Richard Sheldon QC (sitting as a Deputy Judge of the High Court)
Introduction
- This is the trial of claims originally brought by Arthur Ronald Towns ("Mr Towns") for repayment of sums totalling approximately £127,000 drawn from a joint account in the names of Mr Towns and his wife Edith Anne Towns ("Mrs Towns") at the Moorgate Branch of Barclays Bank, account number 30930695 ("the Joint Account"). The claims for repayments are made against the First Defendant, Richard Henry Pulbrook ("Henry Pulbrook"), who was given a mandate to draw funds from the Joint Account, and who is alleged to have withdrawn these sums in breach of fiduciary duty for his own benefit or for the joint benefit of himself and the Second Defendant, Dr Roger Martin Pulbrook ("Dr Pulbrook").
- These proceedings were commenced on 5 October 2007. Mr Towns died on 3 June 2008, and the current Claimants were substituted as such in their capacity as executors of Mr Towns' estate on 3 September 2008.
- The claims originally made in these proceedings included a full account of Henry Pulbrook's dealings with the Joint Account as well as an account of his dealings with the assets in the estate of Mrs Towns since the date of her death on 8 December 2005. By the time of the trial, and as a result of disclosure made and accounting documentation and explanations provided by Henry Pulbrook, the claims for full accounts were not pursued, and the number of payments in respect of which claims were being made was reduced to seven payments made out of the Joint Account.
- The claims for repayment pursued at trial in respect of the seven sums drawn from the Joint Account may be broken down into three categories, which I here summarise as follows:
(i) £54,000 paid on 28 February 2007 and £12,000 paid on 22 March 2007, both to a "Legal Fees Account" (referred to below) and then applied in payment of the legal fees of Farrer & Co. It is common ground that these two payments were paid out of sums in the Joint Account out of monies belonging to Mr Towns. Henry Pulbrook maintains that he was entitled to make these payments by reason of a deed of indemnity in favour of himself and Dr Pulbrook which is signed by Mr Towns and dated 6 March 2006 ("the March 2006 Deed"). The Claimants deny that Henry Pulbrook is entitled to rely on the March 2006 Deed and seek a declaration that it is void (on the grounds of non est factum) or voidable (on the grounds of undue influence). I shall refer to these two payments as "Mr Towns' Indemnity Payments".
(ii) £2,173.75 and £7,665.41 paid on 7 August 2006 and a sum of £48,355.85 out of a payment of £65,277.39 made out of the Joint Account on 6 July 2006. These sums were also ultimately applied to pay the legal fees of Farrer & Co. Henry Pulbrook claims that these sums were paid out of monies in the Joint Account belonging to Mrs Towns' estate and were properly applied to discharge the legal fees of Farrer & Co by virtue of a letter of indemnity provided by Mrs Towns in favour of himself and Dr Pulbrook which is signed by Mrs Towns and dated 6 November 2005 ("the November 2005 Indemnity Letter"). The Claimants assert that these sums were paid out of monies in the Joint Account belonging to Mr Towns (in which case the same issues arise as in respect of Mr Towns' Indemnity Payments), alternatively that the November 2005 Indemnity Letter did not create a liability of Mrs Towns' estate as it was unenforceable as having been given for no consideration. I shall refer to these three sums as "Mrs Towns' Indemnity Payments".
(iii) £625 paid on 1 June 2006 and £1,780 paid on 23 November 2006, both to Henry Pulbrook. These are said by the latter to represent his agreed fees for managing the Joint Account and Towns Trust. I shall refer to these two payments as "the Fee Payments".
- Henry Pulbrook has also raised issues as to whether Mr Towns had capacity to bring and prosecute the claim.
- At the trial, the Claimants were represented by Ms Tracey Angus. I am grateful to her for having produced a detailed chronology which has been of considerable assistance to me in finding my way around the documentation. It is unfortunate that the way this had been reproduced in the trial bundles is far from user friendly.
- Henry Pulbrook appeared in person. Dr Pulbrook did not attend the trial, having written to the Claimants' solicitors on 17 November 2008 to say that he made no admission or denial in relation to the claims in these proceedings, that he would not enter a defence and that he would agree to be bound by the Court's final decision. The Claimants do not seek monetary relief against Dr Pulbrook but he was latterly joined as a defendant as he would or might be affected by the declaration being sought by the Claimants in relation to the March 2006 Deed (and, I would add, by my findings in relation to the November 2005 Indemnity Letter).
- Before considering in detail the factual and legal issues which I have to decide, it is necessary for me first to describe the witnesses who gave evidence at the trial and then to set out the salient background facts by reference to matters which are not substantially disputed.
The witnesses
- For the claimants, I heard evidence from David Lewis Parkhouse ("Mr Parkhouse"), a solicitor and partner in the firm of Lester Aldridge LLP, Stephen Charles King ("Mr King"), a solicitor and partner in Payne Hicks Beach, and Richard Curtis, the First Claimant.
- Mr Parkhouse has been a solicitor since 1974 and specialises in probate work, wills and inheritance tax planning and powers of attorney. He takes particular responsibility in his firm for advising the elderly. Mr Parkhouse gave evidence about Mr Towns' mental capacity in the summer of 2007 whilst Mr Towns was his client. Mr Parkhouse was an impressive witness and I have no hesitation in accepting the evidence which he gave.
- Mr King acted for the current claimants in connection with claims they made in their capacity as beneficiaries under certain family trusts against Henry Pulbrook in 2005 and 2006 which I describe below. Mr King acted for Mr Towns from about the summer of 2007 in connection with the claims being made in these proceedings and has continued to act for the current claimants. Mr King has given evidence as to the information which was imparted to him by Mr Towns in the course of being instructed to pursue these claims, Mr Towns' capacity to instruct him, and the circumstances in which Mr Towns' witness statement was prepared. I found Mr King to be a reliable witness and I accept the evidence which he gave.
- Richard Curtis has clearly had a deep distrust of Henry Pulbrook for most of the period of time which is material to these proceedings and this was reflected in the manner he gave evidence. I therefore exercise caution before accepting his evidence, but with this caveat I found that he was a straightforward witness and I have no reason to doubt that the evidence he gave as to facts which occurred was essentially truthful. In the event, the evidence he gave was not central to the issues I have to decide.
- Mr Towns, originally the claimant in these proceedings, was born on 10 July 1921 and died on 3 June 2008, after these proceedings had been commenced. He produced a witness statement on 27 April 2008 which is relied on by the present claimants. There are a number of reasons why I consider that it would be inappropriate to attach significant weight to the matters he refers to. As will appear later, it is clear that Mr Towns' mental condition declined from at least about late 2007 onwards, and it was felt necessary for Richard Curtis to be appointed his litigation friend in March 2008. The evidence given by Mr King as to the circumstances in which the statement was prepared showed that there were matters which Mr Towns could no longer recall at the time he signed the statement since Payne Hicks Beach had first been instructed to pursue the claim - and it was for that reason that Mr King produced a witness statement to fill these gaps. There was, of course, no opportunity for Mr Towns to be cross examined. In the event the evidence given by Mr Towns in his witness statement is only of particular relevance in connection with the plea of non est factum and I consider what weight I should attach to it in that context.
- Henry Pulbrook gave evidence on his own behalf but called no other witnesses (although he did rely on a witness statement dated 6 May 2008 produced by Dr Pulbrook). In her closing submissions, Ms Angus described him as intelligent with a plausible and persuasive manner. I agree. As a litigant in person, he has presented his case with commendable skill and in a measured manner. He is a persuasive advocate. I nevertheless take into account that he has little experience of litigation and consider it would be unfair when considering his evidence to place much reliance on his failure to take the steps in the course of litigation which a seasoned litigator would have appropriately taken. It is nevertheless the case that he has failed to comply in a timely manner with his disclosure obligations and there are a few relevant documents which are missing or incomplete. These are referred to later in this judgment.
- Henry Pulbrook was a stockbroker until about 1990. Since then, prior to his emigration to Thailand in late 2007, he has been managing the financial affairs of a number of persons, including those of Mr and Mrs Towns. As will appear, there have been a number of allegations of impropriety made against Henry Pulbrook by certain members of his family. Other than those made in the course of these proceedings, it is not my function to decide upon the merits of those allegations and I do not take them into account in considering the integrity of Henry Pulbrook. However, there are matters which do cast doubt on his credit. I refer in particular to the letter which he wrote to Farrer & Co on 21 February 2007 which I consider below. I also refer to the explanation he has given for Mr Towns not taking legal advice in connection with the March 2006 Deed which I also consider later in this judgment. It is apparent from the materials that I have seen that Henry Pulbrook is a fertile generator of documentation, including correspondence, reports and legal documentation. I consider that I need to exercise particular caution with regard to the evidence he has given regarding matters said to have been orally agreed which are not reflected in contemporaneous or near contemporaneous documentation which he has prepared.
The background facts
The family tree
- The parties are all descendants of Sir Eustace Pulbrook who died in 1953. Sir Eustace Pulbrook and his wife Dorothy had two children, Roger Pulbrook (who died in September 2003) and Olive Wyatt (nee Pulbrook, who died in January 2002). Henry Pulbrook and Dr Pulbrook are the sons of Roger Pulbrook and first cousins of Mrs Towns, who was Olive Wyatt's daughter. Mrs Towns was born in 1932. Mrs Towns had three children by her first marriage, Judith Ambler, Richard Curtis and Susan Broker (now the Claimants in these proceedings). Mrs Towns married Mr Towns in 1972.
The Family Settlements
- In late 1990/ early 1991, Henry Pulbrook and a school friend of his, Richard Onslow, became the trustees of 3 settlements which, between them, held all 1,000 issued ordinary shares in a company, Farnham Royal Nurseries Ltd ("FRN") established by Sir Eustace Pulbrook in 1919. The 3 settlements are known as "the 1925 Settlement", "the Towns Trust" and "the Dorothy Pulbrook Will Trust".
- The 1925 Settlement had been created in 1925 by Sir Eustace Pulbrook and his wife conferring a life interest for the benefit of their two children with remainder to their issue.
- The Towns Trust had been created by Olive Wyatt in September 1934 by which she settled property on protective trusts for her daughter, Mrs Towns, with remainder to Mrs Towns' children.
- Henry Pulbrook was appointed a director of FRN in February 1991. The Claimants say that shortly after his appointment, FRN invested the majority of its assets in a substantial residential property near Reading (Staddle Stones) and that Henry Pulbrook later moved into the property and occupied it rent free.
- On 31 March 1994, Mrs Towns created a settlement for the benefit of her children and issue ("the Curtis Settlement"). Henry Pulbrook and Mr Onslow were the original trustees of the Curtis Settlement. In 1996 the Curtis Settlement acquired 300 shares in FRN.
- As will appear later in this judgment, the beneficiaries of the 1925 Settlement, the Curtis Settlement and the Towns Trust (who include those persons who are now named as Claimants in these proceedings) complained of the actions of the trustees, and Henry Pulbrook in particular in connection with dealings in FRN shares. These complaints led to 2 sets of proceedings being brought against the trustees which were settled following a mediation in January 2007. I should emphasise that in the light of that binding settlement, and as I made clear to the parties during the course of the present trial, the issues which arose in those proceedings do not fall to be relitigated in these proceedings. It will nevertheless be necessary for me to refer in more detail to the steps taken by the beneficiaries, including the allegations which they were making, in order to set in context the issues which have arisen in these proceedings. I should make it clear that when I refer to the allegations being made by the beneficiaries I form no view, and do not intend to express any opinion, about the merits of the allegations being made.
The Joint Account
- At around the same time he became a trustee of the family trusts and a director of FRN, Henry Pulbrook also became involved in the management of the financial affairs of Mr and Mrs Towns. In late 1991 Mr and Mrs Towns opened the Joint Account, and gave Henry Pulbrook a mandate to draw funds from that account.
- By an affidavit dated 22 August 1994, Mr and Mrs Towns referred to the Joint Account and declared that as from that date the first £135,000 "of the moneys revolving in and out of the said account, or the first [£135,000] of other investment assets which may subsequently be substituted for the said funds, is and shall be the sole property of [Mr Towns]" and that the whole of the balance in excess of that amount be the sole property of Mrs Towns ("the 1994 Declaration").
- There is an issue of fact which I will need to resolve as to whether the 1994 Declaration was subsequently varied.
More recent chronology of events
(i) the events leading to the November 2005 Indemnity Letter, the 2005 Claim and Mrs Towns' death on 8 December 2005
- In order to set in context the other issues which have arisen in these proceedings, it is necessary to set out in more detail the chronology of events from about August 2005 onwards. By then, Mrs Towns' children (or at least some of them) had started to complain about Henry Pulbrook's conduct as trustee of certain of the family trusts.
- On 21 August 2005, Mr Onslow retired as trustee of the Curtis Settlement in favour of Mrs Towns. In consequence, the trustees of the Curtis Settlement were thereafter Mrs Towns and Henry Pulbrook. On the same date, Mr and Mrs Towns made Wills which were prepared by Henry Pulbrook.
- Mrs Towns' Will appointed Henry Pulbrook and Mr Towns as executors, bequeathed £10,000 to each of her children, exercised a power of appointment under the Towns Trust directing the trustees to pay the income thereof to Mr Towns during his life and on his death to pay the whole of the Towns Trust to the trustees of the Curtis Settlement, and gave the residue of her estate to Mr Towns. This was Mrs Towns' last Will.
- Mr Towns' Will appointed Henry Pulbrook and Mrs Towns as executors and gave all his net estate to Mrs Towns failing which, if she should die first, to the Curtis Settlement. As will appear later, Mr Towns subsequently made new Wills.
- On 26 August 2005, Payne Hicks Beach appeared on the scene, acting for the persons now named as Claimants in these proceedings and one other person (Dr Nicole Tracey, a sister of Henry Pulbrook) as beneficiaries of two of the family trusts. On that day, they wrote to Henry Pulbrook seeking information in relation to FRN and in relation to the Curtis Settlement. Correspondence followed, at times quite heated, which it is unnecessary for me to describe for present purposes.
- On 4 October 2005, Payne Hicks Beach wrote a letter before claim to Henry Pulbrook, Dr Pulbrook and Mrs Towns, referring to their clients' concerns about the conduct of Henry Pulbrook and Richard Onslow as trustees of the 1925 Settlement and of the Curtis Settlement. Payne Hicks Beach invited (i) Henry Pulbrook and Mrs Towns to provide the disclosure which had been requested in earlier correspondence to the extent it had not to date been provided (ii) Henry Pulbrook and Richard Onslow to retire as trustees of the 1925 Settlement and Henry Pulbrook and Mrs Towns to retire as trustees of the Curtis Settlement, in both cases in favour of professional trustees. In the event that these requests were refused, they threatened proceedings seeking orders to such effect. They stated that in such proceedings orders would also be sought for the transfer back to the 1925 Settlement of shares in FRN which had been transferred away in the past year by Henry Pulbrook and Richard Onslow as trustees of the 1925 Settlement. They wrote that the new trustees would then be in a position to bring appropriate proceedings against Henry Pulbrook and Richard Onslow for the loss suffered by FRN and the settlements by reason of their actions. The letter goes on to set out the matters which it was said entitled Payne Hicks Beach's clients to the relief they had described. Although the letter is principally directed to conduct of Henry Pulbrook and the benefits he obtained from FRN, complaint is also made of the actions of Richard Onslow as trustee and, on the final page of the 5 page letter, of the actions in late August 2005 of Mrs Towns as the then co-trustee of the Curtis Settlement in making appointments (together with Henry Pulbrook) which in effect excluded Judith Ambler from that settlement.
