Vivian v Koningsveld and 2 Others
| Jurisdiction | England & Wales |
| Judge | Mr John Randall |
| Judgment Date | 29 October 2010 |
| Neutral Citation | [2010] EWHC 3961 (Ch) |
| Date | 29 October 2010 |
| Court | Chancery Division |
| Docket Number | Claim No: HC09C00198 |
2010 EWHC 3961 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand,
London WC2A 2LL
Mr John Randall QC
(Sitting as a Deputy Judge of the High Court)
Claim No: HC09C00198
Mr P John (Instructed by Milton Rosenfalk) appeared on behalf of the Claimant
The Defendants were unrepresented.
Approved Judgment
Friday, 29 October 2010
THE DEPUTY JUDGE:
This is a claim for rectification of a deed of variation of the will of the late John Adams ("John"). The application is brought by his only daughter, and the stepdaughter of his late widow, Violet, as claimant. The first defendant is the personal representative, firstly, of the estate of Violet, who died 10 months after John did, and secondly, by the chain of representation, of the estate of John. He is also a defendant because he, in common with the second and third defendants, is one of the nephews of Violet, and under her will the claimant obtained half of the residue, and the nephews between them the other half.
John died aged 99 on 22 June 2005, his last will having been executed 2 years earlier. By that will he made two specific bequests: one of £100,000 to his daughter (the claimant) and the other of £5,000 to his sister, Alice Downe. Subject to those bequests, he made a residuary gift to Violet in the event of her surviving him, which she did. The specific bequests were not, in the event, capable of being fully satisfied, because the net value of John's estate was only £66,000-odd. The reason for that, albeit a reason which took their surviving relatives by some surprise, was not that John and Violet had only modest assets, but rather that, despite their combined assets having a total value of almost £900,000, most of them were vested in their joint names and accordingly passed not into John's estate, but directly to Violet by survivorship.
Ten months later Violet died, aged 94, and her last will, which had been executed on 16 August 2000, dealt with her estate essentially by way of the residuary gift, which was split in two halves as I have mentioned. Given what, at least to their surviving relatives, was the relative wealth of John and Violet, this was, of course, an extremely inefficient way of their estates being dealt with for the purposes of inheritance tax ("IHT"). This came to the attention of the claimant, who, through reading newspapers, had been aware of the possibility of retrospective variation of wills, including for the purpose of mitigating the incidence of IHT. She explored the matter initially by attending a seminar concerning estate planning in August 2006, and then, following that seminar, by obtaining advice from the principal of the firm which had run it, Miss Iolande Jackson. The letter which she in due course received from Miss Jackson was a detailed one, though much of the detail is, in the event, of no particular relevance to the application before me. Importantly, however, in relation to the wishes formed by the claimant as a result of Miss Jackson's advice, near the outset of the letter Miss Jackson stated that:
"…This will involve severing the joint ownership of some of the assets so that they were held as tenants in common…"
Beyond that conventional advice, the letter went on to recommend a somewhat elaborate trust structure which, in the event, as I shall shortly explain, was not something that the claimant chose to pursue.
The claimant then consulted solicitors, RHY Law, concerning the implementation of this advice. She initially dealt with a Miss Elaine Openshaw, a probate manager, but following Miss Openshaw speaking with her managing partner, a Mr Yalden, he himself wrote a letter of advice to the claimant dated 9 November 2006. It recorded in its second paragraph that deeds of variation of the estates of both her late parents were under consideration, and then continued:
"The deeds of variation clearly would enable the nil rate band attributable to each of the estates to be utilised based on the nil rate band available at the date of each respective death…"
Mr Yalden went on to advise, in essence, that he felt that the trust structure which had been recommended by Miss Jackson was, firstly, unnecessary and, secondly, potentially disadvantageous; his advice was in due course accepted by the claimant.
