Private law case digest:

1. Wilkinson -v- IRC (2002 SPC 347)

The case concerned an unsuccessful application by a widower (sponsored by Liberty) for the application of the Widows Bereavement Allowance to widowers as well as widows. The claim involved the Human Rights legislation and the Revenue was held not to have acted unlawfully in refusing.

Mr Wilkinson’s wife died in June 1999 and he claimed an allowance equivalent to the Widows Bereavement Allowance (WBA). Under Section 262 ICTA 1988, WBA was available to the widow for the year of assessment in which the husband dies but there is no express statutory provision for an allowance to widowers.

There had previously been a complaint by another widower, Mr Crossland, before the European Court of Human Rights alleging that the failure to provide for widowers was contrary to Article 14 (read together with Articles 8 and 1 of the First Protocol) of the European Convention. The UK government reached an amicable settlement with Mr Crossland, paying him what he would have received had he been eligible for WBA plus costs. Mr Wilkinson’s case partly rested on this, arguing that, as a matter of fairness, his case should be dealt with in the same way.

The Revenue argued that their care and management powers (which included the right to make extra statutory concessions) did not allow them, in this case, to contradict unambiguous primary legislation such as Section 262. In addition, during the passage of the 1988 Finance Bill, parliament specifically refused to extend WBA to widowers.

The court held that, in the absence of objective justification, the refusal to grant the WBA to men was in breach of Article 14 (read together with Article 1 of the First Protocol) of the Convention. It was also held that there was no legal principle which would prevent the Revenue from exercising its powers to make an extra statutory concession (ESC) that contradicted the intention of parliament. In refusing to exercise the power to make any ESC, the Revenue was in this case giving effect to primary legislation in Section 262 and there was no duty on the part of the Revenue to give an ESC to remedy a human rights incompatibility inherent in primary legislation.

As a result, the Revenue had not acted unfairly by failing to treat Mr Wilkinson in the same manner as Mr Crossland. A tax payer seeking an ESC in the UK was not in the same position as one bringing proceedings in Strasbourg. In any case, the WBA allowance was abolished in relation to deaths occurring after 6 April 2000.

The case was, however, interesting in considering the different applications of the Human Rights legislation to existing statute.

2. Healey v Brown and Another (2002) ChD 25 April 2002 (unreported)

The case concerned the difficulties and dangers of relying on mutual Wills in relation to land.

A and B were the beneficial joint tenants of the matrimonial home. They executed mutual Wills in identical form, each leaving his or her share of the property to the survivor or, in the event that neither of them survived, to Mr Healey. The remainder of the estate went to the first defendant.

The first joint tenant died having made no alteration to her Will and subsequently the second joint tenant transferred the property from his sole name to the joint names of himself and the first defendant. He later died having made no alteration to his Will. The first defendant took the property by survivorship and Mr Healey contended that he held it on trust for her absolutely and sought an Order that it be transferred to her.

It was held by David Donaldson QC sitting as a deputy that the doctrine of mutual Wills undoubtedly applied here and as a result would impose, in favour of Mr Healey, a constructive trust attached to the property. It was, however, also held that as a matter of both principle and policy, any agreement in such mutual Wills containing a bequest of land is treated as a contract for the disposition of land to which Section 2 Law of Property (Miscellaneous Provisions) Act 1989 applied and hence the mutual Will contract between the two tenants had no effect as a contract. In this situation, equity would intervene and impose a constructive trust on the first life tenant’s one half undivided share which he had allowed to pass to the second joint tenant. That share was now held by Mr Brown, the first defendant, on constructive trust for Mr Healey.

The case is interesting as it is clear that where joint tenants seek to deal with their jointly owned property by mutual Wills they can (and did in this case) fall foul of the provisions of Section 2 of the 1989 Act. Cases concerning mutual Wills having been few and far between, it is interesting that another case decided over three years ago but newly reported, also covered the subject but had a quite different result.

3. Re Woolough, Perkins v Borden ChD 14 July 1999 (only reported [2002] WTLR 595)

In this case, a brother and sister, L and E, owned a house as joint tenants. They essentially made identical Wills giving all their property to each other and another sister. When that sister died in 1981 they made new Wills giving the survivor a life interest in the entire estate with remainder to their niece. E then died and L made a new Will leaving everything to charity.

The niece claimed that the joint tenancy was severed before E had died so that her share of the house was held for her estate and did not pass to L by survivorship.

