The moral of Higgins v Morgan [2021] and of Hirachand v Hirachand (CA)(2021) is to mediate early in order to contain the risk of a judge making an award of financial provision that includes an element of a CFA success fee that is impossible to calculate with any precision because as HHJ Cawson QC concluded in Higgins,

‘I do not agree with Mr Willetts that awarding some part of the CFA success fee would necessarily be contrary to s. 1(2)(b), because it involves providing for something other than maintenance. To the contrary, I consider it relevant for the purposes of s. 3(1)(a) of the 1975 Act to the question of the financial resources and financial needs which Mr Higgins has or is likely to have in the foreseeable future. This is because if I do make an award in his favour so as to trigger “success” and a requirement to pay the success fee, which cannot as a result of s. 58A(6) of CALSA be recovered from the Defendants as costs, then his liability to pay the success fee will be bound to affect his ability to maintain himself to the extent sought to be achieved by the award. I consider that Cohen J was thus correct at [55] in Re H to consider it appropriate to consider the liability for the CFA success fee as part of the claimant’s needs.

However, there is plainly a tension, in my judgment, between giving effect to s. 3(1)(a) of the 1975 Act in taking into consideration the success fee on the basis that it would affect the claimant’s ability to maintain himself on the one hand, and the policy considerations behind s. 58A(6) of CALSA on the other hand in not requiring the opposing party to litigation to meet the payment of success fees, a factor taken into account by Deputy Master Linwood in In re Clarke, but not seemingly by Cohen J in Re H.

On the other hand, the actual effect of s. 58A(6) is simply to prevent a “costs order” being made so as to permit the recovery of the success fee. It is not in terms outlawing the making of an order under the 1975 Act that includes an element of success fee within the quantum of the award because that has been taken into account as a consideration in respect of the claimant’s needs. I take Mr Willetts’ point in respect of CPR 36.17(4) that circumstances might arise in which an element of the success fee is brought into account in calculating the punitive sums provided for thereby. However, even if this can properly be construed as a “costs order”, the difficulty occasioned by any unlawfulness could be dealt with by the exercise of the Court’s power under CPR 36.17(4) to depart from the operation thereof, given that the relevant provisions only apply “unless [the Court] consider it unjust to do so”. This exception could be used to avoid any difficulties of the kind that Mr Willetts raises.

The overall conclusion that I come to is that I am required to take into account the success fee in considering Mr Higgins’ financial resources and financial needs for the purposes of s. 3(1)(a), but that the policy considerations behind s. 58A(6) CALSA fall within the category of “any other matter” which the Court is entitled to, and in my view should take into account for the purposes of determining the manner in which it should exercise its powers under s.2 of the 1975 Act.

I am not persuaded that it is appropriate to take into consideration the respective merits of the case in deciding how much of the success fee ought to be recoverable as part of an award under the 1975 Act, even on the basis of submissions made post judgment. Apart from the difficulties that is likely to create so far as questions of privilege are concerned, I consider it to be an inherently unreliable exercise. I consider that I am entitled to take a rather broader view of the position and have regard to the size of the estate, the amount of the likely success fee compared with the award actually made, and the fact that in many cases, particularly where significantly less is recovered than claimed, some agreement for payment of a significantly smaller success fee might well be negotiated, even if the same is technically payable under the relevant CFA.

Taking these broad considerations into account, and having regard to the policy considerations behind s. 58(6)(A), I consider that the appropriate course is to increase the award to £55,000 to include an element of success fee provided that evidence can be produced, in an appropriate way, to prove that the success fee has become payable.’

See also my recent blog – Inheritance Act – 25% CFA cases – Hirachand v. Hirachand (CA) (2021): Inheritance Act – 25% CFA cases – Hirachand v Hirachand (CA)(2021) | Carl’s Wealth Planning Blog

FS Cairo (Nile Plaza) LLC (Appellant) v Lady Brownlie (as Dependant and Executrix of Professor Sir Ian Brownlie CBE QC) (Respondent) (bailii.org)

C:\Users\joeur\Documents\AutoIt_code\getter\processing\out\2021\45.image1.html (bailii.org)

FS Cairo (Nile Plaza) LLC (Appellant) v Lady Brownlie (as Dependant and Executrix of Professor Sir Ian Brownlie CBE QC) (Respondent) (bailii.org)

Supreme Court rules in favour of Lady Brownlie in Four Seasons Cairo case | Law News | Kingsley Napley

When reviewing a will in a probate dispute, I am sometimes left wondering why a solicitor has advised a testator to gift his or her beneficial interest in the family home into a discretionary trust.

It also recently occurred to me that some Solicitors and Barristers (including practitioners who specialise in drafting wills and trusts), may be completely unaware of the potential to expand the pie when negotiating the settlement of a probate dispute, by re-structuring a testamentary gift of the family home made on professional advice into a discretionary trust, as a more tax-efficient IPDI, i.e. to increase the IHT tax shelter for the benefit of the estate.

This is a technical tax solution, and I set out below extracts from my article co-written with Stephanie Churchill CTA for Taxation about how the relief works: Tax_2017_Vol180_Issue4619_RNRB-final.pdf (carlislam.co.uk)

For DOV’s, see section 10.9 of Chapter 10 of my book, the ‘Contentious Probate Handbook’: Wildy & Sons Ltd — The World’s Legal Bookshop Search Results for isbn: ‘9781784460600’; and for planning using an IPDI, see pages 174-177 and 298 – 300 of by book ‘Tax-Efficient Wills Simplified’: Tax-Efficient Wills Simplified eBook : Islam, Carl: Amazon.co.uk: Kindle Store

‘The amount of the transferable RNRB is capped at an additional 100% of a surviving spouse’s available RNRB. However, more than one pre-deceased spouse’s RNRB can be transferred. As with the NRB, it is the unused percentage of the RNRB that is transferred, not the unused amount.

Be wary of the many pitfalls when trusts are used to own residential property (either during lifetime or on death). …

If a property is left into a discretionary trust … the RNRB will not be available even if all beneficiaries are lineal descendants. This is because the beneficiaries are not treated as the beneficial owners of the property. Therefore, it is important that lifetime trusts and wills are reviewed to ensure that any potential issues are identified. To avoid the trust being created, it might be possible to put in place a deed of variation within two years of death. On a practical note, there can be problems if the beneficiaries include future children and grandchildren because it is necessary for all parties to agree to a variation. Many discretionary trusts cater for unborn generations and it might be necessary to apply to the court to vary this type of arrangement. Another option is for the trustees to make an appointment of the residential property to lineal descendants under the provisions of s. 144 within two years of death. In this case, the appointment is read back to the date of death which should enable the RNRB to be claimed. However, if no action is taken, no RNRB will be available to the estate. …

Generally, an immediate post-death interest (IPDI) will be effective in providing access to the RNRB because the beneficiary is deemed to own the asset. However, sometimes an IPDI can be set up as a discretionary trust in the first instance. It may therefore be necessary to review its terms to ensure that the RNRB is available. To use the RNRB it will be necessary to transfer part or all of the residence to the life tenant.

As mentioned above, if the RNRB is not available because, for example, the residence is a discretionary trust asset, … the trustees can restore it by making an RNRB gift post-death under s 144 (which is read back to the time of death and so qualifies for the relief). As long as the trust is unwound within two years of death (in other words by the trustees appointing the trust assets to S absolutely) this will be treated for inheritance tax purposes as if the assets had simply been left by T to S outright. Alternatively, the trustees can confer an interest in possession on S within two years of T’s death, which will be treated for inheritance tax purposes as if the will had conferred an IPDI on S.’

For non-tax planning reasons re-structuring may not be appropriate. Before proposing and drafting a DOV, current tax advice should be taken from a CTA in addition to legal advice from a specialist trust law practitioner, as there are elephant traps for the unwary. So plan carefully!

I am co-writing an article with Stephanie Churchill CTA for publication by Taxation early next year entitled, ‘The use of trusts, DOV’s, and s.142 appointments in the tax-efficient settlement of a contentious probate dispute.’

