Drakeford v Cotton & Anor

A joint account holder may acquire a beneficial interest taking effect on the other holder’s death, even though the first holder retains the right to use the account during life. Such an arrangement is not necessarily testamentary. The court must determine the parties’ actual intention from the language used, the manner in which the account was operated and the surrounding circumstances.

Where existing equitable interests are replaced by an informal declaration that the joint holders will hold for themselves, the arrangement need not infringe section 53(1)(c) of the Law of Property Act 1925. A trustee may deduct only expenses properly incurred in administering trust property.

The claimant and defendants were siblings disputing the beneficial ownership of two building society accounts formerly held by their mother and one defendant jointly. The claimant argued that the accounts remained part of their mother’s estate under her will. The defendants argued that statements made shortly before their mother’s death gave the surviving defendant the money by survivorship.

The parties also disputed expenses incurred in managing a trust property and the extent and treatment of jewellery belonging to the deceased. The central questions were the effect of the mother’s statements, the application of section 53(1)(c) of the Law of Property Act 1925, and the recoverability of the claimed trust expenses.

1. Building society accounts. The accounts were initially held in the joint names of Mrs Cotton and Mrs Stain for Mrs Cotton alone. The addition of Mrs Stain’s name was originally for convenience and did not itself confer a beneficial interest.
2. The evidence did not establish an immediate lifetime gift of the entire beneficial ownership. Mrs Cotton continued to operate the current account for her own affairs, and neither party took steps to place the accounts solely in Mrs Stain’s name. Those facts were inconsistent with an immediate outright gift.
3. The court accepted, however, that Mrs Cotton had formed and expressed a settled intention that the money should belong beneficially to Mrs Stain on Mrs Cotton’s death, independently of any later alteration to the will. The arrangement fell within the principles illustrated by Russell v Scott [1936] 55 CLR 440. Mrs Stain’s survivorship gave her the legal title, and equity imposed no resulting trust for the estate.
4. The arrangement was not a testamentary disposition. The parties’ intentions could be implemented by an informal declaration that they would hold the accounts on trust for themselves. That route did not constitute a disposition of an existing equitable interest requiring writing under section 53(1)(c) of the Law of Property Act 1925. Section 205 supported the relevant statutory definitions.
5. Trust expenses. Under section 31(1) of the Trustee Act 2000, the defendants could deduct expenses properly incurred. The court allowed the evidenced cash expenditure but rejected gardening, maintenance and most mileage claims. A modest £100 allowance was made for petrol.
6. Jewellery and relief. The defendants’ list of jewellery was accepted as complete. The parties were permitted to agree its division or sale. Failing agreement, each party could bid and the items would be sold to the highest bidder. Declarations were to be made and counsel were directed to agree a minute of order.