Bhatt v Bhatt
| Jurisdiction | England & Wales |
| Judgment Date | 03 April 2009 |
| Neutral Citation | [2009] EWHC 734 (Ch) |
| Docket Number | Claim No. HC07C03456 |
| Court | Chancery Division |
| Date | 03 April 2009 |
[2009] EWHC 734 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: Mr. Martin Mann QC sitting as a Deputy Judge of the Chancery Division
Claim No. HC07C03456
Mr. John Smart (instructed Kotecha & Co) for the Claimant
Mr. Peter John (instructed by Malcolm Dear Whitfield Evans) for the 1 st, 2 nd and 4 th to 6 th Defendants
Hearing dates: 31 st March 2009, 1 st and 3 rd April 2009
APPROVED JUDGMENT
I direct pursuant to CPR PD 39A paragraph 6.1 that no shorthand note shall be taken of this judgment and that copies hereof as handed down may be treated as authentic.
The claim before the court is for a variety of equitable relief including for rectification of the registered title to 33 Shirehall Park, Hendon, London NW4 2QN (“the Property”) and rescission of a number of documents (which, where the context admits, I shall refer to as “the documents”). The documents were all entered into as part of or consequential on the same transaction whereby, in summary, the claimant (“Mrs Bhatt”) sought to make future provision for her children out of her distributable estate (consisting at the time primarily of the Property) and to mitigate the incidence of inheritance tax (“IHT”), IHT which she believed arose on her late husband's death on 28 th December 2003 and which would arise on her own death should she not execute these documents. The documents she wishes to have rescinded are a declaration of trust (“the trust deed”), a deed of variation, a notice of severance and a Transfer of the Property from her as transferor to herself and the 3 rd and 4 th defendants as transferees. These are all dated 12 th March 2004. The 3 rd defendant and 4 th defendant are two of the children of Mrs Bhatt by her late husband. The other defendants are their siblings.
The notice of severance, which recites that Mrs Bhatt and the 3 rd and 4 th defendants are or will be the proprietors of the Property and that they hold the Property, “as Tenants in Common and as Trustees in accordance with a Deed of Trust signed by them”, is expressed to be for the avoidance of doubt that, “As from 28 th December 2003 the Property is held by the parties hereto upon trust to sell the same and to hold the net income until sale and the net proceeds of sale in trust for themselves as Trustees in accordance with a Deed of Trust duly executed by the parties and attached herewith.” The parties were Mrs Bhatt and the 3 rd and 4 th defendants. Terms of the notice of severance included that the parties were to apply to the Chief Land Registrar for the entry on the Register of appropriate restrictions relating to dispositions under which capital monies arise.
Although a deed of trust was not physically attached to the notice of severance, the declaration of trust to which I have already alluded and defined as “the trust deed” has been treated for the purpose of the proceedings as the trust deed to which the notice of severance refers as attached thereto.
The trust deed, which appears to have been duly executed by Mrs Bhatt and the 3 rd and 4 th defendants, declares trusts for Mrs Bhatt as to 50 % of the beneficial interest in the Property and for the 3 rd and 4 th defendants as trustees in respect of the other 50%, which 50%, under clauses 3(i), 3(ii) and 4, is to be held during the trust period (as defined) on the terms of a discretionary sub-trust. Under the discretionary sub-trust, the 3 rd and 4 th defendants or their delegates have a special power of appointment among all of the defendants (exercisable in favour of one or more to the exclusion of others but nevertheless revocable during the trust period).
Clause 6(a) of the trust deed declares residuary trusts of this 50% to be divided between the defendants as therein mentioned. There are gifts over in clause 6(b) covering alternative situations should any of the defendants either die leaving or die without leaving children.
Although clause 6(a) uses language which suggests the draftsman intended this 50% to vest absolutely it is clear from the trouble he went to in incorporating the special power that it was not his intention that these should vest in possession immediately but rather that they should vest in the future subject to the exercise of the special power.
Clause 5 of the trust deed provides,
“The trustees acknowledge and agree and declare that [the Property] is home to [Mrs Bhatt and the 1 st, 2 nd and 3 rd defendants] and they or each of them may continue to live in the property without paying any rent but they share all the outgoings and the maintenance and upkeep of the property. Any other potential beneficiary or beneficiaries [a reference to the defendants not so mentioned] shall accept this situation and requirement.” [Parenthesis supplied]
It is common ground that besides other effects and consequences of these components of the transaction, clause 5 amounts arguably to a potentially exempt transfer in as much as it might be regarded by the Revenue as having created interests in possession in the Property in addition to her own in favour of the 1 st, 2 nd and 3 rd defendants whereas they had had none hitherto, with potentially disastrous tax consequences.
