Seminar Notes 13.06.07 Tilly Baderin

2 Gray's Inn Square Chambers

Seminar Notes 13.06.07 - Tilly Baderin

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Seminar Notes

These notes were prepared by Tilly Baderin and form part of the seminar Inheritance Act Claims - What you need to know in 2007 given on 13th June 2007 by members of the 2 Gray's Inn Square Chambers Property & Commercial Group.

Tilly Baderin

Index

DOMICILE

Introduction

A person can have only one domicile. The English definition of domicile has not changed since the days of the British Empire. Recommendations for change made by the Law Commission have never been followed through, so that the UK is one of the few jurisdictions that still have the doctrine of revival of the domicile of origin. Since the Family Law (Scotland) Act 2006 the definition of domicile in Scotland is different.

The consequences/importance of Domicile

Succession

Applications made under the Inheritance (Provision for Family and Dependants) Act 1975 require the deceased to have been domiciled in England and Wales when they died.

Section 1(1) of the 1975 Act begins with the words: “Where after the commencement of this Act a person dies domiciled in England and Wales…”

Thus if the deceased dies domiciled elsewhere, there is no jurisdiction to entertain an application under the 1975 Act, notwithstanding any lack of adequate financial provision made for the applicant by the deceased.

Tax implications

Inheritance tax is charged on the value of a person’s estate at his or her death. The estate of a person who is domicile or deemed domiciled in the UK is charged on the value of assets wherever they are situated; the estate of a person who is non UK domiciled is charged only on the value of assets situated in the UK.

Transfers between spouses are usually exempt from inheritance tax whether the transfer or gift was made during lifetime or on death. However, in cases where the donor spouse is UK domiciled and the recipient spouse is non-UK domiciled the general exemption does not apply and there is a limited exemption of £55K.

Index

Types of Domicile

Domicile may be of three types, namely, of origin, of choice, and of dependency. A person (“A”) may die domiciled in England and Wales because:

(1)

his domicile of origin is there and either:

(a)

he has never acquired any other domicile; or

(b)

he has acquired another domicile but subsequent to that his domicile of origin has revived;

(2)

his domicile of dependency is there and on his becoming independent he has acquired that domicile as a domicile of choice;

(3)

neither his domicile of origin nor his domicile of dependency was there, but he has acquired a domicile of choice there.

Domicile of Origin

This is acquired at birth according to the following rules (Dicey & Morris, r.9 (1)):

(a)

if A is legitimate and born within his father’s lifetime, A’s domicile of origin is that of his father at A’s birth;

(b)

if A is legitimate and born after his father’s death, or illegitimate, A’s domicile of origin is that of his mother at A’s birth;

(c)

if A is a foundling, his domicile of origin is in the country where he was found.

The domicile of origin can only change in circumstances where A is a minor child and is adopted. In those circumstances, A is treated under the Adoption Act 1976 s39 (1) (5) as born to his adoptive parents in wedlock.

10.

It is difficult to rid oneself of one’s domicile of Origin. Even if an individual resides for a long period in another country, the domicile of origin will not be abandoned if the individual retains a firm intention to return to the jurisdiction. This intention must be both realistic and capable of being independently measured.

Index

Domicile of dependency

11.

Children under 16 and people suffering from mental disorder may acquire a domicile of dependence based upon the domicile of the person on whom they are legally dependent. A child, on reaching the age of 16, will usually retain the domicile of the parent on whom he was for that purpose dependent, as a domcile of choice.

12.

Prior to the coming into force of the Domcile and Matrimonial Proceedings Act 1973, all married womer were considered to be dependent on their husbands. A married woman who had her husband’s domicile of dependency before that date is treated as retaining that domicile as a domicile of choice unless and until it is changed by acquisition or revival of another domicile on or after that date.

13.

Section 4 of that Act provides for a child to take his mother’s domicile where the spouses are living apart and the child makes his home with his mother.

Domicile of Choice

14.

