State of play: case summaries

P was a widow aged 97. She had two children; M, who lived locally and who was appointed P's deputy in June 2010 and G, who now also lived locally after previously living abroad. G had run a business which 'went bust' and had a conviction for shoplifting.

G applied to the court for an order appointing her to be a joint deputy with her brother, M, and for him to produce an account of his handling of P's financial affairs. Failing that, G applied for a panel deputy to be appointed.

M objected to the application on the basis that G was not suitable to be a deputy, that they did not get on
and it would not be practical. Further issues arose as G had complained constantly about the quality of the care her mother was receiving, and the nursing home had banned her twice from visiting. M also provided evidence of his management of his mother's financial affairs.

In June 2015, Senior Judge Lush made an order for a section 49 report to be prepared by the public guardian. There is a statutory duty under section 58 of the Mental Capacity Act 2005, for the public guardian to supervise deputies appointed by the Court
of Protection.

The public guardian's report found that relationships between G and M were more or less non-existent, and that M's performance as deputy for property and financial affairs had been satisfactory. The public guardian concluded that a joint appointment of M and G would be unworkable and not in P's best interests, as 'every minor decision would give rise to a conflict' and there would be 'deadlock'.

The public guardian considered whether P's present wishes and feelings could be ascertained and if she could be involved in her financial affairs. It was concluded that, due to advanced dementia, P was unable to participate in decisions or the proceedings.

Senior Judge Lush also found no reason to remove M as a deputy, nor for an independent professional deputy to be appointed in his place. Senior Judge Lush quoted from the Court of Appeal decision in New South Wales, in Holt v Protective Commissioner [1993] 31 NSWLR 227, in which it was held that an application for the removal of a deputy does not invoke the same discretion as the initial appointment of a deputy.

Any party seeking a change in the status quo must show some strong reason why the court should make an order such as proving the deputy was incompetent, or had acted improperly or unlawfully, which is not the case here. The court considered section 16(8) Mental Capacity Act 2005, under which deputies can be removed, and it was concluded that none of these applied.

Senior Judge Lush concluded that G's application should be dismissed and it would not be in P's best interests for G to be P's deputy. The court made an open order for costs, noting that a costs warning had already been given to M and that her costs may not be paid out of P's estate. Another timely warning.

See MLJ, Re [2015] EWCOP63

 

Re AJ

This case was an application for the court to reconsider an order appointing A’s father, E, as her deputy, and for a panel deputy to act in his place.

A was 21 and although she had no definitive diagnosis, her disabilities included various physical conditions, including delayed development. Her father, E, was 57 and semi-retired. Her parents had separated and sadly her mother, J, had later died. 

In February 2011, E had been appointed a sole deputy for A, for both property and financial affairs and personal welfare. In July 2012, shortly after they separated, A’s parents were appointed jointly and severally to be her deputies for both property & financial affairs and personal welfare. 

Following J’s death in 2013, E was appointed jointly and severally to be a deputy with G, a close friend of the family, in July 2014. G was never closely involved as a deputy.

In October 2014 the public guardian applied to the court for an order that a panel deputy be appointed as A’s property and financial affairs deputy, and that E and G would then stand down. E was also asked to account for his dealings with A’s property and financial affairs from February 2011.

The public guardian’s application was in response to concerns raised by a whistle-blower, whose identity was not revealed, and about E’s alleged lack of reports regarding A’s finances. The concerns raised included queries about a sum of £5,000, the net proceeds of a sale of J’s holiday cottage, and dealings with J’s estate. 

A was served with notice of the application and signed an acknowledgement of service form (COP5), indicating she wanted to be joined as a party, that she objected to the application and wished the existing order, in favour of her father E, to remain in force. E also objected to the application and challenged the allegations made.

At the hearing, the court considered section 16(8) Mental Capacity Act 2005, setting out the grounds for removing a deputy. Senior Judge Lush found no such grounds and ordered that E should be reinstated as A’s deputy for property and financial affairs.

Having met A, Senior Judge Lush said it was clear she was fond of her father; she had lived with him since J’s death. He confirmed that her wishes contained in the acknowledgement of service were a true reflection of her wishes, both then and now.

Interestingly, one of the judge’s reasons was that the allegations that E had not submitted annual reports were untrue, as the court had in fact filed them incorrectly. The court also accepted that when E and J split up, there was a hiatus while all the paperwork remained with J.

The judge accepted E’s explanation about the unaccounted £5,000, and the issues regarding J’s estate. In particular, he noted that the allegation about the holiday cottage was unfounded and potentially malicious. It was considered that the whistle-blower had been on J’s side during the acrimonious divorce proceedings. 

The judge also commented that, as A had very little money, the appointment of a panel deputy would be disproportionate and inappropriate.  

It was deemed sad that so much time and effort was spent on a case where there was little money and where one parent had died.

