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N2-10: Equitable principles
PROCEDURAL ASPECTS OF CLAIMS
Constitution of claim
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- Person with more than one capacity can only be joined once and on a single side
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"[8] At the hearing I also raised the question of the constitution of the claim, as mentioned above. It is clear on the authorities that a person who has more than one capacity, such as trustee and beneficiary, should be joined as a party to litigation once only, and on a single side of the record. Thus, in Neale v Turton (1827) 4 Bing 149, where one member of a partnership drew a bill of exchange on that partnership (including himself), which was accepted, and then sought to sue the whole partnership (including himself) on it, Best CJ said (at 151):
"There is no principle by which a man can be at the same time Plaintiff and Defendant."
And, in Hardie & Lane Ltd v Chiltern [1928] 1 KB 663, CA, a claim was brought against members of an association, three of whom were mentioned twice over, being sued first on their own behalf and second on behalf of all the other members of the association. Sargant LJ said (at 699):
"I desire to add, though the matter is perhaps one of form rather than substance, that it is incorrect to make any individual the defendant twice over because he happens to fill two capacities or has two different interests. The case often arises in actions in relation to trusts and the practice to the contrary is, in my experience, invariable."
[9] At the hearing of this claim I therefore ordered that the claimant be removed as first defendant, so the position was regularised, as was done by Rimer J in Allnutt v Wilding [2006] EWHC 1905 (Ch), [4]. If a trusteeship had needed to be transferred to a third party to resolve the difficulty, then that could have been ordered too, as Maugham J did in Re Phillips [1931] WN 131; and see also Public Trustee v Guaranty Trust [1980] 2 SCR 931, 115 DLR (3d) 513, SCC. The double appearance of the claimant did not cause any particular difficulty in this case, but in other cases practical questions may arise, such as, for example, double legal representation, set-off and enforcement, and so it is well to avoid the problem in the first place." (Armstrong v. Armstrong [2019] EWHC 2259 (Ch), HHJ Paul Matthews)
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Evidence to prove intention and mistakes
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- Unchallenged evidence not to be disbelieved save for limited exceptions
"[56] ... That said, it seems to me that the principle identified in Long, namely that, subject to limited exceptions, the court cannot and should not disbelieve the evidence of a witness given on paper in the absence of the cross-examination of that witness. applied equally to the Master's consideration of the evidence before her at the hearing of the Claim.
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[105] If, as I think is correct, the Master was obliged to take account of Mr Sharp's evidence of his discussion with the Claimant immediately before she signed the Deed of Appointment, this seems to me to affect the points made by the Master in Paragraphs 50 and 51.
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[110] Although the evidential position was unsatisfactory, one ultimately comes back to the point that the evidence in support of the Claim was unchallenged. There was no cross examination in which questions of the kind set out in my previous paragraph could have been investigated. If the evidence of the Claimant and Mr Sharp was taken as a whole, it seems to me that, despite the problematic nature of the Claimant's evidence, there was not in fact an inconsistency between the first and second witness statements of the Claimant." (Laird v. Simcock [2023] EWHC 2054 (Ch), Edwin Johnson J)
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- But in such circumstances, Court limited to what is actually said, which may be ambiguous
"[59] First, in a case where the court is confined to considering paper evidence, whether in the form of witness statements or affidavits, the court is equally confined to what the relevant witness actually says in the relevant witness statement or the relevant affidavit. The court has to construe what is in the witness statement or affidavit, without the benefit of the witness being able to elaborate. If the evidence is ambiguous or opaque, the court may not be satisfied, on the balance of probabilities, that a particular fact has been established. If the evidence to establish a particular fact is simply missing from the witness statement or affidavit, that is it, so far as the evidence of the relevant witness is concerned. Again, the witness cannot fill in the gap, assuming that the witness would, if asked, have been able to fill in the gap. In each of the situations which I have just postulated it may be possible for sufficient proof of the relevant fact to be found elsewhere, in the evidence of another witness and/or in the documents. Further or alternatively, the party which finds itself with an ambiguity or a gap in its evidence may, if the circumstances allow, have the opportunity to ask the relevant witness to clarify or supplement their evidence in a further witness statement or affidavit. What the court cannot do is to read evidence into a witness statement or affidavit which is simply not there" (Laird v. Simcock [2023] EWHC 2054 (Ch), Edwin Johnson J)
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- Bare statement not accepted
"[90]...The problem with the Claimant's first witness statement, specifically at paragraph 5, seems to me to have been an obvious one. The Claimant commenced her evidence in paragraph 5 of her first witness statement by saying that she had read Mr Sharp's first witness statement. What was clear from Mr Sharp's first witness statement was that he was the person within SM who was principally responsible for dealing with the Deed of Appointment. There was however nothing in Mr Sharp's witness statement which explained what dealings he had with the Claimant in relation to the Deed of Appointment. There was no evidence of the Claimant giving him any instructions in relation to the Deed of Appointment. There was no evidence of Mr Sharp giving any explanation of the Deed of Appointment to the Claimant. The December Letter was not, so far as I can see, sent to the Claimant, and there is no document which contains or evidences any explanation of the Deed of Appointment being given by Mr Sharp to the Claimant. There was a reference to advice given to the Executors (the Trustees) in paragraph 40 of Mr Sharp's first witness statement but, and this is symptomatic of much of the evidence relied upon by the Claimant in this case, it was a general reference, giving no clue as to what advice was given, and when.
