Green & Ors v Gaul & Ors, Re Loftus (deceased) [2005] EWHC 406 (Ch)

Case No HC 03 C 00220

[2005] EWHC 406 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Royal Courts of Justice

Strand

London WC2A 2LL

Friday, March 18 2005

Before

MR JUSTICE LAWRENCE COLLINS

Between

(3) KATHERINE EVA TOMSClaimants

(3) DEXTER CHRISTOPHER GAULDefendants

In the Matter of the Estate of

IVOR ANDREW LOFTUS (deceased)

Miss Sarah Asplin QC and Miss Kerry Bornman (instructed by Pearson Row) for Claimants

Mr James Pickering (instructed by Blaser Mills) for First Defendant

Mr Stephen Acton (instructed by Lock & Marlborough) for Third Defendant

Hearing: January 25, 26, 27, 28, 31, February 4, 2005

Judgment

Date 2005-03-18

I Introduction

[1]Ivor Loftus (“Mr Loftus”) was born on November 14, 1918. He and his wife Margaret (“Mrs Loftus”) had 6 children: Angela Green (Angela”), born October 23, 1943; twin sisters Christina Loftus (“Christina”) and Margaret Gaul (“Margaret”), born April 15, 1946; Sheila Ross (“Sheila”), born November 3, 1948; Michael Loftus (“Michael”), born April 19, 1953 and Katherine Toms (“Katherine”), born November 3, 1960.

[2]Angela, Sheila and Katherine are the claimants. Margaret is the first defendant, and Michael is the second defendant (who has taken no part in these proceedings). Mr and Mrs Loftus had 15 grandchildren, including Margaret’s son Dexter, the third defendant, who was born on June 13, 1977. I heard oral evidence from the claimants, from Margaret and Dexter, and from Mr Arthur Lemer, Margaret’s former solicitor.

[3]Although it was famously said that every unhappy family is unhappy in its own way, in my experience there is a depressing similarity between unhappy families when it comes to disputes over the assets of deceased parents. This is a particularly bitter dispute, where the sums of money are modest by modern standards, and which has been going on ever since the death in 1990 of Ivor Loftus, the father of the claimants and of the first and second defendants, and the grandfather of the third defendant. As is usual, the dispute is not really about the money, but about long-running sores within the family, no doubt preceding the deaths of the parents in 1989/1990. In evidence, Katherine described the claimants’ attitude to Margaret as being:

“You have hurt us, we wanted to hurt you.”

[4]On several occasions during this trial, I encouraged the parties to see if the dispute could be settled, but with no effect. Indeed as long ago as April 1992, the then solicitors for the claimants and Michael wisely advised:

“The alternative to Court proceedings is simply to cooperate as a family as best you can and bring to an end this long running dispute in the most effective and efficient way you can.”

[5]I have also to say that there seems to have been a culture of dishonesty in the family which is evidenced by extensive tax evasion, by Michael’s imprisonment for fraud, and by the fact that parties on both sides lied to me in the witness box. II The background

[6]Mr Loftus was a successful builder of Irish origin. From about 1942 he had run a partnership with his brother Kevin Loftus. There was evidence that he loved to gamble; and that he owned and bred greyhounds, and had a table at Wembley for evening dog racing meetings on Mondays, Wednesdays and Fridays.

[7]Mr and Mrs Loftus lived in the family home at 13 Gordon Road, Wealdstone, Harrow. They owned the house jointly.

[8]In 1970 or 1971 Kevin Loftus decided that he did not want to continue with the business. In August 1970 Mr Loftus incorporated I Loftus & Son Ltd (“the Company”).

[9]Angela, Sheila, Katherine and Michael were involved in the business. According to Sheila, from the age of 14 she ran the payroll and bookkeeping side of the business, and Angela also had involvement with the business and they would share tasks and duties. Sheila became fully employed by the business when she 18. Mr Loftus gave Sheila a shareholding of 10% in the Company.

[10]MP Loftus Ltd began to trade in about 1977. The shares in MP Loftus Ltd were registered in the names of Michael and Katherine. It seems from the accounts of the Company that the Loftus family business was arranged so that the Company acted mainly or exclusively as sub-contractor for MP Loftus Ltd, which was its largest creditor and its largest debtor.

[11]According to the claimants’ unchallenged evidence, in June 1997 Michael was sent to prison, probably in connection with fraudulent transactions within his company. III Margaret and Chris Gaul and 68 Headstone Road

[12]Angela, Sheila and Katherine had, it seems, stable marriages. That was not so with regard to Christina and Margaret. Christina married, but separated from her husband in the early 1980s. By her own account, Margaret (and also Christina) was not academic, and she and her twin were dyslexic. There was also some evidence that both Christina and Margaret suffered from alcohol-related problems. In April 1985 Christina died at the age of 39. According to Margaret, Mr Loftus was heartbroken and Christina’s death brought Mr Loftus and Margaret closer together. According to the uncontradicted evidence of Sheila, Margaret had occasional jobs between the age of 16 and 21 but thereafter was never employed.

[13]In 1968 Margaret married Chris Gaul. Chris Gaul was a gambler, and (it seems) a violent and abusive person. Chris Gaul, apart from about 3 years working for Mr Loftus, in his late teens or early 20s, never worked. Their son Dexter was born on June 13, 1977. The marriage was a difficult one. They were divorced in about 1986, and were then reconciled and re-married, but there were further divorce proceedings in the 1990s, although they did not end in a decree absolute. Chris Gaul died in July 2003. There was a further major family row following his death, when Margaret arranged for him to be buried alongside the graves of Mr and Mr Loftus and Christina. The claimants tried to stop it, but failed.

[14]Margaret lived at 68 Headstone Road, Harrow. Mr Loftus bought it in 1969 for £4,450 shortly after Margaret’s marriage as a house for her and Chris Gaul to live in. It was registered in the joint names of Mr Loftus, Chris Gaul and Margaret. Margaret’s position has always been that Mr Loftus intended it as a gift to her, but that he kept his name on the title to prevent Chris Gaul from exploiting her by bullying her into mortgaging it. The claimants have at various times taken the position that Mr Loftus retained a beneficial interest, and bought, or took a share in, the house as an investment for himself, but whether that is so is not an issue in this case. After the death of Chris Gaul in 2003, Margaret transferred the house to Dexter for no consideration. It is a substantial house, worth some £300,000 in November 1991 (according to a letter from the Royal Bank of Scotland to Margaret dated November 22, 1991), and obviously worth much more now. IV The death of Mr Loftus

[15]Mrs Loftus died intestate on January 30, 1989, and Mr Loftus died on August 11, 1990.

[16]In 1984 Mr Loftus had executed a will at the offices of his solicitors, Pictons. Sheila and his solicitor Mr Fuller were to be the executors, and the estate was left to Mrs Loftus and Angela, Christina, Sheila and Katherine. Margaret was not mentioned, apparently because Mr Loftus did not trust Chris Gaul, or (according to the claimants) because Mr Loftus felt that he was supporting Margaret and had given her enough. Michael was not mentioned because (according to the claimants) he was going to carry on the family business through his company MP Loftus Ltd. If Mrs Loftus predeceased Mr Loftus, 13 Gordon Road was to go to Christina. According to Sheila, the 1984 will provided for 13 Gordon Road to pass to Christina, because Christina had recently separated from her husband and returned to live in the family home.

[17]In June 1986 Mr Loftus executed a new will, which was dealt with by Mr Fuller of Pictons. After Mr Loftus’ death Pictons were unable to locate the original, or a copy, of the 1986 will. There had been a fire at their offices and extensive refurbishment. The claimants were suspicious that Margaret had a copy of, or the original of, the will, and claimed that Margaret said shortly after Mr Loftus’ death that she had a copy of the will, but would not give it to them, and Sheila’s solicitors claimed that Margaret was holding the original, but nothing came of this. As a result of the presumption of revocation, Mr Loftus was treated as having died intestate. V An overview

[18]In this section I shall endeavour to summarise (at the risk of over-simplification) much of what is dealt with in greater detail below.

[19]The assets in Mr Loftus’ estate were his 90% shareholding in the Company, the matrimonial home at 13 Gordon Road, Wealdstone (“13 Gordon Road”), his personal chattels and the premises known as the land lying to the south of Headstone Drive (“the Yard”).

[20]In September 1991, without the knowledge of her siblings, Margaret applied for, and, on December 10, 1991 was granted, letters of administration in Mr Loftus’ estate.

[21]13 Gordon Road was put on the market by the family in early November 1991 at £95,000.

[22]In late 1991 the Inland Revenue investigated the Company and MP Loftus Ltd. The focus of the investigation was two offshore accounts amounting in all to about £500,000: one was held in the Isle of Man in the joint names of Mr Loftus and Sheila, and the other in Jersey in the joint names of Mr Loftus and Michael. The Revenue took the position that the money in the accounts had come from the Company and represented undeclared income of the Company. The Revenue’s claim was compromised in 1993, following which Sheila retained what was left in the Isle of Man account, about £150,000. As a result of the accounting between the Revenue and the Company, a tax rebate of about £71,000 became due to the Company. In early 1995, payments were made out of the Company to Angela of £60,000 and to Katherine of £10,000, purportedly as remuneration for past services.

[23]Following her appointment as administratrix, Margaret frustrated the sale of 13 Gordon Road, and later put it on the market herself, selling it for a figure which after payment of inheritance tax and fees, left her with about £50,000.

[24]As a result of the difficult situation to which these events had given rise, there were meetings in April and May 1992 between the siblings (other than Katherine) and advisers. Margaret claims (but the claimants deny) that following the second of the meetings, on May 11, 1992, she made an agreement with Angela, Sheila and Michael, which had the effect of being a compromise agreement with all the claimants whereby in essence they would keep the Company and the offshore accounts, and she would keep the proceeds of 13 Gordon Road and the Yard.

[25]In 1992 Margaret executed an assent of the Yard to herself, and became the registered proprietor of the Yard. From 1993 there was litigation between her and Michael/MP Loftus Ltd in the Willesden County Court concerning the question whether MP Loftus Ltd was entitled to use the Yard. It was settled in 1995 or 1996.

[26]In 1996 the claimants re-asserted their interest in the Yard, but did not take the matter further. In 1999 Margaret transferred the Yard to Dexter on the basis that he would pay off the existing mortgage on which she owed about £26,000. Dexter also paid Margaret a further £14,000 in cash, which he says was part of the consideration for the transfer.

[27]In August 2000, Chris Gaul wrote to Sheila enclosing portions of an affidavit sworn by Margaret in her divorce proceedings, in which she said that she had transferred the Yard to Dexter. This was the first the claimants had heard of this.

[28]In December 2001, the claimants applied in the Family Division for an order that Margaret give an inventory and account of her dealings with the administration of the estate, which resulted in the claimants obtaining in the following year further details of Margaret’s dealings with the Yard.

[29]The present proceedings were commenced in January 2003. The claimants say that Margaret failed to provide any or any adequate accounts, failed to complete the administration of the estate and failed to make any distribution; and that her mortgage of the Yard and the transfer to Dexter were in breach of trust. The claimants seek an order removing Margaret as administratrix, and an account, and claim that Dexter holds the Yard on trust for the estate. Margaret’s defence is that she was entitled to act as she did by virtue of the alleged compromise agreement and that in any event the claim is time-barred. Dexter’s defence is that he was a bona fide purchaser of the Yard.

[30]The main issues are:(1) whether there was a compromise agreement;

(2) if there was no compromise agreement (a) whether the claimants are time-barred, or estopped, from bringing the claim against Margaret; (b) whether Dexter was a bona fide purchaser for value without notice of the Yard or was in knowing receipt of it and whether he is liable to account for the rents and profits of the Yard; and (c) whether the claimants are required to account to Margaret or substituted administrator (in particular in relation to the offshore accounts). VI Margaret obtains letters of administration and prevents sale of 13 Gordon Road

[31]As I have said, the assets in Mr Loftus’ estate were his 90% shareholding in the Company, 13 Gordon Road, his personal chattels, and the Yard. The Yard was also used by Michael’s company, MP Loftus Ltd. Angela obtained a valuation in July 1991 of the Yard at £95,000 as a builder’s yard.

