RFPG

Wills – Practical Points, Hints and Wrinkles and the Future

September 2014

Practical (but important) points in Will Drafting There are a number of points which should be kept in view when drafting a Will. Admittedly some are obscure, others not so. I do not claim that the following list is exhaustive. However, they represent points to watch out for:-

• Always bear in mind the question of your client’s capacity. Capacity is a very difficult topic

and there would appear to be an increasing number of challenges (particularly in England)

to Wills based on allegations that the Will was made at a point in time where the testator

lacked capacity. The difficulties which can arise here would justify a Seminar on their own.

The point I wish to make is that you may find yourself in a situation where you are not sure

as to whether or not the client before you lacks capacity. In such circumstances, I think

best practice would dictate that you seek an assessment of your client’s capacity to make a

Will from a suitably qualified clinician. The main thrust of the point which I wish to make to

you today is this – do not just write to the clinician indicating that your client wishes to make

a Will and requiring the viewpoint of that clinician as to whether or not your client retains

capacity. What is wrong with that approach? Frankly, you are not providing the clinician

with sufficient information to form a proper and decided view. This means that quite apart

from enquiring as to testamentary capacity, the clinician requires to have further information.

The British Geriatric Society Guidelines on capacity and testamentary capacity – Best

Practice Guide 2.2 (Updated 2006) stated in terms of General Rule 6

“Any assessment of mental capacity must be made with reference to a particular

task. Thus, testamentary capacity has to be determined with regard to a particular

Will - the more complex a disposition, the greater the mental capacity necessary.

The doctor has to have some idea of the extent and complexity of the Estate and

the number and nature of likely claims”.

In particular, it is well accepted in both Scotland and England that where the individual

suffers from a delusion, this can “poison” the mind of the testator and affect the disposition

of his Will. This means that, if, for example, the testator (whose capacity may be in doubt)

has indicated that he wishes to exclude a child (whom you might normally expect to have

been a beneficiary) you should explain to the clinician the reasons put forward to you by the

individual for such exclusion and seek the view of the clinician as to whether or not the

testator does suffer from some delusion which is affecting the disposition of his

testamentary instructions.

Do not lose sight of the important Guidance Notes issued by the Law Society of Scotland

in August 2013 in relation to Powers of Attorney and Vulnerable Clients.

• Never express the appointment of Executors to be “joint”. The reason for this is that the

Commissary Clerk will not (in certain circumstances) grant Confirmation on a Will where, for

example, the testator has stated:-

“I appoint A and B jointly as my Executors”.

If one of the Executors is unable to act for any reason, the Commissary Clerk takes the view

that the appointment of the other Executor has fallen. This leaves you with a Will which is

valid, but no Executors, and the normal (but not insurmountable) problems which can be

faced in that situation.

Similarly, avoid the expression “sole Executor”. Why?

• Always be wary of the conditio si testator sine liberis decesserit. The effects of the same

can be drastic.

Many clients do, for personal reasons, will understandably wish to name their children.

However, where that approach is adopted, unless appropriate drafting is employed, and

where another child is born to, or adopted by, the testator after the date of the Will, then

problems can arise. If the client wishes to name their children (and there is nothing wrong

with this) then always add on an additional phrase (why a client should not wish you to add

the following clause might give you pause to query such a decision) i.e.

“….and any other child of mine born to or adopted by me after the date of these

presents…”

The “nuclear” effect of the conditio was most recently seen in the case of Greenan v

Courtney 2007 SLT 355.

The Scottish Law Commission favours the abolition of this condition. This viewpoint is

repeated in the very recent Consultation on Technical Issues relating to Succession

(August 2014) issued by the Scottish Government. It seems clear that this Conditio will be

abolished – but will this abolition relate to all Wills whenever executed, or only to those

granted after inception of the relevant legislation?

• Make sure that clients are not confusing children/adopted children with stepchildren. As

discussed, the Law Commission has noted, there are more step relationships in Scottish

society than ever before. This is likely to increase. The Scottish Law Commission had

considered whether or not Scots Law should be amended to provide the Rights to

Succession to stepchildren but (I think rightly) concluded against this. The particular

problem which I have in mind is where a step-parent treats a stepchild as one of their own

having “accepted” the step child for the purpose of Maintenance. However, even where a

stepchild has been accepted and therefore may claim a right to aliment, this opens no

Rights of Succession in the step-parent’s Estate. If a step-parent wishes to benefit a

stepchild, then he or she must specifically provide for this in his or her Will.

• Make sure you avoid the conditio si institutus where a testator clearly intends that a bequest

is not to pass to the issue of the legatee. This is fairly simple.

An example of a bequest which would avoid the effect of the conditio si institutus is:-

“… I bequeath a legacy of TWENTY THOUSAND POUNDS (£20,000) STERLING

to my nephew, JAMES SMITH, residing at One Brown Street, Gourock but

expressly excluding his issue.”

I deliberately chose the foregoing example. For some strange reason, Scots law still

(bizarrely, in my view) recognises that the conditio applies not just to issue but also to

nephew and nieces. The Scottish Law Commission is of the view that the conditio should

be amended so that it no longer applies to nephews and nieces, only to direct descendants

(again see the Consultation referred to above).

The conditio si institutus does not apply to inter vivos deeds – Trustees of the Gwendolen

Beatrice Thomson Trust, Petitioners 1963 SC 41.

• Always check your drafts carefully – The use of one small simple (and wrong) word can

have a dramatic effect. Again see the Greenan case referred to above.

• Always send a copy of the draft to the client to be approved by them. In the English case of

Hawes v. Burgess and Another 2013 EWCA Civ 74 the Court of Appeal allowed a

challenge to a will on the basis of “want of knowledge and approval”. Inter alia, even

although the will had been read over to the testator prior to signature, the Court placed

some importance on the fact that a draft had not been sent to him for approval prior to his

meeting with his solicitor to sign the document.

• Where charities are to benefit, check their details – full name, Registered Charity Number

and current address. Do not simply rely on the details provided by the client. Why?

• If you are asked to incorporate a Nil Rate Band legacy/Discretionary legacy provision, then

be careful as to how you word the same. In the case of RSPCA v Sharp 2010 EWCA Civ

1474 the testator had made a Will which included a legacy in terms of which the testator

bequeathed the maximum amount he could “without Inheritance Tax becoming payable in

respect of this gift” to be divided between two individuals. The testator bequeathed his

dwellinghouse to one of those individuals in terms of a separate bequest, providing that

Inheritance Tax, if any, due in respect of the property was to be payable out of the testator’s

residuary estate. The residuary estate was left to the RSPCA.

At the testator’s death, his estate comprised assets valued at £780,000. His dwellinghouse

was valued at £169,000. The Executor had administered the estate on the basis that the

pecuniary legacy referred to amounted to the entire Nil Rate Band (then £300,000). The

Executor took the view that the dwellinghouse passed to the relevant beneficiary free of

Inheritance Tax which required to be borne by the residue – which had, of course, been

bequeathed to a charity.

The RSPCA contended that the Executor’s construction of the Will was incorrect. In the

charity’s view, the gift of the unused Nil Rate Band was only of such amount as remained

after the value of the dwellinghouse (also subject to a specific bequest) had been taken into

account.

At first instance, the Judge found in favour of the Executor’s construction of the Will. The

charity appealed to the Court of Appeal.

The Court of Appeal overturned the decision of the lower Court and upheld the charity’s

construction. The Court of Appeal took the view that the phrase at issue contemplated

calculation of the Nil Rate Band by reference to all transfers of value made by the Will. The

phrase was not superfluous but an accurate recognition of how Inheritance Tax worked.

The Court held that the draftsman of the Will had appreciated gifts under the relevant

clauses would be aggregated in order to calculate what was left of the Nil Rate Band. The

legacy of what was left of the Nil Rate Band was therefore limited to what might left of the Nil

Rate Band, taking into account the specific bequest of the dwellinghouse.

I think it also noteworthy that the Court of Appeal rejected the suggestion made on behalf of

the Executors that the relevant clauses in the Will required to be regarded as taking effect

sequentially i.e. that the Nil Rate Band legacy was equal to the whole of the Nil Rate Band

and therefore Clause (iv) should not be taken into account when construing Clause (iii).

However, the Court took the view that this was in inappropriate way to read the Will. The

Court pointed out that payment of debts and expenses had been placed after the two

clauses under discussion despite that obligation taking precedence over the same. The

Court of Appeal held that this undermined the contention that the effect of the clauses was

intended to be strictly sequential. In the Court’s view, clear words were required, and

otherwise that one clause could not be construed as being subordinate to the another simply

because it was later in the Will (see also the case of Thwaites v Foreman 63 ER 477).

