Patrick James Gordon Pettigrew and Others v Edwin Colin Neale Edwards
| Jurisdiction | England & Wales |
| Judge | Master Matthews |
| Judgment Date | 12 January 2017 |
| Neutral Citation | [2017] EWHC 8 (Ch) |
| Docket Number | Case No: HC-2016-002187 |
| Court | Chancery Division |
| Date | 12 January 2017 |
[2017] EWHC 8 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Master Matthews
Case No: HC-2016-002187
Guy Adams (instructed by Clarke Willmott LLP) for the Claimants
Rory Brown (instructed by Broomhead & Saul) for the Defendants
Hearing date: 6 October, 1 November 2016
Judgment Approved
Introduction
This is an application by claim form under CPR Part 8 issued on 25 July 2016 for an order that the claimants as trustees of the will of Veronica Ann Edwards deceased (i) have permission to continue to defend a claim brought against them by the defendant to this claim, Neale Edwards, in an earlier claim, no HC-2016-001404 issued on 11 May 2016, and to make a counterclaim in that claim, and (ii) be indemnified out of the trust fund in respect of all costs properly incurred by them in connection with the claim and counterclaim. In other words, this is a claim for a Beddoe order (see Re Beddoe [1893] 1 Ch 547) and also for a protective costs order. Since there are two claims, and the positions of the parties in the one are reversed in the other, I will from now on call the present claimants "the trustees", and the present defendant "the life tenant".
The application is supported by the witness statement dated 21 July 2016 of Claire Louise Dennison, the trustees' solicitor, together with two exhibits, one of which is confidential to the Court. It is opposed by the witness statement dated 23 August 2016 of Julia Clegg, the life tenant's solicitor, plus one exhibit. I have also seen relevant documents (see paragraph 11 below) from claim no HC-2016-001404, and of course I have had the benefit of skeleton arguments from both counsel involved.
The hearing was originally listed for 6 October 2016, but the time was insufficient and it had to be adjourned to 1 November 2016. At the hearings Guy Adams of counsel appeared for the trustees, and Rory Brown of counsel for the life tenant. Even then there was not enough time to finish and the trustees' reply had to be made in writing. I received this within the timescale set, ie by 3 November 2016. The following day, I also received a short bonus from Mr Brown, counsel for the life tenant, in the form of a comment by email. Mr Adams, for the trustees, did not object to me looking at this. I am sorry that it has taken quite so long since then to produce this written judgment.
Facts
Although all Beddoe cases are notoriously fact-sensitive and hence discretionary (see Re Evans [1986] 1 WLR 101, 106), this one is unusually so. I give here a short summary of the essential facts. The deceased died on 2 April 2003 and her will was proved by the trustees as her executors on 20 October 2003. The first and second trustees are the deceased's sons from her first marriage. The third trustee was her solicitor and drafted the will, as well as a promissory note which features heavily in the story. Under the will the deceased left her residuary estate to the trustees as trustees upon trust to pay the income to the life tenant, her fourth husband, for his life, and subject thereto, and to certain specific gifts (to which I refer further below), upon trust for the first and second trustees beneficially in equal shares.
The residuary estate on completion of the administration, which became the trust fund, was valued at £521,897.53. This included a promissory note signed by the life tenant to the deceased in the sum of £100,000. This note represented the value of a loan made by the deceased to the life tenant in respect of works done to the life tenant's property, The Old Rectory, Chaffcombe, where they both lived. Originally it appears that the deceased was intended by expenditure of her money in improvement of the property to acquire an interest in it but, once the deceased learned that she had the pancreatic cancer from which she ultimately died, this was altered to a loan to be made by the deceased to the life tenant.
The promissory note was signed by the life tenant and dated 21 March 2003, and recited his promise to repay to the deceased the sum of £100,000 on demand. It appears that it was the parties' wish that the loan (and therefore the note) should remain an asset of the estate during the life tenant's lifetime, and that the loan would be repaid only after his death. As already stated, the deceased died on 2 April 2003. At that date the deceased had not in fact paid the whole of the agreed sum of £100,000. The outstanding balance was treated as a liability of the estate.
