Summer 2016 Charity Newsletter

Cantileverrock      Bayer10k

Welcome to the summer edition of our Charity Newsletter

It was great to meet up with many of you at the recent ILM conference in London and well done once again to Naomi Orrey on winning your well-deserved award!

We would also like to announce that our firm’s charity of the year Naomi House and Jacksplace has now come to an end. We have really enjoyed our time supporting this charity, which actually lasted for 18 months.  We have taken a firm wide vote for our new firm charity of the year, which we will announce shortly.

We have four contributors to our Newsletter this time around.

I hope you all enjoy our Newsletter. If you have any questions on any subject we have touched on in this edition then please do not hesitate to contact us on 01635 508080

Alastair Goggins

Vines

The Lesson in Elliot v Simmonds by Tara McInnes, Senior Associate in Dispute Resolution Team

One of my recent cases demonstrates the importance of charities asking for costs orders against persons who seek to bring will challenges but fail to do so.

This matter concerned my client (eventually the Claimant), the major beneficiary of an estate and the Defendant, an illegitimate child of the deceased from a previous relationship when he was very young.

The deceased had worked hard all his life and built up a good business. He met my client many years ago and they formed a relationship.  An illegitimate child from a much earlier relationship came back into his life when she was in her forties.  The deceased was happy to build a relationship with her but already had two children and a wife of fifty years and did not really consider her to be family.

The deceased fell out with his family and left the entirety of his estate to my client in his 2012 Will. Aggrieved with this decision, Ms Simmonds (the Defendant) proceeded to enter a caveat against the estate and raise various will challenges against the 2012 will in correspondence.  However, she took no steps to bring an actual claim and after many years and significant costs the executor issued proceedings to prove the Will in October 2014.  Instead of raising a will challenge as a defence, the Defendant raised a passive defence in accordance with The Civil Procedure Rules.  Throughout the proceedings, the Defendant continued to insist that she would bring a will challenge but failed to do so, even when provided with additional time by the judge.

Instead she forced the matter to go to trial in December 2015, where Deputy Judge Murray found in my client’s favour.

In fact, the judge held:-

I have concluded that none of the individual arguments raises a reasonable ground on which to oppose the will. I have also considered and rejected the conclusion that somehow, taken together, they raise a reasonable ground”.

He accordingly ordered that the will be proved and the caveat removed. A happy ending you might think, however my client had incurred significant costs as a result of the Defendant’s behaviour and accordingly we made an application for costs against the Defendant on the grounds she had acted unreasonably in raising a challenge against the will.   

There is usually a ‘no costs rule’ in these types of proceedings UNLESS it can be shown that the Defendant had ‘no reasonable grounds for opposing the Will’. We argued that the Defendant had all relevant documents in her possession by 3 June 2013 and at this point she should have been in a position to consider whether or not she had serious grounds for challenging the will but she did nothing and forced the matter to go to trial.

The judge agreed and ordered costs against her, to be assessed if not agreed with an initial payment of £65,000.

Whilst no charities were involved in this case, these types of proceedings can be brought by disgruntled relatives who do not bring a will challenge but want the charity beneficiaries to incur the costs of proving the will hoping that in the meantime, the charities will be forced into settling a weak claim. 

This case has now set a precedent against this type of behaviour and shows that the courts are no longer willing to allow disgruntled family members to act obstructively and cause delay and increase costs with no financial cost to them. Charities should be aware of this important case and especially the costs decision should they come across this type of matter in the future. 

The full judgments can be accessed at:-

Elliott v Simmonds [2016] EWHC 732 (Ch)

Costs: Elliott v Simmonds [2016] EWHC 962 (Ch)

As I acted in this matter, I am able to provide tailored advice in this unusual area of contested probate.

BranchWithOwl

Case Law Update – June 2016 by Judith Rountree, Associate in Dispute Resolution Team

 1. An equitable mistake meant a transfer of farmland into a trust, which was then sold, could be rescinded.

The recent case of Bainbridge and another v. Bainbridge [2016] EWHC 898 (decided on 22 April 2016), concerned a father and son (who farmed in partnership) who had transferred farmland into a discretionary trust. They did not realise until the land was subsequently sold by the trustees (who bought replacement land with the proceeds) that the original transfer would cause them to pay substantial capital gains tax charge. The capital gains tax liability was described as “crushing”.

The reason they had transferred the land into a trust was to protect it against future possible claims from other members of the family or the possibility that it might be the subject of future divorce proceedings.

As a result of the tax liabilities they were forced to make an application to the High Court to rescind the trust following a mistake. The High Court applied the case of Pitt and another v. HMRC [2013] UKSC 26. It decided that it would be unconscionable or unjust to leave the mistake uncorrected and the transfers should be rescinded for the equitable mistake regarding the tax liabilities.

In addition though, as the trustees had sold the land the court had to decide whether the trustees’ sale should be set aside. It was agreed that the sale should not be set aside and that the new land should replace the sold land (that was originally held on the trust) and should be restored to their beneficial ownership as original owners of the sold land.

