SOLICITORS: Solicitor of Inland Revenue; Titmuss, Sainer & Webb.
COUNSEL: John F. Mummery for the Crown.
Leolin Price Q.C. and P. W. E. Taylor Q.C. for the executors.
JUDGE: Ewbank J.
DATES: 1981 Dec. 1, 2, 4
APPEAL from the senior registrar.
EWBANK J. This is an appeal from the order of the senior
registrar made on August 3, 1981. By the order the senior registrar provided
that a grant ad colligenda bona should be given to the Official Solicitor and
in doing so he passed over the executors under the will. The executors appeal
against that order. Before the registrar the executors were opposing a grant ad
colligenda bona, but they now ask for such a grant for themselves rather than for
the Official Solicitor. They have issued a draft summons for that purpose.
Sir Charles Clore was born in England in 1904 and died on July 26,
1979. He was domiciled in England for most of his life and the Inland Revenue
Commissioners claim that if he was not, in fact, domiciled in England at the
time of his death, he ought to be deemed to be domiciled in England under the
appropriate statutory provisions for tax purposes.
Sir Charles Clore left two wills - a Monaco will, dated April 4,
1979, and a general will, dated April 9, 1979. By the general will the testator
dealt with all his property, other than the property in Monaco. Under the
Monaco will all his assets went to his daughter, Mrs. Duffield. The executor
under that will is M. Meyohas, who lives in France. Under the general will, the
executors are M. Meyohas, Mr. Kaiserer, who lives in Israel, and Mr. Karlweis,
who lives in Switzerland. Mr. Karlweis, on January 23, 1980, executed a form of
renunciation and if that form is valid he is no longer an executor under the
general will.
Under the general will, all the testator’s property was
left to the testator’s personal settlement which he had created in
Jersey on February 20, 1979. Under the settlement, the beneficiaries are three
charitable foundations, the Clore Jersey Foundation, the Clore 1979 Israel
Foundation, and Kerin Clore (Israel). The testator had two children, a son,
Alan Clore, and a daughter, Mrs. Duffield. Alan Clore attacks the general will
and has issued a caveat in England and in Jersey. He asserts that the testator
died domiciled in Monaco and that the disposition made by the testator is
invalid since he, by the law of Monaco, was entitled to share in the estate;
the estate is worth something of the order of £30m. to
£40m.
Although the testator died on July 26, 1979, there has been no
grant of probate in England yet. The executors assert that they are ardent to
be appointed executors under a grant of the English court. The reason why there
has been no grant is there has been a dispute about the payment of capital
transfer tax.
Under section 156 (a) (i) of the Supreme Court of Judicature
(Consolidation) Act of 1925, the executors must deliver an account and a
receipt for capital transfer tax before a grant of probate can be issued. The
executors do not agree with the assessment the Crown makes and further they say
that they have not the money in the jurisdiction in any event.
The dispute seems to centre on two main points; the first is the
Crown’s assertion that the testator died domiciled in England, or, at
any rate, ought to be deemed to be domiciled in England, and the second relates
to the [*116] provisions of section
27 of the Finance Act 1975. This limits the liability of a personal
representative to the amount of assets which he himself has received. The
executors assert that their liability is so limited. There is a provision in
section 27 of the Finance Act 1975 that if the personal representative might
have received other assets but for their own neglect or default, then the
limitation extends to those assets also. The Crown asserts that but for the
neglect, or default, of the executors, there would be, at any rate, a further
£21m. in England available to meet the tax claims.
An appeal from a registrar to a judge is a rehearing. The senior
registrar considered the matter in a careful judgment, but some of the points
which were taken before him were not taken before me, and some of the points
which were not taken before him have been taken before me. So I approach the
matter afresh. It might be wondered why such an application is dealt with in
the Family Division of the High Court. The answer is that non-contentious probate
is part of the jurisdiction of the Family Division, and although this matter
could hardly be more contentious, it is, nevertheless, categorised as a
non-contentious matter.
There is bound to be further delay before a full grant is made and
it now appears to be accepted by the executors that someone ought to have a
grant ad colligenda bona which would enable the administrator so
appointed to bring in the assets, to pay debts, and, in particular, to sell six
aeroplanes worth about £4m. which are a deteriorating asset of the
estate. Alan Clore has issued a caveat in the estate and the senior registrar
considered whether the issuing of a caveat affects the power of the court to
make a limited grant, such as is asked for in this case. He rightly concluded,
in my judgment, that although a full grant cannot be made with an effective
caveat on the file, the caveat does not affect the power of the court to issue
a limited grant.