An individual acquires a domicile of choice by residing in a country, other than that of his domicile of origin, with the intention:

(i)

of making his sole or principal permanent home in the country of residence and of

(ii)

continuing to reside there indefinitely

15.

If either of the two conditions above cease, unless a new domicile of choice is acquired, the domicile of origin revives.

16.

An intention to reside in a country for a fixed period of time or until some clearly foreseen and reasonably anticipated event happens, will not be sufficient to establish that country as a domicile of choice.

To put this in context, in the case of Furse v IRC, an intention to leave the domicile of choice upon an ill-defined onset of ill-health was not deemed to be sufficient to constitute abandonment of the domicile of choice as the ill-health concerned was deemed by the Court to be a vague and indefinite contingency. The net result was that the testator was deemed to be domiciled in England where he had lived for the last 40 of his 80 years, despite being a US national and declaring that he would return to the US when he became incapable of leading an active life on his farm in England. In contrast, in the case of IRC v Bullock, a Canadian-born individual lived in England for 44 years but was held to have retained his domicile of origin as he always intended to return to Canada if his wife pre-deceased him (an unambiguous contingency). Similarly, in Irvin v Irvin, an extended absence caused by employment in the Netherlands did not establish a Dutch domicile whilst the intention to return to England upon retirement remained.

Index

Challenging Domicile

18.

In many cases, the location of an individual’s domicile is uncontroversial. However with global lifestyles, international families and retirements in the sun increasingly commonplace, possible challenges to an application under the Act on the basis of the deceased’s domicile should never be overlooked.

19.

The onus of proof in any domicile determination falls on the party that is asserting an individual’s domicile has changed. Therefore, in the context of an Inheritance Act application:

(i)

where the deceased was at some stage domiciled in England and Wales during his lifetime, it will be for those resisting the application to prove that a new domicile of choice has been acquired (or, if relevant, a non-English domicile of origin has been revived)

(ii)

where the deceased had a non-English domicile of origin, it will be for the applicant to prove that, by the time the deceased died, he had acquired (and not subsequently abandoned) an English domicile of choice.

20.

Generally the standard of proof is the normal civil standard – the balance of probabilities. However this is subject to the principle that so serious a matter as the acquisition or abandonment of a domicile of choice is not to be lightly inferred from slight indications or casual words.

21.

The courts have ruled that “there is no act, no circumstance in a man’s life, however trivial it may be in itself, which ought to be left out of consideration in trying the question whether there was an intention to change the domicile” (Drevon v Drevon (1864) 34 LH Ch 129 at 133)

22.

Practitioners should therefore find out as much as possible about the life of the person whose domicile status is being questioned, their links to the various jurisdictions, statements that they might have made concerning their intentions and other evidence to support or contradict any such statements.

23.

As a starting point to establish the deceased’s domicile, a practitioner will require information on:

where and when the deceased was born;

the domicile and nationality of the parents;

dates and details of any moves between different countries and reasons, e.g. periods of education or employment; and

where and when the deceased died.

24.

Practitioners should also look for signs of domicile. Typical signs of domicile would be the following:-

long residence in a country/state/province

the country where arrangements have been made to pay pension

the choice of country for burial

the adoption of the law of a country (e.g. system of law chosen for drafting of the will or any trust documents)

severing of ties with country of origin e.g. giving up British passport, advising the Inland Revenue authorities, relinquishing club memberships, selling family home

any statements made by an individual as to domicile

25.

Statements made by the deceased concerning domicile status for the purposes of family proceedings or in order to obtain the preferential tax treatment given to individuals domiciled overseas constitute valid evidence but such evidence is not considered to be particularly persuasive. In addition, while HM Revenue and Customs will often make rulings concerning an individual’s domicile for tax purposes, such rulings are not binding on the courts.

Index

Recent Case law on Domicile

Leon Rhys Morgan as Attorney of Sir Anthony Shaffer v Diane Cilento and others [2004] EWHC 188 (Ch)

26.