- On 14 October 2005, Payne Hicks Beach wrote to Mrs Towns explaining why her children had no alternative but to involve her in legal proceedings as long as she supported the actions of Henry Pulbrook. Mrs Towns responded by letter dated 17 October 2005, saying:
It was I who initiated a consultation with my co-trustee, Henry Pulbrook, whereby we agreed to exclude my daughter, Judith Ambler, from any further interest on the Settlement.
I, as both Settlor of the Trust and a present Trustee, fully support the actions of my co-trustee Henry Pulbrook. It is, regrettably, the conduct of my children which is causing all the trouble.
- At about this time, Richard Onslow retired as trustee of the 1925 Settlement and was replaced by Dr Pulbrook.
- By fax dated 17 October 2005, Henry Pulbrook wrote to Mr Bridges at Farrer & Co, on the recommendation of Richard Onslow, inviting them to act for the trustees of the Curtis Settlement (himself and Mrs Towns) and for the trustees of the 1925 Settlement (himself and Dr Pulbrook) in their defence of the proposed litigation.
- By Mr Bridge's faxed response of the same date to Henry Pulbrook, he raised the question of how the costs of obtaining advice were to be met, explaining that, in general, trust deeds provided for trustees to be indemnified for the costs of advice taken in their capacity as trustees. He warned of the potential for costly and lengthy litigation.
- Henry Pulbrook wrote to Mr Bridges on the following day, 18 October 2005, saying that the respective trustees of the two settlements in question had agreed that the costs should be met 75% from the Curtis Settlement and 25% from the 1925 Settlement reflecting the number and composition of the litigants. He pointed out that they were relying entirely on the trust funds as a means of paying the costs and there would be extreme difficulty in meeting these "in any other way i.e. personally". He noted Mr Bridges' comments concerning complexity and explained why "this case could turn into a monster or be solved very simply".
- By a letter dated 25 October 2005 to Mr Bridges, Henry Pulbrook stated that, in the light of advice received from Mr Bridges the previous day, so far as the Curtis Settlement was concerned, and subject to certain provisos as to action to be taken by the then current trustees, "we shall be ready to hand over to strong, independent Trustees as you suggest".
- Formal letters of engagement were sent by Farrer & Co on 26 October 2005. In their letter to Henry Pulbrook and Mrs Towns as trustees of the Curtis Settlement, the scope of their work was described as:
1. Review the Trust Deed, subsequent Deeds, and relevant papers relating to the Trust
2. Review correspondence between the trustees and the beneficiaries/ Payne Hicks Beach
3. Advise you as trustees on your position
4. Draft and settle a proposal for settlement of the beneficiaries' potential claims against you
There is clearly a real chance that proceedings could be issued against you in advance of a proposal for settling this matter has been tabled. If that is the case we will inform you of the further work which will require to be undertaken in any such proceedings.
The cost of the work was estimated as in the range of £2,500 to £5,000 for the initial aspects of the work with additional fees in the same range, depending on how matters progressed, if a settlement could be negotiated in the next few weeks. A letter in similar terms was sent to Henry Pulbrook and Dr Pulbrook in relation to the 1925 Settlement, save that the range for the estimated costs for each of the two phases was in the increased sum of £5,000 to £10,000. According to a letter from Henry Pulbrook dated 1 February 2007, the letter of engagement sent to Mrs Towns was signed by her and returned to Farrer & Co.
- On 31 October 2005, Mr Bridges wrote to Henry Pulbrook, with a copy sent to Mrs Towns and Dr Pulbrook, giving details of first discussions with Payne Hicks Beach with a view to settlement. In the course of that letter, Mr Bridges advised that the trustees would need to be prepared to face a request that as part of any settlement their legal costs be paid out of their own pockets.
- Also on 31 October 2005, Henry Pulbrook sent a 7 page fax to Mr Bridges. In the covering letter, he confirmed that "you have our consent to disclose to [Payne Hicks Beach] all and any information you see fit as best might serve our interests.." When cross examined, Henry Pulbrook accepted that he and Mrs Towns had no objection to giving disclosure which was freely on offer.
- In a letter dated 1 November 2005 to Farrer & Co, Payne Hicks Beach stated that, in connection with the utilisation of trust funds to discharge Farrer & Co's fees, their clients had no objection if that use was limited to the provision of information and documents, but they considered that it would be entirely wrong and inappropriate if trust funds were used to pay the costs of defending the proceedings being brought to remove the trustees.
- In a letter dated 2 November 2005 to Mr Bridges, Henry Pulbrook stated in regard to the Curtis Settlement:
Anne [Mrs Towns] and I do not acknowledge any breaches of trust, but we are willing to stand down forthwith in favour of 2 independent trustees (not the beneficiaries) in any case.
- By letter dated 3 November 2005 to Henry Pulbrook, copied to Mrs Towns and Dr Pulbrook, Mr Bridges referred to recent correspondence with Payne Hicks Beach and warned about problems faced by Henry Pulbrook in connection with his personal share acquisitions in the light of rules about self dealing. He referred to the question of the trustees' legal costs and continued:
There is now a probability that you in particular are at risk personally on the costs point. Likewise your co-trustees may be at risk.
Later in the letter Mr Bridges referred to the requests for disclosure of information and asked for the requisite documents and information to be collated. In the penultimate paragraph of the letter, Mr Bridges advised that the trustees might have a problem about the Deed of Exclusion.
- In his reply to Mr Bridges dated 4 November 2005, Henry Pulbrook stated:
I note that the subject of costs is of ongoing concern. We, the instructing parties, greatly appreciate your cautionary comments and the steps which you have already taken on our behalf to mitigate the dangers to us in this respect. We understand that we are responsible to you for our instructions in the final analysis.
Later in the letter, Henry Pulbrook referred to his forthcoming trip to Thailand between 18 November 2005 and 5 January 2006.
- The November 2005 Indemnity Letter is the next document in the chronological sequence of events. It is dated 6 November 2005 and signed by Mrs Towns. In view of the arguments over its validity, I should set it out in full:
TO WHOM IT MAY CONCERN
I, Edith Anne Towns, state that I, personally hereby indemnify my cousins Martin Pulbrook and Henry Pulbrook against all and any legal costs and solicitor's fees which may have been or may be incurred or for which they may become liable either individually or conjointly with me and as a result of intended litigation by, or associated with my children Judith Ambler, Richard Curtis and Susan Broker.
I also make the following statements in a personal capacity
1. As at the present time my personal estate is valued at about £380,000 of which about £260,000 is contained within my personal Trust Fund known as the Towns Trust.
2 According to my Will dated 21st August 2005 and the Will of my husband, Arthur, of the same date, our entire estates are left mutually to the survivor of us both, and thereafter to the Trustees of the Curtis Settlement as an accretion to the capital thereof for the benefit of the families of my three children as defined therein.
3. Any and every child of mine who litigates against me for whatever reason, or who litigates against either or both of my cousins Martin Pulbrook and Henry Pulbrook shall be disinherited by me forthwith and thereby take no interest whatsoever in my estate.
- It is to be noted that the second statement does not appear to be strictly accurate but nothing of significance turns on that. The sentiments expressed by Mrs Towns towards her children echo those expressed in her letter of 17 October 2005. Richard Curtis, when giving evidence, accepted that there had been a massive falling out with Mrs Towns towards the end of 2005 and that they did not speak to each other during this period.
- A copy of the November 2005 Indemnity Letter was sent by Henry Pulbrook to Mr Bridges on 7 November 2005, together with a declaration by the shareholders of FRN. In the accompanying letter, Henry Pulbrook stated:
We believe that these 2 documents give you some very powerful weaponry with which to negotiate a settlement. Anne's statement addresses the costs issue. We do not agree their costs claim at all, but we are now showing them that to pursue it is a no-brainer.
- Farrer & Co then drafted a letter which contained an offer of settlement (which I have not seen). In commenting on that draft in his letter to Bryony Cove of Farrer & Co dated 11 November 2005, Henry Pulbrook stated:
"… we take the view that our offer needs to be accompanied by Anne's letter of indemnity and declaration (dated 6th November) if it is to have the slightest chance of acceptance. Without this, our offer is certain to be rejected; with it there may be a real chance of success…"
- On 24 November 2005, Farrer & Co sent two fee notes to Henry Pulbrook in connection with advice for the Trustees since they first instructed Farrer & Co. The fee notes were addressed respectively to the trustees of the 1925 Settlement and to the trustees of the Curtis Settlement. They were each in the sum of £5,287.50 (including VAT) and the scope of the work described broadly reflects that found in the engagement letters. Farrer & Co asked if they could offset these sums against £7,500 held by them on account of the Curtis Settlement and £2,500 on account of the 1925 Settlement. By fax sent from Thailand on 26 November 2005, Henry Pulbrook agreed to the requested offset and said that there was no need to send copy invoices to his co-trustees: he said he would keep them informed.
- On 1 December 2005, Dr Nicole Tracey and the beneficiaries of the Curtis Settlement (who included Mrs Towns' three children) issued a Pt 8 Claim Form naming Henry Pulbrook, Dr Pulbrook and Mrs Towns as the defendants against whom relief was claimed ("the 2005 Claim"). In summary, the relief claimed in respect of each of the Curtis Settlement and the 1925 Settlement was (i) the appointment of new trustees, (ii) the transfer of assets to the new trustees, (iii) the provision of documents and information which had been requested in earlier correspondence, and (iv) orders that existing trustees repay to the new trustees funds paid from the settlements to meet the costs of the claim. The particulars of claim complained of Henry Pulbrook's self dealing in FRN shares and exploitation of FRN and also alleged impropriety on the part of Henry Pulbrook and Mrs Towns as trustees of the Curtis Settlement in purporting to exclude Judith Ambler from benefiting from that settlement. The appointment of new trustees was sought to enable steps to be taken to remedy these alleged improprieties.
- Farrer & Co sent copies of the claim to Henry Pulbrook in Thailand and to Mrs Towns on 5 December 2005.
- Mrs Towns died on 8 December 2005.
- Despite her death, Farrer & Co filed an acknowledgment of service on 13 December 2005 ostensibly on behalf of Mrs Towns as well as Henry Pulbrook and Dr Pulbrook.
- By letter dated 19 December 2005 to Farrer & Co, signed by Henry Pulbrook and Mr Towns, they stated:
We hereby confirm that the instructions given to you by the late Anne Towns in October 2005 to represent her in respect of intended litigation by her 3 children and Nicole Tracey are now endorsed and fully upheld by us as Executors to her estate.
- I was told that Mrs Towns was subsequently removed as a defendant in the 2005 Claim.
(ii) The Administration of Mrs Towns' estate and events leading to the March 2006 Deed
- In early January 2006, arrangements were made for Mr Towns to appoint Henry Pulbrook as his attorney under an enduring power of attorney ("EPA"). Mr Holmes, a solicitor at Buchanan & Llewellyn, Bournemouth, was instructed for that purpose. Mr Holmes arranged for Mr Towns to see Dr Lawrence Brad (Mr Towns' GP) in this connection. On 20 January 2006, Dr Brad reported to Mr Holmes that he had seen Mr Towns on 12 January 2006 and that he was "satisfied that [Mr Towns] was fully aware of the issues and that although he does have some short term memory loss I was satisfied that he has the capacity to make a Power of Attorney".
- On 27 January 2006, Payne Hicks Beach wrote to Farrer & Co asserting that the November 2005 Indemnity Letter was void on the grounds that it was not in the form of a deed and that no consideration was provided and that there would be a presumption that it had been procured by undue influence which Henry Pulbrook would not be able to rebut. I have not seen Farrer & Co's response but it would appear from other correspondence that these assertions were challenged.
- In early February, Payne Hicks Beach wrote to Henry Pulbrook expressing concern at his actions as executor of Mrs Towns' estate (they had earlier written asking him to step down). The letter was sent to Farrer & Co as a matter of courtesy. On 4 February 2006, Henry Pulbrook replied, rejecting the criticisms that had been levelled against him and confirming that Farrer & Co were not acting for the executors. Mr Towns also signed that letter.
- On 6 February 2006, Payne Hicks Beach, on behalf of Judith Ambler, lodged a caveat in respect of Mrs Towns' estate.
- On 10 February 2006, Mr Towns signed an EPA appointing Henry Pulbrook as his attorney with general authority over his property and affairs. Mr Towns' signature was witnessed by Mr Holmes. It would appear from Henry Pulbrook's letter of 21 March 2006 to Mr Holmes that the latter went to see Mr Towns at his home. Henry Pulbrook signed the EPA on 3 March 2006.
- It is to be noted that Henry Pulbrook does not rely on the EPA as part of his defence to these proceedings: he relies on his powers of signature over the Joint Account to effect the payments in issue in these proceedings (together with the other grounds of entitlement to make the payments which I have summarised earlier in this judgment). It seems to me that the issues which have arisen would be identical if Henry Pulbrook had relied on the EPA: it is not in dispute that Henry Pulbrook had power to make the payments in question - the issue is whether he was properly entitled to exercise that power.
- There was in the meantime further correspondence between Payne Hicks Beach and Farrer & Co concerning the 2005 Claim, not all of which I have seen, but the details of that claim are not materially relevant to the issues I have to decide. I should mention that in a letter dated 27 February 2006 to Farrer & Co, Henry Pulbrook mentioned that he would be sending them his draft of "Arthur's letter of indemnity and accompanying statement in due course".
- On 3 March 2006, Henry Pulbrook and Mr Towns obtained a grant of probate in respect of Mrs Towns' Will. The gross, and net, value of her estate was certified to amount to £88,291. I shall have to refer later in a little more detail to the documents which had been lodged in this connection. (It would seem that the grant was shortly thereafter cancelled by the court, on 6 March 2006, because the caveat which had been lodged was overlooked: the letter from the Probate Registry warns that no attempt should be made to administer the estate in the meantime).
- On 6 March 2006:
(i) Henry Pulbrook wrote to Mr Gordon at Farrer & Co informing him that he was due in Dorset that afternoon to "help Arthur complete his indemnity statement and revised Will".
(ii) Mr Towns signed a letter of indemnity prepared by Henry Pulbrook ("the March 2006 letter"). In view of the deed of indemnity which Mr Towns signed later in the month it is unnecessary for me to refer to its terms in detail. There was reference to the November 2005 Indemnity Letter. Paragraph 2 states:
My late wife's firm wish was to mount a defence to the legal Claims brought against her and her cousins by her own children and Nicole Tracey, and it was understood that her cousins would undertake the considerable work in meeting her wishes.
The letter referred to respecting Mrs Towns' wishes and to Mr Towns deploring Mrs Towns' children challenging the validity of the November 2005 Indemnity Letter and making attacks on her competence, abilities and wisdom. Paragraph 7 states:
I now hereby endorse my late wife's indemnity in favour of Henry Pulbrook and Martin Pulbrook with my own personal indemnity in the same terms.
Finally there is a reference to the recent visit of Dr Brad confirming that Mr Towns was "of sound mind and thoroughly capable of deciding my own affairs".