Master Anthony Moncaster held that although the 1981 and previous Wills were identical, no evidence could be found of any agreement that they should be irrevocable and hence they were not mutual Wills. It therefore followed that the making of the Wills in itself did not sever the joint tenancy. He further held that although Section 36 Law of Property Act 1925 provides for the severance of joint tenancies by notice in writing, it expressly preserved the pre-existing methods of severance, which include a course of dealing sufficient to intimate a tenancy in common, or an agreement to sever.

Although the evidence was scanty in this case, it was held that there had been such a severance; the evidence was that L and E had attended their solicitors together to make the Wills and gave instructions together for the whole of the estate including the house to be given to the other for life only with remainder to the niece. The second piece of relevant evidence was that they had made specific provision that the house should not be sold during the lifetime of the survivor. Master Moncaster held that had only one of them attempted this course it would have been an invalid attempt to deal with their share but as both of them did so, it was indicative of an agreement to sever in accordance with Section 36.

We therefore have two interesting mutual Wills cases, reaching rather different results. It is also interesting that neither the judge now counsel in Healey mention the decision in Woolough although admittedly it was unreported at the time. Similarly interesting is the fact that the problem identified in relation to Section 2 Law of Property (Miscellaneous Provisions) Act which was fatal to the arrangements in Healey was not mentioned in Woolough. Finally, it is by no means clear why Section 2(5) Law of Property (Miscellaneous Provisions) Act was not applied in Healey. The section states that Section 2 should not be treated as affecting the operation of resulting, implied or constructive trusts which could have saved the Healey – arrangement if the point had been taken and accepted.

4. Robertson v IRC SpC 309, 13 February 2002 (SPI 19)

This was an interesting special commissioners’ decision concerning penalties charged to a solicitor executor in relation to an Inland Revenue Account which he had submitted using estimated values.

The testatrix died in August 1999. Her estate comprised, among other things, a house in Scotland and a cottage in England. Mr Robertson’s (the executor) Scottish solicitor had drawn up the Will and held the title deeds for the Scottish house but had not

otherwise acted for the deceased. The Scottish house was bequeathed to the Church of Scotland who had requested it be sold immediately to avoid any deterioration over the winter and to avoid any slow down in the housing market.

At the end of November, the executor submitted an inventory of the estate to the Capital Taxes Office stating an estimated value of the Scottish house of £60,000 and contents at £5,000. He estimated the value of the English cottage at £50,000 based on a photograph which appeared to show a small cottage plus a copy agreement with a long standing tenant for a very modest rent. The executor had received the deeds for the English cottage but had not appreciated from them that the cottage was set in five acres of ground.

Shortly after submission of the Inland Revenue Account, the executor received a valuation of the contents of the Scottish house at £25,000; the house was subsequently sold for £82,000 in January 2000. He also received a valuation of the English cottage and its grounds at £315,000. He immediately submitted a corrective account to the Capital Taxes Office and paid the additional inheritance tax.

The Capital Taxes Office subsequently advised the executor they considered he had not fulfilled his obligation under Section 216 IHTA to make the fullest enquiries practical to ascertain value. They sought to impose a penalty of £9,000 but the executor objected and proceedings were commenced before the Special Commissioners. The Revenue alleged that the executor had been negligent in not having included in the Inland Revenue Account statements under Section 216(1), 216(3) and 247(1) IHTA in relation to the contents of the Scottish house and the English cottage to the effect that the executor was unable, having made the fullest practical enquiries, to ascertain the exact value as required by Section 216(A).

The executor succeeded against the Revenue and was not liable to pay any penalty. The Special Commissioner held that, where an estimated value had been given, it could be inferred that this estimate had been given after the fullest enquiries practicable in the circumstances had been made. In this particular case, this inference could be drawn from the statement that the inventory of the contents of the Scottish house was correct to the best of the executor’s knowledge and belief. The Inland Revenue Account did contain a printed warning about liabilities to penalties and prosecution should an executor fail to make a full enquiry and include all property

on which tax was payable. As a matter of fact, the executor had made a thorough examination of the deceased’s house after her death and in the opinion of the Commissioner, had acted reasonably thereafter to enable the Scottish house to be sold as quickly as possible. The Commissioner therefore concluded that the executor’s actions could not be classified as amounting to negligently delivering an incorrect account and indeed the account was not incorrect.

The Capital Taxes Office’s view of the case is as set out in the newsletter of August 2002. Their position is that estimated figures are permitted where executors need to obtain a grant urgently. In this situation, the Revenue will accept an estimate even if no enquiries have been made at all. It will be interesting, however, how the law develops following this case especially where the executors and Revenue disagree as to what is “urgent”.

Private law case digest was compiled by Julia Abrey, a partner at Withers solicitors. She can be contacted at julia.abrey@withers.co.uk.