[32]On January 29, 1991 a deed of variation was executed in relation to Mrs Loftus’ estate, which severed the joint tenancy in 13 Gordon Road so that 50% passed under a notional will in her estate and 50% on Mr Loftus’ intestacy.

[33]In July 1991 the beneficiaries met and agreed to sell 13 Gordon Road. It was put on the market in early November 1991 at £95,000. The estate agent strongly recommended an offer by a Mr and Mrs Barczynski of £90,000, which Angela accepted on behalf of the beneficiaries on November 28, 1991.

[34]Without the prior knowledge or consent of the other beneficiaries, on September 9, 1991 Margaret applied for, and, on December 10, 1991 was granted, letters of administration in Mr Loftus’ estate. Margaret’s position is that she applied for letters of administration because she felt that her siblings were moving assets of the estate around to make them harder to trace. Having seen Margaret in the witness box, I am satisfied that she could not have come to this decision alone, and that she was not capable of understanding or handling the necessary paperwork. As in other parts of this unhappy case, I consider that Chris Gaul was playing a malevolent role.

[35]Margaret took possession of 13 Gordon Road and changed the locks. This was discovered by the claimants when Sheila went to the house on December 11, 1991 to meet the purchaser’s surveyors. Before the claimants had become aware of the grant to Margaret, Angela’s son entered the property and changed the locks again.

[36]On December 18, 1991 Angela wrote to the purchasers to say that she was saddened that the purchase could not progress. She said that Margaret had proved to be obstructive and had taken independent legal action without the knowledge of the other four siblings to ensure that she would be the only person authorised to sell the property. Angela went on:

“If it is any consolation to you, three of us are embarking on a court action to challenge her newly acquired legal standing. But this will take time and I fully understand that you are unable, and probably unwilling, to wait for the outcome.”

VII The Company, off-shore accounts and the Inland Revenue investigation

[37]The accounts of the Company to December 31, 1990 indicate a small trading profit, and net assets of about £264,000, consisting mainly (as in other years) of a debt from MP Loftus Ltd.

[38]In October 1991 the claimants were informed of an Inland Revenue investigation into the Company and MP Loftus Ltd. The focus of the investigation was two offshore accounts: one was held in the joint names of Mr Loftus and Sheila with Allied Irish Bank in the Isle of Man, and the other was in Jersey (it seems, although there are no relevant documents available) in the joint names of Mr Loftus and Michael. The documents suggest that in this period the aggregate amount in the two accounts was about £500,000, although Margaret claims that the sums in the offshore accounts were much larger. There is evidence that the balance in the Isle of Man account was as at the date of Mr Loftus’s death about £216,000, which had (with the accrual of interest) become about £235,000 in November 1991, and about £250,000 by early 1993.

[39]The Revenue took the position that the money in the accounts had come from the Company and represented undeclared income of the Company. The Revenue threatened to raise assessments for corporation tax, interest and penalties.

[40]Sheila and Michael negotiated with the Revenue, and on February 27, 1992 Sheila signed on behalf of the Company a document offering £400,000 in consideration of no proceedings being taken against the Company. She certified that she had made a complete disclosure of all sources of income and all facts bearing upon the liability of the Company and any other businesses with which she had been concerned to corporation tax and other taxes in the period from August 6, 1970 to December 31, 1988.

[41]The auditors’ reports also contain a qualification to the accounts for the years 1989-1991 (drawn up following the Revenue investigation) in these terms (taken from the 1989 accounts): “Also, included in the expenses incurred by the company are amounts totalling £171,600 which were paid in cash. There was no system of control over cash expenditure on which we could rely for the purpose of our audit and there were no satisfactory audit procedures that we could adopt to confirm independently that all cash expenditure was properly recorded.

[42]The figures are £115,339 for 1990 and £75,819 for 1991.

[43]The claimants say that, notwithstanding the claim by the Revenue and the settlement, the money in these accounts was the fruits of Mr Loftus’ gambling, and that on his death Sheila and Michael respectively were entitled to the accounts by survivorship. The practical point for the purposes of this case is that Sheila took the benefit of about £150,000 in the Isle of Man account which was left after the settlement with the Revenue was concluded. If the money in the account was Company money, then she should have accounted to the Company. VIII Margaret sells 13 Gordon Road, the Company’s Jaguar, and puts the Yard on the market 13 Gordon Road

[44]On January 31, 1992 the estate agents reported to Margaret that the proposed sale of 13 Gordon Road to Mr and Mrs Barczynski was no longer proceeding. On February 11, 1992 the estate agents wrote to her confirming a sale of 13 Gordon Road for £88,500 to Mr Qureshi, subject to contract.

[45]On March 20, 1992 Mr Ruddy (Margaret’s solicitor) wrote to Mr Ross-Smith at Camerons (who acted for the claimants and Michael) to say that 13 Gordon Road was expected to be sold for £86,000 to Mr Qureshi with exchange of contracts taking place early the following week. In view of the fact that all five siblings benefited equally from the devolution of their parents’ respective estates, they could not see any reason why the sale of 13 Gordon Road should not proceed as quickly as possible. Margaret was the legal administrator of Mr Loftus’ estate, and she was legally entitled to convey the property with good title.

[46]On March 20, 1992 Camerons replied to say that until their clients had proper details of the sale price, they could not be expected to give any confirmation of the sort which was sought.

[47]On April 8, 1992 Camerons wrote to Mr Ruddy complaining about lack of information about the sale of 13 Gordon Road, and said:

“If litigation is to be avoided, would you please let us have, in particular, copies of the bank statements relating to the administration account, a cash account of all receipts and payments made by your client, documentary evidence relating to the disposal of the monies in the late Mrs Loftus Abbey National account, a receipt of the sale of the Jaguar motor car for the company records … the reasons why your client denies the validity of the Deed of Variation ….”

[48]On April 8, 1992 Camerons wrote to Sayer Moore & Co (the solicitors acting for Margaret on the sale of 13 Gordon Road), enclosing a copy of the deed of variation, and stating:

“Our purpose in telephoning you was to advise that we had instructions to register a Caution against the property if exchange had not already taken place. It was not and is not our clients intention to frustrate a sale but simply to ensure that any purchasers were made aware of their interest so that arrangements could be made for one half of the net value to be either distributed in accordance with the Deed of Variation or otherwise placed on deposit pending a resolution of the difficulties. … We do anticipate receiving instructions to apply for injunctive relief against your client and, we regret, your firm may have to be named as a party in those proceedings. We anticipate that the type of Order which we would be seeking would be that you should retain not less than one half of the net proceeds of sale in a high interest rate account … pending a further Order of the Court or otherwise the agreement of all five parties. It is our clear view that upon receipt of those monies your firm will be in a position of constructive trustee, having notice of the terms of the Deed of Variation. Quite apart from the possible Court proceedings mentioned, we believe that you might be found to be personally liable to our clients in the event that you distribute that proportion to your client and our clients suffer loss as a consequence.”

[49]On April 8, 1992 Messrs Camerons advised the claimants, and Michael, that contracts had already been exchanged on 13 Gordon Road and there was little purpose in attempting to lodge a caution. They said that their intention would not have been to frustrate the sale but simply to use the caution as a lever to apply pressure on Margaret to place half the net proceeds into a deposit account. Mr Ross-Smith expressed the hope that Michael would have had a chance to speak to Margaret in a final bid to reach some sort of compromise. He stated that “There may yet be further ammunition concerning the interest in 68 Headstone Road which is denied by Margaret, and some point may be made out of the personal possessions …”. He stated (as I have already said) that:

“The alternative to Court proceedings is simply to cooperate as a family as best you can and bring to an end this long running dispute in the most effective and efficient way you can.”

[50]Margaret instructed Mr Lemer of Arthur & Co in place of Sayer Moore & Co and completion took place on April 24, 1992. Out of the sale proceeds of £81,700, £30,000 was paid to the Capital Taxes Office, and about £2,000 to the estate agents and solicitors, with a balance due to Margaret of £49,502.75. Jaguar car

[51]Mr Loftus drove a Jaguar XJ6. It had been bought in the name of the Company in 1988. In February 1992 Margaret sold the car to EJ Cars Ltd. The invoice showed the price as £9,000 but the claimants later discovered that the actual price was £9,300, and that Margaret had not produced a logbook on the sale. The reason given by Margaret was that the logbook had been returned to DVLC Swansea to register a change in the owner’s name to Margaret. The purchasers had accepted what they described as High Court documents showing her dealing with the estate of Mr Loftus. The Yard

[52]Early in 1992 Margaret put the Yard on the market. On January 28, 1992 Ferrari Dewe & Co, property consultants, reported to Margaret that they had received a verbal offer of £165,000 for the Yard. Mr Chamberlain of that firm said that he understood that she was not prepared to accept the figure, and that she had mentioned that she did not want the property to be advertised in the Harrow Observer, and that she felt that a prospective purchaser would come from outside the Harrow area. IX The meetings of April and May 1992

[53]In February/March 1992 Margaret acquired new advisers, Gerald Krasner of Bartfield & Co, insolvency practitioners, and Noel Ruddy of Paul Davidson Taylor, solicitors. On March 5, 1992 Paul Davidson Taylor wrote to the claimants’ solicitors, Camerons, suggesting that there should be a meeting between the beneficiaries in the hope of achieving a consensus and the administration of the estate proceeding without further hostility or delay. They stated that 13 Gordon Road was in the process of being sold, and that the Yard was being marketed, although it appeared that Michael was seeking to establish rights as a tenant under the Landlord and Tenant Act 1954. The Jaguar had been sold for £9,000. It was their hope that at the meeting the whereabouts of each and every asset in the estate would be discussed and a course of action agreed on. They saw no reason why the administration should become problematic, so long as personal differences could be put to one side and all efforts concentrated on the central issue, which was the winding up of Mr Loftus’ estate.

[54]After further correspondence, a meeting was arranged for April 27, 1992. On April 24 Mr Ruddy wrote to Mr Ross-Smith. Mr Ruddy said that he understood that Mr Ross-Smith was instructed on behalf of all three claimants, and possibly Michael. He assumed that Mr Ross-Smith was also representing Sheila’s personal interest in the company.

[55]The persons present at the meeting on April 27, 1992 at the offices of the accountants Alliotts in Harrow were Angela, Sheila, Margaret and Michael, Mr Steven Guthrie of Guthrie Grimes Associates (advising Michael), Mr Derek Greene and Mr John Davern (of JB Davern & Co, the Company’s auditors and accountants) and Mr Krasner, instructed by Margaret.

[56]The notes of the meeting drafted by Mr Krasner suggest that an important topic of discussion was the solvency of the Company in the light of the Revenue investigation and the offshore accounts. In the course of the meeting Margaret acknowledged that she had sold the Jaguar for £9,000 and that it was a Company asset. The meeting also discussed the sale of 13 Gordon Road which had recently been completed, and the pending sale of the Yard. The conclusion of the meeting was recorded as follows:

“The Meeting concluded at 6.25 pm, at which point [Mr Krasner] summarised the position as follows:` ‘… It appeared that with reasonable goodwill and compromise on all sides, a solution could be found to the problems which would save a considerable amount of professional costs and time. He pointed out however that if agreement could not be reached by all parties then the matter would proceed to litigation. Mr.Guthrie agreed with this saying that the costs could effectively wipe out the entire estate, and [Mr Krasner] put forward the idea that a further meeting should be held in the near future at which solicitors for either side would attend with a view to implementing any agreement that may be reached.’ ” ‘… It appeared that with reasonable goodwill and compromise on all sides, a solution could be found to the problems which would save a considerable amount of professional costs and time. He pointed out however that if agreement could not be reached by all parties then the matter would proceed to litigation. Mr.Guthrie agreed with this saying that the costs could effectively wipe out the entire estate, and [Mr Krasner] put forward the idea that a further meeting should be held in the near future at which solicitors for either side would attend with a view to implementing any agreement that may be reached.’ ”

[57]On May 5, 1992 Sheila wrote to Mr Krasner with some corrections to the minutes.

[58]The second meeting was held on May 11, 1992 at the offices of Alliotts. Those present were Angela, Sheila, Margaret and Michael, Mr Krasner and Mr Ruddy representing Margaret, Mr Guthrie representing Michael, and two assistants to Mr Krasner.

