PT-2024-000461 - [2025] EWHC 2285 (Ch)

Probate was granted to the claimants and Vicki on 30 August 2002. The grant was extracted by Hegarty & Co. The value of the estate was stated to be £865,000 gross and the net value of the estate was stated to be £857,776. The probate value of the deceased’s interest in the Property was £300,000.

Mr Neal disclaimed his role as a Rutland Trustee on 1 October 2002. The deed of disclaimer describes him as the Disclaiming Trustee and Vicki as the Remaining Trustee. He was no longer prepared to act. The defendants say that he explained that this followed accusations made against him including complaints to the Law Society and the Legal Services Ombudsman about his firm Hegarty & Co. The defendants understand that it was JSH who made the complaints. Certainly JSH makes it clear in her evidence that she considered that Mr Neal had a conflict of interest and had prioritised his role in relation to the Rutland Trust over his duties to the executors. I do not know what the outcome of the complaints were but clearly the relationship was not harmonious.

The defendants record what they describe as challenging behaviour by the claimants over the period from 2002. They say they have themselves experienced hostility from the claimants. They explain that Vicki was frightened of the claimants and found them to be overbearing and bullying. JSH does not accept this characterisation of her behaviour. However, it is about how that behaviour was experienced by others.

Certainly, her approach to this claim and the tenor and content of her witness evidence suggests that she has firm and robust views about what she considers to be the right answer to the issues and is resistant to any contrary view.

Following the deceased’s death there were discussions about a possible agreement to vary the provisions of the will. No such agreement could be reached before the second anniversary of the deceased’s death to enable a potential amelioration of inheritance tax.

Whilst negotiations appear to have continued no agreement was reached. From late 2007 Vicki took the following steps:

Vicki continued to live in the Property rent free from 2002 until her death at 97 in September 2023.

The defendants say that they do not know what steps the claimants actually took in relation to the administration of the estate but that the figures set out in the grant of probate show that there ought to have been no difficulty in the transfer of the Cash Sum to the Rutland Trustees.

JSH says that the difficulties in administering the estate were caused by Vicki’s refusal to engage with the claimants properly and have meetings with them. However, the defendants explain that it was the claimants’ conduct that was the cause of the issue. For example, SHW explained to JSH in October 2011 that as a result of the aggressive tone of her letters, Vicki was unwilling to attend a meeting and that the defendants could not see what a meeting was likely to achieve.

From 2008 onwards engagement between the claimants and the defendants was sporadic. The defendants did call for the Cash Sum. The Cash Sum was not paid over and it appears that no income was paid to Vicki. JSH did not recognise the defendants as the Rutland Trustees nor did she recognise the Rutland Trust. This remains her position in these proceedings.

MKD explains that although Vicki considered taking action, she was concerned about the impact JSH’s aggression would have on her health. Vicki was by this stage in her 80’s. Vicki continued to resist taking action to enforce any rights and or to remove the executors throughout the period despite having obtained advice about that course of action for fear of antagonising JSH. Whether JSH considers it a fair characterisation of her behaviours is not the issue. It was how Vicki perceived them which evidence is provided to explain why no directions were sought from the court by Vicki or the defendants at an earlier stage.

Equally despite the apparent difficulties in the relationship and JSH’s complaints that the administration of the estate was delayed as a result of Vicki’s behaviour and failure to engage, she did not herself take any steps to remove Vicki as executor until 2023.

JSH relies on correspondence from the defendants in 2008 and 2011 to support her contention that they were not and knew they were not the Rutland Trustees.

The short answer to JSH’s reliance on this correspondence is that the question to be determined is whether as a matter of law the defendants were the Rutland Trustees. If they are then it does not matter what SHW or JSH thought the true position was whether in 2008, 2011 or now.

JSH continued to assert that the defendants were not the Rutland Trustees and further that the DOA and DOT were void. However, Vicki continued to live in the Property rent free consistent with a life interest trust.

In 2016 JSH proposed that the Cash Sum be held in an account and that Vicki be paid the interest going forwards with the balance of funds to be released to the claimants. She said that in the absence of agreement that proceedings would be issued which would include Vicki having to attend for cross examination about her conduct. There was no suggestion that the Cash Sum was needed for estate purposes and could not be used to provide income for Vicki as intended by the will. Indeed the proposal to release the balance of the relevant fund to the claimants does not suggest that the estate had any outstanding liabilities for which the Cash Sum might be needed. A clear indication that there was no need to retain the Cash Sum any longer. There does not seem to be any reason not to have transferred it to the Rutland Trust.

In 2018 William Sturges were instructed by Vicki and Mr Bradshaw in relation to the issues with the administration of the estate and receipt of income from the Cash Sum. They continued to represent her thereafter and now represent her estate.