In these circumstances the obvious question which arose was how the Claimant was able to assert, in paragraph 5 of her first witness statement, that she did have the Required Intention. There was nothing in her first witness statement, and there was nothing in Mr Sharp's first witness statement which explained how the information was communicated to the Claimant that the Deed of Appointment was only intended to appoint to Catherine a life interest in the income from the IHT Liable Assets.
Nor was this deficiency made good in any of the contemporaneous documents. I have already mentioned that the December Letter was not, so far as I can see, sent to the Claimant. Mr Burton took me to the IHT400 Form, on the basis that it showed a treatment of the assets in the Estate consistent with what Mr Sharp had said the Deed of Appointment was intended to achieve. I take the point, but I do not think that this document can be relied upon as the basis of the Claimant's alleged knowledge of what the Deed of Appointment was intended to achieve. There was no such evidence from the Claimant in her first witness statement. The Claimant did not say, in her first witness statement, that her knowledge of what the Deed of Appointment was intended to achieve came from the IHT400 Form. Beyond this, I was not taken to any other document which explained how the Claimant could have formulated the Required Intention, or which corroborated what the Claimant said in paragraph 5 of her first witness statement.
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[94]...Putting the matter at its lowest, it seems to me that the Claimant's evidence, in paragraph 5 of her first witness statement, required further explanation. Without such further explanation, I cannot see any basis on which the Master was obliged to accept that evidence. By reference to the evidence in the first witness statement of Mr Sharp and the contemporaneous documents, the evidence of the Claimant did not, without further explanation, seem to me to be credible.
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[141] The key point is that the court was entitled in this case to see properly particularised evidence, which identified what each witness was able to say, and was not able to say, and why. Bald and unqualified statements of intention were not sufficient. The same applies to other cases of this kind. In the present case the original evidence was not properly particularised. It was only by reason of the May Directions that sufficient was ultimately done, in my judgment, to prove the Required Intention." (Laird v. Simcock [2023] EWHC 2054 (Ch), Edwin Johnson J)
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- Evidence of past behaviour as evidence of intention
"[44] I turn now to the blank space in Part 2 of the Trust Schedule. First of all, there is the question whether I am satisfied that a mistake has been made at all, by leaving the space blank. The choice is simple. Either Mrs White intended to name beneficiaries in default of appointment, and omitted to do so through inadvertence, or she deliberately decided to omit default beneficiaries, so that there would be a resulting trust for her estate, subject only to the exercise of the power of appointment. I accept that, given the terms of Mrs White's will, a resulting trust for her estate would be likely to benefit her daughters. Nevertheless, taken as a whole, in this case the evidence (including the pattern of previous behaviour with other life assurance trusts, the oral evidence of Mr Pretorius, and the letter from Clarke Willmott) amply satisfies me that she intended the former.
[45] The second question then is whether I am satisfied as to what she intended to write in the blank space. Again, that same evidence (but including also the evidence that there were no other children, and that there was no one else for whom Mrs White felt morally obliged to provide) completely satisfies me that her intention was to name her daughters, the claimant and the second defendant, in equal shares. The issue between the parties capable of being litigated is whether the daughters take as direct beneficiaries of the trust or only indirectly as residuary beneficiaries of Mrs White's estate, and therefore subject to her debts, taxes and so on. I will accordingly order rectification of the 2007 trust." (Armstrong v. Armstrong [2019] EWHC 2259 (Ch), HHJ Paul Matthews)
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- Judge permitted to direct cross-examination to honesty of witness
"[113] In my judgment it is quite clear from this that when the Appellants were cross-examined they must have appreciated that one of the main issues in the Judge's mind to which he had directed cross-examination was the possibility that they had been (as the Judge had put it in his document),
"aligned with (and not innocent of) Aston's dishonest and tax evasive structures."
