Wills interpreted according to their ordinary and natural meaning despite this not reflecting testators’ intention

The English High Court has recently held that, in a case concerning construction of Wills, the ordinary and natural meaning of survivorship clauses should be given effect to.[1] This operated to mean that certain beneficiaries under the Wills of a husband and wife benefitted twice, which the parties agreed was not the couple's intention. The claimants were the executrices of the couple's estates (and also beneficiaries of the estates). They wished to know how to distribute the estates. The claimants wanted the Court to interpret the Wills in accordance with the couple's intention. This would have meant that they received less under the Wills than they would have done if the Wills were interpreted in their ordinary and natural terms. The defendants were the solicitor who drafted the Wills and his firm.

The case is a reminder to executors of the importance of administering estates in accordance with the terms of the Wills. The case is also a reminder to draftsmen of the importance to accurately convey a testator's intention when drafting a Will.

Background

A husband and wife were both found dead in their home leaving mirror Wills. Under the terms of their Wills, they each left their estate to the other if each survived the other by 28 days. However, in the event that that gift failed they each provided for the disposal of their personal chattels, left pecuniary legacies to the same named individuals and charities and left the residue of their estate to the claimants, also being the executrices of the Wills.

It was not possible to determine which of the couple died first. Therefore, it was not in dispute that the husband, being the younger of the pair, was deemed to have survived his wife. This was so because of the "commorientes rules" under statute. Therefore, under the husband's Will the gift of residue in favour of his wife failed because she was deemed to have pre-deceased him. The husband's Will fell to be distributed in accordance with the provisions in the remainder of his Will.

The key issue for the Court was to determine whether the survivorship clause meant that the wife's gift of residue to her husband also failed. If so, then her Will would also fall to be distributed to the same named individuals and charities as the husband's Will with the residue going to the claimants. The result of this would be that the named individuals and charities would benefit twice (once from the husband's estate and once from the wife's). This was not the couple's intention. Instead, they had intended that in such circumstances other beneficiaries would take the estate of one of them so no beneficiary would benefit twice.

The claimants brought the claim in their role as executrices in order to ascertain how to administer the estates. It was the claimants' position that the correct interpretation of the wife's Will was that the survivorship clause meant the wife's gift to her husband failed. This was so because the wife's Will required the husband to survive her by 28 days in order to inherit her estate. It was the defendants' position that the survivorship clause did not apply to the gift of residue to the husband because inter alia the overall purpose of the Will and the facts known or assumed by the parties at the time the Will was executed did not suggest it should. It was common ground between the parties that the husband and wife did not intend beneficiaries to benefit twice.

Judgment

The Court held that on true construction of the wording of the Will, the survivorship clause meant that the residue gift in favour of the husband failed. In so holding, the Court examined the principles of construction, noting that the starting point was to give the words of the Will their ordinary and natural meaning. The ordinary and natural meaning of the survivorship clause was that anyone who was named in the Will must survive the testator by 28 days in order to take under the Will. The fact that the husband died within 28 days of the wife meant that the gift to the husband failed. This failure could have easily been avoided by different drafting, for example by excluding the effect of the survivorship clause in respect of the relevant spouse and/or the primary gift.

The Court commented that the apparent mistake on the part of the draftsman in failing to give effect to his clients' apparent actual intention may have been capable of being cured through a claim for rectification. However, such a claim was not brought before the Court so the Court declined to rule on it.

Comment

The case serves as a reminder that in considering claims of Will construction, the Court will start by considering the natural and ordinary meaning of the words. If the words are clear and unambiguous then that unambiguous meaning will be given effect to as the testator's intention. This was despite in this case the unambiguous meaning being at odds with the apparent actual intention of the testator.

For draftsmen, it is important to remember to draft in a way which gives effect the client's intention. Failure to do so may give rise not only to dispute as to the meaning of the drafting, but also a potential negligence claim. For executors, it is important to remember your duties in administering the estate and the necessity to administer the estate according to the terms of the Will. This is true even if you know this to be contrary to the testator's actual intention.


[1] Jump and another v Lister and another [2016] EWHC 2160 (Ch)

 

For more information, please contact Richard Norridge, Joanna Caen or your usual Herbert Smith Freehills contact.

Richard Norridge
Richard Norridge
Partner
Email | Profile
+44 20 7466 2686
Joanna Caen
Joanna Caen
Senior Consultant
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+852 2101 4167

 

 

 

 

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Filed under Estates disputes, London

Widow removed as administratrix after persistent breaches in administering the estate

The Hong Kong Court has recently ordered the removal of an administratrix, who was the widow of the deceased, after finding she had misappropriated and converted the estate to her own use, repeatedly breached Court orders and had failed to render a proper and accurate account.[1] This case is a reminder to all administrators to fulfil their duties or face removal.

