Lawyers in Glass Houses (or, indeed, Cubicles)

Paris Hotel de Ville ready for a visit by George V and Queen Mary. From the Universite de Caen collection on Flickr Commons.

Paris Hotel de Ville ready for the state visit of George V and Queen Mary in April 1914. From the Universite de Caen collection on Flickr Commons.

Not long ago, I visited two very different solicitors’ offices in the space of the same week. The first was a stone-built Victorian warren of rooms in a rural Derbyshire market town. The firm had been in the same premises since at least the mid-nineteenth century, and it showed: from the faded posters advertising farm auctions that had taken place before the first world war, to the massive walk-in safe which was itself literally big enough to accommodate a meeting, it was testimony to the part that the firm had played in the local economy, and the ties that bound the two together. It was also dark and gloomy, badly organised for modern business needs, and I suspect the winter heating bills are tremendous. On the other hand, it had character by the bucketload.

The same week I visited the offices of another firm. The office building itself dated from the 1920s, but the designers had been given free play over the interior. Open-plan ruled. The old dividing walls between rooms had been swept away, and glass partitions now divided the working areas, including the meeting rooms. One particularly striking feature was the design of two meeting rooms on the ground floor, which had full-height windows on the street side, and full-height glass partitions on the interior side. If the window blinds had been raised, the effect would have been pretty much as if you were holding a meeting in a terrarium, with the added feature that any stray passer-by could stand and watch you (and presumably peer at the documents on the table if they felt so inclined). Understandably, therefore, the window blinds remain permanently lowered, at least on the street side. It seemed an odd place to put a meeting room, but perhaps the exigencies of the building demanded it.

These offices were light and bright and, I imagine, much more cheerful and pleasant to work in; but they seemed much less connected to the local community and the local economy. They also have far less character: I visit more or less the same office in different parts of the country all the time. Something always seems to get lost when the designers get going; and there are other dangers in glass walls, as  S v J & Ors [2016] EWHC 586 (Fam) demonstrates.

S v J is an interesting decision, which will feature in the upcoming edition of Family Property News. Ms S sought (and obtained) declarations under the MWPA that she owned substantially more of the equity in two properties than her partner, Mr J. There will be more detail on the trusts of land aspects of the case in FPN, but one other feature was that Ms S claimed that she had been placed under considerable pressure by Mr J to enter into a mortgage re-financing deal which was very much to her disadvantage. Mr J was described as having a volatile temperament, and Ms S’s evidence was that she was “walking on eggshells” during the time that the deal, which was his pet project, was being put together. She was caring for one child of less than a year old and was pregnant with their second child, and in the circumstances felt extremely vulnerable.

When Ms S attended the solicitors’ office to execute the charges and receive independent legal advice about her position, the meeting took place in a glass-walled room. Mr J was outside the room throughout the meeting, waiting in the reception area. The Judge (Roberts LJ) noted that “throughout the course of this one to one meeting, the applicant told me that she could see the respondent through the glass wall. He was sitting in the reception area looking at her”. It is not expressly said that this situation was at the very least stressful for Ms S, but given that she specifically mentioned it in her evidence, it is likely that it was.

In fact, Ms S was at that moment being given very clear (and very sensible) evidence not to enter into the charges, but one suspects that the impact of that advice on her was substantially decreased by her being under observation by Mr J throughout. Matters cannot have been made any easier by her awareness that the solicitor was telling her the opposite of what Mr J, who was directly in her eyeline, had been telling her about the whole arrangement.

As it happens, Ms S did not claim that she was entitled to set aside the charges as against Mr J because of his undue influence; the facts of her case did not support it. But it’s clear that this situation could well arise in cases where there is either real or presumed undue influence, and the fact that the oppressor was able, throughout a crucial interview, to glare at the oppressed might be important. It’s all too foreseeable in such circumstances that a client might well come back to the solicitor and complain that her interests were not properly prioritised, and that she should not have been put in a position where her oppressor was able to fix his eye on her in an intimidating manner through a glass partition.

At the very least, ensuring that the client has a safe space, where she can hear and respond to independent advice away from the gravitational pull of the person who wants her to enter into the transaction, is good client care. It’s good care even if you have no reason to believe that there is any possibility of undue influence; the whole point of the “independent legal advice” requirement is to get the client to focus, unimpeded, on her own interests and position, and the requirement to give that advice arises when she is proposing to enter into an agreement to her disadvantage, not when there is any suspicion that undue influence may be at work.

In other words, when you give independent legal advice in a glass-walled office, lower the blinds. Better still, ensure that the client is given advice well away from the person who will benefit from the transaction, and certainly not within his field of vision.