A grant ad colligenda bona, together with other grants, is made
under section 162 of the Supreme Court of Judicature (Consolidation) Act 1925.
The provisions of that section are shortly to be replaced by section 116 of the
Supreme Court Act 1981.
The Crown puts forward the Official Solicitor as a suitable
administrator on the ground that he will be independent and reliable. The
executors oppose his appointment on the ground of the inconvenience and
difficulty that a new person, a new administrator, would have in mastering the
details of this great estate, particularly coming in 2 years after the death of
the testator. They assert that the appointment would be inefficient and
expensive and would cause further delay. They say that the appointment should
be given to themselves as they are the executors who, in the end, will get the
grant. They were appointed by the testator as his representatives and thus are
the proper administrators to be appointed. They are ready, willing, ardent and
able to take either a limited, or full, grant.
The executors have referred to various cases which indicate the
concern of the court that the personal representatives chosen by the testator
should have priority. They have referred to In the Goods of Richardson(1871)
L.R. 2 P. & D. 244, where Lord Penzance said, at p. 246:
“It would, therefore, be unwise of
the court to depart from the old-established rule, that a grant of
administration must be made to [*117] the person who is by law entitled to
the property. That rule is the basis of the practice that has been acted on by
the Ecclesiastical Courts for centuries; it is a sound rule, and by departing
from it the court would introduce a practice the laxity of which might lead to
dangerous consequences.”
The problem that faces the executors in obtaining a full grant can
be circumvented in the case of limited grant. This is achieved under section
156 (a) (ii) of the Supreme Court of Judicature (Consolidation) Act 1925, which
provides that arrangements may be made through the President of the Family
Division and the Inland Revenue Commissioners, for dispensing with the receipt
of the payment of capital transfer tax and the Crown proposes, if a limited
grant is made, to apply to make such arrangements, so that the administrator
appointed can collect the assets, pay the debts and perform the other duties of
an administrator ad colligenda bona.
On an application for the appointment of an administrator ad
colligenda bona, the court is guided by section 162 of the Supreme Court of
Judicature (Consolidation) Act 1925 (as amended), which provides that in
granting administration the court shall have regard to the rights of all
persons interested. That means, in the first place, the executors, who normally
have priority, and, in the second place, it means, in this case, the Inland
Revenue, who are the main creditors of the estate.
Paragraph (b) of the proviso to section 162 reads:
“… if, by reason of the insolvency of
the estate of the deceased or of any other special circumstances, it appears to
the court to be necessary or expedient to appoint as administrator some person
other than the person who, but for this provision, would by law have been
entitled to the grant of administration, the court may in its discretion,
notwithstanding anything in this Act, appoint … such person as it thinks
expedient …”
The Crown says that the estate in England is insolvent, and that
there are other special circumstances which the court ought to regard as making
it necessary and expedient to appoint someone other than the executors as
administrator. In considering the question of special circumstances I have been
referred to In re Taylor, decd. [1950] 2 All E.R. 446. Willmer J. said, at p.
448:
“I am much attracted to the view put forward in
argument by counsel for the respondent that the terms of this proviso, where it
mentions ‘insolvency of the estate … or … any other
special circumstances,’ relate only to special circumstances in
connection with the estate itself or the administration of the
estate.”
Speaking for myself, since this is a section giving discretion to
the court, I would not impose any limitation on the words “special
circumstances.” I would say that the words “special
circumstances” are not necessarily limited to circumstances in connection
with the estate itself or its administration, but could extend to any other
circumstances which the court thinks are relevant, which lead the court to
think that it is necessary, or expedient, to pass over the executors.