[59]The matters discussed included:(a) the sale of 13 Gordon Road, for a net £84,000;

(b) the value of the Yard: Mr Krasner suggested that the value was £155,000 for settlement purposes, and Mr Guthrie reserved the right to value it at £100,000 for that purpose;

(d) the offshore accounts and whether they passed by survivorship;

(e) whether 68 Headstone Road was an estate asset;

(f) the sale of the Jaguar.

[60]Mr Ruddy’s notes of the meeting conclude:

“It was agreed by both [Mr Krasner] and Mr Guthrie that there were too many outstanding points to negotiate a settlement. A further meeting was required where it was hoped that more information would be available and the more contentious outstanding issues could be dealt with. Mr Guthrie identified the valuation of The Yard and the valuation of the shares as areas of major discrepancy, and the overseas account and the position as regards 68 Headstone Road as the contentious matters of principle. As nothing further could usefully be settled it was agreed that the meeting be closed. [Mr Krasner] and Mr Guthrie agreed to meet again on either Tuesday 26 May or Wednesday 27 May in order to progress matters.”

[61]On May 28, 1992 Mr Krasner sent Margaret a summary of the proposals put forward to Mr Guthrie for consideration by “his clients” and recommended her acceptance. The effect of the heads of agreement drafted by Mr Krasner was as follows:(a) Margaret was to be entitled to £80,000 less (in effect) the proceeds of sale of the Jaguar, and (it seems) the net proceeds of 13 Gordon Road;

(b) the offshore account was (unless it turned out to be substantially higher) to be taken as being £100,000; and

(d) “No claims by any of the beneficiaries or [Margaret] against each other, following settlement of the matter, subject to details on foreign bank account being correct.” Mr Krasner proposed in the heads of agreement that there should be agreement in principle by all parties by June 17, 1992, and draft documentation sent out by June 30, 1992 with a view to completion by July 14, 1992.

[62]On July 17, 1992 Mr Krasner wrote to Mr Guthrie (sending a copy to Margaret) stating that having spoken to both his client and the solicitor involved:

“Whilst I have no complaint regarding your involvement in this matter, I must place on record my complete dissatisfaction with the actions taken by your clients. Draft Heads of Agreement were drawn up and you were instructed by your clients that these were agreeable and that solicitors would be instructed to draw up the necessary paperwork by 30 June, for completion by 14 July. Nothing was heard from your clients on this, and I am instructed by my client to say that negotiations are broken off and the matter is no longer available for discussion.”

[63]Margaret says that at the end of the meeting on May 11, 1992 Angela, Sheila, Margaret and Michael left the offices and went out on to the pavement. Michael came up to her and asked her if she was all right. She said something to the effect that she was all right but would be a lot happier if all of this, meaning the family dispute, could be settled. She told them that she was not interested in the Company or the offshore accounts but that she wanted 13 Gordon Road and the Yard, and said that if she could keep those, they could keep everything else. Angela and Sheila were clearly flustered and she could tell that a raw nerve had been struck with her accountant’s questions over the Company and the offshore accounts. She cannot remember who exactly said what but the general gist was that everyone wanted an end to all the in-fighting and that this would be a relatively clean way of doing it. She recalled that it was Michael who first shook her hand, as then did Sheila. She cannot recall shaking Angela’s hand, although she was certainly there and appeared to be in agreement too. Although Katherine was not there (she was pregnant) it had been made clear at the start of the formal negotiations that Angela and Sheila had authority to speak for her too. As far as she was concerned and as far as they were concerned at that time too, they had a deal. It made sense. She would keep the proceeds of sale of 13 Gordon Road (£49,000), the Yard (probate value £95,000) and the proceeds of sale of the Jaguar, less the various expenses she had incurred. She was giving up her interest in the Company, which on the figures would have been up to £47,000, and the offshore account, up to £20,000. In addition her accountant and she had always suspected that there were further funds around which may well have been dissipated in the months leading up to her father’s death. There was also the tax rebate and a property in Ireland. Angela, Sheila, Katherine and Michael were much involved in the Company and the offshore accounts, and it was a good deal for them too. In short, although none of them attempted to do a precise mathematical calculation, in the round it appeared a sensible was to effect a clean break and let them get on with their lives.

[64]On November 12, 1992 Margaret signed a letter to the Capital Taxes Office (Mrs Oxlade) in answer to questions (not in the documents before the court) in which she said:

“I am writing in answer to your latest correspondence and listed below are the answers to the questions you have put forward listened in order 1-4 as requested. 1) Re the car:- The Jaguar XJ6 was sold by Henlys for the sum of £9000 . 2A) Realty:- 13 Gordon Road was sold for £84,000- on the 24th April 1992 B) The Builders Yard:- I can confirm that the yard is on the market for sale, and we are finding it very hard to sell this. The original asking price stood at £160,000- and has now been reduced to £120,000. 3) Re business – I Loftus & Sons Ltd. a) The meeting did take place on 27th April 1992. b) At this meeting it was agreed by my family that I would receive the proceeds from the sale of the house and a lump sum, which should have been made to me on the 14th July 1992. Which yet again this agreement was not kept.” a) The meeting did take place on 27th April 1992. b) At this meeting it was agreed by my family that I would receive the proceeds from the sale of the house and a lump sum, which should have been made to me on the 14th July 1992. Which yet again this agreement was not kept.”

X Post-meeting events: the Company, Inland Revenue, offshore accounts, tax rebate and payments to Angela and Katherine Inland Revenue and offshore accounts

[65]On January 5, 1993 the Inland Revenue Special Compliance Office wrote to Mr Davern to say that the £400,000 was unpaid, and threatened to refer all arrears to the Inland Revenue Enforcement Office and to advise them that two of the individuals concerned (Sheila and Michael) were in possession of around £500,000 of the Company’s money.

[66]£100,000 was paid to the Revenue from the Isle of Man account on about February 17, 1993, leaving approximately £150,000 in the account.

[67]Draft minutes of a meeting of the Company for February 1993 record a declaration of interest by Sheila in an account held offshore. In the draft minutes Sheila reports that she had reasonable cause to believe that her account was not sourced by the Company but from other income and capital of Mr Loftus accruing during his lifetime and that upon his death the value of the account passed to her by survivorship; but that in consultation with the Company’s accountants and Michael it had been agreed with the Revenue that a payment of £400,000 should be paid within 30 days of February 27, 1992 in full and final settlement; that funds were not available in the Company to meet the total liabilities; that the Revenue had indicated that it would be acceptable if the sum of £100,000 were paid from her account by February 28, 1993 and £200,000 from Michael’s account by the same date; that an offer to pay £87,757 by February 28, 1993 should be made; and that if the offer was put the Revenue would in all probability accept £300,000. Tax rebate

[68]There was some confusion in the evidence between a tax rebate which was made to the Company in or after 1987 (of some £97,000), and what appears to have been a net repayment of tax to the Company of about £71,000 in 1993. The earlier tax rebate was the subject of the discussions in 1992.

[69]The latter payment arose in the following way. In 1993 (apart from the Revenue’s investigation of the offshore accounts) £87,757 was owing by the Company comprising £17,777 Corporation Tax, £27,980 Advance Corporation Tax and £42,000 PAYE.

[70]It had also been agreed that a further £400,000 would be paid. Together with interest on that sum of £28,109, and the £87,757 there would be a total outstanding liability of £515,866. But there were also credits to the Company of £287,221.

[71]The proposals which the Revenue indicated would be acceptable were that:(1) the sum of £100,000 should be paid from Sheila's account by February 28, 1993;

(2) the sum of £200,000 should be paid from Michael's account by February 28, 1993; and

(3) an offer to pay £87,757 by February 28, 1993 should be made.

[72]In a letter dated March 1, 1993, the Revenue confirmed that the offer of £87,757 would be met from a SC60 repayment due to the Company. In addition, £128,109.26 SC60 refund would be set against the earlier £400,000 contract settlement (£100,000 plus £28,109.26 accrued interest). The letter confirmed that £200,000 had been received from Michael and £100,000 from Sheila and stated that the balance (SC60 tax plus supplement) of £71,355.89 would shortly be paid to the Company. Payments to Angela and Katherine

[73]In early 1995 it was arranged between the claimants that Angela would be paid £60,000, and Katherine would be paid £10,000, from the Company’s assets in return for past services provided.

[74]Some attendance notes taken by the claimants’ then solicitor, Mr Ross-Smith, were disclosed at the very end of the trial, and the claimants were recalled to give evidence on them. An attendance note of January 5, 1995 by Mr Ross-Smith of a conversation with Angela records that in the last 48 hours Katherine and Angela would receive a payment from the company, Sheila had £100,000 of the offshore account, and that Margaret had the estate of about £100,000.

[75]There was a telephone conversation between Mr Ross-Smith and Angela on January 6, 1995, in which he recorded as follows in connection with payments etc. to Angela and Sheila:

“Perhaps all will come out in the wash i.e. general admin of the estate etc? But gen. rule → don’t [confuse] the funds. You accept that the plan is a device to get £ out at expense of estate …. QED  unlawful”

QED  unlawful”

[76]There is also a note on the first page of the attendance note:

“NB you say you do not accept the payments are a device  all legitimate for work done.”

The attendance note also records:

“the rebate from I.R. which caused the probs in the first place is being taken out, but for c. £2,000.”

[77]An undated attendance note by Mr Ross-Smith of a conversation with Katherine which took place in 1997 states that Angela got £60,000, Katherine got £10,000 and Sheila “had the a/c.” Dissolution of Company

[78]In about 1994 or 1995 the Company stopped trading and was struck off the register (and subsequently dissolved) for failure to file returns. MP Loftus Ltd stopped trading towards the end of 1995, and administrative receivers were appointed in 1996. XI The Yard

[79]In June 1992 Margaret executed an assent of the Yard to herself, and on June 23, 1992 Margaret was registered as proprietor of the Yard. On February 28, 1994 the Harrow District Land Registry wrote to Michael’s solicitors to say that Margaret was registered as proprietor of the land pursuant to an assent made by her in her own favour dated June 22, 1992.

[80]Margaret’s evidence is that she wanted an income from the Yard. Michael’s company was using the Yard, and on September 15, 1992 Mr Lemer of Arthur & Co wrote on behalf of Margaret to MP Loftus Ltd in connection with what was described as that company’s repeated trespass to her property and warning of an immediate application for an injunction if there were any further acts of trespass. Michael’s solicitors replied on September 22, 1992 stating that their client could substantiate exclusive and uninterrupted use of the land since at least 1979 and that rights of ownership had passed by adverse possession.

[81]There were then proceedings in the Willesden County Court between Margaret as plaintiff and MP Loftus Ltd and Michael as defendants. Arthur & Co acted for Margaret.

[82]On September 23, 1993 Margaret sought an injunction against Michael and MP Loftus Ltd. Her affidavit in support (and the amended particulars of claim) referred to the letters of administration and was based on her status as administratrix. In an affidavit of November 25, 1993 she stated that in her capacity as administratrix she had repeatedly attempted to ensure that the gates to the Yard were padlocked and the Yard secure. She wished to sell, or at the very least, to let the Yard in order to realise moneys for the estate in accordance with her duties as administratrix, but in order to do so, required it to be free from trespassers. The 1991 grant was exhibited. She also exhibited an extract from the Land Registry showing her registration as proprietor on June 23, 1992 as indicating her title.

[83]An affidavit by her solicitor of December 30, 1993 states that her solicitors were acting in the application for an injunction in respect of land “which she controlled as Administratrix of her father’s Estate”. On February 10, 1994 HH Judge Krikler ordered that Margaret could re-amend the particulars of claim and summons so as to show her acting as administratrix. On March 9, 1994 Margaret signed a letter (written by her daughter Sarah) to Angela to inform her “as administratrix” about the Willesden County Court proceedings.

[84]On March 20, 1994 Angela wrote to Margaret’s solicitors asking for information about the estate. They replied that they had instructions to disclose matters relating to the Willesden County Court proceedings, but they were not solicitors acting in respect of the estate of Mr Loftus. On March 23, 1994 Angela wrote to them to say that the Yard formed part of the estate. The solicitors replied to say that they were not dealing with the winding up of the estate.