The possible effect of the transferable Nil Rate Band in respect of a clause incorporating a

Nil Rate Band legacy provision was considered in the case of Loring v Woodland Trust

(2015) EWHC 4400.

In the Loring case, Clause 5 and 6 of the Will at issue were as follows:

(5) My Trustees shall set aside out of my residuary estate assets or cash of an

aggregate value equal to such sum as is at the date of my death the amount

of my unused Nil Rate Band for Inheritance Tax and to hold the same for such

of the following as shall survive me and in the case of grandchildren attain

twenty three and, if more than one in equal shares absolutely (the names of

the beneficiaries were then set out).

(6) Subject as aforesaid, my Trustees shall hold the remainder of my estate for

the Woodland Trust of Autumn Park Grantham aforesaid absolutely

The net value of the estate of the testator (Mrs Valery Smith) amounted to £680,805. The

Will under discussion had been signed by Mrs Smith on 2 February 2001 i.e. long before the

introduction of the transferable Nil Rate Band. Depending on how the Will fell to be

interpreted, the residue left for the charity was either £30,805 or £355,805.

Section 8A(3) of the Inheritance Tax Act 1984 provides

“Where a claim is made under this provision, the Nil Rate Band maximum at the time of the

survivor’s death is to be treated for the purposes of the charge to tax on the death of the

survivor as increased by the percentage specific in sub-section (4) below”.

Sub-section (7) provides

“In this Act, “Nil Rate Band maximum” means the amount shown in the second column in

the first row of the table in Schedule 1 to this Act.”

There was no contemporaneous evidence as to the intentions of the testator. She was, however,

entitled to her late husband’s full Nil Rate Band.

The Judge considered the Will as a whole and examined the language of Clause Five in that

context. Giving the words used in that clause their normal meaning, and then taking into account

the relevant background which informed the meaning of the words used, the Judge concluded that

Clause 5 should be construed as including the increase in the Nil Rate Band available to the

testator’s Executors. Not only is the statute clear that the effect of a successful claim would be

retrospective, but also that the effect is that the Nil Rate Band maximum at the time of the

survivor’s death is treated as “increased” at that date. The Judge held that it was of no

consequence that the increase arose as a result of an election made at the discretion of the

personal representatives after the death.

In their submissions to the Court, Counsel for both parties referred to the guidance and examples

contained in the Inheritance Tax Manual series 43065. The Court noted the guidance – and also

that it was not binding. In IHTM 43064, HMRC give an example of a bequest which in their view

would carry the enhanced Nil Rate Band

“I give free of tax to the Trustees such sum at my death as equals the maximum amount

which could be given to them by this Will without Inheritance Tax becoming payable in

respect of my estate”.

Examples given by HMRC of gifts not carrying the enhancement as

“To my Trustees, such sums as I could leave immediately before my death before IHT

becoming payable”

– because any Nil Rate Band which may be transferred is not available immediately before the

death.

“I give free of tax to my Trustees in amount equal to the upper limit of the Nil Percent Rate

Band in the table of rates in Schedule 1”

- because it refers to a fixed amount

“To my Trustees, an amount equal to the Nil Rate Band in force at my death”.

The Judge commented that Clause 5 in Mrs Smith’s Will was similar to the first example given by

HMRC.

• If you are setting up a Testamentary Discretionary Trust ensure that the entitlement to

exercise the discretionary pounds is extended not only to the Trustees originally nominated

in the Will but also to any Trustee who may be assumed by them. There is a body of law

which suggests that an assumed trustee cannot exercise discretionary powers, unless

expressly authorised to do so.

• Always ensure that you fully and properly identify the subject of a specific bequest. For

example, a client may wish to leave a bequest of a diamond ring to a friend. However,

following death, it transpires that the testator had three diamond rings and the residuary

beneficiaries may get into a battle with the specific legatee as to which ring the bequest

applied. Thus, it is best always to check whether or not the testator has more than one

diamond ring and to ask the testator to specifically identify the ring intended (for example -

my diamond ring inscribed with the initials “JK” and the date “1977”).

• Bear in mind ademption. It is worthwhile endeavouring to ascertain with the testator

whether, if the testator disposes of an item which is the subject of a specific bequest, that

item should be replaced by something else, or perhaps cash. If not, then say so.

See the very sensible comments of Sheriff Baird in BH Applicant Glasgow Sheriff Court , December 2010.

See also Turner v Turner 2012 CSOH 41

• Always endeavour to ensure that intestacy will not flow from your drafting. Consider

questions of over destination. Perhaps an example of what I mean may assist you:-

Testator A is widowed and her net estate which is all moveable amounts to £100,000. In

her Will she has left the following residuary bequests:-

(a) A one quarter share of my estate to my son whom failing in the event of him

predeceasing me equally between or among his issue per stirpes;

(b) A one quarter share of my estate to my daughter whom failing in the event of her

predeceasing me equally between or among her issue per stirpes; and

(c) The remaining one half share thereof equally between such of my grandchildren as

shall survive me.

What could possibly go wrong with that?

It is important to remember that Section 13 of the Succession (Scotland) Act 1964 might be

criticised as having been poorly drafted. Why? The reason I say this is that Section 13

could have (but does not) state what should happen to a bequest left in the Will to the

individual who opts to claim legal rights.

In truth, there may well be good reason to include in most Wills which we prepare nowadays

a clause which will specifically deal with the possibility of a beneficiary under the Will

claiming legal rights. Barr and Others in both editions of their Book “Drafting Wills in

Scotland” suggest a style of clause which would largely deal with this awkward situation –

the clause provides that where an individual renounces etc., then he or she will be treated

as having predeceased the testator and the share left to that individual under the Will pass

to the other beneficiaries by way of accretion. Do not, however, include that clause

unthinkingly. You have to make sure that the clause fits in with the manner in which the

residue clause has been drafted.

• It is always better to predicate a beneficiary’s entitlement on survivance i.e avoid referring to

the beneficiary “predeceasing”.

See Ross’s Judicial Factor v. Martin 1955 SC (HL) 56

Again, this matter is covered in the Consultation document issued by the Scottish

Government, and referred to above, in relation to its consideration of Section 32 of the

Succession (Scotland) Act 1964.

• It is always an idea not to leave a bequest of furniture and house contents in liferent.

Furniture et cetera, by their nature, will deteriorate and this can bring the liferenter into

conflict with the fiars (particularly where the liferenter is an unpopular step parent). Thus, if

you are asked to draft a Will, in terms of which a bequest of a dwellinghouse is to a

particular beneficiary in liferent, it is always better not to include the furnishings and

contents within the liferent. It would be very much better simply to persuade the client that

the furniture and contents should be left absolutely to the liferenter.

• The incidence of IHT. The normal rule is that where a Will is silent, specific bequests and

legacies will be free of IHT, with the burden of that tax falling on the residue. (See Section

211 of the Inheritance Tax Act 1984 as also the case of Cowie’s Trustees 1982 SLT 326).

The point I am trying to make here is that a client who has no dependants may wish to

substantially benefit friends and wider members of the family. However, they may choose

to do this by means of specific bequests and pecuniary legacies, leaving the residue of their

Estate to charity. I am aware of one case where significant bequests and legacies were left

to friends and more distant relatives “tax free”. However, the testator’s Estate was

substantial. Although the residue was left to charity, with the effect of grossing up and the

fact that the residue had to bear the Inheritance Tax, the charity was left with substantially

less than the testator had anticipated.

• A specific bequest of heritage can also raise issues – is the bequest to be free of any

mortgage or charge secured over the property at the testator’s date of death, or subject

thereto? Some clients, when they make their Wills, will wish to leave their heritable

property to a friend or relative. When you raised the question of whether or not this should

be free of or subject to a mortgage they may scoff – “I have no mortgage over the property

and I have no intention of taking one out”. However, an individual’s circumstances can

change. Many of our older clients, having been mortgage free for many years, have ended

up taking out equity release mortgages to additionally fund their retirement. The client’s

position should be ascertained.

Bear in mind that the normal clause regarding expenses will not enable Executors to convey

the property to the specific legatee free of any outstanding mortgage - see the case of

Muir’s Trustees –v- Muir 1916 1SLT 372.

