give rise to a presumption of undue influence.  The presumption had not been rebutted owing to Mrs Joyce’s mental impairment and the absence of independent advice.  It was doubtful whether she was capable of understanding the transactions.  The defendant’s contention that there was no evidence of actual undue influence seemed to be irrelevant. What was relevant was the defendant’s failure to rebut the presumption.

The Golden Rule, capacity and knowledge and approval

Key v Key[26] provides a stark warning to professionals involved with elderly clients of the dangers of not adhering to “The Golden Rule.”  The rule was first formulated by Templeman J in Kenward v Adams,[27] was reiterated by him in Re Simpson[28] and has subsequently been referred to in a number of cases.  It is not a formulaic or rigid rule and is largely derived from common sense.  The Golden Rule suggests that where a solicitor is instructed to prepare a will for an aged testator or a testator who has been seriously ill, he should arrange for a medical practitioner to satisfy himself as to the capacity of the testator and record his findings.  Mr Justice Briggs in Key v Key was clear that “The Golden Rule”:

“does not, of course, operate as a touchstone of the validity of a will, nor does non compliance demonstrate its invalidity.  Its purpose, as has repeatedly been emphasised, is to assist in the avoidance of disputes, or at least in the minimisation of their scope.”[29]

Briggs J had strong words of criticism for the testator’s long-standing family solicitor, who had failed to make enquiries or take any steps as to the capacity of the 89-year old testator, despite receiving instructions for a new (radically altered) Will just one week after the testator had lost his wife of 65 years.

The claimants were the sons of George Key, who died on 20 July 2008, aged 90.  They challenged the validity of the deceased’s Will, executed on 6 December 2006, for want of testamentary capacity and want of knowledge and approval of its contents.  The 2006 Will left most of the deceased’s estate to his two daughters, who were the first and second defendants.  This was a significant change from the deceased’s previous Will, made on 18 December 2001, which provided for the claimants to share most of the estate.

The claimants and George Key had been partners in a farming business from 1972 to 2006.  Both claimants had been given a house by their father as a wedding present and each had received 100 acres of farmland from him in 1996.  The first and second defendants’ evidence was that George Key had expressed a wish to be fairer to his children.  Instructions for the new Will had been given exactly a week after the death of George Key’s wife, to whom he had been married for 65 years.  The new Will had been prepared by Michael Cadge, a solicitor.  Mr Cadge had attended upon George Key at the request of the second defendant.  His evidence was that it had not occurred to him to obtain medical advice before taking instructions for and subsequently preparing the Will.

Both sides called expert witnesses.  The claimants’ expert had examined the deceased on 30 April 2007 on the instructions of one of the claimant sons, in response to his discovery that his father had made a new Will.  It was common ground between the experts that George Key was already suffering from some cognitive impairment when his wife died and that he had found himself emotionally unable to attend her funeral.  The experts also agreed that George Key’s reactions to his bereavement constituted an affective disorder.  Divergence between the experts was limited only to the extent of the testator’s impairment.  The claimants’ expert was resolute that George Key had lacked capacity when the 2006 Will was executed.  The defendants’ expert was only able to say that this had not necessarily been the case.  Other than the defendants and Mr Cadge, all witnesses who saw the deceased between his wife’s death and the execution of the 2006 will ten days later described the deceased as devastated by her death.

Briggs J held that testamentary capacity remains governed by the well known test derived from Banks v Goodfellow:[30] the testator must be able to understand the nature of his act, to understand the extent of the property of which he is disposing and to comprehend the claims to which he ought to give effect.[31]  However, Briggs J was clear that factors must now be accommodated within the Banks v Goodfellow test that the Court might have found difficult to recognise in the nineteenth century.  Such factors could include the type of affective disorder which may be caused by bereavement, a condition which produces almost identical symptoms to severe depression.  Briggs J observed that the strict letter of the test in Banks v Goodfellow focuses on comprehension rather than decision-making.  However, the type of affective disorder from which George Key had been suffering was more likely to affect powers of decision-making than comprehension.  It may lead to increased suggestibility or assents to suggestions from others.[32]  Briggs J held that if taking into account decision making powers rather than simply comprehension constituted a slight development of the Banks v Goodfellow test, this was necessitated by modern psychiatric medicine.[33]

