B e f o r e :
MR JUSTICE NORRIS
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Between:
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Philip William Howard
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Claimant
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- and -
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Sir John Howard – Lawson
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Defendant
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Mr Philip William Howard in person
Stephen Boyd (instructed by Ward Hadaway) for the Defendant
Hearing dates: 3, 9, 10, 11, 14 May 2012, 12, 13, 15, 18, 19, 20 June 2012
Written Submissions: 29 June 2012, 6, 11 July 2012
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HTML VERSION OF JUDGMENT
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Mr Justice Norris:
- This case is one part of the current litigation that Mr Philip Howard ("Mr Howard") is conducting against his father, Sir John Howard-Lawson ("Sir John"), relating to trusts created by the Will of Philip John Canning Howard ("the Settlor"). It was commenced within one week of Mr Howard losing at first instance the other part of the current litigation (which concerns the effect of a "name and arms" clause). Mr Howard charges Sir John with exercising undue influence over him in connection with a variation of the trusts and with multiple breaches of trust in the administration of the trusts, with the consequence that Mr Howard has been swindled out of his rightful inheritance.
- Mr Howard is now deeply hostile towards Sir John, and to Sir John's advisers and co-trustees (though that hostility is not reciprocated). He finds it easy to resort to terms such as "fraud", "theft", "deception", "dishonesty", "lying", "coercion" and "bullying", and to accuse a range of professionals of gross breaches of duty. This is the fourth set of proceedings Mr Howard has brought against Sir John. But Mr Howard's personal animosity towards his father and the colourful language with which he adorns his complaints does not mean that those complaints as advanced in these further proceedings do not warrant serious examination (though such animosity and language may have other consequences): and that is what I shall undertake in this judgment.
- Both parties acted in person until late in the day, when Sir John retained Counsel (Mr Boyd) under the Bar's Public Access scheme and then instructed solicitors. I commend both solicitors and Counsel for the way they have discharged their professional duties to the Court in the preparation for and conduct of the trial. I would also record that Mr Howard conducted his own case with considerable skill and was sensitive to guidance as to what matters assisted me (and what did not) in the resolution of the legal disputes (it being beyond my power or ability to resolve personal disputes or to repair family relationships).
- Mr Howard has brooded long (at least since 1993) over the wrongs he considers he has suffered. But I do not intend to resolve every issue he raised. I shall focus on the legal issues arising from the pleaded cases, and will make such findings of fact as are necessary for the resolution of those issues. In some instances (when I can fairly do so) I will address unpleaded issues.
- In resolving those issues I shall have to consider both the written and oral evidence of witnesses, and the surviving contemporaneous documents.
- Sir John (who is now 78) said of his own evidence in his fourth witness statement:-
"I have tried to answer in this document Philip's statements and questions as best I can. It is not easy to do after all this time, and all I can do is to give my story of the course of events as I remember them. Decisions were made with a constant lack of cash as a permanent background. My wife was deeply involved and had an exceptional memory but she is sadly no longer with us, and my memory is not what it was……"
In my judgment that is a fair recognition of the limitations of this witness's evidence. But he was without doubt honest and fair, if sometimes muddled.
- Mr Howard was an astute and argumentative witness. He anticipated where questions were leading, often saying "What this seem to be leading to is….."; and then deploying his grasp of the chronology and his mastery of the documents to avoid an answer to the question put and to present an argument in support of his case. This made it extremely difficult to separate recollection from forensic reconstruction, and did his case no good. Although there were occasional instances of moderation and balance, his evidence was for the most part intensely partisan: as it could be because he only brought his case after his mother's death, after the death of his godfather (Mr Scrope) and at a time when the trust's former solicitor, Mr Eastwood, was aged 80 and in such a state of health that Sir John declined to involve him in the proceedings. I do not feel able to rely on the accuracy of Mr Howard's recollection.
- This means one has to rely very heavily on the documents and on the inherent probabilities.
- As to the documents, they are extensive but nonetheless incomplete. Mr Howard was afforded access (though he complains it was insufficient) to trust papers: and I have seven files of such material as he extracted. Sir John's solicitors have produced six further files as part of the process of standard disclosure. I have so much of the story as involved the professionals: but little in the way of correspondence passing between Mr Howard and Sir John and other members of the family. Mr Howard complains (and fairly complains) that he does not have the files of one of the trustees (Mr Scrope) because Sir John deliberately destroyed them. Sir John explained that in October 2011 (as a result of persistent requests from Mr Howard) he collected Mr Scrope's files from Newcastle and "without reading, binned them", because (as he wrote to Mr Howard) he regarded them as "private to Simon" and
"all you wanted the files for was to try and find something else to plague me with and I don't see why I should help you with that".
At trial he said that in retrospect he should not have done it and would not have done it if he had known all "the hullabaloo" it would cause: but that he "suddenly snapped". Accordingly I do not regard this as a case of deliberate destruction of material known to be damaging. The absence of the documents is of less significance than it might have been because although Mr Scrope was a trustee from 1960 until 1984, the way Mr Howard puts his case the key period is from just before 1980: and in any event Mr Scrope's correspondence with Mr Eastwood (the former trust solicitor) is contained in the solicitor's files.
- No hearsay notices were given under CPR 33: but each side relied on the documents as proof of the events which they described. I have reminded myself of the terms of s.4 of the Civil Evidence Act 1995: and in particular (though not exclusively) that in assessing the weight to be given to a hearsay statement I must have regard to whether it would have been reasonable and practicable to have called the maker of the statement, whether the statement was made contemporaneously with the occurrence of the matter stated, whether there is multiple hearsay, and whether there was a motive on the part of the maker of the statement to conceal or misrepresent matters.
- I would make one further observation about the documents. An examination of the documents of title with a conveyancer's eye throws up discrepancies which cause me to question whether what was achieved was always what was intended: and certainly not all of the title documents are consistent one with another.
- Since neither witnesses nor documents provide a truly sure or reliable guide I shall have regard also to the inherent probabilities.
The essential factual background to the complaints
- The Settlor (who was Mr Howard's great-great-grandfather) died on 22 April 1934. His duly proved will dated 19 February 1930 ("the Will") dealt with three estates: the Corby Estate, the Foxcote Estate, and the Middleton Estate. This action concerns the Corby Estate, which centres on Corby Castle in Cumbria. Corby Castle itself has at its heart a 13th century peel tower, to which were added wings in the 16th century, and the whole turned into a splendid mansion in the 19th century.
- By clause 2 of the Will the Settlor created a settlement of the Corby Estate and granted a life interest to his daughter Ursula. Ursula was married to Sir Henry Lawson of Brough Hall in Catterick. By clause 3 of the Will the Settlor devised the Corby Estate to the younger son of Ursula and Sir Henry, William Howard Lawson ("William Lawson"), for life with remainder to his first and other sons in tail male (and with further remainders over). By clause 6 of the Will the Settlor declared that in the event that any person made tenant in tail of the Corby Estate should be "living at or born within due time after" his death then the gift of the estate in tale male should be replaced by a gift of a life interest with remainder in tail. This provision would eventually affect the interest in the Corby Estate taken by Sir John, because he was born on 6 June 1934 (and so within nine months of 22 April 1934). Clause 8 of the will contained the "name and arms" clause which was at the time of trial of this action the subject of separate current proceedings (now concluded by the rejection of Mr Howard's petition to the Supreme Court). By clause 16 of the Will all of the furniture and chattels in or about Corby Castle were left to the Settlor's widow, Alice.
- Ursula died on 5 January 1960. (Sir Henry Lawson had pre-deceased her: and in 1949 she had married Col. Levin). William Lawson did not become the next life tenant of the Corby Estate because he forfeited his interest by virtue of the operation of the "name and arms" clause. His son, Sir John, did comply with the "name and arms" clause by 5 January 1962 and so became the next tenant for life of the Corby Estate. (Mr Howard still does not accept this: but it is settled by decision). Although under the primary limitations in the Will Sir John would have taken an estate in tail, the effect of clause 6 reduced that to a tenancy for life with the estate tail in remainder. Mr Howard had been born on 28 June 1961: so he took that estate tail in remainder.
- On 15 November 1960 Mr Simon Scrope ("Mr Scrope") was appointed a Settled Land Act trustee of the Corby Estate. He was a friend of Sir John and was Mr Howard's godfather. His obituary in The Daily Telegraph was to describe him as "the epitome of the traditional country squire": but in addition to managing a substantial estate in north Yorkshire he pursued a City career in insurance, being for 30 years the chairman of Richards Longstaff. His obituarist said of him
"He set the highest standards for himself and others. With his unswerving sense of fair play, sound judgment, sense of humour and understated turn of phrase, he inspired many devoted admirers"
In this action Mr Howard has described him as "a bully" and one who "failed completely in his fiduciary duty of care".
- On 21 October 1963 a Vesting Deed conveyed the settled property to Sir John upon the trusts of the Will. The settled property included the Corby Castle estate, and some chief rents at Coniscliffe (three in number worth together £5.60): there was no mention of any chattels.
- Notwithstanding that Sir John was the tenant for life under the trusts of the Will, it was William Lawson who lived at Corby Castle, and used the chattels in and about the mansion house. He continued to do so until 1970 when he vacated in favour of Sir John.
- Sir John took in hand one of the farms on the Corby Estate (Low Wood Farm) and sought to upgrade it into a modern dairy unit. The Trustees agreed to pay him some £13,250 out of capital money to fund the farming operation. Some of the necessary work fell outside the rather restricted and antiquated list of "improvements" upon which capital money could properly be laid out under the Settled Land Act 1925. In return Sir John was obliged ( by Deed dated 16 October 1969) to effect in the names of the trustees and to maintain a policy of insurance on his life in the sum of £15,000 with profits: and to charge his life interest under the Will with the payment of the premiums. Clause 5 of the October 1969 Deed declared that
"the Trustees shall stand possessed of the Policy….upon the trusts and with and subject to the powers and provisions that would have been applicable thereto if (a) the same were or represented capital money arising from the sale of assets comprised in Corby Estate; and (b) [Sir John's] said life interest under the Will…had been extinguished at the date hereof".
The policy which Sir John effected was one with the National Mutual Life Association of Australasia at an annual premium £323 ("the National Mutual Policy"). An endorsement indicated that the National Mutual Policy had been issued to the named individuals
"as trustees for the purposes of the Settled Land Act 1925 of the Corby Estate and as Trustees of a Deed dated 16th day of October 1969 ….. and they [the named trustees] or other the Trustees or Trustee for the time being of the said Deed shall hold this Policy and all monies arising there from or representing the same upon the trusts and with and subject to the powers and provisions declared by and contained in such Deed".
This payment of £13,250 was subsequently treated in trust accounts as a loan by the Trustees to Sir John: and in this action Mr Howard has argued the case on the footing that it was an unlawful loan.
- In 1973 Sir John required further money in connection with his farming operations. The trustees agreed to pay a further £5000 out of capital money in their hands comprised in the Corby Estate to be used in connection with his farming operations. Once again Sir John was obliged to effect a policy of insurance (this time in the sum of £6000 with profits) and to covenant in the same terms as the October 1969 Deed. The Deed dated 23 October 1973 contained a declaration of trust in the same terms as that in the October 1969 Deed.
- This time Sir John effected a policy with Hill Samuel Life Assurance Limited ("the Hill Samuel Policy"). But it appears this policy was issued in the name of Sir John and never assigned to the trustees. Nonetheless I consider that Sir John was under a contractual obligation (under the 1973 Deed) to assign the Hill Samuel Policy to the trustees and that (so long as that obligation could be specifically enforced) they were the equitable owners.
- In September 1974 Mr Eastwood of Banks & Co became the solicitor to the trustees. Mr Howard detests Mr Eastwood. Sir John did not call Mr Eastwood to give evidence and be cross-examined by Mr Howard on account of Mr Eastwood's age and state of health. I have considered the decision in Wisniewski v Central Manchester HA [1998] PIQR 324. I am satisfied that Mr Eastwood's absence from the trial results from a genuine gentlemanly concern on the part of Sir John to spare his elderly adviser the ordeal of a trial and in the circumstances I decline to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on issues in the action. It should be noted that although Mr Howard made free and frequent accusations of fraud and gross impropriety against Mr Eastwood (and should, if he was to bring his entire case before the Court have added him as a party) he did not do so: that may well be because he too shares Sir John's assessment of Mr Eastwood's condition.
- In April 1976, by virtue of the deaths of other trustees, Mr Scrope became the sole Settled Land Act trustee. On 3 November 1976 Mr Derek Pattinson ("Mr Pattinson") was appointed an additional trustee. He was a land agent and managed many thousands of acres. Mr Howard does not criticise him because, he says, Mr Pattison "was kept in the dark". The documents do not bear this out. Mr Pattison died in the 1990's.
- On 28 June 1979 Mr Howard attained his majority. Sir John had in October 1978 been advised by Mr Christopher McCall of Counsel that when that event occurred he and Mr Howard would together be able to make themselves absolutely entitled to the Corby Estate and, indeed, resettle it.
- On 18 August 1980 Sir John and Mr Howard (together with Mr Scrope and Mr Pattinson, the then trustees) executed a Disentailing Deed. It is in conventional form. It recited that Sir John was the tenant for life and that Mr Howard was the tenant in tail male in remainder, and then (subject to the preservation of Sir John's life interest) declared that the settled property was held in trust for Mr Howard for an equitable estate in fee simple. Mr Howard's signature is witnessed by an insurance broker who is otherwise unconnected to the transaction.
- That same day a further Deed (on which Mr Howard had the advice of Mr Roger Horne of Counsel) was executed. In this case it has been called "the Powers Deed" and I will adopt that terminology. Frequently a disentailing deed is accompanied by a Deed of Resettlement declaring new trusts binding upon the erstwhile tenant in tail. But the Powers Deed did not declare any trusts binding on Mr Howard: it expressly confirmed the trusts contained in the Will (now as a result of the Disentailing Deed a life interest in favour of Sir John and an absolute remainder to Mr Howard). It also confirmed the powers in the Will: but it added to them. It first conferred a power on the trustees to accelerate Mr Howard's interest in remainder or enlarge Sir John's life interest (each with the consent of the other beneficiary); by exercise of this power the Settlement could be brought to an end. It then conferred a power to lend trust capital to the beneficiaries: this would in the future authorise what the trustees had hitherto been doing outside the terms of the Settlement (and for wider purposes, such as the payment of school fees). It further conferred a power on the trustees (and on Sir John with the consent of the trustees) to charge the settled property for the purpose of raising capital money required for the purposes of the settlement or in connection with any current or future liability of Sir John or Mr Howard incurred in farming the settled land. It also extended the powers of the trustees to apply capital monies in the improvement, protection, development or enhancement of the value of the settled land. All this is on its face a conventional and entirely sensible updating of the dispositive and administrative provisions of the Will.
- Clause 3 of the Powers Deed addressed the loans that had hitherto been made to Sir John by the trustees and which remained outstanding. Sir John and Mr Howard together covenanted to indemnify the trustees against all claims arising out of the making or leaving outstanding of those loans (to the intent that the trustees should be in the same position as if those loans had been made in exercise of the wider lending powers conferred by the Powers Deed). Mr Howard's argument is that the whole exercise was really about this one clause, because it "got the trustees off the hook".
- Mr Boyd submitted that when the entail was barred the provisions of the Settled Land Act 1925 ceased to apply and the land ceased to be settled land: this, he argued, altered the fiduciary duties owed by Sir John. He founded his submission upon the decision in Re Alefounder [1927 1 Ch 360 and a passage in Gray and Gray "Elements of Land Law" 5th edition (2009) paragraph 7.6.4 note 3. I do not accept the submission. In the Re Alefounder "the defendant was an adult legal tenant in tail in possession, with remainders over, but without any overriding trusts or encumbrances" (ibid p.363). In the instant case when he barred the entail Mr Howard was a tenant in tail in remainder (not in possession): Sir John's life interest continued. The Corby Estate continued to stand limited in trust for persons by way of succession (SLA 1925 s.1(1)(i)) because Sir John continued to be the tenant for life. It therefore remained settled land.
- In 1984 Sir John and Mr Howard agreed upon a partial partition of the trust property: but they did not use the powers conferred by the Powers Deed. On 31 January 1984 they entered into a Deed of Arrangement ("the Partition"). Sir John took certain assets listed in the First Schedule subject to certain liabilities and Mr Howard took other assets listed in the Second Schedule subject to other liabilities. The assets that were to remain subject to the trusts of the Will (as varied) were listed in the Third Schedule. Clause 2 of the Partition provided that
"..all if any assets not specified in any Schedule hereto which may be comprised in the Settlement shall henceforth be held in trust for [Mr Howard] freed and discharged from the trust of the Settlement".
Mr Howard calls this "the catch-all provision".
- Sir John took specified parcels of land at Low Wood Farm, at Byre Hill Farm and elsewhere ("Low Wood Farm etc"). Amongst the other property allocated to Sir John in the First Schedule was
"All if any debts liabilities and obligations owing by [Sir John] to the Trustees and all if any other moneys howsoever recoverable from [Sir John] by the Trustees insofar as the same are comprised in the Settlement".
(A trust balance sheet prepared for the purposes of negotiating the Partition had shown loans by the Trustees to Sir John of £229,757). There was no express mention of any insurance policies: and no mention of the Conniscliffe chief rents. A thorough review of the documents leads me to the clear view that the property taken by Sir John absolutely was taken with the objective not that he should dispose of it, but that he should be free to charge it and make partial disposals of small marketable units, and (with the money so raised) improve and sustain the estate with the intention that it be passed to Mr Howard by will.
- Amongst the property allocated to Mr Howard in the Second Schedule were (by paragraph 13) "shooting rights over the property described in paragaphs 1 to 5 of the First Schedule hereto" (i.e over Low Wood Farm etc. being the property taken by Sir John). He also took the shooting rights over the two tenanted farms and woodland which he himself took absolutely under the Partition. He was not allocated the shooting rights over the land remaining subject to the trusts of the Will (Corby Castle and its grounds and dedicated woodland). Mr Howard's evidence is that Sir John was "absolutely furious" that Mr Howard should obtain anything on the Partition: but this is not consistent with contemporary or subsequent documents.
