Cases of Interest – September
Each month we will be noting recent decisions in our areas of practice. This month we note the decision of the Privy Council in Whitlock v Moree, a decision concerning ownership of jointly-owned property and in particular joint bank accounts.
 UKPC 44
Mr Lennard was successful businessman. In November 2009, Mr Lennard, who was in his mid-90s, visited First Caribbean International Bank (Bahamas) Ltd for the purpose of joining his friend, Mr Moree, to his existing bank account. This was achieved by Mr Lennard and Mr Moree signing the bank’s standard joint account opening form.
The standard form signed by Mr Lennard and Mr Moree was headed “Personal Account and Services Application”. The first and second pages contained a number of printed boxes in which were inserted in handwriting the name and other details of the account holders. In a box headed “state purpose of account” the bank clerk had written “to pay utilities”. Thereafter, there followed one and a half pages of 23 closely printed terms, covering matters such as the overdraft facility. Immediately above Mr Lennard and Mr Moree’s signatures there was a declaration in the following terms:
“I hereby declare that the information provided by me in this application is correct and complete to the best of my knowledge and that I have received, read, understood and accepted the agreement (detailed in section 5 above) and the ‘Disclosure Documentation’ and shall be bound by its terms.”
Included in section 5 of the bank’s standard form, clause 20 provided as follows:
“JOINT TENANCY: Unless otherwise agreed in writing, all money which is now or may later be credited to the Account (including all interest) is our joint property with the right of survivorship. That means that if one of us dies, all money in the Account automatically becomes the property of the other account holder(s). In order to make this legally effective, we each assign such money to the other account holder (or the others jointly if there is more than one other account holder).”
Mr Lennard died in February 2010, at which point the joint account had a balance of $190,000. Mr Lennard’s estate (of which Mr Moree was a beneficiary and one of two executors) sought a declaration of beneficial ownership of the choose in action against the bank as debtor.
The only evidence about what, if anything was explained to Mr Lennard and Mr Moree about the consequences of opening the joint account was a witness statement in which Mr Moree stated that he and Mr Lennard: “understood…that we were converting his personal account to a joint account between us, so that upon his death the amounts held on that account became my property”.
The Bahamian courts took the traditional approach to determining beneficial interests in a joint account held by strangers in equity where one party had provided the funds, namely application of the rebuttable presumption of resulting trust in favour of Mr Lennard’s estate.
At first instance, the Chief Justice considered Mr Moree’s evidence self-serving and that he had failed to rebut the presumption of resulting trust. The Court of Appeal reached the opposite conclusion, emphasising the close relationship between Mr Lennard and Mr Moree, the terms of Mr Moree’s will and the terms of clause 20 of the bank’s standard form.
The Privy Council was unanimous that there had been insufficient grounds for the Bahamian Court of Appeal to overturn the Chief Justice’s assessment of the evidence. However, by a majority of three to two, the Privy Council upheld the Court of Appeal’s decision on a point of law, determining that clause 20, on its true construction, was determinative of Mr Lennard and Mr Moree’s beneficial ownership.
The majority (Lord Briggs, Lady Hale and Lord Sumption) stated that the common law dicta was not easy to reconcile and that it was therefore necessary to resort to “first principles”, applying the “equitable toolkit” used to resolve disputes as to the beneficial ownership of land and other property. In particular, the majority referred to well-known cases such as Vandervell v IRC  2 AC 291 and Goodman v Gallant  Fam 106 as authority for the proposition that a statement as to beneficial ownership in an instrument of transfer is conclusive, subject to the usual equitable challenges of fraud, undue influence, misrepresentation and rectification and to the common law doctrines of non est factum and mistake. Accordingly, it was held that where, on its true construction, an account opening document declares the holders’ beneficial interests, it is conclusive. The consequence of such a finding is that, save where there is an attempt to set the instrument aside, the understanding of the account holders is irrelevant and there is no room for the doctrine of resulting trusts. Moreover, in the majority’s judgment, such a document is conclusive not because it provided incontrovertible proof of the parties’ subjective intentions, but because it is itself determinative of the beneficial interests.
In this case, the majority considered clause 20 to contain a clear declaration of Mr Lennard and Mr Moree’s beneficial interests. Emphasis was placed on the following:
- Use of the phrases: “Joint Tenancy”, “our joint property with the right of survivorship” and “if one of us dies, all money in the Account automatically becomes the property of the other account holder(s)”.