(iii) Mr Towns made a will ("the March 2006 Will") prepared by Henry Pulbrook appointing Henry Pulbrook as executor, giving Henry Pulbrook his car and a clock, giving the residue to Richard Curtis and Susan Broker and declaring that the gift of residue should be forfeit if they (or Judith Ambler) pursued litigation against Henry Pulbrook, in which case the residue was to go to Mrs Broker's children.
- The March 2006 Letter was sent to Farrer & Co by Henry Pulbrook on 7 March 2006 with the comment that: "If you agree, it is our view that this should be sent to [Payne Hicks Beach] without further delay."
- Farrer & Co responded by letter dated 10 March 2006 to Henry Pulbrook. It included the following paragraph, headed "The Indemnity from Arthur Towns":
You will recall that Payne Hicks Beach challenged the validity of the indemnity given by Ann Towns on the basis that no consideration was given for it. We have of course attacked this challenge but the fact remains that a question mark still hangs over its validity. The surest way of avoiding such debate is to ensure that the indemnity is executed as a Deed. This obviates the need for consideration. Our suggestion, therefore, is that the indemnity is recast in this way and, as added protection, we would advise that Arthur Towns is independently advised as to the meaning and effect of this action.
Farrer & Co also warned of a possible problem with the March 2006 Will, whilst making it clear that they did not act for Mr Towns.
- On 13 March 2006, Henry Pulbrook wrote to Mr Gordon at Farrer & Co asking him to "recast" the March 2006 Letter as a deed and return it to him. "Arthur will then be in a position to take it to his solicitor in Westbourne". According to Henry Pulbrook, Farrer & Co declined to draft the deed themselves (presumably because they did not act for Mr Towns) but were prepared to consider a draft prepared by Henry Pulbrook himself. He faxed a draft deed to Farrer & Co on about 16 or 17 March 2006 and spoke to Mr Gordon who did not suggest any changes to the recitals, but dictated appropriate wording for the operative parts of the deed (Clauses 1 and 2) which Henry Pulbrook incorporated into the final form of the deed.
- The March 2006 Deed was signed by Mr Towns, whose signature was witnessed by a Mr James Hockley, and dated 6 March 2006. It is common ground that it was in fact signed at a later date. Henry Pulbrook says that Mr Towns signed it on 18 March 2006. A copy of the deed as executed was returned to Farrer & Co by Henry Pulbrook on 28 March 2006 with the suggestion that it be made available to Payne Hicks Beach forthwith.
- The March 2006 Deed provided as follows. The parties are Mr Towns (the Grantor) and Henry Pulbrook and Dr Pulbrook (the Grantees). The first four recitals referred to family relationships. It continues:
E) In the latter half of 2005 the said Nicole Tracey and the said 3 children of the late Anne Towns were threatening to issue legal proceedings against the late Anne Towns and the Grantees
F) The Grantor was present at a meeting in October 2005 between the late Anne Towns and the said Henry Pulbrook when the late Anne Towns expressed her complete disagreement with the demands of her children and Nicole Tracey and when she willingly offered to the Grantees her personal indemnity against the legal costs of mounting a defence not only to the demands then in play but also to any others of a similar nature or upon related matters which might arise in the future
G) On 6th November 2005 the late Anne Towns issued a letter of indemnity to the Grantees..
[There is then a reference to the commencement of the 2005 Claim - described as "the Claim" - and Mrs Towns' death]
J) The Grantor deplores the attack upon his late wife's competence abilities and wisdom made by her 3 children in their solicitor's letter dated 27 January 2006 and 21 February 2006
K) The Grantor now firmly intends to secure that the wishes and intentions of his late wife Anne Towns are respected and upheld
L) The Grantor has recently been interviewed by his General Practitioner Doctor Brad who has confirmed that he is of sound mind and capable of deciding his affairs.
NOW THIS DEED WITNESSES AS FOLLOWS
1. The Grantor hereby undertakes and agrees with the Grantees that he will at all times indemnify and keep indemnified the Grantees against all and any legal costs including (but without limitation) all solicitor's fees and barrister's fees and disbursements which may have been or may be incurred for which the Grantees may become liable as a result of the Claim or any other litigation against the Grantees or any of them brought by the claimants in the Claim or any of them.
2. Each party hereby intends this document to be a Deed and executes and delivers it as a Deed.
The signatures of Mr Towns, Henry Pulbrook and Dr Pulbrook appear together with the signatures of the witnesses.
- It is common ground that Mr Towns did not receive independent legal advice before signing the March 2006 Deed. I shall deal later with Henry Pulbrook's explanation for why this did not occur.
Subsequent events
- It is unnecessary for me to spell out in the same level of detail the chronology of events which occurred thereafter. Many of the factual matters which arise thereafter can more appropriately be considered when I come to deal with the issues I have earlier summarised. For present purposes, I should nevertheless summarise the following salient events which I do by topic rather than in strict chronological form.
The withdrawal of the caveat
- On 22 August 2006, Henry Pulbrook and Dr Pulbrook signed an undertaking not to make any claim under the November 2005 Indemnity Letter against Mrs Towns' estate which would have the effect of causing the pecuniary legacies of £10,000 to each of her 3 children under her Will dated 21 August 2005 to abate. The undertaking was conditional on the caveat entered by Judith Ambler being withdrawn, which was in due course done and a grant of probate issued on or about 11 September 2006.
The 2006 Claim
- Judith Ambler, Richard Curtis and Susan Broker were entitled to the income and capital of the trust fund of the Towns Trust on the death of Mr Towns. As a result of disclosure in the 2005 Claim, they discovered that 138 FRN shares in the Towns Trust had been appointed by Henry Pulbrook and Richard Onslow to Mrs Towns and that Mrs Towns then "gave" those shares to Henry Pulbrook. In November 2006, Judith Ambler, Richard Curtis and Susan Broker issued a further claim against Henry Pulbrook and Dr Pulbrook ("the 2006 Claim") seeking their removal as trustees of the Towns Trust and an order that Henry Pulbrook transfer 138 FRN shares back to the new trustees of the Towns Trust. It is unnecessary for me to go into the details of that claim.
The Mediation Agreement
- On 23 January 2007, an agreement was entered into following a mediation by which the outstanding issues in the 2005 Claim and 2006 Claim were compromised ("the Mediation Agreement"). The parties were Nicole Tracey, Susan Broker, Judith Ambler and Richard Curtis (defined as "the Claimants"), the trustees of the Curtis Settlement (Henry Pulbrook had retired as such trustee in June 2006 in favour of two professional trustees), and Henry Pulbrook and Dr Pulbrook (the latter two defined as "the Defendants").
- The Mediation Agreement was scheduled to Tomlin Orders made in the 2005 and 2006 claims. In summary, by the Mediation Agreement it was agreed that a partner of Farrer & Co and a partner of Payne Hicks Beach would become new trustees of the Town Trust, that Henry Pulbrook would return the 138 FRN shares to those new trustees, that FRN's assets (including Staddle Stones) would be sold, that the sale proceeds would be placed in a joint account in the name of Farrer & Co and Payne Hicks Beach and that FRN would then be placed in liquidation.
- Clause 2.1 of the Mediation Agreement provided that:
This Agreement is between the Claimants and the Defendants in settlement of the 2005 Claim and the 2006 Claim and other issues between the parties which are compromised by the terms of this Agreement.
Provision was made for the Claimants and the Defendants to bear their own costs of the claims relating to the Curtis Settlement and 1925 Settlement (Clauses 3.11 and 3.18) and for the Defendants in the 2006 claim to pay £25,000 towards the legal costs of the Claimants, to be paid out of Henry Pulbrook's entitlement to a distribution of assets in FRN in his capacity as a shareholder (Clause 4.8).
- In June 2007, the claimants in the 2006 Claim issued an application for an order compelling Henry and Dr Pulbrooks' compliance with the Mediation Agreement which was heard by Mr Justice Henderson on 14 June 1997: he ordered Henry and Dr Pulbrook to pay the assessed costs of the application of £18,000 ("the June 2007 Costs Order").
Relevant bank accounts
- I now need to backtrack a little to consider the various bank accounts which are relevant to the payments that are challenged in these proceedings. I have earlier referred to the Joint Account. There are two other bank accounts which are relevant.
(i) The Estate Account
- On 5 July 2006, Henry Pulbrook opened a bank account at Barclays Bank in Moorgate (no 70886955) in the name "Towns Estate Account" ("the Estate Account"), of which he was sole signatory. The purpose of this account was to receive monies belonging to Mrs Towns' estate. On the following day, £65,277.39 was transferred by Henry Pulbrook from the Joint Account to the Estate Account. This amount was said by Henry Pulbrook to represent Mrs Town's half interest in the Joint Account at the date of her death (when the balance was approximately £117,000), after making certain adjustments (which I refer to below). Whether Mrs Towns did indeed have such an interest is one of the issues I shall have to consider.
- I should add that the entries on the respective bank statements are not easy to follow as monies from time to time standing to the credit of these accounts were placed in the money market (e.g. on term deposits) before being recredited to the relevant accounts. This was effected by Henry Pulbrook transferring sums to a "trust account" (into which monies from various trusts/ settlements controlled by him were paid) before being placed in the money market and on maturity would be repaid to the trust account before being recredited to the accounts from which they were originally drawn.
- It is unnecessary for me to analyse in any detail the dealings on the Estate Account since there was, at least by the time of the trial, largely common ground as to what the relevant entries represented. Other than interest earned on the money market and trust income, the principal credits to the Estate Account represented the proceeds of sale of Prudential shares belonging to Mrs Towns (£21,392.67 on 23 November 2006) and of jewellery belonging to Mrs Towns (£3,800.02 on 20 February 2007). So far as payments out of the Estate Account are concerned, I note that there were three payments of £10,000 each made on 23 October 2006 to Judith Ambler, Richard Curtis and Susan Broker which represent the legacies payable under Mrs Towns' Will dated 21 August 2005 (and the subject of the undertaking given by Henry Pulbrook and Dr Pulbrook in August 2006 referred to above).
- The payments from the Estate Account which were challenged at trial (Mrs Towns' Indemnity Payments) represented payments of Farrer & Co's legal fees as follows, which Henry Pulbrook claims were properly paid as liabilities of Mrs Towns' estate under the November 2005 Indemnity Letter out of funds belonging to that estate. There was in the end no dispute that the payments were made to discharge Farrer & Co's legal fees although the flow of funds needs a little explanation.
(i) On 7 August 2006, Henry Pulbrook transferred £12,012.91 from the Estate Account to the Joint Account. There are three debits on the Joint Account between 10 and 16 August in respect of three cheques totalling that sum. No challenge is now made by the Claimants in respect of one of these cheques in the sum of £2,173.75 (which seems to have been paid for an invoice from Farrer & Co for advice given to Mr Towns and Henry Pulbrook as executors of Mrs Towns in connection with the caveat). The other two cheques, one for £2,173.75 and one for £7,665.41 (a total of £9,839.16), were, it is common ground, made out in favour of Farrer & Co towards payments of their legal fees incurred in connection with the 2005 Claim. Henry Pulbrook explained, and I accept, that the reason he did not cause these sums to be paid directly from the Estate Account was because he had no cheque book for that account at the time (because the caveat had not yet been withdrawn). It is clear that the source of the monies to make these two payments to Farrer & Co was the Estate Account which in turn had been funded by the original transfer of £65,277.39 from the Joint Account which was said by Henry Pulbrook to have represented Mrs Town's half share at the date of her death.
(ii) The other payment which was challenged at trial was the withdrawal of the balance on the Estate Account as at 28 February 2007 of £48,355.85 (the last entry on the Estate Account following which it was closed). It was again common ground that this was used to pay Farrer & Co's legal fees. This amount was in fact first transferred to the "Legal Fees Account" before being so used, to which account I now turn.
(ii) The Legal Fees Account
- The background to the setting up of this account is as follows. On 26 January 2007, shortly after the Mediation Agreement was entered into, Mr Bridges of Farrer & Co sent Henry Pulbrook and Dr Pulbrook a final fee note in connection with completing the mediation and a spreadsheet showing the overall balance due. The net amount due was shown as £160,357.27. In the third paragraph of the letter Mr Bridges said:
I should also mention that we have resolved not to accept funds under the Towns indemnity and I would like to return those to Arthur Towns as soon as possible. These amount to £9,839.16. Henry, please let me know whether the cheque should be made payable to the Executors of E A Towns or to Arthur Towns himself.
The sum of £9,839.16 represents the combined value of the two cheques paid in August 2006 to which I have referred above. When giving evidence, Henry Pulbrook said that he thought Farrer & Co were referring to both indemnities i.e. that given by Mrs Towns in the November 2005 Indemnity Letter and that given by Mr Towns in the March 2006 Deed.
- In his response dated 1 February 2007, Henry Pulbrook stated that "your stated resolve not to accept any payment from Anne's lawfully appointed representatives is untenable". He referred to the letter of engagement dated 26 October 2005 which had been signed and returned by Mrs Towns whereby, so he asserted, she incurred a liability to Farrer & Co (jointly and severally with himself) in respect of their work on matters related to the Curtis Settlement and he also referred to the letter dated 19 December 2005. In the rest of the letter Henry Pulbrook queried the level of fees claimed.
- Farrer & Co sent a long letter to Henry Pulbrook on 20 February 2007 which included the following:
Having considered your views on a contribution from Anne Towns' Estate I accept that her estate may have a liability to this firm in connection with fees incurred in relation to the Curtis Settlement.
It would seem from the next paragraph that Farrer & Co were persuaded to retain the £2,173.75 paid in August 2006. As for the sum of £7,665.41 it would seem that this had been paid in August 2006 in respect of fees incurred in connection with the 1925 Settlement (for which Mrs Towns could have had no liability other than under the November 2005 Indemnity Letter). Farrer & Co offered to return this sum or apply it towards the settlement of the Curtis Settlement costs. Unsurprisingly, Henry Pulbrook opted for the latter in a letter dated 21 February 2007.
- Of more significance for present purposes, is that in that letter dated 21 February 2007 to Farrer & Co, Henry Pulbrook said that he proposed to take the following two steps "in demonstration of our willingness to solve our difficulties by agreement".
My brother and I have, since the mediation, established a bank account entitled "R. M. and R. H. Pulbrook - Legal Fees Account", into which we have paid such resources as we have at present with a view to meeting our liabilities to you - whatever these may turn out to be. I shall instruct our bankers to transfer to you tomorrow a total sum of £50,160.84, being £20,000 for [1925 Settlement] fees and £30,160.84 for [Curtis Settlement] fees…
(my emphasis)
- Before commenting on this letter, I consider the account Henry Pulbrook there referred to. The account (no 53617203) had been opened at the Moorgate Branch of Barclays Bank in the joint names of Henry Pulbrook and Dr Pulbrook and bore the title "Legal Fees Account" ("the Legal Fees Account"). The first entries on the account are dated 28 February 2007. These, together with accounts provided by Henry Pulbrook for the Estate Account and the Legal Fees Account and such bank statements as have been disclosed by Henry Pulbrook, show that on that date:
(i) £54,000 was drawn from the Joint Account and credited to the Legal Fees Account
(ii) £48,355.85 was drawn from the Estate Account and credited to the Legal Fees Account (this is the payment I have earlier referred to).
(iii) £50,160.84 was transferred from the Legal Fees Account in favour of Farrer & Co.
