Cases of Interest – May

[2018] EWHC 426 (Ch)

The deceased’s same-sex partner successfully established that he had a 50% beneficial interest in a property registered in the deceased’s sole name pursuant to a common intention constructive trust and/or proprietary estoppel as a result of an oral agreement they had reached and of the significant renovation works the partner had carried out.

The facts

In 2002 the deceased, Mr Culliford, purchased a property at 9 Clover Road, Weston-Super-Mare, with the assistance of a mortgage. In 2010 he met Mr Thorpe online. They began a relationship and later that year Mr Thorpe moved into the property with the deceased. The deceased was employed by British Airways as a flight attendant. Mr Thorpe was not employed and the couple’s lifestyle was therefore funded mostly by the deceased. Mr Thorpe was the more practical of the two and did repairs and decoration jobs round the house.

In April 2012 Mr Thorpe’s father died. On his death the family home in Devon passed to Mr Thorpe’s mother by survivorship. However, the family did not immediately realise this and instead believed for around two years that the father’s will had given the father’s half share in the Devon property to Mr Thorpe and his two siblings, as well as some cash. In May 2012, the deceased and Mr Thorpe discussed their financial circumstances, believing at the time that Mr Thorpe owned a one-sixth interest in the family home in Devon in addition to the cash he had inherited. The deceased told Mr Thorpe “this is it, it is time we joined forces properly” and the couple agreed to share their properties and other assets so that “what’s mine is yours, and what’s yours is mine.” The agreement was an informal one, and there was no discussion of changing the legal title to the property or of whether Mr Thorpe should have a beneficial interest in the property and, if so, whether his interest should be as a tenant in common or a joint tenant. The deceased and Mr Thorpe planned to refurbish the property in order to rent it out, and also to convert the top floor of Mr Thorpe’s family property in Devon into a self-contained flat in which they could live. Mr Thorpe planned to help fund the works with the money he had inherited from his father, and the hope was that the deceased could then reduce his working hours to help him cope with the ill-health he was suffering from as a result of being HIV positive.

The following month (June 2012) Mr Thorpe began to undertake works to the property. Although he had already done some more minor work to the property before this, the judge described these works as being “of a different order of magnitude”. They included removing and replacing carpets, skirting boards and radiators; sanding and painting walls, ceilings and woodwork; fitting and wiring in downlights; laying wooden flooring in two bedrooms; assembling mirrored wardrobes and knocking two rooms into one. The expert evidence indicated that the works had increased the value of the property by about £30,000.

In April 2014 the mistake regarding Mr Thorpe’s father’s estate came to light and the family entered into a deed of variation. This provided that a half share in the Devon property be held on trust for Mr Thorpe’s mother for life, and then for Mr Thorpe and his two siblings in equal shares, so that Mr Thorpe’s one-sixth interest in the Devon property was confirmed (subject to his mother’s life interest).

During 2015 the deceased developed a habit of taking recreational drugs. Mr Thorpe did not approve but did not interfere. The deceased died on 25 March 2016as a result of a drug overdose. He died intestate and his estate passed to his two siblings under the intestacy rules, who took out a grant of administration in respect of his estate.

Mr Thorpe continued to live at the property after the deceased’s death. His relationship with the deceased’s siblings ultimately broke down and the siblings issued possession proceedings against Mr Thorpe. Mr Thorpe counterclaimed a declaration that he had a proprietary interest in the property, either as a result of a common intention constructive trust or of a proprietary estoppel.

The decision

HHJ Paul Matthews (sitting as a Judge of the High Court) dealt first with Mr Thorpe’s claim based on a common intention constructive trust. He referred to Stack v Dowden [2007] 2 AC 432 and Kernott v Jones [2012] 1 AC 776, which he referred to as the “leading cases”, but pointed out that both involved a property registered in joint names, whereas “the most recent case at the third level in England of a case of common intention constructive trust where the legal title was in the name of one party only is Lloyds Bank v Rosset [1991] 1 AC 107”.

