England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Rolls Building London, EC4A 1NL
		11 November 2014

Mr Justice David Richards:

1. The principal relief sought on this application is an order that the Chief Registrar to HM Land Registry be directed forthwith to cancel a caution entered against first registration of a farm property in Derbyshire. On 31 October I informed the parties that I had decided to make the order, with reasons to follow. I set out my reasons in this judgment.
2. The applicant is Mrs Florence Ann Williams, the executor and sole beneficiary of the will of the late Arnold William Seals. She is represented by Mr McNall of counsel, instructed by Nigel Davis Solicitors. The respondents are the adult sons of the deceased, Robert and Andrew Seals, and his adult daughter, Mrs Barbara Robinson. They are represented by Ms Gowling, in-house counsel with The Rural Law Practice. Ms Gowling has also provided a witness statement.
3. The respondents are making, or intend to make, claims which, if successful, would or might establish an interest in or entitlement to the deceased's interest in the farm and other properties. In particular, the respondents intend to issue proceedings to set aside the will on the grounds that it was procured by undue influence or that the deceased lacked mental capacity at the time of making the will, and to advance claims to an interest in the properties on the basis of proprietary estoppel. The caution was lodged expressly on the basis of these intended claims.
4. The background facts so far as relevant to this application may be summarised as follows.
5. The deceased took his own life on 10 December 2013. The principal assets in his estate comprise a half interest in the farm property, Wallands Farm, Brassington, Derbyshire and the entire interest in 9 acres of grassland at Pingle Lane, Carsington, Derbyshire (the Carsington land), a one-acre paddock at Brassington and a residential property, 130 Allestree Lane, Allestree, Derby. The total value of these assets is estimated to be between £570,000 and £675,000. The remaining half interest in the farm is held by the three adult children of the deceased's sister as executors of her will. They are also the beneficiaries under her will.
6. The entire interest in Wallands Farm is entered for sale in an auction scheduled to take place on 6 November 2014 when it will be offered for sale in four lots. The aggregate guide prices are between £590,000 and £700,000. The Carsington land and the paddock are also included to be sold as separate lots. It is this impending auction that created the urgency in the present application, particularly as the professional advice is that the farm and other property could not sensibly be offered for sale until the spring of next year if the auction on 6 November does not proceed.
7. The deceased was a farmer and came from a farming family. His father purchased Wallands Farm and farmed it until the deceased took over in the 1970s. The farm was inherited or acquired by the deceased and his sister in equal shares and the deceased held an agricultural tenancy of the farm. The deceased inherited 130 Allestree Lane from his parents. The farm was the family home, where the respondents lived as children. All the respondents continue to live in the neighbourhood.
8. The deceased's wife died of cancer on 7 August 2010. It is apparent that he found it difficult to cope with his wife's illness and with life after her death. He consulted his GP with symptoms of depression in March 2010 and was prescribed anti-depressants, but stopped taking them in May 2010. He attended his GP every two or three months during 2011, and it was noted that he remained low, with feelings of loneliness. He attended A&E at the Royal Derby Hospital in September and November 2012 and was seen by the mental health team, who identified grief and loneliness, but no major disordering mental illness.
9. Following his wife's death, a friendship developed between the deceased and Mrs Williams. They had known each other as children but had largely lost touch. A routine developed whereby Mrs Williams would telephone the deceased at 8 o'clock each evening and have a chat lasting anything between a few minutes and an hour. There are copies of letters and notes written by the deceased to Mrs Williams which suggest a considerable degree of emotional dependence on her.
10. On 12 May 2011 the deceased made a will, drafted by the firm of solicitors now acting for Mrs Williams as executor and executed at their premises. Mrs Williams is appointed as the sole executor of the will and all the property and assets of the deceased are left to her. On the same day the deceased signed a letter of wishes, also drafted by the solicitors, which read as follows:

"In my Will I have made no provision for my children. The reason for this is that since my late Wife's death they have no further contact with me and indeed my daughter declared whilst my Wife was still alive that she did not wish to benefit from any of my assets. That my children have acted in this way is extremely regrettable to me, but after much careful consideration and I have now executed my Will excluding them all from any benefit and instead benefiting someone who has been a very good friend and help to me.