[85]On January 5, 1996 the claimants applied to register a caution against dealings in relation to the Yard. It was warned off by letter of February 9, 1996. On March 1, 1996 Camerons wrote to the Harrow District Land Registry applying for their caution to remain entered in view of their interests in the proceeds of sale. Because the letter was received after the expiration of the time allowed under the notice served, the caution had already been cancelled. This was later accepted by the Harrow District Land Registry as being in error. A further caution was lodged on March 8, 1996 and was cancelled in May because their rights did not attach to any particular asset until there was an assent in their favour.

[86]In 1995 or 1996 the Willesden County Court proceedings were settled.

[87]On July 31, 1996 Angela reported to Mr Ross-Smith that there had been a chance meeting recently between Sheila and Margaret, where Margaret said she had no intention of replying to any solicitors’ letters or distributing any of the moneys already secured for “her and her children”.

[88]There was then litigation by Margaret (as administratrix) against the receivers appointed by Barclays Bank over MP Loftus Ltd. The litigation was in relation to property taken from the Yard by the receivers. In March 1998 it was agreed that the action be discontinued on the basis of no order as to costs.

[89]On April 29, 1999 Arthur & Co wrote to the London Borough of Harrow (which was, it seems, investigating some aspect of Margaret’s benefits situation) stating they were instructed by Margaret in connection with the transfer of the Yard to her son Dexter. On May 12, 1999 the London Borough of Harrow wrote to say they had passed the original letter to the investigation officer. It remains unclear what the investigation was about.

[90]There was a mortgage on the Yard. Margaret’s evidence is that she raised just over £20,000, most of which she gave to Michael on his release from prison. On April 29, 1999 Arthur & Co wrote to the mortgagees of the Yard, asking whether they were prepared to agree to a transfer of the mortgage when the property was transferred to Dexter. On May 18, 1999 the mortgagees said they were not prepared to consent to the transfer.

[91]On August 9, 1999 Arthur & Co wrote to Barclays Bank, the proposed new mortgagee, to say that the property was currently owned by Margaret and they understood that the intention was for it to be transferred to Dexter without any consideration being paid. Arthur & Co asked the bank whether they wished to take out a deed of gift indemnity policy, to protect themselves against a claim of transfer at an undervalue in the case of Margaret’s bankruptcy. On August 12, 1999 Arthur & Co wrote to Countrywide Legal Indemnities to say that the consideration being paid by Dexter was £30,000, and they understood that the value of the property was £95,000 and that the £30,000 was being raised by way of mortgage with Barclays Bank and asked for a quotation for a deed of gift indemnity policy. £26,712.31 was outstanding on the mortgage with Lancashire Mortgage Corporation, the original mortgagees.

[92]Completion took place on August 16, 1999, and registration was completed on September 14, 1999. Dexter was registered as proprietor as of September 13, 1999.

[93]In about August 2000 Chris Gaul wrote to Sheila enclosing portions of an affidavit by Margaret in their divorce proceedings. In that affidavit she said: “My father died Intestate in August 1990. I obtained Letters of Administration in relation to his estate. This took several years to administrate. It was agreed that my sisters should receive the proceeds of offshore accounts and I received a house at 13 Gordon Road, Whetstone. I also received the Builders Yard although it had always been my father’s wish that my son Dexter should inherit this. It was my father’s intention that he should not, however inherit the property until he was 21 years old. … The builders yard was transferred to Dexter in August 1999. Dexter celebrated his 21st birthday on 13th June 1998, but we did not get round to transferring the property to his name until the following year as we could not afford to do this before this time. Dexter paid the conveyancing fees. I do not know what the rental income is in relation to the builder’s yard. Dexter has always benefited from this income even before the property was formally transferred to him. I raised a loan for about £20,000.00 against the property in about 1998. This was to assist my brother, who was in financial difficulty. Dexter has always paid the instalments on the loan and continues to do so. … “

[94]On November 8, 2001Camerons Jones (Mr Lloyd) wrote to Angela on behalf of Chris Gaul to say that his client believed that she might be in a position to assist him with regard to an important aspect of the dispute between himself and Margaret, namely with regard to the intention of Mr Loftus concerning the Yard. Mr Lloyd said that Margaret had asserted that, following the transfer of the land to Dexter, none of the family raised any objection, which was “proof” that this was Mr Loftus’ wish. Dexter had made a statement in the proceedings to the effect that he was aware that it was Mr Loftus’ wish that he should take over the Yard and he also asserted that the transfer had never been questioned by any of his relatives. He said that Chris Gaul disputed this version of events completely. The claimants replied on November 22, 1991 to say that they were unwilling to help. XII Proceedings Family Division proceedings

[95]On December 13, 2001, the claimants applied in the Family Division for an order that Margaret give an inventory and account of her dealings with the administration of the estate. On February 13, 2002 Margaret was ordered to file and serve by March 25, 2002 an inventory and account on oath of the estate of Mr Loftus and her dealings as administrator of the estate. The application was listed for further directions on April 12, 2002, when it was ordered that Margaret should pay the costs of the application in the amount of £5,026.90.

[96]Margaret failed to file and serve the inventory and account, and on July 25, 2002, upon her giving undertakings to the court to file an inventory and account by August 15, 2002, a summons for committal was dismissed. According to a letter from Brian Flint of Pearson Rowe (the claimants’ solicitors) to Margaret dated July 30, 2002, Margaret gave evidence in court on July 25, 2002 that “I may have done something illegal by transferring the yard to my son but I am willing to transfer it back into my name if that will help.”

[97]In August 2002 Margaret faxed to the court documents purporting to be an inventory and account, and on September 2, 2002 Margaret faxed a form of inventory and account to the claimants’ solicitors. In relation to 13 Gordon Road, the Yard and the car the inventory states: “13 Gordon Road Sold”; “1 Jag car sold”; “1 builders yard. Mine since May 1992”.

[98]On September 20, 2002 Margaret executed an inventory and account prepared by her solicitors Blaser Mills, which was served on the claimants’ solicitors and the court. This account contained a table showing:(1) proceeds of the sale of 13 Gordon Road: £81,700;

(2) proceeds of sale of Jaguar: £9,000; and

(3) proceeds of sale of the Yard:

“£0 (transferred to Dexter Gaul for no consideration).”

[99]In response to a request for further information from the claimants, in December 2002 Margaret filed and served replies, which included the following:(1) The actual sale price of 13 Gordon Rd was £86,000.

(2) The Jaguar car was the personal vehicle of Mr Loftus and was used by him personally. Margaret accepted that it was asserted on behalf of the Company that the car belonged to it and that may have been the case pursuant to the compromise agreement. It was also stated that “this matter is not being pursued”.

(3) The monies received for the Jaguar were paid to reduce borrowings from the Royal Bank of Scotland taken out to enable the Margaret to apply for a grant of representation.

(4) Margaret decided to transfer the Yard to Dexter because it was her view that Mr Loftus would have wished this. The Yard was hers and given to her under the terms of the compromise agreement to deal with as she saw fit. Chancery proceedings

[100]The present proceedings were commenced on January 20, 2003. The claimants’ case against Margaret in the re-re-amended particulars of claim is that:(1) because letters of administration were granted to Margaret in December 1991, she holds Mr Loftus’ estate upon statutory trusts for each of the claimants and for herself and Michael in equal shares absolutely;

(2) despite being administratrix for nearly 11 years, Margaret has failed to provide adequate accounts, failed to complete the administration of the estate and failed to make any distribution;

(3) Margaret failed to comply with the orders and undertakings in the Family Division proceedings, and wilfully filed an incorrect and incomplete inventory and account, which nevertheless showed that she acted in breach of her duties, in particular charging the Yard to Barclays Bank, transferring it to Dexter, and concealing from the claimants the charge, the assent and the transfer to Dexter.

[101]The claim against Dexter is that he received the Yard for his own benefit with knowledge that it was subject to a trust and had been transferred by Margaret in breach of that trust, such that it would be unconscionable for him to retain the benefit of it and/or he was not a bona fide purchaser for value without notice. Accordingly he holds the Yard as trustee on the statutory trusts under an intestacy, alternatively as constructive trustee and is liable to account for it and the profits arising from it.

[102]The particulars of knowledge include these. Dexter knew or had notice of all or some of the following:(a) Mr Loftus died intestate;

(b) Margaret was the personal representative of the estate;

(d) he was a stranger to the estate;

(e) the Yard was an asset in the estate;

(f) he was dealing with Margaret in her capacity as personal representative and she had no authority to deal with it in her personal capacity;

(g) the assent was executed in breach of trust;

(h) Margaret held the beneficial title subject to a trust in favour of the beneficiaries;

(i) Dexter dealt with Margaret as beneficial owner holding the legal title pursuant to statutory trusts on intestacy knowing this to be the case;

(j) Margaret was under a duty to obtain the best possible price for the disposition of the Yard;

(k) £30,000 was not full market price;

(l) Margaret was selling the Yard at an undervalue;

(m) Margaret was selling the Yard in breach of trust;

(n) Dexter wilfully or recklessly failed to make any or any adequate enquiries as to whether the disposition was a proper one in all the circumstances, because: (1) he was then aged 22 and living in his mother’s house; (2) he knew he had three aunts and an uncle and fourteen cousins at the date of Mr Loftus’ death; (3) Dexter has never advanced any reason why Mr Loftus would prefer him over his own children and other grandchildren to receive an asset worth more than Mr Loftus’ own matrimonial home; (4) during Margaret’s divorce proceedings, Dexter gave evidence that he was aware that it was his grandfather’s wish that he should take over the Yard, and that the transfer of the land to him had never been questioned by any of his relatives who could have been entitled to a share as beneficiaries; (5) Margaret gave evidence in her divorce proceedings (in which Dexter was involved) that the Yard was transferred to him; (6) he knew that his father disputed that Mr Loftus had ever promised that it was to pass to him; (7) Dexter admits he failed to inform his solicitors, Arthur & Co, of Mr Loftus’ alleged wish; (8) Dexter knew that there had been a huge family disagreement; (9) Dexter knew that neither his father of his mother worked or had ever been employed for any length of time; (10) Dexter knew that Margaret suddenly had the use of considerable sums of money; (11) Arthur & Co knew or ought to have known and/or were on notice that they were dealing with Margaret in her capacity as administratrix in 1999, their knowledge or notice to be imputed to Dexter; (12) Dexter knew that he was obtaining the Yard at a gross undervalue because Arthur & Co wrote to Countrywide Legal Indemnities in August 1999 to obtain a quote for gift indemnity insurance and stated that the Yard was worth at least £95,000 but that Dexter proposed giving consideration of £30,000; (13) as a result Dexter was prejudicially affected by notice of the trust; (14) alternatively it would have come to the knowledge of his solicitor if inquiries and inspections had been made; (15) Dexter’s failure to inform his solicitors of Mr Loftus’ alleged “wish” that the Yard should pass to Dexter and his purchase of the Yard instead of insisting that it should be gifted to him were actions inconsistent with the actions of a purchaser acting in good faith without notice for value; (16) Dexter received the Yard knowing that it was a trust asset; his state of knowledge is such as to make it unconscionable for him to retain the benefit of the Yard and/or means that he was not a bona fide purchaser for value without notice; (17) in all the circumstances, Dexter failed to act in good faith.

[103]The claimants seek as against Margaret:(1) an order removing her as personal representative of the estate;

(2) an order that an independent solicitor be appointed the personal representative of the estate;

(3) an account of the administration of the estate and payment of such amount as found to be due to the estate following the taking of such account;

(4) an order that Margaret do join with Dexter to execute all necessary documents to transfer the Yard back to the estate.

[104]The claimants seek as against Dexter:(1) a declaration that he holds the Yard and all profits received thereon as trustee or constructive trustee for the estate;

(2) an order that he should convey the Yard back to the estate;

(3) an account of the profits made by him from the Yard; and

(4) payment of such amount as is found to be due to the estate following the taking of such account.

