BAILII is celebrating 24 years of free online access to the law! Would you consider making a contribution?
No donation is too small. If every visitor before 31 December gives just £1, it will have a significant impact on BAILII's ability to continue providing free access to the law.
Thank you very much for your support!
 |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] | |
Jersey Unreported Judgments |
||
|
You are here: BAILII >> Databases >> Jersey Unreported Judgments >> In the matter of the Will of Mrs G (Deceased) [2017] JRC 090 (14 June 2017) URL: http://www.bailii.org/je/cases/UR/2017/2017_090.html Cite as: [2017] JRC 090, [2017] JRC 90 |
||
[New search] [Help]
Estate - Will and moveable property of Mrs G (Deceased).
|
Before : |
Sir Michael Birt, Commissioner, with Jurats Nicolle and Morgan |
|||
|
Between |
Mr Malcolm John Le Boutillier and Mr Daniel Joseph Levy (as Executors of the Jersey moveable Estate of Mrs G (Deceased) |
Representors |
|
|
|
And |
Mr J |
First Respondent |
|
|
|
And |
Mrs K |
Second Respondent |
|
|
IN THE MATTER OF THE WILL OF MOVEABLE ESTATE OF MRS G (DECEASED)
Advocate S. J. Young for the Representors.
Advocate E. C. P. Mackereth for the First and second Respondents.
judgment
the commissioner:
1. This is an application by the Representors ("the Executors") in respect of the movable estate situated in Jersey of the late Mrs G ("the deceased") who died on 5th March, 2014. The application seeks a declaration as to whether transfers of a total of £3m to the First Respondent and £2m to the Second Respondent in September 2010 ("the Transfers") were gifts or were by way of loan.
2. The deceased was born in 1922 and was 93 when she died. She was 88 at the date of the Transfers and the evidence was that she was in good mental health at that time.
3. She was the widow of the late Mr G ("the father") and was domiciled and resident in Jersey at all material times. She left estate in the USA, England and Jersey with a separate will in respect of each jurisdiction. In respect of the Jersey movable estate ("the Jersey estate") she left a will dated 16th February, 2012, (together with three codicils dated 17th May, 2012, 14th September, 2012, and 29th May, 2013,) ("the Will") which appointed Mr Le Boutillier, Mr Levy and Mr Moon as executors of the Jersey estate.
4. A grant of probate in respect of the Will was issued in this Court to the three named executors on 26th March, 2014. However Mr Moon subsequently resigned as an executor on 25th February, 2016, leaving the Executors as the remaining executors of the Will.
5. The deceased and the father had one son, namely the First Respondent ("the son"). He is married to the Second Respondent ("the daughter-in-law") and they have two children ("the grandchildren"). As the sole child of the deceased, the son was entitled to a legitime of two-thirds of her movable estate upon her death. Although the Will provided for the son, it gave him less than his legitime share, with the residue being left equally to the daughter-in-law and the grandchildren.
6. The Jersey estate was substantial. Even after the deceased had given very substantial sums to charity during her life, the net value of her estate was well in excess of £160m.
7. By order of the Royal Court dated 9th February, 2015, on an application brought by the son, the Court varied the Will pursuant to Article 35 of the Probate (Jersey) Law 1998 ("the Law"). The Will as varied gave the son something approaching his legitime entitlement.
8. The administration of the English estate has been completed and the administration of the Jersey estate is virtually complete. However, late in the day, an issue has arisen upon which the Executors seek a ruling from the Court. This relates to the Transfers and whether they were gifts or loans. There are inheritance tax consequences in the UK depending upon the outcome.
9. As we describe below, the son and the daughter-in-law always understood the Transfers to be gifts; nothing was said to either of them at the time to suggest that they were loans. It was only after the death of the deceased that they were made aware that it might be suggested that the Transfers were by way of loan. This was because of the terms of clause 9 of the Will which read:
"9. Whereas I have advanced to my son ... the sum of three million pounds (£3,000,000) and to my daughter-in-law ... the sum of two million pounds (£2,000,000) I forgive and release each of them from the said advances."
10. Mr Le Boutillier gave evidence by two affidavits and also orally about the background to this provision in the Will. He explained that he was a solicitor who had retired as a partner of Le Gallais and Luce in 2009 but had continued thereafter to act for some clients including the deceased. Mr Moon had been the deceased's legal adviser for many years but he had retired. Mr Moon approached Mr Le Boutillier in May 2009 and asked if he would advise the deceased in connection with her Jersey wills. Thereafter Mr Le Boutillier met the deceased on a number of occasions at her home to take instructions. He prepared a will for her in July 2009 and a further one in November 2009 ("the November 2009 Will"). A further will was executed on 20th January, 2010, ("the 2010 Will").