If a bequest of a heritable property is to be effected free of any outstanding mortgage then

you need to specifically state that the bequest is to be free not only of the expenses of

delivery or transfer but also of any outstanding heritable security or charge secured on that

property.

• Always ensure that you include an appropriate clause of revocation. Bear in mind that the

client may have a foreign Will which should be kept alive.

• Do not fall into the trap of failing to postpone vesting. A clause leaving a share of estate of

bequest to a particular individual but stating that they have not to receive the same until they

reach a particular age will be ineffective on the basis of repugnancy. A valid Trust purpose

has to be interposed.

• Where the client has made an earlier will, ask for a copy of the same. Why?

• Finally, please bear in mind (for your own self protection) that incorporation within a Will of a

direction that a particular solicitor or firm of solicitors have to wind up the testator’s estate

will now be regarded as misconduct by the Law Society of Scotland. It is understood that

inclusion of an expression of wish to that effect will not be so regarded.

The Missing Will

I understand that a small number of claims are intimated to our PI insurers each year as a result of

Solicitors losing clients’ Wills

Unfortunately, I think that it is fair to say that most cases now going into the Court of Session relate

to Wills which have been lost whilst in the apparent custody of solicitors or other professionals. An

action to prove the tenor of a Will is normally a Declaratory one which can only be raised before the

Court of Session. The Court of Session has power under the nobile officium to grant such

Declaratory Orders.

The Pursuers in such a case are normally the Executors named under the missing Will but there is

no reason why a beneficiary named therein should not raise the proceedings. The proceedings

require to be served on all individuals named as beneficiaries in the Will and possibly also those

who would be beneficiaries on intestacy under Section 2 of the Succession (Scotland) Act 1964 in

the event of the Declarator being refused by the Court. The Pursuer requires to prove

1. that the document was executed by the testator;

2. the tenor (the actual terms) of the missing Will; and

3. the reason for the Will being missing (causa ammissionis).

Best practice nowadays dictates that where a Will is made for a client, a copy of the same should be

sent to the client but also retained by the solicitor who made the Will. Where such a copy can be

provided, this normally deals with points 1 and 2 above. Where the action is undefended, the

Court will normally be prepared to proceed on the basis of Affidavit evidence. See paragraph 6(1)

of the Act of Sederunt (Rules of the Court of Session Amendment (Miscellaneous) Order 2009) SSI

2009 (No. 63) (which came to effect on 23 March 2009) it is inter alia provided

“In an action approving the tenor in which no Defences have been lodged, evidence shall be

given by Affidavit unless the Court otherwise directs”.

It would appear that where the action is undefended, the Court will be prepared to accept fairly

general evidence as to the reasons for the Will being missing.

Where Decree is granted, the Extract Decree is effectively treated as being the equivalent of the Will

itself.

What happens, however, where the client removes his Will from the solicitor’s custody and it cannot

be found after the client’s death? This is likely to be an entirely different matter – owing to the legal

presumption that where the client has had the Will in his own possession and it cannot be found

after his death then, in the absence of any reasonable explanation otherwise, the testator will be

deemed to have revoked the Will by destruction animo revocandi (see the case of Clyde –v- Clyde

1958 SC 343).

In the Outer House case of Lauder –v- Briggs 1999 SC 453, Senior Counsel for the Pursuer put

forward an argument which Lord Penrose himself described as “persuasive” that every Authorities

did not in fact support that there was any such presumption in Scots Law. However, Lord Penrose

took the view that the Outer House was not a place for such a matter to be decided and upheld the

presumption in the case in question.

In the Lauder case, the Pursuer averred that after the deceased had taken possession of her Will,

whilst not being incapax to the extent of being incapable of revoking the same, she had been

incapable of managing her affairs and demonstrated “a confused treatment of her belongings”. As

Lord Penrose indicated, the Pursuers case was that “the absence of a deed from the repositories of

a confused person, may not, and given the circumstances….sustain the inference that the person

must have destroyed the deed at all…”. Lord Penrose took the view that the averments were

sufficiently relevant for him to fix a Proof before Answer. However, the matter was settled out of

Court beforehand with the Proof before Answer being discharged.

See the important case of McLernan and Another –v- Ash and Others (Outer House, Lord

Eassie 6 March 2001, unreported).

At the relevant time, this case excited some press interest owing to the fact that one of the Pursuers

was Sheriff McLernan. The deceased was his second cousin who had gone into hospital. The

action was rare in the sense that it was in fact defended.

Sheriff McLernan gave evidence that on the day prior to the testator entering hospital, she had

shown him a Holograph Will drawn up and signed by her in terms of which she had bequeathed her

house and its contents to him and a Father Kilpatrick. He gave evidence that the Holograph Will

also provided that her investments should be divided equally between Father Kilpatrick, Sheriff

McLernan and the latter’s sister, Mrs. Ash. Sheriff McLernan gave evidence that he had suggested

to his second cousin that she should not take the Will into hospital with her but leave her Will

amongst dishes in a sideboard in her living room. Mrs. Ash gave evidence that her second cousin

had told her that she had followed the Sheriff’s advice. Following her death, the Will could not be

found. However, evidence was led that there had been a break-in at her house and that the

contents of the sideboard in question had been disturbed. Lord Eassie, having considered the

prior authorities, took the view that whilst a Holograph Will was not normally something which had

any intrinsic value, the confusion and destruction caused by a break-in could explain the fact that

the Holograph Will had gone missing. In the circumstances, he felt that the explanation regarding

the break-in was both possible and coherent and displaced the presumption. Although, it would

appear (strangely) that Lord Eassie did not refer to the Opinion of Lord Penrose in the Lauder case,

after his own review of the relevant authorities, at paragraph thirty of his Opinion, he concluded

that:-

“It is plainly not sufficient simply to aver and prove that a testamentary deed executed by a

testator and subsequently on his actual custody is no longer extant at his death, if only for

the reason that those simple facts alone provide no basis for holding that the absence of the

deed is not the result of a decision by the testator to revoke its provisions by destroying the

deed itself. There must be averred and proved circumstances which, in the particular case,

offer a real possibility that the loss or destruction of the deed occurred otherwise than by destruction by or on behalf of the testator animo revocandi; where the existence of such

circumstances are averred and proved, the decision whether the absence of the

testamentary writ is attributable to the possibility or possibilities thus identified, or to the

exercise by the testator of his power of revocation by destruction, is one to be arrived at on

the balance of probabilities”.

My advice to all of you is never to lose a client’s Will – even although the process of setting up the

Will is reasonably straightforward, it is expensive. My firm had to bear that pain a few years ago

when, having received notification of a client’s death, the client’s Will was sent by DX to the Books

of Council & Session. On the fact that the Extract had not been returned, enquiry was made of

the B & C of S. They claimed that they had never received the Will.

In the circumstances, my firm had to accept responsibility for the loss of the document.

Suffice it to say, that since then, all Wills (and indeed other documents) are being sent by my firm by

Registered Mail to the Books of Council & Session for registration.

A Practical but Unusual Solution?

Documents not reaching the Books of Council & Session, has affected other firms. I was recently

consulted by a firm of Solicitors who had sent a deceased client’s Will to the Books of Council &

Session via DX. Apparently, the Books of Council & Session never received the same. The firm

had a copy of the Will.

Thinking out of the box, the firm contacted Royal & Sun Alliance and explained the situation to them.

The firm were in a situation that the terms of the Will in fact reflected what would happen under the

Laws of Intestacy. Ewan Whitelaw at Royal & Sun Alliance indicated that he had met this problem

before. It had been dealt with by one of the family being appointed Executor Dative and a Deed of

Variation then being entered into to fully reflect the terms of the Will. Quite sensibly, Ewan

suggested that the firm consult with the Commissary Clerk who would have to deal with any

Confirmation Application. The position was explained in full detail to the Commissary Clerk (I can

vouchsafe this as I have seen the relevant correspondence). Somewhat to my surprise, the

Commissary Clerk indicated that he saw no difficulty with what was proposed. He indicated that the

fact that a Will had gone missing, might be mentioned in the Petition for appointment of the Executor

Dative but went so far as to say that he did not feel that this was necessary. He did not think that

the Sheriff would have any difficulty in all the circumstances, the position having been explained in

full. As I understand it, Ewan Whitelaw indicated to the firm in question that he had encountered a

small number of incidences where this solution had been used to avoid the perhaps prohibitive

expense of going to the Court of Session to prove the tenor of the missing Will.

