5 Stone Buildings Trusts, Estates and Court of Protection Caselaw Update – March 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, in order to help practitioners keep up to date. For February 2019, Simon Douglas has covered the first decision in Re Bhusate (with citation [2018] EWHC 2362) and Wellesley v Earl Cowley [2019] EWHC 11.

Re Bhusate [2018] EWHC 2362

The case concerned the administration of the estate of Kashinath Bhusate (“the Deceased”), who died intestate in 1990. The main asset in his estate was a family home in London (“the Property”). At the time of his death the Deceased had the entire beneficial interest in the Property and was the sole registered proprietor.

The Claimant was the Deceased’s third wife and was married to the Deceased at the time of his death (although the status of their marriage had been called into question by some of the Defendants). The Second to Fifth Defendants (“the Children”) were the children of the Deceased’s first marriage. The Sixth Defendant was the only child of the Claimant and the Deceased.

After the Deceased’s death the Claimant continued to live in the Property. In 1991 the Claimant and the First Defendant took out letters of administration. As the widow of the Deceased, the Claimant was entitled to a statutory legacy of £75,000 and a life interest in one half of the residue (which the Claimant elected to capitalise). The Children and the sixth Defendant were entitled to the residue of the estate in equal shares.

The Property was marketed for sale in 1994, and a single offer for £120,000 was made. The significance of this sum is that if the sale had proceeded at that stage the Claimant would have been entitled to the entire proceeds in satisfaction of her statutory legacy. However, the Children discouraged the Claimant from selling at this point as it was felt that the price was too low.

Thereafter very little was done to administer the Deceased’s estate. At around the time of the aborted sale in 1994, various noises were made by the Children about the need for the Claimant to pay an occupation rent, although these claims were never followed through. Apart from this, however, the Children appear to have lost any interest in the Property, and there was evidence that some had intimated that it belonged to the Claimant.

The Claimant continued to live in the Property and maintained it. She was supported by the Sixth Defendant, who spent considerable sums over the years in mortgage repayments and on the general maintenance of the Property. There was little contact with the Children.

In 2018, almost three decades since the death of the Deceased, the Deceased remained registered as the owner of the Property and the Children brought a claim for the due administration of the estate. Their argument was simply that the estate had never been properly administered, and that the Claimant would need to sell the Property and distribute the proceeds amongst the Children and the Sixth Defendant as the residuary beneficiaries.

One of the difficulties faced by the Claimant was that her entitlements and the entitlements of the Children under the intestacy rules were affected in different ways by the Limitation Act 1980. The Claimant’s statutory entitlements were in the nature of a debt against the estate, which was time-barred after a period of 12 years under s. 22 of the Act. By contrast, the claims of the Children were of the nature of a beneficial interest in the estate, and time did not run against these interests (Green v Gaul [2007] 1 WLR 591). All that was left for her to do, it was argued, was to distribute the estate amongst the residuary beneficiaries.

In response the Claimant argued that in the years since the Deceased’s death she had acquired a beneficial interest in the Property (either solely, or jointly with the Sixth Defendant). Her route to a beneficial interest was put on different grounds, but her principal argument was that she had acquired an interest under a common intention constructive trust (“CICT”).

CICTs typically arise in a domestic context where the beneficial interests of a co-habiting couple are either acquired or varied according to the common intention of the parties. In the present case none of the parties had a beneficial interest in the land in a strict sense, but merely a chose in action against the Claimant for the due administration of the estate. Chief Master Marsh held that there was no reason in principle why a CICT could not arise over such interests. However, on the facts he found that no such trust arose. His reasons for rejecting the claim suggest it will always be difficult to find a CICT over an unadministered estate.

The Chief Master noted the difference between the “domestic” context of the leading CICT cases, such as Jones v Kenott [2011] UKSC 53, and the present case. There is a superficial similarity between the present case and Jones v Kernott in that, in the latter case, the claimant had “abandoned” his interest by leaving the family home and ceasing to contribute towards the mortgage. Whereas it could be inferred from such conduct that the claimant in Jones v Kernott had agreed to vary his interest, no such inference was available in the present case. The stand-offish attitude of the Children was entirely consistent with their position as beneficiaries of an unadministered estate. Similarly, the conduct of the Claimant and the Sixth Defendant in maintaining and improving the Property were not actions from which an agreement could be inferred: they were referable to the Claimant’s duty as an administrator to preserve the estate for the benefit of the Children.

Whilst the case does recognise that a CICT can be applied to an unadministered estate, Chief Master Marsh’s reasons for rejecting it on the facts suggests that such claims will rarely, if ever, succeed. The relationship between a personal representative and a beneficiary of the estate is far removed from that of a co-habiting couple. In particular, the dis-interested and passive attitude of the beneficiary cannot be taken as the tacit consent to the variation of his interest. Save in cases where there is a clear agreement, it will be difficult to infer a common intention from conduct.