See also my recent blogs:

Inheritance Act – 25% CFA cases – Hirachand v Hirachand (CA)(2021) | Carl’s Wealth Planning Blog

Zoom Mediation of International Trust Disputes | Carl’s Wealth Planning Blog

Testamentary Capacity claims | Carl’s Wealth Planning Blog

Recent advocacy testimonial | Carl’s Wealth Planning Blog

Liability for costs in a Contentious Probate case | Carl’s Wealth Planning Blog

Beddoe Applications | Carl’s Wealth Planning BlogArt of persuasion in court | Carl’s Wealth Planning Blog

If there is a CFA, then part of the success fee can be taken into account as a debt in making an award for maintenance under the Inheritance Act, i.e. before a decision is made about costs taking into account the making of any Part 36 or Calderbank Offer. Extracts from the judgment at First Instance are set out at the end of this post. See also my blogs:

Financial provision claim by adult child – Miles v. Shearer [2021] | Carl’s Wealth Planning Blog

Could HMRC attack a trust established to receive a capital sum in settlement of an Inheritance Act claim as a sham or an ‘illusory trust’? | Carl’s Wealth Planning Blog

In Hirachand v Hirachand & Anor [2021] EWCA Civ 1498 (15 October 2021),Lady Justice King (with whom Lord Justice Singh and Sir Patrick Elias agreed) concluded:

‘Two issues arise on appeal:

ii)     In determining the lump sum award payable to the Respondent, the judge included the sum of £16,750 as a contribution towards the Respondent’s liability to pay a Conditional Fee Agreement (“CFA”) success fee. The issue is whether it is wrong in law for a judge to include such a contribution in an maintenance-based award calculated by reference to the financial needs of a claimant. …

It is submitted on behalf of the Appellant that the inclusion in the award of all or part of the debt which is represented by the success fee cannot be regarded as “provision that is to be made to meet recurring expenses, being expenses of living of an income nature” as approved by Lord Hughes in Ilott (see [43] above). Ms McDonnell submits that contrary to the Appellant’s argument, the inclusion of the award of £16,750 towards part of the Respondent’s success fee was ‘directed at meeting day to day living expenses’. This, she says, is obvious from the context of the Respondent’s financial circumstances as found by the judge; she has no other means to discharge her debt other than from her income which, on any view, is and will remain very modest. Moreover, Ms McDonnell submits the judge expressly held that if he did not make such an allowance ‘one or more of C’s primary needs will not be met’.

I agree with the analysis of Ms McDonnell, but in any event in my judgment, the Appellant’s argument that a success fee is not a recurring expense falls at the first hurdle as when one reads on from the passage relied upon by Ms Stevens-Hoare taken from the passage In re Dennis incorporated into his judgment by Lord Hughes and highlighted at [43] above, it is quite clear that payment of a debt can form part of a maintenance payment.

It follows that, in my judgment, the judge was right in concluding that an order for maintenance could contain an element referable to a success fee. As already noted, on the facts of this case, the judge concluded that without such a contribution ‘one or more of the claimant’s primary needs would not be met’. As Lord Hughes re-emphasised in Ilott at [24]: ‘The order made by the judge ought to be upset only if he has erred in principle or law’. In my judgment the judge did neither. The judge was entitled to regard the success fee as a debt capable of inclusion in a maintenance award. That being the case, it would be wrong for this court to interfere with the judge’s individual value judgment.

I am conscious, as was the judge, of the difficulty identified by Briggs J in Lilleyman, namely of the potential for undisclosed negotiations to undermine a judge’s efforts to make appropriate provision under the Inheritance Act. The civil litigation costs regime, unlike the approach in financial remedy cases, means that there is the potential for a situation where a claimant is awarded a contribution to her CFA uplift but is subsequently ordered to pay the defendant’s costs of the claim where, for example, the claimant won overall but failed to beat a Part 36 offer. I note however that this is likely to be less of a risk than might be thought at first blush to be the case given that under many CFAs the claimant is obliged to accept any reasonable settlement offer or an offer above a specified threshold or risk the solicitors withdrawing from the CFA. Conversely a success fee is frequently not payable in the event that the claimant, on advice, rejects a Part 36 offer or other relevant settlement offer but subsequently fails to beat that offer at trial.

The judge was alive to this tension and commented that he could not avoid some potential injustice to one side or the other. The judge therefore mitigated that potential injustice by taking a cautious approach towards the success fee liability and made an order which resulted in only a modest contribution of 25% towards payment of the success fee. In my view the judge’s cautious approach to this difficult aspect of maintenance cases where the claim is made on the back of a CFA contract cannot be faulted and only serves to highlight the imperative of the full engagement in the Part 36 process and the importance of the parties making realistic offers in order to settle these difficult and distressing cases.’

A costs order made in proceedings may not include provision requiring the payment by one party of all or part of a success fee payable by another party under a conditional fee agreement, see: Legal Aid, Sentencing and Punishment of Offenders Act 2012, s.44: Legal Aid, Sentencing and Punishment of Offenders Act 2012 (legislation.gov.uk), see also: CFA Success Fees in Claims under the Inheritance | Ashfords Solicitors; and sections 8 (Offers to settle) and 9 (Costs in 1975 claims) of Chapter 7 of ‘Inheritance Act Claims’ by Sidney Ross.

Is this decision likely to result in an increase in the making of hopeless (i.e. unmeritorious) claims using high success fees as leverage to negotiate a bigger settlement for Claimants, who on a forensic (i.e. legal merits based) analysis, have an unrealistic expectation of recovery at trial?

In effect, what the court has done, is to shift the litigation risk of a successful claimant being unable to pay their own irrecoverable legal costs (i.e. the success fee), on to the defendants. Does this mean that Part 36 Offers will now need to arithmetically include an amount for a contribution to a CFA success fee, e.g. of 25%?

In other words, has the court shifted the goal posts, to the advantage of unworthy claimants, at the expense of estates. If they have, is this likely to result in even more litigation and not less?

The uncertainty this decision has created is not limited to just a future merits based analysis of Inheritance Act claims, and its impact upon the drafting and effect of settlement offers, it also leaves both practitioners and judges adrift about how in principle a contribution is to be calculated, as quantification of the contribution in this case was based upon supposition. Making an educated guess in any case is an unreliable method of quantification, because a belief may subsequently turn out to be based upon a false premise. By contrast with an empirical method, ‘best thinking’ based upon supposition is both subjective and arbitrary. Consequently, it is prone to bias, which could result in an appeal.

Has this decision increased the litigation risks involved in these claims, by adding yet another element of uncertainty into what is already a rather muddled, incoherent and unstable equation?

If this decision results in the making of inconsistent judicial decisions, what damage has it caused to the integrity and rigour of the Jackson Reforms?

Is ordering an estate to pay an amount in relation to a legally irrecoverable ‘success fee’ on the basis of ‘need’, the thin end of a wedge, that over time, and with wider application, will undermine the entire edifice upon which the Jackson Reforms were built, by encouraging what in the eyes of some practitioners amounts to sharp practice?

While I have no intention of applying to become a judge, as a practitioner I try to think like a judge when evaluating the likely outcome if a case proceeds to trial. In this case that would have involved asking myself the question, ‘must I rigorously uphold the law (which states that a CFA success fee is not recoverable in costs in this case), or make an imaginative award under a statute (the Inheritance Act), that leaves the successful claimant with sufficient funds to discharge her debt to her solicitors, because she is impecunious?’

In my mind, the correct approach for a judge is to ask a subsidiary question, ‘If the statute or the rules are the source of the tension, who has the power to reconcile the conflict?’ The answer to this question is either Parliament, by voting to amend the statute, or the Civil Procedure Rule Committee by voting the change the Rules, see s.2 of the Civil Procedure Act 1987. Until one or the other takes place, does the judge owe an overriding duty to uphold the law as it is, or can he or she re-invent it, by e.g. re-characterizing a ‘liability for costs’ as a ‘debt’ which impacts upon ‘need’.