There are in the bundle before me subsequent letters addressed to the claimant from her solicitors, but the next document of any particular assistance with this case is the initial letter of instruction which RHY Law — the matter at this stage being handled, as the reference suggests, by a Miss Felicity Wood — sent to counsel, requesting him to settle appropriate deeds. Again, I need not recite much of the content of this letter, but it is important to note, firstly, that in the first paragraph of the letter it was made clear that the purpose for which the two wills were to be varied was "In order to achieve a tax saving for Mrs Vivian" and, secondly, that in the fourth paragraph it was stated that:
"Mrs Vivian now intends to vary her mother's will so that her share [her 50% share in residue under her mother's will] should fall back into her late husband's estate, thereby achieving a saving of inheritance tax on Mrs Adams' estate. She also wishes to vary her father's will [so as to include] gifts to her son, two grandchildren and stepdaughter. The value of these gifts is unknown at the present."
Those instructions to counsel were subsequently varied by a letter of 4 January 2007 in two respects: firstly, that Mrs Vivian's intention was modified so that rather than giving up the entirety of her half share in residue under her mother's estate, she was to give up £160,000 and, secondly, it gave greater detail as to the specific bequests intended to be included in the will of John (as varied).
In due course, counsel provided draft deeds of variation under cover of an explanatory e-mail dated 17 January 2007. It made clear that counsel had taken on board the objectives which were sought to be achieved by instructing him, in that his explanatory e-mail includes reference to "Limiting the residue passing into Mrs Adams' estate and the IHT liability" and "allowing for the £160,000 diminution in the estate to come from her share". When this was received by Miss Wood, she appears to have come very close to spotting what turned out to be the fundamental flaw in the documents which were prepared and in due course executed (to which I will come), in that she responded to counsel's e-mail raising two questions, the second of which was that he should "Explain to us the source of the funds exactly". Counsel's response, by an e-mail dated 23 January 2007, both gave a clear answer to that question and clearly demonstrated the mistake of fact under which he was operating, because, referring to the amount of the specific bequests to be provided for under John's will, as varied, he said this:
"The additional £265,000 which will form the specific bequests in Mr Adams' varied will can all come from funds in his sole name, being more than £329,000 — see the typewritten schedule of his assets including joint assets which would have passed to Mrs Adams by survivorship."
So it is clear either (and more probably) that counsel believed that there were £329,000 or more of assets already in John's estate, or (as is another possible construction of his words) that he believed that the document which he had drafted had the effect of bringing about that position. Whichever of those it was, he was operating under a fundamental error, which most unfortunately was not spotted either by Miss Wood, despite her having raised what was apparently the right question, nor indeed by either of her colleagues whom I have already mentioned.
So, in due course, the deeds of variation, essentially as prepared by counsel, were executed at the solicitors' offices on 25 April 2007, both by the claimant and by the first defendant.
The deeds of variation were appropriately drafted to achieve one of their intended effects, in that they provided, in substitution for the pecuniary legacies of £100,000 and £5,000 (which I have already explained), for a reduced pecuniary legacy for the claimant of £60,000, retention of a £5,000 pecuniary legacy for John's sister Alice, and a series of new and additional pecuniary legacies: £120,000 for John's grandson Adam, £40,000 for Linda Stutherfield and £20,000 each, contingent on reaching the age of 18, for two great-grandsons. This, if effective, would have had the benefit of ensuring that the entire available nil rate band of IHT in respect of John's estate was used. Unfortunately, however, it was not effective, because the deed did not also provide for the severance of any of the joint tenancies to which I have previously made reference, whether (as is conventional) immediately prior to the death of John, or at all. Accordingly, John's estate continued to comprise only the previously mentioned £66,000-odd, so that the substituted bequests, insofar as they exceeded that sum, were of no practical effect. This was picked up by HM Revenue & Customs ("HMRC") when the documentation was sent to them. Although it has not been necessary for Mr John to go into this in any detail, in essence, as one might expect, alarm ensued in the camp of the claimant and the various advisors concerned.
After further advice had been taken, a deed of rectification of the said deed of variation was prepared and in due course executed on 11 December 2008, again by the...
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