Court of Appeal overturns High Court decision in Cowan v Foreman to grant permission to bring claim for financial provision under the Inheritance (Provision for Family and Dependants) Act 1975 17 months out of time

In the recent decision in Cowan v Foreman [2019] EWCA 1336 the Court of Appeal overturned the first instance decision and granted permission to the applicant to bring a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (the “Act“) 17 months out of time. Confirming that the guidelines in Berger v Berger [2013] EWCA Civ 1305 remain at the core of the court’s exercise of its power to extend the six-month period within which such a claim must be brought, the judgment clarifies the position following recent first instance decisions which were hard to reconcile (see our blog posts here and here) on this topic. The decision also contains guidance as to how the court will approach standstill agreements.

Background

Mr and Mrs Cowan started their relationship in 1991 and Mrs Cowan became largely financially dependent on Mr Cowan in 1998. From 2001 they had lived in a property in California and Mrs Cowan still resided at that property at the date of the hearing. Mr and Mrs Cowan were married just two months prior to Mr Cowan’s death in April 2016.

The estate was sworn for probate purposes at just under £30m. Under the terms of Mr Cowan’s will, his business assets were to be held in a discretionary trust for a class of beneficiaries, including Mrs Cowan, and the residue of his estate was to be held on trust for Mrs Cowan for life, subject to overriding powers of appointment in favour of other discretionary beneficiaries. The letter of wishes asked that Mrs Cowan be considered the principal beneficiary of both trusts.

Probate of the will was granted on 16 December 2016 and Mrs Cowan first received advice about the possibility of a claim under the Act in March 2017. No claim was pursued at that time and, soon after, the trustees and Mrs Cowan agreed the terms of a regular monthly payment to Mrs Cowan out of the trust. The deadline for making a claim under the Act passed on 16 June 2017 without a claim being made.

Later that year, Mrs Cowan became concerned about her financial position, prompting her to seek further legal advice about a potential claim under the Act. In December 2017, her solicitors wrote to the executors and trustees, explaining that they were advising Mrs Cowan on a potential claim and seeking confirmation that the executors and trustees would not take a point on the deadline for making a claim under the Act having passed.  In January 2018, the executors and trustees confirmed that they “will not take a point on the six-month deadline having passed pending receipt of a letter of claim“, at which point they proposed to review the position again.

In the following months, the parties explored the possibility of an out of court settlement, with a letter of claim being provided on 1 May 2018 and the parties attending an (ultimately unsuccessful) mediation in October 2018.

Within two days of the mediation, enquiries were made about instructions to accept service of Mrs Cowan’s claim, and Mrs Cowan issued proceedings seeking provision under the Act on 12 November 2018, nearly 17 months after the deadline to bring a claim under the Act had expired.

The Act

The Act provides a statutory basis on which a limited class of people may be able to benefit from the deceased’s estate in circumstances in which the Will (or intestacy) fails to make reasonable financial provision for them. The court will have regard to the matters in section 3 of the Act, including the financial needs and resources of the applicant, the size and nature of the estate, and in the case of a spouse, the age of the applicant, the duration of the marriage and the provision the applicant might reasonably have expected to receive if the marriage had ended in divorce rather than death.

Section 4 provides that an application must be brought within six months of the date on which probate is granted. When considering whether to exercise the power under section 4 of the Act, the courts will have regard to the following guidelines in Berger v Berger:

  1. The court’s discretion is unfettered but must be exercised judicially in accordance with what is right and proper.
  2. The onus is on the applicant to show sufficient grounds for the granting of permission to apply out of time.
  3. The court must consider whether the applicant has acted promptly and the circumstances in which she applied for an extension of time after the expiry of the time limit.
  4. Were negotiations begun within the time limit?
  5. Has the estate been distributed before the claim was notified to the defendants?
  6. Would dismissal of the claim leave the applicant without recourse to other remedies?
  7. Looking at the position as it is now, has the applicant an arguable case under the Act if I allowed the application to proceed?

