England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Norris J
HC11C00176

		Royal Courts of Justice Strand. London. WC2A 2LL
		12th June 2013

Lord Justice Patten:

1. This is a renewed application by Mr Philip Howard for permission to appeal against an order of Norris J, dated 12th November 2012 by which he dismissed Mr Howard's actions against his father, Sir John Howard-Lawson ("Sir John"), except for the claim for what are described as the Coniscliffe ground rents.
2. The events leading up to the claim are described by Norris J. in paragraphs 13-60 of his judgment and what follows is no more than a short summary in order to identify the principal issues to which the application relates.
3. Sir John and Mr Howard were respectively the life tenant and remainderman in tail of the Corby Estate which was settled under the Will of Sir John's great-grandfather, Philip John Canning Howard, who died on 22nd April 1934. His Will provided for the Corby Estate to be held in trust for his grandson, William Howard Lawson ("William Lawson"), with remainder to his sons in tail male. But this was subject to clause 6 of the Will which had the effect of reducing Sir John's interest to that of a life tenant with the estate in remainder in tail for his sons. Mr Howard was bom on 25th June 1962 and is the only remainderman.
4. The Will (clause 8) also contained a name and arms clause which led to the forfeiture of William Lawson's interest under the trust. Mr Howard has alleged that his father also forfeited any interest in 1962 by reason of non-compliance with the clause but this claim (which formed part of a separate action) has been dismissed both by Proudman J. and the Court of Appeal: see [2012] EWCA Civ 6.
5. The settled property was conveyed to Sir John by a vesting deed dated 21st October 1963. A persistent problem for the estate was lack of income and from about 1969 the trustees advanced capital monies by way of loan to Sir John to enable him to improve one of the farms on the estate (Low Wood Farm) and to fund the farming operations. Mr Howard takes the point that these payments were not for improvements authorised under the Settled Land Act 1925 which the judge accepted. But they were used for the benefit of the estate and were in each case supported by insurance policies on the life of Sir John who also charged his life interest with the payment of the premiums.
6. Mr Howard attained his minority on 28th June 1979. Sir John had been advised by Mr Christopher McCall of counsel in 1978 that this would enable them to make themselves absolutely entitled to the estate and, if required, to re-settle it. To this end, Sir John and Mr Howard executed a disentailing deed on 18th August 1980 which, subject to Sir John's life interest, declared the estate to be held in trust for Mr Howard for an equitable estate in fee simple. On the same day they also executed what is described as the powers deed which did not declare any new trusts but added to the powers under the Will so that the trustees could either accelerate Mr Howard's absolute interest in remainder or enlarge Sir John's life interest and, in either event, bring the settlement to an end. These powers required the consent of both beneficiaries. The trustees were also given more extensive powers to lend trust capital to the beneficiaries and contained an indemnity from Sir John and Mr Howard in respect of claims arising from the loans already made outside the powers contained in the Settled Land Act.1
7. The power to terminate the settlement was never exercised. Instead, on 31st January 1984 Sir John and Mr Howard entered into a deed of arrangement under which certain trust assets and liabilities were partitioned between them free of the settlement. Sir John took land at Low Wood and Byre Hill Farms and elsewhere together with the benefit of the loans previously made to him which, according to the trust balance sheet, amounted to £229,757. The judge found as a fact that his intention was to make some disposals and use the funds to improve the estate so that the assets allocated to him on the partition would be passed to Mr Howard by will.
8. Mr Howard received shooting rights over Low Wood Farm and two other farms and other property allocated to him under the partition but not over Corby Castle and its grounds and woodland which remained subject to the trusts of the will as amended by the disentailing deed and the powers deed. The deed of partition also provided that any disposals by Sir John of what remained settled property should require Mr Howard's consent.
9. The partition was effected by a conveyance to Mr Howard by Sir John as life tenant dated 31st January 1984. The shooting rights were subject to a right of pre-emption in favour of Sir John. Notwithstanding the partition which resulted in Sir John and Mr Howard becoming absolutely entitled to the property allocated to them, Mr Howard continued to allow his father to receive the whole of the estate income from the tenanted farms and the shoots in order to maintain the estate. On 18th June 1986 Mr Howard re-conveyed to Sir John the shooting rights over Low Wood Farm which Sir John then sold as part of the farm, reserving 4 days' shooting for himself. The reserved shooting rights were then conveyed back to Mr Howard.