That left £52,195.01 to the credit of the Legal Fees Account.
- Thus contrary to the passage I have emphasised in the letter from Henry Pulbrook to Farrer & Co dated 21 February 2007, the funds which had been paid into the Legal Fees Account were not "resources" which "we have at present" which in the context in which that phrase was used, particularly in the light of Farrer & Co's expressed concerns, were clearly intended to convey the message that they were from Henry Pulbrook's and Dr Pulbrook's personal resources. Instead the funds in question, even on Henry Pulbrook's own case, "belonged" to Mrs Towns' estate (£48,355.85) or Mr Towns (£54,000). Henry Pulbrook of course believed that he was entitled to rely on the November 2005 Indemnity Letter and the March 2006 Deed, but he was also clearly aware that Farrer & Co were concerned at accepting funds from these sources. I find that, when using the words which I have emphasised in the 21 February 2007 letter, Henry Pulbrook was deliberately seeking to disguise from Farrer & Co the source of funds which were to be paid into the Legal Fees Account.
- When giving evidence, Henry Pulbrook sought to explain these matters away by saying that Farrer & Co knew that the source of funds was Mr Towns' money: he maintained that he had suggested to Mr Gordon that an account be opened which did not overtly show the source of funds as being Mr Towns and that Mr Gordon had accepted this. In other words, if the source of funds were disguised, Farrer & Co would accept them. I reject this explanation. This episode indicates that Henry Pulbrook was prepared to deceive (in this case Farrer & Co) in order to extricate himself from the difficulties he was then facing - namely how he was going to discharge his (and his brother's) extensive liability to Farrer & Co for legal fees.
- On 22 March 2007, Henry Pulbrook arranged for the transfer of £12,000 from the Joint Account to the Legal Fees Account. This transfer, together with the payments of £48,355.85 and £54,000 to the Legal Fees Account made on 28 February 2007, constitute all the credits to the Legal Fees Account (other than interest on the account). With one exception, all the sums credited to the Legal Fees Account were used to pay the legal fees of Farrer & Co. The exception is a payment of £18,000 made on 18 June 2007 which was made to Payne Hicks Beach in compliance with the June 2007 Costs Order. The Legal Fees Account was closed on 5 March 2008.
- The payments from the Joint Account of £12,000 and £54,000 referred to in the previous paragraph are Mr Towns Indemnity Payments. It is common ground that these were paid from monies belonging to Mr Towns. Henry Pulbrook says that he was entitled to make these payments out of Mr Towns' monies by virtue of the March 2006 Deed.
Mr Towns: his Wills and the new EPA
- In the autumn of 2006, steps were taken for Mr Towns to execute a new Will. On 25 November 2006, Henry Pulbrook wrote to Mr Holmes of Buchanan & Llewellyn saying:
I am sorry that I have taken so long to send you, on Arthur's behalf, the papers which Arthur wishes you to have to help with the task of redrafting. I am today leaving for my annual trip to the Far East to visit my wife's family, from where I return on 9th January 2007. I thought it might be wise for you to effect the redraft via direct liaison with Arthur during this forthcoming period, when I shall be completely distanced from any involvement.
[Copies of Mr Towns' will dated 6 March 2006, the March 2006 Letter, the March 2006 Deed, Mr Towns' previous Will dated 21 August 2005 and a statement of wishes signed by Mr and Mrs Towns of the same date were enclosed].
I hope that these will be sufficient for you to achieve a broad understanding of the impact upon the situation of the misconceived litigation brought by Anne's children.
The principal change that Arthur wishes to make is to scrap Clauses 5, 6 and 7 of his current Will; these to be replaced by an outright legacy of his estate in favour of his step-grandchildren George Broker and Charlotte Broker.. in equal shares absolutely.
Arthur wishes you to effect every possible safeguard for protecting his dispositions and intentions from any challenge by his stepchildren - Judith, Richard and Susan. In particular, you might give Arthur your independent legal advice as to the potentially serious consequences of his grant of indemnity, and then include a reaffirmation of the indemnity in a new statement to me made by him to accompany his Will - as you envisaged when we met.
I am sure you have retained Arthur's contact details… He is expecting your call whenever you are ready, with a view to your attending him at Melton Court…
(my emphasis)
- When cross examined on this document, Henry Pulbrook accepted that he was not aware that any of the steps suggested in the passage I have emphasised having been taken. He was unable to recall any explanation for this. He nevertheless accepted that Mr Towns had never received independent legal advice in connection with the March 2006 Deed.
- There followed a meeting between Mr Towns and Mr Holmes. On 12 December 2006, Mr Holmes sent a letter of engagement to Mr Towns. The scope of the engagement is described simply as the preparation of a new Will, and the summary of advice relates solely to that subject. Mr Holmes confirmed that he had written to Dr Brad as discussed to confirm that he was satisfied that Mr Towns had capacity to make a new Will: Mr Holmes said that he felt that this was advisable in view of Mr Towns' poor short term memory and a possible contest to the Will by members of Mrs Towns' family. A draft of the new Will was enclosed by which Henry Pulbrook was to be appointed as sole executor.
- On 2 March 2007, Mr Holmes wrote to Mr Towns saying that he had received Dr Brad's report confirming that he had testamentary capacity to make a new Will. (A copy of that report was not available at the trial) A further copy of the draft new Will was attached.
- On 16 March 2007 Mr Holmes sent Mr Towns a fresh draft, following a recent telephone conversation between the two of them, which incorporated the various changes Mr Towns wished to make.
- On 29 March 2007 Mr Towns executed a Will in Mr Holmes' presence appointing Mr Holmes as executor, giving Henry Pulbrook a clock and giving the residue to Mrs Broker's children.
- On 20 April 2007 Mr Towns was admitted to hospital in Poole with a chest infection. He was discharged from hospital on 1 May 2007. Henry Pulbrook maintains that this was a turning point as regards Mr Towns' mental capacity and that from about this time onwards he was incapable of managing his affairs. Henry Pulbrook also says that it was shortly after this that Mrs Towns' children exerted their influence over Mr Towns to turn the latter against him.
- On 18 June 2007, Mr King of Payne Hicks Beach, on behalf of Mrs Towns' children, approached Mr Parkhouse of Lester Aldridge asking him to visit Mr Towns to discuss the EPA given by Mr Towns to Henry Pulbrook, which it was said had been used inappropriately, and if appropriate make a new power of attorney. Mr Towns was described by Mr King as being "in his 80s suffering from Parkinson's disease but perfectly compos mentis".
- On 22 June 2007, Mr King informed Mr Parkhouse that Mr Towns had indicated to Susan Broker that he would be willing to revoke the EPA in favour of Henry Pulbrook and appoint her instead. There was a reference to Henry Pulbrook having sold Mr Towns' Mercedes car which had led Mr Towns to question his bona fides. Mr Parkhouse was asked to visit Mr Towns and make sure he was happy to do this.
- In fact, Mr Towns revoked the EPA in favour of Henry Pulbrook and executed an EPA appointing Mrs Broker as his attorney on 23 June 2007. Mr Parkhouse only met with Mr Towns at his home three days later, on 26 June 2007. I have seen an attendance note of that meeting. Susan Broker and Richard Curtis were at the flat when Mr Parkhouse arrived, but they immediately left and Mr Parkhouse spent about 20 minutes alone with Mr Towns and the details of the discussion are set out in Mr Parkhouse's attendance note, from which it is clear that Mr Towns no longer trusted Henry Pulbrook. In paragraph 15 of his witness statement in these proceedings, Mr Parkhouse says:
… I had no doubt that at our meeting of 26 June 2007 Mr Towns understood the implications of revoking the EPA and making a new EPA and that his decision to remove Mr Pulbrook and appoint Mrs Broker had been made freely.
- At that meeting, after Richard Curtis and Susan Broker had returned to the flat, they expressed concern about Mr Towns' Will, and in particular the fact that Henry Pulbrook might be the executor. Mr Parkhouse considered that it was not appropriate to pursue this with Mr Towns at that time because by then he had become "a little bewildered" and "rather tired".
- Mr Parkhouse thereafter obtained a copy of Mr Towns' Will dated 29 March 2007 from Buchanan and Llewellyn and sent it to Mr Towns. On 30 August 2007, at Susan Broker's instigation, Mr Parkhouse went to see Mr Towns, alone, about preparing a new Will. At that meeting he took instructions and thereafter drafted a new Will, which was sent to Mr Towns on 5 September 2007. Mr Parkhouse visited Mr Towns at his flat with a trainee solicitor on 7 September 2007 when he asked Mr Towns to read the Will, and he summarised its contents for him. Mr Towns confirmed he was happy to sign it and did so, witnessed by Mr Parkhouse and the trainee solicitor. In paragraphs 19 and 20 of his witness statement, Mr Parkhouse states:
I was satisfied that [Mr Towns] understood the contents of the Will and its effect… As an experienced probate practitioner of many years standing, I was and am satisfied that Mr Towns had capacity to make a will in August and September 2007…. if I had had any doubt as to his capacity in relation to the matters I discussed with him, I would have sought a medical opinion confirming capacity. I did not do so because it was clear to me that he did have capacity. Moreover Mr Towns was able to explain to me why he had altered the EPA arrangements and why he wanted to change his will and I was satisfied that he had made his own decision about these matters.
- By his Will dated 7 September 2007, Mr Towns appointed Susan Broker, Richard Curtis and Judith Ambler as his executors and gave his residuary estate to them in equal shares. This was Mr Towns' last Will.
- I mention these matters because Henry Pulbrook has challenged the validity of the Will in these proceedings (although no challenge has been made to the grant of probate which I was told had been issued, in common form, in respect of Mr Towns' last Will). He also relies on these matters more generally in support of his assertions that Mr Towns lacked capacity, not only to execute the EPA in favour of Susan Broker and to make his last Will, but also to instruct solicitors to bring these proceedings and that Mrs Towns' children have subjected Mr Towns to duress and undue influence in causing him so to act. I will have to deal separately with these assertions in connection with the institution and prosecution of these proceedings.
- So far as the EPA and Mr Towns' last will are concerned I have no hesitation in accepting the evidence of Mr Parkhouse and rejecting the challenges made by Henry Pulbrook to the validity of these documents. It seems that Mr Towns began to doubt Henry Pulbrook's trustworthiness after the incident with the Mercedes motor car (it is not necessary for me to decide whether or not this was justified). Thereafter, Mr Towns does seem to have been more receptive to the concerns which were being expressed by Mrs Towns' children which fuelled his doubts about the trustworthiness of Henry Pulbrook. But the evidence of Mr Parkhouse, Mr Towns' own solicitor, clearly shows that Mr Towns had capacity to make the EPA in favour of Susan Broker and his final Will and that he made his own decision to do so.
The institution and prosecution of these proceedings: Mr Towns' capacity to litigate
- In view of the assertion made by Henry Pulbrook that Payne Hicks Beach were not properly instructed by Mr Towns to bring these proceedings, either because he was subject to duress or lacked capacity, it is necessary for me to consider the evidence which I have heard on these matters.
- The events leading to the institution of the current proceedings are explained by Mr King of Payne Hicks Beach in a witness statement dated 20 May 2008, solicitor for Mr Towns who was at that point in time the Claimant. He exhibits attendance notes of his discussions with Mr Towns on 13 July 2007 (at a meeting in person), 30 August 2007 (by telephone) and 25 January 2008 (at a meeting in person). Privilege was waived in relation to these attendance notes (which waiver was so limited). The main purpose of the witness statement was to supplement the witness statement of Mr Towns by referring to matters in the attendance notes which he could not remember at the time he signed his witness statement. Mr King also produced an attendance note of a meeting on 17 April 2008 whilst giving evidence in order to clarify answers he gave in the course of cross examination.
- The first meeting between Mr Towns and Mr King took place on 13 July 2007. Prior to that date Payne Hicks Beach had not acted for Mr Towns but they had acted for members of the family in connection with the 2005 Claim and 2006 Claim. In cross examination, Mr King explained that the meeting came about in the following circumstances. As a result of becoming Mr Towns' attorney, Susan Broker had obtained bank statements which gave rise to cause for concern at the actions of Henry Pulbrook. Following discussion by Susan Broker and Richard Curtis with Mr Towns about these matters, Mr Towns himself became concerned that he had no money left. These concerns were passed on by Susan Broker to Mr King: the meeting with Mr Towns was arranged by Susan Broker but Mr King believed that it had been requested by Mr Towns.
- Susan Broker also attended the meeting. In his cross examination of Mr King, Henry Pulbrook sought to suggest that Mr King was making all the running at the meeting and that Mr Towns was merely reacting to suggestions put to him by Mr King. It seems clear that Mr King had been briefed by Susan Broker in advance of the meeting about the concerns over Henry Pulbrook's actions and there does seem to me some force in the suggestion that Mr King was making the running: this appears from the terms of the attendance note itself. But it does not follow that Mr Towns did not understand what was being suggested and was unable to make up his own mind about how to progress matters. Mr King described Mr Towns as being compos mentis at the meeting, though physically frail and not necessarily able to remember all the details. Mr Towns was clearly concerned that he had little money left and that his money had been used to pay Henry Pulbrook's legal fees. As for funding of Mr Towns' own legal fees, it was apparent that Mr Towns could not afford legal costs if there was to be a legal battle. This was discussed at the meeting and it was left that Mr King would discuss with Mrs Towns' children whether they would be prepared to offer financial support. Mr King said in evidence that they did thereafter agree to lend money to Mr Towns to fund his legal fees. Mr King said that the meeting concluded with him asking Mr Towns whether he wanted to instruct Payne Hicks Beach to try to get the money back and that Mr Towns responded in the affirmative. Mr King said, and I accept, that he believed that Mr Towns had capacity to instruct him and that if he had any doubt about whether Mr Towns wished to instruct him, he would not have acted for him. Mr King saw no difficulty in acting for Mr Towns since he was not a party to the 2005 or 2006 Claims and was not a signatory to the Mediation Agreement.
- The telephone attendance note of 30 August 2007 records Mr Towns as confirming that he had not agreed to payments totalling £66,000 (Mr Towns' Indemnity Payments) being made and that he had no recollection of signing a document agreeing to pay Henry Pulbrook's legal fees and that he had never agreed to this. (Mr King had been unaware of the March 2006 Deed at the time of the meeting of 13 July 2007 but it had in the meantime been referred to by Henry Pulbrook in response to a letter of claim: however at the time of this telephone call Mr King did not yet have a copy.) The note ends with Mr King reiterating to Mr Towns that he would only take steps to try to get his money back if that was what he wanted. Mr Towns is recorded as confirming that he very much wanted Mr King to take steps to try to get his money back. The attendance note also records that correspondence was being sent to Susan Broker and that Mr Towns reconfirmed what he had said previously that all correspondence should be sent to her and he did not wish to receive copies.
- These proceedings were commenced on 5 October 2007. Mr Towns was then the named claimant.
- There is no doubt that Mr King believed that Mr Towns had the capacity to instruct him to pursue the claim. Also relevant to this issue is the evidence of Mr Parkhouse. In paragraph 21 of his witness statement, he says:
I have been shown a copy of the amended claim form and Particulars of Claim in these proceedings. I see that the claim relates to various payments made from Mr Towns' funds whilst Mr Pulbrook was his attorney including payments to pay legal fees incurred by Mr Pulbrook and his brother. I was not asked to consider whether Mr Towns had capacity to give instructions in relation to such a claim when I spoke to him in the summer of 2007. However, during our conversations Mr Towns did tell me of his concerns that Mr Pulbrook had used the EPA for his own benefit and his unhappiness about his money having been paid to pay the costs of the court case involving Mr Pulbrook and, if Mr Towns had instructed my firm to pursue a claim of this nature at that time, I would have felt no doubt about Mr Towns having the necessary capacity to do so.
