One of the family: Re Erskine Trust

In Re Erskine Trust (Re Erskine Trust, Gregg v Pigott [2012] EWHC 732 (Ch)), Mr Mark Herbert QC, sitting as a deputy High Court judge, was faced with a novel question. How does the principle of non-discrimination enshrined in the European Convention on Human Rights (ECHR) operate to affect private law rights under an instrument entered into not only before the Human Rights Act 1998 (HRA 1998) came into force, but even before the ECHR itself was agreed by the Council of Europe in 1950?

The conclusion that he reached may make it difficult in some circumstances to advise with certainty in relation to trusts for a person’s statutory next of kin.

Fact file

The basic facts were not in dispute. Mr Erskine had made a settlement in 1948 under the terms of which the trust fund was held for his daughter, Lucile Saich, for life. Mrs Saich died a widow on ?11 August 2010 without issue. In the events that occurred, the settlement provided for the trust fund to be held upon trust “for the statutory next of kin of [Mrs Saich] at the date of her death on the footing that she died a spinster”.

At the date of her death, Mrs Saich had no children, no living parent and no living siblings. Her late sister, who was her only sibling, had left two sons, Christopher and Stephen Pigott. The Pigotts were not the biological children of Mrs Saich’s sister but had been adopted by her in 1951 and 1952 respectively.

Under the law of intestacy applicable at the date of Mrs Saich’s death and notwithstanding their status as adopted children, the Pigotts were her statutory next of kin (both on the hypothesis specified in the settlement and generally). They would not have been entitled, however, on an intestacy arising in 1948.

Under the law as applicable at that time, the statutory next of kin would have been a class of cousins, many of whom had not been identified, that was represented for the purposes of the proceedings by a niece of the settlor.

It was held by Mark Herbert QC:

1. The first issue to be determined was whether, on a true construction and leaving aside for the moment the effect (if any) of the ECHR, the Pigotts were included among the ‘statutory next of kin’ of Mrs Saich as that expression was used in the settlement. Section 50(1) of the Administration of Estates Act 1925 (AEA 1925) provides that references in any instrument coming into effect after the commencement of the Act to statutory next of kin should be construed as referring to the persons who qualified under the intestacy provisions in the AEA 1925 itself.

Although the question of whether any given individual qualifies as the next of kin of another person must be determined at the death of that other person, there was a general principle that the law in question for the purposes of that determination is the law in force at the date of the settlement. As the law stood in 1948, adopted children were not included within the scope of the word ‘issue’ in the AEA 1925. In the circumstances and but for any application of the ECHR, the expression ‘statutory next of kin’ as used in the 1948 settlement did not include the Pigotts.

2. The particular rights engaged in the present case were those contained in article 8 (respect for private and family life) and article 14 (prohibition on discrimination) of the convention. Article 8 rights had been held to include rights of inheritance from a parent or grandparent; and discrimination between adopted and biological children fell with the scope of article 14. The convention rights of the Pigotts were therefore engaged.

It was clear from the jurisprudence of the European Court of Human Rights (ECtHR) that it has an emphatic aversion to discrimination against adopted children but, in the context of the present case, it was not easy to apply that aversion directly.

First, given that the ECHR became part of English law only in 2000, the question of retrospectivity arose. Second, even if the convention affected the construction of an earlier statue, to what extent did it affect private property rights established ?in 1948?

Looking back

3. As to the question of retrospectivity, the deputy judge held (following Wilson v First County Trust Ltd (No 2) [2004] 1 AC 816) that the presumption against retrospective operation of legislation – in this case, the HRA 1998 – is not unqualified: parliament is merely presumed not to have altered the law applicable to past events and transactions in a manner that is unfair to those concerned in them.

In this regard, the deputy judge also found support in Brauer v Germany [2010] 51 EHRR 23 for the proposition that the convention may operate retrospectively but only if that is fair in the individual case.

4. As to the question of the effect of ?the convention on the construction of a valid, private disposition, the deputy judge considered Pla v Andorra [2006] 42 EHRR 25, in which the ECtHR had applied the convention in favour of an adopted child so as to reverse (by awarding compensation) the effect of the construction placed by the national courts on a private disposition, namely a pre-convention will.

The will in question had been made in 1939. By it, a widow left certain property to her son with a stipulation that, in turn, he was to leave the property to a son or grandson of a lawful and canonical marriage, failing which the estate was to pass to the children and grandchildren of the testatrix’s daughters. The testatrix died in 1949 and, by a will made in 1995, her son left the assets in question to his wife for life and then to their adopted son.

At first instance, the Andorran court dismissed an application by ?the great-grandchildren of the testatrix to have the testamentary disposition declared void. Its reasoning relied on the facts that in 1939 there had been no provision of Andorran law relating to adoption and that, accordingly, the testatrix, by making no reference to adopted children, ought not to be taken as having excluded them by implication.

On appeal, however, the testamentary disposition was declared void on the ground that the matter was governed by the testatrix’s expressed intention. The adopted child took the matter to the ECtHR. By a majority, the court held that the adopted child’s rights under articles 8 and 14 had been infringed.

In particular, the majority held that the decision of the Andorran appeal court was ‘blatantly inconsistent’ with the convention and that there was nothing in the will to suggest that the testatrix intended to exclude adopted grandsons. Despite stating that it was not ‘in theory’ required to settle disputes of a purely private nature, that is what, in practice, the ECtHR proceeded to do.

Three-point turn

5. From the decision in Pla, the deputy judge derived three points of guidance. First, he had to avoid a decision that was unreasonable, arbitrary or ‘blatantly inconsistent’ with the prohibition of discrimination (although he could not see what the adverb ‘blatantly’ added).

Second, he must not put words in the settlor’s mouth, but should construe the disposition in a way that corresponded to national law and the convention as developed in the ECtHR’s case law.

Third, if the disposition, ?as worded by the settlor, made ?a distinction between biological ?and adopted children then he had ?to give effect to that distinction. ?The priority of these three points was not, however, spelt out by ?the ECtHR.

6. Special features in the case caused the deputy judge to find that the convention could apply to the settlement without giving rise ?to unfairness:?

• the settlement contained no explicit exclusion of adopted children;

• the way in which the AEA 1925 applied to exclude adopted children was discriminatory;

• a trust for a person’s next of kin is unique: it creates only an expectancy rather than vested or even contingent rights;

• there was no evidence that the expectancy had or was intended to be assigned for value;

• the contest was between ‘relatively distant cousins’ and the children ?of Mrs Saich’s sister who had been ‘full members’ of the family for ?some 60 years;

• the settlement had come to an end and there was no continuing problem of identifying future beneficiaries.

Without any one of these special features, the deputy judge would have decided the other way. However, given these special features, he concluded that the settlement ought to be construed in such a way as to eliminate the discrimination against adopted children.

The decision in Re Erskine Trust is an important one but it might be difficult to apply in practice.

In one respect, it will be very limited in its application: the convention will operate in this way where the property right in question is a mere expectancy but it appears from the deputy judge’s reasoning that it would not so operate where the right in question is a vested or contingent right.

In other respects, however, it is difficult to establish the precise scope of the decision. By importing the concept of ‘fairness’, the decision adds a potentially unhelpful element of uncertainty when seeking to construe instruments intended to confer proprietary rights.

In particular, it is difficult to establish where one ought to draw the line in circumstances where the relative ‘distance’ of competing family members from the settlor – who might well have died before those family members were born – of the concept of being a ‘full member’ of the family are criteria in establishing whether or not the construction of the instrument in question gives rise to ‘unfairness’.

Joseph Goldsmith is a barrister at 5 Stone Buildings