I merely bring this to your attention. It begs the question perhaps as to how to deal with the

declaration on the second page of the Form C1 but in this particular case, the position having been

explained in advance to the Commissary Clerk, the latter appeared to see no difficulty whatsoever

and (again I have seen in correspondence) appeared to be of the view that there was no question of

obfuscation.

The Missing Beneficiary

I do appreciate that this next part of my presentation to you tonight does not relate so much to Wills

(see below) but rather the administration of an Executry Estate.

I was recently asked for advice in relation to a particular situation. The Executors had made

substantial progress in winding up an Estate under their charge. However, one beneficiary had

“gone missing”. The Executors appreciated that they had to make reasonable efforts to trace the

missing beneficiary but the point was this – could they debit the costs incurred in relation to tracing

the missing beneficiary from that beneficiary’s entitlement in the Estate?

On one level, this seems entirely equitable – but is it correct? I have now entered my thirty eighth

year in the legal profession. If I have learned anything, our Laws of Succession and fairness/equity

are often at opposite ends of the spectrum. The practice of law is not, for the most part, about

justice – it is the bare application of legal rules as they apply at a given point in time. Perhaps an

example would be appropriate:-

A and B are sisters. A never married. However, B fell pregnant when she was 18 and

had a son, C. B never married but, at the age of 40, fell seriously and progressively ill.

A took her sister B into her home and has looked after her and cared for her for more

than 20 years. B is then told by her doctor that she is terminally ill and has only six

months to live. However, shortly after receiving that dreadful news, her son, C, turns

up like a bad penny. It transpires that C has spent much of his adult life in jail for

crimes of dishonesty.

B wants nothing to do with her son. She is intent on making a Will leaving her whole

Estate to her sister, A. However, the doctor’s prognosis as to the remaining lifespan of

B has been unduly optimistic. Before B can complete a Will in favour of A, she died

unexpectantly. There is no Will.

Who is the beneficiary in respect of B’s intestate Estate? And against the background

of the facts as described, would any layperson consider that to be fair?

I hope I have made my point.

Let us return to the difficult situation (based on fact) outlined above. Can the Executors reasonably

debit the cost of tracing the beneficiary to his or her share/interest in the Estate? In my view, he

answer here largely depends on what type of bequest has been left to the missing beneficiary as

also the terms of the Will itself. Barr and others on “Drafting Wills in Scotland” (2nd Edition)

paragraph 3.33 state:

“If a Will silent on the question of expenses where a legacy is concerned, the expenses

are the liability of the legatee...if the bequest is free of expenses, the residue will bear

the expenses...the obvious time to consider potential expenses is at the time that

instructions are taken for drafting the Will with a decision being made on who should

bear them at that time”.

An immediate point which might arise here is whether or not the cost of tracing a missing beneficiary

is in fact an expense of delivery? If those costs are covered by the phrase “expenses of delivery”

then what is the position?

If we are considering a specific bequest or a pecuniary legacy then, frankly, there is likely to be an

immediate problem. Most modern Wills state that specific bequests and pecuniary legacies are to

be conveyed or paid “free of government taxes and duties and of expenses of delivery”. Let us say

that the missing beneficiary has been bequeathed a legacy of £20,000. It costs £2,000 to trace him.

The Executors seek to debit the cost of tracing the beneficiary from his legacy. The legatee objects

on the basis that the Will specifically states that the bequest to him should be implemented free of

expense. The Executors could be in a difficult situation there.

Let us say that the Executors, in the face of opposition from the legatee, decide that they will debit

the cost of tracing him to the residue of the Estate. However, the residuary beneficiaries

immediately object – after all, their interest is being diminished through no fault of their own. How

do the Executors respond to such a complaint on the part of the residuary beneficiaries?

I make it clear that I raise this point purely for your interest and consideration. I am not aware of

any cases which are directly on this point. However, I would offer the following comments:-

• Where a bequest is stated to be free of government taxes and duties and of the expenses of

delivery, then I think that the legatee may have a stateable reason for objecting to the

“tracing costs” being debited against his legacy – but in the world in which we now live,

someone may be happy to foment an argument as to whether tracing costs are truly

expenses of delivery in the sense intended by the testator..

• Similarly, and whilst I could understand the position of the residuary legatees, it is not clear

to me that they have real grounds for serious objection. In the case of Cochrane’s

Executors v. Inland Revenue 1974 SC 158, the First Division of the Court of Session

indicated that residuary beneficiaries could not direct Executors in relation to the

administration of the Estate. Bear in mind that the residuary beneficiary is entitled only to

an accounting. The Court of Session held that Executors were not bound to consult a

residuary legatee before realising any part of the Estate, nor obliged to accept any direction

from a residuary beneficiary in that regard.

The foregoing being so, I think that if the expenses of tracing the missing legatee were reasonable,

the Executors would have a reasonable argument to put before the residuary legatees as to why the

residue fell to meet the costs of tracing that individual – in any event, the expenses of administration

of any Executry Estate fall, in the first instance, to be debited against the residue.

What would the position have been had the missing beneficiary been a residuary legatee? Again, I

would suggest that the costs incurred in tracing him/her (provided they were reasonable) could

properly be debited against the residue.

I have no doubt but that residuary legatees who had not gone missing, would feel hard done by –

however, as I have indicated to you, fairness/equity and the application of our Laws of Succession

are often many miles apart.

If the Will says nothing about expenses of delivery or implementation, then the normal rule is that

the bequest will have to bear the relevant expenses.

In either case, however, what if it is argued by the legatee that the costs of tracing are not normal or

appropriate expenses of delivery et cetera?

There is of course a possible way to avoid this question being raised, although it would mean

incorporating within a Will a particular provision of a type which I have never seen before. However,

I now offer it for your entertainment/consideration. My suggested solution has two aspects. Firstly,

expand the phrase “free of expenses” to “free of expenses and implementation”. Secondly add the

following wording

I declare that notwithstanding any other provision of this Will, in the event of any

beneficiary hereunder being missing and untraced at the time of and following my

death, I hereby authorise my Executors to expend such costs as they may in their sole

discretion consider it to be reasonable in tracing such beneficiary but always subject to

the provision that the whole costs of tracing that individual shall be borne by such

beneficiary and deducted from his/her legacy or share of the residue; In the event of

my having left a specific bequest to such beneficiary, he or she shall require to refund

the whole costs of tracing his or her whereabouts prior to receiving the object of such

specific bequest from my Executors.

I would hope that this would put the matter beyond doubt or dispute.

Digital Wills – Recent Developments and Best Practice This is perhaps the most glaring area where Scots law sadly lags behind what is happening in the

real world. I think it fair to say that for the most part, we all know exactly what physical assets we

own – a house, a car, cash deposits and Bank accounts, Stocks and Shares, insurance policies etc.

However, it is likely that the great majority of us own very much more than that – not physical

possessions which can be readily identified, but rather “digital assets”. Most of us, in this computer

age, are likely to die leaving a “digital estate”. The Office for National Statistics has indicated that

70% of 65-74 year olds are now “on-line”. This take up amongst our older clients will undoubtedly

increase as time goes by. Recently, I visited an 83 year old client at his home to discuss his Will and

Inheritance Tax planning. He opened up his PC and produced a real time valuation of his share

portfolio. He trades via his computer on almost a daily basis.

What if he were to lose capacity against a falling stockmarket? Where would his Attorney stand?

What if he died? How do his Executors access the portfolio if he does not have paper share

certificates – how do they access the programme in the first place if it is encrypted or password

protected?

Worldwide, it is estimated that there now nearly 3 billion individuals on line

One of the main problems with “digital assets” is that the old tried and tested methodology of

ascertaining just what a deceased person owned, or in the case of an incapax what he still owns,

would involve the family or Executors, or the Attorney etc going through the papers of the

deceased/incapax. Such an approach is still valid (and still necessary) but does not take into

account the possibility of the deceased having “digital assets”. The old approach may fail to identify

such assets.

What are the main issues for lawyers? These are likely to include:

1. Identification of Digital Assets – It is important that Executors and interveners establish just

what Digital Assets are owned by the deceased or the incapax.

2. Valuation – Many essentially “sentimental” digital assets may in truth have no value but

others, such as online Bank Accounts, may be of considerable value.

3. Access – How does the Executor or Intervener access the digital asset?

4. Transferability – Can management of the asset be transferred to the Executors or to the

Interveners?

It has only been in recent years that the significance of an individual’s “digital estate” has been

realised.