On 30 July 2020 the first claimant registered a restriction against the title to the Property.

In 2022 the balance of the cash held in the executors account was £535,618.63. No up to date figures have been provided by JSH either at the time of Vicki’s death or now. Nonetheless as set out above it does not appear that there would have been any risk to the estate in distributing the Cash Sum if not earlier then in 2022.

The claimants applied to remove Vicki as an executor of the estate and obtained that order in July 2023. One of the reasons advanced was that Vicki was stopping them from progressing the administration of the estate. William Sturges, Vicki’s solicitors, say that she agreed to be removed at the age of 97 following years of stress and anxiety in respect of the situation with the estate of the deceased. As MKD notes, the removal of Vicki did not result in the payment of the Cash Sum.

JSH says that the deceased’s estate has not yet been fully administered because until Vicki was removed as executor it was not possible for example to amend share certificates into the names of the claimants. JSH does not say that this created a significant block on the ability of the claimants to administer the estate such that the Cash Sum could not be distributed and indeed as set out above she was content to ring fence it and pay Vicki the income in 2016.

Vicki died on 15 September 2023. The dispute about whether the defendants are the Rutland Trustees pursuant to the DOA dated 17 January 2008 and/or whether the Rutland Trust has ever been properly constituted crystallised with her death.

On 1 December 2023 JSH wrote to SHW asserting that the defendants were not and never had been the Rutland Trustees. She asked them to step down as trustees of the Property Trust.

Following Vicki’s death, MKD received demands from HMRC for payment of inheritance tax relating to the Rutland Trust. The defendants are therefore concerned that they may end up with personal liability to pay the tax in relation to the Rutland Trust as Rutland Trustees including interest and penalties.

JSH did not and does not accept that the Rutland Trust came into existence so considers that any inheritance tax is payable by the estate. She appears to have sought to file inheritance tax returns on that basis though there appears to be concern between the parties as to how she may have treated the Cash Sum. This concern arises precisely because there is a dispute about the existence of the Rutland Trust.

It is notable however that no inheritance tax was paid on the testator’s death in 2002 in respect of the Property and that appears to be more consistent with the existence of the Rutland Trust.

On 14 December 2023, SHW wrote to the claimants setting out various options as to the way forward (“the 14 December 2023 letter”). JSH relies on this email as providing the defendants’ agreement to retire and a binding solicitors’ undertaking to do so. It is a centrepiece of the claim. It did no such thing. It is a concern that someone who relies on her experience/background as a barrister felt able to advance her claim on that basis. Instead, it provided three options to be considered between the parties to enable them to move forwards:

“Way forward

In terms of enabling the parties to progress matters, Mark and I would suggest 3 possible proposals for you and Jacqueline to consider to seek to resolve this matter.

Option 1

1.

You and your sister agree to remove the restrictions and allow the Rutland Trustees to sell the property now in consultation with all beneficiaries (i.e. you, Jacqueline and Steve Bradshaw). As the legal owners, we do not require probate or clearance from IHT to sell the property. We would do that through agents agreed with all the beneficiaries.

We had thought Savills would be regarded as a very appropriate and reputable choice. However if all the beneficiaries are not happy with that selection, and we recognise that it is important that all the beneficiaries have confidence in the agent, then please provide us with your alternative proposals and we can put this to Steve and Jacqueline.

Upon the sale, the Rutland Trustees will discharge the IHT liability and the trustees’ costs from the Rutland Trust’s share of the net proceeds of sale and then distribute the balance of the funds to you and Jacqueline. The Rutland Trust will then be wound up.

Option 2

2.

Mark Dunkley and I will retire as trustees of both trusts and appoint:-

2.1

You and your sister as trustees of the Rutland Trust.  But we would require from you, a Deed of Indemnity on a joint and several basis under which you assume, fully and appropriately in accordance with your duties, as replacement Rutland Trustees, all liability to declare fully that a full account of the Trust assets at their open market values at Vicki’s death to HMRC and pay all IHT and interest arising with a requirement that you confirm to us by letter that a full schedule of assets has been submitted to HMRC.

2.2

As far as the property trust is concerned we would appoint you, your sister and Steve Bradshaw (or his nominee) as the new trustees

Option 3

3.

You and/or Jacqueline put us in funds now to pay the IHT liability arising on the assets of the Rutland Trust including its 50% share in the property and the sum of £300,000 bequeathed by clause 10 of your father’s Will together with our costs. We can then wind up the Rutland Trust and will then transfer the property as in 2.2 above

Next steps

In setting out the detail and the various proposals above, we have tried to be constructive and put forward practical solutions.  If you wish to see a speedy and a cost effective conclusion to this matter I am sure you will agree that Options 1 or 2 presents the most effective way forward. 

