Administration of estates - Beneficial interest - Sole beneficiary
Drakeford v Cotton and another: Chancery Division (Mr Justice Morgan): 25 May 2012
The principal issue in the instant case concerned the beneficial ownership of money held in two bank accounts, following the death of the deceased, M. The claimant, L, the first defendant, R, and the second defendant, MS, were siblings. They were the children of the deceased, E and M. In 1997, E and M won around £107,000 on the National Lottery. They subsequently made their wills. M's will, dated 16 May 1997, provided that if her husband, E, survived her, her estate would pass to him. If he did not survive her, she appointed L, R and MS as the executors and trustees of her will and left her estate on trust for them in equal shares. E died on 7 February 2008 and M died on 7 August the same year.
On 7 August 1997, E had entered into a deed which created a settlement. E and the three children were the original trustees of the settlement, which was stated to be irrevocable. The settlement provided for a further trust (the trust), which was to apply from the date of the death of E or M, whichever should be the later. Under the trust, the trust property was to be held on trust for the three children of the settlor in equal shares.
In 2008, E and M had two bank accounts (the accounts), a deposit account and a current account into which the lottery money had been deposited. Prior to E's death, both accounts were in the joint names of E and M. At E's death, £49,186.98 and £2,622.08 remained in each account. It was accepted that, immediately following E's death, the money in the accounts was owned legally and beneficially by M. On 14 February 2008, M went with MS to the building society and transferred the two accounts into the joint names of M and MS. It was accepted that the effect of the accounts being transferred into joint names was that they were held by joint account holders on trust for M alone.
Following M's death, MS made a number of withdrawals from the joint accounts. The defendants contended that as a result of certain statements made by M to MS and others in June 2008, the position was that the joint account holders held the money in the accounts on trust of MS alone, or on trusts under which both M and MS were beneficiaries. The defendants further contended that following an abusive telephone call from L on 16 June 2008, M had told MS that she wished her to have the funds in the joint accounts on M's demise, because MS was her principal carer and she wanted to reward her for that care. MS contended that M had been adamant that she did not want L to have any of the said money. L brought the instant proceedings against the defendants to determine, inter alia, the ownership of the beneficial interest of the accounts.
The issue for consideration was whether the legal title to the money in the accounts had passed to MS by survivorship and did not form part of M’s estate or whether, as contended by L, when M died, M remained the sole beneficial owner of the money in the accounts and that money therefore formed part of M's estate and was to be distributed in accordance with her will. Consideration was given to the possible application of section 53(1)(c) of the Law of Property Act 1925, which required that a disposition of an equitable interest or trust had to be in writing and signed by the person disposing of it.
The court ruled: (1) It was possible to have a joint account with the following attributes: the legal title to the account was in joint names and one of the account holders was entitled to draw on the account. The money so drawn was his sole property. The other account holder was not entitled to draw on the account. On the death of the account holder, the money in the account belonged to the other by survivorship. From the time that the relevant arrangement was made, there was beneficial interest vested in the account holder who was not entitled to draw on the account but who might in due course take by survivorship.
That beneficial interest vested when the relevant arrangement was made and it was not a case of a testamentary disposition on the death of the other account holder (see  of the judgment). In the instant case, a fair reading of the evidence as to M's statements, was to the effect that M had intended that, on her death, the money in the accounts would be owned beneficially, as well as legally my MS. Accordingly, M had formed a settled intention in the middle of June 2008 and she had expressed that intention by stating to MS and to others that the money in the accounts would go to MS and in that way would not be inherited by the claimant.
That statement of intention was not dependent upon M revising her will. A revision of her will so that the claimant did not inherit anything would be very clear and determinative but that did not mean that the earlier statements to MS and others had no effect in the absence of a revision to her will (see ,  of the judgment). Young v Sealey  1 All ER 92 applied; Figgis, Re, Roberts v MacLaren  1 All ER 999 applied; Russell v Scott 55 CLR 440 adopted; R v Reid  50 Ont considered.
(2) If property was held by A and B on trust for C and C wished to transfer his equitable interest to D, then the transfer had to be in writing in accordance with section 53(1)(c) of the act. If C wished to direct his trustees not to hold the property on trust for D, then such a direction was a ‘disposition’ within the subsection and had to comply with it (see  of the judgment).
In the instant case, section 53(1) (c) of the act did not invalidate the intended change in beneficial interests effected in the middle of June 2008. M and MS, as trustees, had agreed to hold the money in the accounts on trust for themselves, that was an informal declaration of trust, which did not have to comply with section 53(1)(c) of the act. Accordingly, the result of the statements made by M in and after June 2008 was that the money in the accounts was held on trust for MS and M. On M’s death, the legal title to the money vested in MS, by survivorship. MS was not subject to any outstanding equitable interest in favour of M’s estate (see , ,  of the judgment). The legal title to the money in the accounts vested in MS, by survivorship. Declarations would be made accordingly (see ,  of the judgment).
Grey v IRC  3 All ER 603 considered; Mark Diggle (instructed Straw & Pearce) for L; Nicola Preston (instructed on Public Access) for MS and R.