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Filed under Estates disputes, Hong Kong and Singapore, Private wealth and trusts

Akers v Samba: Trusts over foreign assets

The UK Supreme Court has held that the extinction of a company's beneficial interest under a trust on the transfer of an asset by the trustee to a bona fide purchaser without notice does not constitute a "disposition" under section 127 of the English Insolvency Act 1986 (the "Act"). Accordingly, the transfer of such assets was not void, the assets could not form part of the insolvency estate of the liquidated company, and the beneficiary's interest in the assets was extinguished: Akers v Samba Financial Group [2017] UKSC 6.

The Supreme Court also considered (albeit by way of obiter dicta) the effect of the lex situs in relation to trust assets.

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Filed under Private wealth and trusts, Trust disputes

English High Court confirms that a claim for financial provision from an estate does not survive death of the applicant

Under English law (and the law of many countries with similar legal systems), a dependent of a deceased person can – subject to various conditions – apply to Court for a payment out of the deceased's estate. The basis of this claim is that the dependent received inadequate provision under the will or under the intestacy provisions.

The English High Court has held that a claim for financial provision under section 1 (1) (a) of the Inheritance (Provision for Family and Dependents) Act 1975 (the "Act") will not survive the death of the applicant: Laurel Marilyn Roberts & Ors v Luanne Fresco [2017] EWHC 283. This is so because a right to bring a claim under the Act is not a cause of action unless an order for financial provision is handed down by the Court prior to the applicant's death.

This case is a reminder that the Court will take a strict approach when considering the timing of claims for financial provision under the Act. As such, a person entitled to bring a claim for financial provision must act quickly. Conversely, those acting for an estate should be aware of this limitation when defending claims for financial provision under the Act.   

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Is a register of beneficial ownership of companies coming?

As part of the global transparency push, the G20 has committed to implement rules requiring the disclosure of beneficial ownership of legal entities (in addition to automatic exchange of financial account information and the BEPS related transparency measures). On 13 February 2017, Treasury released a consultation paper dealing with part of this agenda – to consult on means to establish a register of beneficial ownership of companies. 

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Filed under Australia, Offshore, Private wealth and trusts

Deceased’s “husband” and daughter both unable to obtain letters of administration

The English High Court has recently refused to grant letters of administration to a deceased's daughter (the "Claimant") despite her having the highest entitlement to the deceased's estate.[1] The dispute involved a challenge by the alleged widower of the deceased (the "Defendant"), who was found not to have been validly married to the deceased. Therefore the Court declined to grant the Defendant letters of administration. Nonetheless, the Court found that the Claimant had deliberately lied to Court and thus also declined to grant her letters of administration. Instead, the Court exercised its jurisdiction to appoint "some other person" as administrator. This case is a reminder that all parties need to act lawfully and properly when presenting evidence or face the consequences.

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Filed under Estates disputes, Hong Kong and Singapore, Private wealth and trusts

Hong Kong Court of Appeal affirms law on express, constructive and resulting trust

The Hong Kong Court of Appeal ("CA") in Ip Fung Kuen v Sam Kee Frozen Meat Co Ltd and others (CACV 107/2016) recently affirmed the well-established principles of express, constructive and resulting trust under Hong Kong law. As well as confirming those principles, the judgment is also noteworthy because of the CA's confirmation of the Court of First Instance ("CFI")'s finding that the plaintiff's lack of education and sophistication in comparison with the appellant (a company established and controlled by the plaintiff's eldest brother) was relevant to whether a trust was established. The CA upheld the CFI's ruling that the appellant held the disputed property in trust for the plaintiff.

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Filed under Hong Kong and Singapore, Private wealth and trusts

Judge sentenced to six months’ jail by Nottingham Crown Court for forgery of a will and fraud

A former solicitor and disability claims tribunal judge, and her husband, forged a will and letter to obtain two adjacent cottages in order to create one, large retirement home for themselves. On conviction, they were sentenced to six month's jail, the maximum sentence.  This case should remind readers of the serious penalties for forgery.

Background

The fraud was committed by Margaret Hampshire, and her husband, Alan Hampshire.

The will

The first cottage was owned by Martin Blanche, who died in 2007. Mrs Hampshire administered Mr Blanche's estate and claimed to have found a will while clearing out the contents of Mr Blanche's home following his death. Under the "will" Mr Blanche purportedly left the first cottage and his share in the second cottage to his cousin, Josephine Burroughs. Mrs Hampshire and Ms Burroughs were also related.

There was doubt cast at the time as to the validity of the will. It was widely believed Mr Blanche was illiterate, therefore unlikely to have written a will. Nonetheless the will was admitted to probate and both properties were transferred into Ms Burroughs' name.