I would wish this letter to be produced if a claim is made against my Estate by them either under the Inheritance (Provision for Family and Dependents) Act 1975 or otherwise."

11. This letter of wishes was not seen by the respondents until May 2014 and they say it is untrue. Although Mrs Robinson did not see the deceased after his friendship with Mrs Williams developed, both sons say that they continued to visit the deceased on a regular basis.
12. The respondents became aware of the contents of the deceased's will shortly after his death and they instructed solicitors in January 2014. Their solicitors, The Smith Partnership, wrote to Mrs Williams' solicitors on 14 January 2014, stating that they had advised the respondents with regard to their right to apply for reasonable financial provision under the Inheritance (Provision for Family and Dependents) Act 1975 (the 1975 Act) and continued:

"Our clients are deeply saddened by the fact that their father has made no provision in his Will for them given that they are his only children. Our clients do not seek to challenge the validity of his Will. However, the Will is wholly unfair and does not provide for the children's reasonable needs. Would you please also forward to us details of your client's current financial circumstances and needs."

13. As I earlier mentioned, the respondents now intend to challenge the will. As well as a change in solicitors, they say that there are two important matters which relate to their change in position. First, there were discussions between them and a partner in Mrs Williams' solicitors very shortly after the death of the deceased in which they say that he encouraged them in the belief that Mrs Williams would wish to achieve a distribution of the estate satisfactory to all parties and that they would be best advised not to undermine that intention by challenging the will. This is strongly disputed by Mrs Williams' solicitors. Secondly, the respondents did not see the letter of wishes until May 2014 and therefore did not know until then that the will was made on what they say was a false basis.
14. In correspondence continuing until August 2014, The Smith Partnership advanced claims on behalf of the respondents both for financial provision under the 1975 Act and also for damages in respect of physical and other abuse which they say that they and their mother suffered at the hands of the deceased. Accounts of the abuse have been given by Robert and Andrew Seals in witness statements made on 22 October 2014 in support of their claims under the 1975 Act.
15. In August 2014 the respondents also instructed their present solicitors, The Rural Law Practice. There was a period of confusion in August and September when both firms were acting for the respondents but the latter firm is now the only firm acting for the respondents. They sent an 8-page letter of claim dated 14 August 2014 to Mrs Williams' solicitors. The letter advanced claims in respect of the validity of the will and a claim based on proprietary estoppel.
16. In their letter dated 14 August 2014, the respondents' solicitors sought an assurance that no part of the estate would be marketed for sale until resolution of the claims, failing which they would apply to the court for an injunction. Mrs Williams' solicitors responded that the respondents had known for many months that it was the intention of the estate to sell its share in the farm and that it was intended that the farm would be put on the market for sale shortly. An undertaking not to proceed with the sale was not given. Further correspondence followed during the rest of August, in which the respondents' solicitors threatened an application for an injunction if an undertaking to sell was not given and Mrs Williams' solicitors consistently refused to give such an undertaking.
17. On 21 August 2014, the respondents' solicitors lodged applications with the Land Registry for cautions against first registration of the farm, the Carsington land and 130 Allestree Lane. The respondents' solicitors did not inform Mrs Williams or her solicitors that they had taken this step until 26 September 2014 when in a letter of that date they said that they presumed that Mrs Williams' solicitors had been informed of the successful application for a caution against first registration. In circumstances where the respondents' solicitors knew that both Mrs Williams as executor of the deceased's estate and the co-owners were planning to sell the farm, I find it surprising that they did not consider it appropriate to inform her solicitors of this step, all the more so when they had been threatening an application to the court for an injunction. The explanation of Ms Gowling in her witness statement that she knows of no authority requiring her to give notice of such an application does not in my view meet the circumstances of the case.
18. There appears to have been delay in the Land Registry in dealing with these applications but the respondents' solicitors were informed on 23 September 2014 that the applications had been successful in relation to the farm and the Carsington land. Although Ms Gowling states that 130 Allestree Lane had already been registered in Mrs Williams' name, the Land Registry gave notice dated 14 October 2014 to the respondents' solicitors that they had received an application for first registration in the name of Mrs Williams. However, nothing turns on this, because on behalf of the respondents Ms Gowling stated during the hearing that they would not object to a sale of 130 Allestree Lane and would withdraw their caution against it.
19. The effect of the caution against first registration of the farm and the Carsington land was that in practice they could not be sold. The further practical problems which arise as a result of the registration of a caution are that the process to challenge the registration takes a considerable length of time and that in the meantime there is no undertaking in damages or other protection for the owner of the property. This creates an obvious difficulty where the owner proposes an imminent sale of the property.
20. The parties are agreed that in these circumstances the correct approach to the present application is as analysed and set out by Morgan J in Nugent v Nugent [2013] EWHC 4095 (Ch). The judge noted that the jurisdiction of the court to order the vacation of an entry on the register was well established in those cases where the claim on which the entry was based had no real prospect of success, but he concluded that the case before him did not fall within that category. He therefore went on to consider the jurisdiction of the court in those cases where the claim had a real prospect of success. The questions he posed himself in this respect at [35] were:

"Was the beneficiary of the register entry entitled to say that the statute permitted such an entry where the alleged facts supported it and whether the facts were as alleged could only be determined at a trial? Was the beneficiary therefore entitled to maintain the entry until trial irrespective of whether the entry would cause uncompensatable prejudice to the owner of the land?"

21. Having reviewed the relevant authorities the Judge concluded at [49]:

"I conclude that the jurisdiction, recognised and developed by the courts, in relation to the vacation of cautions registered under the LRA 1925, applies also in relation to unilateral notices registered under the 2002 Act. That jurisdiction applied in different ways in relation to cautions to protect claims which were unsustainable and in relation to cautions to protect claims which were well arguable. In the present case, on the material before me, David Nugent's claim is well arguable. Accordingly, I cannot order the cancellation of the unilateral notice on the ground that his claim is without substance. The earlier cases where the underlying claim was well arguable only went so far as to require an undertaking in damages from the beneficiary of the caution, as a condition of keeping the caution in place. However, the clear philosophy of those cases was that the court should not allow the beneficiary of the notice to have the protection of the notice pending trial without the court considering the position of the registered proprietor and whether, and if so how, the proprietor should be protected pending trial. The court proceeded on the basis of an analogy with the position it would adopt if the beneficiary of the notice had, instead of registering a notice, applied for an interim injunction. I will therefore consider, in accordance with the philosophy in the earlier cases what the court would do, as between these parties, if David Nugent applied for an interim injunction pending trial and, in that context, I will take into account any adverse effect on Mrs Nugent of the court granting such an injunction.

