Pursuer and Respondent: Bartos; Murray Beith Murray

Defenders and Reclaimers: McNeill QC; Turcan Connel

1 April 2011

Introduction

[1] The respondent is the sister of the late Mrs Deirdre Mary Astrea Romanes ("the deceased") who died on 17 May 2010. At the time of her death the deceased was heritable proprietrix of 33 Jamaica Street Lane, Edinburgh and 33 Heriot Row, Edinburgh, where she resided at the time of her death. These heritable properties are jointly called "the Heriot Row properties" in this opinion. The deceased executed a will on 28 June 2008 ("the 2008 will") in terms of which the respondent was a beneficiary. The reclaimers are the first to third defenders in the action at the instance of the respondent and are the executors and trustees of the deceased in terms of the 2008 will and her later testamentary writings. Clause 4.2 of the 2008 will was in the following terms:

"I direct the Trustees to sell my properties at 33 Heriot Row, Edinburgh (or any other property owned by me and occupied as my main residence in the United Kingdom at the time of my death) and 33 Jamaica Street Lane, Edinburgh and the contents of such properties other than any contents which I have bequeathed elsewhere and to pay and make over the net sale proceeds to my sister, MRS ELIZABETH SMYTH."

On the basis that the 2008 will is the final valid testamentary disposition of the deceased's estate, on 13 December 2010 the respondent executed a deed of variation of the foregoing provision ("the deed of variation"), directing the reclaimers to make over the Heriot Row properties, and their contents, in respect of one 50% share to the respondent and in respect of the other 50% share to the respondent's children, the fifteenth to eighteenth defenders. The Heriot Row properties have been valued for the purposes of confirmation at £2,250,000.

[2] The deceased was formerly the wife of the seventh defender, Iain Blair Romanes. Prior to the deceased's death the deceased and the seventh defender had been divorced and the deceased had not re-married. She had no children. On 24 November 1988, when the deceased was still married to the seventh defender, she executed a deed of trust creating the Deirdre Romanes Liferent Trust ("the Trust"). The seventh defender was a beneficiary of the Trust and in the trust deed is designated as "the surviving spouse". As the surviving spouse the seventh defender remains a beneficiary of the Trust notwithstanding his divorce from the deceased.

[3] The deceased was the majority shareholder and managing director of the Dunfermline Press Limited ("the company"). The seventh defender, second defender and third defender are directors of the company which has recorded losses in respect of the last two accounting periods for which returns have been made to the Registrar of Companies. For the purposes of confirmation the 4,571 ordinary shares held by the deceased in the company at the time of her death were valued at a total of £1.

[4] Shortly before her death the deceased executed four testamentary deeds ("the 2010 deeds"): a codicil to the 2008 will dated 6 May 2010 ("the 2010 codicil"); a will dated 9 May 2010 ("the 2010 will"): a list of legacies in favour of the eleventh, twelfth, seventeenth, twenty fourth and twenty fifth defenders dated 9 May 2010; and a list of legacies in favour of the reclaimers dated 9 May 2010. In terms of the 2010 will the deceased appointed the reclaimers as her executors and trustees. In clause 5.2 of the 2010 will the deceased directed the reclaimers to pay to the respondent a legacy of £1,000,000 but in clause 4 she directed the reclaimers to pay to the trustees of the Trust the sum of £3,000,000 ("the preferential legacy") to be preferential to all other legacies and bequests and she expressed the wish that those trustees would use and apply the preferential legacy as they thought fit to secure the future prospects of the company. The preferential legacy essentially repeated and superseded a similar provision made in the 2010 codicil. The reclaimers have confirmed to the estate of the deceased as executors nominate under the 2010 will, confirmation in their favour being dated 20 October 2010. For the purposes of confirmation the deceased's estate has been valued at £4,176,782. The respondent is apprehensive that, if the estate is distributed in terms of the 2010 will or the 2010 codicil, there will be no funds available to satisfy the legacy to her after the reclaimers have paid the deceased's debts, inheritance tax and the preferential legacy. In any event the legacy of £1,000,000 is significantly less than the bequest to the respondent in the 2008 will.