- In relation to the property specified in the Third Schedule which was to remain in trust clause 4 of the Partition provided
"It is hereby agreed and declared that [Sir John] shall not have power to sell or charge any property remaining comprised in Settlement during his lifetime without consent in writing of [Mr Howard] … who shall be entitled to require [Sir John] to deposit the title deeds to all or any of such properties with [Mr Howard] or otherwise as [Mr Howard] may reasonably specify subject always to [Sir John] being satisfied as to the safekeeping of the same…"
- To carry the Partition into effect, on 31 January 1984 Sir John (as tenant for life) conveyed to Mr Howard the specific parcels of land that had been allocated to him on the Partition ("Mr Howard's 1984 Conveyance"). The conveyance included the shooting and sporting rights described in paragraph 13 of the Second Schedule. But paragraph 13 of the Second Schedule to Mr Howard's 1984 Conveyance was not in the same terms as paragraph 13 of the Second Schedule to the Partition. Mr Howard's 1984 Conveyance conveyed shooting rights "over the farms lands woods plantations streams lakes and waters situate at Great Corby in the County of Cumbria and forming part of the Howard Settled Estate at the date hereof" ("the Shooting Rights"). This appears to be mistake since that description included not only Low Wood Farm etc (passing to Sir John absolutely) but also the land that was remaining subject to the trusts of the Will in relation to which the partition had not allocated the shooting rights to Mr Howard. But whether a mistake or not, until rectified Mr Howard's 1984 Conveyance vested the Shooting Rights in Mr Howard.
- Clause 3 of the conveyance granted Sir John a right of pre-emption if Mr Howard wished to sell, charge or otherwise dispose of the Shooting Rights or any part of them. The clause provided that if they failed to reach agreement on the open market value of the Shooting Rights within a specified period then an independent qualified land agent should be appointed to make a valuation binding on both of them.
- Also on 31 January 1984 Mr Scrope and Mr Pattinson executed a Deed of Discharge under s.17 of the SLA 1925 recording that they were discharged from the trusts of the Will as regards the settled property vested in Sir John of which he was to become the absolute owner under the partition. That property was Low Wood Farm, Byre Hill Farm, some woodland, and some specified fields. There was no mention of the Conniscliffe chief rents or of any insurance policies.
- On the same day Mr Scrope and Mr Pattison retired as trustees of the Corby Estate and appointed Sir John and Mr Howard to act in their place. They were to continue as such until April 2006 when they retired in favour of professional trustees from Addleshaw Goddard.
- The Corby Estate then consisted of the mansion house, grounds, ancillary buildings and woodlands described in the Deed of Appointment, and the investments representing capital income arising under the Second Land Act 1925 (less certain liabilities to which the retiring trustees were subject as such trustees). Amongst the investments listed were "Trustees' Loans" to Sir John amounting to £229,757: this again must be a mistake since it is common ground these loans had been allocated to Sir John on the Partition. But no insurance policies were mentioned: nor were the Conniscliffe chief rents listed.
- Notwithstanding that Sir John's life interest had come to an end in that part of the estate which was taken by Mr Howard absolutely, Mr Howard agreed that his father should take the whole of the estate income i.e. the rent from the tenanted farms and the income from the shoots. This arrangement was designed to ensure that Sir John had sufficient income to maintain the estate (both the land in trust and that held absolutely by him which it was intended should pass under his will another day to Mr Howard): and it was an arrangement that had first been suggested by the Country Landowners' Association.
- On 18 June 1986 Mr Howard re-conveyed to Sir John (for a nominal consideration) the shooting rights over Low Wood Farm. Mr Howard's signature of the Conveyance is witnessed by an employee of Wood Nash (the solicitors Mr Howard had at that point chosen to advise him). The following day Sir John sold Low Wood Farm to the Gorst brothers, reserving some 4 days'shooting for himself. On 13 August 1986 Sir John reconveyed to Mr Howard for a nominal consideration those reserved sporting rights.
- Mr Howard then embarked upon property development ventures: in particular he tried to develop part of the land (at Clint Head) which had passed to him on the Partition, with catastrophic consequences. These developments led him into severe financial difficulties. By May 1992 he was involved in legal proceedings with 17 creditors. He sought to promote an IVA funded entirely out of anticipated income from existing or intended development contracts: and he specifically excluded from the IVA his remainder interest, telling his creditors:-
"There is no immediate prospect of this becoming available but should it do so during the life of the Arrangement the benefit will be made available to creditors ONLY if the Arrangement would otherwise fail".
At one point he called upon Sir John for very substantial assistance. When that was not given the IVA failed. On 13 October 1993 Mr Howard was made bankrupt, the deficiency being of the order of £2.6 million. His property (including that part of the former Corby Estate that vested in him absolutely under Mr Howard's 1984 Conveyance, and his interest in remainder in the property remaining subject to the trusts of the Will (as varied)), vested in his trustee in bankruptcy. In effect Mr Howard ceased to be a beneficiary, all his rights vesting in his trustee in bankruptcy. But he continued to be a Settled Land Act trustee of the part of the Corby Estate remaining subject to the trusts of the Will. Before the bankruptcy order was made Mr Howard (on 1 October 1993) gave notice to Sir John of his intention to sell the Shooting Rights, and Sir John served the requisite counter-notice: so the estate of Mr Howard that vested in the trustee in bankruptcy was subject to Sir John's right to acquire the Shooting Rights under the pre-emption arrangement.
- Sir John decided that he must sell part of the land he had taken under the Partition (namely Byre Hill Farm). It also became clear that Duncan Lawrie Limited (who were secured creditors of Mr Howard) intended to realise the securities they held over a substantial part of the land which Mr Howard had taken under the Partition. It was appreciated by Sir John and Mr Howard that such a piecemeal sale of the land formerly making up the Corby Estate would achieve a much lower value than a combined sale of the land remaining in trust and the relevant parts of Sir John's and Mr Howard's land. So a combined sale was agreed by Sir John, Mr Howard and Duncan Lawrie Limited, with the price being apportioned by agreement. Mr Howard did not involve his trustee in bankruptcy in this: how he avoided doing so was not explained at trial. Sir John did not understand Mr Howard to be bankrupt at that time.
- On 27 January 1994 contracts for the sale of the Corby Castle Estate were exchanged between (1) Sir John (as tenant for life under the Will and as vendor of Byre Hill Farm) (2) Duncan Lawrie Limited (as mortgagee of Mr Howard's land) and (3) Edward Haughey ("Lord Ballyedmond") and is wife at a price of £1.85 million with completion set for 6 June 1994 ("the Ballyedmond Contract"). The price was apportioned as to £1.8 million for the land and £50,000 for "Fixtures and fittings". The land was described in the First Schedule and comprised (a) the settled land viz. Corby Castle and its grounds together with some fishing rights (b) Byre Hill Farm; (c) "All rights of shooting [etc]………….over the entirety of [the property described in the First Schedule] and in particular the benefit of all the rights described in paragraph 13 of the Second Schedule to [Mr Howard's 1984 Conveyance]"; and (d) the charged land that was being sold by Duncan Lawrie. The legal title to the Shooting Rights was vested in Mr Howard's trustee in bankruptcy, but was subject to the right of pre-emption that had been exercised by Sir John.
- On 21 April 1994 the Ballyedmond Contract was completed. Sir John as tenant for life conveyed the settled land: as beneficial owner he conveyed Byre Hill Farm together with shooting rights over the settled land, Byre Hill Farm, and Clinthead Farm and its associated woodlands; and Duncan Lawrie Limited as mortgagees conveyed Clinthead Farm and its associated woodlands. Sir John received £325,000 out of the completion monies for Byre Hill Farm. There was some doubt as to whether good title had been made to the sporting rights: so a retention of £250,000 was made on completion and a period of 12 months granted to make title. £50,000 was paid for "fixtures and fittings": Sir John had, shortly before completion, given these to Lady Howard-Lawson she received that money.
- The sale of the Corby Estate was a bitter pill for the entire family to swallow (for the estate had been in the family for 375 years and through 13 generations of Howards). Sir John described the decision to sell as producing "quite the worst night of my life" and the process of conducting prospective purchasers round as "trampling on the family's tombstones". The sale prompted Mr Howard to formulate and pursue all of his complaints about the affairs of the trust. One of Mr Howard's complaints was as to the role of Mr Eastwood as solicitor to the trust: so in April 1995 Eversheds were appointed trust solicitors.
- In 1996 Mr Howard was discharged from his bankruptcy: but that discharge did not restore him to the position of a beneficiary under the Trusts of the Will or revest in him his interest in remainder (which continued to belong to his trustee in bankruptcy).
- In November 1996 Mr Howard asked for access to trust files, which he afterwards clarified to be a request to see all of Mr Eastwood's records and all correspondence between Mr Eastwood and Sir John since Mr Eastwood had become solicitor to the trust. Access was afforded (save to papers relating to Mr Eastwood's acting for Sir John personally) in January 1997, both to Mr Howard and his wife personally and to Mr Howard's solicitors (Halliwell Landau). There is a dispute as to the true extent of that access.
- In October 1997 Mr Howard prepared a document ("the October List") setting out the complaints that he then had in relation to the affairs of the Will. In a further document dated 16 January 1998 Mr Howard said that "[his] pursuit of these matters [would] continue to be unrelenting".
- In November 2001 Mr Howard wrote to his father (then recently bereaved by the death of Lady Howard-Lawson) :-
"You are a liar and a cheat and furthermore Scrope and Eastwood are lying cheats as they knew in 1980 and 1984 about all of the earlier illegal sales off….Furthermore they, as did the whole family, with the exception of myself, knew all about your default under the "name and arms" clause in 1962. What is even more disgusting is that you bullied my mother into setting up a fake trust with almost fictitious beneficiaries to attempt to hide assets you have stolen from the Corby Trust and defraud your creditors…..I will never give up getting to the bottom of this mess and very shortly the whole public, including all of your friends, will find out what you have been up to"
- On 21 March 2003 Mr Howard wrote to his father:-
"You have defrauded me and cost me a fortune. I will never ever stop bringing you and others to justice. You will be made to pay every penny you have taken and much much more. Matters are going to start to get very very serious for you shortly"
- On 25 May 2004 Mr Howard issued his first set of proceedings against Sir John seeking an order that trust accounts should be prepared for the period from 1960 to 2004. (Sir John had only become a trustee in 1984). These proceedings led to the appointment (in 2006) of two solicitors from Messrs Addleshaw Goddard as trustees of the Corby Estate in place of Sir John and Mr Howard, and an agreement that they would investigate matters.
- The new trustees sought the advice of Mr Crampin QC. Mr Howard considers Mr Crampin "was biased in favour of [Sir John] as he comes from the same chambers as….Roger Horne…" who had "bent over backwards to assist [Sir John]". The upshot was that the new trustees did not commence any proceedings against Sir John as a former trustee, notwithstanding the complaints being made by Mr Howard.
- In March 2007 Mr Howard offered (through a company he established for the purpose) to buy back his reversionary interest in the Corby Settled estate (which then consisted of a house called Hunter Hall purchased with trust capital for the occupation of Sir John when the Ballyedmond Contract completed, together with some investments) from his trustee in bankruptcy for £165,000. He was going to borrow this from Whiteaway Laidlaw Bank. The deficiency in the bankruptcy remained at about £2 million. The trustee in bankruptcy needed £6000 paid immediately so that he could instruct solicitors: but Mr Howard did not provide this, so the transaction stalled. Sir John got to hear of this and indicated to the trustee in bankruptcy that he, too, wished to put in an offer. The trustee in bankruptcy said that there had been an offer in the region of £175,000. Sir John's offer was £150,000: but he was willing to put up the £6000 immediately, so on 31 August 2007 the trustee in bankruptcy accepted this offer. But then Mr Howard complained (he called the trustee's conduct "utterly disgraceful"); so the trustee gave both potential purchasers the opportunity to put in sealed bids by 20 September 2007. This led to a complaint from Sir John that his offer had already been accepted: but he agreed to take part in the sealed bid process.
- This prompted Mr Howard to offer £170,000 and to commence proceedings against his trustee in the Canterbury County Court under s.303 (1) of the Insolvency Act 1986, seeking, in effect, a direction that the sale of the reversion be to him and not to Sir John. When Sir John's solicitors asked to see the s.303 application and evidence in support the trustee declined to provide it because "it is not a matter of public record which would entitle your client to inspect the file". Sir John's solicitors protested that since the application was seeking directions as to the sale of property which they said the trustee was already bound to sell to Sir John his case had to be put before the Court.
- In the light of this the trustee in bankruptcy proposed a further "sealed bid" process conditional on cleared funds of £6000 accompanying the bid. As to Mr Howard's application his solicitors wrote:-
"….your client is not a party to this but we acknowledge he may well wish to apply to be joined…….But at the moment we take the view that the documentation is not something which can be made available voluntarily by the Trustee"
- Sir John's solicitors obtained a copy of the Canterbury Court papers for him from the Court itself by 16 November 2007. That led to a dispute over whether they should have done so, and eventually to a hearing before DJ Jackson (of which Sir John was not given notice) at which
a) The judge declared that there was no binding agreement between the trustee and Sir John for the sale and purchase of the remainder interest:
b) The judge directed Sir John to disclose his source of funding for his intended purchase (in the same way that disclosure had been obtained of Mr Howard's source of funding);
c) The judge ordered that if such disclosure was made then there be a new sealed bidding process with the outcome to be reported to the Court;
d) The judge ordered that if such disclosure was not made then the remainder interest be sold to Mr Howard for "the inclusive sum of £171,000" (being £165,000 plus £6000 legal costs).
Sir John gave the relevant disclosure so that under that order the bid deadline became 4.00pm on 12 June 2008.
- Sir John bid £176,150 of which £170,100 was to be funded by a loan from Lloyds TSB: and he paid £6000 in respect of the legal fees. The loan from Lloyds TSB was secured by a personal undertaking from Sir John that the trust assets would, on completion of his purchase and the merger of the interests in possession and in remainder, be paid to and held by his solicitors pending the grant of a mortgage over Hunter Hall to secure the Lloyds TSB lending.
- Mr Howard did not submit a real cash bid. He had asked Whiteaway Laidlaw to borrow £220,000 in order to deliver "a knock-out blow" in the sealed bid process: but instead of increasing the facility Whiteaway Laidlaw Bank withdrew their offer of funding altogether. So Mr Howard bid £1 cash plus 60% of the net trust fund on Sir John's death: but he was unable to fulfil the condition of accompanying his bid with a cleared payment of £6000 in respect of legal expenses.
- The trustee in bankruptcy (with the sanction of the Court under an Order of 2 July 2008) accepted Sir John's bid. The transaction completed on 1 August 2008 ("the assignment of the reversion"). The assignment recited that the trustee in bankruptcy was absolutely entitled to "the reversionary interest in the Settlement so far as the same relates to the Corby Estate". There was no exception or reservation. Whatever it was that the trustee in bankruptcy was absolutely entitled to, that he conveyed to Sir John. He kept nothing back. The right to sue for a breach of trust which damaged that reversionary interest or the right to call for an account of monies due the holder of the remainder to enlarge that remainder were an integral part of the reversionary interest which was assigned.
- On 14 April 2009 in an attempt to continue claims against his father Mr Howard took from his trustee in bankruptcy an assignment of "all right title and interest…in the Name and Arms Clause and the Corby Castle Chattels" in return for payment of 50% of any recoveries. I will call this "the April Assignment". I do not have to deal with the "name and arms" clause (which does not feature in this action). I consider the April Assignment was effective to transfer any personal claim which Mr Howard had to the Corby Chattels other than one deriving from his former status as remainderman. The trustee had already disposed of any claim dependent upon status as reversioner to Sir John by virtue of the assignment of the reversion.
- On 13 November 2009 in an attempt to continue further claims against his father Mr Howard took from his trustee in bankruptcy an assignment of
"..such right title and interest the Trustee [had] under, consequent upon, or arising in connection with the Will…….not otherwise previously assigned ("the Third Assignment Rights")…..including…the right to recover all monies, estates assets and interest of whatever nature derived from or connected directly or indirectly to the Third Assignment Rights…."
That was in return for 50% of any recoveries. I will call this "the November Assignment". The November Assignment excluded anything that had passed to Sir John under the assignment of the reversion, together with some specified claims that the trustee was minded to pursue. In my judgment the November Assignment was ineffective to transfer to Mr Howard any claim deriving from his former status as remainderman. The trustee had already disposed of any claim dependent upon status as reversioner to Sir John by virtue of the assignment of the reversion.
Three general matters
- I have now set out sufficient of the essential background to make a consideration of the complaints (and the necessary more detailed findings of fact) understandable. But before turning to the complaints there are three general matters to be addressed.
- First, it was Mr Howard's constant complaint that he was labouring under a great disadvantage in presenting his case, because of being prevented from having access to documents before the proceedings, through having late and inadequate disclosure during the proceedings, and from having the documents arranged in the trial bundles in a way that was not convenient to him.
- As to pre-action access, I will address this in the context of the substantive complaints. For now I would observe that Mr Howard's disclosure consisted of over 1000 documents, virtually all gleaned from the trust files. I cannot recall being referred to any document disclosed by Mr Howard as coming from his own solicitor's files (he has retained 11 firms in the course of pursuing his complaints) and only a handful prepared by himself or by professionals on his instructions. The trial was conducted largely by reference to the documents in Mr Howard's bundles, with much more limited reference made to the unique material produced by Sir John.
- As to disclosure, it is undoubtedly the case that Sir John (when acting in person) did not focus upon this, even though an order for standard disclosure had been made (extended by agreement at the request of Mr Howard until 31 August 2011). He faced an order for striking out his Defence through failure to provide inspection of three documents and to disclose four others. His attitude added fuel to the fire. But it is equally the case that Mr Howard has not understood the limited nature of standard disclosure, and that this has led him to make intemperate demands for investigations to be undertaken. He wrote to Sir John's solicitor on 20 February 2012:-
"..you are a liar and a bully. I've had the misfortune to put up with this very same conduct from you in the past. If you think that because you are a woman you can get away with this behaviour you have another thought coming."
But I am satisfied that the solicitors were conscientiously seeking to provide Mr Howard with the documents he requested at the address at which they believed him to be: and that, although they required an extended time for compliance, they did discharge their obligations. The solicitors completed the process of disclosure by 28 March 2012 within the timescale set by the Master under an order endorsed (at Mr Howard's request) with a penal notice. Much of the disclosure represented a duplication of Mr Howard's disclosure: and less than 20% of the material was relevant and new. During the trial Mr Howard demonstrated a mastery of the material, with most of which he had lived for more than a decade.