In this respect at least, the antiquated offices in Derbyshire — with its massive panelled doors and gargantuan Victorian furniture — would have suited the purpose better than the light, bright city offices. It would hardly be possible to imagine a safer space, although it would certainly be possible to imagine a more comfortable one. The old ways are not always the worst.





G v G: A TLATA Jurisdiction Dispute

cyanotype smithsonian

G v G [2015] EWHC 2101 (Fam)

Trusts of Land – Application by H to dismiss or stay W’s TLATA claim for order for sale and equal division of proceeds — Appropriate Jurisdiction for Claim – Matrimonial financial remedies case in Poland – Application for sale and division of proceeds in England – Whether a claim for sale order and division of proceeds was a claim in rem or in personam – Applicability of Brussels I arts 5(6), 22, 28

Given the amount of times the issue must arise, it’s interesting that there have not been more cases about the appropriate jurisdiction for TLATA claims where either (1) the parties are domiciled abroad but the property is situated in England or (2) the parties are domiciled here but the property is abroad. G v G is the latest addition to a slender collection, comprising also Webb v Webb [[1991] 1 WLR 1440/[1994] QB 696] and Prazic v Prazic [2006] 2 FLR 1128. Both Prazic and Webb were considered in G v G, which makes it a particularly useful case, although all three cases leave some conceptual difficulties unaddressed.

In brief, H and W were British nationals. They owned property in Poland, France, and in London. They divorced in France, the decree taking effect in July 2013. There were proceedings in France relating to real property and moveables there, and also proceedings in Poland. These Polish proceedings had had quite a chequered history, but it’s enough to know at the moment that they had commenced in July 2013, that H was seeking a 90:10 split of all of the matrimonial property in his favour, but that the proceedings had not been served on W.

In April 2014, W issued a TLATA claim in the County Court seeking an order for sale and equal division of the proceeds of sale. She had severed the joint tenancy of the London property in October 2011.

The Court [Bodey J] carefully considered five separate contentions made by H as to why W could not, or should not be permitted to, make a claim against him in the English courts. The most important of these for present purposes was the question of whether the English courts had exclusive jurisdiction over the London property because W’s claim was a claim in rem. In the context of G v G, if the answer to that question was “yes”, then all of the other contentions made by H were more or less otiose.

Bodey J’s answer to this question distinguished G v G from Webb, which up to now has been the case with the most substantial reasoning of the appropriate forum for a TLATA claim. In Webb the property was in France, and the claim (by a father [F])  was for a declaration that his son S, the sole registered owner,  was holding the property in trust for F absolutely, and then for the French equivalent of rectification of the Land Register. The Webb claim was brought in England, and S argued that the English courts did not have jurisdiction because of the equivalent of Art. 22 of Brussels 1 which was in operation at the time.

Article 22 of Brussels 1 provides that “the court of the Member State in which the property is situated” “shall have exclusive jurisdiction, regardless of domicile … in proceedings which have as their object rights in rem in immoveable property” [emphasis added].

Just a quick reminder that a claim in rem is a claim to a right that, if upheld, will be valid and binding on all the world, while a claim in personam is a claim to a right which, if upheld, will be binding on the particular person(s) against whom the claim has been brought.

In Webb, the English Court, and subsequently the European Court of Justice [CJEC], had affirmed that the claim for a declaration that there was a bare trust, and the claim for rectification of the Register, were in personam claims. That meant that although the property was situated in France, F could validly bring his claim in England.

The particular significance of G v G is that Bodey J decided that W’s claim was a claim in rem, and that the English court therefore had exclusive jurisdiction over the London property.  This looks baffling at first, since both the claimants in Webb and G v G were making a claim under the same statute and indeed under the same section of the same statute.

The crucial difference for Bodey J was that in Webb, the claimant “was seeking to establish and acquire rights in immovable property by way of constructive or resulting trust” [Bodey J’s emphasis] and that in G v G in contrast, “the existence of the trust is not in dispute … [W] already had proprietary rights in the London house as co-owner. What she is seeking to do is to enforce and give effect to those rights …”. W’s proprietary right existed because the London property was registered the joint names of H and W, and the law implied a statutory trust of land whenever land was conveyed into more than one name. In Webb, the property had been conveyed into S’s sole name, so the statutory implication did not arise.

W’s counsel put forward an argument that this reasoning took no account of the Prazic case. Unfortunately the Prazic case report does not make it absolutely clear in whose name the properties were owned, although the context appears to suggest strongly that H owned the properties in his sole name, and Bodey J took this view. The Judge also noted that there was no claim for an order for sale in Prazic, that the judgment made clear that W was seeking a declaration that she was an equal owner of the properties in equity, and that “by parity of reasoning with Webb v Webb, that would be a claim in personam”.