[114] I consider that it is also perfectly clear from the closing submissions that the Appellants' counsel were well aware of the concern that the Judge had raised that the Appellants had (as counsel themselves put it) "participated in the masquerade". However, counsel did not seek to suggest (either whilst evidence was being given or in closing) that a finding that the Appellants had been complicit in Aston Court's dishonesty was not available to the Judge because it had not been put fairly to the witnesses." (Bhaur v. Equity First Trustees (Nevis) limited [2023] EWCA Civ 534, Snowden, Lewison, Arnold LJJJ)
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Court to scrutinise claim even if unopposed
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- Matters for judgment of the court, not the parties
"[107] Even where the claimant's application to set aside a transaction is essentially unopposed, the court must still be satisfied that the claimant has proved the facts necessary to establish that the court has the jurisdiction to set aside the impugned transactions and that it is appropriate for the court to grant relief. See for example, Norris J's observations in Wright v. National Westminster Bank plc; and Judge Hodge, QC's comments in Hartogs v. Sequent (Schweiz) AG." (Bhaur v. Equity First trustees (Nevis) Limited [2021] EWHC 2581 (Ch), Marcus Smith J)
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"[10] In the circumstances this application proceeds on what is effectively an unopposed basis. But even if the evidence is not challenged the court must still be satisfied that it proves the facts necessary to establish that the jurisdiction is available and that it is appropriate for the court to exercise the jurisdiction and make an order for rescission. The exercise of the jurisdiction involves the court making several discrete value judgments as to seriousness, causative effect and unconscionability. These are matters for the judgment of the court and not for the judgment of the parties. The mere fact that the application is not opposed does not mean that it can be safely assumed that an order for rescission will follow. The jurisdiction to set aside transactions, even of a voluntary nature, is not a collusive remedy. Accordingly Mr Studer of counsel who appears for the claimants has in written and oral argument presented the case effectively to persuade me to exercise the jurisdiction." (Wright v. national Westminister Bank [2014] EWHC 3158 (Ch), Norris J)
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- Court will consider letter from HMRC re why relief should be refused
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"[12] The grounds upon which HMRC rely on in the present proceedings in setting out in its letter why it says the court should not grant the recission sought are in essence those alluded to by Norris J in Wright as set out above, namely the absence of the necessary factors of seriousness, causative effect and unconscionably." (JTC Employer Solutions trustees Limited v. Khadem [2021] EWHC 2929 (Ch), HHJ Jarman QC)
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"[4] ... A representative of the Assets, Residence and Valuation Section of the Inheritance Tax and Trusts Technical Division of HMRC responded to that letter by way of email dated 21 December 2018. That email confirmed that HMRC did not wish to be joined as a party to the proceedings and invited Linklaters to let HMRC know the outcome of the proceedings (misdescribed as a petition) in due course. As a result, I have not heard any argument on behalf of HMRC. I wish to make it clear that the court is always willing to consider anything that HMRC may wish to say about claims of this nature, even if it is only in the form of a written letter to be placed before the court by the claimant's own solicitors. In this case I have heard no representations from HMRC. That, however, does not mean that the court will not scrutinise a case of the present kind closely to ensure that the applicable legal principles have been properly addressed and considered." (Hartogs v. Sequent (Schweiz) AG [2019] EWHC 1915 (Ch), HHJ Hodge QC)
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- HMRC should apply to be joined as a part if they wish to put in evidence or challenge evidence
"[11] By a 10 ½ page letter dated 3rd December 2019 addressed to the Court, HMRC set out its case in relation to the Claim. HMRC did not apply to be joined. The concluding paragraph of the letter stated that HMRC advanced "all the above observations in the hope that they will assist the Court." So far as I am concerned, that hope is partly fulfilled and partly not. Insofar as the letter raises legal arguments, I have found it helpful, even where I do not agree with the arguments. I have found the letter less helpful where it has made factual allegations or has attempted to question or add to the Claimant's evidence. If HMRC wished to do that, they should have applied to be joined as a party so that they could put in their own evidence (if any) and cross-examine the Claimant and her witnesses. In the absence of any challenge by way of cross-examination, I cannot disregard the Claimants' evidence. Nor can I treat it as untrue unless it conflicts with some other clear evidence – which it does not." (Mackay v. Wesley [2020] EWHC 1215 (Ch), Deputy Master Henderson)
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Limited, if any, jurisdiction over foreign trusts
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"[227] Although I appreciate that the Particulars of Claim in this case seek – by way of alternative case – orders in relation to the administration of the various trusts here in issue in the event that the primary case on mistake fails,[112] it is not at the moment evident to me the basis upon which I have jurisdiction to make such orders; and – to be clear – even if I had jurisdiction, I would be most cautious in exercising it, given that this is quite clearly a matter where the courts of the Federation of St Christopher and St Nevis are the designated jurisdiction and where I am less than satisfied that I have all of the material before me properly to deal with the continued operation and – if appropriate and/or possible – unwinding of the Second Staff Remuneration Trust.
[228] On the other hand, for the reasons I have given, I would be most reluctant to permit this trust to continue – without check – under the day-to-day control of anyone or anything associated with Aston Court. It seems to me that I can – and, if I can, should – enjoin on an interlocutory basis Equity First, Mr O'Toole and Stratton 17 from doing anything in relation to this trust. That would enable the appropriate court – the courts of the Federation of St Christopher and St Nevis – to properly seise themselves of this trust.