The First instance Decision

At first instance, the judge refused permission to extend the time allowed to issue a claim, finding that there were no good reasons for the delay in issuing the claim and that, in any event, the substantive claim was unarguable given that Mrs Cowan stood to benefit under the trusts.  A more detailed summary of the judge’s decision can be found here.

The court of appeal decision

Mrs Cowan appealed the first instance decision arguing (amongst others) that the judge erred:

  1. in his approach to section 4, which led him to leave out relevant considerations and take into account irrelevant considerations;
  2. in holding that Mrs Cowan did not have an arguable case; and
  3. in finding that there were no good reasons for the delay (and in having considered that to be a determinative factor).

The nature and purpose of the power in section 4

At first instance, the judge had suggested that the six-month time limit existed not only to avoid unnecessary delay in the administration of the estate, but also to protect beneficiaries and the court being vexed by stale claims which should have been made earlier. It followed, on his analysis, that the court’s approach to applications to extend time should be ‘robust’ and consistent with the “ever-developing sanctions jurisprudence“. On his analysis, the claimant not only had to provide an explanation but also ‘good reasons’ for any periods of delay.

The Court of Appeal was critical of this ‘disciplinary approach’. Neither the concept of stale claims nor the court’s approach to applications for relief from sanctions had particular relevance to the court’s discretion under section 4. The Court of Appeal confirmed that the six-month time limit should not be enforced for its own sake and, instead, that the court should consider all of the relevant circumstances, following the guidelines set out in Berger.

No real prospect of success

The first instance judge decided that Mrs Cowan had no arguable case for substantive relief under the Act.  Whilst the Court of Appeal confirmed that the judge had correctly applied the summary judgment test, it found that, in assessing the merits of the substantive claim, the first instance judge had fallen into a number of errors.

  1. The intentions of the deceased are of no relevance to the substantive claim and the judge had unnecessarily speculated that Mr Cowan created the trust structure because he believed that “[Mrs Cowan] should be spared the burden of administering, investing and deploying large sums of money”.
  2. The judge had erred in assuming that the terms of the (unenforceable) letter of wishes would be complied with (and that failure to do so would amount to an actionable breach of trust).
  3. The judge failed to have proper regard to all the circumstances of the case, including the size of the estate, the length of the relationship, and that Mrs Cowan had no autonomy, security, or a direct interest even in her home of 20 years.

Delay

The Court of Appeal also differed from the first instance judge in its analysis of the period of delay between (1) the grant of probate and Mrs Cowan intimating a claim under the Act; and (2) between a letter of claim being provided and a claim being issued.

In respect of the first period of delay, the Court of Appeal found that the advice Mrs Cowan received in March 2017 could not have been substantive and that the delay in intimating a claim until December 2017 could be explained by the fact that it was not until Mrs Cowan started to receive and request distributions from the trusts that she understood the reality of her situation. On appreciating the precarious nature of her position she had requested a face-to-face meeting with her solicitor and a claim was intimated shortly after that meeting.

The Court of Appeal found that the second period of delay should not count against Mrs Cowan either. Negotiations had continued during that period and it was not until after proceedings had been issued that any point was taken about the proceedings being out of time.

Finally, in respect of the moratorium agreed between the parties following the intimation of a claim, the Court of Appeal did not endorse the first instance judge’s suggestion that the practice of agreeing standstill agreements should immediately cease. On the contrary, whilst noting that any such agreement could not be binding on the court, the Court of Appeal was keen to encourage pre-action without prejudice negotiations, suggesting that, in some cases, issuing proceedings may only harden attitudes and lead to increased costs to the estate and a delay in its distribution.  The Court of Appeal suggested that, provided parties had been legally represented, the court should give effect to any such agreement, although care should be taken to ensure that the agreement includes all relevant parties and clearly sets out the duration and terms of the moratorium.