Applications for equitable rescission following mistake are becoming more common, however the equitable tracing element to enable the new land to end up with the original beneficial owners is unusual. From a charity perspective this is an interesting case should part of an estate be held on a discretionary trust for a charity which later attracts “crushing” capital gains tax. It might be able to rescind the trust if it can prove the purpose of the discretionary trust was to avoid extortionate tax liabilities

2. Proprietary estoppel argument successfully obtains a beneficial interest in Property

In Linden v. Burton [2016] EWCA Civ 275, the Court of Appeal considered Ms Linden’s claim for a beneficial interest in her ex-partner’s property as a result of the doctrine of proprietary estoppel.

Ms Liden had moved from Sweden to the UK to live with Mr Burton in a property of which he was the sole proprietor. He said the property was expensive to run and so Ms Liden agreed to contribute £500 per month (half her pension) towards the upkeep and general maintenance of the property. This continued for almost ten years. She had always been assured by Mr Burton that her financial contributions were “towards the house”.

The Court of Appeal, following the guidance in Thorner v. Majors and others (2009) UKHL 18 held that, the oral assurances made by Mr Burton were sufficient for her to acquire a beneficial interest in the property by way of proprietary estoppel. It was held that Mr Burton had induced, encouraged or allowed Ms Liden to believe she was obtaining an interest in the property and that it would unconscionable to deny her an interest in the property.

The first instance decision had previously awarded Ms Liden a 10% interest in the property, which the Court of Appeal upheld.

To establish proprietary estoppel it is necessary to prove the following:

As couples are now living together unmarried more and more, the issue of whether a beneficial interest has been obtained is becoming more common. Often in contested probate cases, one person has died and not left a Will, or has not updated their will to include a new partner. This means the evidence may not be as clear cut as within the above case. This makes it harder for the court to decide on the parties’ true intentions and can cause costly litigation.

Should a charity become aware that a person wishes to leave a property to it in their will, it should try to make sure the full extent of the circumstances relating to the property are considered. If an occupant/new partner also lives in the property a potential claim for a beneficial interest needs to be considered, as well as the possibility that the occupant may also claim a life interest within the property. Such claims can delay the realisation of a property asset for a charity.

3. £6 million settlement claimed pursuant to the Inheritance (Provision for Family and Dependents) Act 1975 after wife left £36,000 in late husband’s Will

This case has recently made headlines as Mari Vindis, the widow of a very wealthy businessman Nigel Vindis had issued divorce proceedings two months before Nigel died. They had been married for 40 years and had two children.

Nigel’s estate is worth £12 million. Within his Will (which he prepared along with a letter of wishes only months before his death) he left Mari £1 million but it was tied up in properties of which she was already the legal owner. Once the properties had been accounted for she was left with a mere £36,000. The remainder of his estate was split equally between his two children.

As Nigel and Mari were still married at the time of death, the divorce proceedings will have no effect on the distribution of his estate as the terms of the Will must be implemented rather than Mari’s divorce claim.

Mari has made a claim for reasonable financial provision from Nigel’s estate under the Inheritance (Provision for Family & Dependants) Act 1975. Had Mari finalised the divorce proceedings she is claiming that she would have received a settlement closer to £6 million (50% of the estate).

As a starting point the court will consider the provision that she might reasonably have expected to receive if on the day the Nigel died the marriage was terminated by divorce rather than death. This is a starting point only though as the court will also take into account the £1 million in properties she has already received under the rule of survivorship, together with her own personal financial situation, her conduct prior to Nigel’s death, as well as the position of the beneficiaries and any further claims made against the estate.

If Mari is successful she could be awarded one of the largest ever settlements in a case of this nature.

Charities need to be wary of inheritance act claims which can still be pursued by estranged spouses who are separated but whose divorce is not yet finalised. Regardless as to whether new wills or letters of wishes have been drawn up, the deceased’s estranged spouse may still come back after death to stake a claim against the estate.

Mari’s case has been adjourned so has yet to be decided once further evidence has been disclosed. It will be interesting to see how the claim is dealt with.

4. The importance of ensuring your charity is named correctly within a will

Gardner Leader has recently been involved in the reported case of Re: Harte [2015] EWHC 2351 (Ch). This case was important as it highlighted the importance of ensuring a will is clearly and properly drafted.

Gardner Leader was instructed on behalf of the Trustees within this case to resolve numerous issues and inconsistencies within a will belonging to Mrs Harte. The will in question divided the residuary estate into ten shares, some of which were referred to as “one tenth” and some as “one part.” This was not the only problem though, the ten shares included numerous charities, the majority of whom had been incorrectly named within the will.

For example, one charity was named as “Newbury Hospital”. There is no Newbury Hospital charity. Another was named as “West Berkshire Ambulance Hospital”. There is no hospital for ambulances either! A well drafted will should also include a clause providing the trustees with the power to enable them to distribute gifts (such as the above) to charities which serve the same purpose of those of the incorrect intended beneficiary. If this will had included such a clause the trustees may have avoided having to instruct Gardner Leader to seek an order from the High Court for rectification/construction of the will.