What a judge decides in reconciling a tension between the CPR Costs Regime and the calculation of ‘needs’ under the Inheritance Act is a highly charged political issue, because the judge must choose between either: (i) depletion of an estate; or (ii) failing to meet the needs of a Claimant.

As Nicholas J McBride observes in this excellent book, ‘The Humanity of Private Law – Part 1’,

‘… The rules and doctrines of private law are geared toward achieving the goal of wealth maximization. Private law achieves this goal by: (1) encouraging the efficient production and distribution of valuable resources; and (2) discouraging the inefficient destruction of valuable resources. …. Dworkin’s argument has never been refuted; indeed, Richard Posner – the doyen of the law and economics movement – is quite happy to admit that there is no necessary connection between wealth maximization and increases in social utility. The problem lies in measuring wealth according to people’s readiness and willingness to pay for things. …. How much someone is ready and willing to pay for an item will depend a great deal upon how much money someone already has. … ‘[it may be that] English private law has been barking up the wrong tree for all these years, and would look very different if it were concerned to promote an authentic vision of what human flourishing involves.’ In his second book, he draws a conclusion about models of human flourishing and welds his central idea to the future creation of a social order ‘that truly fosters our flourishing as human beings’. If he is right, then Private law is a powerful tool in engineering society.  

However, is it the function of a judge to enter into the political arena about the ‘moral’ distribution of family wealth, particularly where the claimant is an adult?

If you draw an analogy with gambling, i.e. substituting the Claimant for the ‘bookie’, and the recipient of the success fee for the ‘punter’, an argument I suppose could be made, that by re-characterising a success fee as a debt to be taken into account as a need, the court is encouraging ‘gambling’.

Whether or not gambling as an activity is either: good; bad; or neutral, for human flourishing, depends upon your personal morality. This is not a legal question, and that illustrates the limits of the law, and thus the jurisdiction and powers of a judge in a private law claim.

If a judicial decision creates instability within the framework of the CPR, where does that leave practitioners advising future defendants about the calculation and drafting of Part 36 Offers?

What now is the policy of the court toward the validity and effect of a Part 36 Offer in an Inheritance Act claim?

Has the court just pushed up the price of doing a deal in mediation, i.e. where mediation is preceded by the making of a Part 36 Offer?

I think it has.

The problem now, is working out in any given case, ‘by how much?’

Therefore, the earlier parties proceed to mediation, the better.

Conversely, where a Claimant refuses to enter into mediation/JENE, or walks out, there is an argument that the court should not make any allowance for a success fee in making an award for a successful claimant.

Since the court has the power to order mediation where parties do not consent, this is a tool that every judge should consider using at the first CMC, i.e. to contain the escalation of costs. However, if for example a Circuit Judge refuses an application for Mediation/JENE, i.e. because he or she thinks it is not appropriate (which can happen), unless your client appeals, the price will go up. Therefore, what is now needed, is judicial guidance about the consequences of refusing to enter into ADR in an Inheritance Act claim.

At First Instance, the Trial Judge, The Hon Mr Justice Cohen held:

‘36.  I have to undertake a two-stage approach by asking two questions:

i)      Did the will make reasonable financial provision for C;

ii)   If not, what reasonable financial provision ought now to be made for C?

That those two tests are the correct approach was re-emphasised in Ilott v The Blue Cross and others [2018] AC 545.

37.   In answering both questions I must have regard to the factors set out at Section 3(1) of the Act, in particular I must have regard to the following matters:

a)     The financial resources and financial needs which the claimant has or is likely to have in the foreseeable future;

b)     … (immaterial);

c)     The financial resources and financial needs which any beneficiary of the estate of the deceased has or is likely to have in the foreseeable future;

d)     Any obligations and responsibilities which the deceased had towards any applicant for an order under section 2 or towards any beneficiary of the estate of the deceased;

e)     The size and nature of the estate of the deceased;

f)      Any physical or mental disability of any applicant for order under the said section 2 or any beneficiary of the estate of the deceased;

g)     Any other matter, including conduct of the applicant or any other person, which in the circumstances of the case the court may consider relevant.

38.    I have read but do not set out for the purposes of this judgment the other sub-sections to section 3.

39.   Lord Hughes in Ilott acknowledged that the section 3 factors are applicable equally to both stages and there is in most cases a very large degree of overlap between them. He confirmed that in terms of addressing the stages in a judgment: “There can be nothing wrong, in such cases, with a judge setting out the facts as he finds them and then addressing both questions arising under the act without repeating them”.

40.   The standard for what is reasonable financial provision (in cases other than spouse claims) is defined in Section 1 (2) (b) of the Act as: “Such financial provision as it would be reasonable in all the circumstances of the case for the applicant to receive for his maintenance”.

41.   At paragraph 14 of Ilott, Lord Hughes explained that, “the concept of maintenance is no doubt broad but the distinction made by the differing paragraphs of section 1 (2) shows that it cannot extend to any or everything it should be desirable for the claimant to have. It must import provision to meet the everyday expenses of living”.

42.   Lord Hughes then cited with approval the extract from Re Dennis (Deceased) [1981] 2 AR 140, where at paragraph 145 Browne-Wilkinson LJ (as he then was) said: “… the word “maintenance” connotes only payments which, directly or indirectly, enable the applicant in the future to discharge the cost of his daily living at whatever standard of living is appropriate to him. The provision that is to be made is to meet recurring expenses, being expenses of living of an income nature. This does not mean that the provision need be by way of income payments. The provision can be by way of lump sum, for example, to buy a house in which the applicant can be housed, thereby relieving him pro tanto of income expenditure. … “

43.   Specific guidance for claims by adult children were considered in Ilott. At paragraph 19 Lord Hughes said this:

“19. For all other claimants [other than spouses], need (for maintenance rather than for anything else, and judged not by subsistence levels but by the standard appropriate to the circumstances) is a necessary but not a sufficient condition for an order. Need, plus the relevant relationship to qualify the claimant, is not always enough. In In re Coventry the passage cited above was followed almost immediately by another much-cited observation of Oliver J at page 475: “It cannot be enough to say ‘here is a son of the deceased; he is in necessitous circumstances; there is property of the deceased which could be made available to assist him but which is not available if the deceased’s dispositions stand; therefore those dispositions do not make reasonable provision for the applicant.’ There must, as it seems to me, be established some sort of moral claim by the applicant to be maintained by the deceased or at the expense of his estate beyond the mere fact of a blood relationship, some reason why it can be said that, in the circumstances, it is unreasonable that no or no greater provision was in fact made. “

20. Oliver J’s reference to moral claim must be understood … There is no requirement for a moral claim as a sine qua non for all applications under the 1975 Act, and Oliver J did not impose one. He meant no more, but no less, than that in the case of a claimant adult son well capable of living independently, something more than the qualifying relationship is needed to found a claim, and that in the case before him the additional something could only be a moral claim”. (Emphasis added).

44.   Thus the first question before me is whether, in the circumstances, C’s financial position, difficult as it is, caused by reason of her suffering from a severe and debilitating mental illness which makes her unable to support herself and her two primary school age children, and which makes her dependent on state benefits and precarious financial support from her partner, means that the will did not make reasonable financial provision for C.

45.   The more that I have contemplated this matter, the harder I have found it. There is no doubt that C is in a position of real need. But, on the other hand, C had cut herself off from her family some 10 – 20 years ago and has had no financial support from them for over 20 years save for the period 2007 – 2011. For these purposes I ignore the minor gifts that they provided her with on birthdays and other festivals.

46.   How do I factor in the fact that C’s treatment of her family is largely to be explained by her psychiatric illness which she, rightly or wrongly, blames upon their treatment of her?

47.   This is not a large estate and the priority must be to ensure that C’s mother, the beneficiary under the will, has sufficient funds properly to be maintained for the rest of her days. She is aged almost 80 and would have a normal life expectancy of 10 – 11 years. She has very severe health problems which do not bode well for her future, but the world contains many who have lived beyond their life expectancy. 

