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Tony Wickenden: Court case shows importance of written evidence

For this week’s article, I am grateful to my colleagues at Technical Connection for all of the essential research work on the facts of the case that I will consider. The case is one that reminds us of the importance of ensuring that, for important transfers of assets, proper written evidence (in the format required by the law to make it effective) of what is intended should be secured. This is not to say that its absence will always invalidate the transaction that is intended (although it sometimes will, for example, in relation to the transfer of real property). It is just that evidence in writing of what is intended will usually operate to avoid any later dispute.

A recent case reminds us of this. The main issue in the case I would like to consider concerned the beneficial ownership of money held in two building society accounts following the death of Mary Cotton (MC). The claimant, Lyn Drakeford (LD) was the deceased’s daughter and the main defendant was the deceased’s other daughter, Michelle Stain (MS). In 1997, MC and her husband won around £107,000 on the National Lottery. They subsequently made their wills. MC’s will, dated 16 May 1997, provided that on the death of the second of herself and her husband to die her children would inherit equally. MC was the second to die on 7 August 2008.

Following the Lottery win, MC and her husband opened two bank accounts. On the death of MC’s husband, the account balances were £49,186.98 and £2,622.08. On 14 February 2008, MC went with MS to a building society and transferred the two accounts into the joint names of MC and MS. It was accepted that the effect of the accounts being transferred into joint names was that they were held by joint account holders on trust for MC alone.

Following MC’s death, MS made a number of withdrawals from the joint accounts. The main defendant contended that as a result of certain statements made by MC to MS and others in June 2008, the position was that the joint account holders held the money in the accounts on trust for MS alone or on trusts under which both MC and MS were beneficiaries.

The main defendant further contended that following an abusive telephone call from LD on 16 June 2008, MC had told MS that she wished her (MS) to have the funds in the joint accounts on MC’s demise because MS was her principal carer and she wanted to reward her for that care. MS contended that MC had been adamant that she did not want LD to have any of the said money. LD brought the proceedings against the defendants to determine the ownership of the beneficial interest in the accounts.

The issue for consideration was whether the legal title to the money in the accounts had passed to MS by survivorship and therefore did not form part of MC’s estate, or whether, as contended by LD, when MC died MC remained the sole beneficial owner of the money in the accounts and that money therefore formed part of MC’s estate and was to be distributed in accordance with her will, under which LD would benefit.

The court ruled that it was possible to have a joint account under which the legal title to the account was in joint names and only one of the account holders (in this case, MC) was entitled to draw on the account. On the death of the account holder, the money in the account belonged to the other (MS) by survivorship. From the time that the relevant arrangement was made, there was a beneficial interest vested in the account holder who was not entitled to draw on the account but who might in due course take by survivorship.

That beneficial interest vested when the relevant arrangement was made. The court ruled that a fair reading of MC’s statements, as an important part of the evidence, was to the effect that MC had intended that, on her death, the money in the accounts would be owned beneficially, as well as legally, by MS. Accordingly, MC had formed a settled intention in the middle of June 2008 and she had expressed that intention by stating to MS and to others that the money in the accounts would go to MS and in that way would not be inherited by the claimant.

That statement of intention (albeit not in writing) was not dependent upon MC revising her will. A revision of her will, so that the claimant did not inherit anything, would be very clear and determinative but that did not mean that the earlier statements to MS and others had no effect in the absence of a revision to her will.

I will continue my look at this case and what financial planners should take from it next week.

Tony Wickenden is joint managing director of Technical Connection

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