The letter

The second cottage was part owned by Mr Blanche and Ms Burroughs. Mrs Hampshire had been granted power of attorney over the affairs of Ms Burroughs.

Following the transfer of both cottages into Ms Burroughs' name, Mrs Hampshire produced a letter, purportedly typed by Ms Burroughs, to the effect of "I have thought about Martin and the cottages at Rolleston and as we discussed I definitely do not want anything to do with it…I think it's fair for you to have it, and I am happy for Sarah [the Hampshires’ daughter], to have them if that is what you want." The letter was dated 24 February 2007 and apparently signed by Ms Burroughs. Mrs Hampshire later admitted that she had written it in 2009 and that Ms Burroughs' signature had been forged.

Abuse of power of attorney

Mrs Hampshire subsequently used her power of attorney over Ms Burroughs' affairs to transfer ownership of both cottages to her daughter, Sarah Hampshire, to avoid inheritance tax.

In 2012 Mr Hampshire stole £23,176 from Ms Burroughs' bank account to fund the conversion of the two cottages into one, large cottage.

Ms Burroughs died in January 2014, prior to the discovery of the forgery and fraud.

In 2016 the Hampshires sold their home and moved into the renovated cottage, following which their offences were discovered due to a dispute with a neighbour.

The trial

Although Mr and Mrs Hampshire initially denied the claims, they eventually pleaded guilty at trial in November 2016. Mrs Hampshire pleaded guilty to two counts of forgery and one count of fraud. Mr Hampshire admitted forgery and two counts of theft.

Timothy Greene QC, for Mrs Hampshire, argued that there had been no intention to cause financial harm and that Ms Burroughs had been telling third parties that she wanted to leave the property to Mrs Hampshire. Mr Greene QC argued that "This was the first example of her smoothing the passage, improperly proved, to enable her to achieve the end that would have been achieved in any event." However there was the issue of whether Ms Burroughs had wanted the cottages transferred before or after her death.

Similarly, Peter Lownds, for Mrs Hampshire, alleged he had forged the will for "reasons of expediency" and that "There was no will. Having a will meant the administration of the estate could be conducted in a speedier and more straightforward manner." Mr Lownds stated, in relation to the will, that his understanding was "…It was her words, and his handwriting."

Decision

On 20 December 2016 Senior Circuit Judge Gregory Dickinson QC sentenced the Hampshires to three concurrent jail terms of six months each.

Judge Dickinson QC admonished Mrs Hampshire in particular for committing the offences while still employed by the Ministry of Justice as a disability claims tribunal Judge and for abusing her position of attorney to Ms Burroughs. Judge Dickinson QC told Mrs Hampshire that "You actually played fast and loose with the Land Registry, probate service and your own cousin's affairs", "You abused your knowledge and experience gained as a solicitor, forgetting or ignoring the need to act with integrity" and "Your terrible fall from grace and your age cannot save you from an immediate custodial sentence."

Judge Dickinson QC also made findings against Mr Hampshire, concluding that he had written the will at the direction of Mrs Hampshire and that Mr Hampshire had stolen £23,000 from Ms Burroughs' account, which was "an appalling abuse of a position of trust".

A further hearing is to be held in 2017 as to whether the Hampshires will be required to pay compensation and forfeit the cottages.

Learning point

As Judge Dickinson QC sentenced both defendants to the maximum jail term of six months under section 6 of the Forgery and Counterfeiting Act 1981, it appears that the Court did not accept the defendants' pleaded mitigating factors of expediency and inevitability. It goes without saying that a potential beneficiary should not seek to expedite the transfer of any property or benefits by forgery and the consequences of doing so can be severe.

 

For more information, please contact Richard Norridge, Joanna Caen or your usual Herbert Smith Freehills contact.

Richard Norridge
Richard Norridge
Partner
Email | Profile
+44 20 7466 2686
Joanna Caen
Joanna Caen
Senior Consultant
Email | Profile
+852 2101 4167

 

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Filed under Estates disputes, Private wealth and trusts

Government launches consultation on enhancing transparency of beneficial ownership of Hong Kong companies

The Government has launched a two month consultation exercise on proposals to enhance the transparency of beneficial ownership of Hong Kong incorporated companies. This is part of a number of reform proposals aimed at bringing Hong Kong in line with international standards to combat money laundering and terrorist financing. With a mutual evaluation of Hong Kong’s regime with other members of the Financial Action Task Force (FATF) looming in 2018, the Government is keen to enhance Hong Kong’s regime to require transparency of beneficial ownership in line with FATF’s standards.

The consultation paper proposes amending the Companies Ordinance (Cap 622). Under the proposals, all Hong Kong incorporated companies (other than listed companies who will be exempt) will be required to obtain and hold beneficial ownership information which will be available for public inspection. The regime will be backed by criminal sanctions for non-compliance.