- As to the arrangement of the trial bundles, this was undertaken by Sir John's solicitors, who volunteered to assume the burden that should have been borne by Mr Howard. Through shortage of time (and their recent introduction to the case) they reproduced Mr Howard's disclosure in one run of bundles and Sir John's in another, so that there was no chronological run. On 23April 2012 Arnold J refused Mr Howard's application to adjourn the trial (Mr Howard objecting that he could not cope with trial bundles in that form). Undeterred, on the first day of the trial Mr Howard renewed his application to adjourn the trial until the next term. I refused that application, but adjourned the trial for a few days to enable Mr Howard to prepare his case by reference to the documents as arranged in the trial bundles. The trial recommenced but could not be concluded within the allotted time. Four weeks later the trial resumed, Mr Howard having the opportunity to prepare his cross-examination and marshal the documents for his closing submissions. In fact he cross-examined for the whole of the allotted time: so that I was constrained (by other listing commitments) to accept written closing submissions for which more time was allowed, Mr Howard having the first and the last word. I am satisfied that Mr Howard has had a full and fair opportunity to present his case both orally and in writing, of which he has taken full advantage.
- Second, many of the matters that Mr Howard wants investigated lie deep in the past. Counsel for Sir John submitted that I should address first questions of limitation and laches. He submitted that
"Doubtless, the Claimant would like nothing better than to subject the Defendant to an expansive and arduous cross-examination over several days, should the court permit him to do so, and have a soapbox from which to heap, in public, calumnies upon the heads of the Defendant, the late Mr Scrope and Mr Eastwood".
He argued that I should prevent that occurring by ruling on limitation and laches as preliminary points. I declined to follow that course (a) because it seemed to me that the legal issues arising on limitation and laches were (because of Mr Howard's liberal accusations of fraud) so embedded in the facts that it was unwise to take them as preliminary issues: and (b) because even if limitation or laches might ultimately determine whether Mr Howard was entitled to relief it was in the circumstances preferable to consider the substance of the complaints rather than to let them fester. But I should acknowledge that my adoption of that course has borne home to me the very good sense of rules which make the passage of time a ground for not entertaining claims.
- Third, in the course of opening Mr Howard abandoned eight heads of complaint. I do not criticise him for this. Indeed, such realism is to be commended. But Sir John had prepared to meet them. I shall not refer to them, save to record that they related to the playing fields at Great Corby, restrictive covenants taken on sales-off between 1962 and 1984, land at Riverside, income arising after 1984 from assets not "disclosed" in the Partition, a mortgage of The Stable Block in November 1986, the accounting for the £250,000 retention on completion of the Ballyedmond Contract, a Halifax Building Society account, and a Hambro Life policy.
Consideration of the evidence
- I turn to consider the individual heads of complaint, and in doing so should make explicit the standard of proof I have applied. In this case Mr Howard alleges fraud, undue influence and duress. I have reminded myself of what was said by Lord Hoffmann in Re B [2008] UKHL 35 about the degree of persuasion which the court must feel before it decides that a fact in issue did happen, and in particular about the suggestion that the standard of proof may vary with the gravity of the misconduct alleged. I have sought to apply the principle that there is only one civil standard of proof, and that, when assessing the probabilities, I must have in mind as a factor (to the extent only that is appropriate in each particular case) that in general, the more serious the allegation, the less likely it is that the event occurred, and so the stronger should be the evidence before I conclude that the allegation was established on the balance of probability. The evidence on each issue must, of course, be assessed within the setting of the entire evidence.
Undue influence in relation to the Disentailing Deed and the Powers Deed
- In paragraph 1 of the Particulars of Claim Mr Howard alleges that he signed the Disentailing Deed and the Powers Deed at the insistence of Sir John. He pleads:-
"Despite his young age and complete ignorance of this Settlement (or any legal or trust matters) the Claimant was not advised, independently or otherwise, but compelled to sign the two deeds".
- In his Response Mr Howard elaborates on this case. He acknowledges that in February 1980 he (together with Mr Eastwood) attended a meeting with Roger Horne of Counsel which lasted about 30 minutes. He says that there was talk about a disentailing deed and that Mr Eastwood and Mr Horne discussed the legalese of it, and that there was mention of another deed. Mr Howard pleads that "he could not get out of the place quickly enough and heard nothing more". Mr Howard then says he was asked to attend a meeting at Corby Castle in July 1980, but declined to do so. He then says that Mr Scrope summoned him to his office in August 1980, produced two Deeds and told him to sign, suggesting that it was some sort of standard procedure. There was the Disentailing Deed, and another Deed was "slipped in". He alleges that neither Mr Eastwood nor Mr Roger Horne was independent. He alleges that
"Mr Scrope was solely interested in engineering a position where he could be indemnified by the remainder beneficiary for his misdemeanours".
He alleges of the whole procedure that:
"It would be hard to make up a set of circumstances more conducive to undue influence should parties wish to abuse their positions of trust, which they did".
- Mr Howard complains that none of the provisions of the Disentailing Deed or the Powers Deed (which he described as a "pivotal" variation of the Will) was adequately explained to him, telling me:-
"It is not as if we were people of good ordinary stock who had got planning permission for some retail sheds outside Birmingham. We were landed gentry and know how to manage land".
So, he says, he should have been directed to discuss matters with his grandfather (William Lawson) or given the chance to discuss things with his flat owner, Julian Byng, a barrister.
- According to paragraph 1 of the Particulars of Claim Mr Howard does not want the Disentailing Deed set-aside: but he does want the Powers Deed set aside (even though the trusts of the Corby Estate are now at an end). In his Response Mr Howard also requests "that any benefits accrued to [Sir John] by virtue of this Deed and subsequent ones are also set aside".
- These are my findings of fact. When Sir John took over Low Wood Farm and sought to improve it the restrictions of the Settled Land Act upon the application of capital became readily apparent. The first advance of trust capital secured by an insurance policy (the National Mutual Policy) was made in 1969. In 1970 the views of Mr Romilly Whitehead of Counsel were sought upon a variation of the trusts, and in particular (a) the conferring of a discretion upon the trustees to apply capital money for purposes connected with the farming business (working capital, repairs and improvements) (b) the conferring of power to raise money on the estate for the purpose of making loans to Sir John for the payment of school fees; and (c) the authorising of the 1969 application of trust money (and the release of the National Mutual Policy to Sir John). These were then (and continued to be) the pressing demands which caused Sir John's incessant demands for money from the estate. Counsel was of opinion that the Court would in principle vary the trusts in that way. But no application was pursued, and the trustees made the further loan secured by the Hill Samuel Policy, and subsequently other loans (not individually identified at trial) on other security.
- The great problem was that the income produced by the "in hand" farms and the rent from the tenanted farms and shooting was not sufficient to repair and improve the Corby Estate and at the same time produce a sufficient income to enable Sir John to pay the school fees of Mr Howard and his siblings. Amongst the schemes devised was a scheme to sell to the trustees of the Will some chattels which it was believed that Sir John owned. As I recount below, the assumptions on which this was proceeding in July 1978 came to require examination, and the application was put on hold. Mr Howard was due to attain 18 in June 1979 so attention turned to more complete solutions.
- In October 1978 Sir John saw Mr Christopher McCall of Counsel for advice. Amongst other matters on which Mr McCall was asked to advise were ways of widening trustees' powers under the Settlement once Mr Howard had attained the age of 18, and possible ways of indemnifying trustees or releasing them from their liability in respect of unauthorised investments and loans already made to Sir John. Mr McCall advised that it would be perfectly possible to introduce powers to leave loans outstanding or to release them, and to grant an indemnity. He explained that, given Mr Howard's agreement, there was no limit to the extent to which powers could be widened. But he warned:-
"…the only overriding constraint on the agreement between father and son is that [Mr Howard] must enter into [it] of his own free will. For that purpose it is in my view essential that he be advised by Counsel before putting his name to any arrangement: otherwise there must clearly be a risk that if it is disadvantageous he will, on reaching a more mature age, be able to set it aside as an agreement made while he was subject to the influence of his father…."
No doubt Mr McCall had in mind the observations of Vaisey J in Re Bullock [1955] Ch 317 at 326 (given in the context of a settlement of property by a daughter upon her father within one month of attaining he majority, and so by one of imperfect judgment who was under the direction of someone both more experienced than she and exerting the force inherent in the relationship of father and child) in these terms:-
"Such a settlement as this can, in my judgment, only be justified after prolonged consideration, being made, as it was, by a young girl only just of age, and can only stand if executed under the advice of a competent adviser capable of surveying the whole field with an absolutely independent outlook, and who explains to the intending settlor, first, that she could do exactly as she pleased, and, secondly, that the scheme put before her was not one to be accepted or rejected out of hand, but to be discussed, point by point, with a full understanding of the various alternative possibilities"
- Mr Howard attained 18 on 28 June 1979. On that day Instructions were placed before Mr McCall which informed him that Sir John and Mr Howard had agreed to enter into a Deed of Resettlement to give the trustees the widest possible powers of investment (including power to leave authorised and unauthorised loans outstanding, an indemnity for the trustees, power to release cash to Sir John and to Mr Howard). Mr Howard says he does not remember any such agreement being reached (and in any event he would have been under 18). He says he does not recall Mr Eastwood explaining anything. Mr McCall drafted the relevant Deeds, and when Sir John saw them (and read the accompanying Opinion) he asked (in November 1979) for the matter to be completed "at top speed".
- It was in these circumstances that Mr Roger Horne of Counsel came (in February 1980) to be instructed by Mr Eastwood to advise Mr Howard in conference and in writing and to consider any amendments to the draft Deed. (Mr Eastwood's subsequent bill includes in the narrative as events occurring between the preparation of Instructions and attendance at the conference "Attendances on Mr Howard, discussing and explaining the position to him". Mr Howard says this did not happen. I attach greater weight to the document). The instructions to Mr Horne included by way of background this overall summary (with which Mr Howard agreed):-
"Counsel will see …..that whilst the nominal value of the assets belonging to the Trust are substantial, the income generated by the agricultural land is totally insufficient to meet the annual maintenance necessary for the upkeep of the Estate and principal dwelling house which is extremely large and old and hence expensive to maintain. In addition the life tenant, due to the age of his children, is at the point of maximum family expenditure."
The Instructions concluded with these words:-
"Counsel is asked to advise Mr Howard in Conference on the effect upon his inheritance of the execution of the enclosed draft documents, so that the Trustees of the Settlement can be satisfied that he is executing them of his own free will, and with full knowledge."
- In Conference Mr Horne said (according to the written record, which I accept) that he had no comments to make on the Disentailing Deed, which he considered must be beneficial to Mr Howard. But he made significant amendments to the Powers Deed. First, he considered that the combined effect of the Powers Deed and of the Settled Land Act was to confer the powers on Sir John: he said that he considered it "inadvisable for such powers to be conferred by [Mr Howard] on his father while he is comparatively young". So he inserted a requirement for the consent of the trustees to be obtained. Second, in relation to the proposed power to take capital out of the settled fund, Mr Horne redrafted the provision to require much greater formality and for the consent of Mr Howard to be obtained in relation to any exercise of the power in favour of Sir John. In relation to that, he gave clear advice that Mr Howard on any such occasion must obtain independent advice as to why it was desirable to exercise the power on that occasion. Third, he ensured powers exercisable in favour of Sir John should also be exercisable in favour of Mr Howard. Fourth, in relation to the proposed indemnity to the trustees in respect of the loans, he gave a clear explanation that the effect was to extinguish Mr Howard's right to take proceedings and said:-
"This is, it seems to me, as I said at the conference, something to which he can reasonably agree."
I have no doubt that the advice I have summarised in this paragraph was given to Mr Howard in Conference.
- The documents do not establish that this Opinion (or the resettled draft Powers Deed) were received by Mr Howard for consideration. But Mr Eastwood (from the account he gave to the trustees) had clearly formed the view that Mr Horne had explained in detail the proposed amendments to the trusts and that Mr Howard understood in Conference what was what was involved and that he wished the alterations to be completed. Having regard to the clear advice that had been given by Mr McCall to the trustees about the necessity of Mr Howard's informed consent I consider it probable that Mr Eastwood was communicating a genuinely held assessment: and having regard to the circumstances in which the family was placed I consider it probable that Mr Howard genuinely did agree with the additional powers to be granted.
- By 19 May 1980 the trustees had signed the Disentailing Deed. Mr Eastwood noted that there was an imminent trustees' meeting and commented
"If [Mr Howard] is able to come on that day, we could get him to sign then".
Mr Howard says that the phrase "get him to sign" demonstrates that he was to be made to sign whatever his own wishes might be.
- In fact on 18 June 1980 Mr Eastwood did send copies of the documents to Mr Howard in preparation for the trustees' meeting in August, concluding with an invitation that Mr Howard contact him if he had any queries. But he sent the documents to Corby Castle (where the meeting was to be held) and not to Mr Howard's London address. (It was not established that Mr Eastwood knew Mr Howard's London address). Mr Howard says that this shows Mr Eastwood wanted to conceal things from him: but on a dispassionate assessment it does no such thing. Mr Howard declined to attend the meeting, so he did not see the documents.
- At the trustees' meeting it was resolved that the Powers Deed (the terms of which were summarised)
"should be taken by Mr Scrope to London where he would obtain [Mr Howard's] signature".
Mr Howard says that the phrase "would obtain" demonstrates that he was to be made to sign whatever his own wishes might be.
- The minute of the trustees' meeting goes on to record the advice of Mr Eastwood as to the circumstances in which capital could be released to Sir John, and the need for Mr Howard to have full explanation and independent advice and not to be under pressure. It is then noted:-
"For the same reason it was accepted as important that [Mr Howard] should receive separate advice before consenting to any release of loans made to his father…….It was agreed that [Mr Howard] should be involved as much as possible in the discussions concerning the trust….".
- The Disentailing Deed and the Powers Deed were then taken by Mr Scrope, and their execution by Mr Howard arranged in London in August 1980. More than a year had passed since Mr Howard attained his majority: and almost a year since he had received the advice of Mr Horne. Such is the level of Mr Howard's animosity towards Mr Scrope that I do not feel able to accept as entirely truthful Mr Howard's account of his meeting with his godfather. Mr Scrope may well have said that a Disentailing Deed and a resettlement or modification of the original trusts was usual: and so it is. He may have been persuasive as to what was usual for a young man in Mr Howard's position. But so ready is Mr Howard to accuse all and sundry of bullying and lying that the currency is debased.
- There is a distinction between influence and undue influence. As it was put in Daniel v Drew [2005] EWCA Civ 507 at [36] per Ward LJ:-
"… in all cases of undue influence the critical question is whether or not the persuasion or the advice, in other words the influence, has invaded the free volition of the donor to accept or reject the persuasion or advice or to withstand the influence. The donor may be led but [he] must not be driven and [his] will must be the offspring of [his] own volition, not a record of somebody else's. There is no undue influence unless the donor if [he] were free and informed could say "This is not my wish but I must do it…."
- Applying that test to the evidence I decline to find that the Powers Deed was procured by the undue influence of Sir John (or by the undue influence of Mr Eastwood or Mr Scrope with Sir John's connivance). The evidence of undue influence simply falls far short of that required.
- First, Mr McCall and Mr Horne were specialists in their field. The fact that Mr Horne had not previously been engaged in relation to the Settlement was not a disadvantage: it was a positive advantage which enabled him to look with entire objectivity at the proposals from the standpoint of Mr Howard alone. Everyone involved knew from Mr McCall's initial advice that scrutiny of this sort was essential. Mr Horne provided it in conference and in a written Opinion. The nature of the amendments he made (and the advice which he gave about any exercise of the power to release debts) shows how thoroughly he discharged his duties. Mr Howard may have been bored and desperate to leave Counsel's chambers: but Mr Horne conscientiously safeguarded his interests even if Mr Howard himself would not engage. Mr Howard undoubtedly had the benefit of skilled independent advice. He appears to have acknowledged as much at a meeting held with the Chief Taxation Adviser to the Country landowners Association in February 1983.
- Second, once the documents were in a form approved by those advising Mr Howard it was up to Mr Howard himself. He exercised his free will not to attend the trustees' meeting at which the Powers Deed was to be signed. He exercised his free will to attend on Mr Scrope in order to sign it. (The language in which these plans are recorded does not have the undertone of compulsion which Mr Howard urges). Mr Scrope knew (from Mr McCall's advice) just how important it was not to provide grounds upon which the transaction might later be challenged: and the trustees and their solicitor had only just recognised the need for Mr Howard to be fully advised before any of the powers was exercised. So there are no grounds for thinking that compulsion was in anyone's mind.
- Third, there is no hint in the contemporary documents that Mr Howard was reluctant to sign, no suggestion that his state of mind was "I do not want to sign this document but I am being forced to do so".
- Fourth, there would not seem to be a lot of point in unduly influencing Mr Howard into signing a Powers Deed that itself provided that he had to give his written consent to the exercise of its key provisions before they could be implemented. If Sir John was going to exercise undue influence to coerce Mr Howard into signing a deed against his will it is most extraordinary that he should do so in relation to such a modest proposal and should not achieve the desired result directly and immediately.
- Fifth, subsequent events underline just how careful everyone was not to prejudice Mr Howard's interests. In 1981 Sir John wanted to raise money to fund an application for membership at Lloyds secured by a charge on trust assets. Mr McCall (who was advising the trustees) was unwilling to draft the requisite documents because of Mr Howard's exposure on such a transaction: and Mr Eastwood and the trustees arranged for Mr Howard to be advised by Mr John Wood of Herbert Smith & Co in relation to the general trust issues. This is simply inconsistent with the supposed desire to ride roughshod over Mr Howard's views and to ignore his individual interests.
- Sixth, it should be noted that Mr Howard did not tell Mr Wood (when instructed) that he had recently been forced to sign the Powers Deed by the undue influence of those around him. On the contrary Mr Howard gave Mr Wood the impression that he would concur in the operation of those very powers.
- The case on undue influence falls at the first hurdle. Undue influence is not proved.
- It would in any event have fallen at the second hurdle. Mr Howard must have ceased to be under any influence from Sir John that was "undue" at the time when Mr Wood began advising him. Forty years on it is simply too late to raise this plea: see Turner v Collins (1871) 7 Ch App 329 at 341.
- Further, even on Mr Howard's own case he was aware at the time of the October List in 1997 (when he had retained Mr Geoffrey Schindler of Halliwell Landau to advise him) that he could mount a challenge. He made clear in that document that he was "also considering [his] position in this as a result of being forced to sign the Disentailing Deed". It took 13 years more to bring his challenge, during which time those who might have had important evidence to give died, the indemnity in clause 3 of the Powers Deed has been relied on and the trust itself (in relation to which the powers granted by the Powers Deed might have been exercised) had come to an end. The claim is plainly barred by laches.
- Yet further, in the proceedings which he commenced in May 2004 Mr Howard actually placed before the Court his allegation that "at no time did the trustees ensure that [he] had proper independent legal advice concerning the documents they wanted [him] to sign – quite the contrary" and that "regrettably it seem[ed] Herbert Smith played along with Mr Eastwood". But although he made those allegations he sought no relief in relation to them: indeed relief in that or this action seems entirely pointless.