This case dealt with the domicile of the playwright, Anthony Shaffer, who died in 2001. Domicile status was relevant in two issues:

(i)

whether the deceased's worldwide estate was taxable in the UK; and

(Ii)

whether the UK had jurisdiction to enable the deceased's partner to bring a claim under the Inheritance Act.

27.

The deceased had a domicile of origin in England and Wales but his widow, former wife and children contended that he had acquired a domicile of choice in Queensland, which he retained until his death.

28.

The deceased's partner argued that either he never lost his domicile of origin or he acquired a domicile of choice in Queensland that was abandoned before his death, whereupon his domicile of origin was revived.

29.

In concluding that the deceased acquired a domicile of choice in Queensland, the court relied on various factors, including the fact that Australia was the place where the deceased was most creative “and creation was perhaps the most important thing in Anthony's life”. Other factors given weight included: the location of the deceased's chattels; his club memberships; where he voted; statements he made in official forms and in a financial and legal context, and in social conversation.

30.

The court held that to give up his domicile of choice, an individual must show that he no longer lives in the territory in which he had a domicile of choice and, second, that he has no intention to return to reside there (as opposed to an intention not to return). On the day before Anthony Shaffer died, he stated that he lived only half the year in London and that the purpose of his stay was “business”.

31.

The court concluded that “It would be idle to speculate about what the future would have held if Anthony had lived … It may be that his intention to return to Queensland was withering. But I do not consider that it died before Anthony did.” Domicile should be decided on the position at death, not on what might happen in future.

Allen & another (Executors of Johnson deceased) v HMRC [2005] STC (SCD) 614

32.

This was an inheritance tax case. If Mrs Johnson, the deceased, had a domicile at her death in England then her estate would have been liable to inheritance tax. If not then it was not as the assets were foreign situated property.

33.

A Special Commissioner held that Mrs Johnson, born near Newcastle, had not revived her domicile of origin (having obtained a domicile of choice in Spain) even though she voluntarily spent her last six years, and the last few incapacitated, with her only relatives in England.

34.

The burden lay upon the Revenue to demonstrate that Mrs Johnson had abandoned her domicile of choice in Spain. Given the adhesiveness of a domicile of origin, one would have thought that would not have proved too difficult a burden. However the Special Commissioner relied on the fact that Mrs Johnson had retained a house in Spain which was maintained ready for her occupation and regarded her home as being in Spain and not in England. He found that Mrs Johnson intended to return to her house in Spain and gave little weight to the fact that Mrs Johnson clearly realised, towards the end of her days, that she had no prospect of returning to live in Spain as a resident of it. The continued existence of the intention was sufficient to hold on to the domicile of choice.

35.

The Special Commissioner cited the judgment of Megarry J in Re Flynn (1968) 1 WLR 103 (at page 115) where he said:

“When animus and factum are each no more, domicile perishes also: for there is nothing to maintain it. If a man has already departed from the country, his domicile of choice there will continue so long as he has the necessary animus.”

Cyganik v Agulian [2006] EWCA Civ 129

36.

This was an appeal against an order of Mr Nicholas Davidson QC (sitting as deputy judge of the High Court) that Andreas Nathanael was domiciled in England at the time of his death. It followed from this decision that his partner, Renata Cyganik, was entitled to bring a claim for further financial provision under the Inheritance (Provision for Family and Dependants) Act 1975. Mr Nathanael had left Renata £50,000 out of his estate of £6,527,362

37.

The Court of Appeal overturned the decision and in so doing held that Mr Nathanael, a Greek Cypriot, who worked and lived in England from the age of 19 until his death at the age of 63, had not obtained a domicile of choice in England but retained his domicile of origin in Cyprus.

38.

Mummery LJ cited Scarman J in Re Fuld (1968) P 675 where that judge held the authorities required that “…the necessary intention must be clearly and unequivocally proved” and that the domicile of origin is more enduring that a domicile of choice. At page 685D of the report, Scarman J further said:

“What has to be proved is no mere inclination from a passing fancy or thrust upon a man by an external but temporary pressure but an intention freely to form to reside in a certain territory indefinitely. All the elements of the intention must be shown to exist if the change is to be established: if any one element is not proved, the case for a change fails”

39.

