“The Trustees shall have power exercisable by Deed o[r] Deeds revocable or irrevocable at any time prior to the vesting date to vary the shares in the Trust Fund to which any one or more of the beneficiaries will become entitled on attaining the specified age PROVIDED ALWAYS: (i) that no such variation shall operate so as to reduce the presumptive share of any beneficiary to an amount less than£100 . (ii) no such variation shall be made or a previously made variation revoked after the vesting date (iii) no such variation shall be made or a previous variation revoked so as to affect (whether by increasing or decreasing) the interests of any person who has at the date of such variation or revocation an interest in possession in the Trust Fund or any part thereof (iv) no such variation or revocation shall be effected so as to invalidate any prior payment or application of the Trust Fund and the income thereof and any part or parts thereof respectively made under any power conferred by this Settlement or by law.”
“ Jamie, Thank you for your telephone message this morning. I have checked the Settlement Deed and confirm that the following arises when your daughter Leonora reaches 25 on14th June 2011 : 1. According to clause 6 (1) of the Settlement as at 14th June the fund is valued and Leonora's share of the trust fund is determined on that date 2. She is entitled to an equal share with her brother and sisters. Provided there have been no other children born before that date her trust fund will be a 1/4 share 3. She becomes entitled as of right to Income from that 1/4 share 4. The Trustees do have power after that date (under clause 10 (2)) to transfer the whole or part of the 1/4 share to Leonora. Accordingly I will instruct Smith & Williamson to prepare a valuation of the Settlement funds as at 14th June. Accounts will be required to that date. The Trustees thereafter will have to decide whether to continue the trust with Leonora's share remaining in trust for her life or whether to pay capital to her. Subject to any comments you may have I will ask Smith & Williamson to prepare the valuation. Accounts can then be prepared and the Trustees will then need to consider in the light of the accounts what steps they would like to take if any. I hope this answers your queries. I am away from Monday on holiday but I will put this all in place before I go.”
“Dear Jamie I write further to our telephone conversations last week. As I mentioned in those calls and in my letter to you dated 25th July the class of beneficiaries of the Settlement is wider than has been previously realised. The Settlement Deed provides that both your children and your two sisters’ children are entitled to interests in the Settlement. You have told me that this is not what you had intended when you signed the Deed. I am unable to comment on the reasons why the Deed was drawn up in the way it was. You have told me that the Settlement is only for your children and that your sisters’ children should not benefit from the funds. What we, therefore, need to do is inform the Trustees of the situation. I need to take their instructions on the next steps. Can you therefore confirm to me within the next seven days that I can do so and accordingly I will send them a copy of this letter and my earlier letter and ask them for their instructions.”
“As legal adviser for many years to the Sparsholt Settlement, you were asked in 2011 to advise on what steps were necessary, before Leonora became 25 on14 June 2011 , to restrict the actual beneficiaries to my four children, in accordance with my original intent. Your advice was given in the below email on2 June 2011 . Your advice, you are now reporting, was totally wrong … at stake is my children’s inheritance worth£2 million in shares, cash and loans plus many millions of £s in future receipts from several life insurance policies … I reserve the option to seek separate legal advice in a claim for both professional fees and damages on behalf of myself, my children and the Trustees of the Sparsholt Settlement. In the meantime, I urgently request that you clarify to me the actions that need to be taken, together with likely outcomes.”
“We intend to do whatever we can to put matters on the correct footing. In order to do this we will inevitably need to involve both you and the Trustees. As you say, we have already taken advice from Counsel. This was at the expense of WB to advise generally as to the position so that we could better advise you and the Trustees. As we have to go back many years, I am afraid that it is inevitable that this will take some time and we will do all we can to progress matters. I have to agree that Ann’s email of2 June 2011 needs explanation. I am investigating further.”