- At trial Mr Howard raised a new argument. He said that he had disentailed when he was only 18: but at the time when the trust was created majority was only attained at 21. He said (although he did not otherwise challenge the Disentailing Deed) that Disentailing Deed and the Powers Deed "had been executed unlawfully".
- There is nothing in this desperate point. Part 1 of the Family Law Reform Act 1969 reduced the age of majority from 21 to 18 years with effect from 1 January 1970. But that reduction in the age of majority did not affect the construction of terms such as "full age", "infant" "minor" or similar expressions (or the operation of statutory powers such as s.31 of the Trustee Act 1925) in deeds, wills or instruments made before that date. The Will was made in 1930 and took effect in 1934. It will be apparent from my summary of the trusts of the Will that Mr Howard's tenancy in tail male in remainder was vested in interest when Sir John became tenant for life: it was not contingent upon Mr Howard attaining majority. Clause 3 of the Will contains no reference to "full age" "infancy" or "minority". The estate tail was an equitable interest. The only question is whether Mr Howard could deal with that item of property. Under the general law he was able to do so (as with other items of property) when he attained his majority. In 1980 the age of majority was 18. Mr Howard was 19 when he executed the Disentailing Deed and the Powers Deed.
The Partition
- In paragraph 2 of the Particulars of Claim Mr Howard alleges that "pursuant to the requirements of [Sir John]" he signed various Deeds which brought about a partition of the estate. Of itself this is not an allegation of undue influence. But in paragraph 7 of those Particulars Mr Howard alleges that the partition was "inequitable": and he expands upon this in his Response. He asserts that Sir John was "desperate to get assets into his own name and put huge pressure on the Claimant to agree to the Partition" and that "the partition was fraudulently conceived to enable [Sir John] to pay off his debts and for the Claimant to indemnify Mr Scrope for the unlawful loans he had made to [Sir John]". Paragraph 99 of the Response says:-
"Once again [Sir John] Mr Scrope and Mr Eastwood exercised extreme undue influence and pressure over the Claimant to agree to the arrangement and coerced his adviser into accepting as fact things that were untrue".
- Mr Howard further elaborates his case later in the Response. At paragraph 145 he pleads:-
"The Partition was fraudulently conceived and based on falsified accounts to enable [Sir John] to pay off his debts and to indemnify Mr Scrope for the unlawful loans he had made to [Sir John]"
The allegation of "falsified accounts" is explained in this way. In the trust balance sheet prepared during the negotiation of the partition total loans of £229,757 had been shown as owing by Sir John. But Mr Howard says the true figure is £476,523: and the difference between the two figures (£246,948) represents a concealed benefit taken by Sir John. He summarises his case in this way:-
"… the Claimant was taken advantage of, deceived, coerced, bullied and misled (by falsified accounting and concealed assets) by [Sir John] into agreeing to a partition he did not want to have and which was in anything but the Claimant's (or the Corby Castle estate's) best interests".
- By way of relief Mr Howard claims a re-calculation of the true position so that a split of the property taken out of the Corby Estate in 1984 can be properly calculated on an equitable basis.
- The idea of a partition of the estate had first been mooted by Mr Romilly Whitehead of Counsel in 1970. It appears to have been accepted by the family that such a course should be pursued: a letter from the solicitor to the trustees dated 16 December 1975 to insurers (in connection with a policy to secure a loan says):-
"The intention of the family is to break the entail and to bring the Settlement to an end when the eldest son reached 18, in 1978".
When that letter was written Mr Howard was 14. That plan was not put into effect.
- In fact, as recounted above, although the entail was barred in 1980 the land was not then partitioned but remained in settlement, though with enlarged powers to enable it to be dealt with, and with Mr Howard the equitable owner in default of the exercise of those powers. (This fact alone is a telling indicator that undue influence was not exercised in 1980).
- The use of the enlarged powers was contemplated in 1981. Sir John sought to be a Member at Lloyds. This would have required a charge over the trust property (as direct or collateral security). Such a charge would have required the consent of Mr Howard. Mr Eastwood considered that Mr Howard ought to be separately advised. So Mr Eastwood introduced to Mr Howard a Mr John Wood of Herbert Smith & Co to provide him with independent advice. Mr Wood thereafter informed Mr Eastwood (a) that Mr Howard understood and would agree to the use of the powers conferred by the Powers Deed in connection with the application to Lloyds; (b) that Mr Howard would like a trust asset to be transferred to him outright (i.e. either under the Powers Deed or under a partial partition) so that he had some financial standing; and (c) that Mr Howard was against a full partition at that stage as possibly not in his own best interest and as possibly leading to a break-up of the estate. There was no suggestion by Mr Howard or by Mr Wood that the Powers Deed was the product of the exercise of undue influence. (Mr Howard has in correspondence alleged that Mr Wood and Herbert Smith & Co were generally negligent and failed to advise him, and that they failed to advise him on Mr Eastwood's instructions. There is absolutely no material anywhere that an objective seeker after truth would regard as supporting this allegation).
- Although Mr Wood had been instructed to advise Mr Howard, Mr Howard still had to deal with Mr Eastwood. In connection he wrote to Mr Eastwood in October 1981:-
"I must thank you for being so tolerant with me over my father's membership at Lloyd's and how good it is that you have managed to manipulate his assets, the Trust, and most difficult the Bank, so successfully……I have been talking to John Ward about my personal financial position and how I stand with my father over how much I am subsidised by him and the estate…… I feel I ought to be earning substantially more to support me…..I feel I would like to make use of a small part of the Trust which will eventually be mine in the distant future, to try and generate income for myself….. my real aim is to become a property developer……"
Correspondence in these terms does not sit easily with Mr Howard's description of Mr Eastwood at trial as "a boor, a liar and a common thug": or with his constant theme that the sole objective of Sir John and his professional advisers was to do Mr Howard down and wrongfully to take from him all benefit under the trust.
- By June 1982 the position had moved on (possibly because the capital transfer tax advantages of a partition had become apparent, possibly because Mr Howard was himself in need of capital). At all events Mr Howard then wrote to Mr Eastwood:-
"I am basically pro the concept of the partition and am trying to get an idea of exactly what proportion my father would take and what proportion I would be left with ………….I have asked [a business associate] to give me some idea what the proportions would be, then if I feel it acceptable and the trustees and my father want to go ahead with the partition I would be behind it…What, as I have mentioned to my parents would be acceptable would be my taking the two tenanted farms and my father taking the rest. However, I have a feeling that because my father is relatively young my share of the partition could be much smaller than that. In that case it would be to my advantage to leave the idea of the partition for 10 years….I do think it wise to do the partition while the farms are tenanted".
What Mr Howard wanted on the Partition was two tenanted farms: in the end he got that and more.
- In February 1983 Sir John and Mr Howard together went to see the Chief Taxation Adviser of the Country Landowners Association. The latter noted in his letter of advice:-
"It seemed to me that both of you agreed that the settlement should be brought to an end……"
I see no reason to question that contemporaneous assessment by a disinterested observer.
- This remained Mr Howard's position after he had obtained the advice of his solicitor, Mr Wood, on the matter. Mr Wood wrote in February 1983 that
"Whilst Philip is quite happy to consider, with appropriate advice, any proposals that are put forward by his father, I do not think I could advise him…..that he should merely assign his reversion to his father".
On the other hand Sir John was of the view that the shares taken on partition were less important than (a) running the estate as a whole (b) raising sufficient cash for this to be done and (c) ensuring that the opportunity was taken to make tax efficient transfers of assets. This was because, as the correspondence makes clear, "his idea was that any benefit that he [Sir John] received on the partition would be returned to [Mr Howard] by will".
- At the time Mr Howard fully understood Sir John's position, and agreed with it. In February 1983 he wrote to Mr Wood:-
"I know your opinion is that I should not do anything with regard to disbanding the Trust (as to disband the trust is not in my interest, which I fully understand) but I am afraid that unless it happens there will be terrible problems."
The fact that it was a hard decision does not mean that the decision was not ultimately Mr Howard's own. Mr Wood himself came to understand those problems, which he described as "a common problem of an overcapitalised trust with insufficient income".
- Sir John's advisers felt that any actuarial split would be about 70/30 in Sir John's favour: Mr Wood (advising Mr Howard) felt it would be more like 50/50. But everyone agreed that the beneficiaries were to be provided with full details of the assets in the Settlement together with up-to-date valuations. To that end in September 1983 the trust accountants were instructed to draw up a trust balance sheet (which they did after an examination of the files "at length"): and actuaries were instructed to prepare preliminary calculations of the approximate percentages in which the assets might be divided. Mr Wood (advising Mr Howard) was of opinion that that would probably be sufficient for the time being. Mr Wood instructed an actuary to advise Mr Howard; and in the light of that advice the suggested outcome was a 55/45 split.
- There then followed detailed negotiations as to the valuation and allocation of assets (taking into account the capital tax status of each asset). Mr Howard played a prominent part: it was his suggestion that the partition should only be partial and that the main house, park and grounds should remain in the settlement (a suggestion which Sir John adopted). Mr Howard wanted two tenanted farms: and that is what he got, and more. Mr Wood fully participated in this process (to the extent that Sir John complained that he was writing too many letters at 50 guineas a time). Mr Howard suggested in evidence that Mr Wood was "kept in the dark" as to the assets comprised in the settlement and that he did not see the trust balance sheet prepared by Pomfret Rushton (but only an older capital account that had been prepared in 1982). But this is a baseless conspiracy theory. The correspondence about asset allocation only makes sense if everyone was looking at the same balance sheet.
- This process led to Instructions being given to Mr McCall in October 1983 to advise Sir John and Mr Eastwood, and Mr Howard and Mr Wood together in conference. These Instructions record the agreement of Mr Howard to the proposals. It would not have been possible for the conference to have proceeded (and for Mr McCall to have produced the documents he did) if the truth was that Mr Howard did not agree but was being coerced by Sir John and Mr Eastwood (in the presence of Mr Howard's own solicitor, Mr Wood) into entering the arrangement.
- The Deed of Partition itself was not entered into until 31 January 1984 (having been under discussion for 18 months). By this time Mr Howard was 22 and had been working in the City for 4 years.
- The truth is, as Mr Howard acknowledged in his October List:-
"I was fully advised on all aspects of the actual partition at the time (by Herbert Smith…..) and therefore whether it was right or wrong is not a matter I can further pursue".
- I will deal with the question of loans hereafter. But there is not a shred of evidence to support the allegation that Sir John, Mr Scrope or Mr Eastwood exercised extreme undue influence and pressure upon Mr Howard, or that Mr Howard was deceived, coerced or bullied. All the evidence points in the opposite direction: namely that Mr Howard was in favour of the partition in principle, bargained for what he wanted, achieved more than he sought and was throughout the beneficiary of appropriate legal and actuarial advice. It should be clearly stated that there is no question of Sir John, the late Mr Scrope or Mr Eastwood having participated in a fraud: nor is there any question of Mr Wood of Herbert Smith having acted incompetently (as alleged by Mr Howard). All these allegations are the product of an obsession and are not grounded in reality.
- There can in any event be no question, 28 years after the bargain was struck, of "recalculating the Partition on an equitable basis". In that period Mr Howard has accepted and dealt with his absolute entitlement under the Partition (and Sir John has done likewise), Mr Howard's absolute property and his remainder interest in the property remaining in settlement have both vested in his trustee in bankruptcy and been disposed of, and the settlement itself has come to an end. Even if everything Mr Howard said was right, the doctrine of laches would put the claim out of Court.
The Title Deeds
- In paragraph 3 of the Particulars of Claim Mr Howard refers to clause 4 of the Partition which contained the right of Mr Howard to ask Sir John to deposit the title deeds of or any of the properties remaining subject to the trusts of the Will and of which he remained tenant for life. Mr Howard alleges that:-
"Wrongfully and in knowing breach of the deed [Sir John] has consistently and deliberately refused to comply …… prejudicing [Mr Howard's] proper investigation into the settlement…"
- In the Response this claim is enlarged to relate to "clear unfettered access to the trust papers". On the tenth day of the trial Mr Howard indicated that he did not seek monetary recompense under this head but that he "wanted it taken into account overall". So I must make some findings.
- The origins of Clause 4 of the Partition are straightforward. At the time of the Partition certain assets were to remain in trust. The trust was subject to the Settled Land Act and Sir John would have had all the powers of disposal and charging conferred on a tenant for life. Since what remained in trust was the castle and the heart of the estate Mr Wood thought that in Mr Howard's interests those powers should be restricted. Accordingly when in October 1983 Instructions were placed before Mr McCall to advise Mr Eastwood and Sir John, and Mr Wood and Mr Howard in conference, Counsel was asked to consider amending the terms of the Will to provide that control of and title to the settled property should vest in the trustees, with powers of sale and borrowing to be exercised only with the consent of Mr Howard. But Mr McCall advised that rather than amend the terms of the Will (and thereby bring the trusts onto the face of the title) the simplest thing would be to give Mr Howard control over the trust documents. That is the origin and intent of Clause 4 of the Partition.
- In October 1984 solicitors instructed by Mr Howard wrote to ask for the deeds: they recorded their instructions to ask for "the deeds of the estate" and (correctly) presumed that this did not refer to the trustees' deeds but to the deeds that would normally be held by the life tenant i.e. the originals of the documents of title to the settled land. Such documents of title were not handed over because (according to Mr Eastwood's response to the request) there were current matters that required production of the title deeds.
- When the conveyancing consequent upon the Partition was complete there appears then to have been a time when the trustees retained the title deeds as protection against Mr Howard's failure to discharge the CTT payable on the property taken by him absolutely under the Partition. (If he did not pay the liability would have fallen on them personally and they would have wished to take the benefit of the Land Charge that had apparently been registered in respect of the unpaid CTT by asset sales, for which they would have needed the deeds). Although it is not possible to determine when all CTT questions were finally settled it would appear from the available correspondence to have been the latter part of 1989.
- I have not traced any later request for the title deeds as such: that would be consistent with Mr Howard's oral evidence that "We paid: then the Deeds were released". Then Mr Howard's bankruptcy intervenes: and after his discharge Mr Howard's requests are not confined to the title deeds that would otherwise be held by the tenant for life, but extend to all trust papers (in relation to which Clause 4 of the Partition is irrelevant). Mr Howard has not drawn to my attention any exercise of the powers of a tenant for life by Sir John which he was able to undertake because he had possession of the title deeds (but would not have been able to undertake if the terms of clause 4 of the Partition had been scrupulously observed). A consideration of whether Sir John was in breach of his obligations under Clause 4 of the Partition does not assist in the resolution of any of the issues in this action. In particular it is not possible to infer from the facts I have found that Sir John was embarked upon some fraudulent enterprise for which he needed the title deeds.
- I should briefly address Mr Howard's complaint about being deprived of access to the trust documents generally (in relation to which he relied on Clause 4 of the Partition). Whatever complaints Mr Howard may have about earlier difficulties in seeing trust documents, Mr Howard and his wife (and then his solicitors, Halliwell Landau) were afforded extensive access to the trust records and correspondence in January 1997 (and it was their researches then that informed the October List). On 7 April 1999 the documents then moved to Eversheds (as the new trust solicitors); and Mr Howard inspected them on 8 July 1999, 17 November 1999, 10 August 2000, 10 October 2000 and 13 October 2000: he (or his solicitors) may have seen them on other occasions that I have been unable to identify. But the assertion that Mr Howard has in some sense been hampered in knowing what he could complain about or in presenting his case is hollow. There is no question of fraudulent concealment.
Capital Transfer Tax on the Partition
- Paragraph 7 of the Particulars of Claim contains another complaint about the Partition, namely that Mr Howard was left with the sole responsibility to pay a capital transfer tax liability of £68,000 on the partition which should properly have been apportioned between himself and Sir John. He alleges that Sir John took advantage of his then immaturity and inexperience, and by deception coerced him to agree to a division on such terms.
- The termination of Sir John's interest in possession in the assets allocated to Mr Howard gave rise to a charge to CTT (prima facie payable by Mr Howard as the recipient of the assets). The complaint about how this liability was dealt with in the Partition is wholly misconceived: the ultimate arrangement results neither from deception nor coercion.
- First, it is plain that the question of how that CTT charge was to be dealt with was a matter of specific discussion at the time of the negotiation of the partition, and that thought was given to the allocation of assets to Mr Howard to enable him to pay the bill.
- Second, Mr Howard was represented throughout those negotiations by his solicitor, Mr Wood who (from the documents) had a deep involvement in and a thorough understanding of the negotiations. Indeed, following the conference with Mr McCall (at which there had been discussion of the availability of agricultural property relief) Mr Wood discussed the CTT position with Counsel directly.
- Third, not only did Mr Wood of Herbert Smith & Co advise Mr Howard, but Mr Howard specifically retained Wood Nash as solicitors to deal with CTT. They wrote to Mr Eastwood on 19 January 1984 (before completion of the Partition) :-
"You will no doubt be aware that Philip Howard has consulted us as well as Herbert Smith & Co in relation to the partition of this estate. It is agreed that Philip will be responsible for payment of the capital transfer tax attributable to the assets transferred to him and he wishes us to conduct any necessary negotiations".
- Of course the issue in undue influence cases is not whether the disponor agreed to the disposition, but how that agreement was produced. As it was put by Lord Eldon in Hugenin v Baseley (1807) 14 Ves 273 at 300
"The question is not whether she knew what she was doing, had done, or proposed to do, but how the intention was produced."
But there is simply no hint in any of Mr Howard's dealings with his independent professional advisers or in their dealings with him that his acceptance of the liability to pay tax on the assets taken by him (which was the default position in any event) was other than informed and the product of his own volition.
- Mr Howard did not pay the CTO the instalments of tax when due (thereby twice putting the trustees in the firing line and forcing them to contemplate their rights of recourse against other assets), and some tension was thereby generated. Sir John offered (of his own free will) to put up his own unencumbered assets to secure Philip's liabilities. That is not the act of one who has deceived or coerced his son into accepting the liabilities in the first place. Mr Howard described this as "a very unique letter" for which he could not account: but it seems to me to be entirely consistent with any objective assessment of all the other correspondence.
- But in August 1988 Mr Howard did pay the outstanding sums. In this he was again advised by his Wood Nash, through whom he in fact made the last payment. Once again, there was no suggestion that Mr Howard should not be discharging this CTT liability because he and Mr Wood of Herbert Smith had been deceived or coerced.
- On this evidence Mr Howard has failed by a wide margin to establish either that Sir John took advantage of Mr Howard's immaturity and inexperience; or that by deception he coerced him into agreeing to a division on inequitable terms.
