So, who gets the house then?
Posted: Tuesday 19 June 2012
By Joy Barnard
Despite death being as inevitable as taxes, it is surprising that there are still some seemingly quite commonly-encountered areas of executry practice where the law is unclear. I was instructed in one such case recently which had the pleasing result of not only clarifying the law in a situation which cannot be a rare occurrence but which also allowed us to try a little-used form of court procedure in the process.
The facts of the case are not terribly complicated. In 1996, in anticipation of her advancing years, Miss Gordon granted a Power of Attorney in favour of her solicitor. In 1997, she made a Will in which she bequeathed her house to her nephew. Eventually, her health was such that she needed to move into a care home, and although she had sufficient resources to meet her care needs, her Attorney took the decision to sell the house because it was clear that she would never be able to go back to live there. The house was duly sold, and the funds invested. Several years later, she died and the question which the executors were unable to resolve was how the bequest of the house should be dealt with now that the house was no longer part of her estate. Should the beneficiary receive the sale proceeds of the property, or should the bequest simply fall away because the property was no longer available to satisfy the bequest, and sale proceeds form part of the residue of the estate (a process known as “ademption”)? It is hard to imagine that this is an unusual state of affairs, but the text books and case reports provided very little guidance, so one can only presume that in estates where a similar thing has happened that either the beneficiaries were able to agree what should happen, or that perhaps the executors simply didn’t realise there was a problem.
This was a case where there was absolutely no dispute about the facts at all. The parties were in complete agreement as to what had happened, and there was no suggestion that the attorney had not power to do what he did. The only thing that needed judicial determination was how the clause bequeathing the house should be dealt with – a very succinct question.
Although there is a general assumption that court actions are going to be long, drawn-out and expensive, the Court of Session does provide rules for several procedures which cut out much of the time and cost and enable parties to get quick answers in narrow or very clearly focussed disputes. In a case like this where there was a single point of law, a summary trial was the ideal way of getting that single point before the court quickly.
The beauty of the summary trial process is that there is a strict timetable, and the hearing must take place within 6 weeks of the order for a hearing being made. Unusually, the parties also get to nominate the judge they want to hear the case, so that makes it possible to choose someone who has an interest in the subject matter (in this case Lord Tyre). Although the procedure is summary in nature, that is not to say the issues aren’t properly explored - the hearing took three days but the Opinion was issued well within the three month rule of thumb to which the courts are currently trying to operate. The downside, if it is a downside, is there is no right of appeal.
So, what were the arguments?
In favour of the ademption approach, the argument was simply that the house was no longer part of the estate, and therefore the proceeds formed part of the residue. The sale by the attorney was something he was entitled to do, as Miss Gordon could have done herself, and that was the end of the matter.
In favour of the estate which represented the proceeds of the sale going to the specific beneficiary, the argument was more complex and to the effect that it was only if the sale had been necessary and unavoidable would ademption operate.
The answer?
Lord Tyre’s Opinion can be found at [2012] CSOH 41. In short, Lord Tyre decided that the sale of the house by the Attorney did not result in ademption, with the result that the beneficiary who should have received the house should receive the sale proceeds instead. The key authority is the case of Macfarlane’s Trustees v Macfarlane 1910 SC 235 which dealt with the sale of shares by a curator bonis which the court held to be more or less analogous with a modern day attorney. In Macfarlane’s Trustees, the court was of the view that because a curator bonis cannot interfere with the testamentary intentions of the person whose affairs he is administering, a specific legacy continued to be valid unless its disposal was necessary and unavoidable and would have been so for the person themselves. If the disposal was for other reasons, then the beneficiary should still get the benefit of their inheritance even although the actual item was no longer available. Had Miss Gordon’s attorney had no alternative but to sell the house in order to provide for her living expenses, the outcome would have been different, but because it was simply an act of prudent management because she was never going to live there again, the sale did not have the effect of nullifying that bequest.
It does seem surprising that this kind of dispute has not come before the courts since 1910, but now we know answer for the future. It is also reassuring to know that a little-used procedure works very well in practice.
To discuss the issues raised in this article please contact Joy Barnard on 0131 247 1102 or email joy.barnard@morton-fraser.com.
