Allnutt v Wilding
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE RIMER |
| Judgment Date | 26 July 2006 |
| Neutral Citation | [2006] EWHC 1905 (Ch) |
| Docket Number | Case No: HC06C00506 |
| Court | Chancery Division |
| Date | 26 July 2006 |
[2006] EWHC 1905 (Ch)
THE HONOURABLE MR JUSTICE RIMER
Case No: HC06C00506
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Alex Hall Taylor (instructed by John Photiades & Co) for the Claimants
The Defendants were not represented
Hearing dates: 3 April and 6 June 2006
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
THE HONOURABLE MR JUSTICE RIMER
Introduction
This is a Part 8 claim, commenced on 9 February 2006, in which the claimants, Robert Allnutt and Kevin Parsons, have sued themselves and others for relief in the nature of the rectification of a settlement executed by the late Malcolm Strain on 18 December 1995 ("the settlement"). The complaint is that the form of the settlement is such that the settled funds did not, as was intended, escape a charge to inheritance tax; and the court is asked to re-write it in order that that intention may now be retrospectively achieved.
Mr Strain died on 9 February 2004. Probate of his will dated 14 December 1995 and a codicil made four days later was granted to the two claimants on 22 September 2004. His net estate was certified at approximately £2m. Mr Allnutt, the first claimant, is the son-in-law of the late Mr Strain. He is married to his daughter Judith. He is a solicitor, although he disclaims having ever been retained by Mr Strain to give him professional advice. Nevertheless he was obviously closely involved at every point in the events leading up to the execution of the settlement, of which he is a trustee. Mr Parsons, his co-claimant, is also a solicitor. Mr Allnutt and Mr Parsons sue in their capacity as the executors of Mr Strain's will. By clause 3 of that will and the codicil Mr Strain gave legacies totalling £13,500, mainly to charities. He then left his residuary estate in equal shares to his three children, Christopher Strain, Adrian Strain and Judith Allnutt ("the children"). They are of full age, they are the fourth to sixth defendants and consent to the relief sought. That is not surprising since it is for their benefit.
The first three defendants are: (i) Mr Allnutt, who is purportedly sued in his capacity as an original and current trustee of the settlement; (ii) Keith Wilding, who is the solicitor who drafted the settlement and was an original trustee of it, but retired as such on 10 November 2003; and (iii) Mr Parsons, who was appointed a trustee in Mr Wilding's place on the same day and is purportedly sued in that capacity.
Suing oneself (even purportedly in a different capacity) is something that traditionally could not be done. "There is no principle by which a man can be at the same time Plaintiff and Defendant", said Best CJ in Neale v. Turton and Others 4 Bingh. 149, at 151; and see to the same effect In re Phillips, Public Trustee v. Meyer (1931) WN 271, per Maugham J. Mr Hall Taylor, for the claimants, disclaimed any suggestion that the CPR have altered that, and so the naming of Mr Allnutt and Mr Parsons as defendants would appear to have been a step in the wrong direction. I propose to strike them out as defendants. That will make no difference to the substance of the claim as all the right people are before the court. I move now from procedure to substance. The evidence was by way of witness statements. No witness was cross-examined.
The facts
Mr Strain was a wealthy man, aged 82 at the material time. He was aware that steps could be taken to mitigate the impact of inheritance tax on his estate after his death. On 8 September 1995 he attended a meeting with his solicitor, Mr Wilding, and Mr Allnutt. Mr Wilding advised Mr Strain to take independent advice from a financial adviser called Anthony Walters, a director of Christchurch Investment Management Limited.
Instructions on behalf of Mr Strain were then given to Mr Walters. I use the passive voice since it is apparent that they were given by Mr Allnutt on Mr Strain's behalf and the exhibited correspondence relating to the advice sought and given is exclusively between Mr Walters, Mr Allnutt and Mr Wilding: and although Mr Walters has given evidence that he had discussions in October and November 1995 with Mr Strain, no documentary support for this is in evidence. Mr Walters prepared a report dated 5 October 1995 and sent it to Mr Allnutt and Mr Wilding. This led to a telephone conversation between Mr Allnutt and Mr Walters, followed by a further letter of advice to Mr Allnutt on 26 October 1995 about investment options for Mr Strain. One of the options mentioned in Mr Walters's report was the making by Mr Strain of a potentially exempt transfer.