11. He described the deceased as a somewhat secretive person who very much knew what she wanted to do. She liked to do things her own way, even after receiving professional advice.
12. In February 2010, the deceased fell during the night. She subsequently underwent an operation in hospital.
13. Mr Le Boutillier attended the deceased at her home on 7th September, 2010. He made an attendance note which has been exhibited to the Court. The deceased told him that she was 'lending' her son £1m that week, interest free, and that in approximately 10 days' time she would be lending a further £2m to her son and £2m to her daughter-in-law. She apparently told Mr Le Boutillier that this was 'to cover costs of boat'. Mr Le Boutillier did not question her about these loans or their terms and he was not instructed to do anything such as write to the son or daughter-in-law or draft any agreements. He was asked to draft a codicil to the 2010 Will and her instructions to him, as recorded in the attendance note, were that the 'loans' were 'to form part of the bequest'. He was instructed to increase the cash bequest in the 2010 Will to the son by £2m and to the daughter-in-law by £2m and to stipulate that 'loans received would form part of [her] estate'. Mr Le Boutillier said that when the deceased asked you to do something, she expected you to do it and she expected her instructions in this case to be dealt with as a matter of urgency.
14. He said that in error he drafted a codicil to the November 2009 Will rather than the 2010 Will, probably because he did not hold copies or originals of the 2010 Will. The codicil which he drafted contained the following provision at clause 3:
"Whereas I have advanced to my son ... the sum of three million pounds (£3,000,000) and to my daughter-in-law... the sum of two million pounds (£2,000,000) I declare that I have made these advances by way of interest free loans which will be repayable by my son and daughter-in-law to my Estate and will be offset by my Executors against the pecuniary legacies made by me to my son and daughter-in-law under the terms of my aforesaid will."
15. Mr Le Boutillier said that he did not contact either the son or daughter-in-law about this matter. He would only have contacted them if he had been told to do so by the deceased. If he had contacted either of them without her asking him to, she would have regarded this as a breach of trust. She was very secretive about her affairs and expected everything to be kept strictly confidential.
16. In January 2012, Mr Le Boutillier met the deceased to discuss a new will and amongst other matters, the deceased instructed Mr Le Boutillier that she wished to "forgive" the son and daughter-in-law their "respective loans" rather than offset them against pecuniary legacies as previously stated. It was following those instructions that Mr Le Boutillier drafted clause 9 of the Will in the form set out at para 9 above and this was duly executed by the deceased. Mr Le Boutillier considers that he used part of the wording of the codicil to the November 2009 Will for the purposes of drafting clause 9 of the Will.
17. He said that the deceased telephoned him on 5th July, 2012, telling him that she was going to 'loan (give)' the son £5m (being a sum additional to the Transfers). However the attendance note goes on to say 'must be a loan'. She said she intended to transfer £500,000 in a few days and the balance of £4.5m when available as soon as possible. It was to be 'agreement against his inheritance'. It was agreed that Mr Le Boutillier would draft a letter for her to send to the son 're loan'.
18. A draft letter was prepared dated 10th July, 2012, which Mr Le Boutillier amended by hand. That draft letter, as amended, made it clear that the sum of £5m was being transferred by way of loan. However, the deceased in fact sent a different letter on the same date and this was subsequently copied to Mr Le Boutillier. That letter to the son read:
"As requested I am arranging to transfer to you the sum of £4,500,000 as soon as it is available and this is plus the £500,000 which was transferred to you last week.
I am sure you understand that this is an advance on your two-thirds legal inheritance and I am happy to be able to assist you..."
19. Again Mr Le Boutillier at no stage had any communication with the son or daughter-in-law.
20. Mr Le Boutillier described various meetings during the course of 2013 but the only relevant one was in October 2013, when the deceased told Mr Le Boutillier that she wanted the son to have two-thirds of her estate. This was a change from what she had said previously and what the previous wills (including the Will) provided. However she did not in fact give instructions to amend the Will and she died on 5th March, 2014, without making any change to the Will.
21. Mr Le Boutillier said that a schedule of assets and liabilities of the estate was drawn up on 4th July, 2014, and these showed the Transfers as being loans due to the estate from the son and the daughter-in-law for respectively £3m and £2m. When the Will was varied, clause 9 was left intact. However he accepted that no attention was paid to that aspect at the time as the son would in any event be receiving the bulk of the estate following the variation.