“I promised last year that I would write to you concerning the Settlement once I had carried out investigations and considered our next step. I apologise for the length of time that this has taken while we reconstructed the accounts on the "alternative basis". You may remember that in June 2011, just before Leonora reached her 25th birthday, you enquired as to whether there was any action required before that birthday. Unfortunately we gave you the wrong answer at that time and we could have taken action to exclude your sister's children subject to a payment of£100 to each of them. The intended beneficiaries of the settlement were your two daughters and the twins when they reached the age of 25 and your sister's children were only intended to be default beneficiaries. I can confirm, however, that we are able to exclude Emma's two children because they have not yet reached their 25th birthday. We have brought the accounts up to date on the traditional basis for your four children and we have also prepared a separate set of accounts on the adjusted legal basis for the remaining seven children (that is your 4 children and Joanna's 3 children). I enclose a schedule setting out these two different bases. The beneficiaries' entitlement to date shows that there have been limited income distributions during the lifetime of the Trust. Under the terms of the Settlement there is a power to accumulate income for a period of 21 years. As a result there are three different situations that arise as follows: Firstly, the Trustees had a discretion during those first 21 years as to whether to pay out income to the beneficiaries. Secondly, on the expiry of the 21 year period the Trustees had a discretion to pay out income to those beneficiaries who had reached 18 but were not yet 25 and thirdly, when the beneficiaries reached the age of 25 each beneficiary then was entitled to a share of income from their fixed share of the trust fund. I can confirm that Leonora and Rosanna's entitlement would have been minimal from when they had interest free loan investments. The schedule also shows the beneficiaries' capital entitlement for each life tenant and the accrued income to date. You will find there are further details in the detailed accounts but for now I am just sending the summary. Properly speaking, the beneficiaries' income entitlements should be paid out now. I should also mention that the position also affects the life tenants' income tax position to date. The Trust investments have fallen into three categories. Firstly, there are the interest free loans which have been made to Leonora and Rosanna which are in excess of their one-seventh share. Secondly, there are the equities and thirdly, there are the life policies. As to the life policies, it may be possible to re-write these for the benefit of the correct beneficiaries, and cease paying the premiums on the current policies. lt may be possible to persuade the insurers to re-write those for the correct beneficiaries but this may be too much of a novel approach. You should, however, be aware that you are under no obligation to maintain the premiums on the existing two policies and you are under no obligation to the Trustees or beneficiaries concerning those. Switching the premiums to new policies on the current trusts would not change the actuarial exposure of the insurers. lt may be possible to decide to surrender the current policies. You may wish in due course to discuss with Joanna (and perhaps Emma) the position. We can, however, see no legal grounds on which Joanna's children could be persuaded or could be required to give up their interest in the Trust on the grounds of the error made. It is well established that lawyers owe a duty of care to disappointed beneficiaries under Wills but the position as regards Trust beneficiaries is less clear. There may also be a limitation point as to the time that has expired since the error was made. Perhaps when you have had time to digest the above details we could meet with you and/or your new advisers as to the way forward. I am sorry to have to write to you about this and we will do all that we can to put the matter right for you. …”
“The way forward The fact that we consider it prudent to issue proceedings to preserve limitation does not of course mean that our clients are not open to sensible discussion about how to resolve these claims.”
“the real reason for concern in cases such as the present lies in the extraordinary fact that, if a duty owed by the testator’s solicitor to the disappointed beneficiary is not recognised, the only person who may have a valid claim has suffered no loss, and the only person who has suffered a loss has no claim.”
“To the extent that the duty to the specific legatee is fulfilled, the duty to the testator is cut down. If and to the extent that the relevant property would have been distributed to the specific legatee in the ordinary course of administration, the other persons interested in the estate can suffer no loss. Insofar as the relevant property or any part of it would have been applied in the ordinary course of administration to discharge liabilities of the estate, the specific legatee can suffer no loss. To impose duties on the solicitors which enabled both the personal representatives and the specific legatee to recover for the loss of the relevant property would involve both double recovery and double liability. The duties would not be commensurate with the loss against which the persons to whom they were owed were to be saved harmless. But there is no reason in principle, as it seems to me, why, in cases of this nature, the law should not impose complementary duties; so that for breach of the one the specific legatee is enabled to recover the loss which he has suffered and for breach of the other the personal representatives are enabled to recover, and recover only, the loss suffered by the other persons interested in the estate. Justice will be done to each of the three interests concerned – the specific legatee, the estate and the solicitors – if solicitors who, in the course of carrying out the testator’s testamentary instructions, have failed to take care to ensure that the relevant property forms part of the estate are liable to compensate specific legatee for the loss which he has suffered as a result of the breach of duty owed to him; and are liable to compensate the estate for the loss (if any) suffered by the other persons interested in the estate for breach of the duty owed to the testator.”