Briggs J summarised the burden of proof in a case of testamentary capacity.  The initial burden of proof lies with the propounder of a will.  However, capacity is presumed where the will is duly executed and rational on its face.  It is then for the objector to raise a real doubt about capacity.  Where a real doubt is raised, the burden returns to the propounder.[34]  In this case, sufficient doubt was raised as to George Key’s capacity to transfer the burden back to the propounders: the new Will had been a radical change to George Key’s intentions in favour of the defendants and the defendants could not discharge the burden.  On the balance of probabilities, the deceased lacked capacity and the 2006 Will would not be admitted to probate.[35]

It followed from the fact that the deceased lacked testamentary capacity that he also lacked knowledge and approval of the 2006 Will.  The burden of proof for knowledge and approval was similar to that for testamentary capacity: due execution satisfied the burden on the propounder, unless the circumstances raised suspicions.  Where there were suspicions, affirmative proof of knowledge and approval was required from the propounder.[36]  On the hypothetical (and in the circumstances somewhat artificial) basis that George Key had in fact had capacity, it was held that the circumstances of the execution of the Will would have required some affirmative proof of knowledge and approval.  This was not forthcoming, so George Key’s revised Will was denied probate for want of knowledge and approval as well as want of testamentary capacity.[37]

Key v Key is most notable for Briggs J’s reiteration of the Golden Rule and for the judge’s strongly worded criticism of Mr Cadge. Briggs J went as far as finding that:

“a significant element of responsibility for this tragic state of affairs lies with Mr Cadge.  Contrary to the clearest guidance, in well known cases, academic texts and from the Law Society, Mr Cadge accepted instructions for the preparation of the 2006 Will from an 89 year old testator whose wife of 65 years’ standing had been dead for only a week… Mr Cadge’s failure to comply with what has come to be well known in the profession as the Golden Rule has greatly increased the difficulties to which this dispute has given rise and aggravated the depths of mistrust into which his client’s children have subsequently fallen.”[38]

These robust comments are clearly meant to hammer home to solicitors the importance of adhering to the Golden Rule.  Despite the embarrassment that can be envisaged for a family solicitor in a small community acting for a long-standing client who suggests a medical opinion is obtained, Key v Key makes clear that the onus is very much on the solicitor to be pro-active.

Key v Key is also interesting because it was not pleaded that the defendants had exerted undue influence on the testator in procuring the new Will.  This was despite some no holds barred witness evidence from the claimants alleging some very serious wrongdoing on the part of the defendants.  As briefly touched on in the discussion of Prendergast v Joyce earlier in this article, undue influence in the preparation of a will is seldom found by the Courts and tends not to be pleaded.  Want of knowledge and approval is the usual pleading.  The modern approach derives from Wintle v Nye, where it was successfully pleaded that a testator did not have knowledge and approval of the contents of her Will (which had been prepared by her solicitor and left him most of her property).  Barnard J directed the jury in Wintle v Nye that where there were suspicious circumstances in the preparation of the Will, then the burden was on the propounder to remove the suspicion.  It has been argued by Roger Kerridge that in Wintle v Nye:

“[i]n effect, Wintle’s lawyers were using the plea of lack of knowledge and approval as a cloak for what was, in substance, a plead of fraud.”[39]

Since Wintle v Nye, the prevailing view has tended to be that there is no need to plead undue influence because want of knowledge and approval is sufficient to do what needs to be done to deny probate to a will.  Undue influence is a serious accusation to make and the burden of proving such misconduct is a heavy one.  Naturally, the burden falls on the party challenging the will.  Briggs J in Key v Key identified the Court of Appeal’s recent consideration of knowledge and approval in Fuller v Strum.[40]  Chadwick LJ found in that case that where there are suspicious circumstances, the propounder must produce positive proof of knowledge and approval.  A will prepared in suspicious circumstances can be denied probate by this route without any unpleasant finding of wrongdoing.  However, as Professor Kerridge has cogently asked:

“And so what would Barnard J[41] have said to the jury if they had asked him what they were supposed to be suspicious of?  Surely, the expression “suspicious circumstances” implies a suspicion of wrongdoing by someone, and it is inappropriate to raise “suspicious circumstances” unless the person challenging the will has alleged fraud or undue influence, or both…The present approach obscures the issues in contentious probate cases, so that it is not clear what those challenging suspicious wills are alleging.”[42]