Exercise of section 4 power

Rather than remit this matter, the Court of Appeal concluded that it was proportionate and appropriate for it to exercise the power under section 4, and allowed Mrs Cowan to bring a claim out of time on the following basis:

  • There is a proper explanation for the entire period of delay, Mrs Cowan acted promptly once her true position was appreciated and advice had been taken, and the negotiations, quite properly encouraged by the trustees, were a significant factor even though they began after the six-month period in section 4 had elapsed.
  • A moratorium was agreed between experienced legal representatives and without prejudice negotiations then continued up to the claim being issued without any indication that a point would be taken about the lapse of time.
  • Mrs Cowan’s claim for relief under the Act has a real prospect of success.
  • Although pecuniary legacies had been paid and the trusts constituted, the fact that beneficiaries would not have to return money to the estate in order to satisfy the Mrs Cowan’s claim under the Act was a point in her favour.
  • It cannot be said that Mrs Cowan has a clear claim, if any, against her advisers.

Comment

The decision confirms that the Berger guidelines remain the starting point for the assessment of whether the court should grant permission to bring an out of time claim for reasonable financial provision under the Act. An application should not be dismissed simply on the basis that there is no “good reason” for the delay in bringing a claim out of time.

The Court of Appeal’s decision also provides some comfort to parties engaged in without prejudice negotiations. Claimants can now be reasonably confident that, provided all potential parties have agreed to it, the courts will look to give effect to a well drafted standstill agreement. From a practice perspective, the judgment highlights the importance of properly drafting and documenting any such standstill agreement. Failure to do so may also lead to claims against the advising firms.

The decision, however, also shows some of the difficulties that arise out of the section 4 regime. When faced with an application under section 4, the court has to consider the Berger guidelines and take a number of considerations into account. This is not a straightforward process, and it can be difficult for parties to predict the outcome of the court’s exercise of its discretion with any degree of certainty. In some cases it may therefore still be preferable, even if negotiations are ongoing, to issue proceedings within the six-month time limit and seek a stay by consent, to reduce the risk of future litigation in relation to an out of time application.

Richard Norridge
Richard Norridge
Partner
+44 20 7466 2686
Dan Saunders
Dan Saunders
Senior Associate
+44 20 7466 2036
Julia Bihary
Julia Bihary
Associate
+44 20 7466 7549

High Court refuses permission to bring out of time application under section 4 of the Inheritance (Provision for Family and Dependants) Act 1975 in Hendry v Hendry & Pertiwi [2019] EWHC 1976 (Ch)

In the latest in a series of decisions on out of time claims, the High Court refused permission to bring an out of time claim under the Inheritance (Provision for Family and Dependants) Act 1975 (the “Act“) where the claimant had failed to promptly bring her claim. The decision is a reminder both for claimants under the Act, and their solicitors, of the importance of bringing claims within the statutory time limits, and the potentially serious consequences of a failure to do so.

Background

Mrs Rosita Hendry met her husband, Mr Michael Hendry in 2001. The couple got married in 2003 and lived together until they separated in June 2016. Following the separation, in August 2016 Mr Hendry made a will, in which he made no provision for Mrs Hendry. In November 2016 Mrs Hendry petitioned for divorce.

Mr Hendry died in February 2017 and Mrs Hendry brought a claim for reasonable financial provision under section 2 of the Act. Probate was granted to Irwin Mitchell Trustees Ltd as executor on 29 August 2017. The deadline for Mrs Hendry to bring a claim for financial provision under the Act was therefore 1 March 2018 (6 months from the date on which representation was taken out). This claim was not issued until 27 April 2018. As such, Mrs Hendry sought permission to bring this claim out of time under section 4 of the Act.