“It can be seen from the last two cases that, even without a legal lacuna, it is possible, exceptionally, for a duty of care to be owed by a professional or a bank to someone who is not a client or customer as regards pure economic loss. However, in both those cases the purpose of the service was to benefit the third party; and in Golden Belt v BNP Paribas the third party was relying directly on the defendant bank to have drawn up a valid promissory note, as the bank knew or ought to have known.”
“Without a close analogy in terms of purpose and reliance, and without any legal lacuna of the type found in White v Jones[1995] 2 AC 207 , it would, on the pleaded (and assumed) facts of this case, not be fair, just and reasonable to impose a duty of care on the Bank to the Fund. This would place an unacceptable burden on banks going outside their contractual relationship with their customers. In other words, the Board sees no good reason in this case for incrementally developing the tort of negligence, beyond the well- established Quincecare duty of care, so as to impose on a bank an equivalent duty of care to a third party who is not a customer of the bank.”
“The First Claimant has personally paid taxes on behalf of the [Settlement] which he otherwise would not have paid. Further he is taking out insurance cover to ameliorate the position having regard to the fact that his children’s shares of the trust fund are less valuable than they would have been but for the First to Third and/or Second Defendants’ negligence. This is a cost which he would not have incurred but for the negligence and is a loss for which the Defendants are liable.”
“(5) For the purposes of this section, the starting date for reckoning the period of limitation under subsection (4)(b) above is the earliest date on which the plaintiff or any person in whom the cause of action was vested before him first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action. (6) In subsection (5) above “the knowledge required for bringing an action for damages in respect of the relevant damage” means knowledge both— (a) of the material facts about the damage in respect of which damages are claimed; and (b) of the other facts relevant to the current action mentioned in subsection (8) below. (7) For the purposes of subsection (6)(a) above, the material facts about the damage are such facts about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment.
“I would also hold that the knowledge of a loss adjuster investigating and advising on a claim on behalf of insurers for the purpose of pursuing a subrogated claim by those insurers is to be treated as the knowledge of the insurers for the purposes of s 14A(5). In the course of argument, [counsel] acknowledged that it is the custom of many insurers to investigate claims through their own ‘in-house’ loss-adjusting department. He was unable to suggest any logical reason for distinguishing between the position of such an insurer, who plainly would be fixed with the knowledge of his employee, and the position of an insurer who, for purposes of economy or business efficiency, delegates the task to an independent loss adjuster such as Mr Handford.”
“In my judgment there is an important difference between the position of existing beneficiaries under a disposition already made and disappointed beneficiaries under a disposition which was not made at all because of the negligence of solicitors. Beneficiaries under a disposition by way of trust which has already been made before the negligent acts were committed have, like the Trustees, a proprietary interest in the trust property, if solicitors instructed by the Trustees carry out their work negligently, thereby causing loss to the trust property or putting that property or the interests of beneficiaries in peril, the loss resulting from such negligence will ultimately fall on the beneficiaries, even if it is the Trustees who incur it in the form of a diminution of the trust property held by them or in the need to expend money in order to protect the trust. By accepting instructions to act for the Trustees the solicitors are of necessity assuming to act, to the extent of the matters which they are instructed to deal with, in the affairs of the beneficiaries as well. It seems to me that solicitors who act in these circumstances must be regarded as owing to the beneficiaries the same duties of care in tort as they owe to their clients, the Trustees, in both contract and tort. The position may be different where the plaintiff is a person who has never become a beneficiary in any true sense. An example might be where the plaintiff is a person who is merely an object of a fiduciary power vested in the Trustees which the Trustees wish to exercise in this favour but fail to exercise because of the negligence of solicitors instructed by them to draw the requisite instrument. The position of such a plaintiff would be much closer to that of the disappointed testamentary beneficiary considered in White v Jones and it may well be that he could only succeed by showing that the relationship between him and the solicitor was of the special nature recognised in that case.”
“It is important to appreciate that the Trustees’ claim to recover the loss of value to the Children’s Shares (i.e. which flow from those shares of the fund being smaller than they should have been) is made by them as Trustees of those shares (i.e. parts) of the settlement held for the Children. Put another way, this part of the chose in action (the claim in negligence) or its proceeds belongs to the trusts of those particular funds, rather than to the trusts as a whole. Viewed in that way the Trustees (qua Trustees of those funds) have suffered loss by reason of the negligence.”