48.   The parties have not been able to agree that I should know of any Part 36 offers and so I will need to deal with costs as between the parties separately, but it is right that I should at this stage consider the Conditional Fee Agreement into which C has entered. …

50. As a matter of law, the other party to litigation cannot be ordered to pay the uplift. Yet, C asks me to make an order that the additional £48,175 success fee should fall on the estate as part of her award. As a result of the agreement which C had to enter into to fund the continuation of the litigation, she has incurred a liability which her solicitors can enforce so that her needs-based claim will be correspondingly reduced.

51.   There are only two authorities which Ms Rogers has been able to trace where this appears to have been considered. The first in time was Re Clarke [2019] EWHC 1193 and 1194 (Ch), a decision of Deputy Master Linwood sitting in the Chancery Division. In an Inheritance Act case he declined to increase his award to include a success fee on 5 grounds:

i)      The calculation of damages is a matter of procedure carried out before costs are considered and has never included an element of costs;

ii)      To allow it would contrary to legislative policy that the losing party should not be responsible for a success fee – s.58A(6) Courts and Legal Services Act 1980;

iii)     It would amount to an increase in damages by way of costs;

iv)     It may put a CFA funded litigant in a better position in terms of negotiation due to the risk of a substantial costs burden;

v)     It would put a claimant in Inheritance Act proceedings in a better position than, say, a claimant in a personal injuries claim.

52.   The second case is Bullock v Denton, an unreported decision of His Honour Judge Gosnell in the Leeds County Court in a judgment given just 9 days before this hearing. In that case the claimant had entered into both a Damages Based Agreement with her first set of solicitors and a Conditional Fee Agreement with her second solicitors and arguably might be liable under both agreements. The judge disregarded the potential DBA liability and considered the CFA. In that case there was a success fee representing a 50% uplift on costs which as at 7 June 2019 (i.e. almost a year before trial) stood at approximately £24,000 + VAT with a substantial (but unquantified) increase as a result of the trial. The judge allowed a figure of £25,000 in total in respect of the CFA by way of contribution. That was added to the claimant’s award.

53.   As it is impossible for me to know how much the true liability by way of success fee was, I can only surmise, but it seems to me that what was awarded was bound to have been less than half the uplift to which the solicitors were entitled under the CFA.

54.   It does not appear that HHJ Gosnell was referred to the decision in Re Clarke.

55.   I accept that it is appropriate for me to consider this liability as part of C’s needs. I do so largely for case specific reasons. I am not making a large award (unlike in Re Clarke). It is not an award that permits of much elasticity. If I do not make such an allowance one or more of C’s primary needs will not be met. The liability cannot be recovered as part of any costs award from the other parties. The liability is that of C alone. She had no other means of funding the litigation.

56.   I refer also to the obiter comments of Briggs J (as he then was) in Lilleyman v Lilleyman [2012] 1 WLR 2801 where the judge was faced with the risk in an Inheritance Act claim of the award being undermined by the effect of undisclosed negotiation offers. He said this: 26. I must in concluding express a real sense of unease at the remarkable disparity between the costs regimes enforced, on the one hand for Inheritance Act cases (whether in the Chancery or Family Divisions) and, on the other hand, in financial relief proceedings arising from divorce. In the latter, my understanding is that the emphasis is all on the making of open offers, and that there is limited scope for costs shifting, so that the court is enabled to make financial provision which properly takes into account the parties’ costs liabilities. In sharp contrast, the modern emphasis in Inheritance Act claims … The judge then went on to observe that the potential for negotiation offers to undermine a judge’s attempt to meet needs is a disadvantage to the sole litigation costs regime.

57.   It was, of course, for that main reason that the making of Calderbank offers in matrimonial financial remedy cases was outlawed.

58.   I intend to adopt the same approach as HHJ Gosnell. I think that it would not be fair on C for me to ignore completely her liability to her solicitors. But, I recognise that there is a risk of injustice to the estate, in particular if an appropriate Part 36 offer had been made, of which I am necessarily unaware at this stage of proceedings. In addition, I flag up that I do not know the precise terms of the agreement and what is the definition of “success”. If my award does not bring about the operation of the uplift, I will revisit this element of the award.

59.   I cannot see how I can avoid some potential (and it is only potential) injustice to either C or the estate. All I can do is mitigate the potential by taking a cautious approach towards this liability.

60.   Bearing that approach in mind and knowing what I do of the case, I cannot envisage how it could reasonably be thought that the chance of failure was a high chance. I propose to allow the figure, as part of C’s needs, of £16,750, which approximates to a 25% uplift.’

I will be attending the ASEAN Business & Investment Summit 2021 online, see: https://lnkd.in/dNM4Ep9p and would like to take this opportunity to thank the organisers for inviting me. See also ‘Cultural Heritage Funds – Can an ESG Fund be a Charitable Trust?’, on the ‘Humanitarian Mediation’ page at www.diplomaticlawguide.com.

I am not sure if anybody has yet designed a structure that combines the idea of a charitable trust with an ESG fund for the ethical financing of social projects, e.g. a cultural heritage project. If you know of any precedent for such a public/private sector project please let me know.

ASEAN Business & Investment Summit 2021 – Advisory Excellence

Where wealth is held in a complex international trust structure with underlying asset holding companies, and a dispute arises out of e.g. a ‘monumental’ event such as death or loss of capacity by the wealth creator, if the overarching trust instrument was drafted using a standard form precedent, i.e. is not bespoke, or has not been reviewed periodically, mediation of the dispute is an opportunity to re-draft the instrument on terms that a court could not direct, i.e. as the end product of doing a ‘deal’ in settlement of the dispute at mediation. Where parties and their legal and tax representatives are located in different time zones, while some parties will be participating late into the night, or early in the morning, a Zoom mediation may be effective, particularly if the distance between participants has the advantage of avoiding face to face venting in a highly acrimonious dispute, as participants are not physically in the same room. In fact they do not have to meet and can stay in their own Zoom break-out rooms throughout the mediation, which is not uncommon in domestic mediations.

In 2022, I am planning to write an article provisionally entitled, ‘Tools and Strategies for Mediating International Family Trust Disputes’, and would be interested to hear generally what your experience of Zoom mediations has been throughout the pandemic. To contact me please send an email to carl@ihtbar.com. See also Chapter 12 of my book, the ‘Contentious Trusts Handbook’ published by the Law Society in July 2020:

Wildy & Sons Ltd — The World’s Legal Bookshop Search Results for isbn: ‘9781784461249’

As a practising Barrister and Author, I specialise in Contentious Probate, Inheritance Act, and Trust Disputes, and as a Certified Mediator, can be appointed to act as either a solo or co-mediator in a Zoom mediation about a dispute anywhere in the world, including the following trust law jurisdictions: Australia; Bahamas; Bermuda; BVI; Canada; Cayman; China (http://www.china.org.cn/china/LegislationsForm2001-2010/2011-02/12/content_21907980.htm); Dubai; Guernsey; Gibraltar; India; Jersey; Malaysia; New Zealand; Northern Ireland; Pakistan; Republic of Cyprus; San Marino (The Court for Trusts and Fiduciary Relations – Corte Trust) (i.e. for trusts holding art, cultural heritage, and luxury assets located in Italy); and the United States.

For more information about the Mediation of Contentious Probate and Trust Dispute services I provide, please visit: Mediator – Contentious Probate, Inheritance Act, & Trust Disputes – Carl Islam

For my recent blogs including:

Advocacy & Experts | Carl’s Wealth Planning Blog

Art of persuasion in court | Carl’s Wealth Planning Blog

Beddoe Applications | Carl’s Wealth Planning Blog

Liability for costs in a Contentious Probate case | Carl’s Wealth Planning Blog

Mediation of Will, Inheritance, Probate, and Trust disputes | Carl’s Wealth Planning Blog

Poverty charity intentionally abused for criminal purposes by two of its trustees | Carl’s Wealth Planning Blog

Recent advocacy testimonial | Carl’s Wealth Planning Blog

Testamentary Capacity claims | Carl’s Wealth Planning Blog

The psychology of advocacy | Carl’s Wealth Planning Blog

please visit: Carl’s Wealth Planning Blog | by Carl Islam LL.M (Exon)

The aim of the advocate is to win at trial within the rules of law, evidence, and professional ethics. ‘The means of winning is by being persuasive… Rightly or wrongly, adversarial advocacy is not really an enquiry into the truth. Perhaps the adversarial system should be about finding out what really happened. But it isn’t. Instead it creates a polite contest. The contest is this: while a judge will seek out the truth as best they can, the advocates use their skill to test the evidence, and to control the way the evidence emerges, and then comment in closing on whether a case has been proved to the necessary standard of proof.’ (Morley).