Undue influence tends not to be pleaded because of the high burden of proof and the possible cost consequences.  An unsuccessful party who reasonably raises want of knowledge and approval will hope to have his costs from the estate, whereas a party who pleads undue influence (even if the challenge to the will succeeds on other ground) is likely to face a costs penalty.  In Key v Key, undue influence was not pleaded.  However, the first claimant’s witness evidence included allegations that were on any analysis consistent only with undue influence.  The first claimant alleged that the defendants deceitfully conspired behind his back to force their father to change his Will in the defendants’ favour.  He further suggested that his sisters had intoxicated George Key with alcohol and increased the dosage of his sleeping pills in order to procure the Will.  These allegations were “unhesitatingly rejected” by Briggs J,[43] so it seems likely that any plea of undue influence would have failed in this case, probably with a costs penalty, despite the claimants’ overall success.  Nevertheless, it must have been a necessary component of the finding of want of knowledge and approval that the “suspicions” arising from the “suspicious circumstances” had not been dispelled by the defendant.  So if the claimants’ evidence of serious wrongdoing by the defendants was unhesitatingly rejected, what did Briggs J remain suspicious about?  Tactically (given the outcome) it was clearly the right decision for the claimants to proceed on want of testamentary capacity and want of knowledge and approval alone.  However, the points raised by Professor Kerridge remain unresolved by Key v Key.

Rectification and the rule in Saunders v Vautier

Miskelly v Arnheim[44] was a decision of the Supreme Court of New South Wales, where two discretionary beneficiaries sought to get their hands on some valuable trust assets absolutely, in opposition to the trustees, who argued that this was against the settlor’s intentions.  A strict approach to rectification saw the beneficiaries scoop the pool.  There were also some interesting comments on the scope of the rule in Saunders v Vautier.[45]

Norman Miskelly had made a Will on 18 April 2005 and died on 1 November 2005.  The plaintiffs were his two adult children, Rowena and Ashley.  The defendants were Mr Miskelly’s three executors.  The residue of Mr Miskelly’s substantial estate was split into two equal parts.  Each part was to be held in a testamentary discretionary trust, with the defendants as trustees.  One trust was for Rowena and her children and the other was for Ashley and his children.  The Will required that a beneficiary had to survive the testator by thirty days.  Neither plaintiff had any children when the testator died. Given the plaintiffs’ childlessness at the time of the testator’s death and the requirement that beneficiaries must survive the testator by thirty days, the class of discretionary beneficiaries for each trust was quite definitely closed at the testator’s death according to the Will.  Each trust therefore had only one possible beneficiary.

Rowena and Ashley claimed declarations that they were absolutely entitled to the capital and accumulated income of the trusts pursuant to the rule in Saunders v Vautier.  By a cross claim, the defendants claimed rectification of the Will by deletion of the words “who survive me by thirty (30) days” from each of the clauses establishing the plaintiffs’ trusts.  Such an amendment would leave the class of beneficiaries open, because Rowena and Ashley might have had children in the future.  The defendants submitted that the rectification they proposed reflected the testator’s intention.

Rowena and Ashley’s claim was allowed and the executors’ cross claim was dismissed.  It was held that the Court had jurisdiction to rectify a will if it was satisfied that it failed to carry out the testator’s intentions.[46]  Such intention had to be examined at the date of the will, not the date of death.  Rectification is available for mistakes, not lack of vision, perception or knowledge.[47]  The Court has to be satisfied that the testator had an actual intention that has miscarried rather than speculate about what the testator would have done in unforeseen circumstances.[48]  The evidence showed that Mr Miskelly had been generally indecisive and unclear as to his intentions and there had been no discussion of providing for grandchildren born after his death.  The case for rectification failed because the defendants had failed to show that the testator intended to benefit grandchildren born after his death.[49]  There was little evidence that Mr Miskelly had had any concrete intention as to specifics.  It is submitted that the obvious reason for Mr Miskelly’s decision to settle his fortune on discretionary trusts was because he wanted to prevent Rowena and Ashley from having unfettered access to capital.  To give effect to this intention, the discretionary class would have to remain open.  If it was closed, it would have defeated Mr Miskelly’s ultimate intention.  However, the matter before the Court was the narrow point concerning whether or not Mr Miskelly had an intention to provide for grandchildren born after his death, rather than his overall intention to keep the capital out of his children’s hands.