The matter was highlighted in 2005 when the family of a deceased US Marine, Lance Corporal

Justin Elsworth, applied to Yahoo! for access to Justin’s e-mails. Yahoo refused. Yahoo’s policies

in relation to subscribers stated that accounts “terminate upon their death”. However, John

Elsworth, the father of Justin, was adamant that his son would have wanted his family to have

access. John Elsworth stated

“He was wanting to forward his e-mail from strangers…which were letters of

encouragement. He said all their support kept him motivated. We thought back and forth

about how we were going to print them out and put them in a scrap book”.

Yahoo’s reason for refusing was that to allow John Elsworth access, would violate the privacy rights

not only of his son but also those with whom he had corresponded. Yahoo stated (via their

spokeswoman, Mary O’Sako)

“The commitment we have made to every person who signs up for a Yahoo mail account is

to treat their e-mail as a private communication and to treat the content of their messages

as confidential”.

The family pursued the matter through litigation and subsequently succeeded in obtaining an order

forcing Yahoo to hand over the contents of Justin’s e-mail account to his father. Notwithstanding

the success of the Elsworth family, Yahoo stuck steadfastly to its policy of refusing access to a

deceased individual’s e-mail account, justifying their position on the basis of “privacy”. Yahoo

issued a statement to the effect that the family of the deceased e-mail account holder would require

to secure a Court Order verifying not only the deceased family members’ identity but also their

relationship to the deceased.

The family of Eric Rash encountered similar problems. Eric (aged 15) lived in Virginia, USA. He

committed suicide in 2011. His family wished to establish why he had killed himself (perhaps to

ascertain if Eric had been subjected to “cyber bullying”). Having failed to guess Eric’s password to

his Facebook account, the family appealed to Facebook for help – but they refused. The family

raised a court action, but soon found that there was little or no legislation governing the

management of data which would assist them. The case indirectly resulted in Federal legislation

regarding the data of minors. Some US State legislatures have now recognised the problem.

The above cases are of course American.

One recent UK example was reported in the Times on Friday, March 7th 2014. The Times

technology reporter, Mourad Ahmed had posted the following report

“Apple has been criticised for refusing to unlock a dead woman’s iPad.

Josh Grant, 26, said his mother Anthea bequeathed the tablet to her family after buying the

computer during her treatment for cancer.

After her death, they had been unable to unlock it despite supply Apple with copies of her

Will, Death Certificate and a solicitor’s letter.

Apple has said that its security measures help its customers protect lost or stolen devices.

Mrs Grant used it for games and video calls with her sons. In her Will, she said her estate

should be split between her five boys, with the eldest, given the iPad.

After her funeral the family approached Apple about the iPad but the firm asked for written

permission from the owner, but was told she had died.

After the family supplied details of Mrs Grant’s death, Apple made more demands,

requesting a Court Order to unlock the tablet. The sons estimated that this would cost £200

in legal fees and said it was “a false economy”.

Mr Grant, from London wrote “I have always been a fan of Apple but this incident has

changed my opinion of them completely. Their utter lack of understanding and discretion in

a time of great personal sadness has been astonishing”.

Apple declined to comment”

However, it remains the case that very few countries, other than the USA, have legislated (or even

considered legislating) in this area. As indicated, some US States have legislated. The first US

States to issue legislation were Rhode Island and Connecticut. Laws enacted in Oklahoma,

Nebraska and Idaho were broader in their scope, including all electronically stored documents of the

deceased, and allowing executors some control over digital assets and social media accounts.

Indiana, Rhode Island and Connecticut have legislation but more restricted in its scope – covering

digital files and mail only. Throughout the world, legislatures are lagging behind digital

developments. Rights of Executors, those acting under a Power of Attorney, Financial Guardians

and beneficiaries with regarding accessing digital assets are extremely confused. This arises from

one simple fact – the ownership of and the ability to transfer digital assets remains confused and in

many cases extremely difficult. Are digital assets property at all? – if they are, are they “intellectual

property”. If not, into what category of property do digital assets fall? Some argue that, certainly in

relation to e-mails, these are not property (see below) and that they amount to no more than a

licence to utilise the service of a particular website. Licences, it is argued, are not transferable and

will certainly come to an end on death of the Licencee.

Some providers have responded to such concerns, but to date there has been little uniformity in

approach. Google now has a procedure allowing users to plan what should happen to their account,

and will on occasion (in appropriate circumstances and after “careful review”) provide the contents

of an email account where no specific instructions have been left by the user. Google has also

recently introduced what it calls the “inactive account manager”, advising on how to manage Gmail

messages etcetera if the account becomes inactive. The subscriber can choose to have the data

deleted if the account is inactive for a specified period. Alternatively, the subscriber can appoint

“trusted contacts” to receive data from Gmail, You Tube etc. Yahoo will still refuse to hand over data

without a court order being obtained.

There will need to be a solution which both the family etc of the deceased, as also Intervenors on

behalf of incapax digital account holders on the one hand and the service providers on the other can

find acceptable – viz. the attitude of Yahoo! in the Elsworth case. There is also the difficulty of

different international views on privacy and confidentiality. At present, France has stricter rules on

privacy than other Members of the European Community – and the US has a quite different view of

privacy than most EU member countries.

There will also require to be a proper definition of what is and what is not “property” in the digital

world and which actually belongs to the deceased user/account holder. The difficulties with “digital

assets” and whether or not they amount to “property” were illustrated in the English case of Fairstar

Heavy Transport NV v. Adkins (2012) EWHC 2952 (TCC).

Fairstar are a Dutch heavy marine transport company. Adkins had been their Chief Executive

Officer prior to the company being taken over. Fairstar had obtained a Court Order against Adkins,

restraining him from knowingly deleting or otherwise interfering with e-mails sent or received whilst

he had held the position of CEO prior to the Company takeover. Fairstar alleged that Mr. Adkins

had not revealed, during the period leaving to the takeover that Fairstar had incurred a very large

liability to a shipyard in relation to the construction of a new vessel. Fairstar’s problem was that it

had no access to electronic correspondence between Mr. Adkins and the shipyard in question. It

could therefore not determine the scope of its liability.

Fairstar sought access to both the incoming and outgoing e-mails in order to assess its liability,

claiming that it had a proprietary claim to the content of the e-mails on the ground that the materials

created by, or that had come into the possession of an agent whilst acting for his principal, are the

property of the principal. In reply, Adkins contended that the content of the e-mails was information

and that information cannot be property, notwithstanding copyright claims.

In effect, the Court had to decide whether or not a proprietary interest did exist in the content of the

e-mails. The Court held that the relevant case authorities pointed strongly against there being any

proprietary right in the content of information and therefore e-mails. However, perhaps leaving the

door open, the Court also indicated that this was by no means settled law. The Court did indicate

that it found assistance from the case of Force India Formula 1 Team v. Malaysia Racing Team

(2012) EWHC 616 (CH). Therein, the Court had held that confidential information was not property.

Fairstar, however, appealed the decision of the High Court to the Court of Appeal. The Appeal was

reported as Fairstar Heavy Transport NV v. Adkins (2014) FSR 8.

In the High Court, Fairstar’s claim had been dismissed on the basis that the contents of the e-mails

was “information” and that there was no property information. In its appeal, however, Fairstar

submitted that it had the right, as principal to require Adkins to produce and deliver up documents

held by him as a former agent so that it could inspect and copy them, and of the duty of the same

whether the documents were on paper or electronic form. Adkins had worked for Fairstar as its

Chief Executive Officer on an agency basis.

The Court of Appeal agreed with Fairstar. However, it would appear the Court of Appeal proceeded

on the basis that Fairstar had the right in question on the basis of the Law of Agency and “the legal

incidents of an agency relationship that survived its termination”. The Court of Appeal held that the

matter could be decided without a debate about the legal characteristics of “property” or whether or

not the contents of the e-mail was information in which property existed or could exist at all. The

quote which I read from the Report of the Fairstar Appeal stated

“The Court declined to enter into a controversy when it was not necessary to do so in order

to decide the case and its particular facts. It would be unwise to endorse the proposition

that there would never be property in information without knowing more about the nature of

the information and dispute and the circumstances in which a property right was being

asserted…..e-mails, and their content, stored in a computer should be treated as documents

for the purposes of determining the scope of the legal incidents of an agency that survived

its termination…the form of recording or storage did not detract from the substantive right of

the principal as against the agent to have access to their content”.

It would therefore appear to remain open as to whether there can be a right of property in an e-mail.

The cases quoted indicate the difficulties which can arise in relation to assessing whether or not a

digital asset is property over which rights can be asserted.