The practical, and sensible, result is that any application for an order for sale of an English property within the framework of an acknowledged and existing trust of land will fall within the exclusive jurisdiction of and English Court under Art. 22 of Brussels 1. However, an application for a declaration that a trust exists in relation to an English property will not fall within the exclusive jurisdiction, and may well be heard in a foreign jurisdiction, depending on the other circumstances of the case.



The Legacy of a Letter

This is a post about an Inheritance Act 1975 claim by an adult child; but it is also a poignant human story about a family feud, about a daughter’s letter sent in wrath, and a mother’s letter that was written but never sent. Those letters came, four years after the deceased’s death (and over a decade after the letters themselves were written) to determine the outcome of the claim.

Dolores Del Rio with her mother on the steps of a train, holding a bouquet of roses, ca. 1929-1932. From the University of Washington Coillection on Flickr Commons.

Dolores Del Rio with her mother on the steps of a train, holding a bouquet of roses, ca. 1929-1932. From the University of Washington Coillection on Flickr Commons.

Claims by adult children under the Inheritance (Provision for Family and Dependants) Act 1975 used to be relatively rare and there was for some time an argument abroad that these claimants, particularly if they were financially independent of the deceased and/or were able to work, had a “heavy burden” in convincing the Court that reasonable provision had not been made for them. More recently, and certainly from 1999 onwards when Espinosa v Bourke [1999] 1 FLR 747 was decided, there has been a more open approach. That said, most successful adult child claimants have been able to demonstrate either a financial dependency, or a serious financial need even where they are in employment.

The real difficulties often arise when either or both of these factors are combined with a significant, and often acrimonious, family feud which has resulted in the son or daughter [for convenience, and because the Wright case involved a daughter, I will refer only to “daughter” in future, but sons are of course included] being excluded from the parent’s Will. In fact, the two most interesting 1975 Act adult child cases this year, Ilott v Mitson and Wright v Waters, have both taken place against a background of irreconcilable family differences, though with rather different causes and different results.

The first question for the Court is not whether the person who made the will was being “reasonable” in the sense of recognising a general/moral obligation to leave money within the family: testatrices are still able to, and still do, leave all their worldly goods to the donkey sanctuary if they so choose. The only litigable question is whether the provision under the Will (including where there is no provision at all) is reasonably sufficient for the claimant’s maintenance. Making that decision involves considering all of the relevant facts under section 3(1) of the 1975 Act, which I’ll discuss in a moment.  Continue reading

Sparks of Time, South Pacific, and a Harsh Result

In 2005, Mrs Rosemary Scott, from Longbenton near Newcastle-upon-Tyne, had money problems. She and her husband had separated and she was finding it difficult to manage. She owned her home, having bought it with her husband from North Tyneside Borough Council in 1999, and she had tried to sell it to raise money, but the only offer she had received was well below the asking price of £156,000.



Things must have looked pretty hopeless until someone put Mrs Scott in touch with a company called North East Property Buyers. NEPB offered to buy Mrs Scott’s property from her at a price of £135,000, but to allow her to continue to live at the property as a tenant at the discounted rent of £250 per calendar month. She would also receive a lump sum of £15,000 if she stayed as a tenant for ten years. She was to receive £24,000 from the net proceeds of sale. She told the NEPB representative that she wanted to live in the property indefinitely, and he assured her that she could stay as long as she liked and that if she died, the tenancy would be automatically transferred to her son and he would receive the £15,000 lump sum.

It was the answer to her prayers: but perhaps Mrs Scott would have been wise to heed St Teresa’s observation that more tears are shed over answered prayers than unanswered ones. NEPB agreed to pay her legal fees provided she used solicitors nominated by them, which she agreed to do. In the event she sold not to NEPB itself but to a nominee purchaser named Wilkinson. Ms Wilkinson financed the purchase by means of a buy to let loan from Southern Pacific Mortgages Ltd, and her solicitors also acted for Southern Pacific. During conveyancing, Ms Wilkinson’s solicitors asked about vacant possession and Mrs Scott’s solicitors replied that arrangements could be made directly with her “as to both handover of the keys and the time that vacant possession will be given”. On the Standard Conditions of Sale, neither seller nor buyer specified whether the property was being sold with vacant possession or subject to a tenancy. The sale contract, the execution of the legal charge and the completion of the TR1 all took place on the same day, namely August 12, 2005; the transfer and the charge were registered on 16 September.

Those of my readers who are wondering how a company called South Pacific Mortgages came to lend on a property which is considerably closer to the Bank of Dogger than to Bali H’ai may be interested to know that SPML was originally one of three English secured lending entities of Lehman Brothers, although it has been operated by another company since 2008.