‘A trial is not an exercise designed to discover the truth. The rules of evidence are mainly designed to exclude. They often operate to prevent the evidence actually presented from showing the truth of the matter at all … The Judge is not an investigator but more like an umpire … What we are doing as advocates is trying to get the fact finder to arrive at an opinion, an opinion in our favour … our objective at trial is not the ultimate truth but an opinion in our favour.’ [Evans].

‘The task of the advocate is to be argumentative, inquisitive, indignant or apologetic – as the occasion demands – and always persuasive on behalf of the person who pays for his voice …when making submissions to a judge … or cross-examining hostile witnesses, the advocate is required to entice, to flatter, [and within the boundaries of what is ethically permissible to ridicule and] to insult, all in order to advance the cause for which he is instructed. The professional function of the advocate is, essentially, one of supreme, even sublime indifference to much of what matters in life. He must advance one point of view irrespective of its inadequacies. He must belittle other interests, whatever their merits … It is not for counsel appearing in court to express equivocation, to recognize ambiguity or to doubt instructions. His client is right and his opponent is wrong. The wider consequences can be left to the judge. The fundamental role of the advocate is not to enlarge the intellectual horizon. His task is to seduce, to seize the mind for a predetermined end, not to explore paths to truth.’ [Advocates].

At trial, the strategic objectives of the advocate therefore include:

(i) persuading the judge to rule in favour of the lay client through the admission and convincing presentation of expert evidence (which includes anticipating attacks upon the credibility of the expert and the value of his evidence);

(ii) the exclusion of expert evidence relied upon by the other party; and

(iii) undermining the credibility of the opponent’s expert, and the value of his evidence, to minimize the weight that the judge will attach to that expert’s opinions and conclusions, i.e. to neutralise its effect in the mind of the judge, e.g. by getting the expert to agree to a point which can be referred to in closing in order to submit that his evidence is abstract and incomplete, and therefore that the evidence of witnesses of fact who knew and or met the testator should carry equal if not greater weight, or to submit that the expert expressed no opinion about the possibility that a disposition made by a deceased testator while prima facie eccentric, was not necessarily irrational, and was in fact in character, i.e. to cast doubt about the probative value of the expert evidence and to add weight to an alternative case theory/narrative.

When examining his own expert witness the advocate’s aims include:

(i) ensuring that the judge understand the expert’s evidence;

(ii) persuading the judge of points essential to the case; and

(iii) anticipating the other side’s cross-examination and fortifying against that assault.

The expert is obliged to state his qualifications in his report (PD 35, paragraph 3.2(1)). The usual practice at trial is for the judge to be referred to the relevant page in the report and for the advocate to then move on to the substance of the expert’s evidence. ‘In almost every civil case the expert will have written a report before the trial which will have been disclosed to the other parties pursuant to a direction of the court. This report should have been pre-read by the judge and examination-in-chief is usually relatively brief consisting of the advocate highlighting the important sections of the report and asking the expert to amplify or clarify ambiguities in the report and, sometimes, to comment on issues raised by the other side’s expert (albeit that this has usually been done in the expert’s joint statement) and/or issues that have arisen since he wrote the report. The bulk of the expert’s time in the witness box is usually taken up with cross-examination. In many civil cases (in particular those involving a single joint expert all of the expert evidence is given by report alone and, thus examination-in-chief does not arise.’ [Expert Evidence, paragraph 8-012].

The opinion of an expert, however correct, is of no use to the court unless it is clearly formed by inference from facts which have been or are to be proved in evidence. The expert must always, in expressing an opinion, indicate which facts he relies upon. Counsel calling an expert should therefore in examination in-chief, ask his witness to state the facts upon which his opinion is based. It is wrong to leave the other side to elicit the facts by cross-examination. ‘Unless a witness states in his evidence in chief the grounds and reasoning that have led to the opinion, the opinion is valueless.’ Cadbury Schweppes v Durrell Lea [2007].

Once the expert’s opinion has been stated, immediately provide the underlying theory. The theory should furnish the nexus between the expert’s conclusion and the data used to support the conclusion. In other words the examination should follow this pattern:

(i) here is my opinion;

(ii) here are the principles that support my opinion; and

(iii) here is what I did to reach my final conclusion.

Having stated and supported his theory choice, the expert can then specify the nature of his investigations and tests. It is not necessary to explain or outline every hypothesis used by your expert, but the more important assumptions should be noted and supported. The examination in chief of an expert should conclude with a powerful restatement of his most important conclusions. Many complex ideas can be made understandable with examples, analogies, or metaphors. Expert witnesses should be encouraged to clarify their testimony through the use of such imagery. (Lubet pages 224 to 232).

Just as a party must in cross-examination challenge evidence of fact given in chief by a lay witness which is not accepted, so the opinions of an expert must be challenged if they are to be disputed. The purpose of cross-examination is to:

(i) elicit support for your own case, and to weaken your opponent’s case; and

(ii) put your client’s case (including as to the fact or content of documents) to the witness to afford the witness the opportunity to respond to it.

‘Effective cross-examination of an expert is no different than of any other witness: you must have a sound analytical approach to the witness so that you can determine whether to cross-examine and, if so, how to organize and execute the cross-examination to carry out realistically attainable goals. This approach involves the following basic considerations.

a. Should you cross-examine? Not every witness needs to be cross examined. If the expert has not hurt you, or if you have no effective points to make, or your own experts have been more persuasive, consider not cross-examining.

b. How should the cross-examination be organized? All cross-examinations have two possible basic purposes: eliciting favourable testimony, and conducting a destructive cross. Eliciting favourable testimony ordinarily comes before a destructive cross. If the expert has substantially helped you by agreeing to helpful facts, consider not attempting a destructive cross at all, although you have destructive ammunition.

c. Effective cross-examinations have a structure that starts strong, and keeps it simple. They maintain control over the witness by asking simple, leading questions and stop when the point is made.

d. What favourable information can you elicit? Did the witness say things on direct that you can have her repeat on cross? Can the witness admit facts not yet mentioned that support your case? What must the witness admit that helps?

e. What discrediting or destructive cross-examination can you do? Are the witness’s perception, memory, or communication skills vulnerable? Can the witness be impeached? Can you expose the witness’s bias, interest, or motive? Has she made prior inconsistent statements? Can the witness be impeached by a treatise? A good approach to any cross-examination is to ask yourself: what will I say about this witness in closing arguments? Planning the cross-examination is then a matter of determining what facts you can realistically make the witness admit during cross-examination that support your planned closing argument.’ (Mauet, page 365).

‘In general, if wishing to contest the opinion of an expert being called by our opponent, we can either contest the factual basis of the opinion, or we can contest the opinion itself. If the factual basis of the opinion is disputed, then we should be able to get the witness to agree in cross-examination that if the facts were as we contend, then his or her opinion would be different. If it is the opinion which we are contesting, on the other hand, then we will probably need to call our own expert witness… There are six critical questions we can ask about experts:

1. Expertise questions: How credible is E as an expert source?

2. Field question: Is E an expert in the field that A is in?

3. Opinion question: What did E assert that implies A?

4. Trustworthiness question: Is E personally reliable as a source?

5. Consistency question: Is A consistent with what other experts assert?

6. Backup evidence question: Is E’s assertion based on evidence? …

The expert’s possession of special expertise or knowledge is obviously the main foundational fact for expert opinion evidence; but it is not sufficient to prove some expertise at large. The expert witness must also be shown to be an expert in the field to which the issue about which they have been called to give evidence belongs.’ [Palmer, page 148].