Rowena and Ashley wanted to collapse the trust, using the rule in Saunders v Vautier.  It was held that for the principle in Saunders v Vautier to apply, it was necessary for the beneficiaries to have an absolute, vested and indefeasible right to the capital and income of the trust.  In the circumstances, the gifts to the trusts absolutely vested the property in the Rowena and Ashley.  Consequently, Mr Miskelly’s children were entitled to demand the trust property without more.[50]  It was further remarked that even if the gifts were not vested and absolute, the modern Australian extension of the Saunders v Vautier principle found in Sir Moses Montefiore Jewish Home v Howell and Co (No 7) Pty Ltd[51] applied.  The Montefiore principle provided that even in the absence of a proprietary right, the entire range of objects capable of calling for the due administration of the trust could together enjoy beneficial ownership.[52]

Removal of all executors owing to a breakdown in relations

Angus v Emmott[53] arose from a most unusual set of facts.  The applicant (Mrs Angus) and the respondents (Mr and Mrs Emmott) were the three executors of the estate of Anthony Steel.  Mr Steel had died on 29 September 2007, leaving a Will made on 5 April 2005.  Mrs Angus was the residuary legatee.  Mr Steel’s estate’s principal asset was a compensation payment from the Home Secretary, arising from Mr Steel’s wrongful conviction for murder on 13 December 1979 and subsequent imprisonment for that crime.  Liability had been accepted by the Home Secretary but quantum had not been assessed at Mr Steel’s death.  Mr Steel had initially confessed to the murder but had an exceptionally low IQ and was highly suggestible.  He had been released on 13 May 1998 and his conviction quashed on 28 February 2003.

At the time of his death, Mr Steel had lived with Mrs Angus as man and wife.  Mr and Mrs Emmott were Mr Steel’s sister and her husband.  A serious dispute had arisen between Mrs Angus and Mr and Mrs Emmott as to the form and content of the estate’s submission to the assessor appointed by the Home Secretary to determine the level of compensation to be paid to Mr Steel’s estate.  In particular, Mr and Mrs Emmott objected to the annexure to the submission of a statement in the form of an open letter purportedly written by Mr Steel dated 5 January 2007.  The respondents contended that the statement was inaccurate and that it had been influenced by Peter Hill, who was an investigative journalist who had known and campaigned for Mr Steel since the 1980s.  Mr Hill’s company had been assigned 10 per cent of any compensation received by an agreement dated 25 October 1999.  The total compensation claimed in the draft submission settled by counsel exceeded £2.1 million.

There were two limbs to the application.  Firstly, the applicant sought directions pursuant to Civil Procedure Rule (CPR) 64 on whether, and if so to what extent, the statement should be included.  The applicant contended that the draft submission should be submitted as it stood.  The respondents’ position was that they would only agree to the draft submission being put forward to the Home Secretary if Mr Steel’s statement were omitted altogether.  Secondly, the applicant sought the removal of the respondents as executors pursuant to section 50 of the Administration of Justice Act 1985, owing to the hostility and breakdown in relations between the executors.

Mr Richard Snowden QC (sitting as a deputy judge of the Chancery Division) was persuaded that a number of the points raised by the respondents contending that the draft submission was inaccurate (for example concerning home visits, Mr Steel’s employment prospects and the quality of English in the statement) were well founded.[54]  The impression in the statement that it was Mr Steel’s own work was not accurate because he had been helped both by the applicant and Mr Hill.  The Deputy Judge considered that it was obvious the submission could not be filed in its current form and so the direction sought by the applicant would not be given.[55]

As to the application by Mrs Angus to remove Mr and Mrs Emmott as executors, it was emphasised that the power of the Court to remove and replace a personal representative was not limited to cases where there was misconduct.  On the facts, there had been no misconduct on the part of the respondents and it had already been held that some of their concerns about the submission were well founded to the extent that it would have been inappropriate to send the submission as drafted to the Home Secretary.[56]  However, a situation had been reached where the animosity and distrust between the executors meant that the due administration of the estate could not be achieved expeditiously.  The reworking of the submission required dispassionate judgment and neither the applicant nor the respondents were equipped to do that.  Consequently all the current executors would be removed and replaced with a suitably qualified professional who would take an independent view.[57]