Mr Walters's report led to meetings on 6 and 14 December 1995 attended by Mr Strain, Mr Walters, Mr Allnutt and Mr Wilding. Mr Allnutt's evidence is that Mr Strain gave instructions to Mr Wilding to create a settlement for the benefit of the children, his intention being to make a potentially exempt transfer of funds to the settlement. He says Mr Strain's expressed intention was that he did not want to give property directly to the children while he was alive but did want them "to have an equal benefit under a trust arrangement after his death." He also says that he recalls no discussions at these meetings as to the exact nature of the form of settlement that was to be used, adding that he did not believe that Mr Strain had any discussions with Mr Wilding at which he, Mr Allnutt, was not present. Mr Allnutt said that both he and Mr Strain relied on Mr Wilding to prepare the appropriate document. He said that Mr Strain never expressed any wish that any of his remoter issue should have any immediate benefit from the settled property. More generally, he said that Mr Strain's intention and expectation were that, provided he survived seven years, the transfer would be an exempt transfer and would escape any charge to inheritance tax on his death. The children would thereby enjoy the benefit of a settlement whose funds would not suffer a charge to inheritance tax; and his estate subject to inheritance tax on his death would have been reduced by the amount of the transfer. Giving property away is, in principle, a simple form of tax planning and this exercise was intended to be just that.
Mr Wilding understood what Mr Strain wanted to achieve and confirmed it in his evidence. He said Mr Strain's instructions were given to him at the meeting on 6 December 1995 and confirmed at the meeting on 14 December 1995. His evidence perhaps differs slightly from Mr Allnutt's in that he says that Mr Strain wanted to establish a settlement for the benefit of the children and grandchildren, so that according to him Mr Strain did intend his remoter issue to be beneficiaries. He says, however, that at no time was there any discussion as to the type of settlement that would need to be formed, or as to what the trustees' powers should be, save that he does recall that Mr Strain "was adamant that the money placed into the Trust should pass to his three children in equal shares." He says that otherwise Mr Strain's only expressed intention was that any transfer into the settlement should be a potentially exempt transfer.
Mr Wilding's evidence is that, following the confirmation of his instructions on 14 December 1995, he drafted a settlement for Mr Strain to execute. The draft was not considered at any meeting with Mr Strain, and Mr Wilding accepts he did not discuss it with Mr Strain. Mr Allnutt's evidence is that nothing was said about the terms of the settlement at the meeting on 14 December 1995. In particular, no reference was made to a discretionary trust, nor was the word "discretionary" used. Mr Wilding sent a draft of the settlement direct to Mr Allnutt on 14 December 1995. He did not send one to Mr Strain. Mr Allnutt concluded that it was in a form acceptable to him and Mr Strain, and so he arranged for Mr Strain to execute it between 15 and 17 December 1995, which he did.
Mr Wilding's letter of 14 December 1995 enclosing the draft contained no explanation of its terms; and Mr Allnutt confirmed that at no time before its execution did Mr Wilding explain the nature and effect of the proposed settlement to Mr Strain. He said Mr Strain did not read the document before executing it: his evidence is that Mr Strain suffered from poor eyesight that would have made its reading very difficult. He said that Mr Strain:
"… was not, by this time, in the habit of reading such things through himself, and would have and did rely entirely upon his advisers to give effect to his intentions in accordance with his instructions. Further he was not versed in the terminology used in the deed and would not have understood its meaning or effect even if he had read it.
The settlement named Mr Strain as the settlor and Mr Allnutt and Mr Wilding as trustees. It recited that Mr Strain wished to make provision for his issue and that he had paid £550,000 to the trustees. The beneficiaries were defined as the children and any remoter issue of Mr Strain born within an 80-year perpetuity period commencing on the date of the settlement. Clause 2(a) gave the trustees a discretionary power to pay or apply income to or for the benefit of one or more of the beneficiaries, with a power to accumulate income for 21 years. Clause 2(b) gave them a discretionary power to pay or apply capital to or for the benefit of one or more of the beneficiaries. Clause 3 gave them an overriding power to revoke the trusts of the settlement and re-settle the trust fund on new trusts for the benefit of one or more of the beneficiaries. Clause 4 provided that,...
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