- I would also repeat here my holdings in paragraph [116] above.
The sale by Sir John of assets belonging to Mr Howard
- I can turn to dealings after the Partition.
- Paragraph 5 of the Particulars of Claim refers to the assets taken by Mr Howard under the Partition and asserts that "those assets included property which Sir John has sold for his own benefit despite knowing that were not his to sell and were the property of the Claimant".
- Paragraph 5.2 identified as one such asset the sporting rights over Low Wood Farm. The paragraph pleads:-
"[Sir John] misled the Claimant into believing that they had mistakenly passed to the Claimant and were, in fact, his. [Sir John] persuaded the Claimant that they were of no intrinsic value and, taking advantage of his then immaturity and inexperience, by deception coerced the claimant into assigning the same to him for £1".
- By way of relief Mr Howard claims that such assignment should be set aside and that Sir John should account to him for the full capital and income value of such rights.
- In paragraph 5.3 of the Particulars of Claim Mr Howard alleges that between 1984 and the sale of the Corby Estate in 1994 Sir John took all the revenue from the Corby Castle shoot and sporting rights, treating them as his own property. Mr Howard alleges that at the time of sale in 1994 these rights were vested in him and therefore vested in his trustee in bankruptcy and that Sir John "should account… for… the capital value of such rights".
- By way of relief Mr Howard claims that Sir John should account to him for all of the income for the period 1984 to 1994 and the capital value of such rights.
- At trial Mr Howard mounted a broader and different attack relating to the sporting rights: it was to the effect that Sir John had managed to persuade Mr Howard's trustee in bankruptcy to sell him the sporting rights over Byre Hill Farm and over the trust land in 1994 too cheaply. Although unpleaded, I will address this additional case.
- I deal first with the Low Wood Farm. At the time of the Partition the total shooting rights were valued at £20,000. On the December 1983 revision of the trust balance sheet these were allocated as to £6000 worth to Sir John and as to £14,000 to Mr Howard. But it is not possible to identify which particular rights were allocated to whom. It is likely that there was a later revision in which all shooting rights were allocated to Mr Howard. What this demonstrates is that the shooting rights were the subject of specific negotiation and that accordingly it is unlikely that Mr Howard would have gained the impression that under the Partition he took no rights and that his father took them all.
- In the Partition itself no shooting rights were separately identified as passing to Sir John; but the shooting rights over Low Wood Farm etc were specifically allocated to Mr Howard: see paragraphs [31] and [33] above.
- I have recounted above (paragraph [39]) how after the Partition the Low Wood sporting rights were transferred to Sir John, sold by him to the Gorsts as part of Low Wood Farm (subject to reservation): and how the reserved rights were transferred back to Mr Howard. At trial Mr Howard contended that the Conveyance dated 18 June 1986 of the Low Wood sporting rights by himself to Sir John was backdated and in fact executed after the sale to the Gorsts had been completed. He wanted it set aside on the grounds that it had been executed in bad faith.
- This relief would, of course, be inappropriate in the absence of the Gorsts as parties (who appear to have taken the shooting rights as bona fide purchasers for value from Sir John without notice of any alleged right of Mr Howard to impeach Sir John's title): and any backdating of the Conveyance would not affect the effective transfer of title from Sir John to the Gorsts. But in any event Mr Howard's claim is not made out.
- Mr Howard confirmed in cross-examination that the transfer of the Low Wood sporting rights to Sir John occurred not because he was "deceived" or "coerced" but because he wanted to help his father when asked to do so (whatever the extent of that "help" actually was). . There was no equity of rescission. So it is not surprising that this complaint does not feature in Mr Howard's October List in 1997. It is surprising that it should feature in this action. It is without merit.
- Moreover, in 1994 the reserved rights appear to have sold by Mr Howard's trustee in bankruptcy to the Gorsts for £1250 (though I have not traced the conveyance and the conveyancing documents relating to the shooting rights in general are in a puzzling state): so, far from disputing the transactions, Mr Howard's representatives adopted them. So no complaint can be made about the Low Wood sporting rights, and Sir John is not required to account for anything.
- I turn to the claim to an account of the shooting income. Mr Howard's case at trial was that Sir John had said that all the shooting and sporting belonged to him and simply took the income, Mr Howard himself being ignorant of his own entitlement to the shooting rights. In the light of (a) the negotiated terms of the Partition and (b) the dealings with the shooting over Low Wood Farm (where Sir John acknowledged Mr Howard's title, took a conveyance, and then reconveyed the residual rights to Mr Howard) the suggestion that Mr Howard did not know he owned any shooting rights is not credible.
- I prefer Mr Howard's own account of his understanding of the arrangements negotiated and implemented in 1984, given in October 1997 in these terms:-
"The castle and grounds would remain in the existing settlement, my father would take Low Wood Farm and the small home farm (Byre Hill) and I would receive the two tenanted farms, woodland, various buildings, sporting rights and some of the fishing."
And at another point:-
"I had an unwritten agreement with my father that he was to receive all of my income because, by then, he would have been unable to live, let alone support Corby, from the small home farm".
- Mr Howard has not established that Sir John took any income in the period 1984-1994 to which he was not entitled or which Mr Howard had not agreed he should have. Indeed, the evidence suggests the contrary: namely, that Mr Howard had an unwritten agreement with Sir John that the latter would receive all of the former's income from the estate. The point of that agreement was that the whole of the income from the estate (whoever was the owner of a particular part) was needed to keep the estate together so that it would one day pass (by succession under the settlement or by testamentary disposition) to Mr Howard.
- In any event Mr Howard knew (at the latest from the time for completion of the Ballyedmond Contract: see his letter dated 18 October 1994) what the position was in relation to ownership of the shooting rights: and any claim for an account of the income (which claim would have vested in his trustee in bankruptcy) was time barred long before the November Assignment and long before the commencement of this action. So the claim to the shooting income fails.
- I turn to the shooting rights generally. When the Corby Estate itself came to be sold in 1993 it was marketed as "A Spectacular Sporting Estate" so the sporting rights had to be sorted out. It appears to have been thought at the time that some of them had been charged to Duncan Lawrie: Mr Howard now disputes this, but I consider the belief probably to have been well-founded. (Mr Howard did not give disclosure of the documents by which he charged his land to Duncan Lawrie but unless the shooting rights had been specifically excepted they would have been subjected to the charge by reason of the general words implied into the words of conveyance by s.62 of the Law of Property Act 1925). But it is clear that Mr Howard retained in his unencumbered ownership the sporting rights over the settled land (and over Byre Hill Farm). So Sir John wrote directly to Mr Howard saying that he would exercise his right to buy whatever rights Mr Howard had to the shooting "to stop someone else entirely separate from trying to purchase (a creditor)…".
- It then became apparent that Mr Howard had been made bankrupt on 13 October 1993: (although Mr Howard had disclosed that he had been made bankrupt the usual searches had not revealed the order, which had not been made in his full name). The sale of the shooting rights therefore had to be negotiated with the trustee in bankruptcy. This could not be achieved before completion of the Ballyedmond Contract: so there had to be a retention whilst the title to the shooting rights was sorted out.
- Contact was first made with Mr Howard's trustee in bankruptcy in March 1994. The trustee in bankruptcy's valuer placed a value of £17,000 on the relevant shooting rights. This was their open market value, not the value to a special purchaser (such as the purchaser of the remainder of the estate): it ignored the "marriage value". That was technically the correct way to assess "open market value", and arguably the appropriate valuation since Sir John was not a special purchaser, but someone exercising a right of pre-emption. But it was arguably not appropriate, since it was known that Sir John was selling on under the Ballyedmond Contract (and the price achieved for the estate recognised that it was "a spectacular sporting estate"). The trustee in bankruptcy therefore sought an offer from Sir John exceeding £18,000 to take into account the enhancement value. Sir John countered with an offer of £6000 (later increased to £7000). This lead to some long drawn out negotiations in which the trustee was advised by Clarke & Co (whose principal was well known to Mr Eastwood). By November 1994 the parties to the negotiation had settled upon the figure of £14,000 "in principle": and on 7 December 1994 Sir John wrote to the trustees to say that Mr Howard had agreed that price. On 28 February 1995 the trustee in bankruptcy conveyed the sporting rights to Sir John for £14,000.
- It is Mr Howard's case that the trustee was "coerced" into this deal: alternatively that the trustee was "hoodwinked" because the rights were really worth £115,000. (In his closing submissions Mr Howard raised this to £500,000). The evidence simply will not sustain such a claim. There was plainly no coercion, but free negotiation with professional advice on either side. Nor is it established that there was any "hoodwinking". The trustee plainly knew that he was conveying whatever were the rights obtained by Mr Howard under paragraph 13 of the Second Schedule to Mr Howard's 1984 Conveyance and was well able to ask his valuer to value those rights.
- Moreover, the trustee in bankruptcy himself makes no claim that he was coerced or hoodwinked. The creditors in the bankruptcy estate (and there remains a deficiency of over £2 million) make no complaint that the trustee failed to achieve a proper price for the shooting rights. Mr Howard (who has no hope of the distribution of any surplus from his bankruptcy estate) has no standing as the bankrupt to make a complaint. Nor has he any standing under the November Assignment, which did not assign to him any personal right which the trustee had, based on an alleged misrepresentation as to the subject matter of the sale by Sir John or Mr Eastwood. So Mr Howard could not pursue this claim, even if it could be sustained on the facts.
- It is in any event statute barred, the cause of action having accrued in 1994, and there being no question of any fraudulent concealment (for the trustee has always known what he conveyed and has always been in a position to ascertain what it was his advisers valued, and why).
- In his closing submissions Mr Howard advanced a new claim to three lots of fishing rights. If these claims were to be pursued they should have been pleaded. I cannot fairly address them. Mr Howard has lost his chance to mount this challenge.
Failure to Disclose and Conversion of Assets
- Paragraph 9 of the Particulars of Claim pleads clause 2 of the Partition, which provided that any asset not specified in any schedule should be held in trust for Mr Howard absolutely discharged from the trusts of the Will. Mr Howard alleges that "wrongfully and in breach of the said Deed [Sir John]…failed to give the Claimant full or any disclosure of such assets and has converted a number of said assets to his own use". Mr Howard then refers to the encashment of the National Mutual Policy and of the Hill Samuel Policy, both of which he says were assets of the Corby settled estate which (not being specified in any schedule to the Partition) came to be held on trust for him absolutely. Mr Howard says that Sir John knowingly falsified trust accounts and deceived him.
- By way of relief Mr Howard seeks an order that the policies be reinstated at death value and accounted to him.
- I have already recounted (see paragraphs [19]-[21] above) the taking out of the policies and the declarations of trust relating to them. At the time of the Partition one of the matters noted for discussion was "which existing debts….be retained and on what security". In the event on the Partition there was allocated to Sir John's share "all….debts liabilities and obligations owing by [Sir John] to the Trustees insofar as the same are comprised in the Settlement". But the question of securities was not addressed. There was no specific reference to the National Mutual or the Hill Samuel Policy.
- Until the Partition the trustees had paid the premiums on the policy (apparently out of the income of the trust that would otherwise have gone to Sir John and pursuant to a charge over income to support Sir John's covenant to pay the premiums). There may have been an occasion when a premium was paid out of capital account, but the trust accounts available at trial do not enable the accounting treatment of that payment to be demonstrated.
- In July 1984, shortly after the Partition, Sir John wrote to Mr Eastwood to say that he would keep the National Mutual policy going and would take over the payment of the premium directly. This he evidently did. In 1999 Sir John wrote to Eversheds (the trust solicitors) to explain why he had done so when (in his view) the risk in relation to which the policy afforded protection had disappeared in 1984: it was in the belief that he could provide his wife with a decent capital sum. He went on to say that whilst he could not see on what ground Mr Howard could object to the National Mutual policy being assigned to Lady Howard-Lawson he did not want Mr Howard to be involved, and he asked for all of the then current correspondence ("all paperwork relating to the …..policy and the work we did for him in looking through the deeds held here…") to be kept separately from the main Corby papers. This has excited in Mr Howard the belief that there was evidently something highly improper occurring from which he was to be excluded. I do not agree: I consider the documents faithfully record what was happening, and that what was happening was not dishonest. It was a genuine attempt to sort out yet another muddle, and to do so in a way that would not generate more vituperative correspondence.
- In fact Mr Howard already knew of the National Mutual policy and by February 2003 had obtained full details of its surrender value and the sum payable on death, and knew that it was held on trust. The policy was surrendered in September 2008 and the proceeds of £69,366 paid to the solicitors for the trustees. They would then have passed them Sir John who had by that date acquired the remainder interest.
- In my judgment the National Mutual policy was not an asset of the Corby settled estate. It therefore does not fall within that part of the Partition which provides that "all if any assets not specified in any Schedule hereto which may be comprised in the Settlement shall henceforth be held in trust for the Son absolutely freed and discharged from the trusts of the Settlement..". The National Mutual policy did not become the absolute property of Mr Howard.
- The National Mutual policy had been taken out to protect the trustees against any allegation that that had acted in breach of trust in advancing money to Sir John to fund the estate's farming enterprise, by (in effect) providing a separate fund to which resort could be had by them. The policy was not itself an authorised investment of the Will trust fund under the Settled Land Act, and its premiums were not funded by trust money. It was held by the persons named as trustees (who became different from the persons who were the Settled Land Act trustees) upon the trusts declared in the 1969 Deed (not upon the trusts and subject to the powers and provisions of the Will and as one fund therewith for all purposes). The benefit of the National Mutual policy was an asset of a separate trust.
- The practical need for the existence of this protection disappeared in two stages. First, when the disentail occurred in 1980 clause 3 of the Powers Deed contained an indemnity by Sir John and Mr Howard to the trustees in respect of the making or leaving outstanding of the then existing loans
"to the intent that the trustees shall be protected against any such claim in like manner as if the Existing Loans had been made in exercise of powers equivalent in all respects to powers in that behalf conferred upon them by this Deed".
So thereafter the trustees could not be sued by Mr Howard or anyone deriving title through him. Second, on the Partition the loans themselves were allocated to Sir John (and thereby released).
- Although the need for the National Mutual policy had ceased to exist this did not bring an end to the 1969 Deed trust. That continued to exist as a separate fund, although Sir John was now adding to the value of that trust fund by paying the premiums in the belief that he was creating an asset for his wife, not for the beneficiaries under the 1969 Deed. When he acquired the reversion he did not by that acquisition directly gain an interest in the National Mutual policy (because that was not an asset subject to the trusts of the reversion). But he did so indirectly. The National Mutual policy continued under the 1969 Deed to be held upon the trusts and with and subject to the powers that would have been applicable if the policy proceeds were capital money arising from a sale of assets comprised in the Corby estate, but as if Sir John's life interest had been extinguished: but under those trusts Sir John was now absolutely entitled (having acquired the reversion). So under the trusts of the 1969 Deed he became absolutely entitled to the National Mutual policy.
- If I am wrong in that analysis and the National Mutual policy is to be treated as an asset of the Corby settled estate, then I would hold that the 1969 Deed created a trust by way of security against prospective claims by reversioners in respect of unauthorised trust investments made by the Corby trustees, and was subject to an equity of redemption. Once Mr Howard had indemnified the trustees against any such claim (by clause 3 of the Powers Deed) and become the equitable owner (subject to Sir John's life interest) under the Partition and once and the loans themselves had been allocated to Sir John under the Partition, then the security for the obligation ceased with the cessation of the obligation itself, and Sir John was entitled to call for a reconveyance i.e a transfer of the policy.
- Although it is unnecessary for me to decide the issue I should record that I have real doubts as to whether Mr Howard has in any event the standing to pursue this claim. A claim that under the Partition Sir John held the proceeds of the National Mutual policy upon trust for Mr Howard absolutely is a claim that must have vested in Mr Howard's trustee in bankruptcy for the benefit of his creditors. I doubt that it passed to Mr Howard under the November Assignment. Whilst the November Assignment recites at some length the Will and makes frequent reference to the "name and arms" clause and to Mr Howard's case that Sir John had forfeited his interest (so that as from the date of the Disentailing Deed Mr Howard has been absolutely entitled to the estate), it makes no mention whatever of the Partition. So when one comes to the words of assignment the primary subject matter to be assigned is what are called "the Third Assignment Rights": and these are defined as
"such rights title and interest [as] the Trustee has under, consequent upon, or arising in connection with the Will and in particular those connected in any way with the Name and Arms Clause, the forfeiture provisions[etc]…".
The Third Assignment Rights are then stated to include
"the right to recover all monies, estates, assets and interest of whatever nature derived from or connected whether directly or indirectly to the Third Assignment Rights".
The claim to the National Mutual policy arises (not "under, consequent upon or in connection with the Will", but) under the 1969 Deed and under the Partition. The words of assignment are undoubtedly wide: but there is a real issue whether they are wide enough to cover rights under documents that are not anywhere mentioned.
- The Hill Samuel policy raises slightly different issues. Once again I consider it clear that this policy was not an asset of the Will trust fund, and so was never capable of being an "unallocated asset of the settlement". Until the Partition it was held on the separate trusts declared in the 1973 Deed. But it was held on trust only because Sir John had covenanted with the trustees of the Will as such to effect a policy in the names of the trustees i.e. the trust depended upon the continued specific enforceability of that promise. But by paragraph 7 of the First Schedule to the Partition the benefit of all promises which Sir John had made to the trustees was allocated to Sir John (making him the obligor and the obligee and effecting a release). Sir John was thereafter entitled to the Hill Samuel policy beneficially.
- If I am wrong in that analysis then I would make the same holdings as are set out in paragraph [168].
- I also entertain the same doubt as is recorded in paragraph [169].
The Chattels
- In paragraph 9.4 of the Particulars of Claim Mr Howard alleges that his grandfather William Lawson owned the majority of the contents of Corby Castle and that Mr Howard
"… believes either [William Lawson] gave these to him prior to 1980 and that [Mr Howard] unwittingly passed them [by means of the Disentailing Deed dated 18 August 1980] to the Trust…. As such they became the property of the Trust in 1980… Or, if these Chattels did not form part of the Trust by virtue of the Disentailing Deed, [Mr Howard] believes that they were passed to him outright by his grandfather, [William Lawson], during his lifetime".
