Bullard v Bullard & Anor, Court of Appeal - Chancery Division, January 05, 2017, [2017] EWHC 3 (Ch)

Issuing Organization:Chancery Division
Actores:Bullard v Bullard & Anor
Resolution Date:January 05, 2017
 
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Neutral Citation Number: [2017] EWHC 3 (Ch)

Case No: HC-2016-002109

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 5 January 2017

Before :

MASTER MATTHEWS

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Between :

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Mathew Roper (instructed by Birketts LLP) for the Claimant

The Defendants were not present or represented

Hearing date: 14 October 2016

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3

Master Matthews:

Introduction

  1. This is my judgment on a claim made by claim form issued under CPR Part 8 on 19 July 2016, in substance for an order determining the true construction of clause 3 of a trust settled by the claimant on 3 September 2002, or alternatively rectification of the trust deed. The claimant is the settlor and one of the trustees of the trust. The defendants are two of the (adult) children of the settlor. They are also the other two trustees of the trust and two of the beneficiaries.

  2. The claim is supported by a witness statement of the Claimant dated 12 July 2016, setting out the background and main facts, supplemented by a witness statement of Ian Cain, her former solicitor, dated 19 June 2016, setting out some additional facts. There are also a witness statement of Bernadette Catherine Baker, her present solicitor, dated 11 July 2016, dealing only with the position of HMRC, and two short, formal witness statements dated 12 September 2016, one from each of the two defendants, consenting to the relief sought.

  3. As appears from the witness statement of Ms Baker, HMRC was asked if it wished to be joined as a party but before issue of the claim replied in the negative. On 5 September 2016, upon considering the letter from HMRC and the acknowledgments of service of the defendants, Deputy Master Hansen ordered that the matter be listed for disposal. The claim was argued before me on 14 October 2016, when Mathew Roper of counsel appeared for the claimant. The defendants did not appear and were not represented.

    Facts

  4. On the evidence placed before me, the following is established. In 2001 the claimant, who claims no expertise in trusts, tax or financial planning, sought advice from Eversheds LLP about mitigation of inheritance tax to be paid on her death. Unfortunately the file maintained by that firm at the time is no longer available, and the claimant had been obliged to rely on the copies of miscellaneous documents surviving on Eversheds' document management system, and such documents as she received and retained. Together with her present solicitors, and the assistance of Mr Cain, one of the team who advised her at Eversheds, she has attempted to reconstruct the advice she says she received from that firm.

  5. Her evidence is that she was advised to enter into a so-called ``double trust'' arrangement in respect of her house. She understood this to mean (1) creating a life interest trust under which she reserved a life interest in the trust fund; (2) creating a second, interest in possession trust for others whom she wished to benefit; (3) sale of her house to the trustees of the first trust, leaving the purchase price outstanding; (4) assigning the resultant debt to the trustees of the second trust. She understood that if she did this there would be no charge to inheritance tax at the outset and, if she survived at least three years, inheritance tax on her death would be mitigated, and, after seven years, avoided altogether.

  6. She makes clear that it was her intention that the second trust (referred to at step (2) above)) should be an interest in possession trust, relying on a number of the documents now available to her. Although Mr Cain is unable to recall the specific advice given to the claimant by his then firm, having reviewed the miscellaneous documents available to the claimant, he has confirmed that his advice would have been that the second trust should be an interest in possession trust, under which each of the beneficiaries should have an interest in possession in the trust fund.

  7. The claimant established the first trust (to be known as ``the Bullard Property Trust'') on 16 August 2002. On the same day she entered into an agreement to sell her home, a property called ``Curlews'' to the trustees of that trust. Transfer was to take place on 14 days' notice being given by either side, or 20 years later, whichever was the sooner. The sale price was left outstanding, represented by a Loan Note. As already mentioned, the claimant established the second trust (to be known as ``the Bullard Family Trust'') on 3 September 2002. On the same day she executed a deed of gift assigning the Loan Note to the Family Trust.

  8. The trust deed for the Family Trust states its name on the front page, accompanied by the words ``(an Interest-in-Possession Settlement)''. The trust fund is divided into two parts, one for each of the two branches of the family represented by the two children of the claimant. The combined effect of clauses 1.2 and 3.1 of, and the Third Schedule to, the trust deed, but subject to an overriding power of appointment in clause 4, is that the first defendant, his wife and their two children are each a Primary Beneficiary of one quarter of one half of the trust fund, and the second defendant, her husband and their three children are each a Primary Beneficiary of one fifth of the other half of the trust fund. Clause 3.2 then requires the trustees to pay to each Primary Beneficiary the income of the relevant share for life, then to the children of the Primary Beneficiary for life, and finally the income and capital to the grandchildren of the Primary Beneficiary, contingently on attaining the age of 18 years, with cross-accruers to the other shares...

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