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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Raymond Saul & Co. (a firm) v Holden & Anor [2008] EWHC 2731 (Ch) (12 November 2008) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2008/2731.html Cite as: [2009] Ch 313, [2008] WTLR 1833, [2008] NPC 122, [2009] 2 WLR 1257, [2008] EWHC 2731 (Ch) |
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CHANCERY DIVISION
Strand. London. WC2A 2LL |
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B e f o r e :
(sitting as a Deputy Judge of the High Court)
IN THE MATTER OF THE ESTATE OF BERTHA HEMMING (deceased)
____________________
RAYMOND SAUL & CO. (a firm) |
Claimant |
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-and- |
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(1) JOLYON HOLDEN (as personal representative of Bernard Leslie Hemming deceased) (2) LOUISE MARY BRITTEN (as trustee in bankruptcy of the estate of Bernard Leslie Hemming) |
Defendants |
____________________
Mr. Robert Denman (of Holden & Co.) for the First Defendant
Miss Constance Mahoney (instructed by Moon Beever) for the Second Defendant
Hearing date: 8 October 2008
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Crown Copyright ©
MR. RICHARD SNOWDEN QC:
Introduction
The facts
The relevant statutory provisions
"all property belonging to or vested in the bankrupt at the commencement of the bankruptcy".
"includes money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of or incidental to, property."
Ownership of the proceeds of sale of the cottage
"It appears to me that the present case is really decided by the decision of this House in Lord Sudeley's Case. It was pointed out in that case that the legatee of a share in a residue has no interest in any of the property of the testator until the residue has been ascertained. His right is to have the estate properly administered and applied for his benefit when the administration is complete. The income from which this income tax was deducted was not the income of the charity. It was the income of the executors."
Viscount Cave stated, ([1921] 2 AC 1 at page 10),
"When the personal estate of a testator has been fully administered by his executors and the net residue ascertained, the residuary legatee is entitled to have the residue as so ascertained, with any accrued income, transferred and paid to him: but until that time he had no property in any specific investment forming part of the estate or in the income from any such investment, and both corpus and income are the property of the executors and are applicable by them as a mixed fund for the purposes of administration."
"In English law the rights of a testamentary legatee in the unadministered estate of a testator are well settled: see Lord Sudeley v. Attorney-General [1897] AC 11 and Commissioner of Stamp Duties (Queensland) v. Livingston [1965] AC 694....A legatee's right is to have the estate duly administered by the personal representatives in accordance with law. But during the period of administration the legatee has no legal or equitable interest in the assets comprised in the estate."
Entitlement to the residuary estate
"...their Lordships regard it as clearly established that Mrs. Coulson was not entitled to any beneficial interest in any property in Queensland at the date of her death. What she was entitled to in respect of her rights under her deceased husband's will was a chose in action, capable of being invoked for any purpose connected with the proper administration of his estate..."
"The case of Lord Sudeley v. Attorney-General ... conclusively established that until the claims against the testator's estate for debts, legacies, testamentary expenses, etc., have been satisfied, the residue does not come into actual existence. It is a non-existent thing until that event has occurred. The probability that there will be a residue is not enough. It must be actually ascertained."
"...it is crucial to appreciate that the property settled by [the legatee] comprised, not the assets in the deceased's estate...but a separate chose in action, the right to due administration of his estate."
"What then, are the rights of the appellants? Their right, and the only right which they could enforce adversely, is to have the administration completed and the residuary estate ascertained and realised, either wholly or so far as may be necessary for the purpose, and to have one-fourth of the proceeds paid to them."
(emphasis added)
"the right to have the estate properly administered and applied for his benefit when the administration is complete".
(emphasis added)
"(1) the entire ownership of the property comprised in the estate of a deceased person which remains unadministered is in the deceased's legal personal representative for the purposes of administration without any differentiation between legal and equitable interests;
(2) no residuary legatee or person entitled upon the intestacy of the deceased has any proprietary interest in any particular asset comprised in the unadministered estate of the deceased;
(3) each such legatee or person so entitled is entitled to a chose in action, viz. a right to require the deceased's estate to be duly administered, whereby he can protect those rights to which he hopes to become entitled in possession in the due course of the administration of the deceased's estate;
(4) each such legatee or person so entitled has a transmissible interest in the estate, notwithstanding that it remains unadministered."