The Learned Judge applied Re Fuld on the basis of Scarman J’s exposition:

“First, that the domicile of origin prevails in the absence of a domicile of choice, i.e. if a domicile of choice has never been acquired or, if once acquired, has been abandoned. Second that a domicile of choice is acquired when a man fixes voluntarily his sole and chief residence in a particular place with the intention of continuing to reside there for an unlimited time”.

40.

The court found that despite the fact that Mr Nathanael had lived for a long period in England and formed a strong relationship with a woman residing in England, he retained his Greek Cypriot culture and ultimately wished to return to Cyprus thus preventing England from becoming his domicile of choice.

Index

ENTITLEMENT

The Position of Cohabitants

41.

Some 65% of deceased persons do not make or leave a valid will. In such cases the intestacy rules, which are contained in the Administration of Estates Act 1925, determine entitlement to the deceased’s estate. The intestacy rules only apply to property which is capable of being left by will and do not apply to jointly owned property that passes to the co-owner.

42.

An unmarried partner, unlike a spouse or civil partner, has no automatic entitlement under the intestacy rules. However, the surviving partner may apply for provision from the deceased’s estate, provided that he or she was living in the same household as the deceased, as “husband or wife”, for a two-year period prior to the death.

O’Brien v Seagrave & Another [2007] All ER (D) 56 (Apr)

43.

A claim under the 1975 Act is an interest in the proceedings for the purposes of bringing a probate action under CPR SI 1998/3 132 Part 57.7.

44.

CPR 57.7(1) requires the claim form to “contain a statement of the nature of the interest of the claimant…”

45.

In O’Brien the claimant, Mrs O’Brien, the deceased’s partner for 12 years, issued proceedings seeking a declaration that his will was invalid for lack of capacity and that he died intestate. Ms O’Brien had no entitlement under the will or on intestacy – even on intestacy she would not take anything as she was not married to the deceased. However, her admitted right to bring a claim under the Inheritance Act 1975 would be more valuable on intestacy (where the estate passed to a brother who was not opposed to her claim) than under the will (where there would be a number of beneficiaries of the estate expected to oppose her claim).

46.

The Defendants disputed the claimant’s title to bring the claim on the basis she had no interest in the estate by the proceedings. However in the absence of reported authority on the point, Judge Mackie QC reversed the decision of the Master who had struck out the claim for failure to disclose reasonable grounds and held that a mere right to claim under the Inheritance Act could amount to an interest for the purposes of bringing a probate claim.

47.

The result is that co-habitees also have the right to challenge wills by the bringing of probate claims whether they can show entitlement or not.

The Overlap between inheritance claims and probate claims

48.

CPR 57.16 requires claims made under section 1 of the Inheritance Act to be made by issuing a Part 8 claim. Such claims cannot be combined in one claim form with other claims which are likely to involve substantial disputes of fact and for which the Pt 8 procedure is not appropriate or which, as in the case of probate claims, must be commenced using the Pt 7 procedure (CPR 57.3 (b)). An application may instead be made in an appropriate case for a claim under the Act to be tried together with another claim under CPR 3.1(2)(h).

49.

A further obstacle to combining a claim under the Inheritance Act with a probate claim is that it was held in Re McBroom [1992] 2 FLR. 49 to be essential for a grant of probate or letters of administration to have been obtained before an application for an order under s.2 of the Inheritance Act is made.

Index

PROBATE CLAIMS: CONTESTING VALIDITY

Forgery

50.

In England and Wales, it is relatively straightforward to forge a will. Testators need not write the will in their own handwriting and do not have to make it before a notary public, conditions required in some countries. The only safeguard in this country is that two witnesses must see the testator sign. The increasing availability of assistance in the form of will packs, will-writing software and DIY advice from legal experts such as “Tesco” on how to make your own will mean that a plausible will can be thrown together, with no need to forge any more than the signature and no need to dupe a solicitor.

51.