22. The court must therefore consider whether, in this case, the respondents have a seriously arguable case that they will succeed at trial in obtaining ownership of or a proprietary interest in the real property held in the deceased's estate. If so, the court must consider whether either or both parties would be adequately compensated by an award of damages and, if neither can be adequately compensated in that way, where the balance of convenience lies.
23. As to whether the respondents have a serious case for a proprietary interest, Ms Gowling on their behalf relied at the hearing not only on the claims to challenge the will and the claim based on proprietary estoppel, but also on the claim under the 1975 Act. She pointed out that under section 2(1)(c) the court has power to order the transfer to the applicant of such property comprised in the estate as might be specified.
24. The only proceedings which the respondents have yet issued are the claims under the 1975 Act made by Robert and Andrew Seals. Mrs Robinson decided not to make a claim under the Act. I have been provided with a copy of the draft claim form and I was informed by Ms Gowling that a claim form in the same terms had been issued on 23 October 2014, shortly before the expiry of the limitation period of six months after the grant of probate. By the claim form Robert Seals seeks an order that he is entitled to 50% of the land in the estate, or such sum as represents that share. Andrew Seals seeks an order that he is entitled to the remaining 50% of the land in the estate or, if Robert Seals' claim to 50% of the land fails, that he is entitled to 75% of the land or, alternatively and in either case, such sum as represents that share.
25. No proceedings have yet been issued in respect of the suggested challenge to the will or the suggested claims based on proprietary estoppel. Ms Gowling informed me that she expected to be in a position to issue such proceedings once the particulars of claim have been drafted by counsel, which she expected would occur within the next 3 to 4 weeks. She filed evidence, and made full submissions, on the present application in support of those intended claims.
26. In assessing both the strength of the case for proprietary relief at trial and the other issues relevant to a decision whether to grant or refuse an injunction, the respondents' intentions as regard the land and their ability to give effect to those intentions are highly relevant. I have already noted that, although the respondents have made claims to the entirety of the land comprised in the estate including as set out in the claim form for relief under the 1975 Act, Ms Gowling made clear at the hearing that the respondents do not object to a sale of 130 Allestree Lane and the one acre paddock. The focus is therefore on the farm and the Carsington land.
27. There are a number of points to note. First, the deceased's estate is of course entitled only to a half share in the farm. The executors and beneficiaries of the deceased's sister, as owners of the other half share, wish to sell the land. Ms Gowling attempted by reference to some Facebook messages from one of the beneficiaries to suggest that they did not wish the farm to be sold, at any rate at this stage. The position is, however, that they have given instructions for the sale of the farm at the auction to be held on 6 November 2014 and have joined with Mrs Williams as executor of the deceased's estate in applying to cancel the caution in respect of the farm. On the evidence before the court, the only conclusion is that they wish the farm to be sold as quickly as possible.
28. Secondly, it follows that if the respondents wished to use the farm in any way, they would need to agree a purchase of the other half interest and they would need to raise the funds to do so.
29. Thirdly, none of the respondents has at any time suggested, and they do not suggest now, that they have any interest in farming any of the land or living at the farm.
30. Fourthly, the respondents wish to maximise the value of the farm and the Carsington land with a view to benefiting financially from its development. Andrew Seals says in his witness statement that he and his brother believe that they can maximise the sale potential of the properties. In his witness statement, Robert Seals says, in the context of making reasonable provision for him under the Act, that the farm and the other land have some development potential.
31. Fifthly, the evidence of Robert and Andrew Seals in support of their claim under the 1975 Act shows that they have very limited means. Robert Seals states in his witness statement that he has no assets of any real value and that he is not earning enough to make any real provision for his future. He cannot afford to buy a house and he has no prospect of improvement without a provision from the estate. Andrew Seals states that his financial circumstances are extremely tight and that his financial management is robbing Peter to pay Paul. Without provision from the estate he will be unable to repay the capital balance on the mortgage on his house. Ms Gowling accepted that they did not have the resources available to them either to buy the other half interest in the farm or to develop the property. They would be dependent on complete success in their actual or intended claims, enabling them to use the proceeds of sale of the other properties in the estate. There is no evidence of the financial resources, if any, available to Mrs Robinson.
32. As regards the merits of the claims under the 1975 Act, they cannot be dismissed as not seriously arguable, at any rate as far as the provision of purely financial relief is concerned. I am not, however, satisfied that there is any serious prospect of obtaining an order for the transfer of any interest in land in the proceedings under the 1975 Act. An essential part of the claim, as the evidence referred to above shows, is that Robert and Andrew Seals are very short of money. The overwhelmingly likely means of dealing with that, in the event that they make out their claims, is by the payment of an appropriate sum or sums out of the estate. Their entitlement under Section 1(2) is to such financial provision as it would be reasonable in all the circumstances of the case for them to receive for their maintenance. There is nothing in the circumstances of the case which would suggest that this is best achieved by a transfer of property to them, all the more so when they lack the financial resources required to carry out their plans to buy in the other half share and to develop the property.
33. The intended claim to challenge the will has different consequences. If it succeeded, the grant of probate to Mrs Williams would be revoked and the respondents as the deceased's next of kin would be entitled to letters of administration and to the distribution of the net estate between them in equal shares. If, therefore, the estate assets then still comprised the interests in land, they would be entitled to those interests insofar as not required to meet other liabilities. The intended challenge to the will is put on two bases. The first is lack of testamentary capacity and for this purpose Ms Gowling relied on the medical evidence relating to the deceased's state of mind between the death of his wife and his own death. I am bound to say that nothing in that evidence suggests that the deceased lacked testamentary capacity. The most that it shows is that he presented some symptoms of depression and was generally low. The other basis is that the will was procured by the undue influence of Mrs Williams. This raises very different issues, in which the evidence of the deceased's state of mind and his apparent emotional attachment to Mrs Williams are clearly relevant. Cases such as this are highly fact sensitive and their resolution depends on an assessment of the witnesses and a close analysis of the relevant events, all of which can only occur at a trial. On the evidence presently available, the claim based on undue influence cannot in my judgment be dismissed as not seriously arguable. It is not necessary on this application to give separate consideration to the merits of the claims advanced on the basis of proprietary estoppel.
34. Turning to the adequacy of damages, I will consider first the position of the deceased's estate, if the caution were not cancelled. The risks to the estate if the farm and other land cannot be sold until a trial of the action has three elements: interest on the purchase price in the meantime, expenditure to maintain the property and the possibility of a decline in market value. It is not apparent from the evidence that, without success on one or more of their claims, the respondents would be in a position to meet a claim to compensate the estate for any of these items. The means of Robert and Andrew Seals, as I have already stated, is shown by their own evidence to be very limited and there is no evidence as to Mrs Robinson's means. Of the three items, the possibility of a decline in value is perhaps the one which causes the greatest concern. Although future movements in market values are by and large impossible to predict, a material fall in property values is always a possibility and there is no evidence on which the court could conclude that any of the respondents would be in a position to pay damages in respect of such fall.
35. On the other side of the equation, I have already observed that it is the intention of the respondents to develop the land rather than to farm it. Essentially their interest in the land is financial. The terms on which the farm will be sold at auction provide for a payment to the vendors of 50% of any increase in the value of the farm buildings and yard area for a period of 20 years, should any planning consents be granted for development. There is no evidence before the court of any realistic development value in the rest of the property. Nonetheless, there is of course the possibility of an increased value if the property is not sold but retained until the respondents have established their proprietary interest, if any. While Mrs Williams has not put any evidence before the court of her financial resources, the evidence of Robert and Andrew Seals is that they understand her to be independently wealthy and to be the sole freehold owner of two properties in Ashbourne over which there are no registered charges.
36. On the evidence before the court, I conclude that the respondents would be unable to compensate the estate for any loss which it might suffer as a result of the caution remaining in place, while it appears likely that Mrs Williams would be able to compensate the respondents for any loss resulting from the cancellation of the caution.
37. In the light of this conclusion and other factors, I considered that the proper course was to order the caution to be cancelled and so permit the sale of the farm to proceed.
38. Those other factors are as follows. First, there is no evidence to suggest that the terms on which the farm is to be sold is anything other than the most appropriate at this time and there is evidence that a delay in the sale could be damaging to the price ultimately received, even without any change in market values. There is no reason at all to suppose that Mrs Williams or those advising her could be found to have acted negligently or otherwise in breach of duty in proceeding to a sale now on the terms which are proposed. Secondly, the interests of the co-owners must be considered. They have been pressing for a sale for much of this year and wish it to proceed. Thirdly, proceedings have yet to be issued to challenge the will or assert a claim based on proprietary estoppel. The respondents have known since May 2014 that the will was based on what they considered to be untrue statements in the deceased's letter of wishes and these possible claims were detailed in a letter from their present solicitors back in August 2014.
39. Although not included in the application notice, a claim was made by Mrs Williams for an injunction to restrain the respondents from impeding or obstructing in any way the sale of the property. The grounds for this claim lie in a statement made by the respondents' solicitors in their letter dated 20 August 2014:

"Of course our clients could simply turn up at the sale and explain to the room why your client is in no position to give good receipt. Presumably she would find that embarrassing at the very least."

This was clearly an inappropriate threat to make, but it has not been repeated and Ms Gowling made clear at the hearing that her clients were not intending to take any such step. Indeed, there is no good reason to suppose that the statement in the letter was made on their instructions or that it was a course of action which had occurred to them. In my judgment, there is no sufficient threat to justify the making of this injunction.

40. There are three further matters to mention.
41. First, Mr McNall disclosed in his skeleton argument that Mrs Williams had applied for and obtained a Beddoe order and he provided a copy to me. The order was made by HH Judge Halbert in the Chester District Registry of the Chancery Division on 3 October 2014. By the order, Mrs Williams is at liberty to defend through to the conclusion of a contested trial any and all claims brought by the respondents and/or on behalf of the estate of the late Mr Seals as set out in the letters of claim dated 23 June 2014 from the Smith Partnership and 14 August 2014 from the Rural Law Practice. She is also at liberty to bring and pursue any proceedings as may be necessary to enable any or all of such claims to be tried and to bring proceedings in relation to the vacation of the caution. Paragraph 3 provides that Mrs Williams shall in any event be indemnified by the estate of the deceased against all costs charges and expenses of any litigation, whether as claimant or as defendant.
42. I am bound to say that I have some concerns about this order. The first is that the position of Mrs Williams' solicitors has been that the letters of claim, at least as regards the claims under the 1975 Act, gave insufficient detail to enable them to be properly dealt with. For example, in their letter dated 24 September 2014 to The Smith Partnership, they stated:

"We regret that we simply cannot assess the merit or otherwise of any of these claims [under the 1975 Act] because your clients have failed to provide the information which we reasonably need."