"This transmissible or disposable interest can. I think, only consist of the chose in action in question with such rights and interests as it carries in gremio, that is to say, the right to which Lord Radcliffe refers in Commissioner of Stamp Duties (Queensland) v. Livingston, in his comment, at pp. 712, 713, on McCaughey v. Commissioner of Stamp Duties (1945) 46 S.R., N.S.W. 192. If a person entitled to such a chose in action can transmit or assign it. such transmission or assignment must carry with it the right to receive the fruits of the chose in action when they mature. The chose in action itself may be incapable of severance, but I can see no reason why a person entitled to such a chose in action should not so dispose of it through the medium of a trustee in such a way that the right to participate in its fruits is given to several beneficiaries either in fractional shares or by any other method of division that a trustee or the court can carry out."
(emphasis added)
"When Mrs. Coulson died she had the interest of a residuary legatee in the testator's unadministered estate. The nature of that interest has been conclusively defined by decisions of long-established authority .. .[W]hatever property came to the executor virtute officii came to him in full ownership, without distinction between legal and equitable interests. The whole property was his. He held it for the purpose of carrying out the functions and duties of administration, not for his own benefit; and these duties would be enforced upon him by the Court of Chancery, if application had to be made for that purpose by a creditor or beneficiary interested in the estate. Certainly, therefore, he was in a fiduciary position with regard to the assets that came to him in the right of his office, and for certain purposes and in some aspects he was treated by the court as a trustee....
It may not be possible to state exhaustively what those trusts are at any one moment. Essentially, they are trusts to preserve the assets, to deal properly with them, and to apply them in a due course of administration for the benefit of those interested according to that course, creditors, the death duty authorities, legatees of various sorts, and the residuary beneficiaries."
"every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property".
"In truth, the right she had was to require the executors of her husband to administer his estate completely, and she had an interest to the extent of one-fourth in what should prove to be the residuary estate of the testator.."
(emphasis added)
Likewise, in Livingston, Viscount Radcliffe both denied that there was any separation of the legal and beneficial interest in any of the assets in the unadministered estate ([1965] AC 694 at page 712B-D), but also acknowledged the "undoubted rule" that "the interest of a residuary legatee in an unadministered estate has always been transmissible" ([1965] AC 694 at page 710D). Such views were reflected in the statement of Lord Browne-Wilkinson in Marshall v. Kerr to which I have already referred, that, "during the period of the administration the legatee has no legal or equitable interest in the assets comprised in the estate" and in Buckley J.'s four point summary of Livingston in Re Leigh.
55. These observations can be reconciled and understood when one appreciates that the word "interest", like the word "property" is a word of many potential meanings. The word must take its meaning from the specific context in which it is used. Viscount Radcliffe made this very point in Livingston, when commenting upon criticisms that had been made of the decision in Lord Sudeley's Case to the effect that Lord Herschell could not really have intended to deny a residuary legatee all beneficial interest in the assets of an unadministered estate. Viscount Radcliffe said, ([1965] AC 694 at pages 712B-713C),
"Criticisms of this kind arise from the fact that the terminology of our legal system has not produced a sufficient variety of words to represent the various meanings which can be conveyed by the words "interest" and "property." Thus propositions are advanced or rebutted by the employment of terms that have not in themselves a common basis of definition. For instance, there are two passages quoted by the Chief Justice in his dissenting judgment in this case which illustrate the confusion. There is the remark of Jordan C.J. in McCaughey's case, "The idea that beneficiaries in an unadministered or partially administered estate have no beneficial interest in the items which go to make up the estate is repugnant to elementary and fundamental principles of equity." If by "beneficial interest in the items" it is intended to suggest that such beneficiaries have any property right at all in any of those items, the proposition cannot be accepted as either elementary or fundamental. It is, as has been shown, contrary to the principles of equity. But, on the other hand, if the meaning is only that such beneficiaries are not without legal remedy during the course of administration to secure that the assets are properly dealt with and the rights that they hope will accrue to them in the future are safeguarded, the proposition is no doubt correct. They can be said, therefore, to have an interest in respect of the assets, or even a beneficial interest in the assets, so long as it is understood in what sense the word "interest" is used in such a context."