Legal background

In determining whether to allow Mrs Hendry’s out of time application under section 4 of the Act, the judge considered the following seemingly conflicting English authorities on the matter (which both came out after the hearing in Hendry):

  1. In Cowan v Foreman [2019] EWHC 349 (Fam) Mostyn J refused permission to bring a claim 17 months out of time. That case drew an analogy with the court’s approach to breaches of the CPRs and relief from sanctions, despite the fact that section 4 is a substantive, not a procedural rule. The judge considered that the proper approach to section 4 was to follow the principles set out in Berger v Berger [2013] EWCA Civ 1305 (summarised below). Permission has been granted to appeal the decision.
  2. In contrast, in Bhusate v Patel [2019] EWHC 470 (Ch) Chief Master Marsh granted permission to bring a claim almost 26 years out of time. He considered that the correct approach was to follow the guidelines set out in Re Salmon (Deceased) [1981] Ch 167 and Berger v Berger. The Chief Master was critical of drawing in the overriding objective or the relief from sanctions principles to a substantive statutory provision.

Our note on the Cowan and Bhusate decisions is available here. The decision in Cowan was very recently overturned by the Court of Appeal; the High Court’s decision in the case should therefore be treated with caution. Check back on this blog for our report on the Court of Appeal’s decision.

Decision

Permission to bring a claim out of time under section 4 of the Act was refused. In reaching this decision, the judge applied the guidelines set out in Berger v Berger:

  1. The court’s discretion is unfettered but must be exercised judicially in accordance with what is right and proper.
  2. The onus is on the Applicant to show sufficient grounds for the granting of permission to apply out of time.
  3. The court must consider whether the Applicant has acted promptly and the circumstances in which she applied for an extension of time after the expiry of the time limit.
  4. Were negotiations begun within the time limit?
  5. Has the estate been distributed before the claim was notified to the Defendants?
  6. Would dismissal of the claim leave the Applicant without recourse to other remedies?
  7. Looking at the position as it is now, has the Applicant an arguable case under the Inheritance Act if the application is allowed to proceed?

(3) Has Mrs Hendry acted promptly and what are the circumstances that gave rise to the application out of time?

Master Shuman found that Mrs Hendry’s evidence that she was trying to avoid litigation and had little money did not explain the delay in bringing the claim. The judge also noted that Mrs Hendry was aware that there was a time limit to bring her claim, and that the time started when the grant of probate was made. She was also critical of the claimant (and her solicitors) for their failure to adduce sufficient evidence to explain the delay in bringing the claim.

It seems that Mrs Hendry’s position would have been improved had (i) a protective claim been issued as soon as possible after her advisers realised they had missed the time limit; and (ii) the other side’s solicitors been informed about what steps were being taken to remedy the position.

(4) Were negotiations begun within the time limit?

Mrs Hendry’s solicitors were engaged in correspondence with Mr Hendry, later with his daughter and executor of his estate, from as early as November 2016 informing them of Mrs Hendry’s intention to bring a financial claim. The court found that, in the technical sense, negotiations had been started within the time period, but concluded that these were inadequate for present purposes. Master Shuman stated that in order for there to be effective negotiations between the parties she would have expected, at a minimum, for the solicitors to set out some considered analysis of Mrs Hendry’s claim. As such, the ground to begin negotiations within the time period was not satisfied.

(5) Has the estate been distributed before the claim was notified to the Defendants?

Whilst the estate had not yet been administered, Master Shuman did not accept that there had been no prejudice. It was the testamentary wish of Mr Hendry that his two children should each receive an equal half share of his estate. This was in spite of the fact that there was no evidence that the children had changed their position in reliance on their inheritance.

(6) Would dismissal of the claim leave the Applicant without recourse to other remedies?

Master Shuman noted that refusing permission to grant this application would not leave Mrs Hendry without recourse to other remedies; she has a potential claim against her solicitors for professional negligence as they had admitted that they missed the time limit.

(7) Looking at the position as it is now, does Mrs Hendry have an arguable case under the Act if the judge allowed the application to proceed?

Having considered (amongst other things) the terms of a pre-nuptial agreement, Master Shuman determined that Mrs Hendry had an arguable case, albeit not a strong one, but that this was outweighed by her failure to act promptly in the circumstances. The judgment makes clear that the Act sets out a substantive not a procedural time limit and that Mrs Hendry had not shown sufficient grounds to satisfy a claim under section 4.