- Henry Pulbrook served his "Statement of Defence" on 2 January 2008 in which he raised the issues I have mentioned in relation to Mr Towns' capacity. Mr King visited Mr Towns at his home on 25 January 2008 and went through the Defence. The attendance note of that meeting shows that Mr Towns had a poor recollection on a number of points of detail and found it difficult to understand the issues surrounding the ownership of a joint account following the death of one of the account holders.
- In the light of these matters, Payne Hicks Beach by letter dated 1 February 2008 instructed Dr Brad to visit Mr Towns and consider his capacity to litigate the claim. Dr Brad's report, dated 12 February, stated that it was obviously clear in principle to Mr Towns that he believed that Henry Pulbrook had stolen money from him and that legal proceedings were needed to try and redeem the situation. Dr Brad did however find it extremely difficult to get Mr Towns to put into words any particular detail related to the matter. Dr Brad concluded:
In summary Mr Towns understood the reason that I called to visit and clearly had a belief that Mr Pulbrook had done something wrong and that this needed to be remedied. I did however find it extremely difficult to get clear detail relating to this. I believe he may not have been in a position to make this claim without prompting from others but once initiated he seems supportive of it despite a poor understanding of detail and implications.
- On 19 March 2008 Richard Curtis lodged a certificate of suitability and was appointed to act as Mr Towns' litigation friend. In the statement of reasons accompanying the certificate, Richard Curtis stated that whilst he did not believe that Mr Towns lacked capacity generally and that he wanted to issue proceedings to get his money back, as the case had progressed it had become increasingly apparent that Mr Towns needed to make decisions and give instructions on complex matters such as how joint property passed on the death of one of the joint owners which he was not able fully to understand. Dr Brad's report is referred to in the light of which Payne Hicks Beach are said to have considered that it would be prudent for a litigation friend to be appointed.
- On 26 March 2008 Susan Broker applied for the EPA granted by Mr Towns to be registered. Such an application has to be made if the attorney has reason to believe that the donor of the EPA has become or is becoming mentally incapable of managing his/her affairs.
- In May 2008, Mr Towns was admitted to hospital after a fall and the trial, due to commence on 4 June 2008, was adjourned. Mr Towns died on 3 June 2008.
- On 3 September 2008, by order of Deputy Master Behrens, the current claimants were substituted as claimants for Mr Towns in their capacity as executors of his will dated 7 September 2007.
Mr Towns' capacity to bring these proceedings
- I first deal with the question of capacity.
- The Mental Capacity Act 2005 came fully into force on 1 October 2007, shortly before these proceedings were issued. On the same date, a new Pt 21 of the CPR came into force. CPR r 21.2(1) provides that:
A protected party must have a litigation friend to conduct proceedings on his behalf.
CPR 21.3 provides:
… (2) A person may not, without the permission of the court -….
(b) take any step in proceedings except -
(i) issuing and serving a claim form; or
(ii) applying for the appointment of a litigation friend under rule 21.6
until the … protected party has a litigation friend.
(3) If during proceedings a party lacks capacity to continue to conduct proceedings, no party may take any further step in the proceedings without the permission of the court until the protected party has a litigation friend.
(4) Any step taken before the child or protected party has a litigation friend is of no effect unless the court orders otherwise.
CPR 21.5 sets out how a person becomes a litigation friend without a court order. (This was the procedure followed in relation to the appointment of Richard Curtis as Mr Towns' litigation friend in March 2008).
- For these purposes a "protected party" means a party, or intended party, who lacks capacity to conduct proceedings and "lacks capacity" has the meaning found in the Mental Capacity Act 2005 (see CPR 21.1(2)). The Mental Capacity Act provides:
1 The principles
(1) The following principles apply for the purposes of this Act.
(2) A person must be assumed to have capacity unless it is established that he lacks capacity.
(3) A person is not to be treated as unable to make a decision unless all practicable steps to help him to do so have been taken without success.
(4) A person is not to be treated as unable to make a decision merely because he makes an unwise decision.
(5) An act done, or decision made, under this Act for or on behalf of a person who lacks capacity must be done, or made, in his best interests.
(6) Before the act is done, or the decision is made, regard must be had to whether the purpose for which it is needed can be as effectively achieved in a way that is less restrictive of the person's rights and freedom of action.
2 People who lack capacity
(1) For the purposes of this Act, a person lacks capacity in relation to a matter if at the material time he is unable to make a decision for himself in relation to the matter because of an impairment of, or a disturbance in the functioning of, the mind or brain.
(2) It does not matter whether the impairment or disturbance is permanent or temporary.
(3) A lack of capacity cannot be established merely by reference to--
(a) a person's age or appearance, or
(b) a condition of his, or an aspect of his behaviour, which might lead others to make unjustified assumptions about his capacity.
(4) In proceedings under this Act or any other enactment, any question whether a person lacks capacity within the meaning of this Act must be decided on the balance of probabilities
3 Inability to make decisions
(1) For the purposes of section 2, a person is unable to make a decision for himself if he is unable--
(a) to understand the information relevant to the decision,
(b) to retain that information,
(c) to use or weigh that information as part of the process of making the decision, or
(d) to communicate his decision (whether by talking, using sign language or any other means).
(2) A person is not to be regarded as unable to understand the information relevant to a decision if he is able to understand an explanation of it given to him in a way that is appropriate to his circumstances (using simple language, visual aids or any other means).
(3) The fact that a person is able to retain the information relevant to a decision for a short period only does not prevent him from being regarded as able to make the decision.
(4) The information relevant to a decision includes information about the reasonably foreseeable consequences of--
(a) deciding one way or another, or
(b) failing to make the decision.
- From the outset, Henry Pulbrook has disputed that Payne Hicks Beach were properly instructed to bring the claim, contending that Mr Towns was either subject to duress or lacked capacity. He says that after Mr Towns' collapse and week in hospital in April 2007, Mr Towns' cognitive powers were vastly reduced and that he suffered from acute memory loss. In support of his assertions he relies on: a conversation he had with Mr Towns in August 2007 when the latter is said to have told him that he did not wish to be involved in legal proceedings in any way, the revocation of the EPA granted to Henry Pulbrook, the grant of a new EPA to Susan Broker, Mr Towns' purported status as a client of Payne Hicks Beach and the issuance of these proceedings. Henry Pulbrook says these are all indications of duress and manipulation Mr Towns suffered at the hands of his stepchildren. Henry Pulbrook also relies on (i) Dr Brad's report dated 12 February 2008 and (ii) the attendance notes of Mr King (in particular that of 13 July 2007) as showing the passive nature of Mr Towns' involvement. These matters are elaborated in the Statement of Defence of Henry Pulbrook and in his third witness statement dated 1st September 2008.
- It does seem from the evidence I have seen and heard that Mr Towns' mental condition declined in the period from towards the end of 2007 and in the early part of 2008. It would also seem clear that once Mr Towns started to lose faith in Henry Pulbrook as a result of the incident with the Mercedes motor car he became more receptive to the complaints that were being levelled against Henry Pulbrook by Susan Broker and Richard Curtis, and it is clear that they "made the running" in investigating the actions of Henry Pulbrook and in formulating complaints against him. The report of Dr Brad dated 12 February 2008 clearly does raise a question as to Mr Towns' capacity by that stage and by its terms also raises some doubt about his earlier capacity.
- However, in the light of the evidence from two experienced solicitors, Mr King and Mr Parkhouse, that they considered that Mr Towns had capacity to instruct solicitors to pursue the claims made in these proceedings, and taking into account all the relevant evidence before me, I am satisfied that Mr Towns had capacity to instruct solicitors to pursue the claim. I am also satisfied from such evidence that he gave such instructions of his own free will.
- Even if I were wrong about this, and that, contrary to these findings, Mr Towns had became a "protected party" at some point before Richard Curtis became his litigation friend, I would have had no hesitation in exercising the court's power under CPR 21.3(4) to regularise the position retrospectively. In Masterman-Lister v Brutton & Co [2003] 1 WLR 1511, a case to which I was referred by Henry Pulbrook, it was said that provided everyone had acted in good faith and there had been no manifest disadvantage to the party subsequently found to have been a protected party at the relevant time it would be unlikely that the court would refuse to regularise the position. It seems to me that on any view the claims made in these proceedings were properly brought and pursued and were to Mr Towns' advantage, at least financially.
- It seems to me that the appointment of Richard Curtis as Mr Towns' litigation friend meets any further complaint of Henry Pulbrook in this regard. Upon Mr Towns' death the present claimants, as Mr Towns' personal representatives, are clearly entitled to pursue these claims in his stead.
- I therefore reject Henry Pulbrook's contentions as to Mr Towns' lack of capacity to instruct solicitors to bring these proceedings and that he so acted under duress.
Mr Towns' Indemnity Payments
- It is common ground that Mr Towns' Indemnity Payments were paid out of money which belonged to Mr Towns and that these payments were procured by Henry Pulbrook under the terms of the mandate which gave him signatory powers over the Joint Account. (In this respect, Henry Pulbrook does not rely on the EPA which he had been granted in his favour by Mr Towns but even if he did so rely, the same issues which I refer to below would arise.) The payments in question were used to discharge the liabilities owed to Farrer & Co by Henry Pulbrook or by him jointly with Dr Pulbrook. It is not in dispute that these payments were made for Henry Pulbrook's benefit.
- As a fiduciary agent, Henry Pulbrook could only be entitled to exercise his powers to make payments for his own benefit with the informed consent of his principal (see eg Bowstead & Reynolds on Agency Arts 23, 43, 44 and the commentary).
- Henry Pulbrook says that he was entitled to make these payments by virtue of the March 2006 Deed. The Claimants say that this deed was void under the principles of non est factum or that it should be set aside in equity by reason of it having been procured by Henry Pulbrook's undue influence and abuse of confidence.
Non est factum
- The principle of non est factum is defined in Chitty on Contracts (30th Ed) para 5-101 as follows:
The general rule is that a person is estopped by his or her deed, and though there is no such estoppel in the case of ordinary signed documents, a party of full age and understanding is normally bound by his signature to a document, whether he reads or understands it or not. If, however, a party has been misled into executing a deed or signing a document essentially different from that which he intended to execute or sign, he can plead non est factum in an action against him. The deed or writing is completely void in whosoever hands it may come. In most of the cases in which non est factum has been successfully pleaded, the mistake has been induced by fraud. But the presence of fraud is probably not a necessary factor. As Byles J said in Foster v McKinnon (1869) LR 4 CP 704,711):
"… it is invalid not merely on the ground of fraud, where fraud exists, but on the ground that the mind of the signor did not accompany the signature: in other words, that he never intended to sign, and therefore in contemplation of law never did sign, the contract to which his name is appended"
- The Claimants do not allege fraud in the present case in connection with the procuring of Mr Towns' signature to the March 2006 Deed but they rely on the dictum of Byles J. At paras 5-104 and 5-106 of Chitty there is a reference to Saunders v Anglia Building Society [1971] AC 1004 where:
It was stressed that the defence of non est factum was not lightly to be allowed where a person of full age and capacity had signed a written document embodying contractual terms. But it was nevertheless held that in exceptional circumstances the plea was available so long as the person signing the document had made a fundamental mistake as to the character or effect of the document.
It was held that no matter what class of document was in question, negligence or carelessness on the part of the person signing the document would exclude the defence of non est factum.
Ms Angus also referred me to the relevant passages in the judgments in that case.
- Ms Angus candidly accepted that for the plea of non est factum to be made out in this case, she had to rely on the witness statement of Arthur Towns. In that statement, having described the trust which he placed in Henry Pulbrook to manage his financial affairs, he continued:
9. On occasions Henry would visit me at my home in Melton Court to deal with financial matters. Sometimes he would bring papers with him and ask me to sign various things. As far as I can recall Henry did not give me any kind of detailed explanation for any of the papers he asked me to sign. I just signed them because I trusted him to deal with my matters and with Anne's estate in my best interests.
He goes on to say that he has no recollection of signing the March 2006 Deed and that: "If Henry had explained to me what the deed meant I would never have signed such a document."
- The attendance notes produced by Mr King of his meetings and discussions with Mr Towns do not significantly add to this evidence as to the circumstances in which Mr Towns signed the March 2006 Deed, save that they show that Mr Towns is recorded as having been adamant that he had not agreed to pay for Henry Pulbrook's legal fees.
- Much of this evidence is disputed by Henry Pulbrook but I consider it is unnecessary to decide on these matters for present purposes, although I shall have to return to these matters later in this judgment.
- In my judgment, this evidence is insufficient to establish the plea of non est factum. I consider it would be unsafe to attach significant weight to the evidence in Mr Towns' statement to which I have referred. This is not only because of the general reasons to which I have earlier alluded, but also because it is clear that by the time he signed his statement Mr Towns was having difficulties of recollection. In paragraph 1 of his witness statement he had referred to the fact that he suffered from Parkinson's disease and that made it difficult to remember some details: "This makes it very difficult for me to remember precisely matters connected to these court proceedings but I will do the best I can". I also consider it to be of some significance that Mr King's attendance note of his meeting with Mr Towns on 25 January 2008 shows that his recollection of other events was poor: for example Mr Towns is recorded as having no recollection of whether or not he granted Henry Pulbrook a bank mandate. But it is accepted by the claimants that the mandate was validly granted, the issue raised being whether it was properly used.
Undue Influence
- The principles to be applied in cases of presumed undue influence are set out in the decision of the House of Lords in Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44, [2002] 2 AC 773. Lord Nicholls set out the principles as follows:
"Burden of proof and presumptions
13 Whether a transaction was brought about by the exercise of undue influence is a question of fact. Here, as elsewhere, the general principle is that he who asserts a wrong has been committed must prove it. The burden of proving an allegation of undue influence rests upon the person who claims to have been wronged. This is the general rule. The evidence required to discharge the burden of proof depends on the nature of the alleged undue influence, the personality of the parties, their relationship, the extent to which the transaction cannot readily be accounted for by the ordinary motives of ordinary persons in that relationship, and all the circumstances of the case.
14 Proof that the complainant placed trust and confidence in the other party in relation to the management of the complainant's financial affairs, coupled with a transaction which calls for explanation, will normally be sufficient, failing satisfactory evidence to the contrary, to discharge the burden of proof. On proof of these two matters the stage is set for the court to infer that, in the absence of a satisfactory explanation, the transaction can only have been procured by undue influence. In other words, proof of these two facts is prima facie evidence that the defendant abused the influence he acquired in the parties' relationship. He preferred his own interests. He did not behave fairly to the other. So the evidential burden then shifts to him. It is for him to produce evidence to counter the inference which otherwise should be drawn…….