It should be borne in mind that not all uses of computers are benign or even neutral. Executors

(where they are given relevant access) may face difficult decisions – what if the deceased had an

account with a pornographic site, or their emails disclose a previously unknown affair or gambling

habit (in the latter case, explaining why the deceased never seemed to have any money whilst

apparently earning well)? What if the computer records of the deceased contain difficult or

embarrassing “family secrets”? Do the Executors disclose this information to the family of the

deceased (perhaps causing great hurt) or request that the relevant records be permanently deleted

– and what if the surviving spouse is one of the Executors?

The difficulties in weighing up the right to privacy against the right to access (if it exists) to a

deceased’s digital information was encapsulated by Professor Peter Swire who had served as a

former Chief Privacy Adviser to President Bill Clinton. Professor Swire stated

“People might decide what they want family members to see or keep secret sometimes for

family harmony reasons…they may know secrets of other family members that they hold in

confidence. The sister had an abortion, the father had a first marriage”.

In commenting on the Elsworth case, Professor Swire indicated that Yahoo’s policies was stricter

than those for access to medical records – and in his view, this was correct.

There are likely to be “clashes” between two perceived rights – to privacy and to freedom of

information.

The term “digital asset” can encompass various different things. It will include online accounts (e-

mails), financial accounts, online Bank accounts and social networking sites such as Twitter,

Facebook etc. Similarly, photograph sharing sites (Kodak Gallery etc) and Blogs fall to be regarded

as “digital assets” – as will online resources such as EBay, PayPal, Avatars and video games and

virtual worlds (e.g. “The World of War Craft”).

All of the foregoing “digital assets” have one common feature – they will be protected by a user

name and password.

Yet another category of “digital assets” can be seen in relation to files stored on a PC. This type of

“digital asset” can include personal documents, address books or contact lists, family photos and

memorabilia – the list of such personal information is long – and although perhaps of no economic

value they may have great sentimental value to those who survive.

Some “digital assets” have only sentimental value – but that is not to be discounted for those who

live on. Other such assets may, however, have a real financial value. Take the example of a

successful author who dies having completed a “computer manuscript” for his new book.

Posthumous publication of that book may be of great value to his heirs – but how do they access the

same? Such intellectual property may have great economic value - but only if it can be accessed

by the heirs.

How do we ensure that our heirs can succeed to such a digital inheritance? Frankly, as indicated,

it is only in very recent times that on line providers, but perhaps more importantly legislators,

throughout the world have begun to realise the importance (and in some circumstances financial

value) of a digital inheritance. It is likely to take some time for even computer savvy legislators to

introduce laws to clarify the difficulty issues which can arise here.

In the meantime, various internet companies have been set up to assist in this area (for example,

the “Digital Beyond” in the US and Cirrus Legacy in the UK). Such providers offer (for a fee) a

service which stores sensitive information and data which can be made available to the Executors of

the deceased digital account holder.

What advice can be offered?

The owners of “Digital Beyond” recommend three principal steps:-

(i) Keep an up to date list of all email/ on line accounts, regularly reviewing the same.

(ii) Consider what information may be required to obtain access to the accounts.

(iii)Set out your wishes as to whom access should be granted, as to what data might be passed on,

and as to what data should be destroyed.

The Scotsman of 26 May 2014 printed an excellent article (“Ensure a Will includes your online life

too”) by Paul Motion, the Conveyer of the Law Society of Scotland’s Technology’s Sub Committee.

Paul Motion indicated that, having pulled together all the current advice he had been able to source,

he indicated that the preparations that an individual should consider were as follows:-

1. Agree with someone you trust and who is IT literate that they will be your Social Media

Executor, in charge of all your “digital assets” after your death.

2. Say in your Will that a copy of your Death Certificate must be given to your Social Media

Executor, in case they need to prove they are acting on your behalf (for example, to close

your Twitter Account, to memorialise your Facebook Account).

3. Check and note all privacy settings and terms and conditions for your social networking

websites.

4. Create a list of your digital assets and digital accounts. Much easier said than done: Do

you know everything on your laptop, phone or PC etc? Can you name all the Accounts and

subscriptions you have, as well as all the logon details?

5. Give your Social Media Executor the list, logon details, user names and passwords. It is

safer not to list all the passwords on the same page as all your Account details.

6. State clearly in your Social Media Will what you would like to happen to each of your

ongoing Accounts e.g. continue, but managed by a friend, memorialised, or closed down.

7. Last but most important, your traditional Will must be linked to your Social Media Will

somehow so all your Executors know what is to happen to your digital assets.

Finally, this is Scotland. Most advice on the internet is American. Get a Scottish solicitor to check

what you are doing”.

It is not advisable for sensitive data such as passwords, to be included in the individual’s will or

Power of Attorney – for obvious reasons – a Will registered in the Books of Council and Session

may come in to the Public Domain very shortly after the death of the testator. Such data should be

retained in a separate document – but obviously if that document is not kept with the Will, then the

testator should still ensure firstly that the document itself is safely and securely stored and secondly

that his Executors/family are advised of its whereabouts and are able to access the same.

There remains yet more uncertainty – what view might the provider take of an

Executor/Attorney/other Intervener seeking access to an online account after the testator’s death or

the onset of incapacity? At the very least, any Will/Power of Attorney which deals with digital

assets should incorporate the specific authority of the consent of/on the part of the testator to his

Executor/Attorney accessing an online account. If the Executor uses the deceased’s user name

and the password without having the specific consent of both the provider and the user, could this

amount to a criminal offence – “unauthorised access” which is a criminal offence under the

Computer Misuse Act 1990?

There is no doubt that our profession (particularly the younger elements thereof) is now reasonably

computer savvy.

We need to bring those skills to bear when making Wills etc for clients.

One thing is certain at this time – our legal principles and current approach to digital assets lags well

behind developments in the real world.

Dealing with the Estate of a Deceased Lloyd’s Name

I think that the difficulties faced by Executors in relation to dealing with the Estate of a deceased

Lloyd’s name are very well set out in the copy article which I have appended to these notes.

On three separate occasions, I have been asked to give advice in relation to the Estate of a

deceased Lloyd’s name. Frankly, this whole area remains problematical and so far as I have been

able to establish, the position remains the same as detailed in the accompanying article.

Frankly, as the law presently stands, it would appear that the only safe way to proceed would be

proceed in terms of the type of Petition outlined in the accompanying copy article.

Threats to Scots Law of Succession from Abroad

There are forces at play of which I suspect many of you are unaware.

It is only very recently that the Scottish Government (the matter in question having brought to our

Government’s attention by the Law Society of Scotland) saw off what I consider to be a very

dangerous attempt to apply the Laws of England to Scots Law of Succession. In that connection

some of you may recall my article which appeared in the Scots Law Times in 2013 “Testamentary

Freedom Revisited – Further Erosion”.

Very briefly, the English Law Commission had suggested that the Inheritance (Family Provision &

Dependents) Act 1975 should be extended. Under Section 1(1) of the 1975 Act (which obviously

applies to England and Wales) a claim for family provision could only be made against the Estate of

an individual who died domiciled in England or Wales. The effect of that “domicile precondition”

was/is that no matter the size of the Estate of a deceased in England and Wales, no claim could be

made against the same if the deceased in question was not domiciled there. In the case of

Cyganik –v- Agulin (2006 EWCA Civ 129) a claim under the 1975 Act failed as the Court held that

the deceased had died domiciled in Cyprus, even although he left assets worth approximately £6.5m

in England – and his Will had been admitted to Probate there.

However, in its Report on Intestacy and Family Provision Claims on Death (Law Com No. 331)

issued in December 2011, the Law Commission in England and Wales reviewed the existing

working of the 1975 Act including the “domicile precondition”.

At paragraph 17.17 (page 129) of its Report, the Law Commission in England and Wales

recommended:-

“… that it should no longer by the sole precondition to an application under the Inheritance

(Provision for Family Independents) Act 1975 that the deceased was domiciled in England

and Wales.”

At page 133 of its Report, the English and Welsh Law Commission recommended:-

“… that an application for family provision under (the 1975 Act) should be possible in any

case where the deceased was either domiciled in England and Wales or English Domestic

Succession law applies to any part of the Estate.”

In effect, this meant that even where the deceased died domiciled in Scotland, if he owned heritable

property in England, a claim could be made against a domiciled Scot’s Estate under the 1975 Act,

even although it did not apply to Scotland.