An expert may be:

(i) challenged as to credit in relation to his opinion as he may in respect of facts;

(ii) asked to justify or deny particular opinions expressed on other occasions (including evidence given in similar cases) to cast doubt upon the opinions he has expressed in the present case;

(iii) asked about his attitude to the parties, i.e. if it is suggested that he is biased; and

(iv) questioned about whether he is or was not in a physical or mental state to express a proper opinion.

When cross-examining an expert witness the advocate’s aims specifically include:

‘(a) limiting the witness’s apparent expertise. Narrow the extent of his or her expertise/experience by showing that it is not directly applicable to the case in question or, perhaps, by contrasting it to the experience of your expert;

(b) showing that the witness has had less involvement/contact with the case than your expert;

(c) showing your knowledge of the expert’s subject. Using your knowledge of the technical terms involved or the way in which any tests were carried out, the expert will be less inclined to avoid your questions. Contrast this approach with the way you may deal with an ordinary witness of fact by simplifying technical terms;

(d) inviting the witness to define technical terms and sometimes in highly complex matters it may be necessary to invite the expert to use common language;

(e) challenging his or her methods, for example showing that there were other tests that the expert could/should have carried out that might have produced a different result. Remember to check that the expert’s facts, calculations and methods do actually produce the results set out in his or her report and, if they do not, challenge the expert as this may undermine the confidence and credibility of the expert’s evidence;

(f) inviting the witness to agree with the propositions that form the basis of your expert’s opinion – he or she is unlikely to disagree with everything your expert says, and you should know from your own expert those areas that are in dispute. Remember to ‘put your case’ to the expert by inviting him or her to deal with your expert’s methods/opinions/conclusions;

(g) inviting the witness to agree that, in his or her field, legitimate differences of opinion frequently occur between qualified experts. This shows that the witness is not infallible and that his or her evidence is ‘opinion’ only; and

(h) using hypothetical facts to test the strength of the expert’s opinion. Testing whether a different interpretation of the same facts or a slight change in those facts would affect the expert’s opinion.’ [Advocacy, paragraph 22.7.1].

Paragraph 5 of PD 35 provides, ‘Cross-examination of experts on the contents of their instructions will not be allowed unless the court permits it (or unless the party who gave the instructions consents). Before it gives permission the court must be satisfied that there are reasonable grounds to consider that the statement in the report of the substance of the instructions is inaccurate or incomplete. If the court is so satisfied, it will allow the cross-examination where it appears to be in the interests of justice.’

Cross-examination of an expert witness is a hazardous undertaking. ‘A witness under cross-examination does not want to agree with you. He will fight tooth and nail to confound you. He will misunderstand your questions. He will provide evasive answers. He will try to use your questions as an excuse to repeat the deadly features in his testimony which destroy your case. Unlike TV, a witness has no script which must be followed. He will try everything to wriggle out from under your questions. Every question in cross-examination is an invitation to disaster. It is an opportunity for the witness to hammer you and your case. So your first thought is don’t do it. Always start from the point of view: if I can avoid it, I will.’ [Morley].

‘The advantage of a cross-examiner over even the most prepared witness is that only the cross-examiner knows which questions are going to be put next… 10 cardinal rules:

(i) Always put your case to a witness in so far as it is relevant to that person’s evidence. Failure to do so may damage your case and may result in the witness being recalled.

(ii) Keep your xx to what is absolutely necessary.

(iii) Leading questions are permissible and should be used. Put propositions to a witness. Don’t give them a chance to give equivocal answers. Listen carefully to what they have to say. If a witness avoids answering the question put it again until he/she does.

(iv) Do not ask multiple questions. Keep them short and keep a tight rein on the witness. You should be in charge.

(v) Permissible – forceful/insistent. Impermissible – hectoring/bullying. XX does not mean being cross. Never lose your temper with a witness.

(vi) Let the witness finish his/her answer, before proceeding to the next question. If a damaging answer has been given, pause before proceeding. Silence is golden. Let it sink in.

(vii) Watch the Judge’s pen. No matter how good the XX is, if the Judge cannot record it, it may be lost. On a long trial, try to get a daily transcript if possible, it is very helpful for closing speeches.

(viii) Never put questions on a false premise. It denudes the XX of its force and makes you look bad/ incompetent/unprepared. (ix) Never misrepresent a witness’s earlier answer. (x) Put questions, don’t make speeches/submissions. Don’t clutter the questions with comment – save that for closing.’ (Hochhauser).

The purpose of re-examination is to correct, clarify or expand matters arising out of cross-examination. No question may be asked in re-examination which does not arise out of cross-examination. The basic rule about re-examination is do not do it, i.e. ‘break glass in the event of emergency’.

For the Bibliography, see: Handout.pdf (carlislam.co.uk) (from which the above is an extract).

See also:

The Advocate and the Expert in a Testamentary Capacity Claim – Layout 1 (carlislam.co.uk)

The Advocate and the Expert in the Court of Protection | Expert Witness Journal

Mediation in the Court of Protection | Carl’s Wealth Planning Blog

Under s.142(1) IHTA a deed of variation can be executed by a beneficiary to rearrange the distribution of the deceased testator (T’s) estate by varying or redirecting his entitlement, with the effect that the altered gifts are automatically read-back into the will as having been made by T.

For planiing using a DOV see paragraph 10.9 (Tools for constructing a tax-efficient settlement) of my book the ‘Contentious Probate Handbook’ published by the Law Society in 2016.

‘Capital from a discretionary trust is specifically excluded, in respect of means-tested benefits, from the ambit of “capital which would become available to the claimant upon application being made but which has not been acquired by him.” For a case in which the court ordered a sum to be settled on [an Inheritance Act claim] applicant on discretionary trusts which would not affect her entitlement to state benefits, see Hanbury v Hanbury [1999[ 2 F.L.R.255 at 275C [and a more recent case, Challinor v Challinor [2009] W.T.L.R.931].’ Inheritance Act claims, by Sidney Ross, paragraph 7-194.

See also: Family provision claims—settlement and welfare benefits | Legal Guidance | LexisNexis

Where under the terms of settlement of an Inheritance Act claim it is agreed that an executor will pay a cash amount out of the estate into a trust to preserve the entitlement of the Claimant to receive benefits, could HMRC attack the trust as being a sham or an illusory trust? That will depend upon the facts, and I can envisage circumstances where this could happen. If the answer is yes, and the trust arrangement is tinged with any kind of civil or criminal fraud, what is the potential legal exposure of any legal representatives who gave professional advice about the drafting of the trust, and its constitution with cash paid out of the estate?

Before providing advice about the constitution of any trust under the terms of a settlement agreement, it is prudent and sensible for all parties involved to take independent specialist advice from both a CTA (who is familiar with the current rules governing entitlement to Tax Credits); and a trust law specialist, about: (i) the potential tax treatment of the arrangement by HMRC and its affect upon continued entitlement to claim any social benefit, i.e. Tax Credits (which is a complex and specialist area that is outside the working knowledge of most Solicitors and Barristers who draft settlement agreements for Inheritance Act claims); and (ii) the legal status and consequences of the arrangement (including the duties and powers of the trustees).

‘[The settlor is] usually advised to name more than one person and/or organisation as a beneficiary so as to avoid the Trust being classed as a “sham”. … [T]he Independent Living Fund (ILF) policy, as viewable on their website, states that if someone is a potential beneficiary of a Discretionary Trust which has capital or assets to the value of £23,000 or more, then ILF will not usually be payable. If the Trust assets are tied up in property being used by the disabled beneficiary, they said this would be decided on a case by case basis.’ Microsoft Word – discretionary_trusts_2010_b.docx (sheffieldmencap.org.uk)

See also:

Independent Living Fund: What is going to happen now? – BBC News

Universal Credit – GOV.UK (www.gov.uk)

If a successful challenge is made, i.e. a sham attack, and the executor was the settlor of the trust, then cash paid into the trust out of the estate will revert to the executor, thereby unwinding the settlement. Therefore, the trust should already be constituted before the transfer is made out of the estate in furtherance of the terms of the settlement (i.e. the executor should not inadvertently become the settlor of the trust).