He held that Mr Thorpe had successfully established that he and the deceased had reached an express oral agreement in relation to the property, which combined with the renovation works he had carried out to the property gave rise to a common intention constructive trust: “I am satisfied that the agreement to share their respective properties, followed by the detrimental reliance of [Mr Thorpe], gave rise to such a trust of the Weston property in his favour. [Mr Thorpe] plainly relied upon that agreement in carrying out the significant works which he did on the Weston property, using his own labour and his own money to purchase materials, as well as occasionally paying others to do work.” He went on to hold that “The normal remedy [in relation to common intention constructive trust] is to hold that the property in question (here the Weston property) is held by the legal owner on trust for the parties in the agreed proportions. Here that means 50-50. I can see no reason why that should not be given effect to.” However, he was not satisfied that the agreement gave rise to a joint tenancy as opposed to a tenancy in common: “The defendant says that where there is an agreement to share property equally, the court will assume it is to be a beneficial joint tenancy rather than a tenancy in common, and cites Eves v Eves [1975] WLR 1338  But I do not consider that that case establishes that there is a principle that agreements for half shares must be construed as for joint tenancy. Each case must turn on its facts. In this case I am not satisfied that the one half share agreement should give rise to a joint tenancy of the beneficial interest in that property, rather than a tenancy in common. If I had been satisfied that at the time of the agreement the parties had considered what might happen if one of them died, then it might have been different. But I am not.”

The judge concluded that an order for sale should be made and that, after redemption of any mortgage, the net proceeds of sale should be divided equally between Mr Thorpe and the deceased’s estate save that Mr Thorpe should pay occupation rent to the estate in respect of the period after the deceased’s death during which he had excluded the deceased’s personal representatives from the property.

Although his decision on Mr Thorpe’s common intention constructive trust claim made it strictly unnecessary to decide Mr Thorpe’s proprietary estoppel claim, HHJ Paul Matthews held that he would have found that claim made out too.

Comment

The case is yet another illustration of the problems – and bitterly fought litigation – which can arise where a person has made informal agreements with, or representations or promises to, another which his affairs on his death do not give effect to. Whilst common intention constructive trust claims often concern cohabitants whose relationship has come to an end, many proprietary estoppel claims involve agreements, promises or representations made by an (often older) property owner to a (often younger) claimant which are then not carried out by the landowner’s testamentary dispositions: see e.g. Jennings v Rice [2002] EWCA Civ 159, Thorner v Major [2009] 1 WLR 776 and more recently James v James [2018] EWHC 43 (Ch). The take-home point for those advising elderly clients is to ensure (in so far as possible) that one is given a clear picture about what promises the client may have made to others in relation to his property and that these are addressed when, for example, the client decides to make his will.

[2018] EWHC 730 (Ch)

HHJ Russen QC (sitting as a Judge of the High Court) recently had to determine the proper construction of a homemade will and accompanying letter of wishes, provide directions in relation to the distribution of a residuary estate and consider cross-applications for the removal of executors and trustees.

The facts

Pauline Wippell died on 4 April 2013 leaving a 3-page manuscript homemade will and an accompanying 2-page letter of wishes which were both dated 17 March 2013. She had written both documents in her own handwriting on blank sheets of paper. In summary, subject to various pecuniary legacies Mrs Wippell left her estate to a new charity which was to be called “the Jepson-Hearn Charity Trust” which was intended to benefit “people with severe facial disfigurement”. Mrs Wippell’s maiden surname was Jepson-Hearn and she had herself been a victim of an acid attack by a stalker in her youth. Mrs Wippell appointed the three claimants and the defendant, who were all friends of hers, as executors and appointed two of the claimants and the defendant (together with another friend) as trustees of the charity.

The will contained a pecuniary legacy of £5,000 to the defendant. However, Mrs Wippell also included the following clause in the letter of wishes: “[the defendant] may receive from the trust fund or charity when she is widowed and not before £95,000 if there are sufficient funds. In the event of a divorce, she may receive £5,000 out of the £95,000 towards costs. The remaining £90,000 or thereabouts will be advanced on the condition that should she co-habit or remarry Malcolm Davey the £90,000 be refunded immediately into the trust fund.”