Some of you may be wondering what all the fuss was about. Perhaps an example might assist

you:-

A domiciled Scottish testator has been estranged from one of his children who has lived in

England for many years. The Adult child is considered by all who know him to be “a bad

sort”. From what you and I consider might be entirely valid reasons, the testator instructs

that the child who lives in England is to be completely excluded from his Will. You do

explain, however, that the child in question will have an entitlement to claim legal rights.

Had the relevant law been enacted, however, there was a real danger – the English Court,

in receipt of an Application under the new law, might well have made an award from the

parent’s Estate to the child in England – but would this also have excluded a claim to legal

rights? This is one of the main points of “attack” adopted in seeking to persuade the

Ministry of Justice not to proceed with the proposed amendment.

The 1975 Act can produce some very strange outcomes. In fact, charities in England have

expressed concern as to how Courts in England and Wales are interpreting the 1975 Act. The

National Trust estimated two or so years ago that ten per cent of the 2000 or so legacies left to that

charity each year, are the subject of challenge by family members under the 1975 Act. In that

connection, I would refer you to the case of Ilott v. Mitson (2011) EWCA civ.346. In 1978, Heather

Ilott the only child of Mrs. Melitia Jackson, had become estranged from her mother who did not

approve of her boyfriend, Nick. The daughter and her boyfriend eloped and were later married.

Although there were attempts of reconciliation (the last in 2000), all of the same failed. In 2002,

Mrs. Jackson (her capacity was not in question) made a Will leaving virtually the whole of her Estate

to three charities and nothing at all to her daughter. The mother’s Estate extended to nearly

£500,000. The daughter made an application under the 1975 Act and the Court of Appeal in the

circumstances, found in her favour (with the charities request for permission to appeal to the

Supreme Court being refused). Not only had the charities lost their bequests but they had incurred

significant legal costs in seeking (unsuccessfully) to defend the same.

The Ministry of Justice was determined to see the relevant law enacted. The effects on the

administration of a Scottish Estate could have been drastic. However, even although the above

provision had been incorporated within a Bill under consideration by the House of Lords at the time

the matter was challenged, our Government (with considerable assistance on the part of our Law

Society) persuaded our English cousins that legislation enacted in England should not be allowed to

affect the proper administration of a Scottish Estate.

I think I can go so far as to say that, had our Law Society not recognised the potential problems and

brought this to the attention of the Scottish Government, we would now have an extension of an

English and Welsh Act to Scotland.

There are other threats. A few years ago, it was brought to my attention that there was a proposal

in Europe that there should be a Central European Registry of Wills. The difficulty arising here from

my perspective was that the proposal in question was that once an individual had made a Will, that

fact should be registered with a Central European Registry. The proposal was ludicrous – not only

would the testator require to pay a fee to have his Will registered, but the failure to do so would

result in the Will being invalid.

Again, I think it fair to say that our Law Society was very important in seeing off that particular

proposal.

However, there remains a proposal currently before the European Commission which causes me

great concern.

It is proposed that there should be transparency in respect of all private Trusts. This would include

not only giving details to a body set up by the EU of particular Trusts but also full details of the

identities of the Trustees and the beneficiaries interested therein. If you think about it for a

moment, this proposal is from the perspective of UK lawyers wholly unworkable. What about

Discretionary Trusts?

European countries which are “civil law” based seemed to hold the view that private Trusts are

merely a vehicle for money laundering. I find it astonishing that given the rights to privacy

embodied in the European Convention in Human Rights, countries such as France should be

insisting that the law in question be enacted.

I am pleased to say that once again our Law Society have made strenuous representations (in

support of the position adopted by the British Government) against the adoption of any such

legislative provision.

The Foreign Account Tax Compliance Act is even more disturbing, and has been active in the UK

since 1 July 2014.

The FATCA was introduced by the US Congress in 2010 as a means of restricting tax avoidance by

US citizens placing funds in Foreign Bank accounts. It has grown like “topsy” and has now been

adopted by many jurisdictions (probably under pressure/threat of/from the US Government). I have

heard numerous incorrect descriptions of the FATCA i.e.:-

(a) It only applies where there is an American beneficiary – wrong.

(b) It only applies if one of the Trustees is a US citizen – wrong.

(c) It only applies if the Trust invests in US assets – wrong.

In fact, the FATCA applies to virtually any UK Trust.

Trusts will require to register with HMRC etc. This is a complicated area and it is retrospective in

effect – it will apply to all existing Trusts. Have fun going through your Trust records!

Vigilance must be our watch word.

Necessary Changes to Scots Law (In my Opinion)

In my first draft of these Notes, the next two paragraphs were

“It is a matter of some regret from my perspective that we are still operating on the basis of laws of

intestate succession which were, frankly, conceived of 64 years ago. Why do I say that? Quite

simply, the Succession (Scotland) Act 1964 was based upon the Mackintosh Report which was

submitted to the Westminster Government in 1950. Arguably, the terms of the Succession

(Scotland) Act 1964 were outdated by the time that law was enacted.

In 1990, Scottish Law Commission recommended significant changes to our Laws of Succession.

Frankly, however, the 1990 Report was virtually ignored. I fear that the same is now happening to

the Scottish Law Commission Report on Succession of 2009. However, there are aspects of our

law in relation to Wills which I think should be changed (whether or not our laws on intestate

succession are amended).”

The Consultation document now issued by the Scottish Government (August 2014) perhaps has

taken the wind out of my sails but is to be welcomed. It deals with a large number of succession

issues. You should read the same as it presages perhaps long awaited and necessary changes,

although I understand that it is considered by the Scottish Government to deal only with non

controversial issues. A second Consultation document is to issued in respect of more difficult issues.

I have already commented on two of the proposals made by the Scottish Law Commission in

relation to the abolition of the conditio si testator and the amendment of the conditio si institutus,

now covered by the Consultation document

However, I think that it is also important that we should look very closely at the current law on

Revocation of Wills – in particular in relation to the revival of an earlier Will – but again this is

covered by the Scottish Government.

Regrettably, in Scotland we have what I consider to be an unfortunate state of affairs – where in

certain circumstances the revocation of an existing Will can lead to the “revival” of an earlier Will –

even although that earlier Will was itself completely revoked by the newer Will.

In his Article “Revival by Revocation of the Revoking Will” (1974 SLT (News) 153) the late Professor

Michael Meston railed against what many agree is an anomalous position, perhaps exemplified by

the case of Bruce’s Judicial Factor v. The Lord Advocate 1969 SC 296. Therein, the testator

had made an earlier Will which was revoked by an express clause of revocation in a later Will.

However, the testator himself had held the later Will in his own custody and following his death, the

later Will could not be found. This gave rise to the presumption (which can be rebutted) (see

Norman v. Dick 1938 D 59) that the testator had destroyed the later Will animus revocandi.

However, notwithstanding the fact that the later Will had expressly revoked the earlier Will, the

presumption was also to the effect that in such circumstances, the testator would be taken to have

destroyed the later Will with the intention of bringing back into force the earlier Will. This case is

often cited as a reason why earlier Wills should be destroyed by, or on the specific instructions of,

the testator. The case was also authority for the proposition for the making of the later Will was not

of itself implied authority granted to a solicitor to destroy an earlier Will.

In its Report on Succession (No. 124) 1990, the Scottish Law Commission confirmed that the

present law would indeed appear to be that “if a Will which revokes a previous Will was itself

revoked, then the previous Will revives unless, possibly, it can be proved by extrinsic evidence that

the earlier Will was not intended by the testator to have any continuing effect as a potential

testamentary document” (paragraph 4.67). The Scottish Law Commission went on to state:-

“The law on this point does not seem satisfactory. Indeed it is quite likely to produce effects

which would not have been intended by the testator...the way in which the law operates in

this kind of case does not seem sensible. A person who expressly revokes all previous

Wills would, it may be supposed, normally assume that they were dead and finished with.

He would not assume that they would remain in a Solicitors’ strongroom in a status of

suspended animation ready to spring into life at any time”.

Unfortunately, once again, in so far as our Laws on Succession are concerned, England was ahead

of us (in my view). In England, under Section 22 of the Wills Act 1837

“No Will or Codicil or any part thereof which shall be in any manner revoked shall be revived

otherwise than by the execution thereof, or by a Codicil executed in a manner hereinbefore

required and showing an intention to revive the same”.