“… there are two main points. The first is that it would be wrong if the solicitors escaped any liability for damages in a case such as this, merely because they could identify a dichotomy between the person who can claim for a breach of duty... and the person who has suffered the damage... Given that any damages would ultimately come to the beneficiary irrespective of who has the right to sue the question of whether it is the executrix or the beneficiary who can bring the proceedings is not of great significance.”
“73. ... Mr Shore plainly knew well before October 2002 (and so more than 3 years before issue) that his ability to draw income was restricted by the GAD rate and that this restriction was, or was very likely to become, significant. He also knew that annuity rates had fallen so he had lost the opportunity to acquire an annuity at the former rates, which might or might not recur depending on whether rates recovered. He had complained about this restriction to SFS, and on his evidence had been persuaded not to make a complaint and reassured that his fund value was doing well and that the restriction on income would be corrected over time. He knew that he had suffered some loss in the sense of a restriction on his income, but was it such as "would lead a reasonable person… to consider it sufficiently serious to justify instituting proceedings…" (s14A(7))? Potentially, the restriction was temporary and reversible. I agree with Mr Flenley that it is at least arguable that the reassurances given are relevant to that consideration and might have led a court to conclude that the loss was not "sufficiently serious". As I said above it would be profoundly unattractive for a defendant who had talked a claimant into waiting to see if his position was corrected thereafter to rely on limitation to bar his claim.”
“In my opinion, therefore, your Lordships' House should in cases such as these extend to the intended beneficiary a remedy under the Hedley Byrne principle by holding that the assumption of responsibility by the solicitor towards his client should be held in law to extend to the intended beneficiary who (as the solicitor can reasonably foresee) may, as a result of the solicitor's negligence, be deprived of his intended legacy in circumstances in which neither the testator nor his estate will have a remedy against the solicitor. Such liability will not of course arise in cases in which the defect in the will comes to light before the death of the testator, and the testator either leaves the will as it is or otherwise continues to exclude the previously intended beneficiary from the relevant benefit.”
“Let me take the example of an inter vivos gift where, as a result of the solicitor's negligence, the instrument in question is for some reason not effective for its purpose. The mistake comes to light some time later during the lifetime of the donor, after the gift to the intended donee should have taken effect. The donor, having by then changed his mind, declines to perfect the imperfect gift in favour of the intended donee. The latter may be unable to obtain rectification of the instrument, because equity will not perfect an imperfect gift, though there is some authority which suggests that exceptionally it may do so if the donor has died or become incapacitated: see Lister v. Hodgson (1867) L.R. 4 Eq. 30, 34-35, per Romilly M.R. I for my part do not think that the intended donee could in these circumstances have any claim against the solicitor. It is enough, as I see it, that the donor is able to do what he wishes to put matters right. From this it would appear to follow that the real reason for concern in cases such as the present lies in the extraordinary fact that, if a duty owed by the testator's solicitor to the disappointed beneficiary is not recognised, the only person who may have a valid claim has suffered no loss, and the only person who has suffered a loss has no claim.”
“ When A contracts with B for B to perform professional services in connection with the establishment of a trust for the benefit of C and B is negligent in the performance of those services with the result that C receives no benefit from the trust, does A or C have a remedy in tort against B? That is the primary issue raised on this appeal. It arises because David and Alison Hughes (“the parents”) by one action and their infant children, Thomas, Stephanie and Charlotte Hughes (“the children”) as the beneficiaries under a trust created by the parents, by another action have sued the defendant, Colin Richards, alleging negligence by him in connection with the establishment of a trust for the benefit of the children. Mr. Richards applied for the striking out or dismissal of the children’s claim. His Honour Judge Norris Q.C. sitting as a High Court judge in the Birmingham District Registry, Chancery Division, on July 30, 2003 refused the application. Mr. Richards appeals with the permission of the judge.”