[105]Margaret’s defence is:(1) during the course of the resumed negotiations following the meeting of May 11, 1992, it was agreed or alternatively provisionally agreed that in full and final settlement of the disputes the parties would be entitled to keep whatever assets they currently controlled, so that the claimants and Michael would, amongst other things, be entitled to keep the funds in the various offshore accounts and the shareholdings in the Company, and Margaret would, amongst other things, be entitled to keep 13 Gordon Road and the Yard;

(2) thereafter all discussions between the parties in relation to the distribution of Mr Loftus’ estate came to an end on the basis of the agreement reached on May 11, 1992 or alternatively on the basis of the provisional agreement reached on that date which thereby became final;

(3) further or alternatively, by reason of the acquiescence by the claimants and Michael in that state of affairs (and in particular the 9½ year delay between the cessation of negotiations in May 1992 and the raising of any challenge to Margaret’s administration of Mr Loftus’ estate in December 2001, and the 12½ year delay between Mr Loftus’ death in August 1990 and the issue of the claim in January 2003 and Margaret’s detrimental reliance in respect of the same, the claimants and Michael are estopped from denying that they gave up any entitlement that they may otherwise have had to those assets then under the control of Margaret;

(4) further and in any event the claimants ought to be denied relief under the doctrine of laches and/or the Limitation Act 1980, sections 21(3) and 22(a).

[106]As regards the Yard, she says:(1) pursuant to the compromise agreement, on about June 22, 1992 she arranged for the Yard to be transferred into her name;

(2) prior to August 1999 she charged the Yard to a mortgagee, Lancashire Mortgage Corporation Ltd, in order to raise the sum of just over £20,000 most of which was given to Michael (who was at the time in financial difficulties having recently come out of prison);

(3) by mid-1999 Margaret wanted Dexter to take over the running of the Yard and the repayments on the mortgage, this having been Mr Loftus’ wish;

(4) a request was made to the mortgagee to transfer the mortgage into Dexter’s name, but the request was refused;

(5) Dexter raised through Barclays Bank plc funds sufficient to redeem the first mortgage in full;

(6) on August 16, 1999 Margaret arranged for the Yard to be transferred from her name into that of Dexter for a total consideration of £30,000, most of which was applied to redeem the first mortgage;

(7) at or about the time of the transfer, Dexter gave a further substantial sum to Margaret by way of further consideration or otherwise;

(8) by reason of the compromise agreement, at the time of the transfer Margaret believed (and still believes) that she was entitled to deal with the Yard as she wished and at all times led Dexter to believe this to be the position;

(9) from time to time Mr Loftus had commented that he would like Dexter to run the Yard someday, although it is not claimed that Mr Loftus ever stated that he wanted to make a formal gift of the Yard (whether during his lifetime or after his death) to Dexter.

[107]As regards the inventory and account, it contained (to the best of her knowledge) an accurate summary of the assets of Mr Loftus’ estate(a) which during the course of the administration came into her hands; and

(b) which did not come into her hands but which fell into the hands of the claimants and/or Michael.

[108]Margaret counterclaims on the basis that if there was no valid compromise agreement (and she is not entitled to rely on the doctrines of promissory estoppel and/or laches and/or the Limitation Act 1980) she is entitled to an account from the claimants and Michael as to the various assets of Mr Loftus’ estate which were under their control, together with an order for payment of any sums found to be due, namely:(1) jewellery removed by claimants shortly after Mr Loftus’ death (estimated value £16,500);

(2) a property in Ireland (address not known);

(3) £3,000 at Mr Loftus’ home removed by the claimants shortly after his death;

(4) cash at Allied Irish Bank (details not known) in Mr Loftus’ sole name;

(5) cash at Allied Irish Bank in Sheila’s name;

(6) the 90% shareholding in the Company, worth £263,000;

(7) a tax rebate of £97,000 from the Inland Revenue received shortly before Mr Loftus’ death.

[109]In the course of the trial she gave voluntary particulars of her case that the offshore accounts belonged to the Company and did not pass to Sheila by survivorship, namely:(1) the accounts were opened in the 1970s, when the Company enjoyed a substantial turnover from an industry which was known to be cash rich;

(2) the nature of the offshore accounts (and in particular the privacy and secrecy surrounding them thereby enabling tax to be evaded) was such that it can be reasonably inferred that the monies would otherwise have been taxable and accordingly came from a business which was the only known source of income of Mr Loftus (as opposed to from gambling or some other non-taxable source);

(3) the notes of the settlement meeting on April 27, 1992 refer to an investigation by the Revenue into the tax affairs of the Company and state that such investigation had included enquiries into “an offshore bank account in which there was approximately £500,000”;

(4) Sheila’s note dated May 5, 1992 does not challenge the above notes in any material way, save to state that the offshore monies were “in the region of £500,000 and held in a Jersey account”;

(5) it can be reasonably inferred that the Revenue had formed the view that the offshore monies belonged to and/or had been sourced from the Company;

(6) the notes of the settlement meeting on May 11, 1992 refer to two accounts and state that “the total aggregate sums in these accounts amounted to some £500,000, such sums coming from the company in the early ’70s in respect of one account, and the late ’70s in respect of the other” and it can be reasonably inferred that the information came from Sheila and/or Michael and that the assertion that the sums came from the Company was correct;

(7) on January 5, 1993 an officer of the Revenue wrote to the Company’s accountant stating that: “I will also be duty bound to advise the receiver(s) that in my opinion two of the individuals concerned are in possession of around £500,000 of IL&S Ltd’s money”, and it can be reasonably inferred that the outcome of the Inland Revenue’s investigation into the tax affairs of the Company was that the monies in the offshore accounts belonged to and/or had been sourced from the company;

(8) in about February 1993 Sheila paid £100,000 from one of the offshore accounts and Michael paid a further £200,000 from another of the offshore accounts in respect of the tax liabilities of the Company, and it can be reasonably inferred that Sheila and Michael accepted (and/or had no good reason to challenge) the Inland Revenue’s finding that the monies in the offshore accounts belonged to and/or had been sourced from the Company.

[110]In the defence to Margaret’s counterclaim, the claimants expressly admit that, in principle, an administratrix is entitled to an account of all the assets in a deceased person’s estate, but deny that the claimants or any of them have had the use or benefit of any assets belonging to the estate, and accordingly, deny that they are required to account.

[111]Dexter does not admit that Margaret was not entitled to execute the assent or that this constituted a breach of her duties as administratrix.

[112]The initial consideration paid for the transfer of the Yard was made out of a loan from Barclays Bank of £30,000 secured by a charge, and £26,712.31 was used in discharge of the previous mortgage. After the indemnity charge and solicitors’ fees, a balance of £2,675.94 was paid to Dexter, which he passed on to Margaret in cash. He also agreed to pay her a further £14,000 after completion, after the Yard had been cleared of waste and let, and he made that payment to her out of two unsecured loans from Lloyds TSB which were credited to his account on May 4, 2001 in the total sum of £18,000. He withdrew the £14,000 from his account on the same date and paid it to Margaret in cash in further consideration for the transfer. Dexter’s case is that the consideration for the transfer was:(a) £44,000;

(b) alternatively £30,000,

[113]It is not admitted that the transfer was at an undervalue but in any event as beneficial owner Margaret was entitled to transfer the Yard to the Dexter for whatever consideration she wished.

[114]At the time of the transfer, Dexter believed that the Yard belonged to his mother who had inherited it from the estate and was accordingly entitled to deal with the same as her own property. He was accordingly a bona fide purchaser of the Yard without notice of any claim by the estate.

[115]In particular, he did not know that Mr Loftus died intestate, or that Margaret was personal representative. He knew that the claimants and Michael and Margaret were the only beneficiaries. He did not deal with Margaret in her capacity as personal representative as a matter of law. He had no knowledge of the legal mechanisms by which Margaret had acquired beneficial ownership of the Yard and was unaware of the assent. He believed that she had properly received the Yard as beneficial owner from her father's estate and that she was duly entitled to it as beneficial owner to the exclusion of the estate. She was not disposing of the Yard as administratrix. It is not admitted that the Yard was sold to him at an undervalue, but it is in any event his case that he paid £44,000 for the Yard and believed that this represented a reasonable price for the same. He had no reason to believe that Margaret was not entitled to sell the Yard as her own property.

[116]By reason of the particular closeness of his relationship with Mr Loftus, Mr Loftus had expressed a wish to him that he would like him to have the Yard when he was older. However, it is not his case that this gave him any right to the Yard out of the estate or that he obtained the same from the estate. He accepts that he did not inform Arthur & Co of the wish, but it is denied that his payment for the Yard for its transfer from Margaret was contrary to this, and that it was accordingly relevant to mention this wish to Arthur & Co. It is denied that Dexter knew that he was obtaining the Yard at a gross undervalue. He in any event believed that Margaret was entitled to transfer it to him at any value they agreed. Further, he believed, particularly taking into account the then dilapidated condition and state of the Yard, that the amount that he was paying for it was a more than reasonable price for the same.

[117]The Yard is currently let out for a commercial rent and it has been from time to time since Mr Loftus’ death. It is denied (if it is alleged) that Dexter received any rents or other profits made on the Yard prior to the Transfer and accordingly that he is accountable for any of them. It is further denied that he is accountable for any rents or profits which he has received thereafter or that he has received them in breach of fiduciary duty. Further or alternatively Dexter has spent in the region of £40,500 in improving the Yard. If the claimants are entitled to recover the Yard from him, they must give credit for such expenditure and for the consideration which he paid.

[118]In their reply, the claimants say:(1) Dexter was aware of the claimants’ entitlement so that his failure to make any inquiries of the claimants or any of them or to seek any independent evidence confirming that the claimants were no longer so entitled alternatively that Margaret’s beneficial ownership of the Yard was untainted by any trust attaching thereto means he was not acting bona fide in the purchase of the Yard;

(2) his failure to make any inquiries amounted to a wilful shutting of his eyes to the obvious possibility that the claimants as beneficiaries of the estate remained entitled to the benefit of the Yard and/or that the Yard was subject to a trust;

(3) he wilfully and recklessly failed to make any of the inquiries which were inquiries that an honest and reasonable man would have made in the same circumstances;

(4) he was not a bona fide purchaser for value without notice and is liable as constructive trustee in relation to the Yard and profits arising thereon; (6) it would be unconscionable for Dexter to retain the benefit of the Yard and the profits arising thereon. XIII Conclusions

[119]I will set out my conclusions under the following heads:(a) the alleged compromise agreement;

(b) limitation, laches and estoppel;

(d) the counterclaim;

(e) remedies.

[120]To the extent that these issues turn on credibility, I should state my impressions of the principal witnesses. Angela, Sheila, and Katherine were forceful personalities. Angela and Sheila were plainly astute in business. My impression is that Angela has taken the lead in this campaign. Although, as I will say, I believed their evidence on an important part of the case, in other respects I found their evidence unsatisfactory and untruthful, particularly Sheila’s evidence on the offshore accounts, and Angela and Sheila’s evidence about the 1993 tax rebate. Katherine plainly played a lesser role, but her demeanour in court convinced me that she is extremely hostile to Margaret.

[121]One aspect on which the evidence of Angela and Sheila was unsatisfactory but is not central to the case concerned the claim (not now pursued) to Mr Loftus’ interest (if any) in 68 Headstone Road. At the very end of the trial a letter from April 1996 was produced which indicated that (despite their use of a claim for negotiation purposes) the claimants knew that Mr Loftus intended to give 68 Headstone Road to Margaret.

[122]An attendance note by Mr Ross-Smith of April 22, 1996 of a meeting with the claimants records Angela as having said that they “must still claim” because Margaret had acted badly.

[123]Mr Ross-Smith’s letter of April 29, 1996 under the heading 68 Headstone Road says:

“During our meeting it transpired that the three of you may not, in fact, have been so far apart in your views after all. It now seems to be your common belief that your late father intended to make a gift to Margaret of his ‘share’ in 68 Headstone Road, to the extent that he never required the investment back for himself but wanted to protect Margaret in relation to her apparently stormy marriage. In other words, if there had been a divorce it was your fathers intention to ensure that Mr Gaul did not benefit from a gift to Margaret. It is my view, therefore, that even if those trusts should be continued by your fathers will, all that would happen is that your late fathers share should be continued to be held as before and would not fall to be divided as part of his estate which is to be distributed amongst the five of you. If any of you are not content that this letter reflects your instructions then please let me know and I will undertake an analysis of the various documents in greater detail.”

[124]In evidence Angela denied that in 1996 she had been advised that it was not part of the estate, and she did not remember seeing the letter. Sheila’s evidence was that the letter was “totally incorrect”. I do not accept this evidence, but (as I have said) there is no issue about 68 Headstone Road, and their answers are only relevant to credibility.