On 16 August 2005 a company called “UK Property Buyers” acting as agents for Ms Wilkinson granted Mrs Scott a two-year assured shorthold tenancy at the reduced rent. After the term expired, the tenancy would become a monthly periodic tenancy terminable on not less than two months’ notice in writing. On the same day, Mrs Scott received a document promising that she could remain in the property as the tenant and that she would get the £15,000 loyalty payment after 10 years.

This was of course not what Mrs Scott had been promised before she sold her house, though she did not realise that at the time. The tenancy she had been granted was one with very limited security of tenure, and certainly did not come anywhere near a tenancy which would entitle her to remain in the property for as long as she wanted; it was also not capable of being inherited by succession. She was also not to know that the tenancy for life which she had initially been promised was not permitted by the terms of the SPML mortgage, and that SPML were unaware of that promise. Nor was she alone. By 2008 the Office of Fair Trading estimated that there were about 50,000 people in these “sale and leaseback” arrangements, many of whom were extremely vulnerable to eviction.

But by August 2008 Mrs Scott had her own problems. She received a letter from “North East Property Lettings” suggested that because of issues surrounding an office move, some tenants might have received letters from mortgage companies saying that their accounts were in arrears, but that this was incorrect. This seems to have been the first time that Mrs Scott was made aware that there might be a mortgage on the property. Then in about March or April 2009 she accidentally opened a letter addressed to Ms Wilkinson which had come to the house, and discovered that a possession order had been made on 17 March 2009. This was swiftly followed by a warrant of possession due to be executed on 20 May 2009. That warrant was then suspended so that Mrs Scott could be joined as a defendant in the possession proceedings. The main plank of her case was that she had an overriding interest as a person in actual occupation under the Land Registration Act 2002 which was binding on Southern Pacific. If she could not succeed on that point, then she would be evicted.

By this time there were quite a number of people in the same position as Mrs Scott: when the matter was heard by HHJ Behrens in Newcastle in 2010, she was one of nine sellers to NEPB who were facing eviction in the greater Newcastle area, and there were others farther afield. By the time the matter reached the Supreme Court in August of this year, Collins LJ noted that there were now 90 or so cases in the Newcastle area involving 20 different lenders, and many more in other parts of the country. They all revolved around the same issue, namely whether sellers such as Mrs Scott had an overriding interest under LRA 2002 which was binding on the mortgagee. Mrs Scott’s case was selected as a specimen case and it was therefore the history of her predicament which the Supreme Court looked at it in detail.
Before looking at the law, I bring to your attention the prefatory words of Collins LJ in the Supreme Court judgment on Mrs Scott’s case and the associated cases:

“It is impossible not to feel great sympathy with Mrs Scott and the former home owners in her position, who may have been not only the victims of a fraud which tricked them out of their homes, but also of unprofessional and dishonest behaviour by the solicitors appointed to act for them …. “ [paragraph 24, p. 6].

He further noted, at paragraph 88, that

“it is also important to emphasise that the scheme in the present case could not have worked if the solicitors for the vendors and the solicitors for the purchasers/lenders had complied with their professional obligations and proper and normal conveyancing practice … “ .

But none of this could lessen the impact of the harsh truth, which was and is that Mrs Scott and her fellow sellers do not have an overriding interest which is binding on Southern Pacific, and which therefore prevents Southern Pacific from obtaining possession against them. The result is therefore that she and her fellow-litigants will be evicted from their homes unless Collins LJ’s recommendations to mercy (“I express the hope that the lenders will, before finally enforcing their security, consider whether they are able to mitigate any hardship caused to the vendors”) [para 94] bear some fruit. Hale LJ also made some extremely interesting observations about this result, which I’ll come back to in due course. For now, let’s look at the law. Continue reading

Double Indemnities … and Exoneration

“Equity of exoneration”. It’s not exactly a phrase that whets the appetite, is it? Nonetheless, you should read on, because  it’s sometimes a weapon of considerable power in advising a client who has acted as a guarantor or surety. A recent case, Day v Shaw & Shaw [2014] EWHC 367 (Ch) (on BAILII here) has extended an existing line of thought that it’s a weapon of particular strength and force when considering “husbands and wives”.¹


When the principle is correctly applied, the difference to the surety (and also to the disappointed creditor) can be huge. In Day v Shaw, Mrs Shaw’s share of the net proceeds of sale doubled from approximately £22,000 in round figures to about £45,000. Nor was that all. In spite of the fact that there was sufficient equity in the property to repay his debt, a creditor [Mr Day], who had his judgment secured on the property under a charging order, got nothing at all.