While it will be harder (but not impossible) to discharge the burden of proof where the executor is the settlor, if the court makes a finding that the arrangement was knowingly tinged with any kind of benefits or tax fraud, that is likely to negate the availability of PI cover. Solicitors and Barristers who negotiate Inheritance Act settlement agreements therefore need to be alert to the potential litigation risks, as this is an area of practice that is fraught with danger.

The fact that a deed has been executed with the benefit of legal advice does not affect the status of a transaction as a sham or an illusory trust. For an analysis of sham and illusory trusts, see paragraphs 7.8.3 to 7.9.3 of my book the ‘Contentious Trusts Handbook’, published by the Law Society in July 2020.

A discretionary trust constituted by a transfer of cash from an estate following settlement of an Inheritance Act claim cannot in and of itself be a personal injury trust because the funds used to constitute the trust are not derived from a payment made in consequence of any personal injury. Furthermore, the following provisions do not prima facie apply to a discretionary trust set up following settlement of an Inheritance Act claim, and do not envisage any such arrangement:

The Income Support (General) Regulations 1987 provide:

 Calculation of capital

46.—(1) For the purposes of Part II of the Act as it applies to income support, the capital of a claimant to be taken into account shall, subject to paragraph (2), be the whole of his capital calculated in accordance with this Part and any income treated as capital under regulations 24 (2) and 48 (treatment of charitable or voluntary payments and income treated as capital).

(2) There shall be disregarded from the calculation of a claimant’s capital under paragraph (1) any capital, where applicable, specified in Schedule 10.

SCHEDULE 10 CAPITAL TO BE DISREGARDED

12.—(1) Where the funds of a trust are derived from a payment made in consequence of any personal injury to the claimant the value of the trust fund and the value of the right to receive any payment under that trust, for a period of two years or such longer period as is reasonable in the circumstances beginning—

(a)if, at the date of the payment the claimant or his partner is in receipt of an income-related benefit, on that date;

(b)in any other case, on the date on which an income-related benefit is first payable to the claimant or his partner after the date of that payment,

but, for the purposes of regulation 17, 18, 21, 44(5) and 71 and Schedules 4 and 5 (applicable amounts and modifications in respect of children and young persons) in calculating the capital of a child or young person there shall be no limit as to the period of disregard under this paragraph.

(2) For the purposes of sub-paragraph (1) any reference to an income-related benefit shall be construed as if it included a reference to supplementary benefit.

13.  The value of the right to receive any income under a life interest or from a liferent.

‘Adults with mental capacity can of course transfer their damages to a trust if they want this advantage. They have a free choice what sort of trust to create. It is suggested that the most appropriate form for a fund producing income is normally a discretionary trust, of which the settlor is a beneficiary. The settlor may also be one of the trustees.’ (Drafting Trusts And Will Trusts by James Kessler QC and Charlotte Ford).

Can such a trust be a disabled person’s trust (‘DPT’)?

If the qualifying rules are not satisfied the trust will not be a DPT. Therefore no tax benefits will accrue. Furthermore, there is a tax sting in the tail, becuase if a trustee make an appointment of capital to the beneficiary, that will be an event for IHT = a PET by the disabled person. Therefore, a DPT is not a tax-efficient vehicle in which to receive and hold cash received in settlement of an Inheritance Act claim if the beneficiary is likely to need a future appointment of capital.

The definition of a DPT is set out in IHTA s.89B.

Four types of interest qualify:

1. a deemed life interest in a trust for a disabled person under s.89(2);

2. a deemed life interest in a ‘self-settlement’ (i.e. trust) created by a

potentially disabled person under s.89A;

3. an actual life interest in settled property (other than an interest within

1 or 2 above) to which a disabled person has become entitled on or

after 22nd March 2006; and

4. an actual life interest in a ‘self-settled’ trust (other than an interest within 1 or 2 above) into which settled property was transferred on or after 22nd March 2006, which meets the requirements of potential disability set out in s.89A(1)(b), and which secures that if the capital is applied for the benefit of any beneficiary it is applied only for the benefit of the settlor.

Trusts which create a ‘disabled person’s’ interest receive s.49 treatment. For IHT the disabled beneficiary is treated as being beneficially entitled to the trust property. From 22nd March 2006, the lifetime creation of a DPT is a PET provided the settlor is not the person with the disabled interest (s.49(1)).

The IHT legislation allows a testator [‘T’] to create a will/trust that benefits a disabled person in a way that the disabled person has no absolute right to income, by taking the trust outside the RPR. This treatment applies to non-interest in possession trusts within s.89, where the principal beneficiary satisfies the conditions for a disabled person at the date of the settlement. A ‘disabled person’ is defined in s.89(4). If the s.89 conditions are satisfied the disabled person is treated as having a qualifying interest in possession in the settled property so that it is not within the RPR. On the death of the disabled person his deemed interest in possession will result in the aggregation of the settled property with his free estate (see IHTM 04102): IHTM42805 – Inheritance Tax Manual – HMRC internal manual – GOV.UK (www.gov.uk)

In Barclay’s Bank Trusts Co Ltd (as Trustees of the Constance Mary

Poppleston Will Trust and another v RCC (2011) (Court of Appeal), the trustees appealed against HMRC’s ruling that s.89(2) applied to treat the trust property under the will/trust of the deceased disabled person as part of his chargeable estate. Dismissing the appeal, Lady Justice Hallett stated that,

‘[the] inheritance tax treatment of settlements with an interest in possession is different from the treatment of settlements where there is no such interest. In very general terms, in the case of the former the person so entitled is treated as being beneficially entitled to the property in which the interest subsists. Inheritance tax is charged on any transfers of value of such property including the termination of that limited interest. In the case of the latter, tax is charged every ten years on a percentage of value of the settled property. It is evident that the purpose of s.89 is to include in the former category settlements for the benefit of disabled persons which, because of their disability, conferred on them something less than full interests in possession. In the latter case the disabled person is to be ‘treated’ as having an interest in possession so as to

fall into the former category when, by definition, he did not. Such treatment avoids any depletion of the trust property in his life by the imposition of the periodic charge.’

Note that the s.89 restrictions (on the application of settled property) only affect capital. Therefore, income may be held on unrestricted discretionary trusts throughout a disabled person’s lifetime. However, the exercise of an overriding power to create continuing trusts for a beneficiary other than a disabled person gives rise to a chargeable transfer for IHT. In consequence the appointed assets fall into the RPR. Any outright appointment is treated as a PET made by the disabled person.

Where blind faith is placed in the relevance, cogency, scientific integrity, and probative value of an expert’s: conclusions; underlying theory; data; and assumptions, there is a risk that the advocate will surrender his judgment, lose his bearings in the case, and that the legal and evidential foundations upon which the case is predicated, will be exposed by his opponent at trial as amounting to nothing more than wishful thinking, rather than blocks of granite.

The advocate should always remember that, ‘It is not the fact of the presence of a mental disorder, or even its severity, that determines testamentary capacity. It is the particular way in which the illness affects a specific testator that decides the issue. These might appear to be statements of the obvious, but sometimes they seem to be ignored… In contentious probate the parties tend to grab at cognitive test results like ship-wrecked passengers from the Titanic scrambling to get into a lifeboat. Lawyers, medical experts, and, dare one say it, judges may also seek refuge there… [However] not all cognitive tests are seaworthy enough for the particular conditions, and some are little better than flotsam…’ (‘Testamentary Capacity’, by Martyn Frost, Stephen Lawson, and Robin Jacoby, paragraphs 13.01 and 14.01).

In The Vegetarian Society & anr v Scott [2013], HHJ Simon Barker QC stated that a key factor in preferring the evidence of the claimant’s expert was that he was ‘familiar with the elements of capacity necessary for a testator to make a will’ whereas the other party’s expert was not. Consequently the evidence of the preferred expert, ‘was the more focused and helpful of the two.’