[125]Margaret is plainly less intelligent than her sisters. She is also plainly ruled by her emotions, and is easily led. She can read, but it seems that all of the letters in the documents before the court signed by her were in fact written by one or other of her daughters or Chris Gaul. As I have said, I am satisfied that Chris Gaul was behind many of her actions. She is also something of a fantasist. I am satisfied that on important parts of the case she did not tell the truth.

[126]My impression of Dexter in the witness box was that he is intelligent and very street-wise. But, as I will say, he was an unsatisfactory witness, and when he saw which way the questions were going, he was evasive and sometimes untruthful. A. The alleged compromise agreement

[127]The claimants say that their evidence that there was no agreement on the pavement following the May 11, 1992 meeting should be believed, and that Margaret’s evidence should be rejected, not least because it is inconsistent with the contemporary and subsequent documents, and with Margaret’s conduct, and would not have made sense for the claimants at the time.

[128]Margaret’s case is that she should be believed, and that her account is supported by a number of factors including these: the claimants were already in possession of substantial assets; the claimants would have wanted an end to probing questions about the offshore accounts; the professional advisers subsequently broke off negotiations; and the claimants took no action for many years.

[129]I am satisfied that Angela and Sheila were telling the truth when they denied that there was any conversation after the May 11, 1992 meeting in the terms which Margaret alleges. I am also satisfied that Margaret made up the account of the meeting some years later to justify the transfer of the Yard to Dexter. In cross-examination she said she could not remember much about the conversation, and accepted that she had not spoken to Angela, but only to Michael.

[130]Margaret’s account is wholly inconsistent with the course of events in 1992, and with subsequent events.

[131]Mr Ruddy’s notes of the meeting of May 11, 1992 concluded that it was agreed that there were too many outstanding points to negotiate a settlement. Mr Krasner and Mr Guthrie agreed to meet again on May 26 or May 27, 1992. Mr Krasner then met Mr Guthrie and put forward terms on behalf of Margaret, which were in essence that (provided the amount in the offshore accounts after payment to the Revenue was not substantially higher than £100,000) Margaret would have £80,000 less the proceeds of sale of the Jaguar, and (it seems) the net proceeds of 13 Gordon Road. Nothing was said about the Yard, which at that time was regarded by all concerned as an estate asset. Mr Krasner proposed in the heads of agreement that there should be agreement in principle by all parties by June 17, 1992, and draft documentation sent out by June 30, 1992 with a view to completion by July 14, 1992.

[132]But on July 17, 1992 Mr Krasner wrote to Mr Guthrie, after speaking to Margaret, breaking off negotiations, on the ground of delay by the claimants and Michael.

[133]That course of events is wholly inconsistent with the agreement which Margaret alleges. It is obvious that she and the claimants would have informed their advisers, if only to prevent further fees being incurred. All that Margaret could say about this in cross-examination was that she could not remember, although she accepted that negotiations were broken off on her instructions.

[134]Furthermore on November 12, 1992 Margaret wrote to the Capital Taxes Office (Mrs Oxlade) in answer to questions (not in the documents before the court) in which she said that at the meeting on April 27, 1992 her family had agreed that she would receive the proceeds from the sale of the house and a lump sum, which should have been paid on July 14, 1992. That is plainly a reference to Mr Krasner’s proposals following the meeting on May 11, 1992. She would not have written this letter if there had been the agreement which she now alleges. In cross-examination she maintained that there had been an agreement on April 27, 1992, and accepted that her account was inconsistent with the alleged compromise agreement on May 11, 1992.

[135]Then documents from 1993 in the litigation in relation to the Yard against MP Loftus Ltd and Michael show that she was claiming as administratrix. There are two affidavits by her and one by her solicitor in the first set proceedings showing that the action was brought by her as administratrix. In particular, in her affidavit of November 25, 1993 she stated that in her capacity as administratrix she had repeatedly attempted to ensure that the gates to the Yard were padlocked and the Yard secure. She wished to sell, or at the very least, to let the Yard in order to realise moneys for the estate in accordance with her duties as administratrix, but in order to do so, required it to be free from trespassers. On March 9, 1994 Margaret signed a letter (written by her daughter Sarah) to Angela to inform her “as administratrix” about the Willesden County Court proceedings.

[136]So also the 1996 litigation against the receivers in relation to property taken from the Yard was instituted by Margaret as administratrix.

[137]The question whether the alleged compromise agreement made overall sense as a drop-hands and equitable settlement was much debated. Since I am absolutely satisfied on the basis of the oral evidence and the documents that there was no such agreement, it is not necessary to decide this. Even taking the most generous valuation of the assets left in the hands of the claimants and Michael, and taking the least generous valuation of the assets in the hands of Margaret, there is no doubt that there would have been a major balance in favour of Margaret, but the then current imponderables (the value of the Company, Sheila’s claim to survivorship in relation to the offshore account) are too great to make this a useful exercise. B. Limitation, laches and estoppel

[138]Margaret has raised defences of limitation, laches and estoppel. The limitation issue was not dealt with as a preliminary issue, but left to the trial. The argument for Margaret is as follows. First, from the date of the assent in June 1992 Margaret would have held the Yard as trustee and not as personal representative. The relevant limitation period would be 6 years under section 21(3) of the Limitation Act 1980 (“the 1980 Act”). Any claim would therefore have become statute barred by June 1998.

[139]By section 21 of the 1980 Act: “(1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action –(a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or

(b) to recover from the trustee trust property or the proceeds of trust property in the possession of the trustee, or previously received by the trustee and converted to his use. … (3) Subject to the preceding provisions of this section, an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Act, shall not be brought after the expiration of six years from the date on which the right of action accrued. …” (a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or (b) to recover from the trustee trust property or the proceeds of trust property in the possession of the trustee, or previously received by the trustee and converted to his use.

[140]Second, if she did remain a personal representative, the relevant limitation period would be the 12 year period in section 22(a). On that basis, the limitation period would have expired on August 10, 2002, which was 12 years after Mr Loftus’ death, and five and a half months before the commencement of these proceedings on January 20, 2003.

[141]By section 22:

“Subject to section 21(1) and (2) of this Act - (a) no action in respect of any claim to the personal estate of a deceased person or to any share or interest in any such estate (whether under a will or on intestacy) shall be brought after the expiration of twelve years from the date on which the right to receive the share or interest accrued; …”

[142]For Margaret, it is argued (with support from McGee, Limitation Periods, 4th ed. 2002, para 14-30) that the effect of Re Diplock’s Estate

[1948] Ch 465

(affd on other aspects sub nom Ministry of Health v Simpson

[1951] AC 251

) is that the 12 year period runs from the date of the death, even though a personal representative is not bound to distribute within a year from death. Time may run from a date before the claimant is entitled to sue: Sevcon Ltd v Lucas

[1986] 1 WLR 462

(cause of action for patent infringement accrued after application and prior to grant); Hornsey Local Board v Monarch Investment Building Society

(1889) 24 QBD 1

(time ran from imposition of local authority charge for paving expenses, even though not then apportioned as between property owners, because the local authority had a right to receive payment, even though it had no right to enforce). If time were not to start running until completion of the administration, it would follow that time has not yet started to run and that no cause of action has yet arisen. That would be a bizarre result.

[143]Should it be found that no period of limitation applies (whether by reason of section 21(1) or otherwise), then the claim will be barred by laches. Even if 21(1)(b) applies, laches may come into play: Lewin, para 44-14; Re Sharpe

[1892] 1 Ch 154

; Nelson v Rye

[1996] 1 WLR 1378

. The only authority contrary is Gwembe Valley Development Co Ltd v Koshy

[2003] EWCA Civ 1478

, [2004] I BCLC 131 (CA), which was a case involving fraud under section 21(1)(a) and accordingly not on point.

[144]The claimants’ argument is as follows. First, their claims against Margaret fall within section 22. The administration of Mr Loftus’ estate remains incomplete and the claimants’ rights to receive their shares or interests therein have not yet accrued: Evans v Westcombe

[1999] 2 All ER 777

at 787 (a decision on section 21(3) by Mr Richard McCombe QC sitting as a deputy judge of this division). Accordingly, time has not yet started to run. If the law were that time began from the date of death (or from the end of the executor’s year), beneficiaries in a complicated estate would lose their rights after 12 years unless they could rely upon section 21, which cannot be right. Re Diplock’s Estate

[1948] Ch 465

is not authority for a contrary view. In any event the action was commenced within 12 years from the end of the executor’s year.

[145]Second and alternatively, the beneficiaries’ inchoate right to have the intestate estate properly administered has been held to be a sufficient interest for the purposes of schedule 1, para 9 of the 1980 Act(Earnshaw v Hartley

[2000] Ch 155

), with the result that time does not run as between the beneficiaries in respect of the claim in so far as it relates to the Yard. By Schedule 1, para 9:

“Where … any land subject to a trust of land is in the possession of a person entitled to a beneficial interest in the land (not being a person solely or absolutely entitled to the land), no right of action to recover the land shall be treated for the purposes of this Act as accruing during that possession to any person in whom the land is vested as … trustee or to any other person entitled to a beneficial interest in the land.”

[146]Third, in the further alternative, the claimants’ claim is in relation to trust property received and converted to Margaret’s use: section 21(1)(b). Accordingly, there is no applicable limitation period in any event. The claimants are entitled to pursue Margaret in order to reconstitute the trust fund and whether that is by way of recovery of specific assets or in equity by the payment of equitable compensation in relation to the loss to the estate matters not. As a result, the value actually received by Margaret as a result of the conversion is also irrelevant.

[147]Fourth, and as an additional alternative, Margaret’s provision of the inventory and account in the Family Division without reference to a compromise agreement amounted to an acknowledgment for the purposes of section 29(5) of the 1980 Act. By section 29(5):

“(5) … where any right of action has accrued to recover - … (b) any claim to the personal estate of a deceased person or to any share or interest in any such estate; and the person liable or accountable for the claim acknowledges the claim or makes any payment in respect of it the right shall be treated as having accrued on and not before the date of the acknowledgment or payment.”

[148]Fifth, in the yet further final alternative, the assent by Margaret of the Yard to herself in her own favour was concealed from the claimants and accordingly, section 32 can be relied upon. By section 32:

“(1) … where in the case of any action for which a period of limitation is prescribed by this Act, either - (a) the action is based on the fraud of the defendant; or (b) any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant; … the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment … (as the case may be) or could with reasonable diligence have discovered it.” (a) the action is based on the fraud of the defendant; or (b) any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant; … the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment … (as the case may be) or could with reasonable diligence have discovered it.”

[149]The proceedings were commenced on January 20, 2003. August 11, 1990 was the date of Mr Loftus’ death and the date when his property vested in the Public Trustee under section 9 of the Administration of Estates Act 1925. August 11, 1991 was the date of expiration of the one year period pursuant to the Administration of Estates Act 1925, section 44. December 10, 1991 was the date of the grant to Margaret. June 1992 was the date of the assent of the Yard. In August 1999 the Yard was transferred to Dexter.

[150]My conclusion is that section 22(a) applies to the claim, and that the earliest possible date for the running of time is the end of the executor’s year. If I should be wrong in that and the period runs from the date of death, then most of the claim would fall within section 21(1)(b), for which there is no limitation period, and in relation to which laches does not apply.

[151]In Re Diplock

[1948] Ch 465

next-of-kin sued charities who had received funds distributed by the executors of Caleb Diplock under a will which was subsequently held to be invalid. Caleb Diplock died on March 23, 1936. The payments in question were made between November 1936 and March 1938. The actions in which a limitation question arose were treated for the purposes of the appeals as having been commenced on March 22, 1945: p 507.

[152]The Court of Appeal said (at 508) that the two questions to be answered were: first, what (if any) was the relevant limitation period, and second (so far as necessary) from what did it run. The charities contended for a 6 year period, and the plaintiffs contended for a 12 year period.