- Private customers of a bank do not go around, like lawyers, thinking constantly of distinctions between the legal title and beneficial ownership when dealing with their property.
- Even to a lawyer, the use of “Joint Tenancy” and “unless otherwise agreed in writing” would suggest a beneficial joint tenancy because there must be a legal joint tenancy and there is no means of agreeing otherwise.
- The stated intention, “to pay utilities”, was not inconsistent with a beneficial joint tenancy, still less with survivorship.
The minority (Lord Carnwath and Lord Wilson) dissented in strong terms. While agreeing that an account opening document is conclusive if, on its true construction, it makes a declaration as to the beneficial ownership of the account, the minority considered it necessary to construe clause 20 in the context of the established principles and suggested the majority’s attempt to provide “a plain man’s guide to the law of co-ownership…so that the common law of The Bahamas and England may be set on the true path, whatever divergences there may be in other parts of the common law world” to be misleading and likely to divert attention from the particular characteristics of a joint bank account.
“55 …the emphasis placed by the majority on authorities from other property contexts, such as Vandervell v Inland Revenue Commission  2 AC 291 and Stack v Dowden  UKHL 17;  2 AC 432, seems to me with respect misleading, in that it tends to divert attention from the particular characteristics of a joint banking account, as compared to other forms of property transaction. For example, in Vandervell there was no doubt that the purpose of the relevant transaction was to effect a permanent transfer of property; the only issue was as to the effect in law of that transfer. By contrast, from the point of view of the customer, the purpose of a bank account is not generally seen as to effect the transfer of property in the longer term, but rather to provide a convenient vehicle for holding and dealing in money for the time-being…The ordinary expectation is that, rather than being intended to effect a permanent transfer of value from one customer to the other, it is intended as no more than a convenient vehicle for their co-operation (for whatever reasons) in handling funds for the time-being. Issues of construction should be approached against that background.”
In addition to emphasising the subjective intentions of parties opening joint bank accounts, the minority were keen to emphasise the context in which banks draft standard account opening forms, namely their concern to ensure the legal authority of the holders without regard to beneficial ownership. In this respect, the speech of Rand J in the Canadian Supreme Court decision of Niles v Lake  SCR 294 was approved:
“69 Rand J considered that the language of the clause made it clear that what was intended was the creation of a relationship to the bank “in such terms as would preclude any challenge to the irrevocable authority of either of the depositors to deal with the account in unqualified fashion”, and to remove the possibility of controversy involving the bank (p 307). References in the clause to “joint property” and “assignment” were “constituent elements of a conclusive relation to the bank”, but irrelevant to “questions of ownership of funds dehors the bank”:
‘To hold otherwise would, as the result of the bank’s requirement, deny to a depositor the privilege of opening a joint account for the purpose of convenience: that, in other words, the bank would dictate the terms of beneficial ownership, irrelevant to its protection, as a condition of that form of accommodation. The common sense of the situation is confirmed by the language of the agreement in negativing such a construction.’ (pp 308-309)”
With this context in mind, the minority concluded that clause 20 dealt only with Mr Lennard and Mr Moree’s legal ownership. Emphasis was placed on the following:
- Clause 20 makes no reference to beneficial ownership.
- While it may be true that private customers may not go around thinking constantly of distinctions between legal title and beneficial ownership, it is equally that case that ordinary people do not use language like that used in clause 20 to make a personal gift, particularly of some $190,000.
- Clause 20 cannot be read in isolation from the purpose of the agreement as a whole, the purpose of which was to deal with matters with which the bank was concerned). The magnetic factor in this respect is the use of a standard form prepared by the bank with no input from the account holders.
- Any suggestion that the purpose of the agreement was to deal with the beneficial interest is negated by the stated purpose – “to pay utilities”. Such handwritten additions should bear added weight in the Court’s interpretation.
It is respectfully submitted that the majority took the wrong course in this case. Equity intervened to mollify the common law position that jointly held choses in action accrued to the survivor. It did so with reference to the parties’ intentions. A move away from this fundamental principle is regrettable and may cause injustice or increased legal costs in many of the common circumstances in which joint bank accounts are held by strangers in equity (for example elderly individuals who add a family friend or carer to their account for convenience).