The outcome was particularly harsh for the Claimant. She ended up without a home, no beneficial interest in the Property and she had lost her statutory legacy through the passage of time. The difficulty for the Claimant was that her claim fell between a number of stools. If one shifts the facts slightly, the Claimant may have been able to pick and choose between several remedies, including estoppel, adverse possession, laches or constructive trusts. The fact that the estate was unadministered prevented any of these remedies from applying.  Perhaps what is really missing in such cases is a doctrine of “abandonment”. The Children received the windfall of increased property prices despite showing no interest in the house for almost three decades. They could, in the normal sense of the word, be said to have “abandoned” their collective interests. Yet save for some unusual cases involving chattels and easements, there is no general concept of abandonment in the common law, and the argument was not available to the Claimant in the case.

Wellesley v Earl Cowley [2019] EWHC 11

The claim was brought by Ms Tara Wellesley against the estate of her father, the 7thEarl Cowley (“the Deceased”), under the Inheritance (Provision for Family and Dependants) Act 1975. The Claimant was the eldest daughter of the late Earl, and the Defendants were her brother, step-sisters and the fourth wife of the deceased. The estate was worth £1,300,000. The only provision that had been made for the Claimant was a legacy of £20,000.

The Claimant had suffered a prolonged estrangement from the Deceased, having had little contact for some 35 years. The evidence at trial showed that the Claimant had rejected the late Earl’s “aristocratic values”, and had led a chaotic life particularly as a young person (although it was accepted by the Defendants that the Claimant’s difficult upbringing was partly to blame for this). The late Earl had disapproved of the Claimant’s lifestyle and, when early attempts to help her failed, the relationship broke down and was never repaired before his death.

The Claimant had not been in full-time employment for several years and claimed that disability (particularly ADHD) prevented her from working. Whilst this was not accepted by the Court, it did find that the Claimant would need occupational therapy and support to return to work. The Claimant claimed for a substantial part of the estate, arguing that she needed such funds as would allow her to train and work as a fine artist. The claim failed in its entirety.

The influence of Ilott v Blue Cross [2017] UKSC 17 on the decision is clear. Deputy Master Linwood emphasised the principle that the Deceased enjoyed testamentary freedom: provided he had capacity, the Deceased had every right to consider the proper objects of his bounty. Further, insofar as the 1975 Act restricts the Deceased’s testamentary freedom, it does this in a limited way by reference to the “maintenance” standard. Such has always been the law, but it can now be stated with confidence following Ilott v Blue Cross.

In applying the section 3 factors, it was clear that the claim was bound to fail. Whilst the Claimant had limited income and was reliant upon state benefits, she was able to live within her means. Although her evidence was that that she led a “meagre existence”, she could not show a deficit between her income and expenditure.

In terms of the financial needs of the other beneficiaries, it was accepted that they had none, with each being financially independent and, in most cases, reasonably well off. This fact was not enough to tip the balance in favour of the Claimant. As Deputy Master Linwood noted, whereas the beneficiaries in Ilott v Blue Cross were charities with whom the deceased in that case had no prior relationship, the beneficiaries in this case were members of the Deceased’s family who were entirely proper objects of the Deceased’s bounty.

Finally, the Deputy Master held that there was no moral obligation to provide maintenance for the Deceased. As in Ilott v Blue Cross, the long estrangement between the parties meant that the Claimant had no reasonable expectation of financial provision on the Deceased’s death.

Of interest is the rejection of two novel arguments advanced by the Claimant. The first concerns the method of quantification. Had the Claimant got over the first hurdle of establishing that the will did not make reasonable financial provision for her maintenance (which it did), it would have been necessary for the court to quantify her claim.  Counsel for the Claimant argued that a reasonable approach to quantification, particularly where there is a large estate, is a “percentage” approach. It was argued that reasonable provision for the Claimant would have been in the region of 10-13% of the value of the estate.

A “percentage” approach looks similar to the civilian concept of legitim, where a beneficiary can show an entitlement to a forced portion of a deceased’s estate. This is entirely at odds with the concept of “maintenance”, which is designed to meet the applicant’s financial needs.  Rejecting the Claimant’s argument, Deputy Master Linwood opined:

the 1975 Act was never meant to provide in effect by way of an appeal against provision or lack of it in a will of a sum calculated on fair sharing according to need – here, maintenance. There is no system of fixed heirship or compulsory sharing as in certain civil law systems. The starting point is testamentary freedom.” [196]

The second (and even more) novel approach of the Claimant was to invoke Human Rights arguments. In essence, it was argued that the restrictive approach to the construction of the 1975 Act was contrary to several provisions of the Human Rights Act. It was claimed that the Deceased had discriminated against the Claimant in treating her less favourably than her siblings and the court would be endorsing such discrimination should it uphold the validity of the will. Deputy Master Linwood rejected the argument on the basis that none of the Defendants were a public authority. Further, he held that in order to make an argument based upon the Human Rights Act, it was incumbent upon the Claimant to show that the 1975 Act “…does not comply with the Convention in the sense of s3(1) of the Human Rights Act …” [59] The Claimant had failed to do this.

The case is more evidence of the difficulty faced by estranged children in bringing claims under the 1975 Act. Not even, it seems, the Human Rights Act can save such claims from the restrictive approach to 1975 Acts ushered in by Ilott v Blue Cross.