As a result of a falling out between the claimants and the defendant, the court was asked to determine (i) the proper construction of the will and letter of wishes, and in particular whether the letter of wishes was incorporated in the will and if so whether its provisions imposed any legally binding obligations in relation to the £95,000; (ii) whether Mrs Wippell’s residuary estate should be distributed to the Jepson-Hearn Charity Trust, which in the meantime had been registered with the Charity Commission; and (iii) whether the claimants or the defendant should be removed as executors and/or as trustees.

The decision

HHJ Russen QC referred to the principles governing the incorporation of unexecuted documents into wills and held that on the facts the issue in dispute was whether or not the letter of wishes had been written before the will was executed, and was therefore a document which was in existence at the time the will was executed. He held that on the balance of probabilities the letter of wishes was in existence at the time the will was executed, and was therefore incorporated, because: (i) both documents bore the same date, which “leaves open the entirely credible scenario that the Deceased prepared the two manuscript documents in one sitting”; (ii) the will expressly referred to the letter of wishes using a definite article; (iii) it did so in the present tense and referred to the letter of wishes as an attachment; and (iv) the letter of wishes was headed “Attachment to my Will dated Sunday 17 March Two Thousand and Thirteen”, which the judge thought “clearly indicates that the Letter of Wishes already existed when she executed the Will and was not, instead, a postscript to which she turned only once she had made the Will earlier that day”.

To decide whether the (incorporated) letter of wishes created any legally binding obligations, in particular in relation to the £95,000 purportedly left to the defendant (in the terms set out above), HHJ Russen QC applied the principles of construction set out by the Supreme Court in Marley v Rawlings [2015] AC 129. He concluded that the relevant provision of the letter of wishes did not create any legally binding obligation because the language of the letter of wishes was precatory (“letter of wishes”; the defendant “may receive”) and could be contrasted with the legacies in the will, including the legacy of £5,000 left to the defendant herself.

Finally, the judge held that the residuary estate should be distributed to the newly-registered charity, and he removed the defendant as executrix and trustee and dismissed her claim to remove the claimants. Having referred to Letterstedt v Broers (1884) 9 App Cas 371 and more recent cases such as Angus v Emmott [2010] WTLR 513 and Kershaw v Micklethwaite [2011] WTLR 413, he explained that “the guiding principle for the court on any application to remove a personal representative under section 50 [of the Administration of Justice Act 1985] must therefore be to look at the particular circumstances giving rise to it by reference to the welfare of the beneficiaries” and that that inquiry “is likely to involve testing whether or not those circumstances have operated to disrupt the due and proper administration of the estate by which their interests are intended to be served and, if so, consideration of the acts or omissions of the respondent representative that are said to have produced that situation”.

He held that whilst the defendant could not be blamed for litigation which involved “genuine issues over the scope and meaning of the Will”, the defendant’s removal was justified in light of her refusal to agree to the residuary estate being distributed to the Jepson-Hearn Charity Trust on the basis that she was not a trustee and her insistence that Mrs Wippell’s property should be sold and the proceeds donated to another charity because she believed the Jepson-Hearn Charity Trust was not financially viable. The judge concluded that the defendant “has, unacceptably in my judgment, put the cart before the horse on both issues when she should have appreciated, as a personal representative of the estate, that there was no place for such an obstacle created by her own personal interest or contention. On Issue 2, and less directly in connection with Issue 3, it appears to me that it is [the defendant], not the Claimants, who has failed to have sufficient regard to the executors’ oath (including the promise to administer the estate) which was made as long ago as June 2014”.

Comment

The case illustrates the benefit of obtaining competent legal advice in relation to will drafting and the potential downsides and practical repercussions of homemade wills, particularly where the testator’s intentions are not straightforward and are then purportedly spelt out in some detail by a non-lawyer.  It also shows how executors (and other fiduciaries) can ask for the court’s guidance when uncertainty arises in respect of unclear provisions in a will or other trust instrument.

From the perspective of will drafters, the judgment provides some useful guidance on the principles that govern the incorporation of unexecuted documents into wills and a helpful reminder of the need to use clear language when drafting a gift which is intended to be legally enforceable, which may not be straightforward if the gift is intended to be conditional or contingent.