[5] The respondent alleges that at the time the deceased executed the 2010 deeds she lacked the necessary capacity. She also alleges that each of the 2010 deeds was impetrated from the deceased by the seventh defender and/or the reclaimers through circumvention while the deceased was weak and facile. Accordingly the respondent raised the present action in which she seeks production and reduction of each of the 2010 deeds and interdict and interim interdict against the reclaimers as executors and trustees inter alia from selling or otherwise disposing of the Heriot Row properties or their contents and from distributing the estate of the deceased in terms of the 2010 deeds.

[6] On 14 December 2010 the Lord Ordinary heard an opposed motion before calling in which the respondent sought interim interdict against the reclaimers from selling or otherwise disposing of the Heriot Row properties and he granted that motion. The reclaimers have reclaimed against that interlocutor.

Submissions on behalf of the reclaimers

[7] Counsel for the reclaimers submitted that, if the respondent were successful in the reduction of the 2010 deeds, a proper construction of the 2008 would result in her entitlement to receive the net proceeds of sale of the Heriot Row properties and the contents of those properties, other than any contents which had been bequeathed elsewhere. It was clear from the terms of the will as a whole that the intention of the deceased was that the reclaimers would sell the Heriot Row properties and the contents thereof. She did not intend the respondent to receive the two dwelling houses and their contents. That intention was clear not only from the terms of clause 4.2 of the will but also from clauses 4.3 and 4.4 where the deceased gave different directions to the reclaimers in respect of other heritable properties owned by her in Scotland. A cardinal principle to be applied in the interpretation of wills is that the testator's intention must prevail. The principal proof of that intention should be derived from the will itself. The words used by a testator were not to be altered or transposed if they were capable of a sensible interpretation. If possible, effect should be given to the words of the testator. Where, as here, the words of the will are unambiguous they cannot be departed from merely because they lead to a result that may be considered capricious, or even harsh and unreasonable. (Hickling's Trustees v Garland's Trustees (1898) 1F (HL) 7; Bowman v Bowman (1899) 1F (HL) 69); and Wilson's Trustees v Wilson (1901) 3F 967). In the whole circumstances the respondent had failed to show any prima facie entitlement to the Heriot Row properties, as opposed to the proceeds of their sale. The Lord Ordinary had erred in concluding that the direction in clause 4.2 of the 2008 will to sell the properties was a mere administrative provision which could be waived by the pursuer as a sole beneficiary.

Submissions on behalf of the respondent

[8] Counsel for the respondent submitted that, if the 2010 deeds are reduced, the pursuer will have a prima facie vested right to the benefit given to her under clause 4.2 of the 2008 will. The purpose of that legacy was that the respondent should receive the beneficial interest in the heritable properties and the contents other than those specifically bequeathed elsewhere. At the date of the execution of the deed the respondent was resident in Ireland and that would afford a reason for the deceased directing her executors and trustees to sell the Heriot Row properties and their contents. That was consistent with the direction being an administrative one only. In these circumstances the respondent ought not to be put to the disadvantage of receiving her benefit in the form of the net sale proceeds when she prefers a conveyance without a sale. No one else has an interest in the property. The deceased did not provide that the respondent was not permitted to purchase the properties and their contents. In a sale under the 2008 will the respondent could purchase the property in the knowledge that the net free proceeds would be returned to her, leaving the direction to sell the heritable properties and their contents without any substance. The sale would lack any purpose other than the incurring of significant estate agency and conveyancing fees and the respondent having to pay stamp duty. That could not, it was submitted, have been the intention of the deceased. Even if the reclaimers had a discretion not to transfer or sell the properties to the respondent, which was denied, such a decision would be wholly unreasonable having regard to the reclaimers' duty to act prudently in the interests of the respondent. In these circumstances the respondent was entitled prima facie to receive and deal with the Heriot Row properties and their contents without their prior sale. The Lord Ordinary had not erred in reaching that conclusion. Nor did he err in concluding that the balance of convenience was in favour of granting the interim interdict sought by the respondent.

