Case Reports - Elderly Client Adviser

Feature

posted 1 May 1999 in Volume 4 Issue 4

Case Reports

Administration of Estates
Kane v Radley-Kane and others [1998] 3 ALL ER 753

An entrepreneur died intestate. He held 36% of the shares in an unquoted company, valued at £50,000. The net value of the estate shown in the Inland Revenue Affidavit was £93,000. His widow, and administratrix, appropriated the shares as part of her statutory legacy and sold them, three years later, for over £1,000,000.

The entrepreneur's daughter brought an application for a declaration that the appropriation was invalid. The Vice Chancellor held that the administratrix had allowed her fiduciary duty as, in effect, a trustee, to come into conflict with her personal interest. A PR's right of appropriation under section 41 of the Administration of Estates Act 1925 extends only to cash, or the equivalent, and does not exclude this general fiduciary responsibility. The declaration was granted.

Insurance
Cook v Financial Insurance Co Ltd [1998] 1WLR 560 HL

The appellant, a self-employed builder in his fifties, had developed pain in his chest and breathlessness, and had collapsed on a training run. His G.P. thought that he had a viral infection and treated him on that basis, but when he did not improve she referred him to a cardiologist saying in her letter of referral that she would like to rule out angina.

Some months later the plaintiff took out a business development loan, and was also advised to take out insurance to cover the loan repayments should he fall ill. Shortly after this he was diagnosed as suffering from angina, and was subsequently advised to give up work.

The policy contained a typical exclusion clause providing that no benefit would be payable for disability resulting from any sickness, disease, condition or injury for which the insured person had received advice, treatment or counselling from any registered medical practitioner during the 12 months preceding commencement. On the strength of this exclusion clause the insurers declined to pay out under the policy.

The House of Lords drew a distinction between giving treatment "for" a disease, such as angina, and giving treatment for symptoms which are undiagnosed. Here the patient's symptoms did not amount to a "condition" under the policy, and by the time a clear diagnosis had been reached the policy was already in existence. The insurers were not, therefore, entitled to avoid liability.

Comment

Given that this is a decision of the House of Lords insurers will need to take note and older clients, for the time being at least, can take heart. Lord Lloyd held that the term "condition" in the policy means a medical condition recognised as such by doctors. He also said that, to fall within the exclusion clause, "treatment" for a disease requires some knowledge on the part of the doctor of the disease which he is treating. Consequently, "advice" in respect of a disease also requires knowledge on the part of the doctor of the disease about which he is giving advice. A doctor does not give "advice" within the scope of the exclusion clause by saying "I do not know what is wrong with you; go and see another doctor". An example was given of a man who complains to his doctor that he is suffering from headaches. The doctor can find nothing wrong, and recommends a strong painkiller. Eventually it transpires that the man has a brain tumour. In these circumstances it cannot be said that he receives advice for his brain tumour when he first consults his doctor, nor that he receives advice for his "condition".

In handing down its majority decision the House of Lords emphasised that this appeal raised no point of general importance. However, for older people, in particular, diagnosis of a "condition" can be difficult and uncertain. Not infrequently diagnoses are not made at all - for example "memory loss", which is a symptom not a diagnosis, often appears in assessments of older people who may have Alzheimer's Disease or some other form of dementia. By the same token the symptom described as "low back pain" appears on millions of medical certificates every year.

Property
Kinch v Bullard [1999] 1WLR 423

A husband and wife were beneficial joint tenants of the matrimonial home. The wife had been diagnosed as terminally ill. She initiated divorce proceedings, and wished to sever the joint tenancy so that her share could form part of her estate. Her solicitor sent a notice of severance to her husband, who never saw it because he had suffered a severe heart attack, following which the notice was destroyed by his wife, who had changed her mind about severance. Both husband and wife died shortly afterwards. The issue was whether or not a severance had taken place.

It was held that, if a notice could be shown to have been delivered at the last-known home or place of business of the addressee, that constituted good service under section 196(3) of the LPA 1925, and that once a notice has been served, it is not possible to withdraw it. The joint tenancy was effectively severed, and the doctrine of survivorship was prevented from operating. This outcome was to the detriment of the wife, who outlived her husband by a few months.

Comment

This case serves to underline the fact that a joint tenancy can be severed unilaterally and indeed, once the process has been initiated, without either party wanting it to happen. The point is often raised in the context of an admission by one joint tenant to residential care. There is no requirement that the addressee of a notice of severance should have mental capacity, nor is there any basis for treating a severance as a "deprivation" of capital.

R v Kelly [1999] 2WLR 384 CA

This unusual case concerns property rights in the human body!

Two people had been convicted of theft of human body parts, which were kept by the Royal College of Surgeons as anatomical specimens for use in training medical students. There was an appeal against conviction on the question of whether human bodies or body parts are "property" capable of being stolen.