Perhaps, therefore, it’s fairer to say that exoneration is an equity with a dull name, but interesting results!

The Facts

On a wide-angle view of the case, Mrs Shaw had acted as a guarantor of the debts of a business run by Mr Shaw and their daughter, Mrs Shergold. Mr Shaw and Mrs Shergold were directors of the company. There was some evidence at trial that Mrs Shaw owned shares in the company, though that point was never seriously pursued.

The story starts back in 1997, when Mr Day loaned a sum of money [not specified in the judgment] to Mr Shaw and Mrs Shergold. The loan was unsecured. No more is said about it than that, but we can assume it was loaned to them for the purposes of the business; it would seem, however, to have been loaned to them personally and not to the company. The repayment date was in 2007.

In 2002, Avon changed its business bankers from RBS to Barclays. On the same day in March 2002, Mr Shaw and Mrs Shergold executed personal guarantees to the Bank in respect of all debts owed by the company, and Mr and Mrs Shaw executed a second mortgage over their home. Avon was also a party to that second charge.

The terms of the charge referred to Avon as “the Principal Debtor” and to Mr and Mrs Shaw jointly as “the Mortgagor”.

The terms identified by Morgan J as material were:

  • Avon covenanted with Barclays that it would repay all monies on demand;
  • Mr and Mrs Shaw covenanted that they would pay to Barclays the sums due from Mr Shaw [including those due from him as guarantor];
  • This covenant expressly applied to any liability of Mr and Mrs Shaw jointly whether “entered into solely or jointly with any other person and whether as principal or surety”;
  • Mr and Mrs Shaw charged the property with the payment of all monies and liabilities covenanted to be paid under the charge whether by the Principal Debtor or by the Mortgagor.

As is fairly common, the Bank was (at least) doubly protected: it had a double indemnity in the personal guarantees of the directors, and it had security for Avon’s debt and any debt of Mr Shaw’s by way of the mortgage.  Continue reading

Variation of Settlements Revisited — and Don’t Bypass the Trial Judge!

She's off to the Court of Appeal, but she stopped at the trial judge first. From that State Library of New South Wales on Flickr Commons.

She’s off to the Court of Appeal, but she stopped at the trial judge first. From the State Library of New South Wales on Flickr Commons.

Mostyn J’s judgment in AB v CB & Trustees of the X Trust [2014] EWHC 2998 (Fam) [on BAILII here] is interesting for all sorts of reasons. The reason that has been most commonly reported is his very firm best–practice steer that applications for permission to appeal should always be made to the first–instance judge first and not directly to the Court of Appeal, and I’ll come back to that in a moment.

However, he also maintained the correctness of continuing to use the phrase “ancillary relief” rather than “financial remedies in divorce”; he returned again to the question of variation of settlements under MCA s. 24(1)(c) and in particular the question of what property or rights are included within a nuptial settlement; and he came up with an interesting variation of a nuptial settlement in this particular case, where the total amount of the fund was fairly modest.

All this, and he was also reported by the Mail as advising divorcing women to “keep away from new romances while battling their husbands for cash” [news flash: he didn’t]. So you probably need to know a bit about this one!

Don’t Bypass the Judge

The most important best–practice guidance related to appeals. What had happened in AB v CB was that the X Trustees had applied for permission to appeal directly to the Court of Appeal without making an application to Mostyn J on the day, or during the period afterwards when the parties were attempting to agree on transcription of the judgment. Mostyn J found this out via “a cryptic reference … in one of the emails” and directed that the application should come back before him as the first instance judge.

He was characteristically forthright about the principles involved, including a reminder that CPR 52.3(2) and the Practice Direction set out five reasons why the application should be made to the first instance judge first of all. You can see them in full at paragraph 52.3.4 of the White Book or in the judgment itself, but in essence they boil down to reasons of efficiency and economy. Asking the trial judge does no harm to either side; it reduces costs; and if the potential appellant fails, s/he can always have another “bite at the cherry” in the Court of Appeal.

To these, Mostyn J added the further reason that the first instance judge may very well be a specialist in the field. AB v CB had in fact been listed for hearing before a District Judge in Swansea before being moved into Mostyn J’s list; and, with no disrespect intended to that District Judge, it would hardly be possible to have obtained a more specialist first instance judge.

He remarked furthermore that the “increasingly beleaguered” Court of Appeal finds the rulings of first instance judges on applications for permission to appeal to be extremely helpful in identifying the merits or otherwise of that application. While this sounds to me like a double–edged development, the summation of the issues by an unyielding first–instance judge will at least mark out the area of battle and whether or not a death–blow was struck in the court below.