Fortunately, Gardner Leader was able to minimise the losses to the estate in this case to as to ensure the charities received their entitlement and secured the costs of the proceedings against the solicitors who prepared the will and whose drafting resulted in the need for the application.

From a charity perspective it is important that its name and registered charity number are listed correctly within a will. Charities should ensure that this information is readily available to people who may wish to leave a donation or share of their estate to it.

TreeWithOwl

Does DIY =AOK? By Hannah Martin, Trainee Solicitor in Dispute Resolution Team

How many of us would swap time in the sun for making a Will? According to a recent survey most of us would rather spend the money on a holiday – for which I can already predict your response – “well it’s hardly a surprise!”

DIY Will Kits are readily available all over the high street and it is easy to see why this is a desirable option. The low cost hassle-free element alone would entice most of us, in a society where time is of the essence and booking an appointment to see a solicitor is not top of the agenda.

Charities should urge their supporters to proceed with caution when using a DIY Will kit purchased over the counter. Failing to use the correct wording could result in a situation they do not wish for or even worse, that the Will is not valid at all. Whilst it may be uncomfortable for supporters to plan what the future may look like without them, it is important in order to spare their family the joint heartbreak of loss and the potential shock that their loved one’s Will hasn’t quite achieved their wishes.

Charities are probably best placed to raise this issue with their supporters at an early stage when considering legacy giving. Most charities already work closely with solicitors’ firms and some even have agreements for Will Weeks where wills are offered to supporters at reduced rates.

The following examples seek to show the potentially devastating consequences of a DIY Will and are examples, which could easily be raised with supporters in a sympathetic way:

These examples serve as a reminder that whilst it may take more time and money, a solicitor drafting a will is experienced in recognising these situations and it is our role to pose the right questions to prevent uncertainty, allow a person’s true wishes to be recorded and ensure these are capable of being carried out.

For charities, it is important to ensure that their supporters have all the required information available to them if they do want to leave a charitable legacy in their will. Not everyone will go to a solicitor to make their wills. Charities should consider preparing guidance of their own as to how someone should go about making provision for the charity in their will, which might include preparing some example clauses for people to copy into their wills, or clear instructions on the legal process of validly executing the will which has been prepared.

In other words, whilst homemade Wills might be attractive from an immediate cost saving point of view, in the long term, whilst made with the best of intentions, they can cause serious problems, which are ultimately very expensive to resolve.

TreeWithLightbulb

The Cautionary Tale of a Prince with No Will By Sam Pinder, Paralegal, Dispute Resolution Team

The uncertainty that can be caused by the decision not to write a will has been highlighted recently by the untimely death of Prince. The prominent musician died without children, his only close family members being one full-sister and five-half siblings.

If it is established that there was in fact no will, then Prince would have died intestate. Under the law of Minneapolis, Prince’s estimated $300 million estate would in fact be shared equally by his one full-sibling and 5 half-siblings.

Prince’s case is truly unique due to the scale of his wealth, nevertheless a court order was required before Bremer Trust Wealth Management were appointed to manage the musician’s estate.

The Rules of Intestacy in the United Kingdom differ and are governed primarily by the Administration of Estates Act 1925. Had Prince died subject to English law, as he had no spouse, children or parents, the full sibling would have been entitled to the whole estate.

In England, a grant of letters of administration, as opposed to a grant of probate is required in order for someone to be able to dispose of the intestate’s estate where there is no will. A lack of will can lead to further complications as to where such powers vest as no provision has been made in terms of an executor being appointed.

Rule 22 of the Non-Contentious Probate Rules 1987 sets out the order of priority of those who can act as the personal representative. The rules revolve around the idea of who has the greatest entitlement to the estate. If that individual does not apply for the letters, the next becomes entitled according to the following order of priority:

Of course it is up to the individual in question as to whether they wish to formalise their testamentary intentions by way of making a will. Admittedly the case of Prince is a unique example of the consequences of not doing so. Media reports suggest that there are hundreds of individuals now seeking to claim that they are Prince’s sibling or half-sibling!

Closer to home, our own intestacy rules provide some certainty as to who can apply administration and who is ultimately entitled under the Intestacy Rules. However, a valid will prevents the need for an individual to navigate through what can be quite complicated rules due to the fact-sensitive nature of each matter.

The impact of an individual dying intestate in respect of charities is obvious – they are not included in the intestacy ‘family tree’. It is notable from reviews of many individual’s bank account following their death that most were a supporter of one or more charitable causes during their lifetime. By not preparing a will, they lost the opportunity to continue to support those causes after they are gone.

Therefore, writing a will not only ensures that an individual can decide whom their estate goes to but also who is responsible for administering their estate, removing unwelcome uncertainty at a time when family members are grieving the loss of loved ones.