22. Mr Le Boutillier said that the deceased was aware at all times that the son was entitled to claim his legitime of two-thirds. In his opinion she wished to ensure that, if he did challenge, the sums transferred would be counted against his two-thirds as avances de succession.
23. The son gave evidence on affidavit and orally. He said that on his father's death he had not challenged for his legitime and had in return agreed with the deceased that he would receive a total of £12m from the father's estate. He said he had a very good relationship with the deceased until her fall in 2010. She was generous and frequently made gifts to him. For example, he had the use of two aircraft which were owned by companies which were in turn owned by the deceased. He often used these to go to the United States where he had a home. Sometimes the deceased would go with them but on many occasions she would not. All the fuel costs etc. were met by the deceased. He would probably undertake four to five trips a year to the US and occasional trips to Europe.
24. She had also helped him with the acquisition of a boat in 2007. The boat had cost some £7m-£8m and she had provided £6m. He said that on this occasion she had asked him to sign an agreement which he had been content to do. He said that originally Mr Moon had sent a loan agreement but he had sent this back as he did not wish to borrow the money. A subsequent agreement was then produced and signed. This simply said that if the boat were to be sold, the proceeds would be dealt with in such manner as he and the deceased might agree. It was not a loan agreement. In fact the boat had not been sold at the date of her death.
25. He said the deceased had also given him £5m in July 2012. He was a bit stretched at the time and she had offered that sum. There was no suggestion that it was a loan. On the contrary, the letter to him (as set out at para 18 above) merely said that it was an advance on his two-thirds legal inheritance. He understood that as he knew that he was entitled to two-thirds of her estate.
26. He said that until her fall in February 2010, he was in very regular contact with her. However she had rather withdrawn after that and so he did not speak to her so often, although he did still telephone her. He said that in September 2010, he telephoned her. She asked if everything was alright and he said something to the effect that interest rates were very low. She asked whether '5' would help. He knew that this meant £5m as this was how they spoke to each other. He said that was very kind. She then said that she would discuss it with Mr Le Boutillier as Mr Moon was away. This did not surprise him as it was common for her to speak to her lawyers.
27. She telephoned the next day to ask if he would mind if she transferred £2m direct to his wife. He said that that would be fine. She did not say why she wanted to do that but he knew she was very fond of his wife. She at no stage referred to a loan or to borrowing and he said that he in fact had never borrowed from the deceased. The transfer of £1m took place on 8th September and transfers of £2m to each of him and his wife took place on 30th September. The Transfers were made out of the deceased's account in Jersey to their respective accounts in England, which is where they lived at the time. Nothing else was ever said about the Transfers. So far as he was concerned it was a family transaction and his mother had very kindly given them £5m. There was no letter accompanying it and it simply followed the two conversations which he had with her on the telephone.
28. He said that when the Will was read after her death, he was surprised at the content of clause 9 but did not concentrate on it. The main issue at that stage was seeking the variation of the Will as a result of which he would receive the residue. It was only when advice was received subsequently that inheritance tax would be payable if the Transfers were a loan that the issue became of any significance.
29. The daughter-in-law gave evidence by affidavit. In relation to the Transfers, she said that she had not asked for any money whether by way of loan or gift. She remembered talking with the deceased on one occasion about the Transfers. This was after her husband had spoken to the deceased. She remembered the deceased telling her that she was happy to provide £5m in total and that £2m of this would be transferred to the daughter-in-law, for which the daughter-in-law thanked her. There was no suggestion of it being a loan or of there being any obligation to repay the money. Had this been mentioned, the daughter-in-law would have needed to consider whether she wanted to accept a loan as she would have been concerned about how she might pay it back.
30. She said that the deceased had often helped the son's family by making payments to the son. For example she had helped in the purchase of the boat and had also assisted when the son and daughter-in-law had carried out alterations to their home in Florida. She was not clear why the deceased would have made any distinction between the Transfers and all the other payments which she had made to the son during her lifetime. She and the son had always been under the belief that the Transfers were a gift.
31. Mrs L gave evidence by affidavit. She said that she had started to work for the father and the deceased in about 1990 and acted in effect as their personal assistant. She was frequently present at meetings and would hear conversations and have a good awareness of family matters. She said that the deceased was extremely able but she was a proud and private woman who was very cautious about what she told people, including her lawyers. She only shared certain information with them. She said she was often present when the deceased would meet with Mr Le Boutillier or Mr Moon. The deceased was quite sharp in tone and got straight to the point. She did not like to show any sign of weakness or show emotion in any way to her professional advisers and she could be quite derogatory about people, including the son, in front of them. She liked being in control at all times. However, away from her professional advisers, the deceased would soften in nature, particularly when discussing the son.