Because of these three combined elements – the existing guidance under CPR 52.3(2), the fact that some first-instance judges have a high degree of specialism, and because a formal refusal of an application for permission assists to some extent with the efficient administration of justice — Mostyn J noted that it was his “clear view that in the future, in the field of ancillary relief at the very least, an application for permission to appeal must always be made to the judge at first instance before an approach is made to the Court of Appeal” [77]. [my emphasis.]

The Return of Ancillary Relief

Note the use of the phrase “ancillary relief”. Yes, it has made a comeback; in fact, as Mostyn J notes, it never went away. “Ancillary relief”, he notes, is still the heading to Part 2 of the MCA 1973. Since we are all basing our claims on that statute, he implies, we are all able to call our claims “ancillary relief” rather than “financial remedies on divorce”, which is so cumbersome that it has been customarily shortened to “financial remedies”, a phrase so meaningless as to be entirely unhelpful. He is certainly calling them “ancillary relief” claims, as we see.

Of course, the objection to “ancillary relief” was that it was also a meaningless phrase. The main arguments as I understand them were (1) there are all sorts of claims which are ancillary to principal or main claims, and so “ancillary relief” did not inevitably connote divorce; and (2) lay clients found the phrase difficult to understand – a particular issue when so many of them are now representing themselves.

For myself, I’m not sure that swapping one relatively meaningless phrase for an even less meaningful phrase was the way to go; and in fact “ancillary relief” has become strictly entwined with the financial elements of divorce over the past 40 years. At least when you said “ancillary relief” all the lawyers in the room knew what you meant; when you say “financial remedy” you could just as well be talking about damages in tort. For the same reasons, I think it is even more confusing for the litigant in person.

Bravo, therefore, to Mostyn J for restoring some clarity of expression and enabling us to point out, if we wish to do so, that the use of the phrase “financial remedies in divorce” is not, in fact, mandatory.

Variation of the Nuptial Settlement under s.24(1)(c) MCA 1973

The variation of settlement aspects of the judgment were not quite so eye-catching, but they were of interest because this was a creative solution for a relatively small settlement fund: the total value was no more than £320,000.

This settlement was a trust: in fact it was a reasonably straightforward trust of land by which the former matrimonial home, a farmhouse, had been held for the benefit of the husband by three trustees: one trustee was CB’s father but the others were not family members. Mostyn J re-affirmed the definition of a marriage settlement as being “any arrangement which makes some sort of continuing provision for both or either of the parties to a marriage”. This is a deliberately broad definition and can, if the circumstances are right, include companies and their assets, as he had already made clear in DR v GR & Ors (Variation of Overseas Trusts)although that was not this case.

AB v CB was a case in which the matrimonial assets were very small, but the husband’s family background was one of considerable wealth. The couple owned no property together, and had very little in the way of joint investments. Contrary to reports in the press, the husband had not inherited anything from the family, although like Pip he clearly had great expectations. The FMH farmhouse was held by the three trustees on trust for the husband as principal beneficiary and for his children or remoter descendants. There was a power of appointment, which had not been used. The trust fund (which was comprised solely of the farmhouse) and its income was to be paid to CB during his lifetime and there was a power of advancement of the whole or part of the fund to CB. On the expiry of the trust period, the capital and income were to be held by the trustees for CB’s brother. As I have already noted, the farmhouse was worth £320,000 at the most.

Although this was all that was set out in the deed itself, correspondence contemporaneous with the creation of the trust indicated that the settlors had intended CB and AB to be able to occupy the farmhouse for their lives, and that thereafter the property would return to being part of the overall (very large) family landholding.

AB and CB then occupied the farmhouse rent-free for about five years, until their separation in 2012.

At trial, the Trustees argued that the trust did not constitute a nuptial settlement — or that if it did, the only nuptial element which the Court could vary was CB’s lifetime right to occupy. On the basis of the wide definition of “settlement” in DR v GR, Mostyn J was in no doubt that this was a nuptial settlement. The more troubling question for the Judge was whether the settlement extended to the property itself or simply to CB’s right to occupy, and here he gave some helpful indications of how what is, as I have said, a relatively common trust of land is to be approached.

It was the existence of the power to advance the whole of the property to CB which convinced the Judge that it was the property itself, and not simply CB’s right to occupy it, which was the subject of the settlement. He noted that if that power had not been there “I might have reached a different decision, it would then have been more borderline”. Obviously all of these cases turn on their own particular facts and it’s dangerous to lean too heavily on a single judgment. However, this type of “no–frills” trust of land crops up frequently, so it’s interesting to see the pivotal importance that the Judge placed on the express power of advancement of the whole fund.

