State of play: case summaries

Vulnerable clients

The Public Guardian v
Miles & Ors

This case provides incredibly useful guidance for practitioners in drafting provisions contained within a lasting power of attorney (LPA).

The donor, Mrs Miles (MM) executed a Property and Financial LPA and a Health and Welfare LPA whereby in essence, she included the following provisions.

1. Her husband and her daughter were appointed as attorneys.

2. She appointed her son as the replacement attorney.She also directed that the attorneys should act jointly for some decisions and jointly and severally in respect of others.

The LPAs were registered by the Office of the Public Guardian (OPG), although the OPG referred the wording of the provisions of the LPAs to the court for a formal ruling as to the validity of the provisions made.

The exact wording of the Property and Financial LPA were as follows:

"My attorneys may act jointly and severally save with regard to:

1. Any sale of my property at address (or any property which may subsequently replace it); and

2. Any transaction in excess of £10,000.

When all surviving attorneys who are capable of acting (whether originally appointed or who have been appointed by and are acting in substitution) shall act jointly insofar as there may be more than one of them able to do so, but in the event that there is one only of them capable of acting I expressly appoint that attorney to act alone.

My replacement attorney shall act in the event that both of my originally nominated attorneys shall have died before me, or are otherwise unable or unwilling to act or the appointment of them fails for any other reason.

In the event of any difficulty arising with the operation of the provision above, then my attorneys should act jointly and severally and in the event of any replacement attorney acting because of failure of the above provisions, my originally nominated attorneys who are still capable of acting shall be reappointed to act with them insofar as it shall be possible to do so and on a joint and several basis."

A witness statement was obtained from the donor's solicitor indicating, in essence, that his main priority was the protection for his client against abuse of the powers given. Following on from that, his advice for LPAs was always
on the basis of the joint and several powers as contained within the LPAs
in question.

The solicitor also raised points for discussion, which were commented upon by the court. The points raised were as follows:

1. Can the donor of an LPA appoint more than one attorney to act jointly with survivorship by expressly re-appointing the continuing attorney or attorneys?
Section 10(4) of Mental Capacity Act 2005 provides that a donor can appoint the attorneys to act:

(a) Jointly

(b) Jointly and severally, or

(c) Jointly in respect of some matters and jointly and severally in respect of others.
 

Section 4 of the prescribed LPA form sets out the meaning of each possible appointment term. Furthermore, guidance has been produced by the OPG in respect of section 4 for both types of LPAs.

The court determined that to create the effect of appointing attorneys jointly and then to have a survivorship provision, the donor would have to appoint them jointly primarily, and then jointly and severally in the replacement section of the LPAs. The effect of this would be that if one of the terminating events occurred resulting in the termination of the joint appointment, the joint and several appointments would then become effective. The surviving attorneys would continue to act.

However, the prescribed LPA would not allow this to occur in one document as there is only one box allowing you to choose the type of appointment. The court recommended that for this to be effective, two LPAs should be created where the first would make a joint appointment and the second LPA to make the joint and several appointments, but with the provision that the second LPA would only come into operation when the first LPA fails for whatever reason.
The second LPA could also provide for a replacement attorneys, if the donor required it.

2. In the absence of a statutory restriction on the reappointment of an attorney, there is no reason why an attorney cannot do so."

The court disagreed, indicating that
if parliament intended for this to occur it would have expressly provided for this in section 10(4) of the Mental Capacity Act 2005.

3. "The appointments of attorneys…should be compared to the position of appointment of executors under the Wills Act 1837, which is well settled".

The court disagreed and advised that the appointment of attorneys is governed by its own legislation and that the court need look no further.

The court also advised that the solicitor's wording regarding the reappointment of a surviving appointment was contingent and unpredictable, and failed to expressly name an individual or a trust corporation. The court referred to the LPA guidance booklets which specifically states that the LPAs should provide details of named individuals or a trust corporation.

Furthermore, the court identified problems with the surviving attorneys' acceptance of the appointment as this would have been affected by the completion of part C.

The court therefore deemed that section 4 of the LPAs were partially ineffective and severed the wording as highlighted in the paragraphs above.

Similar severances of the wording for the Health and Welfare LPAs on the same grounds were also undertaken by the court.

This will provide excellent guidance to practitioners as to how to provide for the appointment of attorneys and replacement attorneys having regard to the joint appointments.

It is essential for practitioners to stay within the realms of the framework by considering not only the legislation but also the actual LPA documents and OPG guidance booklets.

See The Public Guardian v Miles & Ors [2014] EWCOP 40

Trusts

Crociani and others v Crociani and others

This case concerned the effect of a disputed exclusive jurisdiction clause. The principal issue was whether the proceedings in Jersey should be stayed on the grounds that they had been brought in breach of an exclusive jurisdiction clause.

In 1987, Edoarda Crociani (Mme Crociani) created a trust (the grand trust) for the benefit of beneficiaries including her daughters, Camilla and Cristiana Crociani. Clause 12 of the trust deed gave the trustees the power to resign and appoint new trustees outside of the jurisdiction, and to declare the governing law of the grand trust to be the law of the country of residence of the new trustees.