10. The problems between father and son began following the partition. Mr Howard used the land conveyed to him as part of a property development venture which was unsuccessful. By 1992 he was in severe financial difficulties and proposed an IVA which failed. He was made bankrupt on 13th October 1993 with a deficiency of £2.6 million. All his property, including his interest in remainder under what was left of the settled property, vested in his trustee-in-bankruptcy. On 1st October 1993 he had given notice of his intention to sell the shooting rights and Sir John had served the requisite counter-notice exercising his right of pre-emption.
11. Mr Howard's mortgagees wished to sell the land charged to them to secure Mr Howard's property borrowings. In order to avoid the piecemeal sale of the estate, Sir John decided to dispose of the entire estate, including the settled property, so as to realise the best possible price. The estate was sold to Lord Ballyedmond for £1.85 million and completion took place on 21st April 1994. £50,000 of the purchase price was attributed to "fixtures and fittings" and was paid to Lady Howard-Lawson. The sale included shooting rights over the settled land and the other parts of the estate which had been partitioned but a retention was made to enable Sir John to make title by exercising his right of pre-emption.
12. Mr Howard was discharged from bankruptcy in November 1996. He asked for access to the trust files and was given access in January 1997, although he says that disclosure was not complete. He then drew up a list of complaints about the administration of the trusts of the Will and proceeded to accuse his father of defrauding him. In May 2004 he commenced proceedings for trust accounts. In March 2007 he also offered to buy back from his trustee-in-bankruptcy his reversionary interest in the settled estate which, since the sale, comprised a house purchased for Sir John to live in plus some investments.
13. Mr Howard offered £165,000 which he intended to borrow This resulted in a counter-offer from Sir John and to a prolonged history of sealed bids, threats of litigation against the trustees by Mr Howard, and eventually on 1st August 2008 the purchase of the interest by Sir John under the sanction of a court order of 2nd July 2008.
14. Since the trustee-in-bankruptcy disposed of the entire reversionary interest, it must follow, as the judge found, that this included any claim against Sir John, the Settled Land Act trustees or others for breach of trust. And it is important to keep this in mind when considering the various claims which Mr Howard made at the trial and now seeks to re-litigate as part of this appeal. Many of these issues are peripheral but his principal claims were to set aside or obtain equitable compensation for the undue influence which he says was practiced upon him by his father and the trustees in order to induce him to enter into the disentailing deed, the powers deed and, subsequently, the partition of the estate. I propose therefore to consider these parts of the application first and then to consider the issues which remain. Before doing so I need, however, to say something about a procedural challenge which Mr Howard makes to the whole trial process.
15. In his skeleton argument and in his submissions to me he complained that his father had failed to comply with the Civil Procedure Rules and various case management directions in preparing for trial; that the trial bundles were not prepared in accordance with the rules and made life very difficult for him as a litigant in person; and that Norris J. refused an application for an adjournment which had the effect of preventing him from negotiating a Conditional Fee Agreement with a legal team he had lined up so that he was forced to act in person. This refusal, he submits, amounted to a failure by the judge to comply with the overriding objective and constitutes a ground in itself for setting the judge's order aside.
16. There were undoubtedly various failures by Sir John to comply with the process of disclosure and unless orders were made. But the judge explains in his judgment that Mr Howard ended up with the documents which he needed and that although the failure to produce one set of chronological documents caused him problems, a short adjournment was granted and then later there was a further four week gap in the proceedings during which Mr Howard had time to prepare his cross-examination.
17. This Court will only interfere with a case management decision of the trial judge if it was plainly wrong and caused significant injustice. The refusal of the adjournment does not fall into this category. The judge took steps to accommodate Mr Howard. From his point of view, they may not have been perfect. But they did not prevent a fair trial of the issues.