- In his Claimant's Response of 9 February 2012 Mr Howard enlarged on this by alleging (in paragraph 216) that at a meeting in late 1986 William Lawson (having heard Mr Howard's complaint that he had been made, under undue influence and duress and without any legal advice, to disentail in 1980 and then to partition the estate in 1984) said to Mr Howard "Its all yours". Mr Howard does not allege that those are words of immediate gift. He alleges that the words refer to an earlier gift made "at some point, most likely in 1978-1980 after [William Lawson] discovered that [Sir John] had sold… pictures to the Trustees before challenging [William Lawson's] ownership of the contents of Corby". Mr Howard alleges (in paragraph 218) that the failure of William Lawson to mention him in his Will gives grounds for belief that his grandfather must have passed the contents of Corby to Mr Howard by lifetime gift.
- Mr Howard's oral evidence on this was that he did not know when William Lawson had given the chattels to him because he had no document. (He accused his Uncle Hugh Lawson of removing from William Lawson's solicitors' files in 1997 the papers that would prove the gift of the chattels: this was a wild allegation). Mr Howard gave evidence that William Lawson had simply said sometime between 1983 and 1986 "This is all yours": and that Mr Howard thought that since he was the first tenant-in tail his grandfather (William Lawson) must have given the chattels to him.
- It should first be observed that this pleaded case is quite contrary to that advanced by Mr Howard when he attempted to frustrate the sale of the Chattels in June 1994. The case he then advanced was that William Lawson had simply left the chattels in Corby castle when he moved out and so the chattels were "either the possessions of the House or Trust… or form part of what could now be a partially intestate will….". It also contrary to the case he subsequently advanced when canvassing support from other members of the family in 1997/98. The present case is therefore a relatively late creation.
- There is now a measure of agreement about the actual devolution of the chattels. In the Settlor's will they were given to his widow Alice outright. They thereafter remained the free property of successive individuals. They were generally made the subject of lifetime gifts in order to avoid estate duty being payable on them. Alice gave them to her daughter, Ursula. Ursula married Col Levin in 1949, and she executed two Deeds of Gift in his favour. She gave the Chattels of national and historic interest to Colonel Levin by Deed of Gift on 10 December 1951; and the general Chattels by a further Deed of Gift of the 1 December 1957. When Ursula died Col Levin himself gave various of the Chattels away: the gift was effected by delivery and recorded in a Memorandum. Thus he made gifts to William Lawson and various other members of the family and recorded them in a Memorandum dated 20 January 1960 (concerning the general Chattels): and further gifts (to William Lawson and two others) recorded in a Memorandum dated the 10 May 1960 (concerning the articles of national, historic or artistic interest). What thereafter happened to the Chattels given to William Lawson is more controversial. I turn to the case made.
- Mr Howard's first case is that he (Mr Howard) unwittingly transferred his free property in the Chattels to the Trustees by the Disentailing Deed, so that the proceeds of sale should have formed "a trust asset" which (because it was not mentioned in any of the Schedules to the Partition) fell to be treated as Mr Howard's absolute property. The first step in the argument is that the Chattels became part of the Corby settled estate because by the Disentailing Deed Mr Howard conveyed, assigned and disposed of to the Trustees
"All the freehold and leasehold lands and property (whether corporeal or incorporeal) monies stocks funds shares and other personal estate (including Chattels and Heirlooms)… to which the Grantor is entitled…."
- In my judgment this case is unarguable. It is founded upon a selective reading of the Disentailing Deed which distorts its meaning. The full words of conveyance referred to
"The freehold and leasehold lands and property (whether corporeal or incorporeal) monies stocks funds shares and other personal estates (including Chattels and Heirlooms) now subject to the subsisting limitation or trusts of the settlement to which [Mr Howard] is entitled for such entailed interest as aforesaid…"
- If one assumes (for the purposes of the argument) that the Chattels had been given to Mr Howard by William Lawson at some time in 1978-1980 then they were his own free property and they were not capable of being caught by the words of conveyance. They were not, as at the date of the Disentailing Deed, "now subject to the subsisting limitation or trust of the Settlement" nor was Mr Howard then entitled to them "for such entailed interest as aforesaid". They were (on the assumption made) his own free property. They had never been subject to the trusts of the Will. I need not consider this case further.
- I therefore address the alternative case. This is (a) that the Chattels were given by William Lawson to Mr Howard outright (but secretly) in some way between 1978 and 1980; (b) that the Chattels were sold on about the 18 May 1994 and raised approximately £640,000.00; (c) that Sir John should not have had the sale money (because he was not the true owner of the Chattels) and that the money should have gone to Mr Howard's trustee in bankruptcy (d) Mr Howard can now pursue the trustee's claim under the April Assignment.
- To succeed in this claim Mr Howard needs to show on the balance of probabilities that, at the date of the sale in 1994, the Chattels belonged to him.
- Mr Howard devoted much energy and effort in endeavouring to demonstrate that, as at the date of the sale in 1994, the Chattels did not belong to Sir John. But this does not avail him. To succeed in his claim he has to show that he (Mr Howard) was the true owner. I therefore turn to examine whether, on the facts, Mr Howard has succeeded in so doing.
- I have mentioned so much of the deep history of the Chattels as is necessary to render Mr Howard's case intelligible. It was established as common ground before me both that by means of such gifts the Chattels in both categories vested in Mr Howard's grandfather, William Lawson; and that William Lawson would, like successive previous owners of the Chattels, have wished to avoid paying estate duty or Transfer Tax. On 25 March 1963 William Lawson was advised by his solicitor that if he wished to make over the Chattels then he could simply hand them over to the donee who must retain possession of them. On the 19 December 1963 William Lawson was further advised :-
"When the time comes for you to move out of the Castle and for [Sir] John to take over, you should sign a similar Memorandum of Gift in [Sir] Johns favour so as to avoid, if possible, any risk of duty ever having to be paid on these things. The important point to remember is that these things, although popularly considered to be Heirlooms are not in fact Heirlooms in the legal sense of that word – in other words they do not automatically pass to whoever is the tenant for life for the time being of the Corby Estate that must be given by one occupant to the next, as was done in 1960 when Colonel Levin gave them to you".
- It is known that William Lawson did not follow this advice to the letter because no Memorandum of Gift has been found. The question is whether he acted on the substance of that advice by giving the contents to Sir John when Sir John became the occupant of the Castle in 1970, or whether he kept them in 1970 and later (in about 1978) gave them to Mr Howard (without informing Mr Howard that he had done so and in the knowledge that Mr Howard was not the occupant of Corby Castle).
- What in fact happened is obscure, and the documented consideration of what happened is bedevilled by incorrect assumptions. But in February 1977 Mr Eastwood (the trust's Solicitor) wrote to the Trust accountants:-
"So far as the contents of the Castle are concerned, these were left specifically by [the Settlor] in his Will to his wife absolutely and were not included in the Settled Estate. We understand that [his wife] bequested them in turn to her son, [William Lawson], who gave them to [Sir John] when he moved out of the Castle. We are not able to verify the bequest to [William Lawson] as we have not had a sight of his mother's Will. The contents therefore presumably passed by delivery to [Sir John] on the date when he moved into the Castle".
- It is evident that the writer is speaking of what he believes must have happened, and has mistakenly assumed that the Chattels passed by bequest. It would seem that no (or only limited) enquiries had been made.
- In 1978 it was believed that Sir John was the owner of all the Chattels. A Scheme was proposed under which he would sell the Chattels to the Trustees with the object of raising cash to enable him to pay the school fees of Mr Howard and his siblings. This required an application to the Court. This was made by an Originating Summons dated 13 July 1978 which was supported by an affidavit from Mr Scrope who deposed that:-
"The proposal concerns the purchase from [Sir John] of numerous Chattels which are at present amongst the family Heirlooms held at Corby Castle that which belong to [Sir John] outright".
- The manner in which he had acquired them is not set out. I consider it likely that everyone assumed that the suggested evolution set out in the 1977 letter correctly recorded what had happened.
- But at the same time as the Originating Summons was actually issued Sir John became aware of Ursula's 1951 and 1957 Deeds of Gift and the Memoranda prepared by Colonel Levin. This was obviously only part of the story, but it demonstrated that the assumption that William Lawson had obtained the Chattels by bequest from his mother was wrong. Mr Howard says that this is when everyone discovered that the Chattels in fact belonged to William Lawson (and not to Sir John as the Originating Summons assumed). But I do not think that that is an accurate recollection. More accurately, this was the occasion when everyone discovered that the route by which the Chattels appeared to have devolved upon Sir John was not as it was believed to be, and that the consequences had to be examined.
- There is no documentary evidence to support Mr Howard's assertion that in 1978 it was "realised" that all of the relevant Chattels still belonged to William Lawson: and the documents suggest the contrary. Even after the discovery of the 1957 Deed and the 1960 Memoranda William Lawson was appointed Mr Howard's guardian ad litem in the proceedings commenced by the Originating Summons. That simply could not have occurred if it had been thought that William Lawson had some personal interest contrary to the proposal (because he, and not Sir John, was the outright owner of the Chattels).
- Mr Howard says he remembers a huge family fallout at this time (he was not then 18). But I find no connection between any such "fallout" and the discovery of documents recording the devolution of the Chattels. It is not mentioned in the Instructions contemporaneously placed before Mr McCall of Counsel, and Mr McCall (given his eminence in this specialist field) would undoubtedly have referred to any impediment to the Court application arising out of any claim that William Lawson was the true owner of the Chattels.
- Mr Howard says that the discovery of the 1957 Deed and the 1960 Memoranda and the "realisation" that Sir John was trying to sell to the Trustees property which in fact belonged to his father, William Lawson, was the spur which prompted his grandfather to give Mr Howard all the Chattels (albeit without telling him he had done so). But I do not consider there was any such "realisation".
- How was any such gift effectively made? There is no Deed of Gift. Mr Howard suggests that that is because people will not give him the document (although there is no suggestion in any of the surviving material that such a document was ever prepared or executed). Mr Howard does not suggest that the Chattels were ever physically given to him. Indeed he says he was ignorant of the "gift" until sometime between 1983 and 1986. On some occasion William Lawson then said to him "this is all yours". William Lawson was not then living at the Corby Castle, so the content of the "this" is obscure: and Mr Howard agreed in evidence that it was very strange that his grandfather had not said to him "the Chattels" or "the Corby Furniture" are yours. Mr Howard says that it was only in 1997 that it began to be clear to him that something must have happened between 1978 and 1980, and it dawned upon him that the fact that he had by "gift" received all the Corby Chattels explained why he was not mentioned in William Lawson's will.
- In my judgment Mr Howard has completely failed to establish on the balance of probabilities that in 1994 he was the true owner of the Chattels. The suggestion that on some unknown occasion and by some unknown means William Lawson gave to Mr Howard the contents of the house in which Sir John lived, but never told Mr Howard or anybody else about it is speculation bordering upon sheer fantasy. The assertion that there is some conspiracy to conceal from him a Deed of Gift or to suppress the fact that there was a transfer of title to him by delivery (in order that the property should be kept out of the hands of Mr Howard's trustee in bankruptcy) is entirely without foundation. Mr Howard's claim to the Chattels fails.
- In June 1994 Sir John wrote to the auctioneers of the Chattels in response to Mr Howard's challenge:-
"My father handed all the furniture to me, verbally, shortly after we moved in here in 1971 when he moved to a smaller house".
Then Mr Howard's two uncles wrote to him in June 1994:-
"The Corby furniture passed to [William Lawson] but he gave it verbally to your Pa. He had a conversation with John when he made it clear that he would not be left anything further…"
I consider that those are accurate family accounts of what happened. The Chattels belonged to Sir John.
The Bill of Sale
- In paragraph 9.3 of the Particulars of Claim Mr Howard alleges that on about 24 June 1997 (a mistake for 1977) pursuant to a Bill of Sale in favour of the Trustees Sir John parted with 48 pictures at Corby Castle (valued at £18,170) that belonged to William Lawson in return for a loan believed to be in excess of £7500. Mr Howard complains that Sir John "has failed to account to the Claimant either for the said pictures or for their value together with interest". Implicit in that allegation is the plea that the pictures did not belong to Sir John but that what had belonged to William Lawson came either (a) to belong to Mr Howard after 1977 or (b) to form part of the property subject to the trusts of the Will and allocated to Mr Howard on the Partition (so that there arose a duty to account to him). In his Response Mr Howard opts for analysis (b) and makes clear that he "contends the pictures became an asset of the Trust after the Bills of Sale were executed": then he explains (at paragraph 210 of the Response) that he unknowingly introduced them into the trusts by executing the Disentailing Deed in 1980.
- This is therefore a "re-run" of two arguments I have already dismissed.
- The facts are these. In March 1977 Sir John informed the trustees that he wanted an advance of just over £1000 out of trust capital to pay school fees, and he offered to execute a Bill of Sale on the security of the furniture. In that connection a Sotheby's valuation was obtained. The £1063 was advanced. Sir John then asked for a further advance of £7500 for school fees and farming capital against his promise "to execute a Bill of Sale in favour of the trustees in respect of pictures to the value of £30,000". The clear basis on which this offer was made by Sir John and the basis on which it was considered by the trustees was that Sir John owned the pictures. This basis was (I hold) correct.
- The requested loan was made on 22 June 1977: and the bill appears to have been registered. I am satisfied that the Bill was by way of security. Mr Eastwood reported the transaction to the trustees in these terms:-
"[Sir] John has now signed a conditional Bill of Sale in favour of the Trustees….covering the present unauthorised advance of cash".
- In his evidence Sir John was firm that the transaction did not proceed to completion. But on this the documents are against him. This is an instance of failing memory or confused recollection in relation to a transaction that occurred 35 years ago. It is no evidence of fraud or of fraudulent concealment.
- In the Partition all liabilities owing by Sir John to the trustees were allocated to the assets taken by Sir John absolutely (so that he became both obligor and obligee, and effecting a release). After the Partition he wrote to Mr Eastwood (in August 1985) saying that in view of this "the pictures should be officially released" i.e. that the trustees had no need of a continuing security under the conditional bill of sale for the performance of an obligation that no longer existed. This was undoubtedly right: and although I can trace in the documents no formal dealing with the bill of sale in my judgment it ceased to be an enforceable security and Sir John was entitled to demand its discharge.
- In summary the position is
a) the bill of sale only ever operated as security over pictures that were in the ownership of Sir John;
b) the debt for which they provided security was allocated to Sir John on the Partition, so that it was released and the security discharged.
- In my judgment the pictures never belonged to Mr Howard and could not in any circumstances have been introduced into the Corby settled estate at the time of the Deed of Disentail.
The statue of "Faith" by Nollekens
- Paragraph 9.5 of the Particulars of Claim alleges that "Faith" (which is a statue of historic importance situated in the Howard Memorial Chapel in Wetheral) "is properly the property of the Claimant". The Response expands upon this bare plea. Mr Howard contends first that the statue was treated as "a possible future asset" by Mr Scrope, and if it was made a trust asset then because it was not specified in any of the Schedules to the Partition it is held on trust of Mr Howard under the "catch-all clause". Alternatively, if it was not made a trust asset then Mr Howard contends that the statue was given to him by William Lawson at the same time as he was given the contents of Corby Castle.
- Paragraph 235 of the Response expands this plea to "other Howard statuary … in the chapel": but this was not identified or considered in detail at trial and I shall not consider that further, treating my determination of Mr Howard's claim to ownership of "Faith" as determinative of the wider claim.
- Maria, the first wife of Henry Howard died in childbirth in 1789, the first year of their marriage. Henry Howard paid Joseph Nollekins £1,500 to sculpt a most beautiful memorial to motherhood. Its beauty is said to have inspired Wordsworth to write two sonnets. It was placed in the memorial chapel which Henry Howard built over the family vault. The repair of the memorial chapel presented difficulties, for the Settled Land Act 1925 did not permit the resort to capital for that purpose. Those difficulties were overcome by the trustees lending money to Ursula for the purpose against her undertaking to repay the trustees. This provided a precedent for the arrangements made with Sir John.
- In 1982 Wetheral PCC offered to accept responsibility for the repairs to the Howard Memorial Chapel in return for the transfer of the ownership of the chapel (but not its contents) to them. The trustees agreed this: and Mr Scrope expressed relief that
"Nollekens statue has been excluded because this must be a possible future asset".
- The requisite Deed was entered into on 7 February 1983. It recited that questions had arisen as to the obligation to repair the chapel and as to its future ownership. Clause 1 declared that the chapel should henceforth be part of the parish church. Clause 2 provided:-
"That the sculpture of Maria Howard with Infant by Nollekens situate in the said Chapel and all other memorial plaques situate therein and the vault underneath the said chapel shall remain the property and responsibility of [Sir John] and his successors in title."
- In 1997 Mr Howard wrote to Sir John seeking confirmation that "the Nollekens…..which is a trust asset has not been sold". He received from Sir John the simple (and wholly accurate) response
"The statue at Wetheral Church belongs to me and has nothing to do with the Trust".
- As with Mr Howard's claim to the Chattels generally, this claim is hopeless. There is no evidence that the Nollekens statue ever was an asset of the Corby settled estate. There is no evidence that it became an asset of the trust at any time after Mr Scrope's letter in 1982. It never could have become an asset of the Corby settled estate by operation of the Disentailing Deed. It could never have become subject to the "catch-all provision" in the Partition because it was never a trust asset. The supposed gift by William Lawson of the Nollekens statue to Mr Howard is a speculative creation of Mr Howard's having no objective reality.
Loans to Sir John
- Sir John admits that the Trustees lent him £229,757 (although there is no detail as to when and in what individual sums such loans were made). Under the Partition (paragraph 7 of the First Schedule) loans due from Sir John to the Trustees were allocated to the share of the assets passing absolutely to Sir John. In paragraph 9.6 of the Particulars of Claim Mr Howard alleges that such loans were unlawful and in breach of trust: in paragraph 239 of the Response he requests that
"due to deliberately falsified accounting and fraudulent concealment of so many issues and loans and assets in the Trust at the time of the Partition [paragraph] 7 be declared void by the court… not least for undue influence and fraudulent breach of trust".
- He also alleges that the true amount of the loans was £476,523: and he asserts that Sir John "must account for the whole £476,523 to the Claimant together with interest".
- As I have recounted (paragraphs [30] and [110] above), at the time of the Partition a balance sheet was drawn up by Pomfret Rushton after a lengthy examination of the files. I have rejected Mr Howard's case that this balance sheet was concealed from Mr Wood in the course of negotiations as "a baseless conspiracy theory". I regard the case that this trust balance sheet was "fraudulently conceived" (Mr Howard's Response at paragraph 145) as equally without foundation. It is known that there existed a Capital Account to April 1974, a Capital Statement to September 1974, a Capital and Income Statement to March 1976 and a Schedule of Particulars of Assets and Liabilities as at 5 March 1976, since these are documents referred to in the correspondence. It is also known that Mr Eastwood intended to prepare far more comprehensive estate accounts than had been prepared by Blount Petre (the trust solicitors who had preceded him): for that too is discussed in correspondence. Such material as there is (including Pomfret Rushton's invoice) therefore points to the 1983 balance sheet having been prepared from genuine accounting material.