The Crown says that the special circumstances in this case are the
[*118] conduct of the
executors so far in relation to the administration and the fact that both
executors live abroad. The first aspect which the Crown points to relates to a
property known as the Guy’s estate in Herefordshire. This was a
property owned by the testator. On May 23, 1979, the testator was party to a
declaration of trust executed by a company known as Stype Investments (Jersey)
Ltd., with registered offices in St. Helier, Jersey. The signatories of the
declaration of trust were Mr. Sainer, acting as the attorney of the testator,
and Mr. Dobbs, who is a director of Stype Investments (Jersey) Ltd. By the
declaration, the company, Stype Investments (Jersey) Ltd., declared that on the
conveyance to them of the Guy’s estate, they would hold the property
as a bare nominee for the testator - the beneficial ownership would remain with
him - and that they would account to the owner for the net proceeds of sale and
the net rents and profits arising therefrom until sale. At the same time, the
testator vested the estate in Stype Investments (Jersey) Ltd. The directors of
Stype Investments (Jersey) Ltd., are M. Meyohas and Mr. Kaiserer, together with
Mr. Dobbs, who is an employee of a bank in Jersey. The solicitors for the
executors in this action have also been the solicitors for Stype Investments
(Jersey) Ltd. On May 25, 1979, Stype Investments (Jersey) Ltd. entered into a
contract of sale of the Guy’s estate. They agreed to sell the estate
to the Prudential Assurance Co. Ltd. for £20.5m. pounds. Completion
was due on September 28, 1979. In July 1979 the testator died. On September 27,
1979, the day before completion of sale was due, Alan Clore issued caveats in
the estate of the testator in England and in Jersey. On September 29, 1979, the
completion moneys were paid to Stype Investments (Jersey) Ltd. into a bank
account in Jersey.
The Crown thinks that the £20.5m. which was paid over
ought to have remained in England. The Crown asserts that it was subject to
capital transfer tax of some £15m. and criticises the executors for
spiriting the money away to Jersey.
Alan Clore started proceedings in the Royal Court in Jersey and
the £20m. there is blocked and is subject to the orders of the Royal
Court of Jersey and to article 22 of the Probate (Jersey) Law 1949 which
provides that the production of a grant of probate is necessary to establish
the right to recover, or receive, any part of the personal estate and effects
situated in the Island of any deceased person.
I am told that the Jersey court would accept the consequence of a
finding that the testator died domiciled in England, but would not accept a
decision of the English court that the testator is to be deemed to have been
domiciled in England and, accordingly, it may be that this sum of money has
been lost so far as the revenue is concerned.
The Crown, in the first instance, took the view that Stype
Investments (Jersey) Ltd. had intermeddled in the testator’s estate by
transferring assets of the estate from England to Jersey. It asserted that as a
result, Stype Investments (Jersey) Ltd. had become an executor de son tort and,
accordingly, liable to reimburse the Crown.
The Crown started an action in the Chancery Division: [1981] Ch.
367. That action failed in limine. In relation to payment of the moneys on
completion, Goulding J. said, at p. 378: [*119]
“Completion took place on or about the
stipulated date. Sir Charles, of course, had by then been dead for two months,
and no grant had been obtained in respect of his estate. The
defendant” - that is Stype Investments (Jersey) Ltd. - “was
thus obliged to receive the purchase money and to retain it for the time being.
Shortly before the completion date the defendant through its London solicitors
arranged with the Prudential that the money payable on completion should be
remitted direct by the Prudential to the defendant’s account with a
bank in Jersey. The defendant also instructed its solicitors to transfer to the
same account the balance of the deposit held by them, after retaining their
costs and expenses. The whole net proceeds of sale of the Guy’s estate
thus came to be deposited in Jersey.”
The Crown says that the money did not have to be transferred to
Jersey. It could have been left in England. The Crown stressed that the
executors under the will, and the directors, Stype Investments (Jersey) Ltd.,
who transferred the money out of England, are the same people, using the same
solicitors. The executors say, “Not so.” They say Mr. Dobbs
is also a director and he is not an executor. “In any case we were
wearing different hats.”
The Gown’s case is put this way: the executors derive
their title not from the grant of probate, which has not yet been made, but
from their appointment in the will and upon the death of the testator and that
the first duty of the executors is to take possession of the assets of the
testator and bring them under their control and then to pay the
testator’s debts. The Crown says that one of the testator’s
assets was his interest under the declaration of trust regarding the
Guy’s estate and that under that declaration of trust, having regard
to the rule in Saunders v. Vautier (1841) Cr. & Ph. 240, the executors were
entitled to require Stype Investments (Jersey) Ltd. to retain the money in
England. The Crown says that these executors concurred in the decision to
remove the £20.5m. out of England.