The disentailing deed and the powers deed

18. From the foregoing summary of events it will be clear that there is now no question of recovering the Corby Estate. The only remedy available would be monetary compensation based on the loss, if any, which Mr Howard can prove resulted from his execution of these deeds.
19. Mr Howard does not, of course, want to set aside the disentailing deed which gave him an absolute interest in remainder in the settled property. His challenge is to the powers deed which included the indemnity and the increased power over capital money. The judge found that although young (18) at the time, arrangements were put in hand on Mr McCall's advice for Mr Howard to see Mr Roger Home of Counsel and to be advised on the effect of what was proposed. Since the disentailing deed was beneficial to Mr Howard, Mr Home concentrated on the powers deed which he amended to include safeguards limiting Sir John's power to act alone and requiring Mr Howard's consent to any exercise of the increased power to advance capital. The conference with counsel took place in February 1980 but the deed was not signed until August 1980. The judge found that Mr Howard did receive a proper explanation of the documents from Mr Home and agreed that the additional powers were necessary. He rejected Mr Howard's claims that he had been bullied by the trustees or his father into signing and found that Mr Howard had subsequently signed the document of his own volition. This was confirmed by the fact that, in relation to a subsequent occasion when Sir John wished to raise money from the settled estate to become a Lloyds' member, Mr Howard had the benefit of independent advice from Mr John Wood of Herbert Smith but never suggested to his solicitor that he had executed the powers deed under duress.
20. Mr Howard challenges the judge's findings on a number of factual bases. He says that Mr Eastwood, who had acted for Sir John as his solicitor, accompanied him to the meeting with Mr Home and controlled the flow of information; that he was not allowed to take documents away; and that the witness to the deed was not independent. But these are attempts to re-argue points decided by the judge which were clearly open to him on the evidence. It is worth making the general point at this stage that a very large part of Mr Howard's skeleton argument (which is 198 pages long) consists of a point-by-point criticism of the judge's findings of fact with submissions to the effect that the judge was wrong to reach the conclusions he did. But this Court will not interfere with the trial judge's findings of fact unless there was no evidence to support them or they were based on a misunderstanding of the relevant evidence. If the criticism is no more than that the judge was wrong to make one possible finding in preference to another, that is insufficient to justify the grant of permission to appeal. I am afraid that very many (if not most) of Mr Howard's criticisms of the judgment fall into this category.
21. For this reason, there is no prospect of this Court interfering with the judge's conclusion that there was no undue influence. Nor is it clear to me what damage the execution of the powers deed itself in fact caused Mr Howard. It was not used to terminate the settlement and any advances of capital made under it required his express consent. His real complaint is about the partition which in part terminated the settlement and about the division of property under it.

The partition

22. Mr Howard's complaint about the partition is that the full extent of the assets and liabilities of the estate was not disclosed to him and that he was forced to agree to it. The judge found from the contemporaneous correspondence that Mr Howard in fact welcomed the partition as a means of obtaining property from the trust which he could use as his own and obtained what he asked for. His principal difficulty in challenging the partition is that he was advised by Mr Wood who took part in the negotiations about what was to be included and how the assets should be split between father and son. Mr Howard wanted two tenanted farms and got that and more.
23. He suggested to the judge (and again on this application) that the accounts were unreliable and that his solicitor was kept in the dark. But the judge rejected these allegations on the evidence and again there is no prospect of this Court setting those findings aside. Norris J. also held that after 28 years during which Mr Howard proceeded to deal with the property he received under the partition, any claim to have the partition set aside for undue influence must be barred by laches. That seems to me to be obviously right.

The purchase of the reversionary interest

24. Mr Howard says that Sir John did not have the necessary funding to complete the purchase at the time when the Canterbury County Court made the order of 9th May 2008 approving the sale to him; that he obtained information from the Court in breach of a fiduciary duty he owed to Mr Howard; and that he was under a duty not to interfere with Mr Howard's attempt to re-purchase his interest in remainder.
25. I am not persuaded by any of these points. Mr Howard's own funding was withdrawn during the sealed bid process. Any mistaken disclosure by the Court was not used to challenge the order which the Court made nor, as the judge found, did it result in unfairness to either party. There is also no legal basis for the alleged duties which Mr Howard relies on. Sir John, unlike Mr Howard, was eventually able to obtain funding for the purchase and I can see no basis on which this Court could interfere with the judge's conclusion that he became the effective purchaser of the reversionary interest in the settled estate. Mr Howard's principal complaint seems to centre on the disclosure to Sir John of documents which disclosed to him the extent of Mr Howard's financing. But that was at best a ground for challenging the conduct of the sale by the trustee-in-bankruptcy and the district judge attempted to create an equal playing field by requiring Sir John to give the same disclosure. The trustee obtained the protection of the court in the order of 2nd July 2008 which was not challenged by way of appeal. It was therefore far too late and impossible for Mr Howard to challenge the correctness of the sale as part of the action tried by Norris J.
26. I can take the remaining points more quickly:

(1) Title deeds

There was no relief claimed at the trial based on this allegation and it adds nothing to the other grounds of appeal.