- Pomfret Rushton were instructed to draw up a trust balance sheet recording the assets and liabilities of the trust, and for that purpose to use the valuations with which they were provided. The 1983 balance sheet recorded loans to Sir John of £229,757. A small part of this total is described as relating to "SLA improvements" (and may well therefore have been an authorised application of capital monies by the trustees). But Sir John does not take that point. Mr Howard's two points are (a) the figure of £229,757 is not accurate: (b) the inaccuracy is caused by deliberately falsified accounting and fraudulent concealment.
- The challenge to accuracy of the figure is based upon what is called the "expert report of Reeves" which Mr Howard was given permission to adduce. As to this
a) It is not an expert report because there is wholesale non-compliance with CPR Pt 35;
b) The instruction given to the compiler of the report was "to verify the chart [Mr Howard] has produced showing loans made to the Defendant /payments made on his behalf from trust capital" and to do so on the basis of material which Mr Howard had provided: Reeves were not asked to exercise an independent professional judgement upon material of their own selection for review;
c) The verification process is undertaken on what appears to me to be the same mistaken legal basis upon which Mr Howard's own chart proceeds viz. that all sales of timber are simply to be carried to capital account (whereas (i) since Herlakenden's Case (1589) 4 Co Rep 62a at 63b timber cut from a timber estate is to be treated as the annual fruits of the land rather than as part of the inheritance: (ii) timber may be cut by a tenant for life unimpeachable of waste: and (iii) under s.66 of the Settled Land Act 1925 timber cut by a tenant for life impeachable of waste is to be apportioned between income and capital);
d) The Reeves report is challenged in a true expert report (that does comply with CPR Pt 35) prepared by Peter Smith FCA of Quantis;
e) The Quantis Report makes the fundamental point that it is not possible to reconcile the chart produced by Mr Howard (and verified by Reeves) and the balance sheet produced by Pomfret Rushton without access to the documents from which the latter were working (which date back 50 years);
f) The Quantis Report also identifies transactions totalling £200,495 which are said in the Reeves report not to be accounted for but which are traceable in the accounts;
g) The Quantis Report says that that the Reeves report also appears not to have taken into account certain repayments by Sir John (though these amount only to some £352);
h) There is evidence to suggest that Sir John spent a considerable part of the money lent to him upon improvements to the settled land (in particular to put part of it into a lettable state) and it would appear that in preparing his chart Mr Howard made no allowance for such expenditure, focussing only upon what Sir John received;
i) Mr Howard did not call anyone from Reeves to address these criticisms, so that is impossible to form a view as to the ultimate reliability of the work undertaken by Mr Howard and verified by Reeves.
- On this evidence I am unable to conclude on the balance of probabilities that the Pomfret Rushton statement of loans due from Sir John to the trustees is materially inaccurate. The Reeves report is of little evidential value (other than to confirm that Mr Howard's arithmetic is correct).
- If the Pomfret Rushton statement is inaccurate there is nothing (other than Mr Howard's conspiracy theory) to support the assertion that the inaccuracy was caused by deliberately false accounting. It is easy to assert that Mr Eastwood must have suppressed the detail of unauthorised loans: but there is not a shred of evidence that he did so, and (given that Mr Howard was actually receiving more under the Partition than he was initially seeking) it is not possible to think of a convincing reason why Mr Eastwood should consider it necessary to do so.
- In these circumstances even if I had concluded that the Pomfret Rushton balance sheet was materially inaccurate I would have held that any claim to repayment of the loans was long since statute barred.
- I have already dealt in paragraph [116] above with the ability of Mr Howard to challenge the alleged inequity of the Partition (on the grounds of misstated loans or otherwise).
The Conniscliffe chief rents
- Paragraph 9.7 of the Particulars of Claim alleges that chief rents at Coniscliffe are referred to in the Vesting Deed, but that Sir John has failed to account to Mr Howard in respect of such sums received together with interest. Paragraph 248 of the Response explains that
"Regardless of their value these ground rents were an undisclosed asset at the time of the Partition and should have passed to the Claimant".
Mr Howard goes on to accuse Sir John of fraudulent breach of trust.
- The Conniscliffe chief rents were the small remnant of an estate that had otherwise been sold off by the Settlor. Mr Scrope was informed of their existence when he became at trustee in 1960: they were then described as "the very small amount of [£5.60]". That was £2.50 p.a from Snaith, £2.50 p.a from Eshelby and 60p p.a from Lord Barnard in respect of the Raby Estate. From September 1974 Mr Eastwood's firm had been collecting these ground rents for the Corby estate on a periodic (not annual) basis. Mr Howard said at trial that he believed the Raby ground rent had ceased to be collected from about 1976: and I have not traced any collections recorded in the documents. Mr Eastwood's firm ceased to be solicitors to the trustees in 1999. But they continued to send demands on behalf of the Settlor's executors, rather than on behalf of Sir John as tenant for life of the Will trust. So in 2004 there was an attempt by Mr Eastwood's firm to collect the ground rent due from Eshelby in the sum of £2.50 p.a. on behalf of the Settlor's executors (not Sir John); and in 2008 to collect ground rent from Snaith in the sum of £2.50, again on behalf of the Settlor's executors (not Sir John). But in 2005 (since collection was obviously uneconomic) Mr Eastwood's firm indicated they would no longer be collecting. It is not apparent whether anyone thereafter sought to do so.
- Mr Howard says that small though the sums involved are, it is not possible that existence and ownership of these ground rents have been overlooked. He says that Mr Eastwood decided deliberately to conceal them from Mr Howard; that Sir John was party to this arrangement and he too deliberately concealed the asset; and that Mr Scrope knew about these activities of Mr Eastwood and Sir John but did nothing about it. Why anyone (let alone professional men or men of standing in the City) should conspire to conceal the rights to collect in the aggregate £5.60 p.a. (which it would cost more to collect than it would yield) was not explained.
- In my judgment Mr Howard is in part right about this claim. The Coniscliffe chief rents were vested in Sir John in 1963 as tenant for life. Under the Partition the Coniscliffe chief rents were not allocated under any of the Schedules. Being "assets not specified in any Schedule….which may be comprised in the Settlement" they were declared to be held in trust for Mr Howard absolutely. They were not however included in Mr Howard's 1984 Conveyance. They therefore continued to be vested in Sir John as trustee for Mr Howard absolutely i.e upon a bare trust. Whether or not Sir John has collected the ground rents Mr Howard is still able to assert his equitable title against Sir John and to call for a conveyance of the ground rents: Limitation Act s.21(1)(b). I will order Sir John (if he does not undertake forthwith to do so) to convey the ground rents to Mr Howard.
- Where Mr Howard is wrong is to say that Sir John has been guilty of any fraud in this connection. Sir John told the Master in the course of a directions hearing (in the accounts proceedings) in February 2005 that he was not aware of the ground rents and did not know that they were being collected. Mr Howard says that this is "impossible". But in my view it is entirely probable; for at the time the demands for the ground rents were being made by Mr Eastwood's former firm not on behalf of Sir John as tenant for life of the Corby estate, but on behalf of the executors of the Settlor. (How they were then accounted for is entirely unclear). There is accordingly no satisfactory evidence that Sir John actually knew of the continued payment of these rents, nor any satisfactory evidence that he knowingly received them (or that he received them at all). The sum in question is in any event far too small to warrant the ordering of any account or inquiry. I shall therefore grant no consequential relief.
Manorial rights
- Paragraph 9.10 of the Particulars of Claim contains a bald claim for an account of the "manorial rights" together with all capital raised (if sold) plus interest from 1984. The Response does not illuminate the claim to any great degree. Paragraph 262 simply says:-
"The manorial rights were a personal asset of the remainderman of the trust at the time of the 1984 partition. As such they were the property of the Claimant and in any event under the "catch-all" clause."
Mr Howard claims an account from Sir John of all monies received if he has sold any manorial rights.
- Because Mr Howard has not identified in his pleaded case what manorial rights he is referring to it is tempting to strike out this plea as "embarrassing" (in the technical, pleading, sense). But in order to deal with as many of the multiple issues that Mr Howard raises as possible, I will try and adjudicate upon it.
- There is no full account of any manorial rights in the documents. Mr Howard must prove on the balance of probabilities from such material as does exist either (a) that the manorial rights to which he obliquely refers were his personal assets; or (b) that they were comprised in the Corby Settled Estate and were allocated to him under the Partition; and in either event (c) that they were sold and Sir John received money for which he must account.
- The story has an abrupt start. There is no mention in the 1963 Vesting Deed, the Partition or Mr Howard's 1984 Conveyance of any manorial rights existing in gross (or not annexed to or reputed to belong to Corby Castle). But in 1992 Mr Howard's solicitor (Mr Wood) noticed a reference in the "Wills and Whereabouts" section of the "Law Society Gazette" to some "manorial rights" (apparently at Great Corby) to which he drew the attention of Mr Eastwood. (There is later reference to additional manorial rights at Little Corby and Great Cunliffe: but I am not clear that these were referred to in the published material). Contact was made with Manorial Auctioneers Ltd with a view to establishing whether there was anything that could be the subject of a sale: but it is clear (from Mr Eastwood's bill dated 1 February 1994) that no separate sale took place. So there is nothing for which to account on that head.
- When Lord Ballyedmond bought the Corby Estate in January 1994 he expressed interest in buying "the manorial rights" if title could be made. In the course of attempting to make title Mr Eastwood appears to have established that those manorial rights (whatever they were) were the subject of an 1875 Marriage Settlement (and so were not the personal property of the Settlor capable of being made subject to the trusts of the Will on his death in 1934). On this footing the manorial rights never formed part of the Corby Settled Estate. Sir John, however, appears to have held the view that if such rights existed then they ought to have formed part of the settled estate: and when he communicated that view to Mr Howard, Mr Howard said that as trustee of that estate he objected to their sale to Lord Ballyedmond. Sir John then indicated that he would accept Mr Eastwood's advice that the manorial rights were his personal property so that he could personally sell them to the owner of Corby Castle (which is where he felt they belonged). However, the surviving documents suggest that no such sale went through.
- On this evidence (a) there was no sale of the manorial rights in respect of which any account is due: (b) Mr Howard has not proved on the balance of probabilities that at the time of the Ballyedmond Contract the manorial rights were "a personal assets of the remainderman" (a puzzling expression not explored at trial) or a former asset of the Corby Estate allocated to himself on the Partition; (c) The manorial rights were either subject to the continuing trusts of the 1875 Marriage Settlement or had become the personal property of Sir John and if he dealt with them he would not have had to account to Mr Howard; (d) if the manorial rights were not the absolute property of Sir John but were part of the Corby settled estate then they would (if annexed to Corby Castle) have remained in settlement at the time of the Partition (being part of "Corby Castle") and would then have passed to Lord Ballyedmond under the general words implied into the Conveyance.
- The claim to relief in respect of the manorial rights fails.
The failed IVA
- When he encountered financial difficulties Mr Howard promoted an IVA. Paragraph 8 of the Particulars of Claim alleges that Sir John agreed to the settlement advancing funds to Mr Howard to pay the first instalment due under the IVA, but then withdrew his consent to the loan because of his own financial needs. Mr Howard alleges that as a result the IVA failed and his bankruptcy ensued. Paragraph 8 pleads:-
"The claimant claims damages to him by [Sir John] who as a trustee and tenant for life had a duty of care to ensure the Partition did not place the Claimant in an adverse financial position."
- Mr Boyd argued that in Mr Howard's Response the ground had shifted, so that it was difficult to know his real case: but I shall address Mr Howard's case as pleaded in his Particulars.
- I have recounted the general nature of the IVA. One of its terms was that by June 1993 Mr Howard would make (out of his anticipated earnings from development contracts) a payment of 100 pence in the pound to preferential creditors and a minimum of 20 pence in the pound to unsecured creditors. Further payments would be made in June 1994 and June 1995. In February 1999 Sir John wrote down his recollection of what had occurred in 1992/1993:-
"….he came up to Corby one weekend and told us he was trying to organise an IVA. He said that he had come to a verbal agreement with the bankruptcy people that by paying a sum of money in three instalments the problem could be resolved. He said that the first instalment would be about – if I remember correctly -- £163,000. He asked that the Trust property i.e. the Castle be lodged with some bank which he had already approached as security for this loan which would either be in my name or the Trust's name. When we asked who would pay the approximately £16,000 interest on this loan he said that I would have to. My wife and I were aghast at this as it would take up a large part of the money we raised in rents from our workshops etc. We next enquired about what would happen in the following two years of the arrangement, to which Philip replied that he thought a similar sum would be required. Obviously this was not a starter as we certainly could not afford to pay interest and as soon as we stopped the small bank which Philip had approached would foreclose and you can imagine the result of that on the whole proceedings. Everything would have to be sold piecemeal at the worst possible prices and the Estate would have been a complete mess"
- I regard that account as broadly accurate.
- Mr Howard says that the failure to assume liability for a loan or the failure to subject trust assets to a charge to secure a loan was a breach of Sir John's fiduciary duties as trustee, a breach of his duties as life tenant and a breach of his duty of care as father. But this claim is hopeless. Sir John owed no fiduciary duty as a trustee of the Corby settled estate to permit its assets to be charged to secure the personal liabilities of the remainderman: and nor did Sir John owe any such duty as tenant for life. No parent owes a legal duty to jeopardise an asset in which he has an interest in order to support his child's borrowing. This Mr Howard acknowledged in cross-examination. The claim is dismissed.
The £50,000 for "Fixtures and Fittings"
- Paragraph 9.12 of the Particulars of Claim contains a complaint about "the castle's fixtures and fittings". It alleges that they were an "undisclosed asset" in 1984, that at the time of the Ballyedmond Contract they were sold for a sum of £50,000 and that Sir John gifted these monies to his wife. Mr Howard says that this sum should have been credited to him, and calls upon Sir John to account for these monies to Mr Howard. It is to be noted that Mr Howard does not allege in the Particulars of Claim that at the time of the 1994 sale "the castle's fixtures and fittings" were the subject of the trusts of the Will. He confirms that this is so in paragraph 281 of his Response where he alleges that the fixtures and fittings (by which he means the items for which £50,000 was paid at completion of the Ballyedmond Contract) were "undisclosed assets" at the time of the Partition in 1984 and as such fell into the "catch-all" clause (and so became Mr Howard's absolute property).
- At trial however, Mr Howard advanced the argument that "the fixtures and fittings were vested in the trust by virtue of being part of the trust property" and that Sir John "despite being tenant for life and trustee deliberately converted trust property for his own benefit". This argument is entirely contrary to his pleaded case.
- I shall consider each of these competing and inconsistent cases.
- When Corby Castle was sold the sale specifically included all curtains and some fitted carpets, but it specifically excluded the remaining fitted carpets, all loose rugs and carpets, and all "fixtures and fittings" (though these were available by separate negotiation). By "fixtures and fittings" was meant chandeliers, wall mirrors, wall light brackets etc and household furniture. Mr Eastwood intended to draw up two schedules (one of what was included in the sale and the other of what was to be retained by Sir John). In relation to what he thought was included he prepared what became the Fifth Schedule to the Ballyedmond Contract: it listed items such as doors, fireplaces and shutters, the burglar alarm and pediments over doors, but also listed tables and coat hangers. As Mr Eastwood was doing this, Sir John was agreeing with the purchaser a list of items that were to be purchased for £50,000. This list was sent to Mr Eastwood on 24 November 1993, together with another list of items that might be thought of as "fixtures" (because they were screwed to the wall) but which Sir John intended to exclude from the sale and to take with him, such as mirrors and pictures. There were thus three lists, all dealing with "fixtures and fittings"
- What then happened is obscure and the documents present a confused picture. The Fifth Schedule remained part of Ballyedmond Contract: and on paper £50,000 was paid for the Fifth Schedule assets. But at the same time whatever it was that was being sold for £50,000 was the subject of a Declaration of Trust (now lost) in favour of Lady Howard-Lawson. At completion only £1.85million was paid (there was no separate additional payment of £50,000): and on distribution of the completion monies the sum of £50,000 was allocated to Sir John against the narrative "Loose fittings (carpets and curtains)". The £50,000 received for those items was paid by cheque to Lady Howard-Lawson.
- Sir John has throughout been quite clear that the list of "Fixtures and Fittings" set out in the Fifth Schedule was not separately paid for, but was simply part of the structure of the mansion house paid for by the purchase monies; and that £50,000 was paid for "soft furnishings".
- Lord Ballyedmond is of the same view. In 2005 he wrote:-
"I purchased the freehold of the property for £1.8 million, which would automatically include the fixtures and fittings. On a later visit by me to Corby castle I inspected some soft furnishings and chattels "in a state of severance". We agreed a sum of £50,000 for these. The transaction included rugs, curtains, a large mahogany bookcase, a fender and fire irons………".
- Mr Howard takes a different view: he says that these recollections of events are "dishonest and misleading" and that Sir John, Mr Eastwood and Lord Ballyedmond "have knowingly defrauded the trust".
- I dismiss this claim on four grounds.
- First, on this evidence Mr Howard has failed to establish on the balance of probabilities that Sir John received £50,000 for something that belonged to the trust. It is at least as likely (and the balance of the evidence tends to establish) that the £50,000 was received for loose furnishings, and no part of it was received for doors, fireplaces, shutters, pediments etc.
- Second, I reject Mr Howard's pleaded case that the "fixtures and fittings" (strictly so called, and some of which are listed on the Fifth Schedule) could ever have been "unspecified assets" that would become Mr Howard's absolute property under the "catch-all" clause. The fixtures and fittings in Corby castle vested (as part of Corby Castle) in Sir John as tenant for life by virtue of the 1963 Vesting Deed without specific reference being made to them. They continued to be vested in Sir John as tenant for life under the Partition as part of "Corby Castle, Great Corby" without specific reference being made to them. They were never separate but unspecified assets.
- Third, these proceedings were commenced more than 16 years after the transaction completed and more than 13 years after Mr Howard identified this (in the October List) as a matter of complaint. If the £50,000 did represent trust property Sir John parted with it 16 years before these proceedings commenced. The claim to recover in respect of that assumed breach of trust is barred by laches because brought 13 years after knowledge of the alleged breach was acquired by Mr Howard or his trustee in bankruptcy.
- Fourth, the right to complain in respect of this diminution is a right vested in the person entitled in remainder. That was (in 1994) Mr Howard's trustee in bankruptcy: and as a result of the assignment of the reversion was a right which came to vest in Sir John (whereupon the claim ceased to exist).
