Jemma Trust Company Ltd v Kippax Beaumont Lewis (A Firm) & Ors

Executors and trustees must uphold the trusts of a will and act even-handedly between beneficiaries. When a proposed variation creates conflicting interests, their proper role is ordinarily neutral or facilitative. The Court of Protection may approve a transaction for an incapacitated person only where its statutory purposes are satisfied. A broader conception of benefit may include giving effect to wishes the patient would have had, but such cases are likely to be rare and the transaction must still benefit the patient. In professional-negligence claims, loss cannot rest on a purely speculative possibility. Advice must be assessed in its factual context: changed circumstances may justify a course involving a modest capital-gains-tax liability to secure a substantially greater inheritance-tax advantage.

Sir Geoffrey Hulton’s will gave his widow, Lady Hulton, a life interest in the Hulton Land, with a remainder to his nephew. Lady Hulton lacked capacity, and her receivers required the Court of Protection’s authority to consent to a proposed variation intended to secure inheritance-tax advantages.

Jemma Trust Company Ltd, as trustee of the nephew’s later settlement, brought two negligence actions against the solicitors involved. The High Court, in [2004] EWHC 703 (Ch), found negligence in parts of the deed-of-variation work but dismissed that claim for lack of causative loss. In the capital-gains-tax action it found negligence concerning an assent vesting the land in the executors as trustees and ordered an inquiry into loss. The appeals concerned causation, the Court of Protection application, and the reasonableness of the assent.

Disposition. The claimant’s appeals in both actions were dismissed. The solicitors’ cross-appeal in the capital-gains-tax action was allowed, and the order for an inquiry was set aside. Lord Justice Wall agreed with the result. Mr Justice Lloyd gave separate reasoning supporting the allowance of the cross-appeal.

1. The executors’ and solicitors’ unchallenged failures included taking an inappropriate leading role in promoting the variation. Executors and trustees owed fiduciary duties to all interested parties and should ordinarily have adopted a neutral or facilitative role.
2. Under the Mental Health Act 1983, the Court of Protection’s powers under section 96 were exercisable only for the purposes of section 95. The power to authorise a receiver to consent to a variation of a third party’s will was accepted under section 96(1)(k), but the proposed variation still had to be necessary or expedient for Lady Hulton’s benefit. The nephews and niece were collateral relatives and did not fall within the relevant family provision: In re DML [1965] Ch 1133. Nor was the transaction for persons for whom she might have been expected to provide, or necessary for administration of her affairs.
3. Although benefit in this context may extend beyond material financial improvement to a transaction the patient would have wished to effect, such cases were likely to be rare. The proposed variation gave Lady Hulton no right to the capital payment and risked depriving her of lifetime income. It therefore provided no sufficiently real benefit to found jurisdiction. In any event, there was no real or substantial prospect that competent conduct would have secured agreement or Court of Protection approval at a price below £750,000. The claim for loss was consequently purely speculative.
4. In the capital-gains-tax action, the July 1997 advice against early vesting had been given when a clearance certificate was uncertain. By September 1997 the tax position had changed. It was reasonable to consider vesting the land in trustees to strengthen the inheritance-tax strategy, notwithstanding a potential capital-gains-tax charge. Lord Justice Chadwick considered that no positive advice to assent had been proved but held that the decision was reasonable. Mr Justice Lloyd considered that the contemporaneous note and oral evidence showed that counsel had contemplated an assent, and independently reached the same conclusion on reasonableness.
5. The court did not need to determine the ultimate correctness of the underlying tax analysis. It was concerned with what advice had been given and whether reliance on it, and the resulting decision, were reasonable in the circumstances. The claimant’s section 191 appeal was not pursued, and its costs appeal fell away once the cross-appeal succeeded.

1. Court of Appeal (Civil Division) dismissed the claimant’s appeals in the deed-of-variation and capital-gains-tax actions, allowed the solicitors’ cross-appeal concerning the 1997 assent, and set aside the order for an inquiry.
2. High Court of Justice, Chancery Division, Mr Justice Etherton, in [2004] EWHC 703 (Ch), dismissed the deed-of-variation claim for lack of causative loss, rejected most capital-gains-tax allegations, but found negligence concerning the 1997 assent and ordered an inquiry into loss.