Supplementing the claims for rectification of the Register and for rescission are claims for a variety of additional and ancillary relief among which is a claim by Mrs Bhatt for an order for possession of the Property against the 1 st to 4 th defendants, a claim that the 3 rd and 4 th defendants have no rights of occupation of the Property, claims for orders under section 13(7) of the Trusts of Land and Appointment of Trustees Act 1996 and for an order for sale.
Be this as it may, the parties have sensibly agreed before me to resolve their differences by reference to the narrower issue whether the documents should be or should not be set aside by the court in the exercise of its equitable jurisdiction to do so on well settled grounds, and to limit the evidence for that purpose to that to which I shall refer later in this judgment.
The bare factual basis on which it is asserted the court should exercise the jurisdiction is that of mistake although in this case it is asserted there were a number of crucial errors for none of which Mrs Bhatt can be blamed which led her to execute the documents in the mistaken belief that she needed to do so and that they would not have particular effects and consequences.
It is necessary to know a little about Mrs Bhatt and her family and of some of the arrangements which she and her late husband had made prior to his death for a proper understanding of the factual matrix leading up to and supporting the claim to rescission.
Mrs. Bhatt was born on 18 th May 1929 in Kenya. She went to school for 5 years in Uganda and was not taught English. She was taught in Gujarati. She speaks a little English. Her ability to read documents written in English is limited. If shown a document she recognises some but not all words and her understanding of sentences is often rather limited. She came to the UK in 1978 with the defendants, her late husband having come over in 1976.
The Property had been rented from the local council from about 1981. Mrs. Bhatt and her husband decided to buy it under the right to buy scheme in 1992. She was then aged 63. Her husband was then aged 78. The purchase was completed on 19 th August 1992. The Property was purchased in their joint names.
The price paid was £90,000. The purchase was funded in part from funds provided by Mrs. Bhatt's brother (£45,100). £40,000 (or thereabouts) was raised on mortgage. The 2 nd and 3 rd defendants acted as guarantors. The mortgage was discharged in 2003.
Mrs. Bhatt's late husband had made a will in 2001 under which he left her his entire estate should she survive him by 30 days. No grant was taken out.
Mrs. Bhatt and her late husband were initially beneficial joint tenants but the beneficial joint tenancy had been severed by notice in 2003. That notice had been drawn up by a solicitor, Mr Saujani, a sole practitioner, in fact the very solicitor who drew up the notice of severance signed on 12 th March 2004, a notice which under the circumstances was otiose. He seems to have soon forgotten the earlier one despite it being clear on the evidence that he should have been reminded of its existence in 2004 before Mrs Bhatt signed its otiose successor.
Mrs. Bhatt sought Mr Saujani's advice about how to deal with her late husband's estate in March 2004. She was the sole executrix under the will but, as she put it in her witness statement, she did not understand anything about wills.
According to Mrs. Bhatt, Mr. Saujani advised her to speak to a tax advisor, a Mr. Kakad, who worked for a company called Millenium Financial Solutions. There followed a meeting at the Property during the course of which Mr. Kakad advised her that she needed to take urgent steps to avoid having to pay IHT. He told her that she would have a huge tax bill and that she might have to sell the Property immediately to pay it. He said he would liaise with Mr. Saujani and get him to prepare documents which would avoid this situation. Unsurprisingly, this had worried her a great deal, so much so that she accepted the advice in its entirety. In summary, this was that she should let her late husband's half share of the house be put in trust for her children, that she should make a new will (she...
To continue reading
Request your trial
-
Pitt and another v Holt and another; Futter and another v Futter and Others
...Son & Cooke (Southern) Ltd [1980] QB 677; [1980] 2 WLR 218; [1979] 3 All ER 522Bell v Lever Bros Ltd [1932] AC 161, HL(E)Bhatt v Bhatt [2009] EWHC 734 (Ch); [2009] STC 1540Butlin’s Settlement Trusts, In re [1976] Ch 251; [1976] 2 WLR 547; [1976] 2 All ER 483David Securities Pty Ltd v Common......
-
Pitt and another v Holt and another; Futter and another v Futter and Others
...In re [1969] 1 Ch 463; [1967] 3 WLR 1198; [1967] 2 All ER 1175Allnutt v Wilding [2007] EWCA Civ 412; [2007] WTLR 941, CABhatt v Bhatt [2009] EWHC 734 (Ch); [2009] STC 1540Breadner v Granville-Grossman [2001] Ch 523; [2001] 2 WLR 593; [2001] 4 All ER 705Bunting v W [2005] EWHC 1274 (Ch); [20......