Summary of the key features of the proposals to enhance transparency of beneficial ownership

  • Applies to Hong Kong incorporated companies – The proposals apply to all companies incorporated in Hong Kong including companies limited by shares, companies limited by guarantee and unlimited companies. Listed companies, however, will be exempt given the existing regime imposed on them under the Securities and Futures Ordinance (Cap 571) for the disclosure of interests and related registers and record keeping.

  • Company to identify and keep a register of people with significant control – Under the proposals, companies would be required to identify and keep a register (PSC register) of persons with significant control over the company. Persons with significant control means any individual who falls within the definition of beneficial owner detailed below (registrable individual). To capture indirect holdings through corporate structures, the PSC register should also include details of any entity meeting the beneficial ownership definition (registrable legal entity). To ease the administrative burden, only an entity which is immediately above the company in the company’s ownership chain needs to be included.

  • Definition of beneficial owner – The beneficial owner definition proposed is similar to FATF’s definition. It catches any individual who meets one or more of the following conditions:

    • directly or indirectly holds more than 25% of the shares in the company;

    • directly or indirectly holds more than 25% of the voting rights in the company;

    • directly or indirectly holds the right to appoint or remove a majority of directors;

    • otherwise has the right to exercise or actually exercises significant influence or control; or

    • has the right to exercise or actually exercises significant influence or control over the activities of a trust or firm that is not a legal person but whose trustees or members satisfy any of the above conditions in relation to the company, or would do if they were individuals.

  • Details required in the PSC register – The company will need to establish and record in the PSC register information about the registrable individuals and registrable legal entities including name; identity card or passport details or company registration number; correspondence or registered address; date of becoming registrable and the nature of the control. Where there is no registrable individual or legal entity, that fact must be stated in the PSC register. The PSC register must be kept in English or Chinese.

  • Company to verify beneficial ownership information – Information must only be included in the PSC register once provided by the registered individual or ascertained by the company. The company will be required to take reasonable steps to identify and ascertain its registrable individuals and registrable legal entities. The consultation paper cites examples of possible steps a company could take including reviewing a company’s register of members, articles of association, statement of capital and relevant agreements or by sending a notice to persons seeking confirmations of ownership.

  • Notice to persons to confirm beneficial ownership – A company will be able to serve a notice on any person or entity that the company knows or has reasonable grounds to believe either is registrable or knows of a person or entity that is registrable. The consultation proposes that non-compliance by a recipient or the provision of misleading, false or deceptive information in response will attract criminal penalties as a means of ensuring the regime is effective.

  • PSC register to be open for public inspection – The consultation paper proposes that the PSC register is available for public inspection on payment of a fee (or for free for members of the company or any person on the PSC register). As with the existing register of members, the location of the PSC register would need to be notified to the Registrar of Companies. However, the information in the PSC register does not need to be filed with the Registrar of Companies.

  • Criminal sanctions for non-compliance – The Government is proposing criminal sanctions for breaches of the regime similar to those that currently apply to maintenance of the existing statutory registers. Sanctions would include penalties for non-compliance which will apply to the company, its responsible officers and any person who knowingly or recklessly makes a misleading, false or deceptive material particular in the PSC register.

Timeframe for the reforms

The consultation is open for comments until 5 March 2017 and the Government seems set to move quickly towards introducing a bill into the Legislative Council in the second quarter of 2017. With the mutual evaluation of Hong Kong’s regime with other FATF members fast approaching in 2018, the Government is under time pressure to push through these changes.

Other reform proposals

To ensure consistency in the regulatory regimes, the current definition of beneficial owner in the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap 615) (AMLO) may be increased from 10% to 25% consistent with the proposed level for beneficial ownership under the Company Ordinance.

Further, the Government has also simultaneously launched a consultation setting out proposals to enhance the anti-money laundering regulatory regime under the AMLO. The AMLO currently only applies to financial institutions and the Government proposes to extend aspects of this to certain non-financial businesses and professions. This would provide a statutory obligation on solicitors, accountants, real estate agents and trust or company service providers to carry out due diligence on their clients before they engage in certain types of transactions. The Government is also proposing that trust or company service providers become subject to a licencing regime. We will discuss these proposals in more detail in an upcoming e-bulletin.

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Filed under Hong Kong and Singapore, Private wealth and trusts

Tax transparency – a looming issue for Private Groups?

In efforts to increase the “public awareness of corporate tax issues,” tax transparency has been a popular policy option to “maintain public pressure on aggressive tax practices”. Whilst the focus has typically been on large multinationals, broader tax transparency measures that could apply to Private Groups are far from being ruled out.

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Filed under Australia, Tax