Clause 12(6) stated: “Thereafter the rights of all persons and the construction and effect of each and every provision hereof shall be subject to the exclusive jurisdiction of and construed only according to the law of the said country, which shall become the forum for the administration of the trusts hereunder.”

From October 2007, the trustees of the grand trust were resident in Jersey and the effect of clause 12 was that Jersey law became the proper law of the trust. In 2011, the relationship between Mme Crociani and Cristiana Crociani broke down. In 2012, the Jersey trustees resigned and appointed a Mauritian company, Appleby Trust (Mauritius) Ltd as sole trustee.

In 2013, Cristiana and others (the respondents) brought proceedings in Jersey against the Jersey trustees and Appleby (the appellants) challenging various actions and distributions. The appellants made an application to stay the proceedings in Jersey on the basis that the effect of clause 12 is to confer exclusive jurisdiction upon the Mauritius courts

It was concluded that clause 12 was not concerned with identifying which court should have exclusive jurisdiction to determine disputes relating to the grand trust. Clause 12 was a proper law clause, not an exclusive jurisdiction clause. The expression, “The forum for the administration of the trusts,” indicated the place where the grand trust was to be administered and managed, and not which court should resolve disputes.

Even if clause 12 did mean that the courts of Mauritius had jurisdiction, the words, “Shall be subject to the exclusive jurisdiction,” refers to the law, rather than the courts, of the said jurisdiction and ensures that the governing law applies to all aspects of the grand trust.

Given the interpretation of clause 12, whether the proceedings should be stayed was not an issue because the Mauritius courts did not have exclusive jurisdiction. However, the court did offer guidance as to the correct approach to jurisdiction clauses and explained that less weight should be given to such clauses in a trust deed as is given to contractual exclusive jurisdiction clauses.

Thus, even if clause 12 were an exclusive jurisdiction clause, the court would not have stayed the Jersey proceedings on the basis that the majority of the actions being challenged were made under Jersey law, which would make the Jersey court an appropriate court to decide the matter.

See Crociani & Ors v Crociani & Ors (Jersey) [2014] UKPC 40

Trusts

Rajendra Seesurrun & Gniamnun Seesurrun v Revenue & Customs

This case concerned offshore trust structures created by a married couple. The principal issue was whether the income of offshore structures should be taxed as their income under the rules concerning the transfer of assets abroad.

The facts of the case were that Mr and Mrs Seesurrun owned trading companies which provided residential care for the elderly, and various properties out of which the trading companies operated.

In 1998, the couple, who were non-UK domiciled, decided to leave the UK and move to Mauritius. Very shortly before leaving, they each created an Isle of Man settlement. The settlements acquired two Isle of Man companies, Calinda Properties Limited and Mannville Limited.

Mr and Mrs Seesurrun transferred to Calinda and Mannville the properties which the Trading Companies rented. The properties were transferred for loans left outstanding and repayable on demand, or purchased using funds loaned to the settlements by the couple on the same terms. Finally, the couple’s shares in the trading companies were transferred to Calinda.

The settlements were drafted so that Mr and Mrs Seesurrun were each entitled to the income from their respective settlements for life.

Mr and Mrs Seesurrun returned to the UK in 1999. Evidence was given suggesting that the intention was for Mr and Mrs Seesurrun to be excluded from benefitting from the settlements at this point. However, there was a question over whether or not the deeds to achieve this were ever executed.

In the years following the couple’s return to the UK, rents were paid by the trading companies to Calinda and Mannville as landlords. The accounts showed that significant loans were made by Mannville and Calinda to Mr Seesurrun. These loans were interest free and repayable on demand.

Dividends were declared by the Trading Companies to their shareholder, Calinda, and these dividends were paid to Mr and Mrs Seesurrun to reduce their indebtedness.

HMRC applied section 739 of the Income and Corporation Taxes Act 1988 (ICTA); the transfer of assets abroad regime for transferors, now in sections 720 and 727 Income Tax Act 2007. HMRC decided that the dividends paid, to and the rental income received by Calinda and Mannville were taxable on Mr and Mrs Seesurrun. HMRC’s first case was that this was as a result of the couple’s power to enjoy the income as beneficiaries of the settlements.

HMRC’s second case was that Mr Seesurrun received capital sums when dividends from the trading companies were used to reduce his indebtedness to Mannville and Calinda, notwithstanding that Mr Seesurrun was also a creditor, having loaned the funds to Mannville and Calinda to purchase the properties. Mr and Mrs Seesurrun appealed against this decision.

The tribunal supported the HMRC’s position and refused the appeal and declined to consider whether Mr and Mrs Seesurrun continued to be beneficiaries of the settlements following their return to the UK in 1999.

However, the tribunal found that the terms of the debts owed to Mr and Mrs Seesurrun meant that the receipt of income by Calinda and Mannville operated to increase the value of the couple’s debts so that they had the power to enjoy the income received by the persons abroad. In addition, capital sums were received by the couple. The purpose of the scheme had been to shelter the income from their nursing homes from UK tax.

See Seesurrun & Anor v Revenue & Customs [2014] UKFTT 783 (TC) (13 August 2014)

 

Karen Bayley is a solicitor at Barlow Robbins

She writes regular case updates for Private Client Adviser

Jennifer Ridgway is an associate in the private client team at Michelmores

She writes regular case updates for Private Client Adviser