Having reached these conclusions, Mostyn J was able to vary the settlement by dealing directly with the property: but how? His solution was to balance “the sharing principle in relation to the core element of the matrimonial property” and the existence of the trust and its purpose. He was clearly influenced by the abiding intention that the farmhouse should fall back into the family landholdings. On this basis he found that the wife, AB, was entitled to a further award out of the trust, but not on an outright basis: she would have a life interest in one-half of the fund. It seems from the report that the solution of a life interest was suggested by the Judge on the first day of the hearing rather than being advanced by any of the parties.

An award of a life interest in one-half of the fund would generally bring about a sale of the property as night follows day, but in this particular case, given the husband’s family background, there was a possibility that his family might step in to rescue the farmhouse in some way while meeting AB’s award.

This was one of the bases on which the trustees appealed the first instance judgment, asserting that “improper pressure” had been put on them by the judgment to satisfy the order. They failed in that assertion, as well as on a further assertion that the trustees did not have the assets available to make the provision; which, otherwise than by selling the farmhouse, appears to have been strictly correct. On the other hand, the background was that the extended family had really significant wealth, and CB’s father was one of the three trustees of the farmhouse trust of land.

On a practical note, the trustees had not particularly assisted their cause by calling evidence at trial that the farmhouse would be needed in due course for a herdsman, then on appeal reverting to an argument that CB needed the farmhouse to live in with his new family.

Mostyn J rejected the contention that the trustees had no access to other assets by pointing out that their legal costs, in the sum of £50,000 for the trial, were being met by CB’s father. As for improper pressure, he was robust: “I did nothing of the sort. I have given [the husband’s family] choices, that is true, but I have not put any pressure on this father, DB, or his brother, EB, to satisfy this award. If they want to satisfy the award and avoid the sale of the property that is up to them. If they choose not to then the property will be sold and the property will be converted into cash. In White v White, in the Court of Appeal, Lord Justice Thorpe memorably stated that the only difference between real property and cash is the sound of the auctioneer’s hammer. In this case, if the family do not rescue, the property will be sold.” [90].

This passage raises a number of intriguing points, among them whether this is a correct interpretation of Thorpe LJ’s comments in White, and indeed if so, whether Thorpe LJ was right. Whatever the answer to those questions,  the trustees failed on these grounds to obtain permission to appeal from Mostyn J; it will be interesting to see if they renew their application to the Court of Appeal.

One final point: the trustees also argued that by in effect ordering a sale of the farmhouse, the Judge had failed to take into account the interests of the other beneficiaries of the trust, including of course CB’s brother. This contention was rejected on the basis that the other beneficiaries retained their interests in the whole of the fund, including AB’s half, which would revert to the estate after death.

All in all, an interesting case to bear in mind as variation of settlement applications become more frequent.

Bank Accounts — New Guidance for Carers (and Banks)

The Bank of England, decorated probably for the coronation of Edward VII in 1902. From the Library of Congress collection on Flickr.

The Bank of England, decorated probably for the coronation of Edward VII in 1902. From the Library of Congress collection on Flickr.

The Law Society has joined with the British Banking Association, the Building Societies Association, and the OPG among others in producing two guidance booklets for those carers and family members trying to deal with a relative’s bank accounts when the relative is unable to do so for one reason or another. One short booklet is aimed at the carer, and is definitely worth passing on to clients; however for my money the really important booklet is the one giving guidance to banks and building societies about how to deal with third party requests in this context. From a practical point of view this area of law and finance has been chaotic, with different financial institutions requiring different items of evidence and proof, some of them completely unreasonable. I have not had an opportunity to look through the booklet in detail yet, so I can’t say whether the guidance given errs on the reasonable or unreasonable side, but the important thing for the practitioner is that there is (finally!) a code of guidance to which a bank or building society employee can be directed and asked to follow. At least we are getting to a point where both sides know what is required of them, and that’s a start. You can find the Law Society posting on the booklets here, and there are links to the booklets themselves at the bottom of the page.

Smile, You’re on WillCam

Portrait of William "Uncle Bill" Lundy, a veteran of the US Civil War, taken in Florida in 1955

Portrait of William “Uncle Bill” Lundy, a veteran of the US Civil War, taken in Florida in 1955

There have been a few articles this week about a study by Dr Claire Royston and Robert Hunter assessing lawyers’ ability to gauge testamentary capacity. The results of the study were alarming, to put it mildly. Participating psychiatrists and solicitors were shown two [scripted and dramatised] client interviews with a businessman in late middle age looking to make a will: one demonstrating a good interview technique and the other, ahem, not. The client had suffered a stroke, which he apparently disclosed in both interviews, but he was still the possessor of what is described in the reports rather charmingly as a “social veneer”.  However, there were sufficient clues for an alert lawyer to pick up that he might not have testamentary capacity, and in fact he did not.