Independent advice
20 Proof that the complainant received advice from a third party before entering into the impugned transaction is one of the matters a court takes into account when weighing all the evidence. The weight, or importance, to be attached to such advice depends on all the circumstances. In the normal course, advice from a solicitor or other outside adviser can be expected to bring home to a complainant a proper understanding of what he or she is about to do. But a person may understand fully the implications of a proposed transaction, for instance, a substantial gift, and yet still be acting under the undue influence of another. Proof of outside advice does not, of itself, necessarily show that the subsequent completion of the transaction was free from the exercise of undue influence. Whether it will be proper to infer that outside advice had an emancipating effect, so that the transaction was not brought about by the exercise of undue influence, is a question of fact to be decided having regard to all the evidence in the case.
Manifest disadvantage
- As already noted, there are two prerequisites to the evidential shift in the burden of proof from the complainant to the other party. First, that the complainant reposed trust and confidence in the other party, or the other party acquired ascendancy over the complainant. Second, that the transaction is not readily explicable by the relationship of the parties.
22 Lindley LJ summarised this second prerequisite in the leading authority of Allcard v Skinner 36 Ch D 145, where the donor parted with almost all her property. Lindley LJ pointed out that where a gift of a small amount is made to a person standing in a confidential relationship to the donor, some proof of the exercise of the influence of the donee must be given. The mere existence of the influence is not enough. He continued, at p 185 "But if the gift is so large as not to be reasonably accounted for on the ground of friendship, relationship, charity, or other ordinary motives on which ordinary men act, the burden is upon the donee to support the gift." In Bank of Montreal v Stuart [1911] AC 120, 137 Lord Macnaghten used the phrase "immoderate and irrational" to describe this concept….
24 ….. The second prerequisite, as expressed by Lindley LJ, is good sense. It is a necessary limitation upon the width of the first prerequisite. It would be absurd for the law to presume that every gift by a child to a parent, or every transaction between a client and his solicitor or between a patient and his doctor, was brought about by undue influence unless the contrary is affirmatively proved. Such a presumption would be too far-reaching. The law would be out of touch with everyday life if the presumption were to apply to every Christmas or birthday gift by a child to a parent, or to an agreement whereby a client or patient agrees to be responsible for the reasonable fees of his legal or medical adviser. The law would be rightly open to ridicule, for transactions such as these are unexceptionable. They do not suggest that something may be amiss. So something more is needed before the law reverses the burden of proof, something which calls for an explanation. When that something more is present, the greater the disadvantage to the vulnerable person, the more cogent must be the explanation before the presumption will be regarded as rebutted.
See also Lord Hobhouse at para 104 and the references to abuse of confidence.
- Thus, undue influence may be presumed on proof of (1) a relationship of influence and (2) a transaction which excites suspicion or calls for an explanation. The onus then shifts to the defendant to provide a satisfactory explanation and to satisfy the court that the person entering into the transaction was free from the defendant's influence.
- There can be no doubt that at the material time, the relationship between Henry Pulbrook and Mr Towns was a relationship of influence. It was accepted by Henry Pulbrook that he owed a fiduciary duty towards Mr Towns (and Mrs Towns) in respect of all his transactions concerning their funds under his management. At the time the March 2006 Deed was executed, Henry Pulbrook managed Mr Towns' finances, had signatory powers over the Joint Account, and was his attorney under the EPA. In the course of cross examination Henry Pulbrook said that after his wife's death, Mr Towns would receive post but not act on it himself but put it to one side and wait for it to be dealt with on the next of Henry Pulbrook's regular visits. It is clear from the evidence I have heard that Mr Towns placed trust and confidence in Henry Pulbrook in relation to his financial affairs. The first element of presumed undue influence is plainly established.
- It is also plain in my view that the March 2006 Deed is a transaction which excites suspicion or calls for an explanation. The indemnity thereby provided was potentially extremely and manifestly disadvantageous to Mr Towns and advantageous to Henry Pulbrook (and Dr Pulbrook), as will have turned out to be the case in the events which happened if the validity of the March 2006 Deed is upheld. Mr Towns will have lost virtually all the money belonging to him in the Joint Account (whatever I decide in relation to Mrs Towns' Indemnity Payments) which represented the principal source of his wealth. It was in the nature of a gift by Mr Towns - there was no consideration passing to him in return for the indemnity. It cannot be accounted for by reason of the family relationship which existed between them or on the grounds of other ordinary motives on which ordinary men act.
- Such was the nature of the relationship between Mr Towns and Henry Pulbrook and the potentially onerous nature of the obligations gratuitously undertaken by Mr Towns under the March 2006 Deed, that this seems to me a paradigm case where the presumption of undue influence arises. Having read the authorities produced by Ms Angus, Henry Pulbrook did not seriously dispute that this was the case.
- The burden then shifts to Henry Pulbrook to rebut the presumption. At para 8-30 of Snell's Equity (31st Ed), under the heading "Rebutting the presumption", the following is stated (citations omitted):
In order to rebut the presumption it is not sufficient to show that C understood what he or she was doing and intended to do it. The problem is not lack of understanding but lack of independence. "The gift or transaction will be set aside, unless it is proved to have been the spontaneous act of the donor or grantor in circumstances which enable him to exercise an independent will and which justify the court in holding that the gift or transaction was the result of a free exercise of his will." In the case of gifts, the presumption may be rebutted by affirmative proof that "the gift was spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will and which justify the court in holding that the gift was the result of a free exercise of the donor's will." Put more shortly, D must establish that the gift was made as a result of "full, free and informed thought about it." The presumption will not necessarily be rebutted because the initial idea came from C…. Nor will it be rebutted automatically where D is able to prove affirmatively that he was not guilty of overt acts of wrongdoing because it remains possible that C was influenced by the relationship to act contrary to his or her interests…..
The most obvious way for D to rebut the presumption is to prove that C received independent legal advice. The normal standard of advice required to rebut the presumption is that S, C's adviser, explained the nature and consequences of the transaction to C with knowledge of the relevant circumstances.
- In his second witness statement dated 19 May 2008, Henry Pulbrook explained the circumstances in which the March 2006 Deed came to be executed as follows:
33. My research into the circumstances surrounding Arthur's indemnity has revealed matters which I had forgotten at the time of writing my Statement of Defence and First Witness Statement…
34. The stepchildren's ongoing litigation following Anne's death was absolute poison to Arthur and his express wish, in February 2006, to grant me and my brother his own indemnity was unsurprising. I cannot quote the exact date of the meeting when this occurred. On 27 February 2006, in a letter to Farrer & Company, I made reference to the fact that it was in the drafting process. He offered me an indemnity at a meeting just prior to that date; and I clearly recall writing down on my notepad the details and stance that Arthur wished me to set out in the document. I also recall giving him the sternest warning about the potential financial loss in what he was doing, and his exact words in reply were: "If we lose, the State will look after me." I then went away and drafted the document, which Arthur signed at my next meeting with him on 6 March 2006. However, what has emerged from my research is that this was not the same document as the Deed of Indemnity dated 6 March 2006 which is now in dispute.
35. I do now recall that Arthur's first indemnity was, like Anne's, in the form of a statement and signed undertaking. I posted this to F & Co on 7 March 2006. On 10 March 2006, F & Co wrote to me with the advice that Arthur's indemnity should be recast as a Deed. On 13 March 2006, I wrote to F & Co asking them to draw up the Deed. Following this letter, I received a telephone call from Jeremy Gordon, who told me that F & Co could not draw up the Deed as the firm did not act for Arthur.
36. On a date between 13 and 17 March 2006, I visited Arthur and reported all of these developments to him. I proposed that we should put the matter in the hands of Arthur's solicitor in Westbourne, Buchanan & Llewellyn. Arthur was not keen to go to Buchanan & Llewellyn again owing to the narrow and steep staircase up to their offices. He asked me if I could draft the Deed for him. Somewhat reluctantly, I agreed that I could; but I suggested that F & Co should check over my work before it was signed. Arthur was delighted with this.
37. On 17 March 2006, I completed the draft Deed and sent a copy of it by fax to F & Co. Shortly thereafter I received a telephone call from Bryony Cove of F & Co, who told me that the recital was fine but that the wording of the body needed amendment and that I should talk to Jeremy Gordon about this. I then telephoned Jeremy Gordon, who dictated to me over the phone the words contained in Clauses 1 and 2 of the Deed.
38. On a date between 18 March and 27 March I took the final version to a meeting with Arthur when, after a further caution from me concerning his potential commitment to a substantial financial loss, he signed it in the presence of a witness. We then agreed it should be dated 6 March 2006, reflecting Arthur's intention to indemnify me as of that time. On 28 March I sent a copy of the Deed to F & Co, with a further request that it be made available to PHB forthwith.
39. I observe that delivery of the Deed of Indemnity by Arthur was not a rushed matter, but one which evolved over a period of a month or so. Its contents and structure were discussed between Arthur and me at several meetings over the period, and my brother was kept informed of these developments over the telephone and in person. Furthermore, there was no element of secrecy whatsoever in my procedure and intentions: my solicitors (F & Co) were consulted and kept in the picture throughout.
- Henry Pulbrook added the following in the course of being cross examined about the March 2006 Letter and March 2006 Deed. As regards the March 2006 Letter:
i. Henry Pulbrook accepted that this was not something that Mr Towns dictated: it was a "translation of Arthur's wishes" from the notes which he had taken down at the meeting with him;
ii. As regards the second numbered paragraph, referring to the November 2005 Indemnity, and in particular the reference to the consideration ("and it was understood that her cousins would undertake the considerable work involved in meeting her wishes"), Henry Pulbrook said that this was added by him "as a truthful part of the background" and to make the letter "more complete": it was not something which Mr Towns had asked him to put in
iii. The wording used in the letter were his own words - it was not a verbatim translation of what Arthur had told him but what Henry Pulbrook described as an "exact representation of the points he [Mr Towns] wished to make";
iv. Paragraph numbered 5 were not Mr Towns' words but Henry Pulbrook's way of expressing his views;
v. When asked about the reference in paragraph 6 to Mr Towns' estate being worth in the region of £150,000, Henry Pulbrook said that Mr Towns had income of approximately £800 per month (£400 pension and £400 from the Towns Trust) and that, if he risked all the monies in the Joint Account for legal fees, such income would be enough to live on. (And Henry Pulbrook in this context also repeated that Arthur had said that "if we were to lose the State will look after me".)
vi. When referred to the letter from Farrer & Co dated 10 March 2006 advising that Mr Towns receive independent legal advice, Henry Pulbrook said that he did not think that this advice was given in order to ensure that Mr Towns understood the effect of the document but simply as "added protection".
- As regards the March 2006 Letter and March 2006 Deed, Henry Pulbrook said that Mr Towns did appreciate that he might lose all his capital: he says he gave a "strict warning" to Mr Towns that this was a remote possibility. When asked why he did not insist that Mr Towns take legal advice, Henry Pulbrook said that he did not feel comfortable that Mr Towns sign without taking legal advice, that he tried to get Mr Towns to see Mr Holmes but Mr Towns wanted to sign it and Henry Pulbrook "obliged his wishes".
- As regards the March 2006 Deed, when it was put to Henry Pulbrook that Mr Towns did not know what he was signing and that it was put before him to sign without explanation, Henry Pulbrook said that he read the whole of it through to Mr Towns and again warned him of the seriousness and gravity of the document.
- The evidence Henry Pulbrook gave in relation to his letter to Mr Holmes dated 25 November 2006 (where he asked Mr Holmes to give Mr Towns independent advice about the March 2006 Deed and draft a statement to be appended to his new will) is referred to earlier in this judgment.
- I make the following comments and findings about the evidence given by Henry Pulbrook on these matters.
- I do not fully accept his statement that the ongoing litigation brought by the stepchildren was "ongoing poison" to Mr Towns. In the course of giving evidence, Richard Curtis accepted that there had been a massive falling out with Mrs Towns towards the end of her life such that in the last month or so she was not on speaking terms with her stepchildren. However, he also said, and I accept, that Mr Towns did not demonstrate animosity towards them after Mrs Towns' death. After her death, he and Susan Broker regularly visited him, about once a month. Richard Curtis said, and I accept, that Mr Towns was shocked at his wife's death and became withdrawn for a period of six months or so. This is not in the least surprising since it is common ground that they were a devoted couple. Richard Curtis also said that Mr Towns had total trust in Mrs Towns and largely left her to deal with their financial affairs with Henry Pulbrook. After her death, he wanted to distance himself with the causes of the fall-out she had had with her stepchildren. I accept this evidence of Richard Curtis.
- Thus, I am not satisfied that the motive attributed to Mr Towns by Henry Pulbrook for the grant of the indemnity is accurate. On the other hand, it seems clear that Mr Towns' devotion to his wife would also cause him to have followed her wishes: Richard Curtis said that a phrase he would often use was "Anne would have wished it like this". In view of the November 2005 Letter, it may be that Mr Towns wanted to "follow her wishes" by granting an indemnity of his own.
- However, the timing of the grant of the indemnity, and the surrounding circumstances, does raise questions as to why it was given at the time it was given. It will be recalled that Payne Hicks Beach had written in late January 2006 to challenge the validity of the November 2005 Letter. It would seem from Farrer & Co's letter dated 10 March 2006 that they had advised that there was a question mark over its validity. It was therefore very much in Henry Pulbrook's interest in these circumstances to obtain an indemnity from Mr Towns to cover Farrer & Co's fees. The fact that he wanted a copy of the indemnity sent immediately to Payne Hicks Beach indicates that, like the November 2005 Letter, he thought it might deter Mrs Towns' children from pursuing litigation.
- In all the circumstances, I consider that there is considerable force in Ms Angus' contention that in the circumstances of this case Henry Pulbrook could only have rebutted the presumption if Mr Towns had obtained independent legal advice before signing the March 2006 Letter and March 2006 Deed of Indemnity.
- This is even more the case in the light of a consideration as to why Mr Towns did not obtain independent legal advice. In his witness statement to which I have referred Henry Pulbrook suggested that Mr Towns did not want to visit Mr Holmes "owing to the narrow and steep staircase up to their offices". That may well be true, but to suggest as he does that this was a reason why Mr Holmes' advice should not be sought is simply incredible. It will be recalled that Mr Holmes was involved in January in connection with the grant by Mr Towns of the EPA in favour of Henry Pulbrook. For that purpose Mr Holmes had visited Mr Towns at his home (see Henry Pulbrook's letter to Mr Holmes dated 21 March 2006 - written at the very time the indemnity was being considered). I find that there would have been no practical impediment to Mr Towns seeking independent legal advice from Mr Holmes. Indeed, some months later, Mr Holmes did visit Mr Towns but Henry Pulbrook was unable to explain why the suggestion in his letter dated 25 November 2006 that Mr Towns take independent legal advice in relation to the indemnity was not pursued.
- Accordingly, Henry Pulbrook's explanation when giving oral evidence that Mr Towns did not wish to take independent legal advice before signing the document, despite Henry Pulbrook's urging that he should first see Mr Holmes, is in my view to be treated with the greatest of circumspection. It is to be noted that when giving evidence, Henry Pulbrook was only able to point to two examples of Mr Towns not following his advice - on this matter, and on obtaining written evidence of the oral variation of the 1994 Declaration (which I consider later). I am not satisfied that this was the true reason why Mr Towns did not obtain independent legal advice. But even if I were so satisfied, I do not regard it as sufficient to rebut the presumption of undue influence in the circumstances of this case.