Comment

The judge’s refusal to grant permission to bring the out of time application depended to a large extent on Mrs Hendry’s inability to sufficiently explain the delay in bringing the claim, with relatively little regard being given to Mrs Hendry’s financial status. As such, this decision is a reminder of the need to bring claims under the Act as promptly as possible, or in any event to ensure that determined efforts to negotiate and expedite claims are demonstrated.

It is also a stark reminder for solicitors acting for claimants for financial provision under the Act to give the deadline to apply for permission its due importance. Failure to do so will not only result in a potential refusal to grant permission for an out of time claim, but may also result in a negligence claim against the firm.

 

Richard Norridge
Richard Norridge
Partner
+44 20 7466 2686
Joanna Caen
Joanna Caen
Partner
+852 2101 4167

Cayman courts emphasise the importance of Beddoe relief and its availability in situations where a third party claim is for an amount greater than the Trust assets.

In the case of X (as Trustee of the A Trust) v Y (beneficiary of the A Trust)[1], the court reiterated the importance for Trustees of seeking Beddoe relief before commencing or defending an action. Obtaining Beddoe relief ensures that Trustees are more likely to be indemnified against any adverse costs consequences than without such relief. The court also found that interested non-beneficiary third parties should be provided with informal notice of a Beddoe application but that the interests of the beneficiaries of a Trust outweigh the interest (actual or potential) of any third party in the trust assets in assessing the Trustees’ application.

Background Facts

The Claimant in these proceedings was the Trustee of the A Trust. The Trustee was involved in English proceedings in respect of a Sale and Purchase Agreement (“SPA“) which involved a claim against a consortium of sellers (including the Trustee) in relation to (a) breach of warranty, and (b) the tort of deceit.

The breach of warranty claim related to, amongst others, failure to disclose a dispute between the Trustee and another defendant (in the English proceedings) which was ongoing at the time of the execution of the SPA. The claim for deceit arose on the basis that the defendants (in the English proceedings) allegedly made material misrepresentations to the claimant (in the English proceedings) (“Z“) that no funds had been invested in the ill-fated Madoff Funds. Z avers that such investments were made before the SPA was signed and came to its attention after the SPA was executed.

The Trustee had sought directions from the Court to defend the English proceedings.  It also sought orders permitting it to borrow funds from the C Trust (i.e. another Trust), to discharge the costs of defending the English proceedings and, pre-emptively, for an indemnity for any costs and expenses properly incurred for those purposes, which would have been ultimately reimbursed from the A Trust assets.

Beddoe Relief

The case of Re Beddoe[2] established the principle that Trustees are able to apply to the court to seek permission to commence or defend proceedings using the trust assets while also obtaining an indemnity from the Trust for any adverse cost consequences. (That indemnity can be lost if the Trustees have failed to make full disclosure of all material facts when making the application for relief.)

It is important to note Trustees who do not seek Beddoe relief are not automatically barred from recovering the costs of litigation from the Trust funds.  However, such Trustees do not have the same certainty of protection as they would if they had obtained Beddoe relief.

The importance of seeking Beddoe relief

The Cayman courts have general jurisdiction to provide relief to a trustee in relation to the management or administration of trust money under section 48 of the Trusts Law (2011 revision). The case of Re Beddoe allows for the applicability of such directions specifically on the question of engagement in litigation.

Smellie CJ re-iterated Lindley LJ’s position in Re Beddoe where he stated that “…a trustee who, without the sanction of the Court, commences an action or defends an action, unsuccessfully, does so at his own risk as regards the costs, even if he acts on counsel’s opinion” especially given the “ease and comparatively small expense with which trustees can obtain the opinion of the Chancery Division on the question whether an action should be brought or defended at the expense of the trust estate“.