Given that the Rutland Trustees have a duty to ensure that Inheritance Tax is paid, and interest will soon start to accrue. If an agreed solution cannot be reached, then we may have no option but to apply to court for directions. This will again be costly and add to the delay.”

This appeared to me to be a sensible and measured proposal for discussion but did not amount to a binding agreement for any particular course of action and certainly did not include a solicitors’ undertaking to take a particular course of action. It made clear that the defendants were willing to retire provided that they had suitable indemnities including in relation to their fees and expenses and any tax liabilities. That remains their position.

JSH is highly critical of the defendants for not having done what she considered they had undertaken to do. She says that it is the defendants that have caused difficulties and delays and frustrated her in finalising the administration of the estate. For their part, the defendants consider that JSH’s behaviours are the cause of the delays and have found her approach to be hostile.

As the claimants do not accept that the Rutland Trust has been established there was an impasse in relation to the type of indemnity that might be suitable and to which the defendants might be entitled on retirement. JSH’s position in relation to the Rutland Trust and the defendants’ concern about how the assets of what they consider to be a properly constituted trust might be accounted for has also resulted in a difference of opinion.

Both the claimants and the defendants had indicated they were considering making claims during this period, but it was not until May 2024 that letters of claim were exchanged.

There were slight delays on the part of the defendants in responding to JSH’s subsequent correspondence due to SHW’s serious health issues. JSH knew about those health issues but does not appear to have made any reasonable allowances for them. The defendants agreed that MKD would take the lead going forwards. There was an unfortunate hiatus whilst SHW was in hospital and emails to MKD seem to have gone into a spam folder.

On 21 May 2024 JSH sent a letter of claim and draft claim to the defendants. Although the claim is dated 27 May 2024, it was supported by the first witness statement of JSH signed on 28 May 2024 (“JSH 1”), and the claim was filed on 29 May 2024 and then served on the same day. Meanwhile, on 27 May 2024 MKD had sent a letter of claim to the claimants by email. The defendants’ letter of claim identified nine issues that they considered needed to be determined by the court. Those issues were subsequently set out in the first witness statement of MKD dated 14 June 2024, (“MKD 1”) and are the subject of MKD’s application dated 29 November 2024 seeking to determine the nine questions set out in MKD 1 pursuant to CPR 8.7 (“the Counterclaim Application”). JSH therefore had received the letter of claim identifying the issues which the defendants considered needed to be determined before issuing her claim. She nonetheless advanced her claim without it appears pausing to consider whether there might be a more proportionate approach consistent with the overriding objective.

If the Rutland Trust was properly constituted, then it will have a significant tax liability following Vicki’s death due to the increase in the Property’s value since 2002 and the need to account for the Cash Sum even if it has not yet been paid into the Rutland Trust.

Savills valued the Rutland Trust’s half share in the Property immediately before Vicki’s death at £740,000. The Rutland Trust will therefore have a significant liability to tax subject to the availability of reliefs and exemptions and the effect of Clauses 9(G) and 10(C) of the will. Whilst the first claimant does not accept that any assets have been assented to the Rutland Trust and so it has not been constituted, HMRC have made direct demands to the second defendant for the inheritance tax. The total tax payable appears to be £318,195.54, attributable as to £91,787.18 to the Cash Sum and £226,408.37 as to the Property. Interest will accrue on the unpaid sums.

JSH says that inheritance tax is payable by the beneficiaries resulting from the death of the life tenant (Vicki) which the defendants say is only consistent with an acceptance by JSH that the Rutland Trust exists. JSH is clear that she agrees that Vicki’s life interest has now ended and the claimants are now absolutely entitled and consequently the determination of the issue of whether the defendants were the Rutland Trustees was purely academic. I do not agree. If the Rutland Trust was constituted the obligations of the Rutland Trustees do not disappear simply because Vicki has died.

If the defendants are Rutland Trustees and retire without a suitable indemnity or security, they are at risk in relation to the tax liabilities of the Rutland Trust and may be at personal risk of being pursued.

JSH had formed a view about the legal position in relation to the Rutland Trust and the Rutland Trustees which she sought to maintain. She may have considered that it would provide some benefit to the claimants in due course following Vicki’s death if they were able to say the Rutland Trust had not been constituted.

It seems to me that the breakdown in the relationship between Vicki, the defendants and the claimants will have caused them all to incur costs, time, and expense unnecessarily over a period of 22 years. And it may be now, as it often is, that the real issue has become the costs and expenses caused by that poor relationship.

This claim demonstrates the dangers of not engaging constructively. What was needed was directions from the court under CPR 64 if the parties were unable to reach agreement. There is no advantage to being the party who issues the claim if the claim does not encapsulate the issues that the court needs to consider. That is rarely a sensible course and even less so where the court has a supervisory role in relation to estates and trusts. It is simply the wrong approach.