32. She confirmed the deceased was very generous to her family. For example the son had use of an aircraft for his travel as and when he wished unless the deceased had a prior call on it. It was never suggested that the son or any other member of the family should contribute to the costs of any trips in the aircraft. She confirmed that in February 2010, the deceased had a fall and telephone calls between the son and the deceased became much less frequent after that. The deceased's physical health deteriorated after that time but her mental acuity remained.
33. She recalled that Mr Le Boutillier came to see the deceased on 7th September, 2010, but she was not present at the meeting. However, following that meeting, the deceased asked her to type a letter of instruction to the bank to transfer £1m to the son and signed that on 8th September. No mention was made in those instructions of the transfer being by way of loan and the deceased had not said anything to Mrs L to suggest that it was. Letters to the bank would be dictated by the deceased which Mrs L would then type up. Once she had completed the letter, she would print it off. The deceased would carefully check the details and only sign it once she was satisfied that the letter contained the correct information. Mrs L also typed the subsequent letters dated 30th September for the two transfers of £2m to the son and the daughter-in-law and again there was no mention of these being a loan.
34. She also confirmed that she typed the letter dated 10th July, 2012, to the son concerning the £5m being transferred at that time. She confirmed that the letter dictated by the deceased made no reference to the fact that it was a loan and indicated, she thought, the way that there was a difference in the approach adopted by the deceased when in front of professional advisers as compared to when she was away from them.
35. Mrs L confirmed that the deceased had on one occasion made a loan to her for repairs to the roof of her house. On that occasion the deceased had contacted Mr Moon to draw up loan documentation. It was the view of Mrs L that, if she had intended the Transfers to the son and daughter-in-law to be by way of loan, the deceased would have asked Mr Le Boutillier to draw up the appropriate loan documentation as she liked to do things by the book.
36. The final evidence was an affidavit from Katherine Neal, an employee of Ogier, who acted for the son in connection with the application to vary the Will. She confirmed that in the varied Will, she had simply repeated clause 9 of the Will without giving much consideration to it. She confirmed that in the affidavit prepared for the son to support the application for a variation, she had referred, when listing the various specific legacies in the Will, to the waiver of the £3m loan and £2m loan to the son and daughter-in-law respectively. She said it was her decision to use the word loan and she had taken this from the estate accounts prepared by Le Gallais and Luce.
37. Finally, the Court was provided with a letter dated 2nd March, 2017, from Mr Moon. However, he was unable to give any evidence about the Transfers as he was not involved with them and did not suggest that he discussed them at any stage with the deceased.
38. The first issue to decide is which system of law governs the Transfers. The Court has been provided with an opinion dated 21st January, 2016, from Mr Richard Wilson, an English barrister. He concludes that, whether the choice of law issue is considered under English law or Jersey law, it is Jersey law which applies to questions of categorisation of the Transfers.
39. Sitting as a Jersey court, we apply the Jersey conflict of law rules. However, we agree with Mr Wilson that the application of such principles leads to the conclusion that categorisation of the Transfers is governed by the law of Jersey. We reached that conclusion for the following reasons.
40. In the absence of an express or implied choice of proper law, the proper law of a contract or gift is the law of the jurisdiction with which the transaction has the closest connection.
41. In our judgment, the Transfers have the closest connection with Jersey for the following reasons:
(i) The account from which the Transfers were debited was an account in a bank in Jersey in the name of the deceased.
(ii) The deceased was domiciled and resident in Jersey and was physically in Jersey at the time she gave the instructions for the Transfers.
(iii) The Transfers were made by way of BACS. The Court was informed that a transfer by BACS is irrevocable once the payment instruction has been made to BACS (by forwarding from the paying bank) with the consequence that the transfer of money is effective at that point.
(iv) The performance characteristic of the transaction (i.e. the alienation of the funds) occurred in Jersey.
(v) The only connection with England was that the receiving bank was an English bank and the ultimate recipients of the transferred funds (i.e. the son and the daughter-in-law) were resident in England.
42. A loan of money is an agreement between two people by which the borrower receives money from the lender and assumes an obligation to repay the money in accordance with the terms of the agreement.
43. In Selby-v-Romeril [1996] JLR 210, the requirements for a valid contract under Jersey law were established. The relevant part of the headnote to that case reads:
In order therefore for there to be a loan in this case, the son must have consented to repay the £3m and the daughter-in-law must have consented to repay the £2m.