Therefore, the Court found the Trustee had adopted the correct approach in this case by seeking Beddoe relief from the court before proceeding with the litigation.

Rights of non-beneficiary third parties in a Beddoe application

The Trustee had provided Z with informal notice of the Beddoe application. However, Z contested that it should have been provided with formal notice so that it could have made appropriate formal representations to the court.

Smellie CJ found that in circumstances where Z is not a beneficiary in the A Trust, it is merely a third party asserting a disputed personal claim in contract or tort against the Trustee. Therefore, Z’s claim is one which is a dispute between a third party and a Trustee in relation to liabilities assumed by the Trustee in administration of the Trust. In such circumstances there is no need for Z to be provided with formal notice of the Beddoe application. However, Smellie CJ also found that Z would be adversely affected if its claim was successful and the Trustee had defended the claim at the expense of the Trust because the costs of the defence would reduce the value of the assets against which Z would have been able to enforce its judgment. The Trustee had therefore been correct to provide Z with informal notice of the Beddoe application. The court also took into account the representations made by Z in its response letter.

Decision

Given that Z’s claim exceeded the value of A Trust, if that claim were to be undefended the A Trust would certainly be exhausted to the detriment of the beneficiaries. However, in deciding how much weight should be given to Z’s interests, Smellie CJ decided that a contingent or putative creditor in Z’s position is not capable of asserting a proprietary claim to the Trust assets, and takes the Trust Assets as it finds them at the time of the judgement. The Trustee obtained Beddoe relief in these proceedings and was allowed to defend the English proceedings and would have had an indemnity from the Trust assets for the costs reasonably incurred in defending the claim.

Conclusion

As this case illustrates, it is important for trustees to ensure that:

  1. they seek the court’s permission before bringing or defending claims in relation to the trust assets (i.e. seek Beddoe relief); and
  2. to the extent that there are third parties interested in the trust assets who would be adversely affected by the outcome of any litigation, they should be provided with informal notice of any application for Beddoe relief.

 

[1] in the Grand Court of the Cayman Islands, Financial Services Division (unreported) 15 March 2017, Smellie CJ

[2] [1893] 1 CH 547

HKMA and PWMA in Hong Kong collaborate to develop a Treat Customers Fairly Charter for the PWM industry

On 8 June 2017, the Hong Kong Monetary Authority (HKMA) announced that it has been working together with the Private Wealth Management Association to develop a Treat Customers Fairly Charter (the Charter) to further promote a customer-centric culture in the private wealth management (PWM) industry.  The Charter is designed to complement, not change, current laws and regulations and the existing terms and conditions between banks and their customers.  It is stated to be a commitment by PWM institutions in Hong Kong to support and implement the principle of treating customers fairly.

The Charter draws reference from good practices locally and overseas and from the G20 High-Level Principles on Financial Consumer Protection.  For example, it bears resemblance to the UK FCA’s consumer outcomes, in particular principle 6 which requires a firm to pay “due regard to the interests of its customers and treat them fairly”.  It comprises five high-level principles (the TCF principles) which are supplemented by examples to illustrate how such principles may be implemented by PWM institutions. However, these examples are not comprehensive, but are stated to be illustrations to enhance understanding of the “spirit” of the TCF principles.

The HKMA expects all Authorised Institutions which operate as private banks, or which have dedicated private banking units, to follow the TCF principles.  It has stated that it expects senior management and boards of directors to ensure that their institutions and relevant staff abide by the TCF principles.  Our recent bulletin outlines further details on each principle.

If you would like to discuss the above further, please do not hesitate to contact Will Hallatt, Richard Norridge, Hannah Cassidy, Joanna Caen, or your usual Herbert Smith Freehills contact.