2008 Will

[9] Before considering the respective submissions on behalf of the parties, it might assist to put them in a proper context if we were to record the terms of the relevant testamentary provisions in 2008. We have already quoted the terms of clause 4.2 but the other provisions relating to the deceased's heritable estate in Scotland were in the following terms:

"4.3(a) I direct the Trustees to hold my heritable property at 45 George Street, Cellardykes, Fife (which, together with any property representing it or added to it in the future and any accumulations of income is referred to as "Jennifer's Fund") for my goddaughter MRS JENNIFER BAIRD ("Jennifer") of 58a The Muirs, Kinross, Tayside to pay to Jennifer during her lifetime the income of Jennifer's Fund and to allow her the use and enjoyment of any part of Jennifer's Fund which does not produce income. The Trustees shall have power during the subsistence of Jennifer's interest in their sole and absolute discretion at any time or times:-

(i) to make over to Jennifer any part or even whole of the capital of Jennifer's fund; and

(ii) to terminate Jennifer's interest in whole or in part.

(b) subject to that the Trustees shall hold Jennifer's Fund for such of Jennifer, Jennifer's parents, Jennifer's spouse, children and remoter issue in such shares and on such terms and conditions as the Trustees in their sole and absolute discretion shall appoint; and failing any such appointment for Jennifer's children in equal shares absolutely.

(c) I direct the Trustees to make over the contents of 45 George Street, Cellardykes, Fife to Jennifer absolutely.

4.4 To BRIAN MAXWELL and SANDRA MAXWELL both of 58a The Muirs, Kinross, Tayside in equal pro indiviso shares my heritable property at 49 George Street, Cellardykes, Fife and the contents of it."

Decision

[10] In this case the remedy of interim interdict preventing the sale by the respondent of the Heriot Row properties and their contents is predicated upon the success of the principal remedy sought by the respondent of reduction of the 2010 deeds. That remedy was founded upon an allegation of the deceased's lack of testamentary capacity to execute the 2010 deeds and also upon averments of facility and circumvention. The Lord Ordinary was not persuaded that the respondent had made out a prima facie case to the effect that the deceased lacked testamentary capacity during the penultimate week of her life when the 2010 deeds were executed. However the Lord Ordinary took a different view, albeit narrowly, on the respondent's case insofar as it was founded upon facility and circumvention. That latter conclusion of the Lord Ordinary was not challenged in the submissions before this court. Accordingly we must proceed upon the basis that there exists a relevant prima facie case to justify the reduction of the 2010 deeds. We would simply add that the position adopted in that regard by counsel for the reclaimers before this court is not surprising, having regard to the fact that the question of circumvention depends upon inference. Although the basis for such inference in the pleadings is not particularly strong, nevertheless there is a sufficiency to merit the conclusion that a prima facie case has been pled. It is also important to bear in mind that this action is at a very early stage. The motion was heard by the Lord Ordinary before the calling of the summons. We note that there are neither conclusions nor pleas-in-law directed to the interpretation of the 2008 will but we recognise that may alter during the adjustment period after defences are lodged.