 EWCOP 8
In this case, a solicitor (“NSC”) had been appointed the property and affairs deputy for over one hundred persons, the majority of whom were in receipt of means tested benefits. NSC applied to be appointed AR’s deputy for property and affairs. AR was in receipt of means tested benefits and NSC sought an order for remuneration pursuant to the last of a number of successive bulk orders made in respect of his remuneration as deputy. The remuneration order in question was made by an authorised court officer on 24th November 2014 and provided inter alia as follows:
“[NSC] is authorised to charge the persons in receipt of means assessed benefits for whom NSC has been appointed deputy remuneration for work incurred in respect of acting as deputy in accordance with the following terms:
Category 1: Work up to and including the date upon which the court makes an order appointing a deputy for property and affairs £850 plus VAT.
Category 2: Annual management fee for acting as deputy payable on the anniversary of the order appointing a deputy £650 plus VAT.
Category 3: Where applicable, an annual fee for managing the person’s tenancy and accommodation of £65 plus VAT.
Category 4: Where applicable an annual fee for managing any direct payments received by NSC from the local authority of £110 plus VAT.”
Accordingly, NSC sought remuneration in excess of the cap imposed by PD 19B. On this basis and given his decision in The Friendly Trusts Bulk Application  EWCOP 40, DJ Eldergill raised concerns about the 24th November 2014 order and the terms of NSC’s remuneration more generally. More particularly, when inviting the Public Guardian to participate in the proceedings, the District Judge raised inter alia the following issues: (1) the fact the 24th November 2014 order permitted charging in excess of PD 19B; (2) the fact the 24th November 2014 order authorised remuneration for categories of work not permitted by PD 19B; and (3) the fact the 24th November 2014 order authorised a detailed assessment in all cases whereas a specific order is required under PD 19B if P’s assets are below £16,000. A number of procedural irregularities were also identified. Given the issues raised, the case was transferred to be determined by the Vice President of the Court of Protection, Charles J.
Charles J agreed with the position advanced by NSC and the Public Guardian, namely that there is no presumption of, or a starting point or bias in favour of, remuneration being authorised pursuant to PD 19B (contrary to a widely held view among Court of Protection practitioners and members of the judiciary). Accordingly, DJ Eldergill had fallen into error so far as he held that there was such a presumption in The Friendly Trusts Bulk Application. Charles J held that the Court is required to decide what is in the best interests of each P pursuant to MCA 2005. Otherwise, the Court’s discretion is unfettered and PD 19B merely provides a scheme of remuneration which can be incorporated into a deputyship order by reference should the court determine to direct remuneration in accordance with its terms.
Moreover, there is nothing in MCA 2005 or COPR 2017, rule 19.13 to prevent an order authorising a deputy to receive a fixed sum for a particular item of work not included in PD 19B or to prevent remuneration in excess of permitted pursuant to PD 19B. The unfettered nature of the Court’s discretion also means there is no prohibition on an order for detailed assessment in cases where P had assets below £16,000.
Notwithstanding this decision as to the width of the Court’s discretion when ordering remuneration, Charles J determined that the 24th November 2014 order and its predecessors could no longer be relied on, owing to what his Lordship described as “surprising, unfortunate and serious flaws in the substantive approach that was taken” and in particular the Court’s failure to separately consider the best interests of each P concerned.
“20 …The informality of the procedure adopted may have been founded on some pragmatic considerations and the historic approach of the old Court of Protection before the MCA. However, in my view the flaws are not confined to issues that can properly be described as procedural flaws that could or should not found the revisiting or setting aside of the ACO orders [the 24th November 2014 order and its predecessors].
21 To my mind, it is remarkable that the COP made the ACO orders in the manner that it did and in particular that it did so:
- i) without either a schedule identifying the persons to which they applied or evidence relating to each P in receipt of means assessed benefits (including whether the remuneration was cost neutral for that P) to whom they applied, and so in a generic form, and
- ii) in respect of future appointments of Mr Cawthorn [NSC] as a property and affairs deputy.
The same can be said of the addition of a number of Ps to the order dated 15 March 2013 if, as appears to be the case, no evidence was put before the COP relating to each of those Ps.