The English viewpoint was reflected by the Scottish Law Commission in its Report on Succession in

2009 (No. 215). The Scottish Law Commission effectively restated the position it had adopted in

1990 with one exception. In 1990, the Scottish Law Commission had taken the view that an earlier

Will expressly revoked should not revive on revocation of the later Will. However, it had adopted a

different position in relation to a Will impliedly revoked by a later Will. However, Recommendation

55 of the 2009 Report stated:-

“A Will or any part of a Will which has been revoked, either expressly or impliedly, by a

subsequent Will, should not revive unless the testator re-executes it or executes another

document which expressly revives it”.

One final point which I would make is that Scottish Law Commission in its Discussion Paper of 2007

on Succession recommended abolition of the entitlement to legal rights for non-dependant adult

children. Fortunately (from my personal perspective) it would appear that this is a matter which our

own Commission is not pursuing. The proposal excited comment from various sources- most of it of

a critical/unfavourable nature – will it be revived in the second Consultation document?

The August 2014 Consultation Document deals with numerous matters – not claiming that the

following list is comprehensive:-

• Whether or not the necessity for Bonds of Caution in intestate Estates should be retained?

• Should a Sheriff retain a discretion to require a Bond of Caution in particular circumstances?

• Whether a Bond of Caution in a nominate case should be required?

• The effect of divorce on a Will

• Possible amendment of Section 29 of the Family Law (Scotland) Act 2006 by extending the

time limit for raising an Application under that Section to one year from the date of death – I

disagree with that proposal although not the timescale suggested – in my view, the one year

period should run from the date of grant of Confirmation whenever this might be – this would

remove any temptation on the part of the family (the beneficiaries on intestacy under

Section 2 of the 1964 Act) from deliberately delaying in doing anything to initiate the

administration of the estate in the hope that the statutory period for raising a claim under

Section 29 of the 2006 Act will expire.

I would hope that once the consultation exercise has been fully completed, a new law of succession

will be enacted.

Further changes to our approach to Will drafting might well be indicated by the terms of The Report

on Trusts (No.239) issued by the Scottish Law Commission on 26 August 2014.

Will the anticipated legislation be a new Succession (Scotland) Act and a new Trusts (Scotland) Act

or will there be a Succession Act and a Trusts Act i.e. two of the early legislative measures of a

newly independent Government of Scotland?

Be very careful out there!

John Kerrigan Morisons LLP 53 Bothwell Street Glasgow G2 6TS John.kerrigan@morisonsllp.com 29 August 2014

Appendix Delivery I Westlaw UK

Private Client Business 2003

Case Comment

Neilson's Executors, Petitioners: a breakthrough for Scottish L1oyd's Names

Ian Clark

Margaret Main

Subject: Succession. Other related subjects: Insurance

Keywords: Distribution; Executors; uovds Names; Scotland

Cases: Nellson's Executors, Petitioners 2002 S.L.T. 1100 (Ex Div)

Yorke (Deceased), Re [1997] 4 All E.R. 907 (Ch D)

·p.e.B. 120 In a landmark Scottish decision, the Court of Session examined the difficulties faced by

executors (and a possible solution) in winding up the estate of a deceased Lloyd's Name.

In the case of Neilson's Executors, Petitioners,' the deceased had been an underwriting member of two

syndicates. The accounts for each of the syndicates for each year had closed naturally, with the

exception of the account for the year 1982 In respect of one of the syndicates. The deceased's syndicate was affected In the same way as many others, by the uncertain level of liability for claims,

particularly on policies covering asbestos and environmental pollution, and because members of a syndicate remain liable to pay claims for an Indefinite period. The Court acknowledged that, although

Equltas had assumed the liabilities of Names for 1992 and earlier years, Names have not been released from those liabilities and so there remains the hypothetical possibility, should Equltas fall to meet those liabilities, that Names will be required to meet them.

The problem

The problem In administering the estate of a deceased Name In Scotland Is that, as In England,

executors are bound to meet all of the deceased's liabilities, before distributing the estate to the beneficiaries. If the executors do distribute the estate to the beneficiaries and at a later date a liability for

a Lloyd's syndicate were to arise, the executors would be personally liable to the syndicate. The effect of this is that the relevant estates become "frozen" and the beneficiaries cannot be paid out.

Even If the executors and the beneficiaries are exactly the same people, and so those who have the

responsibility to meet the liability are also those who have received the Inheritance, the difficulty Is that executors have Joint and several *P.C.B. 121 liability, which means that If one of the executors falls to

pay up, the others, or even one executor alone, will be faced with paying for the whole liability.

One way in which executors might try to reduce their personal liability is to seek Indemnities from the

beneficiaries so that, should a liability to a syndicate or otherwise arise, the beneficiaries would be duty bound to repay what they had Inherited, or part of what they had Inherited, to meet the executors' liability. However, in reality, an Indemnity offers little protection to the executors. Whilst the beneficiary

does have an obligation to meet the executors' liability, enforcement of the Indemnity Is difficult, and the beneficiary may have spent or lost the Inheritance, perhaps through bankruptcy, in which case the

Indemnity is not worth the paper It Is written on.

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So, in many cases, as in the Neilson case, executors cannot complete the administration of the estate of a deceased Lloyd's Name.

The Re Yorke decision in England

The same situation In England, and five years ago In the case of Re Yorke2 similar circumstances were

examined. There the Court decided, on the facts of that case, that It should allow the executors to

distribute the estate to the beneficiaries. Following that decision, there Is an abbreviated procedure In the English courts to authorise distributions In such circumstances.

But until now, no Scottish court had been asked to look Into the Situation, and It was thought that there would be difficulties In getting a Scottish court to agree to a Re Yorke distribution, particularly at this time,

as there is some commentary, as a result of recent Equltas accounts, that Equltas Is financially vulnerable because of the extent of asbestos claims.

The solutions

The Court in the Neilson case decided that It did not need to enquire further Into the financial adequacy of Equltas, and could rely partly on the pronouncements of the English court to the effect that Equltas

was a sufficient and proper security to executors.

The Court's view was that the likelihood of the executors being left with any personal liability to the

Lloyd's syndicate was very small, because the reinsurance with Equitas had to prove to be Inadequate

before there would be a claim against the estate. Lord Abernethy, who delivered the Opinion stated, "the possibility that a liability may emerge ... would be discounted by any reasonable person as so remote as to be merely speculative or hypothetical .. ",

In the light of that, the Court pronounced an order allowing the executors to distribute the estate without

any provision being made for potential claims In respect of the deceased's membership of the syndicate. The Court also made an *P.C.B. 122 order which relieved the executors from any personal

liability arising out of the deceased's membership of Lloyd's or for distributing the estate.

The lingering problem

Whilst the decision will give executors of the estates of deceased Lloyd's Names some comfort, It

should not be assumed that the case gives the executors automatic protection from personal liability.

Indeed, the contrary is true. The Court acknowledged that executors would be personally liable for syndicate claims and that, without an order of the Court, there would be no protection against such claims. The decision is not considered to be broad enough to allow other estates to be wound up on Its

strength.

The Practice Note

Following on from the decision In June 2002, the court, in mid· November, Issued a Practice Note

setting up an entirely new procedure to be followed In cases of this type.

The procedure will only apply to cases where all Lloyd's syndicates' liabilities have been reinsured (directly or Indirectly) through Equltas, and where the only reason for delaying distribution of the estate Is the potential liabilities to Lloyd's syndicates.

The fact that there is now a procedure in place Is of significant help to any further applicants to the Court. In addition, the procedure is abbreviated as compared to procedures for other quite different

types of case, because the Practice Note appears to anticipate that If there are no objections to the application, It might be granted without a court hearing. That would, however, also be dependent on

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the Court receiving a favourable report from the Court appointed "Reporter" who looks Into the facts of the case, Including, the financial status of Equltas.

However, depending on the particular circumstances of the estate In question, the costs to

make the application might be considerable.

Conclusion

Whilst the decision In Neilson certainly has not brought an end to the entire problem facing

executors of deceased Names, It has at least shown that the Scottish Court recognises the

problem. However, a number of procedural hurdles remain, and the application procedure will not be straightforward. It is understood that no application under the new procedures have been made to date, but several are currently being considered by the writers' firm

which will allow the new procedure to be tested.

This article first appeared in the December 2002 issue of The Equltaslan published by the

Association of Lloyd's Members, with whose kind permission, together with that of the writers, it

is produced.

P.C.B. 2003, 2, 120-122

I. [20021 S.L.T. 1100. 2. [199714 All E.R. 907.

Q 2014 Sweet & Maxwell and Its Contributors

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