As Professor Robin Jacoby and Peter Steer remark in their article, ‘How to assess capacity to make a will’ [2007] British Medical Journal 335; 155-7, 2 ‘Much litigation could be avoided… if, doctors, when asked by solicitors, assessed testamentary capacity correctly.’

See also:

The Advocate and the Expert in a Testamentary Capacity Claim | Expert Witness Journal

Testamentary Capacity (my talk to ACTAPS) Handout.pdf (carlislam.co.uk)

Paragraph 4.4 [Mental Disorders] of my book the Contentious Probate Handbook, contributed by Dr Hugh Series of Oxford University:

Mediator – Contentious Probate, Inheritance Act, & Trust Disputes – Carl Islam

Art of persuasion in court – Advisory Excellence

In a testamentary capacity claim, ‘Where the will is rational upon its face…the burden [of proof] shifts to the opposing party to raise a real doubt as to capacity. If that occurs the burden then reverts to the propounder of the will.’ The Vegetarian Society & anr v Scott [2013].

To remove the presumption of validity, the burden is then on those who challenge the will, to show sufficient doubt about the deceased testator’s (‘T’s’) capacity.

The showing of ‘sufficient doubt’ does not require proof that T actually lacked testamentary capacity, merely that the evidence produced shows sufficient grounds for the court to accept there is ‘a real doubt’ as to capacity, Turner v Turner [2011].

In most circumstances, failure by the propounder to produce evidence, results in a finding against the will, Ledger v Wootton [2008] (where the invalidity of the will was decided not on sufficient proof of incapacity but on the defendant’s failure to discharge the burden of proof after real doubt had been raised).

The weight to be attached to expert evidence is entirely a matter for the trial judge, and expert evidence is neither automatically admissible in a testamentary capacity claim, nor necessarily a decisive factor.

The duty of the court is to consider the expert evidence in the light of the facts, not in isolation from them, and where a case involves substantial elements of both opinion and factual evidence the court may accord as much weight to each as it sees fit.

As Lord Justice Mummery stated in Hawes v Burgess [2013] (Court of Appeal), in a testamentary capacity claim ‘… the court has to consider and evaluate the totality of the relevant evidence, from which it may make inferences on the balance of probabilities … I should add a statement of the obvious in order to dispel any notion that some mysterious wisdom is at work in this area of the law: the freedom of testation allowed by English Law means that people can make a valid will, even if they are old or infirm or in receipt of help from those whom they wish to benefit, and even if the terms of the will are hurtful, ungrateful or unfair to those whose legitimate expectations of testamentary benefit are disappointed. The basic legal requirements for validity are that people are mentally capable of understanding what they are doing when they make their will and that what is in the will truly reflects what they freely wish to be done with their estate on their death.’

In Loveday v Renton and Welcome Foundation Ltd [1990] Lord Justice Stuart-Smith stated, ‘In reaching [a] decision a number of processes have to be undertaken. The mere expression of opinion or belief by [an expert] witness, however eminent…[in this case about whether a vaccine could or could not cause brain damage] does not suffice. The court has to evaluate the witness and the soundness of his opinion. Most importantly this involves an examination of the reasons given for his opinions and the extent to which they are supported by the evidence. The judge also has to decide what weight to attach to a witness’s opinion by examining the internal consistency and logic of his evidence; the 6 care with which he has considered the subject and presented his evidence; his precision and accuracy of thought as demonstrated by his answers; how he responds to searching and informed cross-examination and in particular the extent to which a witness faces up to and accepts the logic of a proposition put in cross-examination or is prepared to concede points that are seen to be correct; the extent to which a witness has conceived an opinion and is reluctant to re-examine it in the light of later evidence, or demonstrates a flexibility of mind which may involve changing or modifying opinions previously held; whether or not a witness is biased or lacks independence. There is one further aspect of a witness’s evidence that is often important; that is his demeanour in the witness box. As in most cases where the court is evaluating expert evidence, I have placed less weight on this factor in reaching my assessment. But it is not wholly unimportant; and particularly in those instances where criticisms have been made of a witness, on the grounds of bias or lack of independence, which in my view are not justified, the witness’s demeanour has been a factor that I have taken into account.’

I would add the following observations made by the late Lord Bingham in his article, ‘The Judge as Juror: The Judicial Determination of Factual Issues’ published in his book ‘The Business of Judging’ (which are direct quotations):

1. Expert witnesses may be and often are partisan, argumentative, and lacking in objectivity, but they are not dishonest.
2. The problem remains: how is a judge faced with conflicting opinions of two or more experts, to choose between them?
3. Manner and demeanor give no assistance here, and it is surely that the more truly learned a man is the more ready he is likely to be to admit ignorance and acknowledge inability to provide a perfect solution.
4. It is often the superficial expert or charlatan who offers the most confident answer.
5. Nor can the choice be based on comparison of the expert’s respective qualifications – frequently the experts’ qualifications are broadly comparable.
6. Where they are not, the choice usually lies between one expert whose career has been devoted to the amassing of postgraduate degrees to the virtual exclusion of practical experience in the field, and another with no formal qualifications but a lifetime of experience in handling the commodity or operation in question.
7. There is in truth no easy way out, no short cut.
8. The only safe way in which a judge can choose between the opinions of experts is on the basis of what they have submitted and in the course of forensic questioning.
9. This is as it should be, but it does I think raise a problem. For a judge to prefer the opinion of one expert to another he must understand what they have both said and form a reasoned basis for his preference.
10. Usually this gives rise to no problem.
11. The conflict of expert opinion may relate to an issue which is not particularly complex, or it may arise in a field of which the judge has previous experience or which he has studied at a level which at least enables him to understand the concepts to which the experts refer and the language they use. But this is by no means always so. The more advanced and experimental a technology the more risk there is of mishap.
12. There are in my view times when the ability of judges to understand the effect of evidence given sufficiently to make an informed judgment is taxed to the very utmost, and I can imagine it being exceeded.

The analytical starting point in a testamentary capacity claim is the English law principle of testamentary freedom, which as explained in Banks v Goodfellow [1870], is that, ‘English law leaves everything to the unfettered discretion of the testator, on the assumption that, though in some instances, caprice, or passion, or the power of new ties, or artful contrivance, or sinister influence, may lead to the neglect of claims that ought to be attended to, yet, the instincts, affections, and common sentiments of mankind may be safely trusted to secure, on the whole, a better disposition of the property of the dead, and one more accurately adjusted to the requirements of each particular case, than could be obtained through a distribution prescribed by the stereotyped and inflexible rules of a general law.’

An eccentric disposition of property is not in itself evidence of incapacity, and it is the whole picture that needs to be looked at. Whilst T may make a valid will disinheriting his children out of capriciousness, frivolous, mean or even bad motives, and it is not the function of the court to substitute its own view of what T should have done, it does not follow that the court should not look for a justification for a change in T’s will or inquire why T disinherited a child.

‘An irrational, unjust and unfair will must be upheld if [T] had the capacity to make a rational, just and fair one, but it could not be upheld if he did not. It followed that the court must inquire why [T] has disinherited his children [i.e. what T’s reasons were] where there is a possibility that it is due to disease of the mind… the justice or otherwise of [T] excluding his daughters must as a matter of common sense have a bearing and cannot be excluded from consideration… provided that the inquiry is directed to [T’s] soundness of mind, and not to general questions of perceived morality.’ Re Ritchie [2009].

Where a will has been drafted by an experienced independent lawyer who formed the opinion from a meeting or meetings with the testator that the testator understood what he was doing, a court will only set the will aside on the clearest evidence of lack of mental capacity.

The Court should be cautious about acting on the basis of evidence of lack of capacity given by a medical expert after the event, particularly when that expert has neither met nor medically examined the testator, and particularly in circumstances when that expert accepts that the testator understood:

(i) that he was making a will; and

(ii) the extent of his property.

Expert medical evidence will not necessarily outweigh the factual evidence of lay witnesses who had opportunities for observation and knowledge of the testator.