25 In my judgment, the generic and purported future effect of the ACO orders shows that in making those orders the COP failed to properly address and so have proper regard to the best interests of each P and so contravened a fundamental principle:
- i) of the MCA, and indeed any approach that is founded on the best interests of an individual, and
- ii) more generally, of the fair administration of justice.
These fundamental flaws cannot be excused by pragmatic considerations and cannot properly be described as procedural. Rather, they are surprising, unfortunate and serious flaws in the substantive approach that was taken.
26 Now that these flaws have been discovered I have concluded that the ACO orders should no longer be relied on.”
In the circumstances, Charles J ordered a review of NSC’s remuneration in every case where NSC acted as a deputy. This exercise was to be undertaken without the need to pay a Court fee because, in Charles J’s determination, the Court carried considerable responsibility for the issues to be addressed. Indeed, Charles J had indicated an intention to join the Crown for the purpose of making a non-party costs order to reflect this responsibility. This possibility had however fallen away because neither NSC nor the Public Guardian sought to recover their costs of the proceedings:
“6 …there is no doubt that the COP acting through its then Senior Judge (Judge Lush) and an authorised court officer (Mr Batey) with the concurrence of Judge Lush must carry considerable responsibility for the problems now facing the COP, Mr Cawthorn and most importantly the Ps for whom he acts as a property and affairs deputy. However, the Crown has not been joined to these proceedings because the Public Guardian does not seek any order for his costs and both he and Mr Cawthorn have decided that they do not seek an order for costs to be paid by the court (and so the Crown).”
So far as AR’s case was concerned, Charles J authorised NSC to receive the remuneration he sought for discharging his functions as deputy. His Lordship considered the possibility of appointing the relevant local authority to be remunerated pursuant to PD 19B, but determined that the more personal service offered by NSC justified the additional expense to AR. In this regard, his Lordship placed emphasis on the views of AR’s foster mother and the fact that AR would be unlikely to amass significant savings even if she paid the lower deputyship fees of the local authority. It is worth noting that Charles J also took the unusual step of ordering that NSC’s remuneration should increase in line with the Consumer Prices Index. His Lordship did so in order to avoid the unnecessary time and expense which would be associated with NSC making repeated applications for increases in his level of remuneration.
This decision highlights the potential, in appropriate cases, for professionals to seek their appointment as deputy on more advantageous terms than those provided by PD19B. However, it must be emphasised that the decision in Re AR is fact specific and that the number of cases where such an appointment can be justified may be limited.
 EWHC 1926 (Ch)
The claimants were sisters. The first claimant was married with three children; her husband and children being the first to fourth defendants to the claim. The second claimant was not married, and had no children.
The claimants’ parents were beneficial tenants in common of a residential property. When the claimant’s mother died in 2005 she left her residuary estate to the claimants in equal shares absolutely. The effect of this was that the claimants’ father held his matrimonial home on trust for himself as to 50 per cent and as to 25 per cent for each of the claimants.
The claimants were advised (apparently for the purpose of mitigating inheritance tax) to create a lifetime trust whereby their mother’s beneficial share of the property would be held for their father during his lifetime, subject to that on trust for any spouse of the claimants for life, subject to that on trust for the claimants themselves, and in default for the claimants’ issue. The trust provided inter alia as follows:
“1.3. The “Beneficiaries” shall mean: (a) Christopher Gresley Pearson (b) the Settlors; (c) the spouses and children of the Settlors
[ … ]
- Subject to the powers and provisions hereinafter contained the Trustees shall divide the Trust Fund into two separate sub-funds so that the property which derives from each Settlor can always be identified and shall stand possessed of the capital and income of the Trust Fund thus identified upon trust as follows
4.1. The income of the Trust Fund shall be paid to Christopher Gresley Pearson during his lifetime.
4.2. Subject thereto the income of each sub fund shall be paid to the Settlor during that Settlor’s lifetime and subject thereto the income thereof shall be paid to the spouse of that Settlor and subject thereto the Trustees shall hold the capital and income of each sub-fund to its respective Settlor absolutely if living at the end of the Trust Period provided that if the Settlor dies before acquiring an absolute interest leaving issue living at the end of the Trust Period such issue shall take and if more than one in equal shares the share which his or her parent would have taken had such parent survived.