Consent to the sale of the Corby Estate in 1994
- Paragraph 10 of the Particulars of Claim refers to clause 4 of the Partition which fetters Sir John's power to sell or charge any property remaining subject of the trusts of the Will without the consent in writing of Mr Howard. Mr Howard alleges that the Corby Castle estate was sold under the Ballyedmond Contract but that Sir John failed to seek the consent either of Mr Howard or of his trustee in bankruptcy to that sale. The paragraph pleads that Sir John has thereby "acted to the detriment of the Claimant and the Claimant requires [Sir John] to account to him in relation to the same". In argument Mr Howard explained that he was seeking damages equivalent to the sum that could have been obtained by himself or his trustee in bankruptcy as the price of giving written consent.
- The sale of the Corby Estate in 1994 was undoubtedly triggered by the decision of Mr Howard's mortgagees (Duncan Lawrie) to sell the land over which they held security. It is plain from the documents that it was the intention of Sir John and his advisers that Mr Howard himself should be involved in the arrangements for the combined sale of the land in his ownership (driven by Duncan Lawrie) and the land held in settlement: and it is equally plain the Mr Howard desired that this should be so. He retained Evans Dodd as solicitors to advise him. On 2 September 1993 they wrote to Mr Eastwood to say that no documents were to be approved or signed without their approval.
- It was originally proposed that Mr Howard would himself be a party to any contract for the sale of the Estate (because he owned some shooting rights that had fallen outside the Duncan Lawrie charge). But in September 1993 there was a threat that Mr Howard would go bankrupt: and the proposal was put to Mr Dodd (Mr Howard's solicitor) that Sir John might buy these rights and himself sell them to the purchaser of the estate. Thereafter it was not intended that Mr Howard should be a party to the Ballyedmond Contract; though it was intended that he should sign a separate document recording his assent as trustee to the sale. This was done.
- There is no doubt that Mr Howard was sent the form of the Ballyedmond Contract, and that he looked at it from a personal point of view (not simply from the standpoint of a trustee). On 14 January 1994 he sent a "Memorandum" to Sir John saying of the Corby Estate:-
"You have not given any thought to others beyond yourself and thereby deprived myself and Bella, and our future generations and indeed the rest of the family [of] its enjoyment, and another bit of Great British history ends. Please ask Eastwood to draft a simple agreement to be signed as soon as possible in order to exchange contracts."
On 19 January 1994 he then spoke with his solicitor Mr Dodd and expressed the view that "he should get some benefit from the Trust as a result of the proposed sale" It appears that he did not inform his trustee in bankruptcy of the intended sale of the shooting rights or of his personal involvement in the sale of the Estate or his desire to extract a personal benefit. (Mr Howard evidently changed his position about declining to agree a sale unless he got something out of it personally, once it was explained what the consequences were of the sale falling through; and he subsequently signed a consent to the sale on 20 April 1994 and again on 21 April 1994).
- There is not the slightest doubt that Mr Howard was intimately involved in the sale of the Corby estate. He later sought recoupment from the trust for 65 faxes, 539 telephone minutes and 5895 correspondence minutes in respect of his involvement in the sale, and charged the trust over £6000 for his time. But Mr Howard's point at trial was that the requirement of his written consent to the sale of any settled property was a personal right (not one held by him as trustee): and that the only formal documents he ever signed were signed by him in his capacity as trustee. He says that he (or his trustee in bankruptcy) could have charged for giving his personal consent to the transaction if only he had remembered that he had this "personal right of veto" (but any belief that he had any rights at all "had been beaten out of him").
- This claim is nonsense. There is no doubt that Mr Howard did in fact consent to the transaction of sale in a personal capacity: indeed his Memorandum of 14 January 1994 might be read as consent in writing given its request for a simple agreement in order that contracts be exchanged. I do not consider that either he or his trustee in bankruptcy had any bargaining position that they could use to leverage a payment to put that consent in writing. The Partition (which contained the requirement of written consent) did not form part of the title and Sir John could convey the legal estate even in the absence of written consent from Mr Howard or the trustee in bankruptcy (as happened). Neither Mr Howard nor the trustee would have jeopardised the sale in order to extract a "personal" benefit: Mr Howard threatened to do so, but backed off when he realised the impact of a piecemeal sale.
- In any event, if Mr Howard (or his trustee) did have some cause of action founded upon the failure to obtain written consent that cause of action would have become statute barred in 2006 at the latest: for the terms of the Partition were never fraudulently concealed, and the terms of the sale were fully disclosed.
The fees agreement
- Following the circulation of Mr Howard's October List, he and Sir John sought to agree upon a mode of investigation. In paragraph 13 of the Particulars of Claim Mr Howard alleges that in 1998 an agreement was made between Eversheds (acting as the trust solicitors), Ward Hadaway (Sir John's solicitors) and Dawsons (the firm then acting for Mr Howard) that " each party's fees will be paid for by the Settlement". He alleges that Sir John refused to authorise payment of Dawsons' fees, which caused Dawsons to issue a bankruptcy petition against Mr Howard and "as a result of the same the Claimant suffered substantial loss and damage", in respect of which he seeks damages against Sir John "who as a former trustee and tenant for life had a duty of care to the Claimant in all respects".
- The claim is impossible to square with the surviving documents.
- There simply was no agreement in 1998. Mr Howard decided to retain Dawsons as his solicitors to advise him in his dispute with Sir John and Mr Eastwood. In February 1999 Dawsons gave details of the costs they had incurred (then some £8500 plus VAT with some additional work in progress) and communicated to Eversheds Mr Howard's willingness "for these expenses to be met from the trust if his father will agree". Dawsons added:-
"[Sir John's] authority to secure payment from the Trust of these fees will help [Mr Howard] put some of the history behind him which will certainly help his approach to a final settlement".
This is of course inconsistent with there being any binding agreement in 1998 to this effect.
- There was then a significant meeting between the solicitors for the various parties on 18 May 1999. At that meeting Dawsons agreed (on behalf of Mr Howard) that certain issues would not be pursued (in particular about furniture and the "name and arms" clause). I am satisfied that in return Sir John's solicitors agreed that the reasonable fees of Dawsons down to 18 May 1999 could be paid out of trust money. It was also agreed that the trust fund would bear the costs of Eversheds' examining the deeds to identify transactions under which capital money arose, from the date when Sir John became life tenant until the Partition (or possibly the completion of the Ballyedmond Contract: the notes are ambiguous) and the obtaining of an estimate of the cost of preparing audited capital accounts. It was understood that the payment of costs incurred after 18 May 1999 would have to be reviewed when the process of identifying capital transactions had been completed and could only be incurred on a controlled basis.
- Unfortunately, Mr Howard immediately afterwards contended that Dawsons had no authority to reach any such compromise: and he fell out with the partner in Dawsons who had been handling the retainer (so that someone else in the firm had to take over the retainer and read into the matter). This caused consternation. It was immediately stated by Sir John's solicitors that costs incurred by Mr Howard after the date of the meeting could not in any circumstances be paid out of the trust estate: but that Sir John remained open to consider payment out of trust monies of earlier fees after "a satisfactory explanation of the level of these fees". It should be noted that the trust was inevitably having to bear some £13,000 of fees charged by Eversheds for their participation in the exercise as solicitors to the trust.
- Dawsons then presented a bill in the sum of £34,930 for work undertaken between January and September 1999 (including disbursements on Counsel's fees). Not only was this four times the size of the bill under discussion in May 1999, but it included much work after 18 May 1999. Unsurprisingly Sir John was not willing to agree to the trust paying. Meanwhile Dawsons were pursuing Mr Howard for payment of their fees, and the firm eventually bankrupted him. That bankruptcy was set aside in September 2006: and the new professional trustees decided (if Mr Howard were to accept the payment in full and final settlement of any claims he had against them) to pay Dawson's £34,000 bill out of trust capital.
- From this it is apparent that the only agreement that was reached was reached at the meeting on 18 May 1999: and it was immediately broken by Mr Howard. Sir John remained open to the possibility of agreeing pre-May 1999 costs, but Dawsons never submitted a bill confined to this period. Instead, Dawsons continued to work for Mr Howard even though (a) it had been agreed at the May 1999 meeting that future costs would only be considered for payment if incurred on a controlled basis; and (b) it had been made clear that even that agreement did not hold good once Mr Howard had broken his side of the bargain by reviving issues that it had been agreed would be abandoned.
- Mr Howard has failed by some margin to establish that there was any agreement by Sir John that whatever fees Dawsons chose to submit for whatever period would be paid out of the trust funds. Mr Howard has failed to establish that Sir John was the proximate cause of Dawsons' continuing to incur fees (at three times the level of the fees incurred by the trustees themselves), their continuing to look to Mr Howard as their client for payment of those fees, and their seeking to recover those fees from their client by proceedings (including bankruptcy).
- Apart from a contractual obligation on the part of Sir John to consent to the depletion of the trust fund by the amount of Dawsosn's costs (whatever they might be) there was no other legal duty on Sir John to permit the fees to be charged against capital.
- If Mr Howard had a cause of action then that cause of action arose in September 1999. It became statute barred in September 2005.
- The head of claim must on one or more of these grounds be dismissed.
The purchase of the remainder
- Mr Howard alleges in paragraph 14 of the Particulars of Claim that Sir John unlawfully obtained details of Mr Howard's offer to his trustee in bankruptcy to purchase his own remainder interest (including the Claimant's bank financing details). Mr Howard says that Sir John used these to his advantage in the "sealed bid" process which the court instituted, acting "in a manner contrary to the law and completely inconsistent with his duties of care to his co-beneficiary". The funding offer on which Mr Howard intended to rely was in fact withdrawn during the course of the sealed bidding process. In paragraph 366 of the Response Mr Howard states that he believes Sir John "may have coerced Whiteaway Laidlaw into withdrawing their offer", and in paragraph 369 that Sir John coerced Addleshaw Goddard (the solicitors retained by the professional trustees) into providing security by way of signing letters and guarantees to assist in his own funding arrangements for the purchase of the remainder.
- At trial Mr Howard asked for the Order of the Canterbury County Court dated 2 July 2008 (authorising the sale to Sir John) to be set aside and for me to make an order that the (now merged) remainder interest should be sold to Mr Howard. In the alternative he asked that his trustee in bankruptcy should retain the £171,500 paid by Sir John for the remainder, but either (a) that Sir John should also pay direct to Mr Howard the actuarial value of the remainder interest on the footing that there was deemed to have been a partition (not a sale) on 2 July 2008: or (b) that Mr Howard should retain his remainder interest. In any event he sought damages "for unlawfully obtaining [Mr Howard's] papers" and for "coercing the trustees into allowing him to use side letters and trust assets in contravention of the spirit of the sealed bid process and in contravention of clause 4 of the [Partition]".
- I have recounted (see paragraphs [52]to [58] above) how Mr Howard made an application to the Canterbury County Court founded upon his dissatisfaction with the way his trustee in bankruptcy was handing the sale of the remainder interest: how the trustee in bankruptcy refused to supply a copy of the papers; but how Sir John's solicitors obtained them. The question is whether they did so "unlawfully".
- It is clear that what happened was that when the trustee refused to provide anything Jane Garvin (a solicitor with Ward Hadaway, the firm representing Sir John) telephoned the Canterbury County Court Office and asked for a copy of the relevant papers to be sent: and they immediately were. Mr Howard has in correspondence accused Ms Garvin of having "told the Court over the telephone that you were representing me and required a copy". When she denied practising any such deceit he accused her of being a liar.
- I am satisfied that when she gave her evidence Ms Garvin told me the truth. In 2007 she had 3 years post-qualification experience: she had some knowledge (but not a complete knowledge) of the Insolvency Rules. She was not specifically aware of the terms of IR7.31. This gives an absolute right to inspect the Court file relating to a bankrupt to specified categories of person (within which Sir John did not fall) and goes on to provide:-
"Any person may, by special leave of the Court, inspect the file."
The terms of the rule (and of the restrictions set out in IR 7.28) indicate that the decision to permit access is a judicial one and not an administrative one. A request for a judicial decision ought ordinarily be made by application notice.
- There is no doubt that if an application had been made to the Court a judge would have granted permission to inspect the file. That is because Mr Howard's application itself disclosed that his trustee in bankruptcy had already accepted an offer for the remainder interest from Sir John, which agreement Mr Howard was seeking to set aside. It would not be possible for the Court to rule on that question without giving Sir John (who claimed to have a binding contract) the opportunity to be joined as a party to the application (Mr Howard himself having failed to take that step). That was a point which Sir John's solicitors made to the trustee in bankruptcy on 30 October 2007 and again on 13 November 2007.
- On 12 November 2007 Ms Garvin telephoned Canterbury County Court and enquired how she might obtain a copy of Mr Howard's s.303 application, given that the Order being sought would affect Sir John although he was not a party to the application itself. The Court administrative assistant said that the Court would post a copy out and asked for Sir John's address. That was an error by the Court's administrative staff. But it was not an error contrived by Ms Garvin.
- Nor was it an error that had any material effect. If an application had been made, permission to inspect and take copies would have been given. In the events which happened the Court ruled (as it had to) on the question whether there was a binding agreement for the purchase of the remainder interest by Sir John (although it curiously ruled that Sir John was not entitled to see the reasons why his asserted claim had been rejected in his absence). The Court then set out (as it would in any event have to do) rules for the making of sealed bids, with each party knowing the other's funding arrangements: both sides had to put their cards on the table. The Canterbury Court was satisfied with the propriety of the outcome: and the High Court refused to restrain completion. There have been no appeals. So the mistaken disclosure had no effect: one way or another the trustee in bankruptcy's acceptance on 31 August 2007 of Sir John's original offer had to be sorted out, and one way or another an open sale process had to be put in place. Even if I had power to "set aside" the Order of the Canterbury County Court approving the sale to Sir John there is simply no ground on which I could properly do so.
- There is absolutely nothing in the complaint that Sir John "coerced" Whiteaway Laidlaw into withdrawing their funding offer to Mr Howard. It is baseless speculation.
- Nor is there anything in the complaint that Sir John somehow "coerced" the trustees into making trust assets available. The correspondence is to my mind clear that the trustees would not favour one or other potential purchaser of the reversion. The simple truth is that Sir John (because he was not a former bankrupt and because he was in a position to merge life interest and remainder and so become the immediate absolute owner) was able to obtain a loan from Lloyds TSB secured against undertakings and then, the instant the transaction was completed, grant long term security over the assets then in his absolute ownership. Mr Howard could never be in that position (because of the continued existence of Sir John's life interest).
- Mr Howard sought to frustrate those funding arrangements by contacting Lloyds TSB and asserting that his father was a trespasser on the estate (because of the operation of the "name and arms" clause, in relation to which he attached an Opinion of Leading Counsel) and because he intended to appeal the Court's approval of Sir John's purchase and that "this will shortly be blocked" so that "if Lloyds TSB provide financing to [Sir John] under these circumstances you may find yourselves in great difficulty". But this desperate attempt was wholly unsuccessful. Lloyds TSB called Mr Howard's bluff, advanced the money against undertakings, and immediately upon completion those undertakings were performed. The trustee in bankruptcy with the authority of the Court assigned the remainder to Sir John. Sir John instructed the settlement trustees to merge the two equitable interests and to transfer the assets to him. In return he gave them certain indemnities. The trustees executed a Deed of Discharge and cancelled the restriction on the title of Hunter Hall. Sir John mortgaged Hunter Hall to secure the Lloyds TSB loan.
- For completeness I would hold that Sir John owed no "duty of care to his co-beneficiary" not to bid for the reversionary interest.
- This claim must be dismissed.
The valuation of Byre Hill
- There is one remaining issue which at trial Mr Howard appeared to accept would be "double-counting" if addressed separately. But just in case he did not mean to make that concession I will briefly address it.
- When the Corby Estate was sold for £1.85 million it included Byre Hill Farm (which was in the absolute ownership of Sir John). Part of the aggregate purchase price of £1.85 million therefore needed to be apportioned to Byre Hill and paid to Sir John. From the outset Mr Howard was alive to the valuation question that such apportionment would raise. In November 1993 he wrote to his mother
"I know Eastwood will be gunning for the highest possible valuation on Byre Hill but my concern is to make sure the trust receives as much cash as possible…….."
- It appears from the documents that Knight Frank and Rutley placed an initial valuation on Byre Hill in the range £225-250,000. Sir John regarded this valuation of a 155-acre Cumbrian farm (the equivalent of £1600 per acre) as far too low having regard to local sales (which were at £2600 per acre). Knight Frank then formally re-valued at £343,000 (based purely on agricultural land values). On 14 January 1994 Mr Howard suggested a figure of £300,000 (because Byre Hill included some parkland): Sir John countered with £325,000. It was the figure of £325,000 that was included in the distribution statement which Mr Howard signed and which neither Duncan Lawrie nor the trustee in bankruptcy has never queried. In 1997 Mr Howard complained (in his October List):-
"When I agreed to one of the many completion statements provided by Eastwood I was not in possession of all the facts and if I had been I would not have agreed to your proposal at that time. I was also placed under undue pressure from Eastwood to sign the statement"
- This complaint is unfounded. The proportion of the aggregate purchase money attributable to Byre Hill farm was the subject of a bargain between Sir John, Duncan Lawrie and Mr Howard into which Mr Howard entered with his eyes open. He repented of the bargain in October 1997: but neither he nor the trustee in bankruptcy commenced proceedings. The complaint was against Sir John as owner of Byre Hill. Whatever the cause of action (and it is not easy to identify) it would be statute barred after 6 years. Even if it continued to be enforceable it was a cause of action vested in Mr Howard or his trustee in bankruptcy and enforceable in respect of the remainder interest: too little of the aggregate proceeds had been apportioned to the trust. As such it would have passed to Sir John under the assignment of the reversion. I cannot see any basis on which a claim by Mr Howard in respect of Byre Hill is sustainable.
Disposal
- Mr Howard has won the right to try and collect £2.50 from each of two households and 60p from the owner of the Raby Estate. I will direct a conveyance of the Coniscliffe ground rents (so far as subsisting, with only covenants for title appropriate to a conveyance by a trustee) by Sir John to Mr Howard. I otherwise dismiss the action. The costs of conveyance will be borne by Sir John: but if there is any dispute as to the form of conveyance, then the conveyance will be settled by Conveyancing Counsel to the Court and the costs of conveyance shall be borne equally.
- I will hand down this judgment on 20 November 2012. If it not convenient for the parties then to attend they should notify my clerk and I will adjourn consequential questions.