[153]It was held that section 20 of the Limitation Act 1939 applied and that the period was 12 years. Section 20 is in the same terms as section 22 of the 1980 Act. The argument for the charities was that the section applied only to actions against a personal representative, and that there was a 6 year period for what would now be called restitutionary claims by analogy with the 6 year period for contract (see p 514). The Court of Appeal’s reasoning ( 511-514) was:(a) it was plain that the section applied to claims by an unpaid beneficiary against the executor or administrator, in other words to claims by a beneficiary “to recover” his legacy or share;

(b) a claim against one who has been overpaid is properly described as an action “in respect of” a claim to the personal estate or a share;

(c) it was true that if that construction was right there would be some awkwardness as regards the date from which the limitation period might run, which would be the same date as from which it ran against the personal representative;

(d) a claim against the personal representative would be subject to a limitation period of 12 years from the accrual of the right to receive the share;

(e) accordingly, the period of limitation as regards the charities was 12 years from the date when the plaintiffs’ rights accrued “with the result that the defences of limitation necessarily fail” (at 514).

[154]The Court of Appeal began its consideration (at 508) by saying that it was plain that, if 12 years was the appropriate period, the second question of the date from which time ran need not be considered, and went on:

“The period of twelve years will carry the time back from March 22, 1945, to a date long before Mr Diplock’s death.”

[155]McGee, Limitation Periods, 4th ed. 2002, at 14.030 suggests that Re Diplock is authority for the propositions that(a) the right to receive the share accrues on death, and

(b) obiter, time begins to run from death. But it seems to me to be clear that what the Court of Appeal was saying was that the 12 year period carried the time back to the earliest possible candidate for the relevant date, namely the date of death, and that it was unnecessary therefore to decide from what date time ran. While writing this judgment I came across an authority on section 13 of the Real Property Limitation Act 1860 ( a precursor of section 22(a) of the 1980 Act), on which I gave the parties’ counsel an opportunity to comment. That section (the history of which is outlined in Re Diplock at 509) originally imposed a 20 year limitation period “after a present right to receive the same shall have accrued…” Re Johnson, Sly v Blake

(1885) 29 Ch D 964

was a claim by next-of-kin for general adminsistration of an intestate estate. Chitty J said (at 970-971):

“The second question turns on the meaning of the words ‘present right to receive the same.’ The intestate Johnson died in 1848, and the Defendants contend that the Plaintiff’s right was barred at the end of twenty years from his death, or at all events of twenty-one years, the additional year being conceded in conformity with the general rule that an executor or administrator is allowed in an administration case one year to complete the administration of the estate. In the absence of any special circumstances relating to the getting in of an intestate’s estate, I think that the latter contention is correct, and that the Plaintiff’s claim for the general administration of the intestate’s estate is barred. … But I am of the opinion that the claims of the Plaintiff in her own right and as administratrix of her deceased sister are not barred in reference to such of the assets as came into the possession of T.C. Johnson the administrator, within twenty years before the 11th of April 1883, the day on which the writ was issued. … The right to a legacy and the right to receive a legacy are, (as was pointed out by Lord Romilly in Earle v. Bellingham [24 Beav. 448]), obviously distinct rights. And the observation applies equally to a share of the residue of an intestate’s estate. But the enactments speak not merely of a right to receive, but, emphatically, of a present right to receive. The next of kin have no present right to receive from the administrator a reversionary asset belonging to the intestate, before it falls into possession and is possessed by him, nor where he is compelled to take proceedings to recover an outstanding asset, before he recovers it or obtains possession of it.”

[156]Although Chitty J emphasises the “present” right to receive, and the wording of section 22(a) refers only to “the right to receive,” I consider that this decision is authority for the proposition that time runs from the later of the end of the executor’s year and the date when the relevant interest falls into possession. That would also make sense of section 22(a) and avoid the odd result that if the date were completion of the administration the period might never begin. But it is not necessary in this case to decide whether some later date is the right one, since these proceedings were commenced before the expiry of 12 years from the end of the executor’s year.

[157]This decision was cited in Re Diplock

[1948] Ch 465

, at 509, but without any discussion of the point. But Mr Pickering argued on behalf of Margaret that this decision cannot stand with Hornsey Local Board v Monarch Investment Building Society

(1889) 24 QBD 1

. That was an action under the Public Health Act 1848 by a local authority to enforce a charge on premises imposed by statute to recover the cost of paving works from the owners of premises fronting on a street. The work was completed in 1875, but the apportionment of expenses as between the owners was not done until 1885. The action was brought in 1888. The 1848 Act provided that if the owners did not carry out the works, the local authority could do so, and the expenses incurred by it “shall be paid by the owners in default according to the frontage of their respective premises.” By the Local Government Act 1858 the expenses were to become a charge on the premises. It was held that the action was barred by section 8 of the Real Property Limitation Act 1874 (a precursor of section 20(1) of the 1980 Act), which provided that “no action … shall be brought to recover any sum of money … otherwise charged upon or payable out of any land … but within twelve years next after a present right to receive the same shall have accrued to some person capable of giving a discharge or release of the same …”

[158]The local authority argued that the present right did not accrue until the charge on the land became enforceable following the apportionment of expenses in 1885. The building society argued that the charge was imposed and existed as soon as the expenses were incurred. It was held by the Court of Appeal (Lord Esher MR and Lindley and Lopes LJJ) that the action was statute barred, because(a) the charge was imposed as soon as the works were completed; and

(b) the right to receive the expenses arose then, and not when the charge became enforceable. Lord Esher MR said (at 5-7):

“It was strongly argued that the words ‘present right to receive the same’ in this section are equivalent to ‘present right to enforce payment of the same.’ If there were some overwhelming reason why that construction should be given to the words; if that were the only construction that would render the procedure sensible, I think possibly the words might receive that construction, but I do not think it would be their ordinary meaning in the English language. A present right to receive is not in ordinary English the same as a present right to enforce payment. Then is there any overwhelming reason why we should read the words otherwise than in their natural sense? So far from that, I think that in the present case to read the words in the way suggested for the plaintiffs would raise insuperable difficulties, whereas to read them in their natural sense makes the whole legislation sensible and easy of application … If a person has the right to receive a sum of money, and does receive it, assuming him to be subject to no legal incapacity, why cannot he give a receipt for it; and what is a receipt, but a discharge?”

[159]All the members of the Court of Appeal relied on the fact that such a construction avoided the anomalous result that the creditor could postpone indefinitely the operation of the limitation period by not apportioning the expenses.

[160]In my judgment it does not follow that for the purposes of section 22(a) all actions in connection with the administration of an intestate’s estate become barred after 12 years from the date of death. In the context of the administration of estates the decision in Re Johnson makes sense and provides a reasonable correct construction of what is now section 22(a) of the 1980 Act, and which does not involve the odd consequences which the Court of Appeal in Hornsey Local Board v Monarch Investment Building Society sought to avoid.

[161]If that should be wrong on section 22(a) I consider that the claims against Margaret in respect of the proceeds of 13 Gordon Road and the Yard (and other assets) fall within the scope of the provision in section 21(1)(b) that no limitation period applies to recover the proceeds of trust property or property previously received and converted to the trustee’s use. The doctrine of laches has no application to cases to which the Statutes of Limitation apply either expressly or by analogy: Re Pauling’s Settlement Trusts

[1964] Ch 303

at 353.

[162]Where section 21(1)(b) applies, because it expressly prescribes that there shall be no period of limitation, laches is not therefore available: Gwembe Valley Development Co Ltd v Koshy

[2003] EWCA Civ 1478

[2004] 1 BCLC 131

(CA), where Mummery LJ said (at 173):

“The defence of laches is not available. As already explained no period of limitation is specified by the 1980 Act in respect of the cause of action for dishonest breach of fiduciary duty. The effect of s 21(1)(a) is that either as a result of direct application, or of analogy, there is no period of limitation applicable to that cause of action.”

[163]Although this was a decision on section 21(1)(a) there is no possible principled distinction between section 21(1)(a) and section 21(1)(b) which share the opening words of section 21(1):

“No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action …”

[164]Although the wording of section 29(5) of the 1980 Act is not easy to apply to an action of the present kind, I consider that the provision of an inventory and account in the Family Division proceedings was an acknowledgment of her duty to account as administratrix, although it was not an acknowledgment of the estate’s entitlement to the Yard, which she described as “mine since May 1992.”

[165]If mere delay could be a bar to proceedings, then there plainly has been considerable delay on the part of the claimants. It is apparent from the correspondence that the claimants had on several occasions considered legal action against Margaret without going so far as to issue proceedings. On December 18, 1991 Angela wrote to the persons whose purchase of 13 Gordon Road had been frustrated that the claimants were embarking on a court action against Margaret. In the Willesden County Court proceedings there is a draft affidavit by Michael in which he says that he and the claimants had brought an action to remove Margaret as administratrix. On December 15, 1993 Mr Ross-Smith wrote to Sheila to say that he had been in correspondence with Michael’s solicitors and had been informed that Michael would be commencing proceedings against Margaret, presumably to remove Margaret as administratrix.

[166]It is likely that their reasons for not taking proceedings included these: it would have been (as it has turned out to be) an extremely unpleasant family dispute aired in public; the amounts at stake would have been (compared to the costs involved) relatively small; as Mr Ross-Smith warned in a letter to Angela of January 17, 1997, there would be “a real risk that the Court will require Sheila to disclose details of the offshore account”; in addition, Angela and Sheila had their share of family difficulties, illnesses and bereavements.

[167]Margaret was well aware that she was vulnerable to proceedings. In an affidavit dated November 25, 1993, made in the proceedings against MP Loftus Ltd and Michael, Margaret said:

“I am aware that my brothers and sisters have threatened to bring proceedings in the High Court to remove me as administratrix. Such proceedings have not been commenced and, at present, I remain in such capacity.”

I do not consider that this would have been (had laches been available as a defence) a case where the conduct of the claimants can reasonably have been regarded by Margaret as a waiver of their rights or have caused an injustice to Margaret. It also follows that I do not consider that any of the promissory elements of estoppel are present. C. Claim against Dexter Claimants

[168]The claimants contend that the Yard was transferred by Margaret to Dexter in breach of trust and received by him for his own benefit. Dexter had the requisite knowledge/notice of the breaches, sufficient to render it unconscionable that he should retain the Yard: Bank for Commerce and Credit International v Akindele

[2001] Ch 437

at 448, 453-55. The Yard remained impressed with the trusts of the unadministered estate and they are entitled to follow it into the hands of Dexter and it must be restored to the estate of Mr Loftus.

[169]If he is to be treated as the purchaser of trust property transferred to him (with consideration) in breach of trust, the burden is on Dexter to prove all the elements of the defence of bona fide purchaser for value without notice: Barclays Bank plc v Boulter

[1998] 1 WLR 1

at 8. The claimants deny that Dexter was a bona fide purchaser for value without notice. Dexter’s case

[170]The purpose and effect of Margaret’s assent of June 22, 1996 was to change her character of ownership from that of administratrix. When Margaret transferred the Yard to Dexter she no longer held it as administratrix and accordingly did not deal with him on that basis. In order to impeach Dexter’s title, what he must know or have notice of is that Margaret was not entitled to have taken the Yard and dealt with it as her own property.

[171]The questions of whether the Yard was sold to Dexter at an undervalue, and whether he knew or ought to have known of that, are irrelevant. Evidentially, sale at an undervalue might in appropriate circumstances be evidence as against the purchaser that the vendor might be holding the property unlawfully in some way. But that cannot be the case in a transaction between mother and son because the gift element requires no further explanation.

[172]In these circumstances it is unnecessary for the claimants to plead and seek to argue the knowing receipt basis of constructive trust liability. The main purpose of seeking to establish constructive trust liability on the basis of knowing receipt is when the alleged constructive trustee has disposed of the property so that a personal remedy for its value is sought against him.

[173]The true issues are:(a) whether Margaret executed the assent in breach of her duties as administratrix; and

(b) if so, whether Dexter can assert the defence of bona fide purchaser for value without notice.

[174]It is for the purchaser to establish the elements of the defence; and that the title of a transferee of a registered estate will not be protected if it is transferred to him in breach of trust and he has notice of that.

[175]Dexter’s case is that he believed his mother had become duly entitled to the Yard following Mr Loftus’ death, in particular following an agreement between the siblings as to the division of Mr Loftus’ property. The claimants’ case that he knew that Margaret had taken the property without being entitled to it should be rejected.