For me, the really striking thing about the study is that when shown the “bad” interview technique, only 2% of lawyers spotted that the client potentially had a mental disorder and only 33% identified that there was a capacity problem. Robert Hunter commented that it is easy for solicitors “to confuse social graces with mental ability”, a view which I thoroughly endorse. When shown the “good” interview, 90% of the solicitors identified that there was a testamentary capacity problem.

This is an eloquent demonstration of how vital it is, when taking instructions for wills (and I would suggest powers of attorney too) to get the interview technique right. It is all too easy to be lulled into a false sense of security by a client who is telling you that s/he had a stroke six months ago but has made a marvellous recovery, particularly if s/he is appropriately chatty and forthcoming. Everyday politeness does not give you any real idea of whether s/he is in a fit mental state to make dispositions and can mislead you into thinking that the client is on the ball.

More than anything else, this study reinforces the point that taking will instructions involves connecting with the client on a friendly but objective level, and being watchful about what you see and hear. Robert Hunter commented that the “golden rule” that, when drawing up a will for an elderly person or someone who is seriously ill, a solicitor should try where possible to have the will witnessed by a medical practitioner, is often ignored without good reason. Although GPs are sadly not as connected with their patients now as they were in days gone by, a family doctor will often know right away whether a prospective testator is not on their usual mental form.

It is an unfortunate by-blow of recessionary times that disappointed legatees are much more likely to litigate over a will. In the past couple of weeks alone, we have had Paynter v HinchKloosman v Aylen and Schrader v Schrader, some at least of which I hope to note more fully in the next week or so. There is a higher probability these days that the capacity of a testator will be at least queried and probably scrutinised.

The report apparently made five recommendations, including enhanced training in interview techniques for solicitors; creation of an association of specially trained solicitors to take instructions in problematic cases; and an increased awareness of mental capacity issues in this area. I enthusiastically support all of those, though I’m not so sure about the recommendation that there should be professional sanctions for a failure to observe the golden rule “without good reason”. That would in practice make medical witnessing more or less de rigueur in the execution of any elderly person’s will, and it seems to me that the more important factor is for the will draftsperson to be alert and to listen and observe carefully and sensitively rather than simply “doctor up”.

The last recommendation is that there should be videotaping of testamentary interviews, about which I have my doubts. There is always the forthright and flamboyant (or even defiant) testator who will enjoy the experience of giving instructions on camera, but most of us are reluctant enough to be bit-players in wedding videos, let alone starring in our own Truman Show in which we give what are often the results of intensely private and deep thought. This is probably particularly the case where the testator knows that somebody in the family is going to be disappointed by the effect of the Will. I suspect that few people really want to be video’ed upsetting a close relative’s expectations, however well-deserved they believe the comeuppance to be. It is going to be a matter for individual testators, obviously, but it seems to me to hold the danger of putting the desire for certainty above consideration for the elderly or dying person.

You may well now be saying, “Gosh, this seems like an interesting report: where can I read it?” My answer, after several attempts, is that I don’t know. It is possibly my IT ineptitude [should that be ineptITude?], but I can only find secondhand accounts of it and not the source material. If you have better luck, let me know.



Old and New Sheffield, Side by Side

Park Hill Flats, Sheffield; Image by Christopher Thomond from the Guardian

If you’ve ever arrived in Sheffield via the M1, you’ll know that the Park Hill Flats dominate the southern entrance to the city. In their unregenerated state, they were the poster kids for the caption “It’s Grim Up North”. The Guardian’s “Northern Eye” feature today has a great portfolio of shots of the flats, now partly redeveloped by Urban Splash, with a bit of their history thrown in. The portfolio is great in toto, but this is the standout shot: the still undeveloped blocks right up against the jolly colourful developed ones. Note the bridge from the old world to the new. However, as a commenter on the site has pithily remarked,  in the current context even 1970s brutalist social housing provision is better than no social housing provision at all. Think on.

Form JO – Law Society Issues Practice Note

Mr Jaggers: No nonsense about joint ownership in his day.

Mr Jaggers: No nonsense about joint ownership in his day.

Following the publication by the Land Registry of Form JO, which I covered in my previous post here, the Law Society has now issued a practice note advising conveyancing solicitors on a number of matters to be taken into account when dealing with joint purchasers. It’s all good, sensible stuff and can be found here. Of course there are some problems that Form JO cannot solve, most notably the concealed or phantom purchaser and the “ambulatory trust” whose existence was confirmed in Kernott. But it’s a start.