““56 I am not going to strike out the children’s claim. First I regard Mr. Hill-Smith’s submissions as extremely strong in relation to the investment retainer, and as in accord with orthodox learning. But I am impressed by Miss Shaldon’s submission that all of the observations cited have been obiter, admittedly from the highest authority, but given at a time when the basic principles themselves were just being ascertained and established. There is no decided case drawn to my attention where these obiter observations have in fact been applied to defeat a claim. 57 Secondly, certainly part of the reasoning in White v Jones proceeds on the footing that it lies in the power of the donor to put right the intended gift which has failed, either because the original transaction has never effectively proceeded, or on the footing that if it has, the intending donor can, by proceeding against the solicitor, recoup the property and redirect it. It may make a difference that in the present case the transaction (the establishment of the trust) was an effective one and it is the nature of the investment (as it has been called) that has failed (ie the preservation of the capital). Or it may be that a court at trial would determine that the third party claim by the children should not in law depend on whether or not the parents as donors can afford to sue the solicitor to recoup damages and to make the gift which they originally intended. 58 I have reached the clear conclusion that it would be wrong on this summary application to express a concluded view on those difficult questions, particularly since I am satisfied that the “monitoring claim” is by no means straightforward, and that I cannot say in relation to that claim that there are no reasonable grounds for bringing it. …”
“The correct approach is not in doubt: the court must be certain that the claim is bound to fail. Unless it is certain, the case is inappropriate for striking out (see Barrett v Enfield London Borough Council [2001] 2 A.C. 550 at p.557 per Lord Browne-Wilkinson). Lord Browne-Wilkinson went on to add: “[I]n an area of the law which was uncertain and developing (such as the circumstances in which a person can be held liable in negligence for the exercise of a statutory duty or power) it is not normally appropriate to strike out. In my judgment it is of great importance that such development should be on the basis of actual facts found at trial not on hypothetical facts assumed (possibly wrongly) to be true for the purpose of the strike out.”
“I can of course understand why as a matter of tactics Mr. Richards would like the children’s action out of the way so that he can then deal only with the parents, who may have a limitation problem and who are not legally aided. But that is not a factor which should have weighed in the exercise of the court’s discretion. I think it wrong in principle that the court should pay any regard to the fact that the children have public funding. That would discriminate against publicly funded litigants, contrary tos.31(1)(b) of the Legal Aid Act 1988 .”
“There is also, it seems to me, a narrower, arguable ground of liability. This is that in relation to both retainers the defendant should be regarded as acting not only for the parents, but also directly for the children. After all they could not act for themselves—they were under age. Putting it another way, it is at least arguable that viewing the transaction as a whole, the defendant was advising both donors and donees. If that analysis is correct, then this would not be a case of a duty of care extended to a stranger intended to be benefited by a contract between two others. There would be a direct contractual duty owed to the children.”
“19 As to that the first question is whether the distinction from the Midland Bank case[1979] Ch 384 referred to in the subsequent cases, namely that there was a continuing retainer because the file had not been closed and further advice was sought and obtained, is a distinction of principle rather than of incidental fact. In my opinion it is a factually incidental distinction rather than a distinction of principle. The obtaining and receiving of advice after a mistake has been made (even if the mistake can be easily rectified) cannot to my mind mean that an obligation to correct one’s mistake or negligence continues to accrue and give a fresh cause of action every day after the mistake has been made. As Mustill LJ pointed out in the Bell case[1990] 2 QB 495 it would be unusual for there to be an express term in the average retainer contract (or the average pension adviser contract) requiring the adviser to exercise continuing vigilance to discover any mistakes he may have made and then to busy himself to put them right. Moreover it cannot be right to imply what he called such “a strange obligation” into an apparently usual form of contract. 20 Once it is clear that there is no principled distinction between the Midland Bank and Bell cases, it is clear that our obligation is to follow the Bell case as a decision of this court. If the decision in the Midland Bank case is to be preferred, that must be for a higher court to decide. 21 I would therefore conclude that despite the existence of a continuing retainer on the part of CHBC, it does not follow that fresh acts of negligence occurred, in respect of each of the amendments, of failing to secure the Trustees formal adoption of the amendments in a signed document and failing to inform them that the amendments could not be retrospective. These were original acts of negligence which occurred before 30April 2004 and are accordingly not acts of negligence for which Capita/CHBC are responsible under the indemnity, even though Mr Le Cras made no attempt to repair his omission thereafter.”
“(7) For the purposes of subsection (6)(a) above, the material facts about the damage are such facts about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment.”