43. The other concern is that the respondents' actual and intended claims are essentially claims between the rival parties (the respondents on the one hand and Mrs Williams as sole beneficiary of the will on the other) all of whom are of course adult. Mr McNall told me that he cannot recall that the Judge was referred to any of the authorities on whether in such circumstances it is appropriate to provide an indemnity out of the estate. Now that the respondents are aware of the Beddoe order, they may wish to consider whether they are entitled to apply to discharge or vary the order and whether it would be appropriate for them to do so. I have directed that the Beddoe application be transferred to the Chancery Division in London.
44. Secondly, the proceedings under the 1975 Act have been issued in London. Given that all the witnesses live in Derbyshire, I have directed that these proceedings be transferred to the Manchester District Registry of the Chancery Division and further directed that any proceedings brought by the respondents to challenge the will or for other relief shall be issued in the Manchester District Registry.
45. Thirdly, the correspondence between the parties' solicitors shows that serious consideration has already been given to mediation. This is unquestionably a case which cries out for mediation and I would encourage the parties in the strongest possible terms to pursue mediation, as soon as possible after any further proceedings by the respondents have been issued or after they have made clear that they do not intend to bring further proceedings.
46. Since sending out this judgment in draft, I have received written submissions from the parties as regards costs. Mr McNall submits that the application was largely successful and the respondents as the losing parties should pay the costs. Ms Gowling submits on a variety of grounds that on the contrary the applicant should pay the respondents' costs.
47. I do not find persuasive the submissions made in support of an order that the applicant should pay the respondents' costs.
48. First, Ms Gowling submits that the application would have been unnecessary if the parties had proceeded to a mediation before the end of October. While I have made clear that I regard mediation as virtually essential in this case, the applicant is, I consider, entitled to see first a pleaded case challenging the will and asserting the claims based on proprietary estoppel. Moreover, if a mediation had taken place before the end of October but had failed, it would have left no time for a contested application in respect of the cautions.
49. Secondly, Ms Gowling relies on the fact that she became aware of the Beddoe order on the first day of the hearing. She says that, if the respondents had known of the order at an earlier stage, they would have agreed to the vacation of the caution or at least evaluate whether it was worth resisting the application. Not only does this submission run entirely counter to the tenor of the submissions made at the hearing on behalf of the respondents when it was stressed that they had a strong desire for a transfer of the land, rather than just the payment of money, but no steps were taken on their behalf to withdraw their opposition to the application in the light of the Beddoe order, even at the second day of the hearing which was six days later.
50. Thirdly, Ms Gowling submits that in any event the applicant should pay the respondents' costs of the hearing on 30 October 2014. She points out, quite correctly in my view, that there was no realistic prospect of this application being dealt with within the two hours allowed for an application in the Interim Applications List. If proceedings had been brought at an earlier stage, steps could have been taken to ensure that the application was heard by a Judge with the requisite amount of time available, which would not have exceeded one day. A significant amount of the responsibility for this, however, rests with Ms Gowling for her failure until 26 September 2014 to notify the applicants' solicitors that she had applied for the cautions against first registration.
51. In my view, it is clear that Mrs Williams is substantially the successful party on this application. She should be entitled to her costs. In the first instance, those costs should be paid out of the estate. Whether ultimately the estate should be permitted to recoup the costs against the respondents personally depends on the outcome of the proceedings already issued by Robert and Andrew Seals and any further proceedings which may be issued challenging the will or asserting claims based on proprietary estoppel. I will therefore order that the applicant be paid her costs of this application out of the estate, such costs to be assessed on the indemnity basis, and that she shall have liberty to apply to the Judge hearing the claims made under the 1975 Act for an order that such costs, to be assessed on the standard basis, be paid to the estate by the respondents.