[11] Even if the respondent is successful in obtaining decree of reduction of the 2010 deeds, the reclaimers still have the responsibility for the ingathering and distribution of the deceased's estate because they are also executors and trustees in terms of the 2008 will. Thus the issue for our consideration is a narrow one, namely whether, pending the resolution of the dispute between the parties, the reclaimers ought to preserve the Heriot Row properties and their contents in their present form or whether they are entitled in the meantime to realise these assets in the knowledge that they will be prohibited from distributing the proceeds of sale until the present dispute has been resolved. If the respondent fails to obtain decree of reduction of the 2010 deeds the issues canvassed before this court will be academic, as they can only arise if the 2008 will is reinstated. We accept that if the 2008 will is reinstated it will be necessary for the court to determine whether the respondent is entitled to insist upon the reclaimers giving effect to the deed of variation. We agree with counsel for the reclaimers that, if the question should arise, the court will require to ascertain the intention of the deceased in that regard. From a construction of the 2008 will as a whole it will be necessary to determine whether the deceased intended that the respondent should not receive the heritable property or the contents of the Heriot Row properties in specie. In determining that question the difference in approach adopted by the deceased in clauses 4.2, 4.3 and 4.4 to different parts of her heritable estate might be significant, as also might be issues of any family connection with the Heriot Row properties and their contents. Although in the course of submissions counsel for the reclaimers advised the court that there was no such connection we do not consider it satisfactory to determine such issues on the basis of ex parte statements, particularly where counsel for the respondent advanced reasons why the court should construe the provision as an administrative one. One such reason related to the respondent's residence in Ireland in 2008. In its present form the summons has no such averment or any other averment in support of the contention made before the Lord Ordinary and before this court that the direction to sell the Heriot Row properties and pay the net proceeds of sale to the respondent was merely an administrative provision. We consider that such matters should be sufficiently focused in the pleadings so that the court is fully aware of the respective position of the parties before determining an issue of such importance to both parties. There might well be a strong case for determining that the deceased did not intend the respondent to have transferred to her the title to the Heriot Row properties and that her benefit was to be confined to the net sale proceeds thereof. In that event it might well be, as was submitted by counsel for the reclaimers, that her right to vary the bequest was confined to a variation specifying the destination of the money representing the net sale proceeds. On the other hand, as was observed by counsel for the respondent, the respondent could offer to purchase the heritable property at an inflated price in the knowledge that a substantial proportion of the price paid would revert to her in the form of the net free proceeds of sale. Nobody else has an interest in the Heriot Row properties and there is no specific provision that the respondent is precluded from purchasing them and their contents. Although counsel for the respondent referred to the financial disadvantages to the respondent of her being forced to purchase them from the reclaimers, we note that this is another matter upon which there are no averments in the summons. If the respondent expects the court to take such matters into account it is necessary that they are also properly focussed in the pleadings, not least as a matter of fair notice to the reclaimers.

[12] We respectfully agree with the observations of the court in Toynar Limited v Whitbread and Co Plc 1988 SLT 433 at page 434F to the following effect:

"Where matters of law are raised, it is neither necessary nor desirable for any concluded decision to be made upon them at the stage of considering the making of an interim order."

We consider these comments to be equally apposite in the present case which is concerned with a reclaiming motion against the making of such an order. We are unable at this stage to conclude that the respondent's case is entirely without merit. The practical effect of allowing the reclaiming motion would be the sale of the Heriot Row properties and their contents by the reclaimers, thereby defeating the respondent's claim to an entitlement to their conveyance in her favour, which appears to be one of the objectives of the litigation. We consider that would be an undesirable result at this early stage in the proceedings as it might deny to the respondent an effective remedy for a perceived wrong. The court should be slow to bring about such a result. In Innes v Innes (1829) 7S 762, a case in which an issue arose as to the respondent's right to sell an estate, Lord Pitmilly observed at page 763:

"... the question is, whether we should not extend our equitable powers, and stop the sale, while the legality is still under discussion? The principle is this, pendente lite nihil innovandum, particularly if the innovation is a practical decision of the case ...."

These observations are applicable to the circumstances of this case for reasons already explained. Accordingly it seems to us that it would not be just to allow the reclaiming motion. We are reinforced in that view because the reclaimers cannot, in any event, distribute the estate until the legality of the 2010 documents has been determined. Moreover, they will be entitled to recover from the respondent the additional costs associated with maintaining the heritable property and its contents, in the event that the respondent fails to satisfy the court that she is entitled to insist upon a transfer of the heritable property and its contents to the persons specified in the deed of variation.

[13] For the foregoing reasons we shall refuse the reclaiming motion.