5 Stone Buildings Trusts, Estates and Court of Protection Caselaw Update – April 2019

Each month on our website we provide summaries of recent important decisions in our key practice areas of trusts, estates and the Court of Protection. This update is provided by Mark Baxter.

This month we consider two decisions, each of which concerns an issue that will be met regularly by our readers. The first is a return visit to one of last month’s cases, Re Bhusate, but this more recent decision (with citation [2019] EWHC 470 (Ch)) concerns permission to bring an Inheritance Act out of claim – something of a hot topic! The second decision (Moursi v Doherty [2019] EWHC 830 (Ch)) is a claim by Personal Representatives to set aside a transaction by the testator before death on the grounds of undue influence.

Re Bhusate [2019] EWHC 470 (Ch)

Readers will recall that in the earlier decision discussed last month, Mrs Bhusate, the widow, failed in her attempt to establish a beneficial interest in the matrimonial home, which had been solely owned by the Deceased at his death, and in which Mrs Bhusate had continued to live for the 28 years since the Deceased’s death, during which period the estate was not administered (notwithstanding a grant of letters of administration had been made to Mrs Bhusate and one of her step-children).

As was noted last month, that decision had rather harsh consequences for Mrs Bhusate, in that she had no right to, or to live in, the matrimonial home she had shared with her late husband, in which she had then lived alone for decades after his death, spending her own money maintaining and improving it.

The rejection of Mrs Bhusate’s claim to a beneficial interest (and the barring of her claim to her statutory legacy by limitation) – which was actually by way of a successful strike-out application – left her with nothing but an Inheritance Act claim. That claim had actually been included in her original claim form with her other claims, but consideration of it had been stood over to a separate hearing after the strike-out application was heard. That claim required the Court’s permission under Section 4, and was almost 26 years out of time.

The Section 4 permission application was heard by Chief Master Marsh before the controversial decision of Mostyn J in Cowan v Foreman [2019] EWHC 349 (Fam), but judgment was given afterwards. Of course, two of the most commented upon aspects of Cowan– the disapproval of standstill agreements and the suggestion that being an object of a discretionary trust was reasonable provision for a spouse – were not in play here.

Chief Master Marsh, however, did not rely on those distinguishing features though in rejecting square-on and in very short order the reasoning in Cowan which equated the approach under Section 4 to relief from sanctions under the CPR. He said “I do not consider [that approach] is right… To do so, I suggest, involves conflating issues that, if they are related, are at best distant cousins.”

Instead, the Chief Master took the orthodox approach of applying the principles to guide the exercise of the Court’s discretion in Re Salmon [1981] Ch 167 and Berger v Berger [2013] EWCA Civ 1305, and the cases that consider and apply those decisions.

Permission was granted. Given that absent her claim Mrs Bhusate would be homeless and with no capital, the merits were clearly in her favour, and she had no other remedy (having had her other claims rejected). Perhaps most importantly though, the Chief Master considered that she was in no way the architect of her own delay: she was unsophisticated, had very little English, and faced implacable hostility from her step-children – there was no realistic prospect of her progressing the administration in those circumstances.

It might also be noted – as the Chief Master himself noted early in the judgment, but did not repeat in summarising his reasons – that there is authority to the effect that the Section 4 time limit and discretion exists for the purpose avoiding unnecessary delay to the administration of estate by tardy Inheritance Act claims (Nesheim v Kosa [2006] EWHC 2710 (Ch) decided by Briggs J), but already there had been inordinate delay in which the step-children defendant-beneficiaries had been complicit.

Although the facts are rather different, this decision shows that the consequence of Cowan, even if that decision at first instance stands, is that there is not a higher hurdle for late claimants to overcome on a Section 4 permission application due to the application of ‘relief from sanctions’ principles (at least in the Chancery Division): it remains a question of judicial discretion. The exercise of that discretion will turn on the facts of each case, but the merits of the underlying claim and the reason for the delay appear to continue to carry significant weight.

A copy of the judgment can be found below.

Moursi v Doherty [2019] EWHC 830 (Ch)

This is an unusual example of summary judgment being granted to the Claimant in a claim to have a transaction set aside on the basis of (presumed) undue influence: a claim which turns significantly on the evidence.

The Deceased and the Defendant met when she was 78 and he was 33, when he did some gardening and property repairs for her. They formed a close friendship, and two years later the Deceased sold her home to the Defendant for £70,000 and he executed a declaration of trust for her benefit for life. Expert evidence had established that the property was worth £275,000 unencumbered, or £191,500 subject to the life interest. The Deceased died five years later from pneumonia and dementia.

The application came on before Master Price. He noted that if a presumption of undue influence is established by (i) a relationship of trust and confidence, and (ii) a transaction that calls for an explanation, then the burden is on the Defendant to show that the transaction was entered into with full free and informed consent.

As a general proposition, that is most easily done by proving that the disponer received adequate and independent legal advice. In this case the Deceased did have a solicitor act for her in the sale, but the same solicitor also acted for the Defendant. The solicitors appreciated the sale was at an undervalue, and this was explained by the Deceased on the basis that she had some financial difficulties and that she preferred to generate the ready money quickly (as well as that her and the Defendant had known each other for 10 years and were in love – he averred that there was no romantic or sexual element to their relationship). The Deceased had also procured a letter from her GP recording that she was in ‘a sound state of mind’, but had informed him that she was selling because she was moving in with her partner, who she said was only 20 years her junior.

In addition to the Deceased’s own (deliberate or innocent) misinformation, the Defendant had not informed her or the solicitors that he and his brother had previously bought the house of another woman at an undervalue and settled a claim bought by that woman’s Deputy by payment of a substantial sum.

As the Master put it, the facts which would establish a presumption of undue influence not being in dispute, “it would at the very least be necessary to show that [the Deceased] was advised independently as to her options, and such advice should have been given independently and in the knowledge of the defendant’s character.”

Accordingly, as it was established that was not the case, there was “no evidence to displace the presumption since the transaction was preceded by inadequate and uninformed advice. There [was] moreover no realistic prospect that the defendant [could] improve upon this and he [had] deployed no evidence in this regard.” Thus, the Defendant had “no realistic prospect of a successful defence to this claim, were it to proceed to trial.”

The hurdle for summary judgment is high, and litigants are right to be extremely wary of seeking summary judgment in cases that will turn on the evidence. Those basic propositions must, though, yield to two particular considerations which may weigh in favour of such an application, namely (i) who bears the burden of proof (normally it is the applicant, but if it is the respondent, it is they who face the high hurdle), and (ii) which relevant facts are “common ground or incontrovertible, by evidence which establishes them, or by reason of inherent incredibility” (if it is facts that mean the respondent’s case cannot be made out, summary judgment can be granted, even if at trial there would be significant disputes as to other, more peripheral, facts).

A copy of the judgment can be found below.