- That leaves Henry Pulbrook's evidence that he read the March 2006 Letter and March 2006 Deed to Mr Towns before he signed it (it was common ground that Mr Towns' eyesight sight was poor) and warned him of the consequences. In all the circumstances of this case, including the relationship between Mr Towns and Henry Pulbrook, the vulnerable state of Mr Towns following the death of his wife, the significant benefit which Henry Pulbrook stood to obtain from the indemnity and the significant potential detriment to Mr Towns, such evidence, even if it were true (as to which I have my doubts), is in my view clearly insufficient to rebut the presumption of undue influence.
- My clear conclusion is that it is to be presumed that the March 2006 Deed (and the March 2006 Letter) was procured by Henry Pulbrook's undue influence, and that that presumption has not been rebutted. They should therefore be set aside in equity. It follows that the claim in respect of Mr Towns' Indemnity Payments is made out. There is no other basis on which Henry Pulbrook can claim to have been entitled to make Mr Towns' Indemnity Payments.
- It is therefore unnecessary for me to consider the alternative claim for abuse of confidence. But I would add that, insofar as this claim is truly an alternative claim now that, following Etridge, the law on abuse of confidence is largely subsumed in the doctrine of undue influence as regards the type of transaction and relationship between the parties with which I am concerned, I am satisfied that such a claim is made out. Having regard to the applicable principles set out in Snell at para 8-41, it seems to me plain that the indemnity given by Mr Towns in March 2006 was not a "fair transaction".
Mrs Towns' Indemnity Payments
- The first issue which arises in relation to Mrs Towns' Indemnity Payments is whether these sums were paid out of monies belonging to Mrs Towns' estate. If they were, Henry Pulbrook says that he was entitled to make these payments by virtue of the November 2005 Indemnity Letter and the issue then arises whether that letter is unenforceable on the grounds that it was given for no consideration. If they were not paid out of monies belonging to Mrs Towns' estate, they were paid out of Mr Towns' monies and, in view of my findings as regards the March 2006 Deed, Henry Pulbrook cannot rely on that deed as having entitled him to make such payments out of Mr Towns' monies.
The ownership of the monies in the Joint Account on Mrs Towns' death
- It will be recalled that on 6 July 2006, a payment of £65,277.39 was transferred out of the Joint Account to the Estate Account and in due course applied to the extent of Mrs Towns' Indemnity Payments to discharge Farrer & Co's fees. Henry Pulbrook says that this amount represented Mrs Towns' half interest in the Joint Account at the date of her death (when the balance was approximately £117,000), subject to certain adjustments. According to a reconciliation prepared by Henry Pulbrook dated 30 April 2008, the adjustments took into account the balances at the date of Mrs Towns death on joint accounts at NatWest bank in the names of Mr and Mrs Towns as well as joint accounts at Barclays (in addition to the Joint Account it seems there was a small credit balance on a joint current account of some £939) : the reconciliation shows that Henry Pulbrook divided in half the total balances on all these accounts of which one half was allocated to Mrs Towns' estate (represented by the payment of £65,277.39 out of the Joint Account to the Estate Account) and the other half retained by Mr Towns (represented by the balance left in the Joint Account after such payment and the sums standing to the credit of the other joint accounts).
- The Claimants rely on the 1994 Declaration to support their contention that the monies standing to the credit of the Joint Account as at the date of Mrs Towns' death belonged to Mr Towns and never formed part of Mrs Towns' estate. By the end of the trial, and in the light of the evidence which had been given, an alternative claim that the monies in the Joint Account passed to Mr Towns by survivorship was not seriously pursued.
- The 1994 Declaration was prepared at the instigation of Henry Pulbrook as part of estate tax planning: see his letter of 15 July 1994 which suggests that it was prepared to ensure that each of Mr and Mrs Towns secured a £150,000 tax free allowance on death.
- Henry Pulbrook claims that the 1994 Declaration was superceded by an oral variation made in about 2001 to the effect that it was agreed between Mr and Mrs Towns that the monies in the Joint Account would, upon the death of either of them, be split 50/50. In his second witness statement dated 19 May 2008, Henry Pulbrook, having referred to the 1994 Declaration, stated:
24. In 2000, Anne and Arthur asked me to prepare their revised Wills. Previously Anne had left no pecuniary legacy to her 3 children, and I had suggested at our summer 2000 meeting that this might be taken badly. She therefore decided upon a figure of £10,000 each after much careful thought. The new wills were signed on 11 September 2000.
25. On 9 August 2001, I visited Anne and Arthur for our annual tax-planning meeting. In view of the various changes that had taken place in the intervening years and others in prospect, they decided that their 1994 Affidavit was no longer appropriate and that it should be cancelled. The main reason for this was that the sum in the joint account stood at £136,100, and so there would be insufficient money of Anne's with which to pay her pecuniary legacies to her children in the event of her prior death.
26. In place of the 1994 Affidavit, Anne and Arthur wished to effect that their jointly-banked wealth be divided equally between (i) the estate of the one dying the earlier and (ii) the survivor. I proposed that a new Affidavit should be sworn, but both Anne & Arthur reacted upon the lines "Is it really necessary? It might change again. We don't want to be swearing Affidavits all the time. We are all here, we are all the executors; let it simply be understood between us and done when the time comes." I accepted their dispositions and have subsequently acted in complete accordance with them.
27. I observe that Arthur also upheld these dispositions in his capacity as my co-executor…. I maintain that according to the spoken contract of 9 August 2001 they became dedicated funds as I have described.
- I should make certain initial observations on this evidence by reference to contemporaneous documentation (or lack of it). Henry Pulbrook has produced a copy of Mr Towns' Will dated 11 September 2000, but not that of Mrs Towns' Will of the same date. It is not therefore possible to substantiate by reference to that Will whether or not it provided for the pecuniary legacies as described by Henry Pulbrook. It is nevertheless to be observed that these pecuniary legacies do appear in her last Will executed in August 2005. Mr Towns' Will dated 11 September 2000 appointed Mrs Towns and Henry Pulbrook as executors, bequeathed his chattels and effects to Mrs Towns, and the residue to the Curtis Settlement.
- Henry Pulbrook has produced a document apparently prepared in advance of a meeting on 9 August 2001 (which he described as an agenda for that meeting). It is headed: "Inheritance Tax - Anne" and shows in tabular form the history of the values of the Towns Trust and the Joint Account since 1990. It shows that the balance in the Joint Account had declined from about £201,000 in April 1995 to £136,100 by that time. Beneath the table the following is noted:
The balance at Barclays is decreasing
We should retrieve the original Affidavit of 22/08/94
Are the contents of the Affidavit still appropriate? Maybe
Keep in mind what the respective Wills do. Are we happy?....
This document does lend certain support to Henry Pulbrook's case inasmuch as it shows that the 1994 Declaration was a topic for discussion between himself and Mr and Mrs Towns in August 2001. However whether the alleged oral variation was actually agreed is a separate matter.
- In the course of cross examination in the afternoon of Thursday 19 February 2009, Henry Pulbrook:
i. Suggested that Mrs Towns Will dated 11 September 2000 may have been a mirror Will to that of Mr Towns of the same date; and that it was likely that Mrs Towns' Will was in a similar format, giving the chattels to the spouse and the residue to the Curtis Settlement where the principal beneficiaries were her children;
ii. Accepted that in 2000/2001 it was expected that Mr Towns would die first and that it would therefore be a waste of the nil rate band unless there were assets in his estate;
iii. Stated that at the meeting in August 2001 with Mr and Mrs Towns he had advised the making of a new affidavit to replace the 1994 Declaration but thought it was first necessary to retrieve the original affidavit so that it could be destroyed;
iv. Said that the original affidavit could not be retrieved because Mr and Mrs Towns had no success in tracing the firm of solicitors with whom it had been lodged and that at a subsequent meeting Mr and Mrs Towns said they did not wish to be bothered to go to solicitors to swear a fresh affidavit despite Henry Pulbrook's advice that they should do so;
v. Said that he did not believe that it was necessary for the original affidavit to be destroyed to follow the course of action agreed between them;
vi. Accepted that he had drafted the 1994 Declaration which had then been sent to solicitors to be put into proper form and that he could have done the same in 2001/2 (and he now wished he had done so);
vii. Said that his recollection about these matters was not clear, save that he was absolutely clear that the new arrangement concerning the Joint Account - that upon first death it be split 50/50 - was made and agreed.
- On the morning of Friday 20 February 2009, Henry Pulbrook wished to clarify his evidence on these matters. In so doing, he largely followed the account given in his witness statement. He said that, having thought about matters overnight, his clear recollection was that:
i. In her Will made in September 2000, Mrs Towns had left pecuniary legacies of £10,000 to each child;
ii. There were in fact two meetings in 2001. At the first meeting, probably that which took place on 9 August 2001, the decision was taken in principle to divide the money in the Joint Account equally on first death. The reason was that with the diminution of funds that had occurred in the Joint Account because of money given to the Curtis Settlement there might not be enough money to pay the pecuniary legacies if she died first if the 1994 Declaration were not altered. Henry Pulbrook asked Mr and Mrs Towns to retrieve the original affidavit with a view to destroying it and making a new affidavit to enable the decision to be put into effect;
iii. At the second meeting, by which time Mr and Mrs Towns had been unable to retrieve the original affidavit, Henry Pulbrook said that he believed he suggested that this was not a stumbling block and that a new affidavit could be drawn up and cancel the original one even if the latter were not physically destroyed. Mr and Mrs Towns asked whether this was necessary because they did not wish to be bothered with having to go to solicitors.
iv. "Against my better judgment I agreed and let the matter rest on the basis that it had been agreed orally".
- Even taking into account the heavy burden on Henry Pulbrook of having to conduct this case by himself, there are features of this evidence which strain credulity. There was a clear shift in his oral evidence between his answers given in cross examination and his "clarificatory" statement the following morning. Even that statement departs from what he said in his witness statement which clearly only refers to one meeting. More significantly, the reasons Henry Pulbrook gave for not documenting the alleged oral agreement have, it seems to me, to be treated with considerable scepticism. He seems to have first thought that it was necessary for the original affidavit to be destroyed in order to put into effect the agreement which he says had been reached. He then says that he did not believe this was necessary as a new affidavit could cancel the old one even if it had not been destroyed. He had drawn up the 1994 Declaration and passed it through solicitors and accepted that he could have done likewise to document the new arrangement. Henry Pulbrook was accustomed to drawing up legal documentation (e.g. Mr and Mrs Towns' Wills) and, more generally, to producing documents whether in the form of correspondence, reports and the like. It is also clear from Henry Pulbrook's evidence that it was exceptional for Mr and Mrs Towns not to follow his advice. Arranging for an affidavit to be sworn is not a burdensome undertaking and it would have been a simple matter for the new arrangement to have been documented. Against that background, I find Henry Pulbrook's alleged explanation of why the alleged variation was not recorded in writing to be incredible - and that casts serious doubt as to whether there was an oral variation as he alleges.
- Further doubt is cast on the alleged oral variation by the fact that there is no direct mention of it in any documentation until some time after these proceedings had progressed. In particular, it is not mentioned in any of the subsequent annual reports prepared by Henry Pulbrook for Mrs Towns that I have seen, nor is it mentioned or recorded in letter form, which I find surprising. Ms Angus also relied on the fact that the alleged oral variation is not mentioned in Henry Pulbrook's Statement of Defence, even though the allegation that all the money in the Joint Account had passed to Mr Towns by survivorship had clearly been pleaded in the original Points of Claim. However, it could be said to have been raised inferentially by reference to the schedule to the Statement of Defence and I think it would be unfair to attach too much significance to this in view of the fact that Henry Pulbrook has conducted his own defence of these proceedings.
- Nevertheless, the question of ownership of the monies in the Joint Account was clearly an important issue in these proceedings from the outset. In a letter dated 10 February 2008 (wrongly dated 2007) to Mr Towns, Henry Pulbrook said:
.. the money in the joint account was all Anne's in the beginning. She wished to share it with you in life, just as she shared everything else with you - but it was never all yours. It was understood and agreed at our many meetings over the years that her half of it would form part of her estate if she died first (and yours vice versa). It could not be otherwise: she wished to fund her legacies to her children as well as her own funeral expenses.
This is the first direct mention in the documentation of something approaching the alleged agreement: it is notable that it is not wholly consistent with the evidence now given by Henry Pulbrook: there is no reference to the 1994 Declaration and the arrangement is said to have been understood and agreed at many meetings over the years, as opposed to the two meetings in 2001 referred to by Henry Pulbrook in oral evidence.
- Henry Pulbrook disclosed a copy of the 1994 Declaration in April 2008 - at a stage when it was alleged in the Points of Claim that the monies in the Joint Account passed by survivorship (these were later amended to rely on the 1994 Declaration). I have already referred to Henry Pulbrook's witness statement dated 19 May 2008 when his case on this point is clearly made - for the first time. Ms Angus suggested that this evidence was manufactured to explain away the 1994 Declaration.
- The rationale given by Henry Pulbrook for the alleged oral variation is plausible: namely that the diminution in the balance to the Joint Account resulted in there being a possibility of insufficient assets passing into Mrs Towns' estate to pay the pecuniary legacies which he says were provided for in her Will dated 11 September 2000. However, a copy of that Will has not been produced, which is unfortunate, so there is no independent means of verifying whether that Will did make provision for pecuniary legacies. More significantly, this rationale would only come into play if Mrs Towns predeceased Mr Towns. Mr Towns was 11 years older than Mrs Towns. In giving evidence, Henry Pulbrook accepted that at the time of the alleged oral variation it was expected that Mr Towns would die first. This is borne out by documentation prepared by Henry Pulbrook himself. In his report to Mrs Towns dated 7 May 2001 on the performance of her trusts (signed also by Richard Onslow), shortly before the alleged oral variation was agreed, the following is stated:
As we hold an annual review of this subject [estate planning]…. it now seems sensible to concentrate our planning on the survival of the youngest - Anne
This is said in the context of "sensible measures" having been taken for "the 'equalisation' of your [i.e. Mr and Mrs. Towns'] estates as far back as 1994". The 1994 Declaration was clearly such a measure. This casts considerable doubt on the alleged rationale for the oral variation: if the planning was concentrated on the survival of Mrs Towns, there would have been no reason to vary the 1994 Declaration.
- These reasons point strongly to a conclusion that Henry Pulbrook's evidence as to the alleged oral variation of the 1994 Declaration should be rejected. There is, however, a document relied on by Henry Pulbrook which I need to take into account before deciding whether this is indeed the right conclusion.
- Henry Pulbrook relied on a HM Revenue & Customs form headed "Joint and nominated assets" on which the entries were made by Henry Pulbrook and which was signed by himself and Mr Towns on 10 January 2006. Henry Pulbrook was not cross examined on this document - he only referred to it in the course of his closing submissions. I should state at the outset that I attach little weight to the fact that Mr Towns has signed the document in the absence of clear evidence that its effect was clearly and accurately explained to him and that he understood what he was signing. As far as he was concerned, at the time the form was signed it would have appeared to have made little difference to him how the sums in the Joint Account would have passed to him - whether under the 1994 Declaration, by survivorship or under Mrs Towns' will. This is because at the time, the liability of Mrs Towns' estate under the November 2005 Letter was, in Henry Pulbrook's words, "both remote and unquantified, and so it had been overlooked" (see his letter to the Inspector of Taxes dated 1 February 2007, signed also by Mr Towns, as to which I attach little significance for similar reasons to those referred to above). So it is clear that the form did not disclose any liability on the part of Mrs Towns' estate under the November 2005 Letter.