5.1. Notwithstanding the above, the Trustees shall have power to appoint the whole or any part of the Trust Fund for the benefit of such of the Beneficiaries, at such ages or times, in such shares, upon such trusts (which may include discretionary or protective powers or trusts) and in such manner generally as the trustees That shall in their discretion think fit. [ … ]
- In the event of the failure or determination of the above trusts, the capital and income of the Trust Fund shall be held upon trust for such charity or charities as the Trustees shall in their absolute discretion appoint.
[ … ]
13.1. No discretion or power conferred on the Trustees or any other person by this Deed or by law shall be exercised, and no provision of this Deed shall operate directly or indirectly, so as to cause or permit any part of the capital or income of the Trust Fund to become in any way payable to or applicable for the benefit of the Settlor or any person who shall previously have added property to the Trust Fund or the spouse for the time being of the Settlor or any such person.
13.2. The provisions of subclause 13.1 shall not preclude the Settlor or any such person from exercising any statutory right to claim reimbursement from the Trustees for any income tax or capital gains tax paid by him in respect of income arising to the Trustees or capital gains realised or deemed or treated as realised by them.
13.3. Subject to subclause 13.2, the prohibition in this clause shall apply notwithstanding anything else contained or implied in this Deed.”
The claimants’ father died in 2015. It appears that some time thereafter doubt was raised about the effect of clauses 4.2 and 5.2 in the light of clause 13.1. More than two years later the claimants claimed an order for:
“(a) the construction of the settlement so that clause 13 is either of no effect or there is no bar to the claimants or their spouses receiving a benefit from the fund or act of the trustees, or (b) the rectification of the instrument by the deletion of clause 13.”
HHJ Matthews (sitting as a Judge of the High Court) confirmed, despite the absence of direct authority to this extent, that the principles of interpretation for commercial documents set out in Investors Compensation Scheme v West Bromwich Building Society  1 WLR 896 and developed in Rainy Sky SA v Kookmin Bank  1 WLR 2900 apply equally to family trusts.
Applying those principles, clause 13 was of no effect and should be disregarded completely. The Judge gave the following reasoning for this interpretation of the trust:
- In the Judge’s judgment clause 6 was dependant on clause 4.2 and thus did not take effect if clause 13 prevented clause 4.2 from taking effect. Thus, when considering the effect of clause 13 the Court was to do so on the footing that there was no gift over to charity. In the absence of clause 6, there would be a resulting trust for the claimants/settlors because the interests reserved to them under clause 4.2 could not take effect. (No mention is made in the judgment to the default gifts to the claimants’ issue).
- Ignoring the effect of clause 5.1, the substantive effect would be the same whether clause 4.2 or clause 13.1 triumphed. In the premises, the Judge held that “it would be perverse…to allow clause 13 to negate the effect of clause 4.2 and leave the settlors to claim outside the deed on a resulting trust.”
- Whilst acknowledging that the blatant inconsistency between clauses 4.2 and 13.1 did not necessarily prevent clause 13.1 cutting down the power of appointment’s class of discrectionary objects, the Judge determined that the logic which he applied to clause 4.2, applied “almost as much to clause 5 as well” and that “in those circumstances clause 13 should not bar the exercise of the power in clause 5 in favour of the settlors”.
The Judge indicated that, had he not resolved the matter by the process of construction, he would have ordered that the trust instrument be rectified.
Save that the decision to disregard clause 13.1 in respect of clause 5.1, and to a lesser extent the decision to apply clause 4.2 in favour of clause 13.1, might have been more appropriately made under the Court’s jurisdiction to rectify trust instruments, this decision is unremarkable.
The approach of the Court to representation is however noteworthy. The claimants failed to seek orders for the representation of their future spouses and future children. They also failed to obtain the usual response from HMRC as to whether they wished to be joined as a party or alternatively bring relevant authorities to the Court’s attention. In this respect the Judge held that, in line with the decision of Wilberforce J (as he then was) in Re Westminster Bank Ltd’s Declaration of Trusts  1 WLR 820 (a case in which trustees were authorised to deal with a beneficiary’s shares in settlements on the footing she would have no further children), he could and should proceed to determine the issue of construction or rectification without binding future spouses, children or HMRC. This is an unusual approach in the context of a claim for construction or rectification which may leave the claimants in a vulnerable position as against HMRC.