Duties of a protector

Centre Trustees v Van Rooyen[58] included a detailed analysis of the duties of protectors and appointers. An earlier successful application had been made to the Royal Court in Jersey by the representors for the removal of the second respondent (Mr Pabst) as appointor and protector of a family trust (the VR Family Trust).  The representors were the current (“Centre”) and former (“Langtry”) trustees of the VR Family Trust.  Removal of Mr Pabst was sought on the basis of his alleged conflict of interest.  At a previous hearing, Mr Pabst had not continued to resist his removal.  The reported case concerned whether costs fell to be paid by Mr Pabst or the VR Family Trust.  Mr Pabst and the late Herman Van Rooyen had together held mining interests in South Africa through Terret Holdings Limited.  On 14 September 1997, Mr Van Rooyen set up the VR Family Trust to hold 50 per cent of the shares in Terret.  At the same time, a settlement was created by Mr Pabst called the Africa Trust I to hold the other 50 per cent.  Mr Pabst was Appointor and Protector of the VR Family Trust and Mr Van Rooyen was the Protector of the Africa Trust I.  In simple terms, Mr Van Rooyen and Mr Pabst were protectors of each others’ trusts.  Centre was the trustee of both trusts.  In November 2000, Mr Van Rooyen and his wife were killed in a helicopter accident.  In 2002, Terret received $US46,133,652.92, following the sale of certain mining interests.  It was submitted by Centre that the VR Family Trust received only a very small share of these proceeds and that it had concerns that substantial payments had been made to the benefit of Mr Pabst.  In 2006, Mr Pabst made a series of claims, including a demand that the VR Family Trust repay to Terret US$6.1million, on the basis that sums paid to the trust in 2002 had been intended as a holding device and had only ever constituted a loan.  Without prior notice to Centre, Mr Pabst exercised his powers as Appointor in January 2007 to appoint Langtry as an additional trustee to carry out an independent review of his claims.  Both Centre and Langtry independently rejected Mr Pabst’s claims.

It had initially been submitted by Mr Pabst that there had been no conflict between his position as protector and appointor of the VR Family Trust and his personal interests in bringing claims against the trust.  Prima facie, Mr Pabst’s position did not look promising.  However, the matter did not ultimately require argument because Mr Pabst did not ultimately oppose his removal as protector and appointor at the hearing.  Centre sought costs from Mr Pabst personally.

The Court carefully reviewed the duties owed by appointors and protectors to determine whether Mr Pabst had been in a position of conflict and the judgment provides a helpful overview of these duties.  It was held that the power to appoint new trustees is fiduciary and the power to appoint new protectors is probably also fiduciary.[59]  Ordinarily there would be no doubt that the powers of a protector would also be fiduciary, although the VR Family Trust instrument expressly provided that the protector did not hold his powers in a fiduciary capacity.[60]  However, this provision simply meant that Mr Pabst was not under an obligation to consider from time to time whether or not to exercise the powers.  If he did exercise the powers, he would be bound to exercise them for the benefit of one or more of the beneficiaries.[61]  It was held that proper management of conflict by a protector is analogous to that of a trustee.  When a conflict comes to light, the first step should be for the protector to disclose it to the trustees and the beneficiaries.  It may be possible for a protector to remain in office if he honestly and reasonably believes that he can discharge his duties in the interests of the beneficiaries.  However, he runs the risk that he will later be called upon to justify his conduct.  If he cannot properly discharge his duties, he must resign.  If he does not do so the trustees are under a duty to apply to the Court for his removal.[62]

Unsurprisingly, the Court held that it was impossible to envisage a conflict more pervasive than that of Mr Pabst: Mr Pabst was actively pursuing claims against the trust assets.  Circumstances in which such a person could reasonably contemplate remaining in office as protector and appointor were impossible to envisage.[63]  Mr Pabst’s conduct gave the trustees no alternative but to make an application for his removal and treat it as contested.  His conduct had been wholly unreasonable and in flagrant breach of his duty.  Mr Pabst was required to pay the costs of the application for his removal incurred by the trustees and the first respondents on the indemnity basis, save for the costs of two hearings with which he had not been involved.[64]  Centre also sought from Mr Pabst the costs to the VR Family Trust of the appointment of Langtry as co trustee.  Langtry itself accepted that with hindsight it appeared that Mr Pabst had appointed Langtry with the principal aim of having his claims acceded to.[65]   The power to appoint was fiduciary and having exercised this power when in a position of conflict, it would be for Mr Pabst to satisfy the Court that this was reasonable and not influenced by the conflict.  However, this was not a cost of the proceedings but a substantive claim for breach of fiduciary duty and would have to be determined separately.[66]