The Court of Appeal held that body parts can become the property of third parties (in this case the RCS) if they have acquired different attributes by virtue of the application of skill (such as dissection or preservation techniques), for exhibition or teaching purposes. Consequently the Theft Act 1968 applies.

Comment

The common law position is that there is no property in a human body, and there has, in fact, been no previous prosecution for theft of a body or body parts. Potentially, this decision could have considerable ramifications in respect, for example, of human tissue which is used for research leading to commercial profit. Advances in bio-technology, and the culture within which we live, will certainly combine to produce litigation over who is entitled to the proceeds of research.

It is interesting to note that the Court of Appeal held open the possibility that human body parts may be capable of being "property" for the purposes of the Theft Act, even without the acquisition of different attributes, if they have "a use or significance beyond their mere existence". Use in an organ transplant operation, or for the extraction of DNA were cited as express examples of such use or significance. Protracted litigation in the USA (Moore v Regents of the University of California (1990)) has already demonstrated what the future may hold.

Trustees
Tankel v Tankel [1999] 1 FLR 676

There was a discretionary trust for a wide class of beneficiaries, including the daughters of the settlor. The trust deed directed that no discretionary payments were to be made for the benefit of trustees. Some years after the trust was set up the original trustees retired, and the settlor's daughters became replacement trustees. A number of substantial appointments were made in their favour. The settlor and trustees then sought rectification of settlement, and the insertion of a new clause providing that a beneficiary who was also a trustee could be an object of discretion.

The Divisional Court held that rectification was not available because there was no evidence that the original trust deed had not, at the time, expressed the wishes of the settlor.

Comment

This decision points up the limitations on rectification, as a remedy. The trust in issue was the second of two discretionary trusts set up by Mr Tankel. The first one had been too restrictive in its scope and his instructions in respect of the second were to include charities as objects of the trustees' discretion, and to widen the class of individual beneficiaries. The two trust deeds were drafted by different people, and the second did not follow the same precedent as the first. In relation to the second deed the judge commented that the managing clerk, who was the draftsman, "appears to have constructed his draft as a compilation of selected passages from a number of precedents which he had consulted. It has to be said that he did not do this with a high level of skill." The problematic clause was taken from a precedent in Potter and Munro's Tax Planning With Precedents, in which there a note explaining the purpose of excluding a trustee from benefiting. The judge made it clear that, had there been evidence that Mr Tankel's instructions were to draft the second settlement in the same way as the first, rectification would have succeeded. The same would have been true if there had been evidence of specific instructions to draft a settlement under which beneficiaries could be trustees but still continue to receive benefits.

The message of this case is clear. The tax and other consequences of the invalid appointments made were very considerable and presumably the firm's professional negligence policy was on the line. These days technology permits draftsmen to take their pick from large menus of possible clauses, kept on office databases. The reminder here is that the better the technology, the more complicated become the decisions, and the greater the dangers for practitioners who lack appropriate expertise. Therefore adequate supervision becomes critically important.

James v Williams (1999) The Times, April 13th CA

The plaintiff was one of three siblings. Her brother and sister had never married, and had lived with their parents all their lives in a property known as Rose Cottage, Penzance. For her part, the plaintiff had been effectively excluded from the family home after her marriage in 1951.

The parents died intestate in the early 1970s, and from then on the plaintiff's brother behaved as though Rose Cottage belonged to him, to the extent of taking out a mortgage on it in 1986. No questions were asked because his name was the same as that of his father, which appeared on the title deeds. The brother died in 1993, and left Rose Cottage by his will to his sister (not the plaintiff). On the latter's death it passed to her daughter, the plaintiff's niece. Only at that point did the plaintiff realise that she should have been entitled to a one third share in the property on her mother's intestacy.

On the hearing of the originating application it was accepted that the brother was an executor de son tort in respect of his late mother's estate. Since he had not taken out letters of administration he could not be an express trustee, so that the plaintiff's application would be time barred unless there was a constructive trusteeship. In the absence of direct authority, the judge held that the plaintiff's brother had known that she was entitled to a share in Rose Cottage, and that if he had taken out letters of administration he would have had a fiduciary responsibility to carry out the terms of sections 46 and 47 of the Administration of Estates Act 1925. Although there is no duty to become a personal representative there is a duty to see that equity prevails. Consequently a constructive trust had arisen at the time of the plaintiff's mother's death, and the action was not time-barred.

Comment

Despite the lack of previous direct authority, the family estrangement seen in this case will be familiar to most private client practitioners. The decision serves as a reminder of the flexibility of the constructive trust, which can be imposed wherever property is held knowingly subject to the equitable interests of others, and which gives rise to the beneficiary's right to trace.