After the deceased's death and the administration of the estate, there was correspondence between the trustees and the life tenant about the repayment of the loan. The trustees sought security for the loan. None was ultimately forthcoming. In addition, the trustees learned that the life tenant had remarried, had put the Old Rectory on the market, and was thinking of emigrating to France. Subsequently they learned that the Old Rectory had been transferred to the life tenant and his new wife jointly.
In May 2014 the trustees asked again for security, saying that if the life tenant failed to pay on demand they would be entitled to withhold from him income arising from the will trust. The parties discussed proposals for breaking the trust, but they came to nothing. In May 2015 the trustees demanded the repayment of the loan, commenting that one method of repayment would be for the trustees to withhold the income otherwise due to the life tenant on the rest of the trust fund. In June 2015 the life tenant's solicitor in correspondence declined to accept that there was any loan liability outstanding. In July 2015 the trustees instructed the fund manager to stop making income payments to the life tenant. Income from 8 July 2015 to date has been transferred to a holding account, still under the trustees' control. The life tenant's solicitor complained on 14 July 2015 of a "clear breach of trust", and asserted that the "alleged debt" of the life tenant was "in any event statute-barred and unenforceable".
The main claim
As mentioned above, on 11 May 2016 the life tenant issued a claim in the Chancery Division of the High Court, allocated for case management purposes to a different master from me, for (i) an order requiring the payment to himself of outstanding income since 30 June 2015, plus interest thereon, (ii) a direction that the trustees pay the income to him during his lifetime pursuant to clause 3 of the will, or alternatively a declaration as to the meaning of that clause, (iii) costs, and (iv) further or other relief. The claim was issued under CPR Part 8, for claims raising questions of law but no substantial questions of fact, and pursuant to CPR rule 64.2.
The latter rule, so far as material, reads as follows:
"This Section of this Part applies to claims –
(a) for the court to determine any question arising in –
[…]
(ii) the execution of a trust;
(b) for […] the execution of a trust, to be carried out under the direction of the court ('an administration order');
[…]"
It is supplemented by the Practice Direction to Part 64, para 1(2)(a)(iii), which, so far as material, reads as follows:
"The following are examples of the types of claims which may be made under rule 64.2(a) –
[…]
(2) a claim for any of the following remedies –
(a) an order requiring a trustee –
[…]
(iii) to do or not to do any particular act…"
On 31 May 2016 the trustees filed their acknowledgment of service, seeking directions and an order that the claim be treated as one under CPR Part 7, ie more suitable for cases raising substantial questions of fact. That order was made by the court on its own initiative on 1 June 2016. Directions were given for the future conduct of the action. On 20 June 2016 the trustees filed and served their defence and counterclaim in the action. The life tenant served his reply and defence to counterclaim on 6 July 2016. The parties have now filed their directions questionnaires, draft directions and disclosure reports, but no further steps have been taken in that claim pending the resolution of the present one.
It appears that the issues now requiring to be decided in the main claim include issues about the loan and the promissory note, including (i) whether the debt is statute barred, on the basis that the cause of action accrued when the loan was made, the note was payable only on demand by the deceased, and she made no such demand during her life, and if not (ii) whether it is repayable before the life tenant's death, and also (iii) whether the promissory note was for consideration. Even if the debt is due and payable, there is also an issue (iv) about the right of the trustees to set off the income due to the life tenant under the will trust against that debt. The trustees' counterclaim is for the whole sum of the loan and a declaration that they are entitled to retain the income due to the life tenant until the debt has been discharged.
Parties
The parties to this application are the trustees and the life tenant. The first two trustees are also in substance the only beneficiaries interested in the capital of the trust fund after the life tenant's death. The third trustee is a professional trustee and has no beneficial interest. As mentioned above, however, the will provided for certain other specific gifts, in each case contingent on surviving both the deceased and the life tenant. One legatee, although he survived the deceased, did not survive the life tenant, and his gift failed. A second such legatee has been paid out and has no further claim. Three other legatees, all now adult, are entitled to £5,000 each contingently on surviving the life...
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