Welcome to our last edition of our Newsletter of 2015. It does not seem very long at all since our last edition but quite a lot has happened in between. We have welcomed Jude Rountree back following her maternity break, we have managed to fit in two trials, bag a few awards and have news of a reported case.
We have articles from a number of contributors including Dr Claire Routley who has worked in fundraising for twelve years, specialising in legacy fundraising for the last nine. She considers the impact on those who have lost loved ones in the year and how charities could remember them at Christmas.
Nathan Wells, barrister at Radcliffe Chambers who has a broad Chancery practice, with a particular emphasis on wills, probate and estate administration and trusts, leads us through this thoughts on the what to consider when ‘passing over’ an Executor
David Finnerty, a solicitor here at Gardner Leader considers for us the intricacies of his recently reported case and Penny Wright, a senior Associate at Gardner Leader leads us through the changes in the Charity Commissions regulatory powers governing charities ability to fundraise.
I hope you enjoy our Newsletter and have a wonderful Christmas.
Strengthening the Charity Commission’s Regulatory Powers by Penny Wright, Senior Associate, Inheritance Protection Team
New laws are shortly to come into effect which give increased powers to the Charity Commission to regulate charities. The Charities (Protection and Social Investment) Bill is in the course of passing through parliament. This in intended to equip the Commission to tackle abuse of charities, as seen in recent cases of people using charity structures to finance terrorism or avoid tax.
Tightening of fundraising standards are included. The Bill also contains provisions permitting charities to make social investments.
What new powers will the Charity Commission have?
The Commission already has powers (primarily under the Charities Act 2011) to conduct an inquiry into the activities of a charity, to disqualify trustees, and to intervene in the management of a charity, where the charity’s assets were at risk; and to protect the reputation of charities generally. However, the Commission’s powers were restricted and contained a number of loopholes.
The Bill contains provisions designed to close the loopholes and strengthen the Commission’s regulatory powers. These include:
How about fundraising standards?
The Bill also contains new laws regulating how charities engage in fundraising. This includes a duty to monitor the activities of professional fundraisers who have been engaged to act on behalf of the charity, and commercial partners. This is intended to ensure that they do not place undue pressure on members of the public, make unreasonable intrusion on privacy, or make persistent approaches, especially where vulnerable people are involved. Charities will be obliged to include a statement about their compliance with the new fundraising regime, in their annual reports.
What is social investment?
Social investment is defined in the new Bill as an action taken with a view to both directly furthering the charity’s purposes, and achieving a financial return for the charity. This might include, for example, loans and grants made by organisations that relieve poverty by supporting small businesses and job seekers. The new rules won’t apply to charities whose governing documents expressly prohibit social investment; and will be subject to any restrictions set out in the governing document. Before deciding to make a social investment, charity trustees must consider taking professional advice; and satisfy themselves that it is in the charity’s best interests having regard to the benefit they expect to achieve and how it would further the charity’s purposes. This must be kept under regular review.
What should charities do to prepare for the new laws coming into force?
Charity trustees and senior management should familiarise themselves with the new version of Commission’s guidance note “The Essential Trustee” which has recently been updated to tie in with the provisions of the Bill. Charities which engage actively in fundraising must also review this in light of the new fundraising regime; and update policies and processes to ensure that such activities are appropriately monitored and reported. Where social investment might further the purposes of the charity, the trustees should look carefully at the new rules to ensure that the proposed investment meets the criteria, and is in the best interests of the charity.
Avoiding a ‘Harte’ Attack By David Finnerty, Solicitor, Inheritance Protection Team
Thankfully, during the usual course of working on probate matters, the number of times a deceased’s will causes difficulties to an estate’s administration are few and far between. However, one matter I found myself dealing with this year very much brought home the message of how critical it is to make sure a will is clearly and properly drafted (and the potential scale of the problems which can result when it is not).
The case in question was reported as Re: Harte  EWHC 2351 (Ch).
The will in question belonged to a Mrs Florence Harte, who had prepared mirror wills with her husband Mr Harte, who pre-deceased her. The frustrating factor of the matter was that her will was not particularly complicated. It did not include any complex trust arrangements or the like; it simply sought to leave her estate to her husband should he survive her (which he did not) or divide it between a combination of friends and charities if he did not.
Unfortunately, the will was badly drafted and littered with problems:
The nature of the parties involved (in particular the beneficiary who pre-deceased Mrs Harte) meant that the only safe way for the executors to distribute the assets contained within the estate of Mrs Harte was to seek an order from the High Court for rectification/construction of the will, to ensure it accorded with the deceased’s intentions.
Such application permitted the consideration of extrinsic evidence, including; all available evidence relating to the preparation of the will, notes from the file of the solicitors who prepared the will and contacting the attesting witnesses. The only assistance came from the will file, which contained a reference to ‘air rescue [illegible] West Berks’ in a note prepared by either Mr or Mrs Harte (which was interpreted as relating to the gift being made to the ‘ambulance hospital, as there was nothing else in the will to which it could otherwise reasonably relate).
We therefore had to interpret the will based upon assumptions made from the document itself, and present our best interpretation of Mrs Harte’s intentions when making it to the Court for approval. In the case of the individual who pre-deceased Mrs Harte, this resulted in a share of the estate being dealt with by way of partial intestacy, which in itself required tracing agents to locate eighteen new beneficiaries to that one share of the estate.