In Supple v Pender [2007] All ER (D) 195 the High Court for the first time in over 30 years overturned a will for forgery.

52.

Mr Len Supple died suddenly of a heart attack in February 2004 aged 77 leaving a very valuable 60-acre farm behind him. He was the father of two children: Stephen, his son by his wife and Lynda, his daughter from a short affair. Initially no will was found. The contested will materialised somewhat mysteriously about a month later leaving Stephen £100 birthday money a year, until he reached 70 and the rest of his estate to Lynda.

53.

Stephen alleged that the signature on the newly found will was not that of his father and brought an action to overturn the will as a forgery. The claim was upheld and the judge directed that the papers in the matter be sent to the Director of Public Prosecutions.

54.

The Court declined to rule on which party the burden of proof lay. For Stephen it was argued that the marked difference in the signature on the will from the true signature and the expert evidence combined to place the burden of proof firmly on Lynda. For Lynda it was argued that the serious allegation that she, the executor and the witnesses had conspired to produce a forged will, should be proved to the court’s satisfaction. The issue will have to be resolved at a later stage.

55.

The court provided no clear guidance on the use of expert evidence in forgery cases. The submission in Fuller v Strum that the court must decide the forgery issue in line with the expert’s evidence was rightly rejected. The Judge did not rule on the submission that expert evidence of forgery throws the burden of proving the signature is genuine on the will’s proponent, and renders that burden a heavy one. Interestingly the expert’s conclusion that there was “strong positive” evidence of forgery was not strong enough to discharge the criminal standard of proof.

56.

One of the key points in the case was the importance attached to the solicitor’s attendance notes and to the evidence of the witnesses rather than the expert evidence. In particular the court subjected the defendant’s solicitors’ attendance notes to intense scrutiny to establish the circumstances in which the mysterious new will came to light. The judgment was based largely on the fact that the judge found the evidence of Lynda and her other witnesses to be unimpressive and unreliable, whilst the attendance notes, consisting mostly of undated and limited diary entries provided little assistance in establishing exactly how and when the alleged will materialised.

Index

Incapacity/Undue Influence

Cox Johnson v Cox Johnson and Others

57.

In the litigation over the estate of Richard Cox-Johnson, dubbed the Rolling Stones’s banker by the press, three of Richard’s sons from his first marriage challenged the validity of testamentary provisions made for their step-mother, Lady Caroline Burnett-Armstrong.

58.

Richard had been diagnosed with a Parkinsonian syndrome in October 1993 but his symptoms were relatively mild until the last 18 months of his life, when his mobility worsened and his ability to articulate speech deteriorated severely. He suffered a stroke on his way to a board meeting in London and later died in hospital on 25 March 2005, aged 70. He had made a number of testamentary documents, namely a will in 2001 making no provision for Lady Caroline and a codicil in June 2004 and wills in August 2004 and February 2005 in which provision was made for Lady Caroline.

The sons claimed that all the documents making provision for Lady Caroline were invalid on the basis that their father did not know and approve of their terms. While stopping short of alleging undue influence against Lady Caroline, they claimed she had a “very forceful personality” and had convinced herself that it was Richard’s wish to make a final bequest to her in a situation where he could not have properly understood the implications. Later the sons also challenged the will on the basis that their father lacked testamentary capacity.

60.

It was crucial to Lady Caroline’s case, particularly in light of Richard’s significantly impaired speech, that she was able to provide detailed evidence to counter the suggestion by his sons that Richard was suffering from deterioration of his ability to make reasoned and balanced decisions.

61.

Over 30 witnesses, including Richard’s accountant and his GP, gave evidence on behalf of Lade Caroline. The witnesses gave dates and details of specific conversations with Richard, which substantiated Lady Caroline’s case that although Richard’s health had deteriorated, his mind was left largely unimpaired.

62.

The case settled after six days in court with the sons withdrawing their challenge to the validity of the last will. The case highlights that the quality of evidence from those who knew the testator (the key witness) is crucial in showing that the testator is of sound mind and their evidence may prove more useful than any expert evidence.

Tilly Baderin