(2) Capital transfer tax

As the judge found, this was a statutory liability imposed on Mr Howard by the partition for which he was compensated. Any allegation of deception is rebutted by the fact that he was advised throughout this transaction by Mr Wood.

(3) The sale by Sir John of assets belonging to Mr Howard

This was pleaded as a complaint that Sir John took all the income and sporting rights for himself including the shooting rights over Low Wood Farm which were reconveyed to him and then sold. But at trial Mr Howard also alleged that Sir John had persuaded the trustee-in-bankruptcy to sell the sporting rights over Byre Hill Farm and the trust estate too cheaply. The judge decided those issues against Mr Howard on the basis of a concession by him in evidence that he had not been coerced into conveying the Low Wood Farm rights to his father and evidence that he had agreed that his father should continue to receive the income from the estate. The issue about the price paid was also a question of fact for the judge and, in the absence of any complaint of deception or coercion by the trustee (who is not a party), I cannot see how Mr Howard has any locus to make a claim based on the sale price to Sir John being inadequate. An appeal on these points has no prospect of success.

(4) The insurance policies

Mr Howard says that the judge was wrong to find that the two life assurance policies taken out in connection with the pre-powers deed loans were not assets of the settled estate which should have been assigned to Mr Howard under clause 2 of the 1984 deed of arrangement. But that does not assist Mr Howard. If they were trust assets they must have passed as part of his remaining interests to the trustee-in-bankruptcy and the interest in them was purchased by Sir John as part of the interest in remainder. The November 2009 assignment was not effective to vest in Mr Howard a claim to them for the reasons which the judge gives in paragraph 169 of his judgment. There is nothing in this point.

(5) The chattels

This was a question of fact for the judge and his finding was open to him on the evidence.

(6) The bill of sale

The issue raised by Mr Howard of whether the loans secured by the bill were repaid is irrelevant. The benefit of the loan passed to Sir John under the partition and he could therefore call for the release of the security.

(7) The "Faith" statue

This was again a question of fact for the judge.

(8) Loans to Sir John

Mr Howard challenged the amount (£229,757) of the loans used for the purpose of the partition agreement. He says that the true amount was £476,523. The judge reviewed the relevant evidence and was entitled to conclude that there was no false accounting. He was also right in saying that any claim to repayment became statute barred long ago.

(9) Manorial rights

Since these have never been sold there is nothing for Sir John to account for and no basis for challenging the judge's rejection of this part of the claim.

(10) The failed IVA

Mr Howard alleges that Sir John owed him a fiduciary duty to act in his best interests in respect of the IVA by not placing him in an adverse financial position. The judge was right in my view to conclude that no such duty exists. Sir John was obviously not obliged to use trust assets to meet the personal liabilities of a beneficiary. The claim is hopeless.

(11) The £50,000 paid for fixtures and fittings

The claim to the £50,000 paid to Lady Howard-Lawson depended upon their being caught by the catch-all position in clause 2 of the deed of arrangement and therefore being Mr Howard's own property or being trust assets. The claim was advanced on this second basis. The judge rejected this on the facts but, even if the premise is right, it does not help Mr Howard. His settled interest in the £50,000 passed to his father on the sale by the trustee-in-bankruptcy.

(12) Consent to the sale of the Corby Estate in 1994

The judge found that Mr Howard did consent and was entitled to come to that conclusion on the evidence. The trustee-in-bankruptcy has not challenged the sale and is not party to these proceedings. The judge is in any event right that any cause of action would be statute barred but there is no evidence that any loss was in fact caused.

(13) The fees agreement

Again, this ground of appeal is a challenge to the judge's findings of fact. It has no real prospect of success.

Conclusion

27. I dismiss the application.