- The form which Henry Pulbrook has produced is incomplete. The only clear conclusion which it seems to me can be drawn from the entries on the form which I have seen is that the 1994 Declaration was not given effect by those entries. There could be a number of reasons for this: it might have been overlooked or the entries might truly reflect the oral variation which Henry Pulbrook alleges. The entries themselves appear to me to be inconclusive and do not fully answer the questions posed in the form. Such entries as I have seen could be consistent with Henry Pulbrook's case on the alleged oral variation or with property passing by survivorship or with a situation in which the person completing the form, not knowing of the principle of survivorship, believed that all monies in joint accounts would be divided equally on death. Although I have to exercise great caution because Henry Pulbrook was not cross examined on this document or his reconciliation dated 30 April 2008 (which showed how the balances on all joint accounts in the names of Mr and Mrs Towns were split to explain how the payment of approximately £65,000 made from the Joint Account in July 2006 formed part of Mrs Towns' estate), the latter situation I have referred to in the preceding sentence is not wholly implausible. In that reconciliation all balances on all the joint accounts were split equally - but there has never been any suggestion that the oral agreement extended to the joint bank accounts at NatWest, which would in the ordinary course have passed by survivorship to Mr Towns.
- The relevance of this document is of course that it was prepared well in advance of these proceedings having been contemplated. If it clearly supported Henry Pulbrook's case it would give powerful support to his case on the alleged oral variation. But I find the entries on this form inconclusive for the reasons I have mentioned. In view of the fact that the form I have seen is incomplete it also seems to me that the figure showing Mrs Towns' estate as £88,291 on the grant of probate obtained on 3 March 2006 is inconclusive.
- Having given careful consideration to this form, it does not deter me from reaching the conclusion which I would otherwise have reached, namely to reject Henry Pulbrook's evidence as to the alleged oral variation of the 1994 Declaration. It follows that the 1994 Declaration stands and that all the monies in the Joint Account belonged to Mr Towns as at the date of Mrs Towns' death. It follows that Mrs Towns Indemnity Payments were made out Mr Towns' monies and that Henry Pulbrook can therefore not rely on the November 2005 Letter as entitling him to have made these payments. Nor, on the basis that these payments were made out of Mr Towns' monies, can he rely on the March 2006 Deed (or March 2006 Letter) for the reasons given earlier in this judgment.
- I should add that Henry Pulbrook argued that certain documents relating to the lifting of the caveat in some way helped his case in that they showed that the executors had validated the use of monies in Mrs Towns' estate to paying sums due under the indemnity in the November 2005 letter. Henry Pulbrook referred in particular to a letter dated 6 July 2006 to Farrer & Co (the copy before me is unsigned). There is a reference to Mr Towns and Henry Pulbrook giving their guarantee that the pecuniary legacies totalling £30,000 fall outside the scope of such indemnity. But the indemnity was not in favour of Mr Towns: it was for Henry Pulbrook and Dr Pulbrook, in whose favour the indemnity was given, to make the forbearance referred to (as reflected in the actual undertaking that was later given). I do not see how this letter, which does not in any event appear to have been signed by Mr Towns, assists Henry Pulbrook.
- I accordingly find that the claims made by the Claimants in relation to Mrs Towns' Indemnity Payments are made out.
Want of consideration
- It is therefore strictly unnecessary for me to decide whether or not the November 2005 Letter is enforceable, but since I have heard evidence and argument on the matter I should set out my findings on the assumption that, contrary to the conclusion I have just expressed, Mrs Towns' Indemnity Payments were paid out of monies belonging to her estate.
- The Claimants challenge the enforceability of the November 2005 Letter on the grounds that it had been provided for no consideration. In opening, Ms Angus also suggested that it had been procured as a result of Henry Pulbrook's undue influence. But this had not been pleaded and there was no application to amend.
- In short, the Claimants' case on lack of consideration for the November 2005 Letter is that Henry Pulbrook (or Dr Pulbrook) was not asked, and did not offer anything, in return for the indemnity for legal costs provided by Mrs Towns. Henry Pulbrook's case is that it was orally agreed that in return for the indemnity he would undertake the work and liaison involved in defending the claims being made.
- For the purpose of deciding this issue, it is necessary to refer to the chronology of events in late 2005 which I have set out earlier in this judgment. The following salient points emerge from that chronology so far as Mrs Towns is concerned. It is to be noted that she was only directly concerned with the claims made in respect of the Curtis Settlement of which she was a trustee: she was not a trustee of the 1925 Settlement.
- In their letter before action dated 4 October 2005, Payne Hicks Beach essentially sought (i) disclosure and (ii) the replacement of the trustees. By the time the November 2005 Letter was signed on 6 November 2005, the position of Henry Pulbrook and Mrs Towns was that they were in principle willing to comply with these demands. In the course of cross examination, Henry Pulbrook maintained that Mrs Towns was "vehemently opposed" to being removed as a trustee. Whilst that may have been the position earlier, it is clear that by the time the November 2005 Letter was signed, it was no longer the case (see Henry Pulbrook's letters dated 25 October 2005 and 2 November 2005 to Farrer & Co).
- Thus, as part of the background, it is of some significance that by the time the November 2005 Letter was signed, the underlying demands were in principle agreed.
- Henry Pulbrook said that Mrs Towns' agreement to provide an indemnity had in principle been agreed at an earlier meeting in October 2005. However, it seems to me that I have to look at the position as at the date the November 2005 Letter was signed, since no enforceable agreement of the type contained in that letter could have arisen before then by reason of the requirement that such an agreement be in writing.
- As at 6 November 2005, the question of the trustee's potential personal liability for costs had been clearly raised. Henry Pulbrook was in particular at risk personally. Although he denied this in cross examination, saying that he and Mrs Towns were equally at risk in relation to the Curtis Settlement (and that he and Dr Pulbrook were equally at risk in relation to the 1925 Settlement), I find that he clearly was potentially more at risk than the others. This appears from Farrer & Co's letter dated 3 November 2005 and follows from the underlying allegations being made against Henry Pulbrook about self dealing. It was also clear by then that Henry Pulbrook and Dr Pulbrook would have extreme difficulty in meeting these costs personally (see Henry Pulbrook's letter dated 18 October 2005).
- It is clear from Mrs Towns' letter dated 17 October 2005 and the evidence given by Henry Pulbrook that she was during the relevant period wholly supportive of his actions and antipathetic to the allegations being made by her children.
- It is also clear to me that in the period from when the complaints against the trustees were first made and the date of the November 2005 Letter, Henry Pulbrook had been liaising with Farrer & Co and generally undertaking the work required to meet the complaints being made. When it was put to Henry Pulbrook in cross examination that nothing was provided by Henry Pulbrook in return for Mrs Towns indemnity, he said that the stipulation for Mrs Towns providing the November 2005 Letter was that he would do all the work involved. It was then put to him that this was something he had always done. His response was that they were embarking on "new territory". It is true that Farrer & Co had only recently been instructed, but it was Henry Pulbrook, principally against whom the complaints had been levelled, who had throughout this period undertaken the role of responding to those complaints. He acknowledged in cross examination that it was he who was in possession of all the necessary information. In a letter to Farrer & Co dated 4 November 2005 (2 days before the 2005 November Letter was signed) he wrote:
You may have guessed that (like yourself), I work days, evenings and weekends. Since at least the end of July I have been almost solidly devoted to our defence against the proposed litigation. Liaison by fax, telephone and in person with so many parties - my brother in Ireland, my cousin in Dorset, my sister in South Africa, my sister in Somerset and my mother in the Isle of Man (not to mention the demands upon my time arising from your own kind participation) - has been all-consuming.
- One of the reasons why the November 2006 Letter was produced, as Henry Pulbrook acknowledged, was to exert every possible discouragement to her children's pursuit of litigation: if they were to pursue their complaints by litigation, win or lose the costs would be borne out of their personal pockets, their Trust Fund or their future inheritance from Mrs Towns' estate (see para 9 of the Statement of Defence). It was for this reason that a copy of the November 2005 Letter was immediately sent to Payne Hicks Beach - to show them that for them to pursue their costs claim would be a "no-brainer" (see Henry Pulbrook's letter to Farrer & Co dated 7 November 2005). I find that one of the principal reasons why the November 2005 Letter was produced was to encourage Mrs Towns' children to agree a settlement (see also Henry Pulbrook's letter dated 11 November 2005 to Farrer & Co).
- It is to be noted that the consideration which Henry Pulbrook says he agreed to provide for the November 2005 Letter does not appear from the letter itself. It could easily have been referred to, although I do not regard this omission as conclusive in any way. The omission is nevertheless a factor to be taken into account.
- Reference is made to the alleged consideration in the second numbered paragraph of the March 2006 Letter. By that stage Payne Hicks Beach had challenged the enforceability of the November 2005 Letter on the grounds of lack of consideration. Bearing also in mind Henry Pulbrook's description of how the second numbered paragraph of the March 2006 Letter was prepared (to which I have earlier referred), I consider that the reference to purported consideration is self serving and I attach little weight to it. There is no similar reference in the recitals to the March 2006 Deed.
- I also take into account a witness statement from Dr Pulbrook dated 6 May 2008 (and in particular paragraph 4). I do not consider that this casts any significant light on the issue I have to decide.
- In the light of these matters I conclude that the November 2005 Letter is unenforceable for want of consideration. I reject Henry Pulbrook's evidence that in return for it he agreed to undertake the work and liaison involved in defending the claims being made. I find that this was something that he had done all along and would have continued to do regardless of the November 2005 Letter. I find that the reasons why the November 2005 Letter was produced was not to induce Henry Pulbrook to continue such work but (i) so that it could be used as a negotiating tool to achieve a settlement (ii) as a result of Mrs Towns' wish to support Henry Pulbrook in his actions and protect him (and Dr Pulbrook) from any personal liability for legal fees since they had insufficient funds of their own.
- Henry Pulbrook made the point that, if the November 2005 Letter were unenforceable, there was still a potential liability on the part of Mrs Towns' estate in respect of the short period in which she instructed Farrer & Co (jointly with Henry and Dr Pulbrook) prior to her death. In view of my findings in relation to the ownership of monies in the Joint Account this point falls away as regards the issues before me.
The Fee Payments
- I turn to the Fee Payments. I can deal with these claims quite shortly. Henry Pulbrook has produced a schedule which shows that from 2000 onwards, he received payments twice a year representing his fee for managing Mr and Mrs Towns' affairs at a rate of 1% of the assets under his management - namely the Towns Trust and the Joint Account. The schedule continues to 8 March 2007 when, pursuant to the Mediation Agreement, Henry Pulbrook retired as a trustee of the Towns Trust.
- I was shown a letter from Mrs Towns dated 27 August 1991 which disclosed her agreement for Henry Pulbrook to charge a fee of 1% per annum of assets in the Towns Trust. There was no equivalent letter in relation to the fees in respect of the Joint Account. However, Henry Pulbrook pointed to a number of annual reports he produced to Mrs Towns in connection with the management of her and Mr Towns' affairs which showed "expenses" of figures which matched those appearing in the schedule. I have seen reports which predate the entries in the schedule which show comparable figures for such expenses. Henry Pulbrook said that this showed that these charges had been agreed and were regularly reported to Mr and Mrs Towns.
- The only payments for fees which are challenged are the final two payments which appear in the Schedule, namely the payments of £625 paid on 1 June 2006 and £1,780 paid on 23 November 2006. The amounts are calculated on a similar basis to those which appear earlier in the schedule. However the source of the payments is different. These payments were made from the Joint Account out of monies which, it is common ground, belonged to Mr Towns. All earlier payments were made from the Towns Trust. The payment of £625 from the Joint Account is said to represent a fee based on the amount in the Joint Account as at 30 April 2006. A fee of £1265 (not the subject of a claim in these proceedings) was paid from the Towns Trust in respect of assets in that trust as at the same date. The payment of £1,780 is said to represent a fee based on the amount in the Joint Account and the assets in the Towns Trust as at 23 November 2006. The schedule shows a small balance outstanding in respect of what Henry Pulbrook says are unpaid fees.
- Henry Pulbrook says that Mr Towns agreed to the payment of these fees (see para 11 of his second witness statement) and followed a longstanding agreement and course of dealing. This was challenged by the Claimants. Ms Angus referred me to Bowstead & Reynolds on Agency (18th Ed). Article 55 states that: "An agent is only entitled to remuneration for his services as agent if either the express or implied terms of the agency contract, if any, so provide…". Para 7-006 states: "The fiduciary nature of the agent's functions may mean that he cannot charge for other services without the informed consent of the person or persons to whom the fiduciary duty is owed."
- I accept Henry Pulbrook's case in relation to the Fee Payments. His case is supported by a lengthy history of substantially similar payments which had been made and accepted by Mr and Mrs Towns. Even though, as between the two, Mrs Towns had been principally responsible for dealing with their financial affairs, after her death it would seem that in general Mr Towns wished to follow her wishes. The Fee Payments represented the continuation of a longstanding arrangement and I am satisfied that Henry Pulbrook's case is made out.
The Mediation Agreement
- I finally need to deal with an argument raised by Henry Pulbrook to the effect that the Claimants cannot maintain the claims in these proceedings because these were settled by the Mediation Agreement. It is unnecessary for me to consider in any detail the terms of that agreement because it seems to me that a complete answer to this argument is that the claims being pursued in these proceedings are claims of Mr Towns. The current Claimants act in their capacity as executors to his estate. Mr Towns was not a party to the Mediation Agreement and so no question can arise of his claims being settled by that agreement.
Conclusion
- For these reasons:
i. I find for the Claimants in relation to Mr Towns' Indemnity Claims and Mrs Towns' Indemnity Claims;
ii. I find for Henry Pulbrook in relation to the Fee Payments.
- Henry Pulbrook lives in Thailand. In order to inconvenience him as little as possible, I propose formally to hand down this judgment at a hearing at which none of the parties need attend. If the form of order arising from this judgment, including costs, can be agreed between the parties, it should be sent to me for approval and it may be possible to avoid a further hearing. If the form of order cannot be agreed, or if any application is sought to be made arising from the judgment such as an application for permission to appeal, I will consider the matter further (i) on the basis of written submissions, which I direct should be served on the other parties and filed with the court within 28 days from the date this judgment is formally handed down; or (ii) if any of the parties so request, at a further hearing to be arranged.
Postscript
Following on from the last paragraph of this judgment, I have seen correspondence between the parties after a draft of this judgment had been made available to them. The form of order has not been agreed. In the light of that correspondence, I now make the following directions supplementing the direction for written submissions which I had proposed:
(i) the parties do serve on each other and file with the court written submissions by 6 May 2009;
(ii) the parties do serve on each other and file with the court written submissions in reply by 27 May 2009.
The written submissions should specify with clarity (i) the orders which I am asked to make giving effect to this judgment; (ii) the orders as to costs which I am asked to make; (iii) any other orders which are sought consequential upon this judgment, such as for permission to appeal and/or for a stay. The written submissions should set out the arguments in support of the position adopted by the party in question and identify any relevant materials which that party relies upon. Insofar as the position of a party has already been set out in correspondence, I would encourage the other party to respond to that position in the written submissions to be served and filed on 6 May 2009.