"Where, as here, the question is whether a succession arose on a death in respect of a "devolution by law of any beneficial interest in property," and the necessary limitations of the Queensland Succession Duty Act reduce that question to one whether there was a beneficial interest in Queensland property belonging to her at her death, it is necessary, to use Lord Greene's words, to "discover the locality to be attributed to a right," and this requirement involves a precise analysis of the nature of the right. It is not enough for this purpose to speak of an "interest" in a general or popular sense. It is apt to recall what Lord Halsbury L.C. said on this point in his speech in the Sudelev case:
"With reference to a great many things, it would be quite true to say that she had an interest in these New Zealand mortgages - that she had a claim on them: in a loose and general way of speaking, nobody would deny that that was a fair statement. But the moment you come to give a definite effect to the particular thing to which she becomes entitled under his will, you must use strict language, and see what it is that the person is entitled to; because upon that in this case depends the solution of the question. It is idle to use such phrases as ... that she had an 'interest' in this estate."
57. In the present context, Miss Mahoney submitted, and I agree, that the general approach of the courts has been to give the words used in section 436 a wide meaning. Miss Mahoney cited the remark of Ferris J. in In re Landau [1998] Ch 223 at page 232A, that the words of section 436 were "about as wide as they could be". The same point was made more fully by Morritt LJ. in Re Celtic Extraction Limited [2001] Ch 475 at page 486,
"The word "property" is not a term of art but takes its meaning from its context: see Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014, 1051; Kirby v Thorn EMI plc [1988] 1 WLR 445, 452. In the context of insolvency there is, as Lord Atkinson observed in Hollinshead v Hazleton [1916] 1 AC 428, 436, a well established
"principle of public policy, which has found expression in the provisions of the Bankruptcy Codes of ... England ... as estimable and as conducive to the welfare of the community as any. It is this, that in bankruptcy the entire property of the bankrupt, of whatever kind or nature it may be, whether alienable or inalienable, subject to be taken in execution, legal or equitable, or not so subject, shall, with the exception of some compassionate allowances for his maintenance, be appropriated and made available for the payment of his creditors."
Thus in successive statutes dealing with bankruptcy and insolvency the definition of "property" has been progressively extended {Morris v Morgan (unreported) 31 March 1998; Court of Appeal (Civil Division)
Transcript No 524 of 1998); though however wide the definition it is subject to the implied exclusion of rights of the bankrupt with respect to his body, mind or character {Heath v Tang [1993] 1 WLR 1421, 1423). It is apparent from the terms of section 436 of the Insolvency Act 1986 that the definition is to some extent circular but is not exhaustive. Further as Sir Nicolas Browne-Wilkinson V-C observed in Bristol Airport plc v Powdrill [1990] Ch 744, 759 it is hard to think of a wider definition of "property.""
Australian Authority
"real or personal property of every description ...and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property."
"The right which any beneficiary has in an unadministered estate springs from the duty of the executor to administer the estate, to preserve the assets and to deal with them in the proper manner. Each beneficiary has an interest in seeing that the whole of the assets are treated in accordance with the executor's duties. In that sense, the beneficiaries as a class may be said to have an interest in the entire estate. But it does not follow that each piece of property which goes to make up the estate is held on a particular trust for the beneficiary named as its intended recipient upon completion of administration... Whether or not the estate is held on a trust for the beneficiaries as a class in the usual sense in which the word "trust" is used, so as to confer a specific proprietary interest, as distinct from a general, non-specific interest, upon all beneficiaries, is not something which arises for consideration in this case.
Nevertheless, [S] acquired upon the death of [P] a right to have the deceased estate administered in accordance with the duties of the executors. Though not the legal or equitable owner of the assets which were the subject of the devise and bequest in her favour, she had, by virtue of the chose in action created by that devise and bequest, an expectation that the assets would pass to her upon completion of the administration, subject to their being realized to meet any outstanding liabilities and to defray the costs of administration, and an interest in respect of those assets. That interest was derived from and dependent upon the chose in action.
The interest is of such a kind that, when a beneficiary transmits a chose in action (or part thereof), or that chose in action passes by operation of law, such as under the Bankruptcy Act, that transmission naturally encompasses not only the chose in action but also the expected fruits of that chose in action: ... In re Leigh's Will Trusts [1970] Ch 277, at p 282."
Practical consequences
The result