The executors put the matter in an entirely different way. They
say that from the time of the declaration of trust and the conveyance of the
Guy’s estate, to Stype Investments (Jersey) Ltd., the asset was no
longer land in England, but was a chose in action. The chose in action was
situated in Jersey, because that is where any action in relation to it would
have to be brought. That is because Stype Investments (Jersey) Ltd. have their
registered office in St. Helier. The executors say that notwithstanding the
duties of executors to gather in the assets and pay the debts they could not
give an adequate receipt without probate to anybody who required one, and that
this is particularly the case because of the caveat. I doubt, however, whether
the caveat, in fact, affects the situation one way or the other.
The executors say that not only could they not give an adequate
receipt, but they could not compel the trustees to pay the money over to them.
In particular, they say, the Inland Revenue do not correctly understand the
rule in Saunders v. Vautier, Cr. & Ph. 240. They say the trustees had
to retain the money until they could properly hand it over. [*120]
They refer to the passage in the judgment of Goulding J. which I
have read, and they say the bank account of Stype Investments (Jersey) Ltd. in
Jersey was clearly the proper place to keep the money until they were able to
hand it over properly to the executors. They go on to say that once the money
was in Jersey there has been no way in which they have been able to return it
to England because of the law of Jersey and the orders of the Royal Court of
Jersey. The transactions involving the Guy’s estate seem to have been
cunningly planned and carefully arranged in accordance with the law. If the
executors are right, at the stroke of Mr. Sainer’s pen, the land in
England became money in Jersey, not available to pay the taxes claimed by the
Inland Revenue Commissioners in this country.
I have not been asked to decide the validity of the opposing
arguments in relation to this matter. I have been asked on behalf of the
executors to note that they have a serious argument which, in due course, will
merit careful consideration and which may well succeed. I accordingly do not
attempt to unravel all the implications of the transaction. But I do observe
that the executors who now ask for the grant ad colligenda bona are the directors of
the Jersey company who concurred in the removal of £20.5m. which
might otherwise have been left in England. I am not surprised that the
principal creditor of the estate does not have confidence that his interests
will be preserved if the executors are given a grant ad colligenda bona and this lack of
confidence on the part of the Crown is a factor which I take into account in
coming to a conclusion.
The Crown also draws attention to the testator’s
shareholding in England. It is said that the executors have been far from
candid in relation to the testator’s shareholding in England.
According to the records of the Inland Revenue Commissioners, the testator had
some £13m. worth of shares in England. There has been no reference to
this shareholding from documents supplied by the executors. When asked in an
affidavit about the shareholding, the reply was merely that all the shares had
been sold by the testator before his death. During the course of the hearing I
was told there was no secret about this matter. They were sold in 1978 and the
proceeds were settled in the personal settlement of the testator; that is the personal
settlement created on February 20, 1979, in Jersey. The Crown points out that
this means another £13m. worth of assets have found their way to
Jersey. They say that tax is going to be due on this holding if the testator is
deemed to have been domiciled in England. The executors, for their part, say
the transfer of this money to Jersey is nothing to do with them. The Crown also
asserts that the executors have been delaying in the process of administration
of the estate.
The main dispute between the executors and the Inland Revenue
Commissioners is the tax liability. Since January 1981 the Crown says the
executors have known that the Inland Revenue Commissioners were not going to
change their position and, yet, it was not until July 20, 1981, that the
executors started legal proceedings in order to determine the liability for tax
and, even now, the Crown points out, no evidence has been filed. They say it is
2 years since the testator died, and there has been a marked lack of urgency so
far as the interests of the principal creditor is concerned. There seems to be
substance in that assertion. [*121]
The next point the Crown raises is not related to any conduct on
the part of the executors, but merely to the fact that the executors both live abroad.
This, I think, is a factor which can be taken into account, particularly when
it is coupled with the way the executors have so far dealt with the estate.
It will be recalled that insolvency is a circumstance in itself
which can be regarded by the court as making it necessary or expedient to pass
over the executors. It is accepted by the executors that if the Crown claims
are justified, the estate in England will be insolvent.
The conclusion I have come to is that both by reason of the
insolvency of the estate in England, and the special circumstances which I have
described, it is expedient that an administrator should be appointed who is not
one of the executors. In my judgment, the Official Solicitor is an expedient
person for such an appointment and I, accordingly, dismiss this appeal from the
order of the senior registrar and I confirm the granting of administration ad
colligenda bona to the Official Solicitor.
Appeal dismissed.