44. It is well established that family arrangements will often not give rise to legal consequences. The position was summarised in this jurisdiction in the case of Ferchal-v-Ferchal [1990] JLR 117 where Hamon DB said at 121:
45. That position was reaffirmed more recently by William Bailhache, Bailiff in Al Tamimi-v-Al Charmaa [2017] JRC 033 at para 85 where he said:
46. An inter vivos gift to or for the benefit of a child by a parent is described as an avance de sucession. On the death of a parent, the child may be compelled at the instance of the co-heirs to rapporter á la masse, i.e. to bring the gift back into the gross of the estate, so as to prevent one heir benefitting to the prejudice of others by means of inter vivos gifts. See De La Haye-v-Walton [2013] (1) JLR 117 at para 54.
47. We are conscious that we have not heard adversarial argument in this case. Mr Le Boutillier remained neutral in his evidence but no one was arguing in favour of the Transfers being by way of loan. Nevertheless, having probed the evidence as best we could and making such allowance as we can for the lack of adversarial argument, we have come to the clear conclusion that the Transfers were gifts, not loans. We would summarise our reasons for so concluding as follows:
(i) Having seen and heard the son give evidence, we accept his assertion that the deceased never suggested or mentioned to him that the Transfers were a loan. We accept his account of what she said to him and that it was her decision to transfer £3m to him and £2m to the daughter-in-law.
(ii) His evidence is supported by the daughter-in-law who, furthermore, stated that she would have had to think very carefully before accepting a loan because she might not have been in a position to repay it.
(iii) It is further supported by Mrs L who said that the deceased made no mention of the Transfers being by way of loan.
(iv) In the absence of consent on the part of the son and/or the daughter-in-law to entering into a loan, the requirements for a valid contract of loan are simply not present.
(v) A gift would be consistent with the deceased's general generosity towards the son as mentioned above and also with the fact that there was no other occasion on which she loaned him money.
(vi) Whilst it might be understandable that she would wish to lend £5m to her son, we think it highly unlikely that she would have loaned £2m to her daughter-in-law. She would be aware of the difficulty which the daughter-in-law might have in repaying it and it is also inherently unlikely that, if the sum of £5m was intended to be by way of loan, she should suddenly switch part of the loan to her daughter-in-law.
(vii) The complete lack of any documentation is also inconsistent with the existence of a loan. The agreement in connection with the boat and the loan to Mrs L suggest that, if she wished there to be clarity about a matter, the deceased was quite willing to enter into written agreements.
(viii) The circumstances surrounding the transfer of £5m to the son in 2012 are also consistent with the Transfers being gifts, not loans. In 2012, the deceased told Mr Le Boutillier that the £5m would be by way of loan and Mr Le Boutillier went as far as drafting a letter to make that clear. However the letter which was sent later the same day by the deceased to the son makes it clear it was not a loan but merely an advance on his two-thirds legal inheritance, i.e. an avance de succession. It seems inherently unlikely that she would treat the Transfers in a completely different manner from the payment of a similar sum two years later. Furthermore, it is an example of her telling Mr Le Boutillier she was making a loan when she was in fact making a gift.
48. We accept Mr Le Boutillier's evidence that she referred to the Transfers as loans. However, this does not persuade us that the Transfers were in fact by way of loan for the following reasons:
(i) Whatever she thought, they could only in fact have been loans if that had been agreed to by the son and/or the daughter-in-law. We have already found that they entered into no such agreement. A secret intention on her part that the Transfers should be a loan could not constitute them as loans in law.
(ii) We think it quite possible that, when she referred to loans, she really had in mind that, as in 2012, the sums advanced would be taken into account when calculating the son's legitime. We accept of course that that is not a loan in strict legal terms but we can envisage a non-lawyer possibly using the expression in such a context.
(iii) Even if she did envisage a loan in the strict sense, there was simply insufficient certainty as to the terms of any such loan. Mr Le Boutillier accepted that he never asked her what the terms of the loan were and no terms were ever communicated to the son or the daughter-in-law.
(iv) Furthermore, there is insufficient to rebut the presumption against the intention to create legal obligations in the context of family relationships.
49. For these reasons, we conclude that the Transfers were by way of gift and not loan. Advocate Young asked us to grant a declaration to that effect. In Re Curatorship X [2002] JLR 259, the Court held that it had jurisdiction to grant declaratory relief where there was a live practical question with practical consequences. We are satisfied that that is the case here. The Executors need to know the basis upon which they should proceed to administer the rest of the Jersey estate. Whilst the declaration cannot bind any non-party as a matter of law, we think it is reasonable to grant such relief in this case.
50. Accordingly we grant a declaration that the Transfers were made by way of gift, not by way of loan.