William Hallatt
William Hallatt
Partner, Financial services regulatory Hong Kong
+852 2101 4036
Richard Norridge
Richard Norridge
Partner, Head of private wealth - Asia
+44 (0)20 7466 2686
Hannah Cassidy
Hannah Cassidy
Partner, Financial services regulatory Hong Kong
+852 2101 4133
Joanna Caen
Joanna Caen
Senior consultant, Private wealth Hong Kong
+852 2101 4167

OPEN LETTERS REVEAL DISPUTE OVER THE ESTATE OF THE FORMER SINGAPOREAN PRIME MINISTER

On 23 March 2015, Lee Kuan Yew (LKY), the former Prime Minister of Singapore (and father of the current Prime Minister of Singapore, Lee Hsien Loong ("LHL")) passed away, leaving behind a will. The will included a clause concerning LKY's former home (38 Oxley Road). This clause provided that LKY's daughter (LWL) was to be granted the right to remain living at 38 Oxley Road, and upon her passing or relocation, it should be demolished (the Demolition Clause). The intention behind this will, and in particular the Demolition Clause has been questioned in two public letters in social media between LKY's three children.

Further to the two public letters, additional information has been released by the Lee family to the public through various social media postings, including questions relating to the validity of a Deed of Gift of certain family items that the younger Lee siblings (LHY and LWL) purported to make, as executors of LKY's last will and representatives of his estate, to the National Heritage Board.

The above events have culminated in LHL announcing that he will deliver a Ministerial Statement when the Singapore Parliament sits on 3 July 2017, with the lifting of the People Action Party's party whip in order for Parliament to have a full public airing of the issues. This is significant because the party whip has been lifted fewer than 10 times since 1965 when Singapore became independent.

This post explores some of the interesting questions raised by this matter in relation to private wills and gifts when public interest issues are at play.

Letter by LHY and LWL regarding demolition of 38 Oxley Road

The dispute over LKY's estate was first made public upon the release of an open letter by LHY and LWL, the joint executors and trustees of LKY's estate, on 14 June 2017. Titled, "What has happened to Lee Kuan Yew's values?" (the First Letter),  the First Letter raised concerns over the fate of 38 Oxley Road, which was left to LHL in the will. In doing so, LHY and LWL asserted that "[LKY] made clear throughout the years in public and private his wish that his home at 38 Oxley Road be demolished upon his passing" and that this was "reiterated" in his final will which was executed on 17 December 2013 (the Final Will).

The First Letter also alleged that because LHL was in a position of power over a Ministerial Committee which had been set up to consider options with respect to 38 Oxley Road, he was in a position of conflict, which also contradicted his previous undertakings that he would recuse himself from all government decisions involving the property.

Letter in reply by LHL

Following the letter by his siblings, LHL issued an open letter in reply on 15 June 2017 (the Reply), which called into question the circumstances under which the Final Will was executed by LKY.

In particular, LHL alleged that the reinsertion of both the Demolition Clause and the clause to grant all children equal shares of LKY's estate from earlier wills of LKY happened under rushed circumstances under which LKY was not properly legally advised. LHL also stated that it was LHY's wife's firm who had prepared the Final Will, which presented a conflict of interest.

Therefore, LHL stated that his father may not have known that the Demolition Clause, which was omitted from LKY's prior two wills, had been reinstated in the Final Will as it was not drawn to his attention.

Deed of Gift

In subsequent posts, LHL also released information relating to a Deed of Gift that LHY and LWL had executed in 2015 in favour of the National Heritage Board for the donation and public exhibition of significant items, with a stipulation that LKY's wish for the demolition of 38 Oxley Road (as set out in various documents) be displayed prominently at the exhibition.

However, LHY alleged that LHL had acquired the Deed of Gift from the National Heritage Board in his capacity as Prime Minister, for the purpose of issuing private objections to LHY and LWL.

Ministerial Committee

Under the Preservation of Monuments Act in Singapore, the Government has the right to preserve 38 Oxley Road as a national monument. The National Heritage Board can ask the Minister for Culture, Community and Youth to gazette the property, if it fulfils criteria such as having historic, cultural, traditional, archaeological, architectural, artistic or symbolic significance and national importance. This can be done in spite of an individual's wishes in a will regarding a property. Current national monuments in Singapore include the former City Hall and the former Tanjong Pagar Railway Station.