[176]There would be nothing unusual or suspicious from Dexter’s point of view in his mother inheriting the premises from Mr Loftus. Dexter’s evidence was that:(1) he knew nothing about the circumstances of the estate, including the disputes and any agreement, in the early years following Mr Loftus’ death;

(2) right up to the transfer he did not know that Mr Loftus had died intestate and that his mother was administratrix, and did not really understand these concepts; but

(3) he always understood or assumed that the estate went to Mr Loftus’ children and he was later told by his mother, when he was perhaps 17 or 18, that the siblings had agreed between themselves who should have what; but

(4) he was still not told about any earlier disputes or arguments regarding the estate; and

(5) in any event by the time of the transfer he understood that his mother had received the Yard from the estate and now owned it, and was unaware that there was any continuing dispute or question about this. Conclusion

[177]I do not think it matters whether the claim is to be classified as a claim of knowing receipt or a claim of a proprietary nature. The test of knowledge is substantially the same in the circumstances of this case. I am satisfied that Dexter did not purchase the Yard in good faith. As I have said, he was an unsatisfactory and unhelpful witness, and when he saw which way the questions were going, he was evasive and sometimes untruthful.

[178]I do not believe his story that Mr Loftus always intended that the Yard should go to him. Although it was not relied upon by his advisers as giving him any rights, I consider that this story was originally devised by Margaret and Dexter to bolster his right to have the Yard, when he knew that his aunts and uncle might otherwise have a claim. He did not adduce any evidence to support the contention that Mr Loftus should prefer him.

[179]Dexter gave evidence that he knew that the Yard was an estate asset and accepted that he knew the claimants and Michael were originally entitled to the benefit of the Yard.

[180]His evidence that the arrangement between the claimants, Margaret and Michael, was made to ensure that Mr Loftus’ alleged wishes were carried out was also untrue. I also attach significance to his evidence in Margaret’s divorce proceedings that none of his relatives who could have been entitled to a share of the Yard as beneficiaries of Mr Loftus’ estate had questioned the transfer to him. That is a very odd thing to say if he believed Margaret had the right to transfer the Yard.

[181]In his second witness statement he said that Margaret’s right to deal with the Yard was “not something that it seemed necessary for me to know or ask about, which I did not.” (para 9).

[182]I am satisfied that Margaret knew full well that she had not entered into the alleged agreement with the claimants and Michael. I also disbelieve Dexter’s evidence that she told him of the precise terms of the alleged compromise agreement upon which Margaret relied in these proceedings. He sets out in paragraph 10 of his second witness statement what he understood at the time to be the consequence of what Margaret had told him was the “basis agreed between them” for the division of Mr Loftus’ estate. When asked in cross-examination to describe the “arrangement”, he stated “it is my mother’s defence.” Neither Margaret nor Dexter told Mr Lemer anything about the arrangement. In my judgment, the reason for this is that there was no such arrangement. If there had been such an arrangement, there would have been no reason not to tell Mr Lemer, although Mr Lemer’s evidence was that if he had known about the “arrangement” referred to by Dexter, he would have advised that there might be a potential dispute and should look into the background.

[183]In cross-examination Dexter said that he knew that Margaret was administratrix: “I probably knew around the transfer”, and he was extremely evasive (and not, as Mr Acton contended on his behalf, confused) when he was pressed on this.

[184]I do not attach any significance for the purposes of this part of my judgment to the contradictory evidence on the cash consideration of £14,000 which was allegedly paid by Dexter. D. Counterclaim

[185]With regard to the counterclaim for an account, the claimants’ position is as follows:(1) they deny that they have removed any jewellery or cash;

(2) they deny that Mr Loftus owned property in Ireland at the date of his death;

(3) they do not have, and never have had, control over any cash at the Allied Irish Bank in either Mr Loftus’ or in Michael’s sole name;

(4) the joint account in the name of Sheila and Mr Loftus at the Allied Irish Bank was a joint account and any balance at the date of death passed by survivorship to Sheila and did not form part of Mr Loftus’ estate;

(5) the 90% shareholding in the Company was worthless, the Company being insolvent.

[186]The claimants’ position is that it is not for the court at this stage to seek to take an account, nor should it make findings on the basis of incomplete evidence. In particular, in relation to the offshore accounts, it will be for the new administrator to determine the nature of those monies, the intention of Mr Loftus, whether the monies in them passed by survivorship, or were Company monies. If having considered all the evidence including the contemporaneous Revenue documentation, the new administrator comes to the conclusion that the offshore accounts were Company monies, it must also be established whether they or any tax refund repaid to the Company at any time after payment of all outstanding company liabilities, were properly paid out by the Company. Thereafter, if it is alleged that they were improper payments of company money, the Company would have to be restored to the register and reconstituted and any claim in relation to the monies would have to be brought by the Company to which allegedly they belong. There is no right directly to an account between the beneficiaries in relation to those monies and the new administrator would not be in a position to conduct an account in relation to them without more.

[187]I accept that the court should not at this stage order an account in relation to the matters raised in the counterclaim. But it was accepted on behalf of the claimants that I had jurisdiction to make a declaration as to whether the offshore accounts belonged to the Company. I accept that making such a declaration would only be a first step, since the Company would have to be reconstituted, and it is impossible to know at this stage what effect repayment of the money left in the offshore accounts after payment of the Revenue’s claim would have on the Company. But I am satisfied that I should exercise my discretion to do so, since the only persons with an interest in arguing the contrary, Sheila (especially) and Michael, and with any relevant knowledge, are before the court, and the question was thoroughly canvassed in the voluntary particulars and in cross-examination.

[188]I will make a declaration that the money in the offshore accounts belonged to the Company. My reasons are these. First, the Revenue took the position that the money in the accounts had come from the Company and represented undeclared income of the Company, and Sheila and Michael agreed to pay the Revenue £400,000 from these accounts without a fight. Second, the auditors’ reports show that there was no control over cash expenditure in the Company. Third, the evidence by Sheila, that she personally knows from her experience of the Company as a co-director (second witness statement, para 2), that the funds were the personal funds of Mr Loftus (particularly from gambling) is untrue: I found her account of the source of the money and her knowledge of it wholly unconvincing. Fourth,the notes of the settlement meeting on May 11, 1992 refer to two accounts and state that “the total aggregate sums in these accounts amounted to some £500,000, such sums coming from the company in the early ’70s in respect of one account, and the late ’70s in respect of the other” and I accept the submission made on behalf of Margaret that it can be reasonably inferred that the information came from Sheila and/or Michael and that the assertion that the sums came from the Company was correct. Fifth, it is apparent from a letter of January 17, 1997 (disclosed only at the very end of the trial) from Mr Ross-Smith to Angela that Sheila was unwilling to disclose details of the offshore account, and Mr Ross-Smith warned that there was a real risk that the court would require Sheila to disclose those details. He wrote:

“[The current impasse] appears to arise because Sheila is unwilling to disclose details of the offshore account. I would have been prepared to proceed with litigation against Margaret on behalf of the three of you, but there is a real risk that the Court will require Sheila to disclose details of the offshore account. There could be criticism against her (and therefore all three of you) if that information is not freely disclosed, and adverse costs consequences. I am assuming that neither you or Katherine are prepared to take that risk. At least, you have not told me that you are willing to do so.”

[189]The other matters which were canvassed in the trial were the existence of an undisclosed property in Ireland, and the tax rebate. No evidence was produced to me which would support the existence of a property in Ireland belonging to Mr Loftus. The fact that he gave an address in Ireland to Allied Irish Bank is not evidence that he owned the property in question.

[190]I am satisfied on the evidence that the 1993 tax rebate of about £71,000 was used to pay Angela £60,000 and Katherine £10,000. As I have said, there was some confusion in the evidence between a tax rebate which was made to the Company in or after 1987 (of some £97,000), and a net repayment of tax to the Company of about £71,000 in 1993.

[191]Before various attendance notes were produced at the very end of the trial, Angela’s evidence was that she had received about £30,000 in remuneration when the Company’s activities were wound down, and that Katherine had received about £5,000. She did not recall whether Sheila had received any money, but Angela said that she could recall Sheila being magnanimous and saying that all the money should be paid to Angela. Sheila gave evidence that she had no idea when the tax rebate was received or where it went. Katherine’s evidence was that she did not know where the tax rebate went.

[192]As a result of the documents which were disclosed at the very end of the trial, it is apparent that in early 1995 it was arranged between the claimants that Angela would be paid £60,000, and Katherine would be paid £10,000, from the tax repayment, and that the payments would be treated as being in return for past services provided.

[193]This is apparent from the attendance note by Mr Ross-Smith of his conversation with Angela on January 6, 1995, to which I have referred, which states:

“the rebate from I.R. which caused the probs in the first place is being taken out, but for c. £2,000.”

An undated attendance note by Mr Ross-Smith of a conversation with Katherine which took place in 1997 states that Angela got £60,000, Katherine got £10,000 and Sheila “had the a/c.”

[194]On the final day of evidence, Angela denied that there had been any discussion to take out the money. She had not got £60,000, but £30,000 after deductions. She was asked about the attendance note of January 6, 1995. In answer to a question whether she recalled the discussion with regard to money in the Company, she replied that it was an on going situation when they were considering putting the Company to bed. It was all about sorting out what was left in the Company. She could claim legitimate payments for 5 years work done by her. She only withdrew money for remuneration purposes. She drew attention to the note on the first page of the attendance note:

“NB you say you do not accept the payments are a device  all legitimate for work done.”

Angela said that this was, and remained, her position.

[195]On the payments out of the Company, Sheila said when recalled that she and her sisters had worked increasingly through their lives, and in later years she had received nothing. She was asked whether Angela reported to her on her conversation with Mr Ross-Smith, and she said that she was then nursing a sick husband. When asked whether the payments were at the expense of the estate, she said she could not comment, it was salary.

[196]When recalled Katherine said that she had not received £10,000 but £6,000, and Angela had received not £60,000 but £30,000. The offshore account was Sheila’s by survivorship. She denied the payments were not for genuine remuneration but to avoid accounting to Margaret.

[197]I did not believe Sheila’s evidence that she had no idea where the tax refund went. Nor did I believe Katherine’s denial that she and the other claimants had control over the tax refund. Nor did I believe Angela’s denial that there had been any discussion to take out the money.

[198]It is not necessary for me to make a declaration with regard to these payments. I am not in a position to determine whether they were legitimate payments which could have been properly authorised by the board of the Company. That will be a matter for the new administrator. E. Remedies

[199]I accept the claimants’ submission that there was no compromise agreement, and that in the absence of such an agreement, Margaret’s conduct in retaining and converting to her own use the sale proceeds of 13 Gordon Road, Mr Loftus’ personal chattels, the rents and profits of the Yard, raising a mortgage against the Yard, transferring it to her son in return for the redemption of the mortgage, and failing to provide information to the beneficiaries (and swearing an incorrect inventory and account) was in breach of trust.

[200]As regards the application for removal under Administration of Justice Act 1985, section 50, it is a matter for the discretion of the court, and that it is reasonable for the court to take a pragmatic approach, to consider the views of the beneficiaries and the interests of the estate as a whole: Perotti v Watson

[2001] EWCA Civ 116 (CA)

; cf Letterstedt v Broers

(1884) 9 App Cas 371

at 385 –387. I have no doubt that I should exercise my discretion to remove Margaret, and appoint an independent solicitor in her place.

[201]As a result of my findings in relation to Dexter, I will grant a declaration that he holds the Yard and all profits received therefrom for the estate, and will order that he should convey it back to the estate, and that he should account for all such profits, and pay the estate such amount as is due following the taking of the account.

[202]The claimants argue that if Dexter is not a bona fide purchaser he must restore the property, and whether he may have spent monies improving the Yard is irrelevant. In my judgment, although there appears to be no authority directly in point, that submission is in accordance with principle, and a person who acquires property with notice that the vendor had acquired it in breach of trust is not entitled to be reimbursed for expenditure, even if thereby the estate will receive a windfall benefit. On the other hand, when that person has to account for rents and profits, revenue expenditure (such as the £25,000 or so spent on clearance of the site) should be taken into account for his benefit. So also he should account for the reduced rents and profits after taking account of the allowance for improvements, which are alleged to amount to about £15,000.

[203]As I said earlier in this judgment, I urged the parties to settle this dispute. I am conscious that this judgment is not the end of the legal battle. But the sums at stake are very modest, and I hope that this judgment, in which neither side has secured a complete victory, could form the basis of sensible discussions, perhaps through a mediator, which could put an end to this unhappy dispute.

Cited in 1 later judgment

Green & Ors v Gaul & Ors 2006