See Re AJ, The Public Guardian and EJ [2015] EWCOP62

Barclays v HMRC

In this case the court considered an appeal in connection with section 48(3) Inheritance Tax Act 1984 (IHTA). The act provides that settlement property (that is situated outside the UK) will be ‘excluded property’ (and outside the relevant property regime) if the settlor was domiciled outside the UK, ‘at the time the settlement was made’. The court also considered the interaction of that section with sections 81 and 82 IHTA.

The facts of the case were that the settlor, Michael Dreelan, settled funds in a Jersey trust. The funds were settled on trust (trust one) while Mr Dreelan was not domiciled in the UK (the property in trust one was therefore excluded property for inheritance tax purposes). Mr Dreelan subsequently transferred part of the trust property to another trust (trust two). 

Trust two was created at a time when Mr Dreelan was no longer domiciled outside the UK. The funds were then transferred back to trust one and were in that settlement at the point of a ten year anniversary of trust one’s creation; HMRC looked to charge inheritance tax at this point. 

Section 81 IHTA applies to transfers between two settlements and means that, for the purposes of calculating a 10-year charge, the date of the first transferor settlement is used for the ten year anniversary date, by deeming the property to remain in the first settlement. 

Section 82 IHTA applies where excluded property is involved, so that, for property to retain its excluded property status, the settlor of both the first transferor settlement and second transferee settlement must be domiciled outside the UK. 

Mr Dreelan argued that the settled property should not be subject to the 10-year charge on the basis that it re-acquired its excluded status when it was transferred back to trust one. His argument was that the reference in section 48(3) to ‘the time the settlement was made’, was to the original creation of trust one. 

Mr Dreelan was not UK domiciled at that point, and so his case was that excluded property status should be given to the funds transferred back to trust one from trust two. 

Mr Justice Mann concluded that this construction would mean that a settlor who had ceased to be domiciled outside the UK could continue to add funds to an existing excluded property settlement. This could not be parliament’s intention. 

Instead, a later addition (in this case, the transfer of funds from trust two to trust one) was a disposition whereby the property became held on trust, and the settlor’s domicile had to be considered at the point of that addition. 

The deeming provision in section 81 IHTA did not prevent this. The funds were therefore not excluded property; the ten year anniversary charge on the fund in trust one was correct and the appeal was dismissed. 

See Barclays Wealth Trustees (Jersey) LTD v HMRC [2015] EWHC 2878 (CH)

 

Aidiniantz v Aidiniantz 

This case concerned an elderly lady in poor health, Mrs Aidiniantz (Mrs A), who had been the subject of long-term family feuds and disagreements, resulting in numerous court hearings. On this occasion, the court was asked to make decisions regarding Mrs A’s living arrangements and family visitation rights.

The court was also asked to take a decision as to whether a financial enquiry should be undertaken in relation to Mrs A’s finances. While this case is quite fact specific, Judge Peter Jackson used the opportunity to warn other families against unnecessary and costly use of the court process.

There was a long history of family disputes. Mrs A had four children, three of whom are the respondents in this case. One of Mrs A’s children, JA, was the step-brother of the respondents. He conceived the idea of setting up a business (the Sherlock Holmes Museum on Baker Street, in London) in 1989, which he then set up using funds provided by his mother. 

This was run as a family affair until 2012, at which time the respondent’s stopped JA visiting his mother at her home, and said that this was due to his alleged business conduct. From this point on, JA experienced difficulties in seeing his mother and the respondents went to great lengths to prevent visitation (including taking their elderly mother to Florida for over a month).

Judge Peter Jackson, having considered the complicated background, decided that Mrs A should be moved to a nursing home, where she could receive the medical support she required (rather than this being provided by support hired by the respondents, causing her to remain in the midst of family arguments) and visitation should take place in accordance with the care home’s rules (supported by the official solicitor). 

In this instance, the result was that the separate sides of the family could visit once a day. This was coupled with a warning that visitation should be approached with caution.

Significantly, Judge Peter Jackson decided that his judgment should be made publically available, without being anonymised. The rationale for this was that there was no criticism made of Mrs A, and (more importantly) much of the information regarding the family was already in the public domain, and it would be in the public interest for the judgment to be available. 

Judge Peter Jackson commented that ‘very few families descend to the level of mutual acrimony that existed in the family…it is in the public interest, if it is interested, to see the consequences'. 

The family had spent a total of £270,000 in legal fees in one year. 

It was hoped that by publishing this case, it would deter others from behaving in a similar manner. In such cases, practitioners should keep in mind the overall cost of the matter in relation to proportionality.

See Aidiniantz v Aidiniantz and others [2015] EWCOP 65

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

Elizabeth Eyre is an associate at Barlow Robbins

Jennifer and Elizabeth write regular case updates for Private Client Adviser