An internal Ministerial Committee has been set up to list the different options and implications for the actions to be taken with regard to the house, while paying attention to LKY's wishes. It has been suggested by the Deputy Prime Minister Teo Chee Hean that one option that is being studied is demolishing the house but keeping the basement dining room, where many important meetings took place. The Ministerial Committee will also be looking into how the Final Will was prepared and the roles of the people involved.

Conclusion

It is yet to be seen how the correspondence between LKY's children will develop and the effect it will have in respect to decisions over LKY's estate. The 38 Oxley Road family saga calls into question the extent to which public interest may override individual wishes in a will, and emphasises the importance of being aware of any possible conflicts in the process of drafting and executing a will. Given the complex legal issues and questions of governance involved, the development of this matter will likely have important implications on how property disputes involving important public figures in Singapore will be resolved going forward. 

Richard Norridge
Richard Norridge
Partner
+44 (0)20 7466 2686
Joanna Caen
Joanna Caen
Senior Consultant
+852  2101 4167

Court resolves dispute between parties as to who should hold the power to appoint trustees following settlor’s death

The English High Court has recently approved an application to change the provision of a trust deed relating to the appointment of new trustees.[1] The change was necessary because the original power was reserved exclusively for the settlor, who had died. All adult beneficiaries of the trust supported the change, as did three of the four trustees.

This case illustrates the importance of having succession plans for the power of appointment of new trustees. It also addresses disputes between parties about changes to trust terms.

Background

The case concerned an application to change the provision relating to the appointment of new trustees of a trust. The original settlement gave the power to the settlor during his life. The settlor had died. The application proposed to change the provision for appointment so that the principal beneficiary (as defined in the trust instrument) was granted the power to appoint new trustees, with the written consent of the trustees.

One trustee opposed the application. His view was that the trustees should have the power to nominate and appoint new trustees, with the principal beneficiary holding a veto power. The opposing trustee considered this a better proposal on the basis that:

  1. The collective view of existing trustees may be better informed as to the attributes needed and through their wider collective contacts they may be better able to identify suitable candidates than the principal beneficiary.

  2. Exercise of the veto power by the principal beneficiary would less likely result in any lasting discord than exercise of the veto power of the trustees.

  3. Beneficiaries can be ill fitted to make such important enduring appointments in the wider best interests of all beneficiaries. There are examples of unsuitably partisan and over compliant trustees being appointed by principal beneficiaries for their own ends.

Judgment

The Court granted the application, noting that the change would not be departing radically from the structure the settlor first created. The case was not one where the settlor had originally entrusted the appointment of new trustees to the existing trustees, but rather had reserved to power to himself.

In rejecting the opposing trustee's arguments, the Court noted:

  1. There is no reason why trustees may be better able to identify suitable candidates than the principal beneficiary, and there was no evidence put before the Court to that effect. Further, even if it were true, likely there would be prior informal discussion, so the benefit of the trustees' experience, knowledge and contacts would be available to the principal beneficiary.

  2. The possibility at someone taking offence in relation to the exercise of the veto power existed whether the trustees had the veto power or the principal beneficiary had it. The power to nominate trustees was a fiduciary power and there was no reason to suppose the principal beneficiary would not take his responsibility seriously.

  3. A senior beneficiary, knowing the situation of all the beneficiaries (being members of his extended family), and having enjoyed a long relationship with the trust assets was in a better position than most to decide what qualities were needed in a new trustee.

Comment

The case, whilst fact specific, provides an interesting insight into what a Court will consider when considering changes to the power to appoint trustees and how the Court deals with the situation where one party opposed an application. As noted above, it could have been avoided had the trust deed provided for successor appointors following the settlor's death.

 

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

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

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
+44 20 7466 2686
Joanna Caen
Joanna Caen
Senior Consultant
+852 2101 4167

 

 

 

 

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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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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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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