[229] This is a difficult point of jurisdiction that arose on the last day of this trial, when I indicated a degree of misgiving regarding any exercise of jurisdiction in relation to the administration of the trusts (as opposed to setting aside the Scheme for mistake). It seems to me that I should go no further than I have gone so far, and to invite further submissions from any interested parties as to how to proceed." (Bhaur v. Equity First trustees (Nevis) Limited [2021] EWHC 2581 (Ch), Marcus Smith J)
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English law applied to foreign trusts and companies in the absence of proof of different law
"[18] Finally, Mr Weale invites the court to note that in circumstances where the trusts are governed by Guernsey law, and the relevant holding companies were incorporated in the BVI, it is possible that the law of one (or other) of those jurisdictions might be thought to govern the principles relating to the setting aside of the disputed transactions. In the present case, however, neither party has alleged either that foreign law governs or that the application of foreign law would produce a different outcome from the English law. On that basis, Mr Weale, with the concurrence of Mr Wilson, submits that the court should proceed on the basis that English law applies. He refers to the principle expressed at rule 25 of Dicey, Morris & Collins on the Conflict of Laws (15th edn) at paragraph 9R-001:
"Rule 25
(1) In any case to which foreign law applies, that law must be pleaded and proved as a fact to the satisfaction of the judge by expert evidence or sometimes by certain other means.
(2) In the absence of satisfactory evidence of foreign law, the court will apply English law to such a case."
I have no doubt that I should apply English law principles in the present case. No different foreign law has either been pleaded or proved; and, in those circumstances, the court will assume that English law applies, and will apply English law to the case." (Hartogs v. Sequent (Schweiz) AG [2019] EWHC 1915 (Ch), HHJ Hodge QC)
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- Court inferring foreign law not the same
"[142.8] Without more I might have had some doubt as to whether I should presume Manx law to have included an equivalent provision to s.40 Trustee Act 1925 (England and Wales). However, there is more. There are the terms of clause 2 of the DORA and there is the Agency Agreement of 26th March 2003. I infer from both of these that the draftsman of those documents did not think that the DORA operated to vest the trust fund in the New Trustees. That is some evidence that under Manx law there was not an equivalent provision to s.40 Trustee Act 1925 (England and Wales). Accordingly I will not apply the Default rule and will hold that the Claimant has failed to establish that there was a Manx equivalent of s.40 Trustee Act 1925 (England and Wales); with the result that the DORA did not operate to vest the trust fund in the New Trustees." (Mackay v. Wesley [2020] EWHC 1215 (Ch), Deputy Master Henderson)
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SPECIFIC PERFORMANCE​​
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Purchaser of land treated as beneficial owner before completion
"[87] In our view, the authorities in this area make it plain that, by virtue of the fact that the purchase price for the Property was paid in full when the Sale Agreement was executed, beneficial ownership of the Property passed at that time from Mrs Elborne to the trustees of the Life Settlement and therefore that Mrs Elborne was not the beneficial owner of the Property when she died.
[88] We think that the fact that the whole of the purchase price was paid up-front on execution of the Sale Agreement means that this case is readily distinguishable from the uncompleted executory contract pursuant to which none of the consideration had been paid, which was the situation being addressed by the House of Lords in Jerome.
[89] The decision in Ezair raises a different question in this area, dealing as it does with the rights which the beneficial owner under a sale agreement that has not yet been completed is entitled to create prior to completion. The basis of Patten LJ’s decision in that case, which relied on the decision of the Supreme Court in Southern Pacific and the Court of Appeal decision in Berkley, is that a contractual purchaser (such as B in Ezair) cannot create rights of a proprietary character which would take priority over other interests in land until the contractual purchaser has acquired the legal estate in the land. When applied to the facts in this case, it means that the trustees of the Life Settlement would have been unable to create proprietary rights over the Property by entering into a contract with a sub-purchaser in relation to the Property prior to acquiring the legal estate in the Property on completion.
[90] However, that is not the question which we are addressing. The fact that the trustees of the Life Settlement would have had to acquire the legal estate in the Property before they were able to create proprietary interests in the Property does not mean that the trustees were not the beneficial owners of the Property from the time that the Sale Agreement was executed or, more relevantly, that Mrs Elborne remained the beneficial owner of the Property from that time. The authorities cited by Mr Bradley and referred to in paragraphs 83 to 86 above are, in our view, compelling that the beneficial ownership of the Property when Mrs Elborne died was vested in the trustees of the Life Settlement and not with Mrs Elborne notwithstanding the fact that completion had not yet occurred." (Executors of Elborne v. HMRC [2023 UKFTT 626 (TC), Judge Beare)
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