After nearly ten months of complying with various directions made by the Court, it was able to resolve the various problems with the will by way of both interpretation and rectification. It relied partly on the finding in Marley v Rawlings that the word ‘clerical error’ has a broad meaning. The costs of the proceedings were eventually ordered against the solicitors who prepared the will and whose drafting resulted in the need for the application.
Ultimately, Mr and Mrs Harte cannot be criticised for any of this sorry tale, as they placed their trust in professionals to prepare their wills. There was therefore little to nothing they could do to prevent the problems which unfolded, as they validly assumed all was well with their wills. The message is clear – it is critical that the terms of a will are properly and competently set out, regardless of who is responsible for drafting it. Fortunately the losses to the estate in this case were fairly minimal and it was possible to ensure that the charities received their entitlement. Had Mrs Harte drafted her own will for example, the consequences would obviously have been far worse.
Christmas – A Time to Give Something Back By Dr Claire Routley, Institute of Fundraising
Christmas can be a particularly difficult time when someone you love has died. It’s one of the times of year when we really feel the absence of those we’ve loved and lost.
If your organisation has found a way of giving something back its bereaved supporters at Christmas that they’ve found particularly helpful, do share it with us.
The Removal of Personal Representatives By Nathan Wells, Barrister, Radcliffe Chambers (London)
There are many possible reasons why, following the death of a testator or intestate, it may be considered appropriate for an interested party to seek the removal of the deceased’s personal representative(s). The personal representative may have disappeared, there may be concerns about their physical and/or mental fitness for the task of administration, they may be guilty of unreasonable delay in the conduct of the administration, and so on. There are two principal jurisdictions governing the removal of personal representatives.
Section 116 of the Senior Courts Act 1981 establishes the “passing over” jurisdiction. The section provides that if, by reason of any special circumstances, it appears to the High Court to be necessary or expedient to grant administration to someone other than the party who would be entitled to the grant in accordance with probate rules (i.e. a named executor or, in the case of an intestacy, the person(s) entitled to a grant in accordance with r 22(1) of the Non-Contentious Probate Rules 1987) then the Court may in its discretion appoint as administrator such person as it thinks expedient.
Such applications are normally brought in the Family Division as non-contentious probate business. The application may be made to a district judge or registrar, and must be supported by an affidavit setting out the grounds of the application (see r 52 N-CPR 1987). The application may be made without notice in an appropriate case, but where it is likely to be contentious it should be made by summons, on notice to the other interested party or parties (see the Court’s observations in Ghafoor v Cliff  2 All ER 1079). The authorities have, for the most part, indicated that the section gives the Court a wide jurisdiction: see, for example, In re Clore decd  Fam 113 and, more recently, Khan v Crossland  WTLR 841.
Accordingly, personal representatives have been passed over in a wide variety of circumstances, from cases where the representative is serving a long sentence of imprisonment (In the Estate of S, decd  P 302) to a case where the potential representative was “a dissipated man, who was mismanaging a public house which was part of the estate, and of which he refused to give up possession” (In the Goods of Ardern  P 147).
Section 50 of the Administration of Justice Act 1985 gives the High Court jurisdiction to terminate the appointment of a personal representative and/or to appoint a substitute in place of an existing personal representative. The application can be made by or on behalf of a beneficiary of the estate or one of the other personal representatives. Such claims must also be brought in the High Court but they are assigned to the Chancery Division (see CPR r 57.13(2)). The section itself does not set down a test for removal/substitution, but the authorities have confirmed that the Court’s main concern will be the interests of the beneficiaries and the proper administration of the estate. A useful summary of the relevant test might be found at paragraph 80 of Sales J’s decision in National Westminster Bank plc v Lucas  WTLR 637: a personal representative might be removed where there is a real risk that (s)he will not act fairly and conscientiously in that office or if (s)he cannot be expected to continue to carry out the administration of the estate in an effective and proper manner.
It had previously been thought that the s 116 jurisdiction was to be used in those cases where a grant of representation had not yet been taken out, and that the s 50 jurisdiction was only to be used where problems arose post-grant. However, in In re Goodman, decd  Ch 186, Newey J held that the s 50 jurisdiction could in fact be used to remove an executor who had not yet taken a grant of probate.
The decision in Goodman, which seemed to run against earlier Court of Appeal dicta, is plainly an important one, and the Judge accepted that there will now be a considerable overlap between the s 116 and the s 50 jurisdictions. However, it certainly does not mean that s 116 is likely to become redundant. In the first place, it will continue to be the only means of passing over a potential administrator prior to the grant in the case of an intestacy. It was confirmed in Goodman that s 50 could apply to executors, but not to prospective administrators, in cases where no grant of representation had yet been made. The reason for the difference in treatment lies in the fact that an executor derives title from the Will, whereas an administrator can only derive title from their appointment as such by the Court.
In addition, s 116 will remain of particular relevance in certain cases where s 50 is unlikely to be appropriate/available, such as those difficult cases where a grant (often limited) is sought at an early stage for the purpose of enabling one particular party to decide upon the appropriate disposal of the deceased’s remains: see, for example, Ibuna v Arroyo  WTLR 827.